Galapagos announces strategy to accelerate innovation and reports strong third quarter 2022 results
Galapagos NV (Euronext & NASDAQ: GLPG) today announced its strategy for accelerated growth and value creation, its financial results for the first nine months of 2022, and the outlook for the remainder of 2022. The results are further detailed in the Q3 2022 financial report available on the financial reports section of the website.
Forward, Faster strategy to accelerate innovation
“Guided by our purpose to bring transformational medicines to patients around the world to help them live longer and healthier lives, we today announce our Forward, Faster strategy to accelerate growth and value creation by reshaping the way we innovate and operate. This strategy provides a clear path forward based on three key pillars. First, we will shift from novel target-based discovery to patient-centric medical need research and development with a focus on our key therapeutic areas of immunology and oncology. Second, we will build on our current capabilities and derisk R&D through multiple drug modalities, including CAR-T, and by focusing on best-in-disease validated targets in our strategic therapeutic areas with shorter time-to-patient potential. Third, we will increase our business development efforts to complement our pipeline and continue to work with our collaboration partner Gilead to bring more medicines to patients worldwide,” said Dr. Paul Stoffels1, CEO and Chairman of the Board of Directors of Galapagos.
“Our new fit-for-purpose organizational structure and operating model will focus on accelerating our pipeline in immunology and oncology, supported by externally sourced opportunities, and we will discontinue our activities in fibrosis and kidney disease2.
As a result of our new strategic direction, we intend to reduce our workforce by approximately 200 positions across our sites in Europe to create room to reinvest in new capabilities and programs in our oncology franchise. This is a difficult but necessary decision, and we will follow all applicable processes with respect for our people.”
Third quarter financial performance
“Jyseleca continues to perform very well with a growing European base and a solid €60.5 million in net sales as of 30 September. As a result, we further increase our 2022 net sales guidance to €80-€90 million from our initial guidance of €65-€75 million. We ended the third quarter of the year with a strong balance sheet of €4.4 billion in cash and current financial investments, which provides us with the necessary means to invest in immunology and oncology and execute on smart business development. We reiterate our cash burni guidance of €480-€520 million for the full year 2022,” added Bart Filius, President, COO and CFO of Galapagos.
Q3 2022 operational review and recent events
Jyseleca commercial & regulatory progress
Strong adoption across Europe with reimbursement for rheumatoid arthritis (RA) in 15 countries and for ulcerative colitis (UC) in 10 countries
Marketing Authorization Application (MAA) submitted for the treatment of UC to Swissmedic, the regulatory authority in Switzerland
Article 20 pharmacovigilance procedure ongoing by the European Medicines Agency (EMA)
Preparations advanced to start Phase 2 of GLPG3667 (TYK2 inhibitor) in dermatomyositis, with the aim to recruit the first patients around year-end
Received various transparency notifications from FMR LLC, indicating that its shareholding in Galapagos changed, without crossing below the 5% threshold, to 5.65% of the current outstanding Galapagos shares
Raised €6.7 million year-to-date through the exercise of subscription rights
Q3 2022 financial results
We reported product net sales of Jyseleca in Europe for the first nine months of 2022 amounting to €60.5 million (€6.1 million in the first nine months of 2021). Our counterparties for the sales of Jyseleca were mainly hospitals and wholesalers located across Europe.
Cost of sales related to Jyseleca net sales in the first nine months of 2022 amounted to €7.9 million.
Collaboration revenues amounted to €349.7 million for the first nine months of 2022, compared to €311.7 million for the first nine months of 2021.
Revenues recognized related to the collaboration agreement with Gilead for the filgotinib development were €166.8 million in the first nine months of 2022 compared to €136.4 million for the same period last year. This increase was due to a higher increase in the percentage of completion, as well as a higher revenue recognition of milestone payments, strongly influenced by the milestone achieved related to the regulatory approval in Japan for UC in the first nine months of 2022. The revenue recognition related to the exclusive access rights for Gilead to our drug discovery platform amounted to €172.6 million for the first nine months of 2022 (€173.3 million for the same period last year).
