Letter from the management
Dear shareholders,
We are very grateful that Galapagos remains well positioned to weather the storm, while facing challenges in view of the pandemic. In fact, just recently, we achieved, for the first time in the history of Galapagos, a positive opinion from the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP1Committee for Medicinal Products for Human Use) for our investigational rheumatoid arthritis (RA) drug filgotinib. The positive CHMP opinion is a crucial step toward European approval.
We are all very proud of this important milestone, which is a great reward after fifteen years of development of filgotinib. I want to thank and congratulate the Galapagos teams who have worked tirelessly to make this happen, and together with our collaboration partner Gilead, we look forward to bringing filgotinib to European patients suffering from moderate to severe RA, if approved by the European Commission.
We are encouraged by the positive CHMP opinion for filgotinib in RA, and await regulatory decisions in the EU, U.S. and Japan, expected in H2 2020.
In the second quarter, Gilead and we announced positive topline results from the SELECTION trial in patients suffering from ulcerative colitis (UC) – the first Phase 3 inflammatory bowel disease (IBD) read-out for filgotinib, and a second potential indication for commercialization. The SELECTION results demonstrate that patients receiving filgotinib 200 mg achieved clinical remission at Week 10, and both the filgotinib 100 mg and 200 mg dose maintained remission through Week 58 in a significantly higher proportion of patients compared to placebo. We are very pleased that filgotinib has the potential to help UC patients to achieve a meaningful and sustained improvement in treatment response, including those refractory to multiple treatment options, and look forward to presenting more detailed results at a future scientific conference.
After a pause in recruitment due to COVID-19 in DIVERSITY and PENGUIN - the ongoing filgotinib trials in Crohn’s disease and psoriatic arthritis - Gilead recently restarted recruiting patients at select sites, and enrollment into the MANTA and MANTA-RAy studies has been concluded. We anticipate that Gilead will start the global Phase 3 program with filgotinib in ankylosing spondylitis (AS) in the second half of 2020.
Moving beyond filgotinib, we are making significant progress with our other clinical programs.
Our global Phase 3 ISABELA program in idiopathic pulmonary fibrosis (IPF) with ziritaxestat continues to recruit. While we see a slowdown in recruitment rates due to COVID-19, we remain on track for the futility analysis planned for the first half of 2021.
Furthermore, we are on track to report topline results from three patient trials in the second half of 2020. First, we anticipate the readout from the Phase 2a NOVESA trial with ziritaxestat in systemic sclerosis (SSc); secondly, the results from the PINTA Phase 2 trial with GLPG1205 in IPF; and finally, together with our collaboration partner Servier, we aim to release topline results of the ROCCELLA Phase 2b trial with GLPG1972 in patients with knee osteoarthritis (OA).
Our earlier-stage pipeline is also advancing well. In our growing fibrosis portfolio, we nominated an additional preclinical candidate, GLPG4586 – the first compound emerging from our collaboration with Fibrocor.
With regard to Toledo, our innovative program in inflammation, we recently nominated an additional preclinical candidate of the Toledo family, GLPG4605, a selective TOL2/TOL3 compound, and remain excited about the dual mechanism of action observed with the Toledo family of compounds.
Our balance sheet remains very strong with a cash position of €5.6 billion to support our R&D activities and the further ramp-up of our commercial organization. Receiving a positive CHMP opinion is a major step toward delivering on our promise to become a fully-integrated biopharma company, and we are ready. In the past two years, we built a strong team from the ground up to roll out the commercialization of filgotinib, and we are looking forward to bringing filgotinib to RA patients, hand in hand with our European co-commercialization partner Gilead.
Operational overview Q1 2020
We refer to our Q1 2020 report.
Operational overview Q2 2020
In inflammation
- Collaboration partner Gilead resumed recruitment in the ongoing filgotinib trials, DIVERSITY and PENGUIN, at select trial sites
- Presented data from the 52 Week FINCH 1 and 3 Phase 3 trials at EULAR2European League Against Rheumatism (EULAR) E-Congress, together with Gilead, demonstrating sustained efficacy and a consistent safety profile of filgotinib across patient populations. Also presented an integrated safety analysis for over 4,500 patient years’ exposure, highlighting the long-term safety profile of filgotinib in RA
- Completed recruitment into the MANTA and MANTA-RAy trials
In fibrosis
- Nominated a new preclinical candidate, GLPG4586, with undisclosed novel mode of action in fibrosis. This is the first candidate to emerge from the Fibrocor collaboration
- Nominated a new preclinical candidate of the Toledo-family, GLPG4605, a selective TOL2/TOL3 compound
- Continued recruitment in the ISABELA Phase 3 program in IPF with ziritaxestat; on track for futility analysis in H1 2021
Corporate & other
- On 28 April 2020, Galapagos held its annual (ordinary) and extraordinary shareholders’ meetings. All agenda items were approved, including the appointment of Dr. Elisabeth Svanberg as independent director and the remuneration policy and -report. Furthermore, the extraordinary shareholders’ meeting resolved to amend the articles of association in light of the new Belgian Code of Companies and Associations. A two-tier governance structure was introduced, with the supervisory board replacing the board of directors, and the management board replacing the executive committee
- Created new subscription right3“Subscription rights” is the new term for instruments formerly referred to as “warrants”, under the new Belgian Code of Companies and Associations. plans, offering all Galapagos employees the opportunity to participate
- Raised €17.9 million from subscription right exercises
Recent events
- Received positive CHMP opinion from the European Medicines Agency for filgotinib 100 mg and 200 mg in RA adult patients who have responded inadequately to, or who are intolerant to one or more disease‑modifying anti‑rheumatic drugs (DMARDs). Filgotinib may be used as monotherapy or in combination with methotrexate (MTX)
H1 2020 financial result
Revenues and other income
Our revenues and other income for the first six months of 2020 amounted to €224.6 million, compared to €108.5 million for the first six months of 2019. Revenues (€201.8 million for the first six months of 2020 compared to €91.8 million for the first six months of 2019) were higher mainly due to the revenue recognition of the upfront payment received from Gilead in August 2019 related to (i) the exclusive access to our drug discovery platform during the collaboration period and exclusive option rights on our current and future clinical programs after Phase 2 outside Europe, and (ii) additional consideration received for the extended cost sharing for filgotinib.
