Galapagos - Earnings Call - Q1 2020

Transcript

Speaker 0

Thank you all for joining us today for the audio webcast of Galapagos' First Quarter twenty twenty Results. I'm Elizabeth Goodwin, Investor Relations. This recorded webcast is accessible via the Galapagos website homepage and will be available for replay later on today. So that your questions can be included, we request that you call in one of the telephone numbers given in last night's press release. And I've got one here for you.

That's 32 for Belgium, 24040659, and the code is 6118715. 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, possible changes in the industry and the 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 Ana Vomestolpe, CEO and Bart Fidias, COO and CFO.

Ana will go through the operational highlights, and Bart will explain financial results and expected future news flow. You'll see a PowerPoint presentation on screen. We estimate that that presentation will take about ten minutes. This will be followed by a Q and A session until 09:00 with Bart and Anno joined by Walid Abifab, our CMO Pete Wiehrenk, our CSO and Michele Manto, our CCO. I'd now like to hand over to Anno to start the presentation.

Speaker 1

Thank you, Elizabeth. I would like to start with some issues regarding the COVID-nineteen impact and I really want to start with thanking my organization for adapting very, very well to this exceptional situation. These are challenging times, especially for a research and development company. We have implemented everything early on in the pandemic. So people are working from home as much as possible.

But of course, for the research teams in the labs that is not possible. They continue to come into the office and into the labs. And of course, the support functions around that are also still functioning. So I'm really, really pleased how that has all evolved over the past weeks. And I'm very happy to say that the company is really continuing to run very efficiently and we're moving forward.

With regard to all our objectives that we have set, of course, are seeing the impact. We have seen the impact on the filgotinib trials that have been halted and also the start of early stage trials like the Phase I studies clearly are late because of the safety of patients that is the first priority, patients and people, healthy volunteers, the first priority of a company. The good news is that we are on track to report all the top line results that we have indicated previously. Of course, with the most important one, the ulcerative colitis filgotinib trial, the selection trial that we will announce this quarter. So you can expect that data in the next couple of weeks.

Then we have the Phase IIa trial of sixteen ninety in systemic sclerosis, which will come in the second half of the year. And sixteen ninety is now called cirituximab, which is the generic name of this drug that has been approved. So as of now we will name it that name. Then we are looking forward to the very important readout in osteoarthritis of 1972, a Phase 2b trial, the RUCELA trial that will also readout in second half,

Speaker 2

as

Speaker 1

well the second molecule in idiopathic pulmonary fibrosis twelve oh five, which will also readout in the second half of this year Phase 2a. All these trials were already fully recruited when the pandemic hit. In the Toledo program, we concluded the Phase I studies and we are planning the start of the Phase II trials with, of course, that start of those Phase II trials depends on the developments in next couple of months with regard to the pandemic, which means that we have adjusted the expectation of the first Phase II Toledo data to the first half next year from late this year. And in that program, we have prioritized 39,070 as the main molecule to move forward. We have multiple programs in discovery and development.

39,070 has at this moment most data and the most promising data set, so we will focus on that molecule to move that in phase two, whereas we continue very heavily on the further discovery and development of other molecules with other profiles. Then the very important phase three trial, the ISABELA trial in idiopathic pulmonary fibrosis with cerataxostat. That recruiting is still ongoing. It's tough, of course, these patients are at risk clearly with reduced lung functions. But of course, this is a very severe disease, a deadly disease.

So we see the willingness of doctors to continue to recruit these patients is clearly there. Not all centers are able to do that if they have been dedicated to or at least have major COVID-nineteen activities, then clearly they cannot recruit IPF patients for a trial, but the other centers can continue to recruit and although at a slower pace, we are happy that we are we actually have now over 1,000 patients recruited in that trial, and we are continuing to recruit these patients as we go as we speak. The futility analysis is expected in the 2021. We had said that it would fall in the beginning of next year. That, of course, will be delayed.

Also with regard to COVID-nineteen, but we're still expecting that in the first half next year. If we go to the next slide to the operational highlights this year, then we have completed the recruitment of the PINTA study, the twelve oh five in IPF. We completed two phase one healthy volunteer studies for the Toledo compounds. We were very pleased to get orphan drug designations in systemic sclerosis for cirtaxistat. As I said, we recruited over 1,000 patients already for IPF in the ISABELA trial with cirtaxistat.

And then we had two business development activities where we expanded the FibroCore collaboration in fibrosis, and signed a collaboration with the Vaivu Therapeutics in Poland in inflammation. If I can go to the next slide, then I would like to highlight or clarify our activities in the commercial footprint for filgotinib in Europe. So as you know, Gilead is taking on the marketing of filgotinib in most of the world. But in the deal that we signed with Gilead last year, we expanded our involvement in filgotinib marketing and commercial activities. And it's somewhat complicated, so I would like to highlight that again in this slide.

