Good day, and thank you for standing by. Welcome to the Galapagos Q3 2024 Financial Results Audio Webcast. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sofie Van Gijsel, please go ahead.

Thank you, and welcome to the audio webcast of Galapagos' Q3 2024 results. I'm Sofie Van Gijsel, Investor Relations representing the reporting team at Galapagos. This recorded webcast is accessible via the Galapagos website homepage and will be available for downloads and replay later today. We would like to remind everyone that we will be making forward-looking statements during today's webcast. These forward-looking statements include remarks concerning future developments of the pipeline and our company and possible changes in the industry and competitive environment. Because these forward-looking statements involve risks and uncertainties Galapagos' actual results may differ materially from the results expressed or implied in these statements. Today's speakers are Dr. Paul Stoffels, CEO and Chair; and Thad Huston, CFO and COO. Paul will present the Q3 key takeaways, and Thad will provide a financial update. We will also discuss the anticipated milestones and present concluding remarks. Please follow the presentation on your screen as we go through the call. We estimate that the prepared remarks will take approximately 20 minutes. We will then open the line for Q&A with Paul and Thad who will also be joined by Dr. Jeevan Shetty, Head of Development Oncology; and Dr. Wulf Bocher, Head of Immunology. And with that, I'll now turn over to Paul.

Thank you, Sofie, and good afternoon, everyone. I would like to take a moment to share the strong foundation that we are building and how we have set up Galapagos for value creation. Today, we are a pure-play biotech with a renewed R&D strategy to accelerate and bring innovative medicines to patients. We are moving forward faster with the focused, differentiated and expanding R&D pipeline and competitive technology platforms. We're also making important regulatory and operational progress with our decentralized CAR-T network in Europe and the U.S. This slide summarizes our efforts to build a robust product pipeline that will enable us to accelerate future growth and drive value creation for all stakeholders. In doing so, we will focus on our key therapeutic areas of oncology and immunology to advance our R&D pipeline of potential best-in-class cell therapies and small molecule drugs. Today, we are developing four clinical candidates for 11 indications, and we have more than 15 preclinical programs. For further expansion and progress of our pipeline, we take a collaborative approach combining internal and external innovation. And finally, our strategy is supported by a strong cash position of EUR3.3 billion at the end of September 2024. In the third quarter of this year, we delivered on several important milestones. Let's start with the regulatory achievements. We are very pleased to have received the IND clearance from the FDA for GLPG5101, for which we have generated encouraging results in the Phase I/II ATALANTA study in Europe. We now plan to enroll our first patient in the U.S. in the Phase II expansion part of ATALANTA study in non-Hodgkin lymphoma before year-end. Obtaining the IND clearance for our seven day vein-to-vein fresh CAR-T decentralized manufacturing process was a crucial achievement for expanding the development of our cell therapies in the…

Thank you, Paul, and thanks, everyone for joining today. Let's look at the financial results for the third quarter of 2024. During this quarter, we have worked on strengthening the foundation for our future growth. We continue to keep our focus on priority programs while investing in our pipeline and building our global cell therapy network. For operations, revenue remained fairly stable year-over-year and consists mainly of the linear recognition of the platform for the Gilead collaboration. As explained in previous earnings calls, we see an increase in R&D costs as compared to last year. This is mainly driven by our investments in oncology, both in cell therapy and in small molecules and includes the expense recognition of collaborations with BridGene and Adaptimmune signed in the first half of the year. Over the first nine months of the year, we recorded a net profit of EUR49 million, driven by fair value adjustments in foreign exchange as well as EUR71 million in interest income. We also reported a net profit from discontinued operations of EUR69 million, mainly driven by the one-time gain for the Jyseleca transaction with Alfasigma as announced earlier this year. Now over to our 2024 guidance. We reconfirm our full year cash burn guidance of EUR370 million to EUR410 million for 2024, including the business development transactions closed earlier this year. We report a net decrease in our cash position of EUR346 million for the first nine months of 2024. This decrease is composed of EUR321 million of operational cash burn including EUR80 million related to business development activity executed in the first half of 2024. The cash out related to the Jyseleca transaction with Alfasigma and an equity investment in Q1 as well as financial transactions, including the timing of interest income, our cash balance at the…

Thanks so much, Thad, and thank you, Paul. Greatly appreciate it. That concludes the presentation portion of today's audio conference call. I would now like to ask the operator to open the line for Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Xian Deng from UBS. Please go ahead. Your line is open.

|Thank you so much for taking my question. Just one, please. On the BCMA CAR-T 5301 in multiple myeloma, just wondering -- given now you have received trial enrollment, just wondering what's your conclusion for the case of Parkinsonism phase. And also just wondering, whether you could share any thoughts on the potential change in future enrollment criteria related to that, please? That's my question. And best of luck, Sofie in your future endeavor. Thank you.

