Good day, and welcome to the Galapagos Financial Year 2018 Results Webcast and conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Elizabeth Goodwin. Please go ahead, ma'am.
Thank you very much, and welcome all to our audio webcast today. I'm Elizabeth Goodwin , Investor Relations, and I'll be hosting the event. This recorded webcast is accessible via the Galapagos website homepage and will be available for replay later on today. That your questions could be included, we request that you call into one of the telephone numbers given in last night's press release. I've got one right here. For Belgium, 32-2404-0659, and the code is 5739601. I would 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 from the results expressed or implied in these statements.
Today's speakers will be Onno van de Stolpe, CEO, Walid Abi-Saab, CMO, Piet Wigerinck, CSO, and Bart Filius, COO and CFO. Onno will go through the operational highlights, Bart will explain the financial results and give guidance for 2019. Onno will close with the late-stage clinical news flow we expect this year, you will see a PowerPoint presentation on screen during our talk. We estimate that this will take about 15 minutes and will be followed by a Q&A session, including Piet and Walid. I would now like to hand over to Onno at this point. Onno?
Thank you, Elizabeth. Pleasure to be here, everybody. Welcome on the webcast. I'll start with a slide which we call Think Big. Think Big is the slide that shows what Galapagos stands for. It's an important year for Galapagos because we are having our 20th year anniversary. 20 years in which a lot has happened since we started as a small biology outfit looking for novel targets towards the move to become a fully integrated company by introducing filgotinib in the marketplace. If we go back and look at some of the highlights, I want to point to 2003, when we actually discovered in our platform the JAK1 target as the right one to go for if you want to target rheumatoid arthritis. A long time, 16 years, until we are waiting for the phase III results with filgotinib.
Some other highlights, the IPO in 2005 and the first pharma alliance for those who have followed us a long time. That actually was with GSK in 2006. And then the first proof of concept in 2012 when filgotinib showed excellent results in the famous Moldova trial. We went public on the DARWIN results on the Nasdaq in 2015, shortly after, followed with a deal with Gilead around filgotinib. And then last year, the highlight of the year, clearly the first phase III data of filgotinib with FINCH 2. Excellent data set. We're now eagerly awaiting, as everybody else, the phase III, the other phase III FINCH 2 data, FINCH data that are coming this quarter. Last year also a highlight, of course, the start of the ISABELA trial in IPF.
We're looking forward to an excellent year this year, but before that, let's look at some of the highlights that we delivered in 2018 and especially the clinical ones. A lot of filgotinib news with the FINCH 2 results, as I mentioned, but also other indications in psoriatic arthritis and ankylosing spondylitis, where we showed fantastic proof of concept data in the TORTUGA and EQUATOR trials. And then of course, we initiated the start of the commercial organization. We're building that internally, and of course, Gilead is preparing for the introduction of filgotinib in the various markets worldwide. In IPF, we started the phase III program, a daring move based on a very small phase II trial. We got agreement with EMA and FDA to launch a regulatory program there, and we are currently in the recruitment phase. That's not the only thing.
We also started on another target, another mode of action, phase II trial, the FINTA trial in IPF. We're really building out an IPF franchise. In osteoarthritis, a very important disease area, we started the ROCCELLA trial, phase II-b trial together with Servier, where Galapagos is responsible for the U.S. market. Servier is doing the rest of the market. Recruitment there is going quite a bit faster than anticipated, that's looking good. Also, last year, a lot of news on MOR106 in atopic dermatitis, where we made a deal with Novartis that they took over the program from MorphoSys and us, whereby we continue to execute some of the trials, after which Novartis will take over also the operational side of the business.
We started the IGUANA phase II trial and then the phase I bridging study. Last but not least is clearly the progress we made in Toledo, where we saw very exciting preclinical results in IBD, but also now in lupus. We have moved the first molecule in phase I. We're expecting the second one later this year. We believe Toledo can be really a game changer in how to treat inflammatory conditions, and we're looking forward to the first clinical data there. If you go to the next slide, let's highlight the move into the commercial space for Galapagos.
We do it step by step, where first we'll use our own home territory, the Benelux, where we will introduce filgotinib in all indications, starting of course with RA when that gets approved, but later, if the data justify that, also of course IBD, so that is Crohn's and ulcerative colitis. In 2021, we anticipated everything going according to plan, that we can start launching filgotinib together with Gilead in the main countries in Europe, in IBD. As the next step, then we become really a worldwide international biopharmaceutical company, is when we start to introduce GLPG1690 in idiopathic pulmonary fibrosis, where we will also do the U.S. and some countries in the rest of the world. By then, we should have built a commercial organization worldwide.