So for Holland and Belgium and Luxembourg, the Benelux as we call it here, Galapagos has the responsibility for all indications of filgotinib, and so we are ready to roll with regard to marketing and introduction of this molecule in these countries initially for rheumatoid arthritis and later for IBD, inflamed bowel disease. For France, Italy, and Spain, so the bigger countries here in light orange, we have the responsibility for commercial activities for rheumatoid arthritis, but not for IBD, that will be handled by Gilead. And for England and Germany, it's the other way around. So we will not launch filgotinib in RA in those countries, but we will launch RA for IBD like Crohn's and UC in The UK and Germany. So that is the way we have prepared it.

It enables us to do a statewide approach. We started building the Venelux, started two years ago, a year and a half ago. We started a year ago with activities in France and Italy and Spain, and we have just started also activities in England and Germany. So it enables us to not overplay our hands, build a commercial organization as we go, and we're fully ready to launch filgotinib later in this year in those countries in the current market. So very excited about the first commercial activities, of course, assuming that we will get regulatory approval to introduce filgotinib in those markets.

With that, I would like to hand it over to Bart to go through the financials.

Speaker 3

Thank you, Ono, for that part. Good morning, everyone in The U. S, good afternoon in Europe. Pleasure to give a quick introduction to the financials and obviously, as always, ready to take any further questions that you might have during the Q and A beyond the couple of slides that I'll be showing. And I always start with our cash position, which is our key performance indicator for the company, 5,700,000,000.0, very healthy balance sheet at the end of Q1 of this year with an operating cash burn of €83,000,000 in the first three months.

As you recall, our guidance was for the full year operating cash burn to land at between $420,000,000 and $450,000,000 which includes, by the way, some cash inflows from regulatory approval milestones. I'll talk to that in a second in a bit more detail as well. So the actual cash burn in the first quarter is a bit below our expectations. And as a result of the measures around COVID-nineteen, we've slightly reduced our cash burn guidance for the year to 400,000,000 to €430,000,000 So 83,000,000 in the first quarter, we always exclude some non operating items such as cash proceeds from warrant exercises or translation effects on currency, as you see here on the slide, the total of those are roughly €25,000,000 This quarter, they are in the positive direction. On the P and L, on the next, we have revenues that have increased significantly to €107,000,000 But I should say that to a large extent, this is accounting and non cash, meaning that a big proportion of the revenues is driven by recognition of upfronts that were paid by Gilead both in the filgotinib deal and in the twenty nineteen larger license collaboration.

And the amounts are here reflected on filgotinib. There is a recognition of €35,000,000 and on what we call access rights to the drug discovery platform, there is €56,000,000 of revenue recognition included in the 107,000,000 that we have reported for the first quarter. Operating costs are up as well from the first quarter in twenty nineteen. Some technical items therein. First part, Filgotinib itself, the cost sharing has moved from 20% to 50%, again, as part of the Gilead transaction.

Then for Zirid Taxistat, it's actually the other way around. We are now sharing costs with Gilead. And then there is proprietary programs that we are executing and bearing full costs such as Toledo, and the costs for those have increased as well, including also the preparation for the commercial launch where we see the cost to start to increase in the 2020 compared to 2019. Giving us a net result, which

Speaker 2

is more or less flat compared to

Speaker 3

2019, so negative €50,000,000 I should point out that there are quite a few non cash items that are between operating cost and the net results. One important one is what we call a fair value loss on the Gilead warrants. As you will recall, Gilead has the right to buy an additional 5% of Galapagos shares at a premium to the market price when they decide for the next ten years. And we need to record a liability for that rights. And because of the significantly increased volatility in the Galapagos share as a result of the general market increase in volatility, that liability has also increased with a negative €20,000,000 in the first quarter.

So you will see fluctuations like those in our financial results. Again, fully noncash in quarters to come as volatility will also change from one quarter to the next. Then to confirm indeed the revised operating cash burn, so a bit lower, euros 400,000,000 to $430,000,000 is our range here, mainly driven by what we've seen in terms of, let's say, pauses in trial execution around COVID-nineteen. And as a reminder, these still include $200,000,000 of milestones anticipated for RA approvals in The U. S, Europe and Japan.

So with that, I'll conclude the financials. I'll just, as a reminder, give you the news flow for 2020 that we are still anticipating, and it is still a very rich eight months still to come with the four big patient trials that are reading out and Ono referred to those already before with filgotinib, with twelve oh five, with ziritaxistat and with nineteen seventy two. And obviously, the highlight of the year will also be the anticipated approval in RA in The U. S, Europe and Japan, which we still anticipate for the second half of the year. With that, I conclude the introductory remarks and hand it over to Elizabeth to guide us through the Q and A.

