Letter from the management
This quarter we achieved key steps in our growing commercial business in Europe, while moving earlier-stage R&D programs forward. We continue to deliver on our revised strategy, while accelerating the savings program announced at the first quarter results.
We are proud of the progress made with our filgotinib (Jyseleca®) franchise. One year after receiving approval for filgotinib in Europe in rheumatoid arthritis (RA), we secured reimbursement in 14 countries, including Germany, France, Spain, Italy, and Great Britain. Meanwhile, the process of transitioning all commercial activities for filgotinib, including the European marketing authorization (MA) for Jyseleca, from Gilead to us is on track to be completed by year-end. After years of hard work by so many, we are very excited to bring a new treatment option to patients living with RA, and for the first time in the history of our company, we report on sales achieved with our own commercial organization. As per 30 September 2021, we booked €6.1 million in net sales for Jyseleca, for a total of €15.8 million together with Gilead, building confidence in the potential of our filgotinib franchise in Europe and in Galapagos’ commercial capabilities.
Recently, we received the positive opinion issued by the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) for filgotinib as treatment for adults with moderately to severely active ulcerative colitis (UC). We anticipate a decision for filgotinib in UC from the European Commission (EC) and Great Britain’s Medicines and Healthcare products Regulatory Agency (MHRA) before year-end. If granted, this would add a second indication for filgotinib, and we are ready to go full steam ahead with the commercial roll out in UC throughout Europe.
On the clinical development side of filgotinib, we recently announced the completion of patient enrollment for our DIVERSITY Phase 3 program in patients with Crohn’s disease (CD), with 1,374 patients enrolled across 369 sites globally. This study evaluates the efficacy and safety of filgotinib on clinical remission and endoscopic response in a 10-week induction study, followed by a 47-week maintenance study, with topline results anticipated in the first half of 2023. The full recruitment is an important milestone for the DIVERSITY program, which has the potential to provide robust evidence to assess the use of filgotinib as a new treatment option for people suffering from CD.
We recently announced that we will be solely responsible for all development activities for the ongoing DIVERSITY study and its long-term extension study starting on 1 April 2022. Gilead will make a one-time payment of $15 million to support Galapagos with the remaining DIVERSITY trial costs, and should the European Commission (EC) grant regulatory approval of filgotinib for the treatment of CD based on data from the DIVERSITY trial, royalties payable by Galapagos to Gilead will be reduced by 30% across all filgotinib indications, or 5.6% to 10.5% of net sales in Europe. These royalties are payable as of 2024.
In early Q3, we also announced positive topline data from the Phase 1b trial with GLPG3667, our proprietary selective tyrosine kinase 2 (TYK2) compound in psoriasis (Pso). We are currently running a further dose escalation study in healthy volunteers, and we aim to launch both a Phase 2b dose finding study in Pso and a Phase 2 study in UC with GLPG3667 in 2022.
Our earlier-stage inflammation pipeline continues to progress as well, and in particular our salt inducible kinase (SIK) program. At UEGW1United European Gastroenterology Week, we presented additional preclinical data showing evidence of the potential dual mode of action of SIK2/3. We plan to bring an SIK2/3 molecule with optimized pharmacology into a healthy volunteer Phase 1 study in 2022.
Moving beyond inflammation, we are on track to complete recruitment for the Phase 2 MANGROVE study with GLPG2737 in patients with autosomal dominant polycystic kidney disease (ADPKD) by year-end. ADPKD remains a high unmet medical need, and we look forward to reporting topline results in the first half of 2023.
This quarter we also announced key management changes. After 23 years of leading this company, my time as CEO at the helm of Galapagos will come to an end. I plan to retire after achieving a seamless hand over to a new CEO. The supervisory board is conducting an external search for my replacement, while we continue our search for a new CSO. I am convinced that great candidates will be selected to lead Galapagos into a successful future.
Meanwhile we continue to progress with our differentiated, refocused portfolio of novel target-based assets in our core areas of inflammation, fibrosis, and kidney disease:
Operational overview H1 2021
We refer to our H1 2021 report.
