Hi, everyone. Thanks for being here today. My name is Ramveer Gatwala. I'm the Vice President in the Healthcare Investment Banking Group at J.P. Morgan. And it's a pleasure to have Galapagos here with us today. I will be introducing and handing it over for the presentation shortly, and also moderating Q&A after the presentation. Today we're joined by Dr. Paul Stoffels, CEO and Chairman of the company, as well as Thad Huston, CFO and Chief Operating Officer as well. So with that, I'll hand it over to them to kick off. Thank you.
Thank you very much for the introduction. Good afternoon. Thank you all for joining us to really outline our bold vision for Galapagos moving forward. Last week, we issued a press release outlining these plans. Before we begin this presentation, I would like to remind everyone that we will be making forward-looking statements during this presentation.
Joining me on today's presentation is also Thad Huston, my colleague, Chief Operating Officer, and Chief Financial Officer. Let's discuss what we believe is an exciting transformational transaction for Galapagos and its stakeholders. In just over two years, Galapagos has undergone a profound transformation. Our journey began with a strategic pivot to transform Galapagos into a pioneering biotech by expanding into life-changing cell therapies. Our announcement last week marks an important milestone in that journey.
As many of you know, in 2019, Galapagos entered into a 10-year global option licensing collaboration agreement called the OLCA with Gilead. Since that time, Gilead, Galapagos, and the biotech industry have evolved. And as a result, we in Gilead recognized that some of the opportunities that current industry advances and financial markets' conditions have created.
Given the limitation of the OLCA, we came together to develop a thoughtful and creative solution that would allow us to unlock significant value for all our stakeholders. And we are delighted to discuss our plans to separate into two entities, Galapagos and SpinCo. SpinCo called for the moment, yeah.
With Galapagos continuing to advance our global cell therapy leadership in addressing high unmet medical needs with the full ownership of all our programs now. And with SpinCo, focusing on building a pipeline of innovative medicines through transformational transactions.
Galapagos gaining full global rights from Gilead to a robust discovery and development pipeline supports our strategy for accelerated growth and value creation as a leader in the development of cell therapies. Concurrently, we are spinning out a newly formed Belgian entity, SpinCo, with significant capital to deploy for acquisitions of companies and assets.
We believe that the scientific and clinical advances made over the past few years, combined with an environment of tightened capital in the market, provide great opportunities for SpinCo to invest in promising new therapeutics. In the proposed transaction, each shareholder of Galapagos will receive one share of SpinCo for every share they hold in Galapagos stock.
As noted, Galapagos will continue to focus on advancing its next-generation cell therapy pipeline, which we will review in detail. SpinCo has been allocated $2.45 billion in capital to work with Gilead as a collaboration partner.
And this to invest and identify in building a pipeline of innovative medicines with robust demonstrated clinical proof of concept by acquiring one or more companies or assets in oncology, immunology, and virology. We believe that today's transaction brings a number of benefits for both patients and investors.
For investors, Galapagos now has the opportunity to exclusively focus on its strategy to develop its next-generation cell therapy portfolio and allocate resources and capital in a way that maximizes that strategy. Galapagos will remain well capitalized to execute on this strategy and will have a cash runway through 2028.
SpinCo, with $2.45 billion in capital, will be well positioned to execute transformational acquisitions and to give investors exposure to an exciting portfolio of new medicines. This transaction will also benefit patients.
Galapagos is in a position to do this by focusing and advancing our decentralized manufacturing platform and next-generation cell therapy strategy faster, better, and more impactful. On the other hand, through its acquisition strategies, SpinCo will look to acquire advanced portfolio assets that have the potential to revolutionize standard of care diseases with significant unmet medical needs. And now, I'll pass it to Thad, who will say a couple of words on the SpinCo.
Thanks, Paul. We're very excited by the opportunity that we have with creating two separate entities under Galapagos. Paul has reviewed the benefits for Galapagos as an independent company, and that we could fully operate its programs and platform. But now let me talk a little bit about how we plan to create value with SpinCo.
As Paul mentioned, over the last few years, there have been significant advances in science, technology, clinical development of new medicines. But unfortunately, the capital markets have been very tight over this time period, leaving many companies struggling for financing. This has led some companies to have to sell off promising assets or search for strategic alternatives to further the development of their clinical programs. For companies with cash and capital to deploy, such as SpinCo, we believe that this creates multiple opportunities to create value.