Thank you.

Speaker 0

Thank you very much, Bart and Anno, for those thoughts. And this does conclude the presentation portion of the call. Questions will now be taken on a first come, first served basis, and we don't manage the queue. So please limit yourselves to one question per caller. And I'd now like to ask the operator, Derek, to connect us to any callers with questions for our executives.

Speaker 4

Thank you. Thank you. And we'll take our first question from Christopher Marai with Nomura. Please go ahead.

Speaker 5

Hey. Good morning, and and good afternoon, and thanks for taking the questions. First one is is really on Toledo, and and, maybe if you could elaborate further on on, number one, the target. But number two, it it appears you've selected, you know, one molecule over another. Thirty nine seventy, if I recall, was that toll two, toll three target, selective molecule versus the the the thirty three twelve that you are, it looks like no longer developing, and that may have been a pan toll, selective molecules.

So could you maybe elaborate on on what it was that that helped guide the decision here in healthy volunteers to choose one over the other. You know, if this is related to sort of selectivity of the compound or or others, you know, other other molecular properties often served in in phase one trials. And then finally, just on on your SSC program, we would love to understand if if you think that autotaxin would have a differential manifestation on on organs. You know, we've seen some data historically on skin and lung, and and it's sort of different across various compounds and modalities. So would love to hear your comments on that.

Thank you.

Speaker 6

Okay, Chris. Thanks for the question on the TOP program. So you first ask on the target, well, that's still undisclosed, so I'm not going to disclose that today. So we have plans that when we're in the clinic, will brief the whole field broadly on the discovery, the identity and the promise we see in this program, but that is not for today. So you mentioned the two compounds, three thousand three and twelve and three thousand nine hundred seventy.

So three three and twelve indeed was a PAMTO, three thousand nine hundred seventy, the two two hundred three. Three thousand three twelve was a compound we targeted for distribution in the column that has been taking a long time. So over Q1, we completed the multiple ascending dose parts of the healthy volunteer studies with both three thousand three and twelve and three thousand nine hundred and seventy. For both compound effect, we were pleased with the observed safety and the observed exposures. For 03/1970, we as well could include there, plasma biomarkers and when Ono hinted to promising data on three thousand nine hundred seventy, I think you should think about the plasma biomarker that really shows us that with that compound we are very well on track.

So that's then, when we had all the data looking forward with the COVID-nineteen around starting up novel clinical studies is really a struggle because we can't get to to to the hospitals. We have a number of protocols approved, but they are waiting until the hospitals open. We can go in there and we can start those studies. And in all of that struggle, we decided to focus on a single compound in the hope to push that compound through in a number of indications rather than disperse over different compounds and not do anything good. But it's not a choice for a profile, it's more that with 03/1970, the plasma biomarker CD pushed us to say let's put every effort behind that in difficult landscape where we live in today.

Over to Walid for systemic. Oh, Walid is cut off. Can somebody call back on it?

Speaker 0

Operator, we're gonna have to call back to to Waleed to get him in the call. We'll come back to his question when we get Waleed reconnected.

Speaker 7

So we stopped. I I lost everything. So I'm responding to the scleroderma question now to Chris.

Speaker 2

Correct. Correct. Correct. Yeah. Yeah.

Alright.

Speaker 7

Alright. Sorry about that, guys. This is the COVID situation where we have to deal with remote connection. So regarding scleroderma, Chris, so the approach that we've taken in the in the trial is to have a exploratory phase two study where we're evaluating essentially the effects on the disease itself, not a particular subtype or a particular organ. We're taking a very broad approach, and this is our first foray into this space.

Scleroderma is really a tough disease. It's actually the number one cause for death in autoimmune diseases, actually. But the trials in that space are difficult. So based on our animal models, or at least the one we understand of the biology, we cannot prioritize certain organ versus the other, but we have good reason to believe that the autodaxin inhibitor should have a positive effect in this disease, and that's what we're setting up to do in the NOVESA trial. That's the approach we're taking.

Thank you for the question.

Speaker 4

Thank you. Thank you. We'll next go to Jason Gerberry with Bank of America. Please go ahead.

Speaker 8

Hi, good day. Thanks for taking my question. Mine is just regarding the update on GLPG sixteen ninety and the the timeline shift on the futility analysis due to COVID. It was my understanding that you guys had enrolled the one third of subjects, necessary for futility in early two thousand. So just sort of curious what's causing the the the push and the timing there.

I'm wondering, is it a, maybe trouble capturing the, FVC endpoint? Or, alternatively, are you just, you know, needing to upsize, the trial, maybe a a larger, sample for the futility? Any color on that would be really appreciated. Thank you.

Speaker 7

Thank you, Jason. This is Walid again. Yeah. So, actually, just bear with me. I'm gonna get a little bit more technical here.

