Earnings Call: Q1 2021

May 7, 2021

Good day and thank you for standing by. Welcome to the Galapagos Financial Results Q1 2021 Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Elizabeth Goodwin. Please go ahead. Thank you all and welcome To our call today, I'm Elizabeth Goodwin, Investor Relations. And the webcast that we're recording is going to be accessible via the Apicos website homepage and will be available for download and replay later on today. I'd like to remind everyone that we'll be making forward looking statements during today's webcast. These forward looking statements include remarks concerning future developments of the pipeline and our company and possible changes in the industry and Competitive Environment. Because these forward looking statements involve risks and uncertainties, Galapagos' actual results may differ materially and the results expressed or implied in these statements. Today's speakers will be Onno van Masopa, CEO and Bart Filiates, President and COO. Anna will reflect on the operational highlights and then Bart will go over the financial results and with expected news flow for the year. You'll see a PowerPoint presentation on screen. We estimate that their prepared remarks will take about 10 minutes. And then we'll open up with the Q and A with Bart and Onno joined by the rest of our management board. And with that, I would now like to hand over to Onno. Thank you, Elizabeth, and welcome everybody to this webcast. We have clearly had a tough 12 months behind us. A lot of confidence was lost. We had a Dramatic drop in stock price caused by a number of events, including failures in our late stage pipeline with 19.72 and diritaxistat and of course the CRL with regard to Vijay Celica in the United States. So very disappointing, but clearly, we are ready to go forward With confidence to regain the trust of the investors and regain the excitement around the company that was with us for a very long period of time. We have done a soul searching and analyzed our R and D portfolio and our organization and see what we can do to optimize and balance the risk better than we have been doing. We have done a complete portfolio review in the research pipeline. And we have taken a number of actions that I will highlight that we believe is improving the risk balance. This gives us a better chance of bringing a lot of actions to the patients. On the commercial side, we are full in the launch of GYASILICA in Europe for rheumatoid arthritis. We have taken over many of the European countries from our partner, Gilead. And so Galapagos, by the end of the year, will be the only one Marketing, forgotten it in Europe, Yesilica. And that is, of course, fantastic for Globapagos to be in that position after many years of development of filgotinib to now bring the drugs to patients. We have said that we are stepping up to the plate with regard to our business development. We have a lack in the pipeline Between a gap in the pipeline between Giselleca on the market and the earlier stage programs with the TYK2 and Toledo that are in EcoVic concept studies. And we would like to fill that with getting a product into in licensing or through an acquisition. So that is one of the objectives for this year. And then on the financial side, we decided to rightsize the company with a reorganization round with substantial savings that Bart will highlight later in this presentation. If we go to the next slide, I can show you the priorities that we have in R and D. We decided to Focus on the core indications. So we let go of some of the disease areas that we were having activities in. We prioritize projects, and we also put additional resources on certain Candidates product candidates where we believe have the highest chance of reaching the clinical phases And potential make the difference in certain diseases. So I think we did a very good analysis of our R and D pipeline. If you go to the next slide, If you look at the pipeline, it's quite differentiated and quite diverse still After the reanalysis of that pipeline with tuzatinib Still in one late stage Phase III study in Crohn's disease, of course, RA on the market. You see it in filing. We expect The EMA approval in the second half of this year. We have another program In the JAK class 555, which is in an exploratory study in osteoarthritis. And then of course, we have the whole Tuleo franchise that I won't go through in detail, But we have a number of molecules moving forward with 3,090,70 are most advanced in 5 different Proof of concept studies. So a very big part of our research and early development pipeline at the moment. We have our KIK2 in psoriasis and then proof of concept study. Then we have another a range of other programs in various stages So a pipeline that we heavily focused on inflammation and fibrosis. So we Our focus would still have a lot of different mechanisms in the various disease areas. If you go to the next slide, you see the Discontinued programs as a consequence of the analysis where we decided to stop our molecule, TRYTO5, in fibrosis And selected actually an in licensed molecule to move into Phase II in IPF. Unfortunate, but we believe it's the best decision Also based on the information we learned from the zerotaxistat failure in Phase 3. Then we have stopped all activities in metabolic disease, which is, of Of course, disappointing, but I think the right thing to do for Galapagos. It's a difficult disease area and it's clearly not our core expertise. And we also decided to stop early discovery work in osteoarthritis. We had started that 2 years ago with the idea to come up with new targets. OA is a very difficult disease area to bring products to the