We have recognized royalty income from Gilead for Jyseleca for €8.2 million in the first nine months of 2022 (compared to €1.9 million in the same period last year) of which €3.6 million royalties on milestone income for UC approval in Japan.
Additionally, we recorded milestones of €2.0 million triggered by the first sales of Jyseleca in the Czech Republic and Portugal by our distribution and commercialization partner Sobi, in the first nine months of 2022.
Our deferred income balance on 30 September 2022 includes €1.6 billion allocated to our drug discovery platform that is recognized linearly over the remaining period of our 10-year collaboration, and €0.5 billion allocated to the filgotinib development that is recognized over time until the end of the development period.
Our R&D expenditure in the first nine months of 2022 amounted to €364.1 million, compared to €378.0 million for the first nine months of 2021. This decrease was primarily explained by a decrease in subcontracting costs from €189.1 million in the first nine months of 2021 to €158.5 million in the first nine months of 2022, primarily due to the winding down of the ziritaxestat (IPF) program and reduced spend on our SIKi and TYK2 programs. This was partly offset by cost increases for our filgotinib program, on a nine month basis compared to the same period in 2021. Personnel costs decreased from €134.3 million in the first nine months of 2021 to €130.0 million for the same period this year. Depreciation and impairment amounted to €35.6 million for the first nine months of 2022 (€14.1 million for the same period last year). This increase was primarily due to an impairment of €26.7 million of previously capitalized upfront fees related to our collaboration with Molecure on the dual chitinase inhibitor OATD-01 (GLPG4716) recorded in Q2 2022.
Our G&A and S&M expenses amounted to €202.7 million in the first nine months of 2022, compared to €151.3 million in the first nine months of 2021. This increase was primarily due to the termination of our 50/50 filgotinib co-commercialization cost sharing agreement with Gilead for filgotinib in 2022. The cost increase was also explained by an increase in personnel costs for the first nine months of 2022 compared to the same period last year explained by an increase in the commercial work force driven by the commercial launch of filgotinib in Europe.
Other operating income (€29.5 million vs €36.3 million for the same period last year) decreased, mainly driven by lower grant and R&D incentives income.
Net financial income in the first nine months of 2022 amounted to €127.5 million, compared to net financial income of €33.6 million for the first nine months of 2021. Net financial income in the first nine months of 2022 was primarily attributable to €102.1 million of unrealized currency exchange gains on our cash and cash equivalents and current financial investments at amortized cost in U.S. dollars, and to €26.0 million of positive changes in (fair) value of current financial investments. The financial expenses also contained the effect of discounting our long term deferred income of €5.7 million.
We realized a net loss from continuing operations of €10.8 million for the first nine months of 2022, compared to a net loss of €141.8 million for the first nine months of 2021.
The net profit from discontinued operations for the nine months ended 30 September 2021 consisted of the gain on the sale of Fidelta, our fee-for-services business, for €22.2 million.
We reported a group net loss for the first nine months of 2022 of €10.8 million, compared to a group net loss of €119.6 million for the first nine months of 2021.
Current financial investments and cash and cash equivalents totaled €4,362.1 million on 30 September 2022, as compared to €4,703.2 million on 31 December 2021.
Total net decrease in cash and cash equivalents and current financial investments amounted to €341.1 million during the first nine months of 2022, compared to a net decrease of €295.2 million during the first nine months of 2021. This net decrease was composed of (i) €343.1 million of operational cash burn, (ii) offset by €6.7 million of cash proceeds from capital and share premium increase from exercise of subscription rights in the first nine months of 2022, (iii) €26.0 million positive changes in (fair) value of current financial investments and €105.6 million of mainly positive exchange rate differences, and (iv) the cash out from the acquisitions of CellPoint and AboundBio, net of cash acquired, of €136.4 million.
