Galapagos - Earnings Call - Q4 2018
February 22, 2019
Transcript
Speaker 0
Good day, and welcome to the Galapagos Financial Year twenty eighteen Results Webcast and Conference Call. Today's conference is being recorded. At this time, I would to turn the conference over to Elizabeth Goodwin. Please go ahead, ma'am.
Speaker 1
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 home page and will be available for replay later on today. So 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, (322) 404-0659, 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, Glabagos' actual results may differ materially from the results expressed or implied in these statements. Today's speakers will be Anno Moustopa, CEO Walid Abhisat, CMO Pete Wiekering, CSO and Bart Suvius, COO and CFO. Anno will go through the operational highlights.
Bart will explain the financial results and give guidance for 2019. Anna will then close with the late stage clinical news flow we expect this year, and you will see a PowerPoint presentation on screen, during, our talk. We estimate that this will take about fifteen minutes and will be followed by a Q and A session, including Pete and Walid. I would now like to hand over to Anno at this point. Anno?
Speaker 2
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 twentieth year anniversary. Twenty 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, then I want to point to 2,003 when we actually discovered in our platform the JAK1 target as the right one to go for if you want to target rheumatoid arthritis. So a long time, sixty 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 02/2006.
And then the first proof of concept in 2012 when filgotinib showed excellent results in the famous Moldova trial. Then 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 two, excellent data set. We're now eagerly awaiting, as everybody else, the Phase three the other Phase three FINCH two data FINCH data that are coming this quarter. Lastly, also highlight, of course, the start of the Isabella trial in IPF.
So 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. So a lot of filgotinib news with the FINCH two results, as I mentioned, but also other indications in psoriatic arthritis and ankylosing spondylitis where we showed fantastic proof of concept data in the TETUGIA 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 a recruitment phase.
Speaker 3
That's not
Speaker 2
the only thing. We also started on another target, another mode of action Phase II trial, the PINTA trial in IPF. So we're really building out an IPF franchise. In osteoarthritis, a very important disease area. We started the ROCCELLA trial, a Phase IIb trial together with Servier, where Galapagos is responsible for The U.
S. Market. Servier is doing the rest on the market. Recruitment there is going quite a bit faster than anticipated, so 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 off also the operational side of the business.
So we started the IGUANA Phase II trial and then the Phase I bridging study. So last but not least is clearly the progress we made in Toledo, where we saw very, very exciting preclinical results in IBD, but also now in lupus. We have moved the first molecule in Phase I. We are 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 we 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 anticipate that 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, and then we become really a worldwide international biopharmaceutical company is when we start to introduce 6,090 in idiopathic fibrosis, where we will also do The United States and some countries in the rest of the world. So 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.
So with that, I'll stop my introduction and hand it over to Bart to talk about the financial highlights.
Speaker 3
Thank you, Ono. This is Bartfidis speaking, 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 €140,000,000 as a result of, on one hand, a successful placement in September that generated over €280,000,000 of cash proceeds in euros and on the other hand, a cash burn which netted out at €158,000,000 for the year, which as you know is a combination of cash income from milestones and upfront payments as well as the cash expenses that are the investments that we do in our R and D platform. There's a small €10,000,000 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 euros and that one year and one quarter is positive and the other quarter is negative. This time we have a €10,000,000 positive impact on our total cash position.
So, Healthily Finance with almost 1,300,000,000.0 at the end of the year 2018. And then as a reminder, we also have roughly EUR 85,000,000 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. So that with regard to cash, let me then move on to revenues and other income. And 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. But the bottom line is that we've had a very good year on the top line, doubling our revenues from €156,000,000 to €318,000,000 And there's a couple of elements that are the big drivers of this doubling.
First of all, and 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. And as you can see here on this slide, 56,000,000 is that impact. Effectively, we've had a change of our equity position on the balance sheet with the opening balance sheet of 2018 and we're re recognizing €56,000,000 of income that has been generated previously, 12,600,000.0 of that in upfront and license in green and €43,000,000 in milestones and those are connected really to the AbbVie and Gilead partnerships that we have signed in previous years. So 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 €93,000,000 if we include also some cost reimbursements by Novartis.
These are transactions on MOR106 with Novartis and on our CF program with AbbVie. And in terms of recognition, the Novartis upfront is fully recognized in the year 2018 and 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 paperworks that makes us recognize a small portion still in 2019, but this is largely all in the revenue numbers. And then there are some other movements obviously within all the aspects of our revenues, 12,600,000.0 in total that make up the total increase to €318,000,000 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 thought it was important to highlight what's the big drivers behind the operating expenses. First of all, the overall number is increasing meaningfully from $245,000,000 to €362,000,000 in 2018.