patient, especially because the Phase 3 criteria, the The litigation criteria are not clear. There's still discussion between the FDA and other authorities. So we decided to stop that part and Put our resources to work in areas where we believe we have a better chance and risk balance profile. In the next slide, you see some exciting data in exploratory Crohn's disease studies. We had a small study together with Gilead in small bowel Crohn's disease as well as in the crystallizing Crohn's disease. You see that in both studies, the 200 milligram performed really, really well. We are very pleased with this data set. And maybe in the Q and A, you can ask questions to Walid to talk more about this data set. So it's clearly very encouraging and hopefully It bodes well for the Crohn's disease data, the big study that is currently ongoing that we anticipate to be fully recruited this year. So it's taken a long time to find the patients for that big study, but at least these data give us Confidence that we're on the right track and clearly, the crystallizing front of these data were met with incredible enthusiasm also by our partner, With that, I would like to hand it over to Bart to continue with the commercial part. Bart? Yes. Thank you, Onno, and good afternoon, everyone in Europe. Good morning, everyone, calling in from the U. S. Great to say a few words about the progress also on the commercial front. And before I dive into the financial details for the quarter. And Nick Kellemanso, our Chief Commercial Officer, is also available for the Q and A later on for any further updates on launch progress in Europe. On this chart of Europe, you see where we are with the operational transition, Transition on track. Actually, in the biggest markets, the transition has been completed with regard to the commercial teams. So that applies to Germany. It applies to the U. K. Employees from Gilead has moved over to Galapagos. France, Italy and Spain, as you all know, were already our primary focus to begin with, especially in rheumatoid arthritis, But also you see in those markets some transitions are taking place. So roughly 80% of the market potential is now, let's say, managed directly by us. And before the end of the year, we will still also take over the Nordics, Austria, Switzerland and Ireland. And as we have also said before, we are not planning to be ourselves active in the other, let's say, dark gray Mark is here on the charts. The rest of Europe will work through a 3rd party, and we'll update you as this year progresses as to how we are planning to execute on that one. So good progress here. For the avoidance of doubt, we are not yet booking the sales in Germany and in the U. K. That's connected to the actual physical supply of goods and that will happen in the second half of this year. Hence, you will not have seen any, Let's see, top line revenues yet in our financials either for those markets as they are still covered by Gilead at least for the 1st 6 months of this year. And probably during Q3, we'll make that transition. Quick word on reimbursement on the next Some interesting updates actually here. Germany especially fully reimbursed already since Q4 of last year, as it's always the case in Germany that you can launch the product immediately after approval. But we now also have We received the verdicts from the Federal Joint Committee, the GBR, and they've given us an additional benefit qualification, which is, We think a big plus is a similar qualification that RINVOC has in this market, but a better one than And then Zealand and Aluminum have in this market. So that's we think bodes well for the Germany launch progression. In France, we anticipate to launch actually in this Q2. There, the authorities have let us know that they want to see The MANTA data to be included before they allow us to launch in male patients, and they will need to review that obviously once that's submitted, But we'll launch on a female only basis in France. And in the U. K, and this is what we communicated already before, we're proud to tell you that Through a recommendation by NICE, we will be the 1st advanced therapy that is going to be recommended by NICE for the moderate and severe RA patients and the moderate patient population is the novelty here. Spain and Italy reimbursement progressing as Plans and in the course of Q3, we anticipate this to also go to patients in those countries in a reimbursed fashion and the same applies for the rest of Europe. Reimbursement discussions on track for finalization by the end of the year. Then skipping on the commercial going to the organizational and financial parts of this And although I mentioned that already, we've refocused our clinical efforts on the programs that were described before. We've also applied, and I think the current portfolio review is a good example of that, some more stringent stage gating work, making sure that we really progress the best opportunities to next stages and that we also make sure that the portfolio approach is appropriate in terms of This balance across different stages and across different therapy areas. All this leads to a very meaningful savings program, And we are planning to take out €150,000,000 of expenses on a full year basis. And that €150,000,000 represents roughly between 20% 25% of our cash burn. We had previously indicated that our cash burn for the year would be about around $670,000,000 We're now guiding for a midpoint of $600,000,000 range between €580,000,000 €820,000,000 And that reflects that we anticipate that roughly half of the savings will be materialized in 2021 and then we'll have a full year savings effect in the calendar year 2022. Then a bit on the