SpinCo, together with Gilead as our collaboration partner, will have significant cash to support the development of new biotech companies to help bring innovative therapies to patients all over the world facing high unmet medical needs. SpinCo will be capitalized with EUR 2.45 billion, which should provide multiple options to create value through acquisitions of companies or assets operating in oncology, immunology, and virology in other areas of high unmet need.
SpinCo will have its own management and separate board. On this slide, you can see some of the next steps and potential actions that we have prepared. Upon the completion of the Works Council process, we're going to complete the creation of SpinCo, and we're targeting the separation for mid-2025.
We're also going to appoint a new leadership team and board of directors at SpinCo. We also intend to list on Euronext and Nasdaq. And we're also going to be focusing on, with this new team, to acquire new assets. So I'll turn it back over to Paul to talk about the Galapagos opportunity.
So thank you, Thad. And as we think about our approach to cell therapy, we are focused on strategies that we believe will provide a number of benefits to patients and overcome some of the limitations we have seen with existing cell therapies. Firstly, we aim on getting treatment to patients faster with our seven-day vein-to-vein time platform.
Not only does this bring logistical and cost benefits, but also by providing patients with fit cells, we believe that we are improving efficacy and safety and providing a solution for all lines of therapy, especially those patients with a very short life expectancy. We continue to build decentralized manufacturing units, bringing medicines closer to hospitals and patients and limiting logistical constraints. We are also building partnerships with countries, hospital networks, healthcare organizations, and payers to increase access significantly.
All of this being done in a cost-effective way, taking advantage of an automated closed-system production system, limited manual work, thereby reducing cost of goods significantly. We are also advancing a series of cell therapies we believe have the potential to be best in class by combination targeting and armoring to best treat a range of hematological and solid tumors.
And finally, we'll also look to partner on our platform with cell therapy companies leveraging our global network for access, for example, what we did recently with Adaptimmune. Our decentralized manufacturing was designed to overcome the limitations of current cell therapy manufacturing, which is centralized and bears higher cost burdens and longer production times.
Our seven-day vein-to-vein is designed to provide fresh, fit cells, which we believe enhance the therapeutic profile by producing highly potent cells that are less exhausted, less toxic, and persist longer. We currently have five operational and approved manufacturing sites in several EU countries and are actively expanding in Europe and the U.S. We have multiple sites in different phases of technology transfer, and start-up will start up and activate them in a few months.
The first site in the U.S. will be the Landmark Bio in the Boston area. But we also have multiple sites in start-up. For example, we signed up with Thermo Fisher for San Francisco as well. We believe the advantage of our Cocoon processes makes it ideal for point-of-care manufacturing. Moving forward, we are advancing our robust cell therapy pipeline, which now includes three CAR-T assets in clinical development across nine indications, then preclinical cell therapy programs, including uza-cel, our TCR-T cell therapy candidate for the treatment of head and neck cancer in collaboration with Adaptimmune.
We are making great progress with our phase 1/2 Atalanta study, clinical program trial of the 5101 in non-Hodgkin lymphoma, with a basket trial in a number of indications, which you see listed here on the slides. We are particularly pleased to present these. We were particularly pleased to present these data at ASH in San Diego last year.
These results support very much the feasibility and potential clinical benefit of our innovative platform to deliver fresh, fit cells with a median vein-to-vein time of seven days. This slide shows the efficacy result of the pooled phase 1/2 Atalanta study. In patients with MCL, all eight out of eight efficacy available patients responded to the treatment with an ORR and a CRR of 100%.
In patients with follicular lymphoma and marginal zone lymphoma, objective and complete responses were observed in 20 of 21 available patients, an ORR and CRR of 95%. In patients with diffuse large B-cell lymphoma, nine out of 13 efficacy available patients responded to treatment, 69%, with seven patients receiving a complete response of 54%.
Across phase one and two, 32 out of 37, 86% of responding patients had an ongoing response at the time of last assessment of end of the study. In diffuse large B-cell, six out of nine, in follicular and marginal zone lymphoma, 20 out of 20, and in mantle cell lymphoma, six out of eight patients. MRD data were available in 15 patients who achieved CR. Patients in CR with no MRD data due to either no biopsy available or pending analysis. Among these 15 available patients who achieved CR, 12, 80% were MRD negative.
