Galapagos N.V. (GLPG) Q3 2025 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Galapagos Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, Dr. Glenn Schulman, Head of Investor Relations. Please go ahead.

Thank you all for joining us today as we report Galapagos' 9-month 2025 financial results. Last evening, we issued a press release outlining these results. This release, along with today's webcast presentation, can be found on the Galapagos investor website. Before we begin, I would like to remind everyone that we will be making forward-looking statements. These forward-looking statements include remarks concerning future developments of our company and our pipeline and possible changes in the industry and competitive environment. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those indicated by these statements and are accurate only as of the date of this recording, November 6, 2025. Galapagos is not under any obligation to update statements regarding the future or to conform to these statements in relation to actual results unless required by law. You are cautioned not to place any undue reliance on these statements. Joining us on today's call from the executive team are Henry Gosebruch, Chief Executive Officer; Aaron Cox, Chief Financial Officer; Sooin Kwon, Chief Business Officer; and Dan Grossman, Chief Strategy Officer of the company, all of whom will be available during the Q&A session. With all of that, let me now turn the call over to Henry Gosebruch, CEO of Galapagos.

Thank you, Glenn, and thank you all for joining us today. It has been a very active time here at Galapagos as we have worked tirelessly toward advancing the transformation of our company. This transformation has been ongoing for several years, and I firmly believe we have a bright future ahead of us. Earlier this year, we announced our decision to separate the company into two entities with Galapagos advancing its cell therapy programs and the planned launch of a SpinCo that would focus on business development and be funded with approximately EUR 2.45 billion in existing cash. However, in May, it became apparent that the spin-off could not be executed as planned, and the Board took swift and decisive action towards a different path to realize value, and I was honored to be named CEO. The Board gave me a clear mandate to analyze strategic alternatives for our existing businesses, including cell therapy. In addition, I was asked to further refine the strategy for deploying our cash resources into transformative business development and rebuilding our pipeline. We moved quickly, brought on advisers and commenced a thorough strategic review and sale process to identify potential buyers or investors with the expertise and resources to take the cell therapy business forward. We were highly motivated to identify a buyer or investor who could not only support the ongoing investment requirements in the business but also honor the efforts of our employees, who have put their blood, sweat and tears into the cell therapy business over the past several years. However, after a 5-month process, there were no viable proposals presented that would reasonably support the business going forward. We offered to divest the business for minimal upfront consideration and, where appropriate, we even offered to provide capital support to potential buyers. But no party was able to provide committed financing to enable a viable acquisition of the business. One key reason is that several hundreds of millions of euros would be required for any such deal given the significant ongoing investment requirements not only in the business but also to stand behind the obligations to our employees. After this comprehensive review of strategic alternatives and given these ongoing investment requirements, coupled with evolving market dynamics and taking into account the interest of all relevant stakeholders, the Board unanimously agreed to form an intention to wind down the cell therapy business. Given the impact on our employees and ongoing operations, this was a difficult decision. But I firmly believe it was the right decision given our circumstances. Now that the strategic review process has concluded, we are actively consulting with the works councils in Belgium and the Netherlands to seek their advice in order to implement this wind down. During this ongoing consultation process regarding the intended wind down, we would consider any viable proposals to acquire all or a part of the cell therapy activities if such a proposal emerges during the wind-down process. In parallel to all this activity, we have assembled what I believe to be a world-class team focused on executing our business development strategy. Our deal funnel has been building steadily, and I'm confident that we can identify and execute on opportunities that can bring exciting new opportunities to Galapagos in our pipeline. I will share more detail on our strategy in today's presentation. As part of our ongoing transformation, we have also welcomed four new Board members over the past 6 months. I am delighted to be working with Jane, Dawn, Neil and Devang on the Board going forward. And I would like to again thank Peter, Simon, Elisabeth, Susanne and Andy for all their valuable contributions during their time on our Board. As I mentioned, our intention to wind down the cell therapy business is subject to the conclusion of consultations with work councils in Belgium and the Netherlands, which is standard practice in Europe. During this period, Galapagos will continue to operate the business. If the wind down is ultimately implemented, we anticipate that up to approximately 365 employees would be impacted across our offices in Europe, the