financials for the Q1 itself. First on cash. Cash position still at €5,100,000,000 in a very healthy place. There's always a There's always a couple of exceptional items, as you know, in every quarter that we do not include in our operating cash burn. Those are proceeds from warrant exercises. In this quarter, specifically worthwhile to highlight that we have divested Fidelta, our CRO in Croatia that generates a net cash proceeds of little less than €30,000,000 We had a positive currency quarter. That's obviously 1 quarter is up, other quarter is down. We had a positive currency quarter And that leads to a translation effect of about €40,000,000 positive. And our cash burn operationally is a negative €128,000,000 And for clarity that includes first income, cash income of €35,000,000 from Gilead That was part of the agreement that we signed in December. So then you can do the math on the quarterly to the full year Cash burn as well, which we then, as I said before, anticipate to be between $580,000,000 $620,000,000 Then on the P and L, a quick words On revenues, costs and in this case profits, revenues are up and driven by revenue recognition On filgotinib and the platform, these are the deferred revenue or the deferred income Positions in our balance sheet that we accrue that we have accrued that we recognize every quarter, a total of 124,000,000 For revenues, costs are up a bit and actually revenues and costs are up by approximately the same amount to about €175,000,000 and the drivers here are filgotinib, our Toledo program and the cost for SG and A in terms of Commercial expansion as well as some items in support costs. On a net basis, we're actually in a profit this quarter, Two big drivers thereof. 1 is the same effect in terms of cash that I mentioned in cash, which is currency translation working in our favor, But also the disposal of Fideltta leads to an accounting profit of €22,000,000 in the quarter. And as a result, we are €9,000,000 positive on net results. Then last words before we go over to the Q and A on the outlook for the remainder of the year. Still quite a lot ahead of us. In terms of data, we have, let's say, in summertime, Data to be expected for 3,667 are TYK2 in psoriasis patients. And also during the summer, we anticipate to give Clarity and see ourselves data from the studies with our first Toledo compound in psoriasis, RA and ulcerative colitis. And then on the forgotten front, we anticipate an approval decision in UC in the second half of the year And our study in Crohn's disease diversity will be fully recruited in the second half of the year as well, which gives us a time line and a perspective on when we're going to see that data, hopefully by the end of 2022. With that, I'll leave it with regard to the prepared the presentation portion indeed. And now I'd like to ask our operator, Lynn, to remind us how callers can post questions. Go ahead, All right. Our first question comes from Peter Welford of Jefferies. Go ahead, Peter. Hi, thanks so much for taking my questions. I'll start with just 2 and I'll come back to one. So firstly, just with regards to the business development, you say in the statement Transformative Business Development. I guess curious to know what you're thinking when you say behind the word transformative. Should we be thinking You're looking to do more than just bring in an asset or 2 here. Is there something bigger picture that you'd like to do? And is this also going to focus On the same core areas that your internal R and D is now focusing on, I. E, I think inflammation, fibrosis and kidney disease? Or is there potentially a wider remit with regards to business development? And then the second question is just with to the JAK1, 555, I think it's 555, that's still obviously in osteoarthritis with data I think due. Curious how you should think about that. Is this an asset that could potentially then be, I guess, something that happened to it, value crystallized sooner? Or is this still potentially something that you could consider moving forward further in osteoarthritis given, obviously, that ceases to be a focus area? Thank you. Yes. Peter, I'll take the first question and Walid can do the second. Yes, we won a transformative BD deal With the idea to fill the gap in the pipeline, and it's clear that we now with CV in 1972 falling away, We have a disbalance with regard to early versus commercial. So that's something we would like To fill in and for the moment, we're thinking about one product that will come in that pipeline late Phase 2 Would be ideal or just before starting Phase 3. That's one option. The other one is that we're interested to Bring more. And that would be in the therapeutic areas most likely that we currently are in. But we're also interested in seeing if we can get certain commercial rights for Europe alone to supplement the gyrselica franchise that they have So that the sales organization has more in their bucket than just the Shalika. So actually, we got 2 different objectives here. Pete, are you tackling 555 or should I do it? Yes. You can do it as well. Well, so the 555, we're actually This is an entire testicular injection that we are testing in Phase 1. So we are doing A series of doses that we're going to be evaluating over time that are series of endpoints that we're going to be looking at, mostly pharmacodynamic, but also safety and PK. And actually based on these data, we will then decide what would be the most appropriate next step. As you imagine, we have Some questions about the regulatory path going forward and the way the risk balance of our portfolio, but at the end of the day, we will evaluate the data and see what is the most appropriate