Galapagos N.V. (GLPG) Q1 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Galapagos's Q1 2026 Financial Results Conference Call. [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, Sherri Spear. Please go ahead.

Hello again from Belgium. Thank you for joining us today as we report Galapagos's First Quarter 2026 Financial Results and Business Update. Last evening, we issued a press release outlining these results. This release, along with today's presentation, can be found on the Galapagos investor website at www.glpg.com. 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 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, May 7, 2026. 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; and Aaron Cox, Chief Financial Officer. Eric Hedrick, Chief Clinical Adviser; Sooin Kwon, Chief Business Officer; and Dan Grossman, Chief Strategy Officer, will be joining us for the Q&A session. With all of that, let me now turn the call over to Henry Gosebruch, CEO. Henry?

Thank you, Sherri, and thank you all for joining us today. It is truly an exciting time to be here. This call marks my 1-year anniversary as CEO, and I couldn't be more proud of what we've accomplished together in the first year of our journey. We have transformed our management team and Board, repositioned our portfolio, added an exciting set of new pipeline programs, and we are changing our name to Lakefront Biotherapeutics. This is not a story of small adjustments. It's a story of real transformation. A transformation like this requires the right people. At Galapagos, we've assembled a management team with world-class business development expertise and a shared mission of leveraging our unique position to develop new medicines for patients and to create significant value for our shareholders. Our executives bring world-class deal making experience and each has an enviable track record. This is a team built for this new phase of our company. We are focused on disciplined decision-making, careful capital allocation, reshaping our pipeline through business development and focused execution that can create long-term sustainable value. As Galapagos transforms, it's also important that the Board brings the right mix of capabilities and background. We are very pleased with the talented group that has joined us. The Board's expertise and background brings the skills and experience that are needed to provide effective oversight of our strategy and the company. Our previous Board Chair, Jerome Contamine, retired from the Board following the 2026 AGM/EGM. I am extraordinarily grateful for Jerome's service. He has been a great partner and provided valuable insights that have positioned us for this next phase of growth. I'm excited to work with Gino Santini as our new Board Chair going forward. Gino is a seasoned pharmaceutical professional with a 27-year career at Eli Lilly, where he served as Senior Vice President of Corporate Strategy and Business Development and led major acquisitions and partnerships. He has advised and directed numerous pharmaceutical, biotech and venture-backed organizations and has relevant experience in M&A, commercial partnerships and Board governance. Gino's extensive operational, strategic and business development expertise shaped by decades of global leadership in our sector will be invaluable as we execute on our strategy to deliver meaningful patient impact and sustainable shareholder returns. Just a few weeks ago, we announced that we had entered into a binding agreement with Gilead regarding the portfolio created by Ouro Medicines. This did not happen overnight. It was the result of a structured process, early relationship building, confidential reviews, negotiations and ultimately, successful agreement on a partnership with Gilead that has the potential to drive significant value for our shareholders. The transaction centers on Ouro's lead program, gamgertamig, a BCMA/CD3 T cell engager for autoimmune diseases with multibillion-dollar revenue potential. Currently in Phase Ib dose-ranging studies and expected to enter registrational studies as early as 2027. Gamgertamig, Ouro's lead molecule is, in our view, a potential first and best-in-class T cell engager that has demonstrated a compelling profile in clinical studies. The collaboration brings a meaningfully clinically differentiated high potential asset into our portfolio. The proof-of-concept initial indications are orphan indications where the clinical trials are manageable in size and scope with significant potential for expansion into additional indications. So far, we've seen compelling data from over 60 patients treated with gamgertamig across 5 distinct autoimmune indications. This clinical experience has highlighted the differentiated profile of gamgertamig characterized by rapid induction of durable complete responses, minimal cytokine release syndrome with the current schedule of administration and remarkable consistency in these findings across studies and disease indications. We look forward to sharing data with investors over the coming months in a series of publication and presentations at medical meetings. We believe that gamgertamig has a clear speed-to-market advantage. The initial focus on the treatment of rare autoimmune diseases has provided rapid proof of concept, enabling initiation of registrational trials as early as 2027. The program has also received Fast Track and Orphan drug designation in the U.S. for ITP and AHA, further supporting an accelerated development path. Finally, the spectrum of diseases that may be addressable by gamgertamig encompasses over 20 separate indications, giving us a pipeline and a product opportunity. In conclusion, we believe gamgertamig could represent a very important new type of treatment approach for immune reset therapy for patients across a large number of conditions. It has shown compelling clinical data so far, and it may have both a first-in-class advantage and best-in-class potential. Our partnership also includes 3 exciting preclinical programs, which we will look to progress with urgency. We look forward to sharing more about these programs in the future. Now I'll turn the call over to Aaron to talk about financials. Aaron?