Jeevan?

Yeah. Thank you very much for your question. I really appreciate it. I think it's important to put in the context that BCMA-targeted CAR-T therapies are actually pre-disposed to leading to Parkinsonism as a consequence of the expression of BCMA targets within the basal ganglia, substantia nigra. And this is clearly defined across all CAR-T therapies that are currently on the market. And clearly, we've looked at this, and we've learned from this. I can't divulge too much in the way of details regarding the patient, but the case had atypical features. What we did is a very deep due diligence across the patient characteristics as well as the literature (ph) as well as seeking significant external expertise. And we have incorporated this into the protocol. But what I will say without going into the details is that we've instituted much more expansive discussion between the medical monitor and the investigator. And we're very confident that based on the steps that we've taken that we can move forward and to address these patients -- very ill patients with our platform, clearly, with the benefit of our seven day vein-to-vein fresh cells and fresh product type.

Thank you.

Thank you. We will now move on to our next question. Our comes from the line of Judah Frommer from Morgan Stanley. Please go ahead. Your line is open.

Yeah. Hi. Thanks for taking the question. Congrats on the progress and best of luck to Sofie as well. I was just hoping you could share a little bit more color on the data you'll be presenting at ASH for EUPLAGIA and ATALANTA? Any detail on the nature of the data? And will we get that update only at ASH or will there be abstracts released next week? Thanks.

Thank you very much for the question. We are clearly limited by the ASH embargo and we can't really disclose any details regarding the studies themselves, abstracts are embargoed until Tuesday, November 5, at 9:00 a.m. So I encourage you to look at this, and we look forward to proactively sharing this data when the embargo is lifted. Thank you.

Thanks.

Thank you. We will now move on to our next question. Our next question comes from the line of Alexander Kelly from TD Cowen. Please go ahead. Your line is open.

Hi. Thanks so much for taking my question. Just curious if you could walk us through your approach to BD next year. What types of deals are you open to and what would be the ideal asset or assets in terms of stage, modality, target and indication? Thank you.

Thank you for the question. We continually look to broaden our portfolio through BD. We think that there's a tremendous opportunity given our cash position and the opportunities we have. We're very focused on the fields of oncology and immunology. We do look at precision oncology as a particular area of interest as well as potential opportunities to broaden our portfolio in CAR-T as well.

Thank you.

Thank you.

Thank you. We will now move on to our next question. Our next question comes from the line of Shan Hama from Jefferies. Please go ahead. Your line is open.

Hi. Thank you. Is there any scope for your CAR-T programs, particularly 5101 to potentially enter the market earlier than 2028, and I guess, similarly, how confident are you in being granted breakthrough therapy designation to actually support that potential earlier market entry? Thank you.

We just got our IND approved in the U.S. We are planning to include the first patient in the study before the year-end and expand in the course of next year to other centers in the U.S. today, the first centers will be in Boston, driven by the Landmark Bio site. So we will follow the scientific process here by doing our next phase in the expansion study of ATALANTA, discuss the data with the regulators, decide on the pivotal designs, and we'll be able to update you as soon as we are in that space. We're very confident on the strength of the data and what we have seen so far and hopefully what you have learned from our previous disclosures on the data that efficacy and safety looks very good. We are evaluating multiple indications in the Phase II expansion study and we'll decide on indication and size of studies competitor in the course of next year as we go through evaluating the Phase II expansion studies, and that will determine ultimate timelines whether we can launch in '28 or whether we could make it faster, but we have to follow the scientific regulatory process here.

Thank you. We will now move on to our next question. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Please go ahead. Your line is open.

Hi, everyone. This is Nevin on for Brian. Just a question on 5101. So have you -- since getting the IND cleared, have you run any test runs and what is the vein-to-vein time, the quality of the CAR-T product look like? And have there been any particular barriers to manufacturing or administering the CAR-T therapy that's specific to the U.S. clinical infrastructure versus in the EU or was there any specific feedback that U.S. regulators brought up with regards to the platform versus the European counterpart?