And that really shows our ambition and our mission to establish a global biopharmaceutical company, and we're nicely on track to deliver that. With that, I'll stop my introduction and hand it over to Bart to talk about the financial highlights.
Thank you, Onno. This is Bart Filius speaking, Chief Operating and Financial Officer. Good morning, everyone in the U.S. Good afternoon in Europe. My pleasure to take you through the financials of 2018 and conclude then also with a bit of background on our guidance for the year 2019. And as usual, I'll start off with the cash position, which is shown here on this diagram. We've increased our cash position during the year with EUR 140 million as a result of, on one hand, a successful placement in September that generated over EUR 280 million of cash proceeds. On the other hand, a cash burn which netted out at EUR 158 million for the year, which as you know is a combination of cash income for milestones and upfront payments, as well as the cash expenses that are the investments that we do in our R&D platform.
There's a small EUR 10 million in between, which is a currency translation effect that we exclude from our cash burn, which really is a translation of the dollar position into Euro, and that one year and one quarter is positive, but the other quarter it's negative. This time we have a EUR 10 million positive impact on our total cash position. Health refinance with almost EUR 1.3 billion at the end of the year 2018. As a reminder, we also have roughly EUR 85 million of receivables from the Belgian and French governments that are not part of our cash position but are due over a four to five-year period from now on in the balance sheet as well. That with regard to cash.
Let me move on to revenues and other income. I've chosen to give you a little bit more details this time than I've done in the past, because there are some complexities that are driving the figure. The bottom line is that we've had a very good year on the top line, doubling our revenues from EUR 156 million- EUR 318 million. There's a couple of elements that are the big drivers of this doubling. First of all, you've seen this in previous quarters, we have generated, let's say, positive revenues through the implementation of a new accounting standard called IFRS 15. As you can see here on this slide, EUR 56 million is that impact.
Effectively, we've had a change of our equity position on the balance sheets with the opening balance sheet of 2018. We're re-recognizing EUR 56 million of income that has been generated previously, EUR 12.6 million of that in upfront and license in green, EUR 43 million in milestones. Those are connected really to the AbbVie and Gilead partnerships that we have signed in previous years. This part I would qualify as an accounting impact of the increase. More meaningful, the business side has generated two large transactions for a total of EUR 93 million, if we include also some cost reimbursements by Novartis. These are transactions on MOR106 with Novartis and on our CF program with AbbVie. In terms of recognition, the Novartis upfront is fully recognized in the year 2018, the AbbVie upfront is almost entirely recognized in 2018.
There's a little bit of work still ongoing in terms of handover of documents and paperwork that makes us recognize a small portion still in 2019. But this is largely all in the revenue numbers. There are some other movements, obviously, within all the aspects of our revenues, EUR 12.6 million in total, that make up the total increase to EUR 318 million. Then also on operating expenses, on the next slide, I will have a little bit more clarification as to the breakdown than I've usually done, because I felt it was important to highlight what's the big drivers behind the operating expenses? First of all, the overall number is increasing meaningfully from EUR 245 million- EUR 362 million in 2018. Research as well as SG&A are increasing, not a material driver for the increase.
I should also add to that in SG&A specifically, this is to a large extent driven by the higher valuation of outstanding employee warrants, that we obviously need to adjust based on the value of the share price of Galapagos, which has gone up over the year. As a result, you see higher SG&A expenses there, which is largely accounting. The big driver though for the operating expense increase is in development costs. As you can note there is our share of the filgotinib development costs, which as a reminder, is 20% of the total. We spent EUR 66 million in 2018. GLPG1690 is the big increase. All the prep work for the ISABELA trial as well as the initiation of that trial and the preparation of the clinical products has led to a total cost of about EUR 70 million.
There's other development costs for the multiple other compounds that we have in the clinic or in preclinical developments, that are also increasing from 2017 to 2018. Maybe as an additional insight between development, other and research, we invest roughly EUR 20 million in 2018 on our Toledo program that we've been speaking about in recent events. Then finally, I'll go through net results, which is always a conclusion of all of the above, but I thought it was useful to make the bridge between 2017 and 2018 here as well. I'd say the improvement of EUR 45 million in blue is really driven by what I would call operational evolution, so that's the sum of the revenues going up and the cost going up at the same time. The net is positive of EUR 45 million.