Thanks, Henry, and hello, everyone. As you heard from Henry, we are really excited about the Ouro transaction. Another major benefit is that it includes a partial waiver and modification of terms of our legacy Option License and Collaboration Agreement or OLCA, with Gilead, marking a meaningful step forward in our strategic and financial flexibility. This slide details the benefits of this transaction relative to our legacy relationship. In short, the participation of Gilead was far above the $150 million expected with the Legacy Agreement. I'm really proud of our team for negotiating far better terms and proving that we are able to work together with Gilead to achieve our common goals. As noted in our transaction announcement, under the revised terms and subject to the closing of the transaction, $500 million is now unlocked for broader use beyond the Ouro investment, enabling Galapagos to pursue new opportunities and transactions independently of Gilead and expanding the universe of potential strategic targets. Additionally, up to $150 million of this $500 million may be used for return of capital to shareholders, subject to certain limitations, providing us with additional optionality to drive shareholder value. This partial waiver and modification to terms of the OLCA further strengthen our ability to deploy capital strategically and to pursue additional value-accretive opportunities. Along these lines, last week, we also received approval from our shareholders to complete a share repurchase. We will provide an update regarding a potential share repurchase following the close of the Ouro transaction. Turning now to our Q1 2026 financial results and as outlined in the press release issued last night. Our total net revenues were EUR 6.5 million compared to EUR 75 million in Q1 2025. This decrease is mainly driven by the prior year comparison, which included EUR 57.6 million related to the OLCA revenue recognition. As noted with our full year 2025 results, the remaining deferred income balance related to the OLCA was fully released at year-end 2025. In Q1 2026, revenues were primarily driven by EUR 4.9 million in supply revenues from Jyseleca inventory sales to Alfasigma and EUR 1.6 million in collaboration revenues, reflecting royalties from Gilead. On the cost side, we continue to see significant reduction in our operating expenses. R&D expenses decreased to EUR 31 million, contributing to an overall improvement in our cost base. This reduction is driven by lower severance expenses as well as the absence of restructuring-related charges that impacted Q1 2025. As a result, operating loss improved to EUR 63.7 million compared to EUR 158.7 million last year, which included EUR 111 million in restructuring costs. Moving below operating income, we reported net financial income of EUR 77.7 million, mainly driven by positive fair value adjustments and favorable unrealized currency exchange gains on our U.S. dollar-denominated cash and investments of EUR 64.3 million. This led to a net profit of EUR 14.5 million for the quarter compared to a net loss of EUR 153.4 million for the first 3 months of 2025. Financial investments and cash and cash equivalents totaled EUR 2,982.2 million on March 31, 2026, as compared to EUR 3,297 million on March 31, 2025. The quarter end cash balance meaningfully benefited from a decrease in the U.S. dollar to euro exchange rate, which moved from $1.175 at year-end 2025 to approximately $1.15 at the end of the quarter. Turning now to our guidance for 2026. With the closing of the Ouro transaction expected in the second quarter, we expect to spend EUR 60 million to EUR 75 million on Ouro-related cash expenditures, including operating costs and transaction expenses in 2026. Along with the upfront payment of approximately EUR 713 million, this results in total Ouro related cash expenditures of EUR 775 million to EUR 790 million for 2026. We continue to expect onetime cash costs of EUR 125 million to EUR 175 million related to the wind down of cell therapy activities. Inclusive of the Ouro-related expenditures and continued wind-down of cell therapy, we now expect to end the year with EUR 1.975 billion to EUR 2.05 billion of cash and cash equivalents. Importantly, the company remains robustly funded. Following this transaction and including estimated R&D spend associated with gamgertamig until first approval, the company will continue to have a majority of its current cash remaining for additional strategic transactions and other capital allocation priorities. Now let me turn it back to Henry to wrap up.

Thank you, Aaron. In closing, I'm just thrilled to introduce you to the new Lakefront Biotherapeutics. To us, Lakefront symbolizes the attractive opportunity in front of us and the new beginning we are creating. My most reflective moments often occur when I'm out exercising on Chicago's Lakefront. Our new name captures what we aspire to achieve for patients, enhanced quality of life, meaningful positive impact and more time for what matters most. It represents helping patients move toward a better future with greater hope and possibility. As of tomorrow, May 8, we expect to be listed as LKFT on Euronext and NASDAQ, symbolizing another pivotal step in our transformation. 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 Brian Abrahams from RBC Capital Markets.

