On May 2, 2024 Galapagos NV (Euronext & NASDAQ: GLPG) reported its first quarter 2024 financial results and provided a business update and outlook for the remainder of 2024 (Press release, Galapagos, MAY 2, 2024, View Source [SID1234642637]).

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"We are moving forward with a renewed focus, a differentiated and expanding R&D pipeline, and competitive technology platforms to bring innovation to patients around the world. We continue to build a strong team of global leaders and we expanded our U.S. footprint," said Dr. Paul Stoffels1, CEO and Chairman of the Board of Directors of Galapagos. "As we look forward to the year ahead, we strive to make important progress in our clinical programs, achieving regulatory milestones to initiate clinical development of our CAR-T programs in the U.S., and expanding our decentralized CAR-T network in the U.S. and Europe. In parallel, we will continue to build our early-stage pipeline of cell therapy and small molecule investigational medicines in oncology and immunology, both internally and through external partnerships."

Thad Huston, CFO and COO of Galapagos, concluded: "We are committed to investing in our internal R&D pipeline, while we continue to actively pursue business development opportunities. We are broadening our oncology and immunology portfolio and will capitalize on opportunities that are aligned with our strategic objectives."

First quarter 2024 and recent business update

At the Annual and Extraordinary Shareholders’ Meetings held on 30 April 2024, all proposed resolutions were approved (see: press release of 30 April 2024).
Presented our innovative decentralized CAR-T manufacturing and 7-day vein-to-vein approach to hematological cancer care at the EBMT-EHA and EBMT annual meetings with new preliminary translational and previously published encouraging clinical data of our CD19 CAR-T candidates. The data support the promise of GLPG5101 in relapsed/refractory non-Hodgkin lymphoma (NHL) and GLPG5201 in relapsed/refractory chronic lymphocytic leukemia (CLL) and Richter transformation (RT), in addressing the critical needs of patients facing poor prognosis.
Discontinued the development of CD19 CAR-T candidate in refractory systemic lupus erythematosus.
Transferred the Jyseleca business to Alfasigma per 31 January 2024.
Signed a strategic collaboration and license agreement with BridGene Biosciences to further strengthen our growing early-stage oncology precision medicine pipeline.
Entered into a strategic collaboration agreement with Thermo Fisher Scientific for decentralized CAR-T manufacturing in the San Francisco area.
Participated with an investment of $40.0 million in the Series C financing round of precision oncology pioneer Frontier Medicines.
Financial performance
First quarter 2024 key figures (consolidated)
(€ millions, except basic & diluted income per share)

Three months ended 31 March % Change

2024 2023
Total net revenues 62.4 58.6 +7%
Cost of sales (2.5) –
R&D expenses (71.6) (52.5) +36%
G&Aii and S&Miii expenses (30.8) (27.1) +14%
Other operating income 9.4 6.8 +37%
Operating loss (33.1) (14.2)
Fair value adjustments and net exchange differences 30.6 (9.7)
Net other financial result 25.4 12.5
Income taxes 0.6 0.2
Net profit/loss (-) from continuing operations 23.5 (11.2)
Net profit from discontinued operations, net of tax 66.7 34.4
Net profit of the period 90.2 23.2
Basic and diluted earnings per share (€) 1.4 0.4
Current financial investments, cash & cash equivalents 3,557.9 4,005.5 (*)
(*) Including €15.4 million of net accrued interest income

DETAILS OF THE FINANCIAL RESULTS OF THE FIRST THREE MONTHS OF 2024
As a consequence of the transfer of our Jyseleca business to Alfasigma, the revenues and costs related to Jyseleca for the first quarter of 2024 are presented separately from the results of our continuing operations in the line ‘Net profit from discontinued operations, net of tax’ in our consolidated income statement. The comparative first quarter of 2023 has been restated accordingly for the presentation of the results related to the Jyseleca business.

Results from our continuing operations
Total operating loss from continuing operations for the three months ended 31 March 2024 was €33.1 million, compared to an operating loss of €14.2 million for the three months ended 31 March 2023.