Research as well as SG and A are increasing, but not a material driver for the increase. And I should also add to that that in SG and 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. So as a result, see higher SG and A expenses there, which is largely accounting. The big driver though for the operating expense increase is in development costs. And as you can note there, there is our share of the filgotinib development costs, which as a reminder is 20% of the total.
We spent €66,000,000 in 2018. Euros $1,690,000,000 is the big increase. All the prep work for the Zabella trial as well as the initiation of that trial and the preparation of the clinical products has led to a total cost of about €70,000,000 And then 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. And maybe as an additional insight between development, other and research, we invest roughly €20,000,000 in 2018 on our Toledo program that we've been speaking about in recent events. Then finally, I'll go to 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 €45,000,000 in blue is really driven by what I would call operational evolution. So that's the sum of the revenues going up and the costs going up at the same time, but the net is positive of €45,000,000 The €41,000,000 orange is an improvement, which is all in the FX and financial lines. This is really the currency translation effect, which was a negative in 2017 and is now a positive in 2018. So as a result, that generates a net result positive income of a little over EUR 40,000,000. Maybe as an additional data point worth to mention is that over the twenty years of the history of Galapagos, as Honno was just describing, we now have accumulated losses of little less than €300,000,000 with about €150,000,000 of deferred income that has not yet flown through the P and L.
So in other words, the twenty 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. And 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. So if you look at the guidance slide, we had 158,000,000 of cash burn in 2018. We have guided for a cash burn of between negative €3.2 and €3.4 First of all, I should explain that the cash burn of €1.58 included a positive of business development income from our transactions with Novartis and AbbVie, which was €86,000,000 if you just look at the upfronts that were paid for those two deals.
So essentially, there is
Speaker 4
an
Speaker 3
underlying increase, which is smaller than what you'd see on the face of the numbers and which is between 76,000,000 and €96,000,000 And again, roughly two thirds to 80% of that increase is driven by developments. Here, you will see increases again on filgotinib and 1690, but 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. So the actual underlying projected cost increase is between 76,000,000 and €96,000,000 leading us to a total guidance of 320,340 And then obviously, that will take you through a little below €1,000,000,000 as a projected cash position between $950,000,000 and €1,000,000,000 at the 2019. So with that, I conclude and hand it back to Onno for the clinical news flow. Thank you, Bart.
Speaker 4
If you look at
Speaker 2
the news flow, let's divide it in H1 and H2, and you'll see the main clinical programs as well as early programs listed. In both, we've added the ones where actually new data will be released, and I will focus on those. Clearly, we're expecting the main news being the FINCH one and FINCH three top line twenty four week data that will come this quarter. So we ask everybody to be patient for a couple of weeks. And 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 Sjogren's disease where the proof of concept will be disclosed as well as the lupus trial. So both of them are very important additional indications for filgotinib, large markets, high unmet medical needs. So 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. And then we have a range of Phase I trials that will read out during the second half of the year, including the first trial with first generation Toledo.
That will hopefully give us indication on the safety and maybe some indication on efficacy. So we're excited about that. And the second Toledo program is expected to start Phase I before the end of the year as well. So 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.
And 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.
Speaker 1
Great. Thanks, Anno. Thanks, Bart. That does conclude the presentation for today. So now I'd like to ask our operator, Tara, to connect us to any callers with questions.
Speaker 0
Thank you. We will now take our first question from Brian Abrahams of RBC Capital Markets. Your line is open. Please go ahead.
Speaker 5
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. So 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?
And then secondly, specifically, might you consider filing on the one hundred 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.
Speaker 4
Thanks, Brian. This is Walid, Chief Medical Officer. I'll take your call. So our view on JAK1 selectivity, I mean, 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 three 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 they 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 three trials, FINCH one and FINCH three, which will be available by the end of this quarter. Those are in more than two thousand six hundred 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 findings of one 100 versus not, so I've I've also spoken about this a number of occasions. I'm I'm very happy with the way we designed our Phase three program where we fully evaluate the hundred and the two hundred milligram in in those studies. And at the end of the of the 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.