step Okay. Our next question comes from Jason Gerberry from Bank of America Merrill Lynch. Go ahead, Jason. Thanks, Elizabeth. Hey, guys. Maybe just for me, just on your selective TYK2, can you talk a little bit about how you see the molecule differently And Bristol's TYK2 and any important pharmacologic attributes of the molecule you think help differentiate and when we might get Some more early stage data on that molecule. And then just on The situation with France and the female only label, is that unique to France? I guess if something were surprising That happened that was discordant with the 13 week results. Just wondering if a female only label is something that you view as a plausible label Hey, this is Walid. I'll take the Q2 question. So our molecule is a domain kinase inhibitor Versus the DMXs is an arsenic modulator. How will that translate in the clinic really is the question. And for us, that's Really where the money is at the end of the day. Pre clinically, our molecule is selective and highly selective actually. And based on that, that's why we Advanced in development. In the clinical data and healthy subjects, we've had very good data from a PK compatible with once a day dosing. In addition, we've had some very good pharmacodynamic activity as well, which has confirms what we have seen pre clinically. And there's been no changes. As you know, we monitored these very carefully. We requested them with the Jack signature in that space, changes in sort of lipid profile or changes in We have not seen anything with our compound. Again, still within a Phase I healthy volunteer setting, but We are eagerly awaiting our Phase Ib study, Which is again a small study, about 30 patients, 2 doses versus placebo in a 1 to 1 to 1 ratio, 4 weeks. This will give us a sense of how the compound is performing. But honestly, if you ask me what is the best way to compare it To docravasitinib is to run a rightsize Phase IIb trial similar to what they've done In psoriasis, most likely or psoriasis arthritis, but I think psoriasis will be the one the area that's more validated where we have much more data And then we can truly compare like for like both platforms. So as to Sharing the data, we look forward to doing that at the earliest possibility. Regarding mechanism of action, our target would be the upcoming rheumatology conference. I cannot promise 100% because I cannot promise what they will accept, but that is our target. And for the psoriasis data, it will be the first The dermatology conference that will be coming up, we will be talking about that. Regarding the Congrats question. Michele, do you want to take that or you want to yes, Michele? Yes, I can. Yes. This is Michele here, so I'll take France. So just to refocus the situation there is relative to reimbursement. So it has nothing to do with label, which is European label and Male and female populations are both approved for the European label. And actually, we see that in different geographies, there is different sensitivity in the reimbursement evaluation so that we got positive NICE even from moderate patients and the GBA in Germany also gave An additional benefit as Bart indicated. So in France, there is normally a tendency to be more cautious on safety, and the authorities there then look at it that way without considering our MANTA data because the procedure started at the moment of the approval end of 2020. So without before the readout of Vanta that we communicated recently. So we are now seeking to Submit the MANTA data to the French authorities for reimbursement to revise that decision as soon as possible And also considering the procedure that we have for the UC approval and with that we are confident that we will get back that female reimbursement in the next period. All right. So our next question comes from Greg Savanna from Goldman Sachs. Go ahead, Greg. Thanks Elizabeth and thanks for taking my questions. I've got one primarily related to filgotinib. Just wanted to get an update on kind of what the path forward, has the MANTA MANTA Ray Safety data have been presented yet to FDA and if not, if there is any visibility on when that might be. I was just also curious if Galapagos had a view on kind of the multiple PDUFA extensions that we've seen across multiple Approved JAKKS and also next generation JAKKS. And then just a quick question on kidney disease. I know you've got 2,737 in kidney disease. But is your interest in kidney disease just beyond 2,137? I'm just curious if you've got other Assets that might be earlier stage and what is the opportunity in kidney disease specifically that excites Galapagos? Thanks. Thank you, Greg. I'll take the filgotinib and then I'll pass it on to Pete to talk about the kidney disease. So the as you know, we've shared with you the top line or actually limited top line on the primary endpoint at 30 weeks of pimanta and manta ray. And the reason for that was because the FDA is asking to keep the study blinded until The reversibility data up to 52 weeks can be put together. And as such, we are limited in how much we can talk about it. However, we've provided the information to European Health Authorities and with the Japanese health authorities, which are more comprehensive than we were able to share with you publicly. With regard to the FDA, the FDA indicated their interest to receive the data as well, but it's not as a way of formal response or submission. So as such, they received the data, but we haven't had any returns from them. So then we can share with you at this point. Regarding your question about the FDA and the PDUFA extensions, I see any speculation on this part. I'll give you my opinion for whatever it's worth. I