The Kaplan-Meier plot left, as you see on the slide, demonstrates enduring responses in patients who are in CR and who are MRD negative. The Swimmer plot on the right demonstrates that these deep responses are seen across indications. These data, in conclusion, show and demonstrate our enthusiasm for going all in on these programs, and it's important to note that all patients, without exception, in our study got their cells.
Now it's time for us, and we think today's transaction positions us to build on the success we have seen so far. Our small molecule programs were built on more than 20 years of research and have identified more than five programs in oncology and immunology. This platform is led by two late-stage programs in phase two clinical development.
Here we have the opportunity now to build value to partnerships as we continue to have confidence in the pipeline best in class potential. Our most advanced candidate is our TYK2 inhibitor, 3667, which is a selective and potent inhibitor of TYK2 with near-complete inhibition of type I interferon signaling for a 24-hour cycle with once-a-day administration.
We intentionally selected SLE and dermatomyositis as our first indication because type I interferon plays a key role in both diseases. Beyond SLE and dermatomyositis, TYK2 inhibition offers potential in several other immune indications, further expanding its market opportunity. Passing it back to Thad.
As you can see from this slide, we have an exciting year ahead with the potential to achieve a number of value-driving catalysts. Moving ahead with our focus in cell therapy, we expect to start enrolling patients in the U.S., which will be an important milestone. As I mentioned, we have both the clinical sites and the manufacturing facilities ready to go and look forward to initiating this work at leading cancer centers.
Beyond this, we continue to build out our DMU network and are focused on building the infrastructure and support for our planned global expansion. Business development remains core to our strategy as we seek to partner our small molecule program, expanding globally and bringing in assets that align to focus in our leadership in cell therapy development.
Galapagos will continue to be led by a blue-chip management team that have the experience and domain expertise to drive our growth and leadership in cell therapy drug development. Moving forward, we intend to reorganize our business to focus on potential long-term value creation in cell therapy, with the anticipated reduction of approximately 300 positions across the organization in Europe, which represents approximately 40% of our employees.
We were extremely thoughtful in our efforts to reorganize the company with the goal of having the flexibility to execute on our immediate priorities and build long-term sustainable growth. This was a very difficult decision to make, and we think that it will right-size Galapagos for future success with its renewed focus in cell therapy. Ultimately, we believe today's transaction brings a series of benefits and opportunities for both shareholders and as well for patients.
With Galapagos continuing to focus its efforts in advancing its cell therapy portfolio and Spinco, while capitalized to acquire an exciting portfolio of therapies, we are very focused on value creation opportunities over the near and long term for both entities. As we embark on this new chapter for Galapagos, we remain focused on our core values and mission, namely our commitment to transforming patient outcomes through life-saving science and innovation. We look forward to sharing with you more updates in the coming months, and happy to turn it over for questions now. Thank you very much.
Thank you for a great presentation. So with that, if there's any questions from the audience, I'm happy to take Q&A. I have a couple myself that I'd like to kick off with. So what types of transformational acquisitions do you foresee targeting with the SpinCo and maybe a little bit more to the value creation from the separate entities and how that ties into the vision for the company?
Yeah, we think that with SpinCo capitalized at EUR 2.45 billion, it actually creates an opportunity to do a number of transformational deals, deals that may be phase two and beyond, multiple opportunities for value creation, and I think it really creates opportunities, particularly in the areas of oncology, immunology, and virology or areas of focus. The team, I think, has with this capital in this market condition, a tremendous opportunity to find more late-stage opportunities in the clinic.
How important is the manufacturing platform kind of tying into that vision to go towards and be a leader in cell therapy?
Yeah, our manufacturing platform is front and center to what we can do because we can deliver fresh cells. Our manufacturing platform is a sterile box with a continuous production process and continuous, but also a very set number of quality and quality release. And so this was developed over the last four or five years and have shown that we could produce fit, fresh cells, which are very expansive.
So it is an early phenotype, high memory type of cell. You give a lower number of cells, which then expand in the patient. And because you leave the expansion in the patient going, you get a better safety profile because you have a much more moderate approach of the killing the tumor cells, but at the same time, a very good efficacy.
Bringing it close to patients, I can say I'm very proud of the fact that patients with life expectancy of one month, yeah, very critical relapsed refractory patients with vein-to-vein time is 10 days. The physician decides to get cells for this patient, 10 days later, the cells are there. And that's where the platform is very important. Now, this is unique. Today, no other platform like that exists.