U.S. and China. Also, we would plan to close Galapagos sites in Leiden, Basel, Princeton, Pittsburgh and Shanghai. In this scenario, we would effectively proceed with a full exit of our cell therapy activities and we would expect to incur the costs detailed on the slide, which will be discussed in more detail during Aaron's review of financials later on this call. We are deeply grateful to our dedicated employees, investigators, patients, shareholders and partners for their continued commitment and support. We will stand behind our obligations as an employer to treat our employees fairly throughout all of this. The remaining Galapagos organization will be repositioned for long-term growth through transformational business development and would maintain a dedicated presence at our headquarters in Mechelen, Belgium. We hope to complete the works council process quickly as we aim to provide more clarity to our employees and stakeholders as soon as possible. Although it is difficult to predict the exact duration of this process, we currently expect it to be concluded in the first quarter of 2026. I wanted to spend a few minutes on the last remaining legacy R&D program, our TYK2 program. Our development team has done an excellent job progressing the Phase III enabling studies, and we expect to see data from two studies by early '26, ahead of our original expectations. The studies are now fully enrolled and the remaining spend related to this program is moderating. GLPG3667 is a differentiated oral TYK2 inhibitor currently in two Phase III enabling studies for SLE and dermatomyositis. At the recent ACR conference, we presented new in vitro pharmacological data suggesting additional differentiation of 3667 from two other TYK2 inhibitors. 3667 demonstrated inhibition of the interferon-alpha and IL-23 pathways with no measurable impact on TYK2 independent pathways. Additionally, 3667 showed no inhibition of IL-10. These findings support our belief in the program's potential, and we are looking forward to reporting data from the two fully enrolled trials in early 2026, which will guide us towards the next steps to maximize value for this program. Now let's review the other assets we have at Galapagos. Our significant scientific successes over our 25-plus year history have enabled Galapagos to attract significant capital. And today, we have the benefit of a significant cash balance as well as a portfolio of other attractive assets that can drive additional shareholder value. Our cash balance of approximately EUR 3 billion represents approximately EUR 46 per share. This cash balance generates significant interest income. Through the first 9 months of this year alone, we received approximately EUR 77 million. In addition, we are receiving an attractive stream of royalties and earn-outs from Gilead and Alfasigma on their sales of Jyseleca, the JAK program developed here at Galapagos. The income related to Jyseleca has been approximately EUR 15 million to EUR 20 million annually and is expected to continue into the mid-2030s with potential upside. In addition, we expect to receive tax receivables of approximately EUR 20 million to EUR 35 million per year over the next 3 years with additional opportunities for credits beyond that. We also have stakes in multiple private biotech companies such as Third Arc, Frontier and Onco3R, plus other private companies that haven't been disclosed. Last but certainly not least, we own our building in Leiden. It's a fabulous building, easily the nicest lab and office building I've ever worked in, a state-of-the-art building in which we invested over EUR 70 million for construction and build-out. It opened in 2022 and it's a great asset. As you look at this portfolio in total, I believe we could see the potential for several hundreds of millions of additional value on top of our cash balance from this portfolio. Let's go back to the ongoing transformation of the company. I am incredibly pleased that we have been able to attract new leadership talent to the company that, in my opinion, represents the team with the best business development expertise in our industry. This team has been through hundreds of M&A and business development transactions as principals and advisers. I won't go into their individual and very impressive bios, but they are summarized on the slide. Aside from their bios, having worked closely with each of them, they are not only uniquely talented, but they are wonderful leaders with strong values and all are excited to be part of our transformation and drive significant value for patients and shareholders going forward. I am very proud to work with this talented group every day as we execute our mission and vision. In addition to our executive talent, we have also assembled a fantastic group of outside advisers that have joined our Strategic Advisory Board. These four individuals have brought numerous drugs to patients, and we are collaborating closely with them as we prioritize the many potential BD transactions in front of us and diligence individual opportunities. Let's jump into our business development strategy. Let me start with what Galapagos brings to the table as we pursue business development. We see several key strengths that provide us a unique advantage. First, we have built the team to execute creative BD deals. Second, we have significant capital to invest in promising programs and science. Third, we can be incredibly flexible in our approach as we are not constrained by an existing pipeline. For example, we can enable external teams or companies to pursue their programs with our capital. Finally, we have a unique partnership with Gilead that I believe also represents a unique asset for us that I will