think I view them personally as in 2 buckets. There's the Durham division And the question about the risk benefit of JAKs in dermatology in these indications, which Usually, the safety bar is much higher than other places. And in In the case of the rheumatology division, I wonder and again, I don't have that information to what degree the submission included 2 doses instead, just one dose of vadafitinib, which formed the basis for approval for rheumatology. So I wonder whether that is the area of concern that the FTEs have. But again, those are nothing more than speculation on my part And I have no more visibility on this. What I can tell you for sure is that we haven't received any request from the FDA or any other health authority Regarding any safety questions or concerns about the JAKs or providing them with any data As one would expect, when there's a concern about the class effect, that's all information I could share with you comfortably. On to you, Pete? Thank you, Alit. Thanks for the question on 2,727. So 2,727 is indeed the first compound we put into The kidney disease, polycystic kidney disease, and that's a 1 year study. So this is a first entry For us in the large space of kidney diseases, so the broader program behind is not limited to polycystic kidney disease only, so it's broader. There, we've made a choice to focus on those diseases where clinical trials and endpoints would be in the range from 3 to 6 months. So we will not step At the beginning into diseases where long term studies are needed to come to clinical endpoints. Well, they're early. We will not disclose the specific compounds needed diseases at this moment. All right. So the next question comes from Larka Ankeldev from JPMorgan. Go ahead, Larka. Thanks so much for taking my questions. Just one left From me actually, just a quick modeling question. With the potential $150,000,000 of OpEx savings on a full year basis, Could you please elaborate on how we should think about the level of OpEx in 2022 versus 2021? Thank you. Yes. Let me take that question, Laka. It's Lars speaking. So obviously, it's way too early to give guidance on '22, but, but, indicatively, we are clearly planning to materialize all of the $150,000,000 on a full year basis next year. So that will give us a new Starting point for our expenses in research and development and also in G and A. And normally, we should be able To leave it at that, I always keep a caveat because if there is, let's say, a scientific, very compelling Reason to change that number that obviously is the key driver. It starts with the science, it starts with the data and there's some Very important data readout still to come in the next 6 months for us that will ultimately determine that. But the envelope would really be to take into account that full year saving of €150,000,000 On the commercial side, there is one technicality that I need to make you aware of or I think you are aware, but I'd want to emphasize is that in 2022, we are shifting our agreement with Gilead from a fifty-fifty cost share to a 100% cost borne by Galapagos. So as a result, the investments that we're making this year in commercial are still, If I would say subsidized by Gilead and that will no longer be the case for that 50% next year. On the offsetting side, we will have Product sales clearly, so this will not all fall to our cash burn, but there will be some variability on the commercial side and probably some increase in costs in 2022. Our next question comes from Vimal Kapadia from Bernstein. Go ahead, Vimal. Thanks for taking my question. Thanks, Elizabeth. Can I ask one question, please? Just on the R and D strategy. So clearly, you're taking a much more focused and controlled approach moving forward. But how should we think about the evolution of the Toledo assets and TYK2 if the early data suggests More questionable differentiation versus the current offering. So how will Galapagos approach these assets in a scenario where they could be considered a little bit more me too? Thank you. Elik, Piet? I'll start on the Toledo. For the Toledo, we are in a phase where we are doing I have single seeking POC studies, and the outcome of those POC studies will determine what disease areas to focus on. So And this is another mechanism of action, and it's in fact the first drug we know that would play on both ends of the In Human Balance, we don't see really a lot of competition out there at this moment for this mechanism of action. Clearly, this means as well that we need to come with data That makes a difference for patients versus all approved drugs. But clearly, on a direct Competitor of these, we don't see many around us. What is for Tig 2? Yes, I mean, I mentioned that before. I think for the T2, we're going to be first stab will be to look at the data From the small psoriasis study, the Phase Ib that is going to read out shortly. And with that, we'll have an initial indication. I strongly doubt that this will be Very informative directionally, and it will require a next study that we can truly benchmark against Duclavacitinib going forward. Of course, before we make any subsequent investments, we will survey the space. We will be watching very carefully how the FDA and the field is actually evaluating We do gravacitinib data and to see whether this space is actually competitive enough and then we need to see whether our compound is competitive enough. And those are the criteria that we will be using to determine whether we will pursue going forward with it or not. But we're going to definitely be Very deliberate in our assessment of this before we jump forward in subsequent development. That will be costly. Great. Thanks very