We have already six manufacturing sites in the world. We have Lonza as a partner who is the supplier of the Cocoon and the cassettes. And that gives us a very flexible way to build the platform in the world. And I mean really the world. We can be active in Asia, but also we can partner the platform or bring in people who want to use our platform in order to go global with us.
And that's where we look at very attractive new CAR-Ts, companies with new CAR-Ts, which we can enable to bring to the world. And with that, cost reduction, speed, and flexibility to be close to patients, but also treat in all lines of patients, from the first line to the very sick patient last line. That's where front and center is the manufacturing capability we are building.
Thanks very much, and maybe one more from me. Is EUR 500 million kind of in terms of proceeds, how far would that take you in terms of milestones and getting towards this vision of?
Yeah, we did a pretty exhaustive assessment of kind of what capitalization would be required for a biotech company in cell therapy. We do think the EUR 500 million is appropriately capitalized. In addition, we mapped out our key kind of inflection points and things that we could look to in the future to create future value, and if we needed to raise capital, what that would be.
Obviously now, with the restructuring and the focus in cell therapy, our burn rate is significantly reduced, so we think that we're going to be in the range of EUR 175 million-EUR 225 million, so we think that that takes, upon separation, about a three-year runway of capital.
Hi, Jon Priestman from J.P. Morgan also. Just a couple of questions for me. Maybe first one. So the TYK2 asset, so currently in phase 2b, you mentioned potentially attractive partnership opportunities. How do you foresee that? Would it be waiting for the phase 2b data and it could be out licensing or co-development for kind of progressing that asset in the future?
Yeah, it's in the phase 2 dose finding and going up to pivotal for phase 3. And so now or at the time the data are there, we are interested to look for partners who want to step in. The recruitment goes very well and we think 12-18 months, the data will be there for conclusion and moving to next phase.
TYK2 is a very attractive space with multiple indications possible in dermatology, in gastroenterology, but also in autoimmune diseases, the rare autoimmune diseases. We chose to go for lupus as a very high medical need and dermatomyositis and hopefully will show positive results there. We had good data in psoriasis as a proof of concept. So we know the molecule is very active and now testing it in two high medical needs and look for a partner to bring this forward.
Excellent. And maybe just one question on the SpinCo. So can you maybe help us understand the structure of that a bit better? So would it be that you would have R&D staff in the SpinCo and you'd look to acquire assets that you would then take on and develop yourself, or would you look to gain ownership of assets maybe through royalties and things?
Yeah, it's more of the latter. So initially, SpinCo will be separate with the cash of EUR 2.45 billion. It will have a new management team and an independent board with five independent directors. We'll also have the Gilead representatives, two representatives on that board. So nine seats in total.
They'll have an independent management team and very, very experienced in business development, obviously drug development, and they'll look for acquiring assets. And then depending on obviously the first acquisition, then you'll have a team. The idea would have a company and a whole management team under that, and then they'll look to acquire other assets around it. So to build a whole portfolio in a new co.
Excellent. Thank you.
Yeah, thank you so much,Paul and Thad . You mentioned lower toxicity of your manufacturing approach. Could you provide more details on the toxicity profile of your approach versus the standard of care?
On the cell therapy, the toxicity. So as I explained, what we do is we make fresh cells. We don't stimulate that much in the incubator, and we use a lower number of cells, which expand very well in patients. And also just we couldn't predict this. Just by observation in the first 50 patients in the study, we see one patient with CRS and one patient with a grade three CRS and one patient with grade three ICANS.
That's what we saw. So it's observation. And the conclusion was, wow, good safety. And if you look at the safety, the efficacy data, you can compare yourself with competition that we are very eager to continue this and bring it to the world. What also was very, we are very proud of, we delivered cells to everybody. We missed nobody in the study, which is also quite unique.
That has to do with the seven-day vein-to-vein, the quality of the manufacturing system, I think we have, but also very important for patients that they don't have to wait six weeks or eight weeks for their therapy and often have to move to other therapies or die. That's why we think the seven-day vein-to-vein is unique, decentralized, very possible for decentralization.
What was the most important event last year to come to the conclusion, yes, this is going to work, was the FDA approved their IND on the seven-day vein-to-vein, which got to a lot of dogmas on how people look at cell therapy and sterility testing. Because we have a continuous process, which is in a sterile box, we can start sterility testing during the process. That allows us to release on day seven. So to have the full explanation on why that is. Yeah.