So for the futility analysis, we said that we need about a third of the patients enrolled, which you're correct. We've enrolled those. But we also said that we need about 70% information to be able to do the right statistical evaluation. And and that 70% information, quote, unquote, is derived from those thirty three percent of the patients who have been enrolled and have gone all the way through fifty two weeks, plus all of those behind them that are contributing to the various earlier endpoints, nine months, six months, and three months, to collectively help us estimate what the one year rate of decline in FVC would look like. And and I think it's it's these other parts that are a bit delayed.

The other piece is indeed as a result of the the COVID nineteen pandemic. We have given more leeway to sites to widen essentially the visit windows and obtain efficacy you know, in a in a safe way, whether they can do it at their site, or maybe they delay it by a month or two and do it lay at a later time point or put in place a system where we can get that, you know, by by a special provider as well. So those elements are leading us to have maybe a bit less information on FVC that we need from the additional patients that I mentioned, but also those that are nearing the fifty two week. And that's why we anticipate there's gonna be a bit of delay. I I don't think that's gonna be, you know, a big issue.

I still I'm hoping that we're gonna get the the data in early twenty twenty one, but we did not did not wanna make a promise that we couldn't keep, and that's why we're we're widening the window and saying the '21. But I can be I can assure you that it's nothing due to, you know, any changes or any difficulties we're having beyond a bit of a slowdown, as a result of COVID.

Speaker 4

Excellent. Thank you. Thank you. We'll take our next question from Evan Seigerman with Credit Suisse.

Speaker 9

Hey, guys. Thank you so much for taking the question. I hope everyone is staying safe and healthy. Can you expand on your commercial strategy for filgotinib in RA in Europe as this is kind of your first launch, into a competitive market? And assuming similar labeling to the competition, namely upadacitinib, you know, how do you differentiate filgotinib?

I mean, have you kind of made contingency plans for a more virtual launch, assuming that things don't necessarily go back to normal right away even in the fall or come early next year? Thank you, guys.

Speaker 0

Hi. This is

Speaker 2

Michele addressing that question. So there are multiple elements you put into this. So first of all, it's to confirm that we're really excited and energized in having our first launch. And this is really reflected in the number and quality of the talent that we have recruited in the past month and we keep recruiting in the country. So just to give a sense, we have completed the recruitment of the leadership teams in all the countries and in the headquarter supporting them.

And namely on the medical and access part, also we are, we are also fully then prepared there. And in terms of sales management also in the countries that will have reimbursement this year, we are also there completed. So and with all people coming from big experience in rheumatology and biologics or coming from companies that have been promoting and working on those markets until yesterday. So they are able to operate, contact customers, engage on day one as they join Galapagos. And that's what exactly how they have been doing.

Also in these different times of COVID, working virtually, we had a number of virtual ad boards, engaged payers. So this is going, I would say, under the circumstances as we plan and as we would wish. So of course, we keep a flexible approach there in terms of expanding our full sales force recruitment depending on how the situation will evolve in terms of reimbursement and

Speaker 3

COVID situation.

Speaker 2

On the label, on the strategy, well, we are, of course, very confident as well in the profile that we've got demonstrated in all the FINCH studies across all patient populations. And this is what definitely we're going to leverage counting on a differentiating label, of course. But anyway, strong data that really positions filgotinib as the best in class JAK with with great efficacy and really differentiating safety profile, especially in these days is coming up as a really needed feature.

Speaker 9

Great. Thank you, guys. Appreciate it.

Speaker 4

Thank you. We'll take our next question from Please go ahead. Your line is open.

Speaker 7

Great. Thank you very much for

Speaker 10

taking my question. I'm Ramakanthapadi from Bernstein. Just I'd like to get your thoughts on, the upcoming UC data, and just the context of what we've seen so far. So, you know, I'm I'm thinking high teens, 20% for the induction phase of what we've seen from some of your your your peers. And even in the the maintenance phase, we're looking at low 20% placebo adjusted rate.

So just to get your thoughts on your expectations heading into the data would be great. Thank you.

Speaker 7

Yep. Thank you. This is Walid. Thank you for the question. Well, indeed, I mean, I think, as you know, for UC, we have no previous phase two data with filgotinib.

The selection trial by itself was a phase two b slash three trial. There was a futility analysis at one point that evaluated each dose versus placebo in each of the the populations we're studying, the biologic naive and the biologic IR groups, and we passed that to make it into phase three, so that's a good sign. But we have no basis specifically with filgotinib in UC to to to try and estimate what our effects will be. So in the absence of that, we actually rely to a to a great extent on performance of filgotinib first in in Crohn, which is sort of a closer disease to UC. And and in that, the FITZMRI trial, our data were, you know, very strong efficacy signal that we've seen in in that trial, and and that makes us feel very positive about it.