much. Okay. Our next question comes from Rosie Turner from Barclays. Go ahead, Rosie. Thanks, Elizabeth. Good afternoon, everybody. So I think just one left for me actually. So I just wondered if you could talk a little bit more about the opportunity in Japan. Obviously, cognizant of that being run by Gilead, but there's Quite a nice royalty stream set to come through to Galapagos. And when do we expect that approval to come through in terms of UC now that it's been submitted? Are there any numbers that you can give us in terms of the kind of peak royalty estimates or something like that? Thank you. Kenny, are you going to take that? Yes, I'm taking that, yes. So On Japan, so we have, as you said, the Gilead is running the launch and the information we have shared is that the launch is progressing in array with Informally uptakes and typically Japan has a slower uptake in the country because of the need to renew prescriptions every few weeks. So but for that, so Gilat seems happy with the progression of the launch there. What you see, of course, that's very important. Submission is done and well, the approval should also come later this year, but we don't have more Visibility on the perspective there. Okay. Thank you very much. All right. Our next question comes from Brian Abrahams of RBC. Hey, good morning, good afternoon. Thanks Two pipeline questions, if I could. First off, you discussed some data for filgotinib in small bowel and fistulizing Crohn's disease. I was wondering if you could maybe contextualize that in terms of how that compares to existing therapies and how generalizable that will be To the broader Crohn's population that you're studying. And then secondly, you announced the decision in IPF to prioritize 4,617 over 1205 that you had generated some proof of concept signals for the latter. And I'm just wondering if you could maybe talk a little bit more about the rationale for that and How you drew upon your extensive experience in IPF development to guide your evaluation of these candidates? Thanks. Thank you, Brian. So the data in the 2 studies that we have, DIVERGENCE 1 and DIVERGENCE 2 In small bowel, krone and crystallizing krone, there were actually 2 exploratory studies that Gilead is conducting. And Actually, both studies were stopped about 70% from full recruitment because they were taking a lot of time. And to some degree, we were a bit distracted from the effort to put behind diversity to drive it to further treatment. So as a consequence, the confidence with which you can make conclusions and generalizability and Centering to others is limited. Having said that, we were quite happy when we look at the data In a very small number of patients when you talk about this type of diseases, you're talking about 25 per arm, something like that, In small bowel Crohn's disease, when you look at the C. And how that changes after 10 weeks so that we can compare best with Fitzroy. Data seem to be quite consistent with what we've seen with Fitzroy, although with Fitzroy only invested 2 100 milligram, but the 200 milligram data seemed quite consistent with that. That made us feel quite comfortable. The crystallizing Crohn is a Tough disease and the endpoints there are based on MRI, but the changes that we have Over 24 weeks were quite impressive. And the way the KOLs responded to it and also Onno mentioned this Our colleagues at Gilead responded to it, indicated that we do have activity at 200 milligram. Again, how do you compare it to others? It's really difficult because, again, there's a lot of variability and MRI as an endpoint is also Something a bit different than what others might have used. But overall, we think that the totality of the data Indicates that when we added to Fitzroy that these data with the company are consistent and that should bode well Our diversity in Israel, which we're very excited that it's going to be fully accrue by year end as Piyush has been guiding. Moving on to IPF. I think for 1205, we did have a proof of concept, and we did see In effect, over placebo with 1205. However, the magnitude of the effect was of a size that Probably would be better suited for combination therapy as opposed to standalone therapy. And with XERI not being in the running anymore and the combination with lenantinib in particular, we saw a significant The target profile that we're going to be going after with such a molecule is a bit more difficult. And as a result, we decided to as you know, target the investment somewhere else. On 2716, we're excited about the pharmacology, but at the same We're not jumping very quickly. We want to take the lessons learned from ISABELA. As you said, we've generated a lot of data with ISABELA. We still don't have all the data in house by the way. We're still gathering all the data and closing out the study. So 1300 patients, many of them treated more than 6 months, many of them actually more than 1 year. So we need to get all that data and try to understand whether there are lessons learned that would There are some assumptions that we made when we designed these developed programs. When we look at the data, actually, I'm not 100% standing out. Like, those on low background therapy did not have a reduction Over a year in FDC as they did in the pivotal trials for lentilip and prostanidone, Actually, the drop was a bit less. And those who are on background treatment in entelodeprofenidone did not drop like the average Of the Phase 3 program, entelabidemetin, they dropped more. Retrospectively, that makes sense because those who are on background therapy and enter your trial There tends to be those who are not doing as well and those who are on no background therapy and choose to stay on no background therapy when you have available therapies are the ones probably who are not the ones who are going to be advancing over time or progressing. But those are valuable lessons that we need to Look at our data and parse them out and based on that, come up with an informed design for our program Our next question comes from Phil Nido of Cowen. Go ahead, Phil. Good morning. Thanks for taking our questions. 