discuss some more in a minute. We will be financially disciplined and focused on value creation while pursuing programs we believe can make a clear difference for patients. We've identified some key focus areas for our activities. First off, we will focus on what we believe have been meaningfully clinically derisked and differentiated opportunities. We are looking for opportunities that can substantially enhance the standard of care in a disease and have clear patient impact. We will initially prioritize areas where there is a strategic synergy with Gilead. Next slide, please. Now let me turn to our existing partnership with Gilead. We've been getting a lot of questions on why we believe it's in our best interest to work with Gilead on business development opportunities. So we wanted to address that here. Let's start with the obvious. Gilead owns 25% of Galapagos and has an existing collaboration agreement, the OLCA as we call it, that allows Gilead to opt into U.S. rights of proof-of-concept assets at Galapagos at relatively favorable terms. These terms were originally envisioned for programs that came out of our original discovery platform, but they also apply to business development opportunities we would bring into the company at this stage. For most assets we might consider bringing in, Gilead's option to acquire U.S. rights for $150 million upfront would likely represent too much value leakage to make a deal attractive for us. However, Gilead has expressed a willingness to renegotiate these terms, and we share a joint perspective that by working together, we can create win-win deal opportunities that create more value than each of us could drive individually. What does that look like? Gilead has expressed a willingness to contribute capital to our BD activities and they are also bringing their capabilities to the table, such as their technical due diligence team. By working with them, we might be able to find unique value creation opportunities where, on a combined basis, we might be able to unlock more value in a portfolio than a single party would be able to. And finally, Gilead's commercial expertise will bring additional credibility to our efforts. Our partnership also allows for creative deals that could drive structural and financial benefits that Gilead may not be able to achieve on their own. I've known some of the key leaders at Gilead for many years, and I'm quite pleased with the close collaborative working relationship we have strengthened over the past several months. In conclusion, I am confident we can find win-win opportunities that will create value for Galapagos shareholders and Gilead. Let's explore how working with Gilead may open opportunities that would otherwise not be available to us. There are many deal structures possible. However, we thought it would be helpful to share just three illustrative examples. Starting on the left side, we can partner with Gilead to jointly acquire or license an opportunity. For example, these deals could potentially involve us acquiring public stock. In the middle, there could be opportunities where we at Galapagos may see value in one asset and Gilead may see value in another asset at the same company, thus enhancing our ability to structure a value-creating deal for a multi-asset company. And finally, on the right, our cash balance makes us a very attractive merger partner, recognizing we would, of course, require receiving fair value for our portfolio of assets in any business combination. So how do we operationalize our strategy? We will be flexible on ideas but financial discipline will be key, and we will balance intrinsic risk of each opportunity with overall portfolio risk. Said in another way, if we dedicate a large portion of our capital to one opportunity, we must have very high confidence in that opportunity to create value. For any significant transaction, we believe we can renegotiate our existing agreement with Gilead to enable win-win deals for both. Of course, nothing prevents us from doing transactions on our own to the extent that they could drive value over the long term. However, I hope I've been clear why we believe working with Gilead can broaden our set of opportunities and create shareholder value. As we execute on our strategy, we believe we can work to eliminate our current trading discount and open our deal aperture even more. Now let me address a few other important topics. As I mentioned earlier during this call, the transformation of Galapagos is well underway. Looking ahead and if the intention to wind down is ultimately implemented, Galapagos would be a much leaner and strategically focused organization. We will maintain our headquarters in Belgium, leveraging the experience and talented teams in place there across a number of functions. Many investors have asked us whether we will return capital to shareholders. While our goal is ultimately to drive value for our shareholders, it's important to recognize that any return of capital would require alignment with Gilead given their 25% ownership and the terms of our existing partnership agreement with them. In addition, even as permitted, Belgium law imposes certain limitations on capital returns to shareholders. Given we do not have any distributable profits available at the current time, the ability to distribute would require a resolution at an EGM with at least 50% of shares present at the meeting and at least 75% approval. So again, while this could be an interesting alternative down the road, for now, we are focused on using our capital for business development opportunities. With that overview, I would now like to turn the call over to Aaron Cox, our CFO, to review our 9 months financial results. Aaron?