Thanks for the talk. Just to follow up on the manufacturing side of things, is your decentralized manufacturing at the point of care?
We evolved on that. We thought first it would be nice to have this in the hospital, but realized that GMP in the hospital doesn't work. No, what we do now is we work in a GMP environment outside of the hospital. For example, Landmark Bio in Boston serves all the hospitals from Boston from one center. That's more the concept we have today on going into the regions, into different regions outside of the hospital.
We build high-quality infrastructure or set ourselves up in existing infrastructure. We train and have the people. It's very hands-off. 95% of the time, the incubator is closed, so it's not manual. That gives us the ability to have multiple Cocoons in a room with a few people, and they can oversee that outside of the hospital under our control.
Moreover, we worked very hard on a digital system, which collects all the data during manufacturing. Not one piece of paper is there. We can control the manufacturing process from Leiden at our headquarters. We see every Cocoon in the world.
We can follow. We can intervene if necessary, but also locally, of course, people can oversee, and it also is connected digitally with cell phone so that operators can get their alerts on the manufacturing process. So the digital environment, the biological environment, and the hardware we developed over the last four years, and that's now fully functioning, but outside of the hospital in a GMP environment.
Testing is also performed. Is testing performed at the manufacturing?
Yeah, it's a good question. We have worked a lot on simplifying the quality release and automating that. So it's like taking a sample, put into an instrument, push the button, data are generated, and go straight into the digital system for final quality control. So that is all part of simplifying, automating, hands-off, making sure that no mistakes can happen in the whole system when you do it outside of a central manufacturing site.
Operators are your staff. They are not hospital operators.
Operators, when we started four years ago with CellPoint, then many of the operators were. The first concept was, let's use local operators. We moved now to we are going to have all the operators on a payroll and trained and in our quality systems.
Thanks.
Yeah, we see an opportunity to move more towards a regional hub model where you kind of cover different major geographies with multiple sites, but far less than the original plan with point of care. So definitely more of a controlled network for us.
If there are no questions, are you after to ask the question?
I think pretty much a lot of it is a lot of my questions were asked. But if there is, I think we've touched on the decentralized manufacturing platform. If you want to double-click into specifically Cocoon and relative to other platforms to the degree you can and how that differentiates, that'd be great to hear as well.
Yeah, what is unique on the Cocoon versus other platforms, it is some have automated, some worked on, some companies work on CAR-Ts with automation. That is one way of doing it. We re-engineered the process to a continuous process. We did the biological re-engineering of the process in order to make it simple. But it's only possible if you have a fully sterile system.
And where we further optimize at the moment is before the cell separation still needed to happen outside of the Cocoon, that now in the next step with Lonza, we are engineering it that also the cell separation gets into the Cocoon. And from then on, as that works, then apheresis, so the white cells get into the Cocoon and that's it. From then it's sterile, including pumping the right number of cells in the bag, which goes to the patient.
It's sterile from the beginning, and that's where we can guarantee sterility. And that has been a development process of probably within Lonza and within our shop, probably six to seven years now. So it's not that this came overnight as a simple and fast development. This is a long-term thing which was coming, but now is brought into practice. That is a big differentiation.
Yeah, I would also add the fresh cells is really a key point of differentiation versus what other companies are doing. In addition, I do think that there's the possibility of also fundamentally reducing the cost of manufacturing. A lot of other companies have to build infrastructure and hire sometimes hundreds of people or thousands of people to build and manufacture the cells.
And so we think that our platform is scalable. Adding in a room like this, eight, 10, 12 Cocoons with a few operators is a very different economic model. And so we have a fixed agreement, a supply agreement with Lonza to supply the Cocoons, and we can just add more Cocoons as we need as demand increases. And so we're in the clinical phase now. We're building our DMU network, but we can add more sites around the world.
We do think that this is also putting the Cocoon near the patient is fundamental. There are so many places in the world cell therapy is not accessible to the patients, and that's what we're trying to solve here. We're trying to make it available and accessible to patients around the world. If we do that, we could put one in Brazil or in Singapore or Australia, again, where logistics are a challenge, so I think there's a lot of uniqueness to this platform that's going to fundamentally change the way cell therapy is treated.
So, unless there's any other questions, I would like to thank. If you do, please raise your hand. But thank you very much, Thad and Dr. Paul, for your time.
Thank you and thank you all, and we go back to work.