Acquisitions of CellPoint and AboundBio
The preliminary accounting of the acquisitions of CellPoint and AboundBio are included in our Q3 2022 condensed consolidated financial statements. To date, we have performed a preliminary fair value analysis of the business combinations. We expect the provisional amount of goodwill to change significantly upon the completion of the purchase price allocation, resulting from the valuation of the different assets and liabilities acquired.
Near term outlook
Immunology – an area in which we have built deep scientific know-how and expertise since our founding
We expect reimbursement decisions in most key European markets for Jyseleca in UC this year and anticipate that Sobi will further progress with reimbursement discussions in RA and UC in Eastern and Central Europe, Greece, and the Baltic countries. We also expect to report initial results from the FILOSOPHY Real-World Evidence Phase 4 trial in RA later this year, and topline results from the DIVERSITY Phase 3 study in Crohn’s disease (CD) in the first quarter of 2023. Before the end of this year, we anticipate a CHMP opinion following the PRAC Article 20 recommendation issued on 28 October 2022.
We aim to recruit the first patients in a Phase 2 study of our TYK2 inhibitor product candidate, GLPG3667, in dermatomyositis around year-end, and we intend to start a Phase 2 study in patients with Systemic Lupus Erythematosus (SLE) in 2023. Finally, we continue to advance select compounds with optimized pharmacology and selectivity from our SIKi portfolio.
Oncology portfolio – an area where we will continue to grow and invest
We will present the initial data from the ATALANTA-1 Phase 1/2 study of the CD19 CAR-T product candidate in patients with rrNHL at the annual ASH conference in December. The objectives of the ATALANTA-1 study are to evaluate the feasibility, safety and efficacy of the CD19 CAR-T candidate manufactured at point-of-care and will provide initial clinical validation of the CAR-T decentralized supply model.
The recruitment of the ongoing Phase 1/2 studies of the CD19 CAR-T candidate in patients with rrNHL (ATALANTA study) and relapsed/refractory Chronic Lymphocytic Leukemia (rrCLL) (EUPLAGIA study) is progressing well, and we are on track to report topline results of the dose escalation cohorts in the first half of 2023, which will be followed by one or more dose expansion cohorts.
Financial guidance and Forward, Faster strategy presentation
For the full year 2022, we reiterate our net cash burn of €480-€520 million, including the acceleration in oncology, and we further increase our net sales guidance for Jyseleca to €80-€90 million.
A detailed update of the strategy, portfolio and pipeline goals and commercial progress will be presented by Galapagos management and key opinion leaders at the company’s R&D Day 2022 which will be held tomorrow, Friday, 4 November 2022, from 8:00 am to 10:30 am EDT (13:00 to 15:30 CET) in New York.
The event will include a live webcast on the Investors section of the company’s website and a replay will be available on the Galapagos website within 48 hours after the event. Presentations showcased during the event will be featured on the Presentations section of the company’s website.
To participate in the conference call, please register in advance using this link. Upon registration, the dial-in numbers will be provided. The conference call can be accessed 10 minutes prior to the start time by using the conference access information provided in the e-mail received at the point of registering, or by selecting the call me feature.
Third quarter 2022 financial report
Galapagos’ financial report for the first nine months ended 30 September 2022, including details of the unaudited consolidated results, is accessible on the financial reports section of our website.
Galapagos is a fully integrated biotechnology company focused on discovering, developing, and commercializing innovative medicines. We are committed to improving patients’ lives worldwide by targeting diseases with high unmet needs. Our R&D capabilities cover multiple drug modalities, including small molecules and cell therapies. Our portfolio comprises discovery through to Phase 4 programs in immunology, oncology, and other indications. Our first medicine for rheumatoid arthritis and ulcerative colitis is available in the European Union, Norway, Great Britain, and Japan. For additional information, please visit www.glpg.com or follow us on LinkedIn or Twitter.