And then the other part is to look at the performance of filgotinib in other indications like RA, psoriatic arthritis, and ankylosing spondylitis, and and kinda try to make this comparison, again, not within trial, but across trials, how other JAKs have performed, and based on that, expect what we will see in UC. And I think based on that, I think you can agree that the data that we have seen in RA and in the other indications that I mentioned, you would expect that filgotinib is gonna be performing at the top line of all these from an efficacy perspective compared to the other JAKs, particularly upadacitinib and perhaps a bit better than Topa, where we have seen so far. And from a safety and tolerability, I I still expect that filgotinib will continue to show this best in class profile in terms of safety. And and that those are expectations going forward. The numbers that recorded quoted are are probably in the ballpark of what we're thinking about, but that's the best way that we have going forward since we don't have previous data with filgotinib.

Thank you. Great. Thank you very much.

Speaker 4

Thank you. We'll take our next question from Debjit Chattopadhya with H. C. Wainwright. Please go ahead.

Your line is open.

Speaker 11

Hey, good afternoon and thanks for taking my question. So I'm just curious about where you stand with the RM ANTA program and especially for any supplemental NDA for UC. Would that be necessary to file? And a follow-up on a prior question regarding the differentiated label. What kind of interactions have you had with the FDA now that there is unlikely to be an AdCom to push for a label which does, you know, recognizes the PE DVD differentiation?

Thank you.

Speaker 7

All right. So again, this is Malik. As you know, the the the status of the MANTA program has not been disclosed yet. The most that Gilead has shared is that we should expect to complete the improvement in the second half of this year. That would be for all the MANTA program, both MANTA in in in the UC population as well as the MANTA and the rheumatology, MANTA Ray, as the name of the study.

In terms of discussion with the FDA, again, these these things, we don't comment on them. There's been a number of discussions, of course, that our partner Gilead has had with the FDA. What we say is that we're very appreciative with the work that they're doing. We're very confident in the data package that we have that we have developed for filgotinib in RA. And, you know, and and we we look forward to to having further discussion as we get closer to the PDUFA later this year.

Regarding submission in UC and whether MANTA will be needed or not, again, I cannot comment on this, but I think it's a little premature before we even have the results of selection. I So think just any discussion with the FDA will have to happen on that indication after the results of selection come out later this quarter.

Speaker 5

Thank you for your question. Appreciate it. Thank you.

Speaker 4

Thank you. We'll next go to Brian Abrahams with RBC Capital Markets. Please go ahead.

Speaker 12

Hi. Thanks very much for taking my question. I was wondering if you could talk a little bit more about your level of confidence in the regulatory timelines and in the filgotinib manufacturing given COVID-nineteen? And then would love to hear a little bit more detail about the specific path forward for 03/1970, your latest views on what proof of concept indications you might be considering and potential trial designs? Thanks.

Speaker 7

Okay. This is Walid. I'll take the filgotinib question. So let's start with manufacturing. We have no concerns around manufacturing, and we've been talking with with Gilead on this.

And and there's we we don't expect any negative impacts from COVID on that at all. In terms of confidence and regulatory timelines, we've been in contact with both the FDA and the EMA on this. So far, we have no indication that there will be a delay in this. As you know, health authorities try to do their best to honor their PDUFA date. Always, there are things that could happen that could delay this.

And, of course, now we're living in unusual circumstances. So I think we need to keep an eye out for this. But so far, we have not heard anything directly from them that indicate that there will be any delay, whether in The US, in Europe, or in Japan for that for that matter. So we're still on target as of now. Pete, over to you for Toledo.

Speaker 6

Okay. Thanks for the question on 3970. So as indicated before, we plan a number of studies that will come in waves. So those waves are triggered by the tox coverage that we have accumulated as of '4. So but we disclose the designs and indication as they come online.

So currently, I believe there is one, which is published as the psoriasis study, which is a stage 1b study in patients. And the next one, as soon as they are approved and they come online, we will share that with you. But it's a wave which is staggered in duration as stocks, coverage has has has, has been obtained. So you firstly, the shorter one, then longer one, and eventually, one one year studies as well. It is all in the autoimmune space.

Let's keep it there today. Thank you.

Speaker 7

Thanks.

Speaker 4

Thank you. And our next question we'll take from Emily Field, Barclays. Please go ahead.

Speaker 13

Hi. Thank you. I just had a couple quick questions about COVID nineteen, actually. You know, I believe that in the NIAID trial, remdesivir is being trialed with baricitinib. You know, was just if if that trial were to, show any promising efficacy, would there be the potential to combine remdesivir with filgotinib?