Thanks, Henry, and hello, everyone. In the press release issued last night, we detailed our 9-month financial results through the quarter ended September 30. Total operating loss from continuing operations for the first 9 months of 2025 amounted to EUR 462.2 million compared to an operating loss of EUR 125.6 million for the first 9 months of 2024. This operating loss was negatively impacted by an impairment on the cell therapy business of EUR 204.8 million as a result of the strategic alternatives process for the cell therapy business. Additionally, there was also a EUR 135.5 million impact related to the strategic reorganization announced in January 2025. This EUR 135.5 million is comprised of severance costs of EUR 47.5 million, costs for early termination of collaborations of EUR 45.5 million, impairment on fixed assets related to small molecules activities of EUR 9.5 million, deal costs of EUR 21.4 million, accelerated noncash cost recognition of subscription rights plans related to good levers of EUR 9.8 million and other operating expenses of EUR 1.8 million. Net other financial income for the first 9 months of 2025 amounted to EUR 30.4 million compared to net other financial income of EUR 71.7 million for the first 9 months of 2024. Interest income amounted to EUR 31.4 million for the first 9 months of 2025 compared to EUR 70.6 million of interest income for the first 9 months of 2024 due to a decrease in the interest rates and a shift from investments in term deposits generating financial income to investments in money market funds generating fair value adjustments. Notably, fair value gains and interest income derived from cash, cash equivalents and current financial investments excluding any currency exchange rate impact amounted to EUR 77.2 million for the first 9 months of 2025. Financial investments, cash and cash equivalents totaled EUR 3.05 billion on September 30, 2025 as compared to EUR 3.32 billion on December 31, 2024. Our cash and cash equivalents and current financial investments included $2.16 billion held in U.S. dollars versus $726.9 million on December 31, 2024. These U.S. dollars were translated to euros at an exchange rate of 1.174. As we announced with our first half 2025 results, we continue to hold approximately 60% of our cash in U.S. dollars and 40% in euros. As I mentioned, cash and investments as of 9/30/2025 was EUR 3.05 billion, representing EUR 46 per share. Looking forward, we anticipate ending 2025 with approximately EUR 2.975 billion to EUR 3.05 billion in cash, cash equivalents and financial investments excluding any business development activities and currency fluctuations. As the intention to wind down is confirmed and implemented, following the Works Council processes, we would expect to incur the following cash impacts related to our cell therapy business: EUR 100 million to EUR 125 million of operating cash impact from Q4 2025 through 2026 with EUR 50 million to EUR 75 million of this being in 2026 and EUR 150 million to EUR 200 million of onetime restructuring cash costs in 2026. Lastly, as the intention of wind down is implemented and completed, we would expect to be cash flow neutral to positive by the end of 2026 excluding any business development activities and currency fluctuations. Now let me turn it back to Henry to wrap up.