But it's really premature at this point to do this. If I may, however, extrapolate from the FINCH two data where we studied both doses in the biological incomplete responder, so those are the more hard 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 hundred milligram, very competitive, but we see also a better performance of the two hundred, so there seemed to be a dose response in terms of efficacy. But 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 one and FINCH three studies, then we would be in a very good place moving forward.
But, again, it's premature. We'll just wait. We need to wait another few more weeks to
Speaker 6
be able to get the totality of
Speaker 4
the data, but that's that's where we are today.
Speaker 5
Thank you very much.
Speaker 0
We will now take our next question from Your line is open. Please go ahead.
Speaker 7
Great. Thank you for taking my questions. Wimal Kapadia from Bernstein. Just following up from the first question. If and 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? And then could you talk a little bit how the mix of OpEx will change between R and D and SG and A, assuming $1,690,000,000 is a success in Phase three? Thank you.
Speaker 4
So, Mark, I'll I'll probably start with the filgotinib. I think it's really premature to be able to ask that question. It's it's very difficult to answer that question. Sorry. It's not premature.
You're you're to ask that question anytime you But but to answer that question about the 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 gonna be treated. Initially. We're gonna give top line results for the first twenty four weeks, but then shortly thereafter, we will have the fifty two week data.
Those are gonna go a long way to help elucidate whether selectivity of JAK1 versus the others is gonna play a role into this or not. This is not a new thing. This is something that the field has been monitoring in detail, and it's very difficult because those are rare events. And and they do happen in the in the in this in in this patient population. So you're trying to to see whether there's a small increase or there is an increase in these rare events.
So so it's a it's a bit difficult. The field is on it. We are on it, monitoring it, and also trying to understand the biological underpinning. And this also leads to your other question whether there is a predefined threshold that the FDA is looking for, and and 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. But 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 controlled trials, whether they're active or whether active or placebo controlled over long term, that's gonna be the more defining way to analyze the data. And I think our FINCH data are gonna be very important to to help the FDA to make up their mind whether we do have an issue with with filgotinib or not.
Speaker 3
Okay. I will take the question on cash burn and then 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 are 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.
And so to the extent that this success continues and what we expect it to do is that you would expect also that the R and 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. So in 2019, just as background, there is very little in milestones included in this number guidance $320,000,000 to $340,000,000 The real material milestones are connected to our to the approval events for filgotinib in our partnership with Gilead, and those will come in the years 2020, 2021. So there, we are in a position where we might be seeing increasing R and D expenses being offset by also increasing milestone events. With regard to SG and 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, but 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, and we will also be bearing 50% of the initial launch expenses there. And also for IPF, even though that's maybe a little further out, we will be starting to invest a bit in launch preparation. So indeed expect the selling components of SG and A to go up from where it is today.
Speaker 7
Great. Thanks very much.
Speaker 0
We will now take our next question from Christopher Mari of Nomura. Your line is open. Please go ahead.
Speaker 8
Thank you for taking the question. First, maybe just to follow-up and clarify, we're getting the FINCH two or one three readouts this this quarter. Can you can you clarify if those might happen together or separately? Any chance they happen together? And then secondarily, we could follow-up on, the SELECTION trial.
Congratulations on full recruitment there. Should we be anticipating first quarter twenty readouts there? Is that reasonable? Could you maybe walk us through how some of that data may be read out? Thank you.
Speaker 4
Thanks, Chris, for the question. So, yeah, the the FINCH one and three were 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 gonna be a fifty two week trial, and then we have to gather the data. So currently, we're targeting 2020. It could be in the earlier part, but we haven't given that clarity yet.
Speaker 8
Okay. And then on 1690, you know, could you could you maybe remind us of some of the Isabella interim go, no go decision making Yeah. Questions? Is that safety specifically or efficacy? I know you you sort of rushed this one after a small but exciting trial result.
That's my my last question. Thank you.
Speaker 4
Yeah. Sure. So, actually, we do both. So take into consideration that we went from the FLORA study, which was in more than 20 patients, twelve weeks into a very large program, more than fifty two week treatment in more than or in about five 1,500 patients. We have to put checks and balances in place.
So we have an independent data monitoring committee that monitors the study. On an ongoing basis, the primary focus is is to look at safety, but at the same time, it's their prerogative to to look at efficacy as well. And and they 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 and come to an agreement.