The EUR 41 million orange is an improvement, which is all in the ethics and financial lines. This is really the currency translation effect, which was a negative in 2017 and is now a positive in 2018. As a result, that generates a net result positive income of a little over EUR 40 million. As an additional data point worth to mention is that over the 20 years of the history of Galapagos, as Onno was just describing, we've now have accumulated losses of a little less than EUR 300 million with about EUR 150 million of deferred income that has not yet flown through the P&L. In other words, over the 20 years, we've been able to build up this pipeline with a limited use of shareholder funds, which is then also reflected obviously in our positive cash position. With that, I conclude the 2018 results.
I'll move right on first to give you a perspective on the guidance for 2019, and then hand it over back to Onno for a view on the news flow of our clinical pipeline for 2019. If you look at the guidance slide, we had EUR 158 million of cash burn in 2018. We have guided for a cash burn of between negative EUR 320 million and EUR 340 million. First of all, I should explain that the cash burn of EUR 158 million included a positive of business development income from our transactions with Novartis and AbbVie, which was EUR 86 million, if you just look at the up-fronts that were paid for those two deals. Essentially, there is an underlying increase, which is smaller than what you'd see on the face of the numbers, and which is between EUR 76 million and EUR 96 million.
Again, roughly 2/3 to 80% of that increase is driven by development. Here, you will see increases again on filgotinib and GLPG1690. It's also worthwhile to mention that 2019 will be a year where we're going to be investing significantly also in phase I programs, including a couple of Toledo programs as well. The actual underlying projected cost increase is between EUR 76 million and EUR 96 million, leading us to a total guidance of EUR 320 million-EUR 340 million. Obviously, that will take you to a little below EUR 1 billion as a projected cash position between EUR 950 million and EUR 1 billion at the end of 2019. With that, I conclude and hand it back to Onno for the clinical news flow.
Thank you, Bart. If you look at the news flow, let's divide it in H1 and H2, and you'll see the main clinical programs as well as earlier programs listed. In bold, we've added the ones where actually new data will be released, and I will focus on those. Clearly, we expecting the main news being the phase I and phase III top line 24-week data that will come this quarter. We ask everybody to be patient for a couple of weeks. That, of course, is a hallmark for the company because that concludes the RA phase III data set of filgotinib and should be the basis for filing later on. If you look at the second half of the year, you see quite a bit of clinical data coming out, mainly Sjögren's disease, where the proof of concept will be disclosed as well as the lupus trial.
Both of them are very important additional indications for filgotinib, large markets, high unmet medical needs. We're excited about those data sets to come. Then later in the year, we'll also get the data for MOR106, the IGUANA trial, where we will share with you the primary analysis of the phase II, and also the subcu bridging study where we expect to report data in the second half. We have a range of phase I trials that will read out during the second half of the year, including the first trial with the first generation Toledo. That will hopefully give us indication on the safety and maybe some indication on efficacy. The second Toledo program is expected to start phase I before the end of the year as well.
We're all excited about the news flow that is coming towards us. We hope the data are positive and that they form a good basis to further progress the pipeline going forward. With that, I would like to stop the news flow discussion and hand it back to Elizabeth, so we can start with questions right away. Elizabeth, the floor is yours.
Great. Thanks, Onno. Thanks, Bart. That does conclude the presentation for today. Now, I'd like to ask our operator, Tara, to connect us to any callers with questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, that's star one to ask a question. We will now take our first question from Brian Abrahams of RBC Capital Markets. Your line is open. Please go ahead.
Hi there. Thanks very much for taking my questions. We've seen several other JAK inhibitors run into issues related to safety at higher doses, and competitors take the strategy of filing based on lower doses. A couple of questions along those lines. First off, can you walk us through your view as to the reasons why JAK1 selectivity might be so important from an AE standpoint? Secondly, specifically, might you consider filing on the 100 mg dose? Do you think that profile would be sufficiently competitive there? Would you still need to complete MANTA if you were to file on this lower dose in the U.S.? Thanks.
Thanks, Brian. This is Walid, Chief Medical Officer. I'll take your call. Our view on JAK1 selectivity, I think, based on preclinical data and initial results from our completed double-blind placebo-controlled trials, as well as the open label long-term extension of the RA program in DARWIN 3 that we keep on reporting on a regular basis. We believe that the profile that we have seen for JAK1 selectivity, particularly sparing the effects on hemoglobin, and the platelets as well as the NK cells, and the way those would relate to respectively potential risks of anemia, potential risks of thromboembolic events and risk of infection or serious infection, potentially malignancies. We believe the data so far are supporting our working hypothesis that JAK1 selectivity is giving us a more differentiated profile.