And then also, obviously, it's quite early on, but, you know, there's been some early evidence of patients with severe disease that have recovered that have significant lung scarring and fibrosis. And given the depth of your fibrosis portfolio, is that something that you, you know, would explore potentially from an R and D perspective? And I would like to sneak in another one if time, but I'll leave it at that for now.

Speaker 7

Yep. Thanks, Emily. This is Lily. Yeah. I mean, I think, as you know, there's there's a lot that we're learning in this field about about the this you know, the the COVID nineteen, the the pathophysiology of the illness.

Data are popping up in a variety of places and, you know, whether you you the approach would be to target antiviral treatment, but then at a later point, focus on also cytokine storms and so on and so forth. So we've been in discussion with Gilead, but as you can imagine, Gilead now is really all firepower is concentrated at least in that space, the virology space to push on moving forward with emdesivir and generating data that would be very potentially useful for humanity as a whole as we're battling this this pandemic. Of course, as we look at data that will come out from the study that you mentioned, and if it turns out that inhibition of JAKs could be helpful for this, of course, this would be something that would be considered in in due time, and and and Gilead would be in a prime position to to do just that. Yeah. Interesting data emerging about sort of some of the sequelae of people who are recovering from COVID and then end up with significant lung impairment.

I think I think today, we don't quite know what is the pathophysiology of this. But as we start getting better information, if our, you know, our compounds actually work on this, and, you know, at at Galapagos, we're very much invested in understanding fibrosis and and working on it, both pulmonary and others other types of fibrosis. We would we would definitely be interested in testing our molecules, either zirataxastat or some of our other molecules in development into that space. I don't know, Pete, if you wanna add anything to this, but but I think right now, we don't quite know about the pathophysiology.

Speaker 6

No. Thanks, Fahed. So well, what I can confirm is that none of our development candidates has any direct antiviral effect, so we are not in that game. We are looking into that side cytokine storm. So the and there we are currently looking which animal models and we are running couple of compounds in in animal models just to see whether we can bring something to to this battle which is not available out there.

But with all of the I sixes and on the market, the chance for for JAK1s to differentiate there is honestly quite quite limited. Fibrosis, our research is really mainly focused on slowly developing fibrosis. So now repositioning those compounds into something which is as acute as a COVID nineteen damage to the lungs. We have to look into that, but I don't believe there's any good animal model there. So that's a huge jump from a theory to patients that are in high unmet medical needs.

So that is a huge step to take and a bit hard, I think, for compounds that are not approved yet. But we'll see where where where we go from there. Thank you.

Speaker 13

Thank you.

Speaker 4

Thank you. And we'll next go to Ellie Merle with Cantor Fitzgerald. Please go ahead.

Speaker 14

Hey guys, thanks so much for taking the question. Just a quick one on the ulcerative colitis trial. Can you tell us a little bit about your expectation in terms of the mix between TNF or biologic naive versus experience in the trial? If you can comment on sort of what you expect to see in the patient mix. And then in terms of the osteoarthritis trial, can you talk about any impacts from COVID that you're seeing in terms of missed visits, if at all?

And if so, sort of what some of the provisions would be in the case of sort of any missing data that could happen as a result of COVID in that trial? Thanks.

Speaker 7

Yep, thank you very much. So the selection trial actually is almost two trials or three trials in one. Right? Because there's an induction part and a maintenance part. But also for each of those, we are studying a cohort of biologic IR and another one in biologic naive.

So so, essentially, the mix will be exactly fifty fifty because they're they're they're separate cohorts. So it's not open within the same trial to be to be, you know, to to be to for there to be a mix, I guess, is what I'm trying to say. For Rocella, the 1972 program in osteoarthritis, Of course, we are we are seeing and we're also dealing with with the effects of COVID. Just as we do for for all of our trials, we were very quickly able to step up and and connect with sites and provide feedback. Maybe I'll take a minute here to tell you a little bit about our approach.

Very early on, actually, we developed a a task force that essentially meets on a daily basis. The task force is comprised in addition to myself, the head of clinical operations, the head of clinical research, the head of medical safety, biostatistics, regulatory affairs, and we monitor information both from our ongoing trials, from the sites, from our teams, but also externally from regulatory authorities, you know, the the any scientific literature and so on and so forth. And the goal is to be able to provide the necessary guidelines to our our teams to to manage things going forward. Our approach has been priority number one, maintain the patient's safety in the trial. Priority number two, maintain the study integrity.

And fundamentally, at the basis of that strategy is to trust our sites, that they are the ones that are best able to judge what should be done and what measures should be used to maintain the safety of the patients and also the integrity of the trial. So we gave them a number of opportunities to widen visit windows, to do use local laboratories, to to get blood work, to provide using maybe other sites which might be open in case one site is closed nearby and so on and so forth. So what we're seeing is that the impact in Rosella is at this point minimal. We're not seeing anything major. I would imagine there will be a little bit of a delay because it's not major, a large delay, but a little bit of a delay because we're widening the the window of a visit to be able to allow patients to to get their their MRI, which is the primary endpoint at the end of the trial.