But that futility analysis will be done when approximately a quarter of the patients have finished fifty two weeks, which and by that time, we will take the totality of the data. If you recall, we will not stop treatment of the patients at week fifty two. All the patients will continue on whatever they were randomized on until the last patient clears week fifty two. You can imagine when we take a quarter of the patients who have done fifty two weeks, there could be more than eighty percent of the patients already randomized under the trial and more than twenty five percent of them who have gone beyond week fifty two. So we take all the totality of the data, which give us a lot of information to be able to assess whether we are gonna hit futility.
And in that case, if we have futility, then 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
Speaker 6
the trial or not. That's kinda how it is currently framed. But but that's Very
Speaker 5
good. Thank you.
Speaker 4
Apologies, ma'am.
Speaker 0
We will now take our next question from Vamil Divan of Credit Suisse. Your line is open. Please go ahead.
Speaker 6
Hey, guys. How are you? This is Oi for Varma. Could you sort of help us understand, I guess, the like, what what we should look for when French one and French three reads out in the end of the quarter? What you would consider as a success or, you know, to be better than the competitors?
Thanks.
Speaker 4
Well, I mean, I think it's for us, we've tested filgotinib in in number of double blind placebo controlled trials in rheumatoid arthritis. We what we don't have is any data yet in early RA, which is what FINCH three is is going after. But, honestly, I think we can extrapolate from the performance of filgotinib. And when you, you know, look at it how it's performing vis a 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 gonna be coming to be very good and positive different differentiated.
Those are expectations. Let's see what the FINCH one and two data will look like at the end of this quarter, but that's that's where we are today.
Speaker 6
Yeah. Thanks.
Speaker 0
We will now take our next question from Adam Walsh of Stifel. Your line is open. Please go ahead.
Speaker 9
Hi. Thanks for taking my question. This is Edwin on for Adam Walsh. So my question is on MOR106 atopic dermatitis. You plan to do a new combo study with topical corticosteroid.
So what is the thinking behind this and what difference do we expect compared to the current IGRAN Phase two study? Thank you.
Speaker 4
Pete, are you taking this, or am I taking this?
Speaker 10
For me, it's the same. I can answer it. So this this study is to bring us closer to the daily practices. So up to now, we've been a proof of concept. We do a very clean dose ranges where patients are only on the drug.
And so the topical, steroid study on top of that is is is a study that brings them closer to the daily practice where some of the patients get treated and we wanna study that indeed are proof in that study that, adding more one zero six on top of corticosteroids gives you an additional benefit, to this patient. So this is this is a a study that, prepares us well, for a phase three to see whether we can safely include patients that have been on topical for a while while stepping into phase three. So it's it is more of a kind of safety study that informs us on how we will design and how we we we need to include or exclude patients that have been recently on topical steroids than anything else. Thank you.
Speaker 0
We will now take our next question from Lucy Codrington
Speaker 11
I've just got a couple. You mentioned that filgotinib is due to start the Phase III for psoriatic arthritis in the second half, but there's no mention of the phase three 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 and D cost during 2019?
Or how are you thinking about that? And then finally, if you could provide any color on the recruitment rate into the Isabella trial, and if possible, any kind of, information regarding the, background medications that the patients are on. Thank you.
Speaker 4
Bart, do you want to take the finance question first and I'll do the others?
Speaker 3
Yes. Let me do that, Walid. 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 twelve months, so this should be part of twenty nineteen revenues indeed. The small caveat is that you don't know exactly what the actual spend is, so it might be that we're just going to be slightly short or slightly earlier.
But we anticipate the next twelve months indeed to recognize the full remaining amount of the upfront from Gilead. Vadid, for you.
Speaker 4
Thanks, Mark. So for the filgotinib, I mean, the data from the Tortuga study in ankylosing spondylitis were very positive, as you've seen, published in a top tier journal. So I think we haven't guided specifically we. By by we, I mean Gilead, and and us haven't guided specifically about the start of the phase three. But I think, you know, we can say that that preparations are underway, and we should expect to hear more in up in subsequent updates from them.
Regarding ISABELA, so we're currently in the start up phase of the study. We we we just held a large investigator meeting in The US 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 gonna be doing ones in Southeast 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 and and great excitement about this this program, and and and I can say that we're off to to a good start.
Regarding background treatment, so if you recall, that study is designed to go on top of standard of care. And our goal in the in the trial is at the end of the day, we will end up in a combination of where we would be mimicking what is essentially the current standard of care in The US and and and major European countries. So, specifically, about a third of patients would be on entitanib, about a third would be on on parfanidone, and a third would be on neither antifibrotic treatment. Now, of course, during the conduct of the studies, 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 overrepresentation rule. So we will do adequate stratification to make sure that that will happen.