Of course, we are waiting with bated breath the results of our two phase III trials, FINCH 1 and FINCH 3, which will be available by the end of this quarter. Those are in more than 2,600 patients and should help us better define the risk-benefit profile there and see whether our working hypothesis is actually translating into reality and backed by data. Regarding the filing of 100 versus not, I've also spoken about this a number of occasions. I'm very happy with the way we designed our phase III program, where we fully evaluate the 100 and the 200 milligram in those studies.
At the end, when we have all the package with us, all the FINCHs, again, by the end of this month, we will be in a much better position to make an assessment on the risk-benefit profile, and whether we should file with both doses, one dose, and so on and so forth. It's really premature at this point to do this. If I may, however, extrapolate from the FINCH 2 data, where we studied both doses in the biological incomplete responder. Those are the more difficult-to-treat patients. With those, when you look at the data both on efficacy and on safety, what we see is you see a very good performance of the 100 mg, very competitive. We see also a better performance of the 200. There seem to be a dose response in terms of efficacy.
What stood out also for us is the absence of any dose-dependent uptick in adverse events or safety concerns. If this profile continues to be confirmed in the phase FINCH 1 and FINCH 3 studies, we would be in a very good place moving forward. But again, it's premature. We need to wait another few more weeks to be able to get the totality of the data, that's where we are today.
Thank you very much.
We will now take our next question from Wimal Kapadia from Bernstein. Your line is open. Please go ahead.
Great. Thank you for taking my questions. Wimal Kapadia from Bernstein. Just following up from the first question. Maybe you can't give too much color here, but if FDA do consider thrombosis to be a class effect- How would that impact your expectations for filgotinib in terms of market potential? And then just following on from that, in your discussions with the regulators, is there a threshold event rate that FDA have in mind for thrombo events to be considered worthy of a warning on a product label? And then just on cash burn and OpEx moving forward, how should we think of the acceleration beyond 2019? Should we expect a similar jump in 2020 and beyond in the underlying expense increase? Could you talk a little bit how the mix of OpEx will change between R&D and SG&A, assuming GLPG 1690 is a success in phase III? Thank you.
Wimal, I'll probably start with the filgotinib. I think it's really premature to be able to ask that question. It's very diffi- Sorry, it's not premature. You're welcome to ask that question anytime you want. But to answer that question about the class effect or not, I think we have to wait to see the totality of the data of the FINCH program. I think that's very important. We have more than 2,600 patients that are going to be treated. Initially, we're going to give top line results for the first 24 weeks, then shortly thereafter, we will have the 52-week data. Those are going to go a long way to help elucidate whether selectivity of JAK1 versus the others is going to play a role into this or not. This is not a new thing.
This is something that the field has been monitoring in detail, it's very difficult because those are rare events and they do happen in this patient population. You're trying to see whether there's a small increase or there is an increase in these rare events. It's a bit difficult. The field is on it. We are on it, monitoring it, also trying to understand the biological underpinning. This also leads to your other question, whether there is a predefined threshold that the FDA is looking for, I believe the answer is no. We're not aware of it. If they have one in mind, they haven't clearly communicated on that. When we were following the baricitinib adcom, that topic did not come out very loud and clear as to a certain rate that they need to see this.
I think when we look at randomized control trials, whether active or placebo-controlled over long term, that's going to be the more defining way to analyze the data. I think our FINCH data are going to be very important to help the FDA make up their mind whether we do have an issue with filgotinib or not.
Okay, I will take the question on the cash burn and the lookout beyond 2019. First of all, let me say that we are very proud to have so many opportunities to invest in at the company. That's why we're increasing our investments this year. Again, from previous year, it basically is a sign of the success of our pipeline with not just the mid-stage assets that are well known and well spoken about, but also the earlier stage initiatives that we have. To the extent that this success continues and will be expected to do, is that you would expect also that the R&D expenses will also increase in later years. However, there is a caveat there, which is that we also anticipate an increase in milestones coming up in later years.
In 2019, just as background, there is very little in milestones included in this number guidance EUR 322-EUR 340. The real material milestones are connected to the approval events for filgotinib in our partnership with Gilead, those will come in the years 2020, 2021. There we are in a position where we might be seeing increasing R&D expenses being offset by also increasing milestone events. With regard to SG&A, that will take up a larger proportion. I think still it will be relatively small compared to what we're investing in late-stage developments. It will be increasing in 2020 as we are ramping up the preparations for launch for filgotinib. In Europe, as you know, we have a co-promotion in the EU5 and Benelux, we will also be bearing 50% of the initial launch expenses there.