2 from us. First, on the Toledo proof of concept studies, in light of your more conservative Pipeline structure, can you give us a sense of what you would consider proof of concept in those five trials? Do you need to see compelling clinical data? Are the trials large enough to generate that or is it more about safety and biomarkers? And then second, just a house Question on the financials, it does look like most of the forgotten revenue was from amortization of milestones and upfront payments. There was 79 €1,000 in your report for commercial sales, I'm curious, were those filgotinib or are those some other product? Thank you. Bart, do you want me to start from Rodrigo? Yes, please go ahead. Okay. On the We have proof of concept. So first of all, very pleased with the progress we made. So 3 of those studies are fully recruited, one is completed. And so we are pleased that over summer, we can present to you all of the data. As I said before, as well these Trials are designed while small to generate clinical data that should allow us to estimate the magnitude of the clinical effect We can get with this compound and with this mechanism of action in these patients. So if you would see a biomarker signal only, we would be disappointed here. So we really Hope to see clinical effects in each of the studies and then based on those, determine what is the disease that is the most appropriate to take this program forward. Bart, over to you. Yes, Phil. We're booking a little bit of sales on Filgo in one of Small countries in Holland in our own P and L. So that's what you're seeing there. It's a Short period of time and early days, small markets. As I said before, the bigger markets, Germany and the U. K, we'll start building that sales in the second half of the year, and we'll start seeing that coming up in our P and L later on in the year. Perfect. Thank you. All right. Our next question comes from Laura Siccliffe of UBS. Go ahead, Laura. Hello. Thank you. Firstly, a pipeline question. So do you view the internal pipeline prioritization exercise as Complete for now or is there still more to do? And maybe related on a BD note, is the idea of Maybe collaborating with Gilead, one of their pipeline assets still a possibility? And then secondly, could you tell us what you've seen that gives you confidence And then 4,876, given that VOSAT and 3,970 hit 6, 23, would you mind just highlighting for us the key differences between those 2 molecules? Thanks. Let me take the part On Gilead assets, we are clearly in discussion with Gilead, how they could potentially help us filling the gap. And We have a very good collaboration and interaction with Gilead. So that's clearly a possibility that we would work together on one of the assets. Also, it would be part of the current alliance that we have with Gilead, where we would get ultimately European rights and Gilead So we think it's both for Gilead and us and a good opportunity to look into. The first question, Hi. Was that for me or what? For anyone, I have a question with the internal Prioritization exercise is complete at this point or is there more to do? No, I think we finalized that prioritization. Of course, we will continuously look at the pipeline and see based on data and on competition and on opportunity If this is the right balance, but for now, we believe these were the decisions being taken. Projects have been stopped. Resources have been reallocated, And we take it from here. Okay. On 4,876, 76, the back of 1223. So this is a compound with the same biological profile than 3,970. But as a backup, as we've advanced quite a bit in our medicinal chemistry knowledge on the target, it's a more potent compound. So we believe that We can cover the target longer and better if needed. So it will depend on the outcome of the box whether We judge at that moment. If we need to give stronger inhibition on the target, then that backup could Deliver that, if out of the box, it's clear that we have a competitive asset in hand, we can progress 3,970 at that moment. Thank you. All right. Our next question comes from Lenny Von Steenhauser from KBC Go ahead, Lenny. Hi, thanks for taking my question. More high level question from my end. There is mention of a more general stringent stage gating process for R and D determination. I was wondering if Could you elaborate on what that looks like in practice? What checks and balances may have changed or been implemented to determine what assets to progress and then at what point in time? Thank you. It's something that's undergoing in the company to see If we have the right steps and balances for the progression, of course, progression, especially when you go from candidates To preclinical as well as from Phase I to Phase II, those are very important and from Phase II to Phase III, Very important decisions where, of course, we have checks and balances and we have a review committee and everything in place, but we are evaluating if we can Increase the governance there and so that we ultimately make better decisions for programs to progress. All right. Thanks for that. And now, Jason Cardi from The Maxim Group. Your line is open. Hey there. Thanks for taking the question. This is Mike Lachinowicz on behalf of Jason. So if I Heard correctly, you