Operational overview Q3 2021
- We observed activity with TYK2 inhibitor GLPG3667 in Pso, with a generally safe and well tolerated profile, and launched a dose escalation study in healthy volunteers, with the aim to start a Phase 2b study in Pso and a Phase 2 study in UC in 2022
- We reported on biological activity with SIK2/3 inhibitor GLPG3970 in inflammation, and more particularly in the CALOSOMA Phase 1b study in Pso and the SEA TURTLE Phase 2a study in UC
- We nominated a new preclinical SIK2/3 candidate for early development in inflammation
Corporate & other
- We announced the planned retirement of Onno van de Stolpe, our founder and CEO, and the initiation of the search for an external successor, in addition to the previously announced search for a new CSO
- We raised €0.15 million from subscription right exercises
- We received a positive CHMP opinion for filgotinib for the treatment of moderate to severe UC
- Following the first read-outs with GLPG3970, we decided to terminate the TAPINOMA Phase 1b study with GLPG3970 in systemic lupus erythematosus due to low likelihood of success and poor recruitment in the trial. We continue to execute on the GLIDER Phase 2a study in Sjögren’s disease, with data expected in 2022
- We announced that Galapagos will assume operational and financial responsibility for the ongoing DIVERSITY clinical study in CD and its long-term extension study. Gilead will make a one-time payment of $15 million to Galapagos to support the costs of the DIVERSITY clinical program, and if the EC grants regulatory approval of filgotinib for the treatment of CD based on data from the DIVERSITY trial, royalties payable by Galapagos to Gilead will be reduced by 30% across all filgotinib indications
Q3 2021 financial result
Details of financial results
Due to the sale of our fee-for-service business (Fidelta) to Selvita on 4 January 2021 for a total consideration of €37.1 million (including customary adjustments for net cash and working capital), the results of Fidelta are presented as “Net profit from discontinued operations” in our unaudited condensed consolidated income statement.
Revenues from continuing operations
Our revenues from continuing operations for the first nine months of 2021 amounted to €317.9 million, compared to €321.9 million for the first nine months of 2020.
We reported net sales of Jyseleca for the first nine months of 2021 amounting to €6.1 million (€5.7 million in the third quarter of 2021), which reflects the sales booked by Galapagos after the transition from Gilead. Total sales of Jyseleca in Europe by both companies for the first nine months of 2021 are €15.8 million.
Collaboration revenues amounted to €311.7 million for the first nine months of 2021, compared to €321.9 million for the same period last year. This was mainly driven by the recognition of upfront consideration and milestone payments received in the scope of the collaboration with Gilead for filgotinib, amounting to €136.4 million for the first nine months of 2021 (€145.9 million for the same period last year). The decrease in revenue recognition was primarily due to a negative cumulative catch up of revenue triggered by the recent agreement under which Galapagos will assume operational and financial responsibility for the ongoing DIVERSITY clinical study. This decrease was partly compensated by additional consideration from Gilead related to the renegotiated collaboration when compared to the same period last year. The revenue recognition related to the exclusive access rights for Gilead to our drug discovery platform amounted to €173.3 million for the first nine months of 2021 (€170.7 million for the same period last year).
Results from continuing operations
We realized a net loss from continuing operations of €141.8 million for the first nine months of 2021, compared to a net loss of €251.8 million for the first nine months of 2020.
We reported an operating loss amounting to €175.7 million for the first nine months of 2021, compared to an operating loss of €167.7 million for the same period last year.
Cost of sales related to Jyseleca net sales in the first nine months of 2021 amounted to €0.7 million.
Our R&D expenditure in the first nine months of 2021 amounted to €378.0 million, compared to €392.2 million for the first nine months of 2020. This decrease was primarily explained by winding down of our ziritaxestat (IPF), MOR106 (atopic dermatitis), and GLPG1972 (OA) programs and by reduced spend on our other programs. This was partly offset by costs increases for our filgotinib and Toledo (SIKi) programs, on a nine months comparison basis. Personnel costs increased primarily because of an increased average headcount compared to the same period last year, and increased costs of our subscription right plans.