Thanks, Aaron. In summary, it has been a transformative time at Galapagos. We are committed to building a novel therapeutic pipeline that can have meaningful impact for patients. We will provide updates related to discussions with the Belgium and Dutch works councils as appropriate. As I mentioned, our deal funnel has been building steadily and we will remain disciplined and will only execute on any opportunity in front of us if we believe we can create value. We are confident we have the team in place to execute and look forward to the future with optimism and purpose. So with that, thank you all for your attention, and we will now open it up for your questions. Operator?

[Operator Instructions] We will now take the first question from the line of Faisal Khurshid from Leerink Partners.

Really phenomenal presentation today. I just wanted to ask, maybe for Aaron or for Henry, when you say that you expect to achieve cash flow neutral to positive status by year-end '26, can you talk a little bit about what the assumptions are that go into that?

Sure. Sure, this is Aaron. We will -- the assumptions that go into it are primarily related to interest income, one. So we made some assumptions on interest rates based on the forward curve and our cash balance. It doesn't assume any BD activity. Obviously, if we use cash for BD activity or take on additional burn with any BD activity, that could impact that forecast. We also have income, as we outlined on Slide 7, related to Jyseleca. We have tax credits coming in related to tax refunds from Belgium and other countries in the region. And we also assume that we are through the works council process and we've implemented and completed the wind down.

Got it. That's helpful. And then for Henry or for Dan, you guys mentioned that you have -- that the deal funnel is currently building. To the extent that you're able to speak to it, could you talk to us a little bit about what kinds of opportunities are in the deal funnel, what those look like and your kind of level of optimism around that?

Yes. No, thanks. It's Henry. I'll start and I'll turn it over to Dan. I mean, as we outlined in the prepared remarks we're focused on opportunities that are clinically derisked. So we're looking at mid- to late-stage opportunities. Again, that can be M&A, partnerships. We're looking at many different structures. But it's clear that there is a lot of capital required in biotech still. And while perhaps the access to capital has improved slightly, there are still many companies that would benefit from capital from us, partnerships, et cetera. So with that, maybe I'll ask Dan to put a little bit more color on it.

Thanks for the question. This is Dan. I would just add the therapeutic area overlay, which I think is an important one. We're in the fortunate position really not having too many legacy attachments of being able to consider opportunities across a wide range of therapeutic areas. But as Henry indicated, for the early deals, we think it's a high priority to the extent we can to collaborate with Gilead, to go in with Gilead on deals. And that brings us to look for assets or at least deals that have some anchor asset that is mutually value-creating for both of us but also strategically aligned with Gilead's direction. That brings us to the therapeutic areas of oncology and immunology or inflammatory disease.

Got it. Okay. And then just one last one for me, if I can. Just kind of maybe combining like the two questions in a way. Henry, can you speak to us about the kind of like relative balance between kind of being conservative and you not going for a deal and kind of getting to the status of being cash flow positive versus doing BD? Like how do you kind of balance those two priorities in a way?

I think they're both really key focus areas. I mean, we have to get through the works council process that we outlined as quickly as we can and then leverage again the broad set of assets we have today and outlined, so the cash balance that generates interest, the good growing and attractive royalty stream, we're getting the tax benefit. So that sets the base. But look, the intent is to ultimately use our cash balance to find opportunities that create a positive return and incremental return on that cash balance. And as we've outlined, we have EUR 46 per share in cash and we're trading obviously at a much, much lower number. So to the extent we can put that cash to work and create a return on that cash, I think there's tremendous upside in our story here. And so that's what we're focused on.

We will now take the next question from the line of Brian Abrahams from RBC Capital Markets.

I'm curious if you could talk about what your expectations would be for Gilead to contribute to the deal process really in terms of their expertise. Would this be kind of expertise in identifying a transaction? Or might you expect commitment to providing resources or expertise on development prior to a formal opt-in? And then just secondarily, really quickly. In the past, I think you've talked about virology as another area that might be of interest. You didn't mention it today. Just wondering if we should assume that, that's not as high a priority as oncology and immunology and inflam?