Other income (€22.8 million vs €16.7 million for the same period last year) increased, mainly driven by higher incentives income from the government for our R&D activities.
Results
We realized a net loss of €165.6 million for the first six months of 2020, compared to a net loss of €95.9 million for the first six months of 2019.
We reported an operating loss amounting to €130.8 million for the first half-year of 2020, compared to an operating loss of €97.6 million for the first half-year of 2019.
Our R&D expenditure in the first six months of 2020 amounted to €265.9 million, compared to €177.6 million for the first half-year of 2019. This planned increase was mainly due to an increase in subcontracting costs primarily related to our filgotinib program, our Toledo program and other clinical programs. Furthermore, personnel costs increased explained by a planned headcount increase following the growth of our R&D activities and increased cost of our subscription right plans. This last factor, together with increased costs from the preparation of the commercial launch of filgotinib in Europe, contributed to the increase in our G&A and S&M expenses which were €89.5 million in the first six months of 2020, compared to €28.6 million in the first six months of 2019.
We reported a non-cash fair value loss from the re-measurement of initial warrant B issued to Gilead, amounting to €21.1 million, mainly due to the increased implied volatility of the Galapagos share price.
Net other financial loss in the first six months of 2020 amounted to €13.0 million, compared to net other financial income of €1.8 million for the first six months of 2019, which was primarily attributable to negative changes in (fair) value of current financial investments of €12.5 million.
Cash position
Current financial investments and cash and cash equivalents totaled €5,566.5 million on 30 June 2020 (€5,780.8 million on 31 December 2019).
A net decrease of €214.3 million in cash and cash equivalents and current financial investments was recorded during the first six months of 2020, compared to a net decrease of €142.9 million during the first six months of 2019. This net decrease was composed of (i) €230.5 million of operational cash burn4We refer to the note on the cash position of our condensed consolidated interim financial statements for an explanation and reconciliation of this alternative performance measure., (ii) €23.3 million of cash proceeds from capital and share premium increase from exercise of subscription rights in the first six months of 2020, and (iii) €7.1 million of negative changes in (fair) value of current financial investments and unrealized positive exchange rate differences.
Finally, our balance sheet as at 30 June 2020 held a receivable from the French government (Crédit d’Impôt Recherche5Crédit d’Impôt Recherche refers to an innovation incentive system underwritten by the French government.) and a receivable from the Belgian Government for R&D incentives, for a total of €116.6 million.
Outlook 2020
The remainder of the year will be a newsflow rich period for Galapagos.
Following the positive CHMP opinion for filgotinib in RA, we anticipate the potential approval of filgotinib by the European Commission in 2020. We also expect decisions from the U.S. and Japanese authorities before year-end, and continue full steam ahead with the preparations for commercial launch in the Benelux and EU5, hand in hand with our co-commercialization partner Gilead. We anticipate that Gilead will start the global Phase 3 program with filgotinib in ankylosing spondylitis (AS) in the second half of 2020.
We expect to report topline results from three patient trials later in 2020. Within our fibrosis portfolio, we anticipate reporting topline results from the PINTA Phase 2 trial with GLPG1205 in idiopathic pulmonary fibrosis (IPF) and, together with collaboration partner Gilead, from the NOVESA Phase 2a trial with ziritaxestat in systemic sclerosis (SSc). Also in the second half of 2020, we and Servier expect to report topline results from the ROCCELLA Phase 2b trial of GLPG1972 in knee osteoarthritis (OA), and upon successful completion of this trial, Gilead has the option to license development and commercialization rights in the U.S. for GLPG1972.
With regard to Toledo, our novel program in inflammation, we still expect to launch several proof-of-concept patient trials with GLPG3970 in the second half of this year, with topline data expected in the first half year of 2021. Pending the successful start of these trials, we intend to share more information on the Toledo program, including the target and more preclinical data, before year-end.
We retain our 2020 operational cash burn guidance of €400-€430 million, which includes $205 million in potential milestone payments subject to regulatory approvals of filgotinib.
With respect,
Onno van de Stolpe
CEO