Congrats on all the transformation over there. I was wondering if you could give us maybe your latest thoughts on what the dose-ranging gamgertamig data will need to show specifically just in terms of B-cell depletion, depth and durability, CRS rate reductions to move forward in registrational, how you're going to be picking which registrational trials to begin first? And just any more thoughts on the potential size and complexity of these trials that could start next year?

Brian, it's Henry. Thanks for the question. I'll start, and then I'll have Eric supplement. So first of all, look, we -- as we said on the prior discussion, we had a chance to really thoroughly diligence not only gamgertamig, but other programs out there with other T cell engagers. And we've seen really compelling data from over 60 patients that showed very rapid onset, very deep depletion and very good durability. And so again, as we've talked about, that will come out here in the next couple of quarters in terms of individual releases at medical meetings and other publications. So just for context. But I'll let Eric go through the specifics on the 3 points you raised. Eric?

Yes. Thanks, Henry. Brian, thanks for the question. Sort of expanding on what Henry just said, I think the team at Ouro has done really good work on exploring dose ranging here. I would say that the profile that would be an optimal profile for going into late-stage development would be one where you get profound B cell depletion, but a dose duration schedule that minimizes CRS risk. And I think at the current dose and schedule, we referred to this previously, it really does seem like alterations in the dose and the duration of therapy can really minimize the CRS risk. I think the other aspect here that's important will be having a dose that results in a period of B-cell depletion that is deep, but relatively short, right, so that you can minimize the infectious risk, the need for supplemental intravenous immunoglobulin. And again, I think the team at Ouro is well on your way to identifying that dose. And we fully expect that by 2027, we'll be comfortable with the doses that we take forward into Phase III programs.

We will now take the next question from the line of Judah Frommer from Morgan Stanley.

I think we saw another transaction recently for BCMA/CD3. There are several assets in the space. Just curious how you think the space might evolve and how you're thinking about development plans. Do you see room for multiple assets targeting the same mechanism within the same large indications? Or do you think this is going to be an area where various assets are going to kind of carve up sub indications, maybe stick to smaller indications as opposed to necessarily all going after the same large ones?

Yes. Thanks, Judah. It's Henry. So again, just for context, we were able to diligence multiple opportunities in some depth, and we're quite pleased that our top choice, i.e., gamgertamig was the one that we were ultimately able to transact with. So we continue to believe that gamgertamig is the best alternative out there and has the potential to be first-in-class. That being said, look, we're very encouraged by the fact that we're not the only ones excited about the space that there's a lot of investment going into it. I think that is good to see and ultimately good for patients. The Ouro team has been really, really savvy in terms of picking very interesting indications that we believe are quite sizable, multibillion-dollar potential easily, but where they have a clear timing advantage. And so I think in those places, we're in a really favorable position. That being said, we don't view gamgertamig behind in any other indication as well, and those are being very actively explored. To your question whether ultimately the best drug takes all of it or the market gets split up in some way, I think we'll defer that when we go a little bit further. But again, we're -- based on our diligence of multiple programs, we think we got the first and best-in-class alternative here with us.

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

Congrats on the progress. Two from us. So first on gamgertamig, you've mentioned that it's perhaps best-in-class. Can you go into a little bit more detail about how it is differentiated structurally or otherwise from the other BCMA/CD3s? That's first. And then a follow-on to Brian's question. In terms of moving into pivotal development, can you talk about the framework with which you're evaluating the different indications and opportunities and how you prioritize the first one or several to move forward into pivotal development?

Eric, why don't you take the first one and then perhaps Dan can take the second one.

Yes, sure. Phil, thanks for your question. Yes, I think in terms of differentiation amongst these BCMA-directed T-cell engagers, yes, one of the things that was attractive about the Ouro molecule, I guess there was 2 aspects. One is the detuning of the CD3 binding arm, which we think goes a long way in addition to dosing and significantly reducing the CRS risk. So that was important. The BCMA binding arm is very potent, right? And so we're comfortable that, that from the data we've seen so far is sort of resulting in very deep B-cell depletion and the sort of response in disease that you would associate with profound B-cell depletion. So I think those were the main aspects of the molecule that were attractive to us. And again, the Ouro team has really advanced us very well in the clinic. And I think you're seeing the clinical representations for those molecular features. And maybe, Dan, if you want to comment as well.