Also for IPF, even though that's maybe a little further out, we will be starting to invest a bit in launch preparation. Indeed expect the selling components of SG&A to go up from where it is today.
Great. Thank you very much.
We will now take our next question from Christopher Marai of Nomura. Your line is open. Please go ahead.
Thank you for taking the question. First, maybe just to follow up and clarify, we're getting the FINCH 1 and FINCH 3 readouts this quarter. Can you clarify if those might happen together or separately? Any chance they happen together? And then secondarily, if we could follow up on the SELECTION trial. Congratulations on the full recruitment there. Should we be anticipating first quarter 2020 readouts there? Is that reasonable? Could you maybe walk us through how some of that data may be read out? Thank you.
Thanks, Chris, for the question. Yeah, the FINCH 1 and FINCH 3 will by the end of this quarter. I don't think we're guiding at this point whether there will be one or two releases at the same time, but we expect them at the end of this quarter. Regarding the SELECTION, I think, yeah, we're very excited that we finished recruitment. As you can imagine, this is going to be a 52-week trial. We have to gather the data. Currently, we're targeting first half of 2020. Could be in the earlier part, but we haven't given that clarity yet.
Okay, and then on GLPG1690, could you maybe remind us of some of the ISABELA interim go, no-go decision making questions? Is that safety specifically or efficacy? I know you sort of rushed this one after a small, but exciting trial result. That's my last question. Thank you.
Yeah, sure. Actually, we do both. Take into consideration that we went from the FLORA study, which was in more than 20 patients, 12 weeks, into a very large program, more than 52 weeks treatment in about 1,500 patients. We have to put checks and balances in place. We have an independent data monitoring committee that monitors the study on an ongoing basis. Their primary focus is to look at safety. But at the same time, it's their prerogative to look at efficacy as well. And they do make an assessment of risk-benefit. In addition to this, we do a futility analysis, which is something that we specify in the protocol. We haven't yet fully finalized it because we would like to have a discussion with the health authorities on this and come to an agreement.
But that futility analysis will be done when approximately a quarter of the patients have finished 52 . By that time, we will take the totality of the data. If you recall, we will not stop treatment of the patients at week 52. All the patients will continue on whatever they were randomized on until the last patient clears week 52. You can imagine when we take a quarter of the patients who have done 52 weeks, there could be more than 80% of the patients already randomized into the trial, and more than 25% of them who have gone beyond week 52. So we take all the totality of the data, which give us a lot of information to be able to assess whether we are going to hit futility. In that case, if we have futility, we will stop.
There will be a recommendation that would come to us from this independent committee that will look at the futility analysis to us, whether we should continue with the trial or not. That's kind of how it is currently framed. It has to be finalized.
Very helpful. Thank you.
Apologies.
We will now take our next question from Vamil Divan of Credit Suisse. Your line is open. Please go ahead.
Hey, guys. How are you? This is Vamil. Could you sort of help us understand, I guess, what we should look for when FINCH 1 and FINCH 3 reads out in the end of the quarter? What you would consider as a success or to be better than the competitors? Thanks.
Well, I mean, I think, it's, for us, we've tested filgotinib in a number of double-blind placebo-controlled trials in rheumatoid arthritis. What we don't have is any data yet in early RA, which is what FINCH 3 is going after. But Honestly, I think we can extrapolate from the performance of filgotinib and when you look at it, how it's performing vis-à-vis the competitors. Our expectations are that we will be performing in the top range in terms of efficacy. Our expectations also from our safety data so far, again, expectations, is that they're going to be coming to be very good and positively differentiated. Those are our expectations. Let's see what the FINCH 1 and 3 data will look like at the end of this quarter. That's where we are today.
Yeah. Thanks.
We will now take our next question from Adam Walsh of Stifel. Your line is open. Please go ahead.
Hi. Thanks for taking my question. This is Edwin on for Adam Walsh. My question is on MOR106 on atopic dermatitis. You plan to do a new combo study with a topical steroid. What is the thinking behind this, and what difference do we expect compared to the current IGUANA phase II study? Thank you.
Piet, are you taking this or am I taking this?