Our S&M and G&A expenses were €151.3 million in the first nine months of 2021, compared to €132.4 million in the first nine months of 2020. This increase is primarily due to an increase in personnel costs and other operating expenses mainly driven by the commercial launch of filgotinib in Europe. This increase was partly compensated by higher cost recharges from us to Gilead in the scope of our commercial cost sharing for filgotinib in Europe.
Other income (€36.3 million vs €35.0 million for the same period last year) increased, mainly driven by higher grant income.
We reported a non-cash fair value gain from the re-measurement of initial warrant B issued to Gilead, amounting to €3.0 million, mainly due to the decreased implied volatility of the Galapagos share price as well as its evolution between 31 December 2020 and 30 September 2021.
Net other financial income in the first nine months of 2021 amounted to €30.6 million, compared to net other financial loss of €75.3 million for the first nine months of 2020. This is primarily attributable to €54.9 million of currency exchange gain on our cash and cash equivalents and current financial investments in U.S. dollars, to €10.1 million of negative changes in (fair) value of current financial investments and financial assets and to €8.5 million of interest expenses. The other financial expenses also contained the effect of discounting our long term deferred income of €7.2 million.
Results from discontinued operations
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.
Group net results
The group realized a net loss for the first nine months of 2021 amounting to €119.6 million, compared to a net loss of €247.6 million for the same period in 2020.
Current financial investments and cash and cash equivalents totaled €4,874.2 million on 30 September 2021 (€5,169.3 million on 31 December 2020, including the cash and cash equivalents included in the assets classified as held for sale).
A net decrease in current financial investments and cash and cash equivalents amounted to €295.2 million in the first nine months of 2021, compared to a net decrease of €472.2 million during the first nine months of 2020. This net decrease is composed of (i) €376.7 million of operational cash burn,2We 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. offset by (ii) €2.7 million of cash proceeds from capital and share premium increase from exercise of subscription rights in the first nine months of 2021, (iii) €7.2 million of negative changes in (fair) value of current financial investments and €57.3 million of mainly positive exchange rate differences, (iv) €28.7 million cash in from the disposal of Fidelta, net of cash disposed.
Our balance sheet on 30 September 2021 also held a receivable from the French government (Crédit d’Impôt Recherche3Crédit 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 €149.3 million.
Going forward, we continue to build our filgotinib franchise throughout Europe, and remain on track to complete the transition of the full European commercial operations for filgotinib from our collaboration partner Gilead to us by year-end. We anticipate an approval decision from the EC and Great Britain’s MHRA of filgotinib for the treatment of UC, which, if approved, would add a second indication to our growing commercial footprint in Europe.
Following the positive topline Phase 1b data from our TYK2 inhibitor GLPG3667, we are running an extended dose escalation study in healthy volunteers, and we are preparing to launch a Phase 2b trial in Pso and a Phase 2 trial in UC in 2022.
We are advancing our SIK3 inhibitor GLPG4399 in healthy volunteers this year, and we aim to move a follow-up SIK2/3 preclinical candidate into the clinic in 2022.
By year-end we also intend to finalize recruitment into the GLPG2737 Phase 2a trial in ADPKD, an indication with important unmet medical need.
Meanwhile we continue to apply lessons learned from the strategic exercise announced at Q1 to the development of our deep pipeline, and we diligently evaluate business development opportunities in our core therapeutic areas of inflammation and fibrosis.
Following our strategic review of operations in March 2021, we implemented a cost savings program of €150 million on a full year basis. As a result of an acceleration of this program, we revise our guidance for full year 2021 operational cash burn from €580 to €620 million to €530 to €570 million.
We thank you for your continued support as we make filgotinib available to patients across Europe and execute on our strategy to develop novel mode-of-action drugs. The supervisory board is focused on the selection of new leadership, and we have no doubt that excellent successors to the CEO and CSO will be nominated. Supported by our strong balance sheet and long-term R&D collaboration with Gilead, we believe that Galapagos remains well positioned for future growth.
Onno van de Stolpe
President & COO
1 United European Gastroenterology Week
2 We 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.
3 Crédit d’Impôt Recherche refers to an innovation incentive system underwritten by the French government.