Yes. Brian, it's Henry. Thanks for the question. So on the first part, I'd say, again, I'm incredibly pleased with the relationship that we've strengthened with Gilead. And on several of the opportunities that we've looked at, they have contributed really along the lines of what you've talked about both their diligence expertise in looking at those opportunities. They've offered capital both upfront and, in some cases, if there's a portfolio of assets, to take some of these assets and develop them at Gilead, leveraging their infrastructure. So it can really take many forms. I think the bigger point is that I think they're coming to the table, as are we, with a very constructive sort of win-win attitude. And that can take many different forms. So we don't have to limit ourselves to that current partnership agreement where we would do the deal and then they would opt into certain opportunities. It can be really a much broader situation. And again, we're quite pleased with their commitment in our working relationship. And I'll ask Dan maybe to talk about the therapeutic area and the question on virology.

Yes, that's fair. Thanks, Henry, and thanks also for the question. Before that, I'll reiterate Henry's point. I mean, we will make our own decisions about deals that we do. We will do our own careful diligence on key aspects of any asset we consider bringing in. In terms of the question about virology, I would say you're correct that it is of lower priority. I wouldn't say we would necessarily rule it out, but this is an area of enormous strength for Gilead. And frankly, our funnel is very, very nicely filling with oncology and I&I already.

We will now take the next question from the line of Phil Nadeau from TD Cowen.

Just one question on the Gilead relationship. We understand the strengths of working with Gilead due to their expertise and the commitments you have through the OLCA agreement. But it seems like one potential drawback would be speed in collaborating and getting to a decision point. In the past, we've seen big organizations take a long time to sometimes make decisions. So how is that contemplated in your strategy? Are there ways that you can assure that Gilead is ready when you need them and the two of you even collaborating can be competitively fast?

Yes. Phil, it's Henry. Look, good observation. And we have to be fair, yes, that does create some complexity. So that is a fair comment. But I think it goes back to having a very collaborative relationship. Gilead is represented on our Board so they see some of the activity we're doing. And again, as I said, I'm very pleased with the ongoing dialogue we have. And so the more we can do in terms of working together and doing joint work ahead of making a formal approach to a company, as an example, or tabling an offer term sheet, if we can in a way sort of prewire some of what it would look like in terms of us and Gilead, then it really shouldn't impact the process ultimately with a potential partner or target. But yes, we do have to acknowledge there's some additional complexity. I guess the last thing I'd say is, look, we've built the team here that has been through many, many very, very complex BD transactions. So it's nothing that anybody here hasn't done in prior context. And I think on a combined basis, I feel we have just a phenomenal team to work through that complexity.

We will now take the next question from the line of Jason Gerberry from Bank of America Securities.

This is Chi on for Jason. There's obviously a lot of focus on bolstering the pipeline from external means. But my question is actually on the internal existing pipeline. Can you talk about the potential plans for 3667 upon completion of the two Phase III enabling studies in lupus and dermatomyositis? Are you leaning towards divesting the asset in favor of BD activities? And how might the different data scenarios help inform that decision? And I'm also wondering, do you have any refined thoughts on the strategy for dermatomyositis given the brepocitinib top line results from the VALOR study in the DM?

Yes. It's Henry. Thanks for the question, Chi. So the company prior to us arriving had started a process talking to potential partners about 3667. Just recognizing that if that asset has the type of data in Phase II that would enable a comprehensive Phase III program, that would take expertise and resources that we currently don't have. And so in that context, a partnering process was started earlier in the year. Given we're so close to data now with data expected early next year, that process is currently not active, but I think it's something we would come back to. So to answer your question, I think we would look at the data very carefully and then we would think through what are the capabilities required if there's a path forward and who is best positioned to maximize the value. And that may well not be us. That may well be one of the players with established infrastructure, and that's sort of how we would how we look at that. As to your specific question on dermatomyositis, I mean, of course, we're paying close attention to the TYK2 landscape and the other landscape in I&I that impacts these diseases. And we'll look at what the target product profile is and what the bars we need to meet in these Phase II studies. So the team is all over that. But all of that will go into a decision sometime early next year in terms of the next steps for 3667.

We will now take the next question from the line of Sean McCutcheon from Raymond James.