This study is to bring us closer to the daily practice. Up to now, we're doing a proof of concept. We do a very clean dose ranger where patients are only on the drugs. The topical steroid study on top of that is a study that brings us then closer to the daily practice where some of the patients get treated. We want to study that indeed our proof in that study that adding MOR106 on top of corticosteroids gives you an additional benefit to this patient. This is a study that prepares us well for phase III to see whether we can safely include patients that have been on topical for a while stepping into phase III.
It is more of a kind of safety study that Informs us on how we will design and how we need to include or exclude patients that have been recently on a topical steroid than anything else. Thank you.
We will now take our next question from Lucy Codrington of Jefferies. Your line is open. Please go ahead.
Hi there. Thank you for taking my questions. I've just got a couple. You mentioned that filgotinib is due to start the phase III to psoriatic arthritis in the second half, but there's no mention of a phase III in the ankylosing spondylitis indication. Is this something that's under consideration? Then secondly, we noticed that the all remaining deferred income has now been classified as current at the year-end. Does that imply that the outstanding upfront from Gilead will be recognized as R&D cost in 2019? How are you thinking about that? And then finally, if you could provide any color on the recruitment rate into the ISABELA trial, and if possible, any kind of information regarding the background medications that the patients are on. Thank you.
Bart, do you want to take the finance question first and I'll do the others?
Yeah, let me do that, Walid. Hi, Bart here. On the deferred income, you're right, it's all classified as current deferred income, which means that we anticipate that we recognize this in full in the next 12 months. This should be part of 2019 revenues indeed. The small caveat is that you don't know exactly what the actual spend is, it might be that we're just going to be slightly short or slightly earlier. We anticipate the next 12 months indeed to recognize the full remaining amount of the upfront from Gilead. Walid, for you.
Thanks, Bart. For the filgotinib, the data from the TORTUGA study in ankylosing spondylitis were very positive, as you've seen, published in a top-tier journal. I think we haven't guided specifically, by we, I mean, Gilead and us, haven't guided specifically about the start of the phase III. I think, we can say that the preparations are underway, and we should expect to hear more and subsequent updates from them. Regarding ISABELA, we're currently in the startup phase of the study. We just held a large investigator meeting in the U.S. where we had upwards of 70 sites attending for the North American sites. Next week, actually, we're doing a very large one in Europe as well. In the next couple of months afterwards, we're going to be doing ones in South Asia and Latin America.
The initial feedback from a lot of the sites and the KOLs, is there's a very high level of engagement and great excitement about this program. I can say that we're off to a good start. Regarding background treatment, if you recall, that study is designed to go on top of standard of care. And our goal in the trial is, at the end of the day, we will end up in a combination of patients where we would be mimicking what is essentially the current standard of care in the U.S. and major European countries. Specifically, about 1/3 of patients would be on nintedanib, about 1/3 would be on pirfenidone, and 1/3 would be on neither anti-fibrotic treatment.
Of course, during the conduct of the study, we will make sure that the proportion of patients in each of the arms, placebo, low dose, and high dose, will be equivalent between these various subgroups so that we don't have over-representation. We will do adequate stratification to make sure that that will happen.
Great. That's helpful. Thank you.
We will now take our next question from Philip Nadeau of Cowen and Co. Your line is open. Please go ahead.
Good morning. Thanks for taking my questions. Just two from us. First, on the filgotinib regulatory filings. Press release mentions that you expect to file once the FINCH data are complete. It doesn't specify in which territories. Could you maybe give us some sense of what your current expectations are for the filing timelines in Europe versus the United States? Second on the IGUANA trial, I'm just curious, what would you consider proof of concept data from that study? What do you think would yield a competitive profile? Thanks.
Sorry, I'll take the filgotinib question, then I'll turn it over to Piet for MOR106. Regarding regulatory filing, I think after the data from the FINCH 1 and FINCH3 become available, the end of this quarter, we will have discussions with the regulatory authorities, in Europe, in Japan, and also in the U.S., to figure out essentially the filing plan for filgotinib. I think more details on this and the sequence of it greatly depends on the outcome of these discussions. Gilead and us will be guiding on this with more clarity a bit later in the year after we've had those discussions.
Okay. Thank you, Walid. On the IGUANA MOR106, which is a large dose- ranging I.V. study. The goal we set for ourselves is there to be in the range where we've been in the phase I-b. That's where we've shown that this is a treatment which is competitive to the efficacy seen and the safety seen with dupilumab. The ambition is to be clearly within that range of efficacy. Thank you.
We will now take our next question from James Quigley of JP Morgan. Your line is open. Please go ahead.