So that could, you know, delay the the the closure of the study by a few weeks to make sure that we maximize the chances that everybody gets that in. But so far, we haven't had any significant missing data. Again, as with everything COVID, we continue to monitor it very closely because it's a it's a shifting environment. But I think it's it's it's good to say that right now, we're starting to see the tail end of it. At least in Europe, we're starting to see the light at the end of the tunnel.

And in The US, also, they're they're starting to relax a little bit, and I would imagine that that things will, you know, the sites will will will have more ability to to gather the necessary information. So so far, I'm not too worried about it. Thank you.

Speaker 4

Thank you. Our next question will come from Matthew Harrison with Morgan Stanley. Please go ahead. Your line is open.

Speaker 15

Great. Good afternoon. Thanks for taking the question. I just wanted to maybe just spend a moment on twelve oh five and and PINTA. I guess could you just comment broadly, given that this will be the second iPS study that you read out, outside of the results specifically related to twelve oh five, what this may tell you either from patient characteristics or being able to validate some of the more novel markers you're using including the imaging.

Will it help you at all validate or give you any more confidence around the early data that you have for your other IPF compound? Thanks.

Speaker 6

Hi, Matthias. Thanks for the question twelve oh five. So twelve oh five, the PITA study is a proof of concept in about 60 patients. And what is new compared to FLORA is that here patients are on what we call a standard of care, which is then one third of the patient is on nintetanib, one third is on pifenidone and onethree is on a local standard of care where none of these drugs is approved. So in that sense, we are, shifting from, the fully placebo controlled local standard of care design in FLORA towards more the Isabella setting, what is expected as well for Phase three.

In PINTA as well, we've included FRI, which indeed will validate that as a more sensitive marker for stopping the progression of this deadly disease. So 12/2005, we have all patients recruited and second half of the year will have a good view and it will help us as well understanding how in a complex setting trials are designed well and how the different groups compare in the progression over six months which help us in the understanding. So the big offer is of course that if both would be active in view of their benign safety profile that we would really come within a combination treatment of the two compounds on the long term with a very clean safety profile and an efficacy which outperforms what we currently have in the market. Thanks a lot.

Speaker 4

Thank you. We'll next go to Phil Nadeau with Cowen and Company. Please go ahead.

Speaker 16

Good morning. Thanks for taking my question. I did want to go back to the 3,970 versus 3,312 in the Toledo program question again. In the past you had actually characterized three thousand three and twelve as being one of the best compounds you'd ever seen in your IBD preclinical models. And now it's being passed over for 3,970.

So again I'm curious why is that? Were the preclinical models somewhat not predictive of what you saw in the clinic? Or is 3,970 producing simply better data on biomarkers than three thousand three and twelve in the clinic? It does seem like something's clearly changed in your enthusiasm for three thousand three hundred twelve. Thanks.

Speaker 6

Yeah. Phil, thanks, for coming back to the to later program. So, what happens is over phase one, in fact, that with 03/2012, which is a column targeting, you don't wanna see anything in the plasma changing, so you wanna see low levels and you don't wanna see any changes. And that's what we saw, but that doesn't prove that you do anything good in the column needed because you don't measure it. Three thousand nine hundred seventy is a different compounds, well absorbed, distributes well from the plasma to the different tissues.

And with three thousand nine hundred seventy, as I said, we had the opportunity of doing plasma biomarkers And as Ono said, we saw promising data there. So we are we are quite pleased with what we saw there. And then you have the the the bird in the hand as we say with those plasma biomarkers, you have the exposure, you want to go for the safety, but we say let's push this forward because it is more solid than seeing absence of things. So that's what made us choose for 3970 at this stage. Thank you.

Speaker 16

That's fair. Thanks.

Speaker 4

Thank you. And we'll next go to Dane Leone with Raymond James. Please go ahead.

Speaker 17

Hi. Thank you for the update. And, it sounds like you guys have a better COVID task force and more qualified than the U. S. Federal government.

So congratulations on that.

Speaker 5

Thank you.

Speaker 17

So I want to actually, go back to the IPF commentary that you made on statistical modeling. Just had got some follow-up questions on that. So was the question on pushing out the futility analysis based on fewer data points than you'd expected on the front end of the curve? And is that because you're using an MMRM model to try and model out missing data points? And has there been any issue with missing data points from dropouts in the study?

Speaker 7

Yep. Thanks, Dane. Thank you for the compliment. But that was a low bar anyway to cross being better than you could be. No.

Yes. I think you're absolutely right. The we will be using statistical modeling. I'm not sure if it's MMRM specifically. I think our our statistical colleagues would be much better at answering that point.