This is [ Yang ] for Sean. We have a question on the cell therapy wind down process. Could you please walk us through the timeline for the wind down and the continued efforts in this process? And also, do you think you may get some additional interest getting the update on the incoming ASH?

Yes. No, thank you for the question. So again, I recognize that for many American investors or analysts, you may not be as familiar with the way the process works in Europe. But in Europe, the Board can really only form an intention to wind down and that intention is subject to consultation with works council. So you're essentially explaining to works council what the rationale is, why it's the best decision for the company. And that process usually takes several months. As we said in our prepared remarks, it's hard to predict exactly how long that takes, but we expect that to be concluded in Q1. So that's what we can say about that. During the process, we are open to receiving viable proposals. But as we said in the prepared remarks, at this point, nobody has come to the table with committed financing. As I said, it would take several hundreds of millions of euros of committed financing to not only take the business forward but stand behind with a pretty sizable employee obligations. And we, of course, are going to treat our employees very fairly in all of this. So again, if an offer does emerge during this process, we're quite open to considering it. But again, we hope to have resolution here in Q1. And we'll, of course, keep the market posted as we make progress in these consultations with works council. So I hope that answers your question.

We will now take the next question from the line of Jacob Mekhael from KBC Securities.

I have one on the topic of BD. You mentioned that you will after derisked programs with proof-of-concept. So I'm just curious, how will you ensure that you obtain such programs in a cost-effective way? And perhaps, are you prepared to pay a bit more in order to get access to the best programs and targets?

Yes. It's Henry. Let me start on that question. We're going to be quite financially disciplined. So at the end of the day, it's really about do we see an opportunity that we think allows us to create value from here. Again, that may well involve partnering with Gilead on the basis we outlined where, on a combined basis, maybe we can see that incremental value that would be hard to realize for other parties. So at the end of the day, yes, when you are ultimately the party that does the transaction, generally speaking, you're going to pay more than everybody else. Otherwise, you won't be able to do the deal. But again, I'm quite confident given the environment and given how our deal funnel is building, we'll find those opportunities. But we're going to be quite disciplined. So if it takes another quarter or 2 or 3 to find the right deal, it will take another quarter or 2 or 3. We're not going to rush into anything, I think. Well, of course, I recognize shareholders and analysts want some clarity of what the deal is and what the pipeline looks going forward. We're not going to compromise on the financial criteria that we'll use to analyze the deal. Does that answer your question?

Yes, very clear. Maybe just a follow-up on that. Given that any deal that you would take over, you'd need to continue developing it until approval either by yourself or in collaboration with Gilead, can you share anything on how much capacity for deal making does that leave you with?

Yes. No, it's a good comment. So look, our roughly EUR 3.1 billion is really a phenomenal starting point plus, again, these other assets that are helping us get to positive cash flow on top of that. But yes, of course, we need to reserve some capacity for what might be a Phase IIb or Phase III spend for any asset we bring in. So that is absolutely part of the deal modeling we're doing. And that's the comments we made earlier. Again, if we dedicate a large portion of that capital into one opportunity, we really have to be quite confident that, that opportunity will create value. If we spread the risk over several opportunities, maybe we could have a slightly different perspective. But the ongoing development requirements are absolutely something that we're quite focused on. And there, again, this is where the partnership with Gilead could come in, where we might be able to split some of those ongoing requirements and on a joint basis come up with a mutually value-creating structure.

We will now take the next question from the line of Sebastiaan van der Schoot from Van Lanschot Kempen.

Really clear on the strategy. I just had one question for our side. Can you provide some clarity on whether potential transactions, whether they would also bring in R&D capabilities? Or is that something that you don't want to take on with newer transactions?