Total net revenues for the three months ended 31 March 2024 amounted to €62.4 million, compared to €58.6 million for the three months ended 31 March 2023. The revenue recognition related to the exclusive access rights granted to Gilead for our drug discovery platform amounted to €57.6 million for the first three months of both 2024 and 2023. Our deferred income balance at 31 March 2024 includes €1.2 billion allocated to our drug discovery platform that is recognized linearly over the remaining period of our 10-year collaboration.
Cost of sales for the three months ended 31 March 2024 amounted to €2.5 million and related to the supply of Jyseleca to Alfasigma under the transition agreement. The related revenues are booked in total net revenues.
R&D expenses in the first three months of 2024 amounted to €71.6 million, compared to €52.5 million for the first three months of 2023. This increase was primarily explained by higher costs for CAR-T and small molecule programs in oncology.
G&A and S&M expenses amounted to €30.8 million in the first three months of 2024, compared to €27.1 million in the first three months of 2023. This increase was primarily due to an increase in legal and professional fees, mainly related to business development activities.
Other operating income amounted to €9.4 million in the first three months of 2024, compared to €6.8 million for the same period last year. This increase is mainly due to €2.2 million of recharges for transition services to Alfasigma for the months of February and March 2024.
Net financial income in the first three months of 2024 amounted to €56.0 million, compared to net financial income of €2.8 million for the first three months of 2023.

Fair value adjustments and net currency exchange gains in the first three months of 2024 amounted to €30.6 million, compared to fair value adjustments and net currency exchange losses of €9.7 million for the first three months of 2023, and were primarily attributable to €12.4 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 €17.6 million of positive changes in fair value of current financial investments.
Net other financial income in the first three months of 2024 amounted to €25.4 million, compared to net other financial income of €12.5 million for the first three months of 2023, and was primarily attributable to €25.2 million of interest income, which increased significantly due to the increase in interest rates.
Net profit from continuing operations for the first three months of 2024 was €23.5 million, compared to a net loss from continuing operations of €11.2 million for the first three months of 2023.

Results from discontinued operations

(€ millions)

Three months ended 31 March % Change

2024 2023
Product net sales 11.3 26.7 -58%
Collaboration revenues 26.0 93.6 -72%
Total net revenues 37.3 120.3 -69%
Cost of sales (1.9) (3.6) -47%
R&D expenses (13.4) (51.0) -74%
G&A and S&M expenses (9.2) (31.1) -71%
Other operating income 53.9 1.5
Operating profit 66.7 36.1
Net financial result 0.1 (1.3)
Income taxes (0.1) (0.4)
Net profit from discontinued operations 66.7 34.4
Total operating profit from discontinued operations amounted to €66.7 million in the first three months of 2024, compared to an operating profit of €36.1 million in the same period last year.