mentioned that one of the Toledo programs has completed its proof of concept study and data is coming out in the following week. So could you just provide a bit more granularity of the Timing for the specific proof of concept readouts on the Toledo compound. So as I think as we guided The beginning of the year, we will gather the 3 first poxaries together and then bring the data of those 3 poxaries at once. And this, I believe, we say today it's in the summertime. So we will get those data over the coming 2 months And then bring them all together and present. All right. Thank you very much. And then As a follow-up, I just wanted to see if you could provide any color on the specific rationale for the U. K. Recommending filgotinib as an advanced therapy for moderate patients as compared to the other drugs out there. Yes, this is Michele. Thank you. So first is the evaluation that the HTA body lines there did on the So that's the race meeting on the combination of our efficacy, rapid and sustained efficacy and the safety profile. That's the first part. And then of course, then we had an access strategy, which then resulted in the balance evaluation of the economics and the value of the Seneselica for the UK. And now we have Peter Welford back for a follow on. Go ahead, Peter. Yes. Hi. Apologies. It's very short. Just on 4,876, is that just a follow-up on what you mentioned with regards to 1205? And curious, have PK combo studies been done with inhibitors together with pisenidone and ornamentsib, I can't say that word. And whether or not you can tell us anything about What's been done either clinically or pre fluently with regards to the PK profile of those combinations? Thank you. I think you mean the 4,760, the catenin inhibitor. Yes. So those trials are So we haven't been executed yet. So we will be able to tell you more about them Later on once they have the data. But those are planned for later this year. That's great. Thank you. All right. That seems to be all the questions we have today. I just invite you to reach out to the IR team if there are any additional questions. Oh, I see we do have just one more question Coming in, Matthew Harrison from Morgan Stanley. Go ahead. Hi, thanks for squeezing me in. This is Connor on for Matthew. So could we just get some additional comments on your biz dev plans? Do you plan to do both commercial and clinical deals Or do you have a priority for one of those? I know you gave some guidance on late Phase 2, but just wanted to hear your thoughts on commercial versus clinical. Thank you. It's actually the plan to do both. We would like to have a product in to bridge the gap And then the commercial one to help the commercial group in Europe to have more in their basket than just the silica. And we have Dane Leone from Raymond James. Go ahead, Dane. Your line is open. Thanks, Elizabeth. Sorry, somehow I got kicked out of the queue. Just two questions for me. The first one being, when you mentioned transformative BD earlier, which could Kind of range from late stage development assets to European rights for a commercial product or a near commercial product. Can you just remind us of if you were to embark on an acquisition, that would obviously be fairly sizable from a monetary perspective, How that works with the Gilead partnership and partnership structure? I think a number of us had thought that If you bought something, Gilead would have automatic buy in rights. And so it wouldn't necessarily make financial sense to do something more sizable. The second question is more of a strategy question, just in terms of how you're continuing to think about the development pipeline. A question we've kind of noticed when looking at the current pipeline is a lot of the indications that you're going after, which are Ranging from Phase onetwo right now are fairly large indications, which is good from a market opportunity perspective, but they also require studies and fairly long studies. Given your breadth of your preclinical pipeline, Do you think there's assets that you could bring forward that might be able to go into more targeted markets that might have a faster development strategy behind them? Thank you. Thank you. Thank you for the questions. Very good questions. Start with the first one. It's indeed true that Gille, whatever we do, we'll have opening rights for products after Phase II for outside Europe. And that, of course, limits the amount we can spend on our own On a certain acquisition or licensing deal, because if it gets too big in numbers, We need to get Gilead along us at the table. And Gilead has indicated that they're clearly interested To look at that and discuss that. So it's not excluded that we would actually do a deal with Gilead who financed part of the transaction for the Change of the non European right. So that's an answer to that question. With regard to Indications, we are clearly looking at opportunities to come with indications In the inflammatory and fibrotic field where we would get a faster path towards approval, It's when we had areas like osteoarthritis, but also the large inflammatory areas, You're talking about very long trials, live trials, which, of course, put an additional risk burden to the company. Of course, the payback in the end, if you get there, is also huge, It would be good to have somewhat of a mix there, a balance where we actually would have programs that have Smaller market opportunity could have faster way to the market. Great. Thank you. All right. Thank you. I think that's all we've got time for. So again, if you have any additional questions, please Come to the IR team, our next financial results call will be the first half results on the 6th August.