Yes. Sebastiaan, it's Henry. That's a very good question. Again, one of the, I think, very attractive features we have here at Galapagos is that we can be flexible on what that looks like. So it could be that, yes, with an acquisition, there might come a very capable team. In fact, it might be very attractive for certain teams just to join us at Galapagos and essentially stay intact and continue to work on their asset. But it might also be that our capital just enables an external party to continue to do the work and we won't have that capability at the company, but we essentially fund that existing capability at a third party. So honestly, we're not focused on one over the other. I think it's whatever is right for any opportunity, whatever is the best way to create value. Now I will say we do have the TYK2 development team still in place. So that does give us a starting point if we wanted to build it further from there. But again, it really depends on the opportunity, and we want to be open to whatever creates the most value going forward.

Got it. And then I'm just wondering whether -- if you compare it to the past, whether Gilead's involvement in the setting process for potential transactions has increased compared to before. Maybe you can comment on that.

Well, look, I don't want to really talk about the past. I'm really more focused on how we're moving forward and how we create value from here. And I think to this question and also the question that I think Phil asked a little bit earlier, I do think it's important that we coordinate with Gilead on these joint opportunities. And yes, that involves talking to them, meeting them, understand mutually how we can create value on certain transactions. So again, I can't talk about the past. I can only talk about the future. And as I think we've been clear on, we don't have to go through Gilead. We don't have to work on everything with Gilead. But we think for opportunities that are jointly aligned, that can create more value for our shareholders than doing it on our own. And I think our approach will be to continue to work with them very collaboratively. Again, I'm quite pleased with how that's going. They're coming really with a kind of a can-do attitude and we plan on continuing that approach.

[Operator Instructions] We will now take the next question from the line of Delphine Le Louet from Bernstein.

Hello, can you hear me well?

Yes, we can hear you fine.

Perfect. I was wondering, and a bit of a follow-up regarding the Gilead partnership, regarding their investment which was so far mostly philanthropic. I was wondering how long the collaboration would last for or will take place for now? Is it something like a 5-year agreement that you have in mind? Or is it shorter, 3-year time? And I was also wondering, what is the underlying KPI? Is it an ROI number? Is it a number of assets? Is it a progress in the pipeline? Can you be more specific on that, please?

Okay. We heard a little bit of background noise. So I think you asked what's the length of the Gilead agreement. Is that the question?

In a way, because Gilead is obviously a preferred partner so far and will help you in the selection. But obviously, I'm asking, will that long for 3, 5 years? Or what is the underlying KPI? Is it an ROI number? Is it a number of asset? Is it progress in the pipeline? What is the underlying you should have in mind?

Okay. Yes. I'm sorry, there was a lot of background noise, but let me attempt to answer your question. So what we're talking about is what we call the OLCA agreement. So that is that broad collaboration agreement that was signed roughly 6, 6.5 years ago. That was a 10-year agreement. So that has another, call it, 3.5 years running. And it is that agreement that provides Gilead's -- yes, sorry, we're getting a lot of background noise. But again, to stick with the answer, that agreement has another about 3.5 years running. And so it is really that period that we are focused on that goes back to the original deal 6.5 years ago. And in terms of KPIs, again, that agreement was entered with a view towards Gilead having the ability of opting into programs that came out of the Galapagos research platform. Now of course, with time moving on, this is no longer the current situation today. So now it's really more about business development that we would be doing and working with Gilead in this period, as we've outlined, to jointly complete transactions that will create value for them but very importantly, of course, for our company as well. Does that answer your question?

All right. Yes, yes, definitely.

Thank you. There are no further questions at this time. I would like to turn back over to Glenn Schulman for closing remarks.

Thanks, Sandra, and thanks, everyone, for your time today and your attention. As the team discussed, there's indeed a bright future as we continue to undergo these transformations at Galapagos. For your awareness, I wanted to mention that our corporate events calendar is provided here in the deck and also posted on our investor website. With respect to upcoming investor conferences, the team will be hosting a fireside chat in 2 weeks at the Jefferies London Conference on Wednesday, November 19. And looking ahead to 2026 already, the team will be attending the Annual JPMorgan Conference in San Francisco and the TD Cowen Conference in next March up in Boston. Please feel free to reach out to your respective bank reps to request a meeting with the team, or you can reach out to me directly to find the time to catch up. Thanks, everyone, and have a great day.