Hello. Thank you for taking my questions. Only a couple left. On MANTA, we've had Gilead announce they've expanded their recruitments outside of just ulcerative colitis and into other indications. I understand it's early, but what's been the feedback so far on the willingness to recruit patients from those sites, and especially interested in the sites that you were involved with in the phase II development? Looking at the U.S. market in general, in RA, and the potential pricing reforms that have been tabled for drug pricing going down to, or removing rebates. Rebates have been quite a big important part of Humira. Again, I appreciate it's not yet through yet, but how does this impact your thoughts around the market for RA and the potential for the JAK inhibitors class to penetrate into the biologics? That's about it. Thank you very much.
Walid, I'll take the MANTA question. As you know, we've discussed with the FDA, opening up the recruitment to other indications. Within IBD, we were going to expand beyond UC to go into Crohn's disease. There are also some opening up of some of the inclusion/exclusion criteria as well. Then in the rheumatic diseases, we're going into RA, psoriatic arthritis, and ankylosing spondylitis as well. Initial feedback has been positive. I think John McHutchison, a few weeks ago in the 2018 end of year results, stated that he saw an increase in the recruitment in MANTA, and I think that's a good sign of the initial response. I would imagine as we start activating more of these changes on the ground, we will see things to continue to move in that direction. Bart?
Yes, I'll take that one. The other question, James, on drug pricing reforms and the impact on the market. To be honest, in all fairness, James, it's a bit early to comment on that for two different reasons. On one hand, we don't know where those reforms ultimately will lead to and if and to which extent they will become policy. That's really a bit difficult for me to start commenting on now. At the same time, we also haven't seen the full profile of filgotinib, where we cannot really comment yet on the positioning it will take in terms of pricing. One thing I think will always stand out, and that is that if there is a differentiated molecule, that there's also an option and a very good market for it.
As long as you can serve patients, you can get a good price both in the U.S. and in Europe. We hope to demonstrate that through the programs that we're running together with our partner, Gilead.
Fair enough. Thank you very much.
We will now take our next question from Emily Field of Barclays. Your line is open. Please go ahead.
Hello?
Yes, your line is open.
Oh, hi. Sorry, couldn't hear. Yeah, just a couple of quick ones. I was just wondering, do you guys intend to publish the data from MANTA publicly? Then have you determined whether that's going to be a determinant for filing in the ex-U.S. geographies? Also, just for the Toledo program, what should we be looking for in terms of incremental news flow, I guess, over 2019 in the coming months? And then on your cash position, in the context of the increased cash burn versus the milestones that you expect in the coming years, how do you feel about your overall cash position, and do you expect that you would need to raise any additional capital this year? Thanks.
Okay. This is Walid. We'll try to take them chronologically then. For publishing MANTA, I think it's too early to say that. I don't think we've had any discussions with Gilead on this, so it's really difficult for me to speculate. I would imagine these would be important data in general for the field, and knowing Gilead, they probably would be open to do this, but I'll have to leave it to them. In terms of whether MANTA data are required U.S. or ex-U.S. and so on and so forth, we will know this after we've had those discussions with the health authorities.
As I indicated earlier, we're waiting for the FINCH 1 and 3 results by the end of this quarter, after which we will engage in those discussions with these health authorities. We will be able to better guide in subsequent earning calls, probably you hear this first from Gilead, as to whether these things are needed or not, and in which geographies. I think, Piet, you're next.
Thank you, Walid. On the Toledo program incremental news flow for this year. We have an ongoing first-into-human SAD/ MAD study ongoing. We probably will report out on if that's completed. Then for the first compound GLPG3312, the plan is to move into patients this year. That as well, we will clearly announce the start of that study. And then we have the second compound GLPG3970, moving quickly behind. The plan there is to announce when we move into first-into-human as well, early second half of this year. In the meanwhile, we have a large drug discovery program, as we indicated before, about half of the scientists that work in inflammation are working on that program within the company. And we expect to select additional novel molecules from different chemistries and with different properties over the course of this year. Thank you. Over to Bart, I think.
I'll take the last question, Emily, regarding your, regarding the cash position. Obviously, we feel comfortable with the current balance sheet of almost EUR 1.3 billion, even with the increasing spend this year. We're in a good position, I think, also at the end of 2019. From that angle, no necessity to raise additional capital. At the same time, we will never fully rule that out. Obviously, what we can say is that over the history of the company, we've always been able to raise additional capital only at share price levels which are higher than previous equity financings. We've always been very conscious of the dilutive effect of any financing, and we will remain to be that in the future as well. We're comfortable with the current position.