But indeed, we rely on on data from the earlier time points to be able to estimate the, you know, the the the the efficacy or actually the the week 52 for those individuals. So those will add add the power. We're not just taking only the 30% or 33% then across the finish line. And and I will tell you, we will we're not having any concerns about dropout in the in Isabella. I think the Isabella trial is really the way we designed it, we tried to make it as much as possible closer to real world because we're going on top of standard of care.

As such, we allow, you know, a much wider window of treatment. We allow change in the background medication. We allow temporary stopping of medication and restarting because, again, we're we're interested in the overall treatment effect after after a length of time. So so far, we're very pleased with with what we're seeing. We haven't had any any concern in terms of dropout.

And and since you're asking me about this, and I think it's important to do this, we we you can imagine those people are at at high risk. They they we worry about them, so we monitor this on an ongoing basis. We have a data safety monitoring committee that actually looks at these data in an unblinded manner, and and we've had a recent meeting with them where they gave us, again, the okay to continue with the trial with no changes. In addition, we work very closely with our scientific advisory boards and particularly with our lead PI, doctor Toby Maher. And and his take on this, and here I'm quoting, is to say, so far, in a large global database of IPF patients from the Isabella program, we have seen a low event rate of possible COVID cases and no fatalities related to to this at this point.

So we're we're quite on top of it, monitoring very carefully. We're not worried about what we have seen so far or loss of data, and I'm very happy with how our patients are are managed, and and they're able to be kept safe. So very pleased Thank you.

Speaker 17

Thank you very much.

Speaker 4

Thank you. And we'll take our next question from Laura Sutcliffe with UBS. Please go ahead.

Speaker 0

Hello. Thanks for taking my question. Could you just tell us with respect to Toledo whether we should think of this really as just $39.70 for now given the current circumstances and some minor change in plans, or whether you're hoping to get some of the other assets you have into the clinic in the near future? Thank you.

Speaker 6

Laura, thanks for asking on the portfolio of the Toledo molecule. So we have a couple of, compounds following. Yes. So we have missed we kicked it off with 3T12, sequence 3970, and then we have 4399 coming as well. We plan to bring that one to phase one this year.

And in in discovery, we keep on looking into all types profiles at toll one, toll one, toll two, toll two, toll three, toll two, two, 3, we can. So it's a very broad program, which we will then look where what are the best indications for the different profiles. So but if you have to do today's studies in the difficult environment, let's be clear, then 3970 is well equipped to open up this broad program in the clinic and with the following molecules we'll see how they differentiate and whether we can push harder in certain diseases spending on the profile. Thank

Speaker 5

you.

Speaker 0

And Derek, we've got time for one more question.

Speaker 4

Thank you. And our last question will come from Lenny von Steenhuis with KBC Securities. Please go ahead. Your line is open.

Speaker 18

Hi, thanks for taking my question. Just a quick one on the financials. We see some shuffling around of cash assets from cash in hand to financial investments back to cash in hand. So I was wondering if you could elaborate a bit on that one. And perhaps a quick one on NOVESSA.

Waleed, you mentioned the broader approach in this trial. Does this also imply that you would be looking at pulmonary function readouts next to the primary endpoint of MRSS?

Speaker 3

Lenny, I'll take the question on the cash shuffling, you call it. What we indeed have done in the first quarter is to go a bit further risk off in terms of our investments. And we've exited a couple of lending market funds and had some further direct investments in deposits and bonds that are, again, are a little bit further risk off in current environment even though we were already very risk off, but better safe than sorry is, I think, the approach at the moment. So that's it for cash. Maybe Novesa?

Speaker 7

Yes. So thanks for the yes. So indeed, we will be looking we'll be measuring FVC in that trial. However, we have not selected patients with scleroderma that do have interstitial lung disease. So this is we took essentially, this is a trial looking at scleroderma as a disease itself, not scleroderma with interstitial lung disease.

But we will look at FVC, of course, and and see what happens over time. I'm not very optimistic that we will have enough power to detect signal because I don't think we're gonna have enough people at least who have interstitial lung disease represented in that trial, number one. And number two, to usually, people who have interstitial lung disease with Straderma have a slower decline than IPF. Again, in this trial, I cannot I don't imagine that we're gonna be able to pick up a signal. But we'll look, so and we'll let you know how how that comes out.

Thank you.

Speaker 18

Okay. Thanks very much for that.

Speaker 0

All right. Thank you all. That does conclude the Q and A part of the call. Please reach out to the IR team, Sophie von Greisel or myself, if you have any questions. Our next scheduled call is going to be for the first half twenty twenty at 8AM Eastern, fourteen CET on the August 7.

And we thank everybody for the participation today. Wish everyone a great weekend. And please all do stay safe. Thank you so much. Bye now.