What I can see -- and thank you for the question. What I can say is that we don't have any concerns regarding the median seven day vein-to-vein time that continues to be intact. What I will say about -- I think your question is directed towards the feedback from the FDA. Clearly, this is a major milestone for us as a company and actually for the CAR-T community to be able to deliver this. We've got very productive interactions with the FDA and gained some really important insights. And so with regard to that, I don't -- we didn't have any specific changes in terms of the approach. The approach is consistent. That is very important. It's consistent by design, whether in Europe or in the U.S. And based on the really constructive inputs and feedback that we got from the FDA. We're in a very robust position to follow on from the IND and similarly across Europe, too.

In addition to that, we work with Landmark Bio, which is a very professional organization with the capabilities to make CAR-Ts. And so the whole process of transferring the production is intensive validation of the production setup, but then also of the validation and of the process on the cocoon and making sure that we get to the same process outcome -- that the process leads to the same product in the outcome in Europe as in the U.S. And we successfully succeeded in that. So that will -- that -- it's complex. It takes a lot of work, but at the same time, once it's validated can get going. And we are now looking forward to building it out in other sites in the U.S. in San Francisco, San Diego, as Thad earlier mentioned. So we are very confident we will be able to deliver the product in a similar way as in Europe.

Got it. Thank you so much.

|Thank you. We will now move on to our next question. Our next question comes from the line of Jacob Mekhael from KBC Securities. Please go ahead. Your line is open.

Hi, there and thanks for taking my question. I have one on the new bispecific CAR-T that you have chosen to advance into IND-enabling studies. Just curious to learn more about your strategy there and whether you will be going after an indication without an approved CAR-T?

Well, we know that the shortcoming of a CD19 is the -- CD19 escape, and that could lead to resistance early on treatment with CD9 CAR-T. So our team did a very good basic scientific work and came up with a bispecific CAR-T, which with -- an armed bispecific CAR-T, which the preclinical data shows that it is ready to progress into preclinical evaluation and getting into the clinic. We will talk more about that in an R&D day, which we are -- which we'll set up next year. on the details of that science, which is behind there. But for the moment, it's progressing towards with the preclinical studies for IND and start of the first in human in the course of next year.

Thank you.

Thank you. We will now move on to our next question. Our next question comes from the line of Jason Gerberry from Bank of America Securities. Please go ahead. Your line is open.

Hello. This is Chi (ph) on for Jason. Thanks for taking our question. I have a question on the early pipeline. You mentioned advancing new programs into the clinic next couple of years, which include next-generation CAR-T for hemo (ph) and small molecule for immunology. I did not hear mention of CAR-T for autoimmune. So curious, are you no longer prioritizing CAR-T for autoimmune? Can you talk about the thinking there? And I guess, broadly, your approach for program prioritization as you move your next batch of candidates into the clinic? Thanks so much.

Let me first answer on the CAR-T early stage. We are -- just to be clear, we are progressing early-stage CAR-Ts both in hemato-oncology but also in solid tumors. We have several programs in both addressing multi-targeting armoring and doing extensive preclinical work getting to the selection of the next-gen CAR-Ts to be put on the cocoon and apply the same seven day vein-to-vein fresh cells and use the benefits we learned there from the use of high memory content cells in order to have the good efficacy. For the immunology, I would like to give it to Wulf, if you can answer that? Yeah. I'm going to answer the question since Wulf is on the line and that can't be unmuted. Yes, we are still interested in that space, although with CAR-Ts, we know the field is very crowded and we are looking at different mechanisms for B-cell depletion and moving forward in the space. But we are still interested, but very carefully choosing when to step in with best-in-class type of product.

Thanks so much.

Thank you. [Operator Instructions] We will now move on to our next question. Our next question comes from the line of Manos Mastorakis from Deutsche Bank. Please go ahead. Your line is open.

Hi. Thank you for the question. Manos Mastorakis from Deutsche Bank. So could you please give us a little bit more color on the TYK2 program and the timelines? Is there a slippage there on the timelines? And if so, just what might be the reason behind it and how do you feel about the probably the success in these two indications? Thank you.