Thanks very much.
We will now take our next question from Dane Leone of Raymond James. Your line is open. Please go ahead.
Thank you for taking the questions. A few from me. Sure. Just one on the IPF. I think in your own words, you said that you started at kind of a daring phase II, based off of a somewhat limited phase I program. I was just curious, it's been a topic of debate with investors regarding that move into a much larger program off of that data set. Could you just remind us how your team thought about the data points that came out of that program, in terms of what you specifically were looking at for the signal that gave you the confidence to scale up that program so rapidly? And then I just have a follow-up on the Toledo program after that.
Thanks, Dane. Thank you for your question. You're probably off by one phase in your question. We started DARWIN phase III based on good data from a phase II study.
Okay.
Well, look, in that trial, we were looking to find evidence of target engagement and a safety profile that would look good. If you recall, the treatments that are available currently on the market suffer significantly from adverse events. Actually, despite the fact that these patients unfortunately have a deadly disease that is as bad as certain severe form of cancers, they choose not to be on that drug. About a quarter drop out every year from treatment. When we saw the results, actually, we were very positively impressed. Not only we had the target engagement we were looking for, a reduction in LPA, but we also have seen effects on the functional vital capacity, which is with the primary endpoint that the FDA looks at. There were clearly a trend between us and placebo. It hit significance at week eight.
Although the study was very much underpowered to detect that. Those data were corroborated when we also used home spirometry, which also gives you confidence that those effects are not just by chance that you managed to pick up when you saw these patients on few occasions in the office. And then when we used the more sensitive imaging technique of FRI, we also managed to detect a signal that indicates that our patients are stabilizing on drug, and on placebo, they continue to deteriorate. When you take the totality of the data, we felt that these data are convincing enough for us to be able to move to the next stage. And then when we thought about the next stage, we balanced the unmet medical need that's out there with the potential risk that we would be taking by engaging in it.
But we felt that if we put the right checks and balances, as I described previously, in terms of the safety of the patients as well as the preparing for protecting the company against these investments, we felt that this was the right move that will balance the getting the drug to the market potentially two and a half years earlier than otherwise if you were to do a phase II-b than a phase III, and engagement, and getting into the study going. Now, what was great is after we did all this and moved forward, we had a great validation of this mechanism action by another company, which is BMS. They've done a trial, which they recently published, and the drug works downstream from us on targeting the LPA1 receptor. There was a nice dose-dependent effect that demonstrated a validation of this target.
Now, unfortunately for that molecule and actually for the patients as well, this compound will not move forward because they've seen some off-target activity, I should say, and they led them to stop it. For us, it was a great external validation of really the decision that we made based on the FLORA data.
Great. Thank you so much for that clarification color. I just want to follow up with a quick question on the Toledo program. We are going to get first-in-human data from this program in the back half of the year from actually a number of the compounds. I'm just curious, in terms of what you would be looking for that first data, is this a situation where we're looking at a novel mechanism of action, where you're going to be looking at biomarkers to see that the compounds are doing what you would expect them to do from the translational work, or is this a pathway or approach that you feel is already well-validated and you're going to be looking more at the toxicity of these compounds?
I know you look at the data in totality, but I'm just trying to understand the balances of what your team has competence in versus what's the unknown variable at this point.
Okay. Thank you for the question. On the Toledo program, it's quite clear that it's something completely novel. As part of the phase I, we indeed would like to see a target engagement, and that would as well give us confidence on how we might or we should translate the animal model data to the patient. It's also completely novel. We'll watch carefully safety as well. But it's a complete novel mechanism of action. We don't have anything external there where we can hook our science up to, so we have to develop it ourselves. There is a target engagement biomarker included, and that's going to be the first anchor point. From there, we'll move on. That's the primary goal for the first compounds. For the second compound, once we've done that translation, we should be able of moving faster.
I just include that probably in the first to human, but more as a check with data points and move then more quicker to the indications which are of most interest. Thank you.
Okay, thank you.
Okay. Thanks, Dane, and everyone who's asked a question today. I'm afraid we've run out of time, if you have any questions that you were not able to ask, please send them to me or Sofie van Gijsel from the IR team, and we'll try to get the answers for you. That does wrap up for today. Please look for publication of our annual report 2018 on or around March 29th. We thank everyone for participating today. Look forward to speaking with you all soon. Bye-bye.