Yes. Sure. I'm happy to talk about indication selection. And first, I'll echo what Henry said in terms of appreciation for the Ouro team's strategic judgment in choosing initial indications in which you could get a very rapid and very clear signal of the actual clinical potency of the molecule and particularly in the benign hematologic indications. Beyond that, I mean, we kind of see gamgertamig as a vanguard of T cell engager therapy for autoimmune disease broadly, it's going to really be revolutionary over the next 10 years. We anticipate that there's a high likelihood that in 10 years, it will be hard to imagine there was a time when this was not -- this kind of technology was not part of standard of care across these B-cell mediated autoimmune disease. And so we are really looking for quite a bit of breadth and to get the product out into the clinic and then into the hands of physicians to see what it can do across not just different diseases, but different therapeutic areas. So of course, the first filter is always going to be a mechanistic hypothesis that deep B-cell depletion will result in meaningful clinical benefit to patients. That's sort of effectively a proxy for PTRF. And then within that, we see a range of disease states in which the -- in which the standard of care today and anticipated over the next couple of years is woefully inadequate. So there's the room to the most good for patients where there are material sized patient populations and where the feasibility of running clinical trials and bringing the product to the commercial market is most feasible. So we're going to be balancing those factors, but really looking to show the broad potential of this kind of technology.

Yes. And Phil, it's Henry. Just to add to Dan's answer. One thing that, again, really attracted us in our diligence is that given how profound the impact is on patients that we've been able to see, you really need just pretty small numbers of patients in these diseases to really figure out whether you get the right dosing scheme to take it forward into larger studies. So we quite like the fact that this is very capital efficient. Again, in due time, we'll provide a little bit more on sort of our R&D spend, et cetera. Aaron gave it for this year, of course. But that's another very important feature that there's really relatively modestly sized studies needed and then you can go into pivotal, which are also quite modest given, again, this profound impact on patients we've seen.

We can do a lot with a little at this effect size.

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

This is [Yang], on for Sean. I have 2 questions. Maybe the first one is, could you speak to the optionality on continued BD activities and the prioritization, for instance, targets or indications driven that may have a clear strategy to have a synergism with gamgertamig in autoimmune disease? And I have a follow-up.

Yes. Thanks for the question. It's Henry. So a couple of things. Again, we've said that the majority of our capital is available for other strategic initiatives and future BD. Aaron walked through the $500 million bucket we now have that we can do deals independent from Gilead and we can take a portion of that for return of capital as well. So we're very excited about that flexibility and the substantial capital we have left to look for other BD. That being said, we're very excited about Ouro and the potential that we just in the prior question outlined and the 3 preclinical assets we have that could also be meaningful opportunities. So I would say the hurdle for the next BD deal is very, very high. The hurdle for the first one was also high, but the next one is very, very high because we've got a really, really nice portfolio. We do have increased capability now, and we, of course, have a set of diseases that it could make sense to build on, as you say, to introduce some development or even commercial synergy down the road. But I think the message right now is, look, we're excited about what we have. We're going to be very, very busy executing these programs, and we're in no rush to do a second BD deal here given how much have.

Great. Could you also please comment on the infection risk, hematology events associated with gamgertamig and all the BCMA-TCE class in general and the company's view on the differences it may be associated with CD19 TCE for autoimmune disease.

Eric, why don't you take that one?

Yes. Yes. Thanks for the question. I would say that sort of in relation to the comment I made previously, the infectious risk here really has to do with the duration of B-cell depletion and plasma cell depletion, right? When we're giving -- when team at Ouro was giving this drug in the current dosing schedule, we're comfortable that we're getting to the point where the period of B-cell depletion will be such that the infectious risk should be manageable. So that will be a key point in sort of determining the dose to go forward. But again, I think the key point is that you can dose this drug in such a way that you can have an impact on the period of B-cell depletion and then the infectious risks should really go along with the durability of B-cell depletion. And again, the team at Ouro has done a really nice job at dose ranging and trying to like optimize that period.

We will now take the next question from the line of [indiscernible] from KBCS.

[indiscernible] coming in for Jacob. I had a question on the Galapagos 3667 program. What are the strategic options you're currently considering? And could one of the potential outcomes be that you choose to develop the program in collaboration with Gilead? Or how do you look at that program at the moment?

Yes. Thanks for the question. It's Henry. As we said previously, we're analyzing various alternatives relating to '3667. That process continues, although it's quite well advanced at this point. So we're coming close to the end of that process and making a decision which way to go, and we're assessing kind of a broad range of options. So more to come on that in the not-too-distant future, but it's inappropriate at this point to comment further on it.

I would now like to turn the conference back to Henry Gosebruch for closing remarks.

Very good. Well, thank you for your time today. We look forward to closing the Ouro transaction here in the second quarter and welcoming the team from Ouro to join us here. But more broadly, reflecting on the last year, it's really been a fantastic year, and I'm super proud of what we've accomplished together. But I'm also super excited about the year ahead for Lakefront Bio. So thank you, and we hope you have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.