Product net sales of Jyseleca in Europe were €11.3 million for the first three months of 2024 consisting of sales to customers in January 2024. Product net sales to customers for the first three months of 2023 amounted to €26.7 million. As from 1 February 2024, all economics linked to the sales of Jyseleca in Europe are to the benefit of Alfasigma.
Collaboration revenues for the development of filgotinib with Gilead amounted to €26.0 million for the first three months of 2024, compared to €93.6 million for the same period last year. The sale of the Jyseleca business to Alfasigma on 31 January 2024 led to the full recognition in revenue of the remaining deferred income related to filgotinib.
Cost of sales related to Jyseleca net sales were €1.9 million for the first three months of 2024. Cost of sales related to Jyseleca net sales for the first three months of 2023 amounted to €3.6 million.
R&D expenses for the development of filgotinib for the first three months of 2024 amounted to €13.4 million, compared to €51.0 million in the first three months of 2023. As from 1 February 2024, all filgotinib development expenses are recharged to Alfasigma.
G&A and S&M expenses related to the Jyseleca business amounted to €9.2 million in the first three months of 2024, compared to €31.1 million in the first three months of 2023. As from 1 February 2024, all remaining G&A and S&M expenses relating to Jyseleca are recharged to Alfasigma.
Other operating income for the first three months of 2024 amounted to €53.9 million (€1.5 million for the same period last year) and comprised €53.2 million related to the preliminary calculation of the gain on the sale of the Jyseleca business to Alfasigma. This preliminary result at 31 March 2024 of the transaction is considering the following elements:
€50.0 million of upfront payment received at closing of the transaction of which €40.0 million was paid on an escrow account. This amount will be kept in escrow for a period of one year after the closing date of 31 January 2024. We gave customary representations and warranties which are capped and limited in time (at 31 March 2024, this €40.0 million is presented as "Escrow account" in our balance sheet).
€13.2 million of cash received at closing of the transaction from Alfasigma for preliminary settlement for net cash and working capital and an additional adjustment estimated at €1.1 million related to settlement for completion accounts.
€47.0 million of estimated fair value on 31 January 2024 of the future earn-outs payable by Alfasigma to us (the fair value of these future earn-outs at 31 March 2024 is presented on the lines "Non-current contingent consideration receivable" and "Trade and other receivables").
€40.0 million of liability towards Alfasigma on 31 January 2024 for R&D cost contributions of which €5.0 million was paid in the first quarter of 2024 (at 31 March 2024, €35.0 million of liabilities for R&D cost contribution is presented in our balance sheet in "Other non-current liabilities" for €10.0 million and on the line "Trade and other liabilities" for €25.0 million).
Net profit from discontinued operations related to Jyseleca amounted to €66.7 million for the first three months of 2024, compared to a net profit amounting to €34.4 million for the first three months of 2023.

Cash, cash equivalents and current financial investments totaled €3,557.9 million as of 31 March 2024, as compared to €3,684.5 million as of 31 December 2023. Total net decrease in cash and cash equivalents and current financial investments amounted to €126.6 million during the first three months of 2024, compared to a net decrease of €88.6 million during the first three months of 2023. This net decrease was composed of (i) €125.2 million of operational cash burn, (ii) €36.9 million for the acquisition of financial assets held at fair value through profit or loss, (iii) €38.7 million of net cash in related to the sale of the Jyseleca business to Alfasigma of which €40.0 million has been transferred to an escrow account, offset by (iv) €36.8 million of positive exchange rate differences, positive changes in fair value of current financial investments and variation in accrued interest income.

Outlook 2024

Financial outlook
For the full year 2024, we reconfirm our cash burn guidance of €280 million to €320 million (compared to €414.8 million for the full year 2023), not including future potential business development opportunities.

R&D Outlook
We are progressing three CAR-T Phase 1/2 studies in hemato-oncology:
GLPG5101 in relapsed/refractory NHL;
GLPG5201 in relapsed/refractory CLL, and RT; and
GLPG5301 in relapsed/refractory multiple myeloma.
We are progressing two Phase 2 studies with TYK2 inhibitor GLPG3667, in systemic lupus erythematosus and in dermatomyositis.
We plan to file Investigational New Drug applications in the U.S. to progress clinical development of our CAR-T programs in hemato-oncology.
We will further upscale our CAR-T network and operations in the U.S. and Europe.
Business development
We will continue to evaluate business development opportunities that fit our strategy to accelerate and expand our pipeline of potential best-in-class investigational medicines in our therapeutic focus areas of oncology and immunology.

Conference call and webcast presentation
We will host a conference call and webcast presentation on 3 May 2024, at 14:00 CET / 8:00 am ET. To participate in the conference call, please register in advance using this link. Dial-in numbers will be provided upon registration. The conference call can be accessed 10 minutes prior to the start of the call by using the conference access information provided in the email received after registration, or by selecting the "call me" feature.

The live webcast is available on glpg.com or via the following link. The archived webcast will be available for replay shortly after the close of the call on the investor section of the website.