Wulf, can we try again? Yeah. Okay. We are progressing very well with the proof of concept and the Phase II studies in dermatomyositis and lupus. The details on the recruitment, we will not disclose, but we are confident that, respectively, '25 '26, we'll be able to come up with the data. On the mechanism, we have chosen -- particularly the TYK2 because the interferon are the key drivers of the pathogenesis in both diseases and their inhibition has been clinically validated by the antibodies anifrolumab and also [indiscernible]. And so that mode of action, we think that are very much focused on the interferons is -- can be a specific -- providing, especially in these diseases, a competitive profile. And so the studies are going well, and we will report the progress in the course of next year and the data end of '25 early '26.

Can you hear me now? Sorry.

Yeah. Now, we can hear you. I apologize.

I apologize. I had to dial back in. Is there anything open left -- left open?

Yeah, the mechanism of action and IL-10 versus the interferon, why don't you explain that in more detail as the lead scientist here? Yeah.

Thank you for the question and sorry for the technical flaws. Our TYK2 inhibitor is similar to the front runners -- is highly selective and potent, but it is also differentiated mechanistically because it doesn't -- it does preserve the IL-10 pathway, which is an important immune regulatory negative feedback loop to the immune system, also signaling through TYK2, our in vitro profiling compared to the front runner, allosteric TYK2 inhibitors, the BMS compound as well as the Takeda compound codes that both of them show a dose and exposure dependent partial inhibition of the IL-10 signaling pathway, which is not the case for 3667. And IL-10 is a key component in the pathogenesis of many autoimmune diseases. It's critical for regulatory T cell differentiation. It's a key effect of cytokine on the regulatory path, and we selected diseases, which are not only interferon-driven but also connected to a regulatory T cell deficiency functional as well as numerically which is why we hope to learn from the ongoing studies, whether this IL-10 differentiation is of clinical relevance. So this we hope to learn from the Phase II data readouts. Does that answer the question?

Yes.

Yeah. Thank you.

Thank you. We will move on to our next question. Our next question comes from the line of Shan Hama from Jefferies. Please go ahead. Your line is open.

Hi. Thank you. Just a follow-up from me. In terms of capital allocation for business development, how much weight would you put on the internal pipeline versus external innovation? So is there a more important key focus at the moment? Thank you.

Yeah. I'd say, I mean we're very focused on, obviously, our internal pipeline and developing that. But given our capital position, we do think that allocating a substantial amount of that to business develop makes a lot of sense to broaden our portfolio. So we do look at opportunities to bring in significant innovation.

Thank you. We will move on to our next question. Please stand by. Our next question comes from the line of Faisal Khurshid from Leerink Partners. Please go ahead. Your line is open.

Hi, guys. Thanks for taking the question. Just to clarify, do you expect to deliver on any additional BD within the year? And if so, what type of deal structure or stage of development are you considering? Thank you.

Yeah. I would say, it's hard to predict whether we have a deal closed by the end of the year or not, but we are in active discussions with different parties. There's a number of targets that we're very interested in. And we'll update you when we can.

And we follow the principle of focus on clinical assets, which can deliver a differentiated profile in oncology and immunology, but also with the potential for an accelerated development, accelerated approval focusing on very high unmet medical need and selecting very carefully the medicine which we could deliver significantly before the end of the decade.

Thank you. [Operator Instructions] We will now move on to our next question. Our next question comes from the line of Sebastiaan Van der Schoot from VLK. Please go ahead. Your line is open.

Hi, team. I was wondering, I understand that you first focus on the Boston area with the CAR-T approach. But can you give some insights into what steps are that are still required to activate the other manufacturing sites? And then also give some insights into how the contracts with the U.S. manufacturing sites are structured? Is it a cut on the royalty payment? Or are they in the end take per product delivered?

Yeah. Let me take that. Obviously, the tech transfer process takes a bit of time to get one site established, Landmark Bio has been validated. And of course, we're now ready to enroll patients into that study in the U.S., which is a major milestone. We do have other sites like Thermo Fisher and now with BCA, with Excellos and San Diego, we essentially structured those deals to basically pay for their services and of course, per product provided. So it's basically the CDMO service essentially. We do think that we'll have Thermo Fisher, we're actively working on the tech transfer and we'll have that site up early next year as well.

Great. Thank you.

Thank you.

Thank you. Since there are no further questions, this concludes today's earnings call. Please feel free to reach out to the Galapagos IR team if you still have questions. Galapagos' next financial results call will be the full year 2024 results on February 13. Thank you all for participating and have a great rest of your day.