Speaker 11
Great. That's helpful. Thank you.
Speaker 0
We will now take our next question from Phil Nadeau of Cowen and Co. Your line is open. Please go ahead.
Speaker 12
Good morning. Thanks for taking my questions. Just two from us. First, on the filgotinib regulatory filings. The press release mentions that you expect to file once the FINCH data are complete, but it doesn't specify in which territories.
Could you maybe give us some sense of when what your current expectations are for the filing timelines in Europe versus The United States? And then 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.
Speaker 4
So Suneet, I'll take the filgotinib question, and then I'll turn it over to Pete for MOR106. So regarding regulatory filing, I think after the data from the FINCH one and FINCH three become available at the end of this quarter, we will have discussions with the regulatory authorities in Europe, in Japan, and also in The US to figure out essentially the the filing plan for for filgotinib. So I think, you know, more details on this and the sequence of it greatly depends on the outcome of these discussions, and I think Gilead and us will be guiding on this with more clarity a bit later in the year after we've had those discussions.
Speaker 10
Okay. Thank you, Walid. On the IGUANA m
Speaker 4
o one zero six, which
Speaker 10
is a large dose ranges IV study, The goal we set for our study is there to be in the range where we've been in the in the phase one b. That's where we've shown that this is a treatment which is competitive to the efficacy seen and the safety seen with the the bilimumab, ambition is to be clearly within that that range of efficacy. Thank you.
Speaker 0
We will now take our next question from James Quigley of JPMorgan. Line is open. Please go ahead.
Speaker 13
Hello. Thanks for taking my questions. Only a couple left. On MANTA, so we've had the Gilead have announced maybe expanding their recruitment, outside of just ulcerative colitis and into other indications. I understand it's early, but what's been the feedback so far on sort of willingness to recruit patients from those sites and especially in just in the sites that you were involved within the Phase II development?
And 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. So again, 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.
Speaker 4
So sorry. I'll take the Manta question. So so as you know, we've discussed with the FDA opening up indications. So within IBD, we were gonna expand beyond use key to go into Crohn's disease. There are also some opening up of some of the inclusion exclusion criteria as well.
And then in the rheumatic diseases, we're going into RA, psoriatic arthritis, and angulated spondylitis as well. So, you know, initial feedback has been has been positive. Think John McConchison in the few weeks ago in the 2018 end of year results stated that he saw an increase in the in the recruitment in MANTA, and
Speaker 10
I think that's a that's a
Speaker 4
good sign that of of the initial response. But I would imagine as you start activating more of these changes on the ground, we will see things to continue to move in that direction.
Speaker 5
Marc?
Speaker 3
Yes. I'll take that one the other question, James, on drug pricing reforms and the impact on the market. So to be honest, it's 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. So that's really a bit difficult for me to start commenting on now.
And at the same time, we also haven't seen the full profile of filgotinib where we don't 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's 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.
And we hope to demonstrate that through the programs that we're running together with our partner, Gilead.
Speaker 13
Fair enough. Thank you very much.
Speaker 4
We
Speaker 0
will now take our next question from Emily Field of Barclays. Your line is open. Please go ahead. Hello? Yes, your line is open.
Speaker 14
Oh, hi. Sorry, I couldn't hear. Yes, just a couple of quick ones. I was just wondering do you guys intend to publish the data from Monta publicly? And then have you determined whether that's going 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?
Speaker 4
Okay. So this will lead. I'll try we'll try to take them chronologically then. So for for publishing MANTA, I think I I think it's it's too early to to say that. I don't think we've had any discussions with Gilead on this, so it's 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 but I will I would have to leave it to them. In terms of whether metadata are required US or ex US and so on and so forth, this will be you know, we we will know this after we've had those discussions with the health authorities. As I indicated earlier, we're waiting for the FINCH one and three results by the end of this quarter, after which we will engage in those discussions with these health authorities, and 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 geography. Think, Keith, you're next.
Speaker 10
Yeah. Thank you, Walid. So on the Toledo program, incremental news flow for this year. So we have an ongoing first into human SAD MED study ongoing. So we probably will report out on, if that's com completed.
And then for the first compound thirty three twelve, if 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 thirty nine seventy moving quickly behind, and the plan there is to announce when we move into first into human as well early second half of this year. And in meanwhile, we have a large drug drug discovery program as we indicated before about half of the scientists that work on in the foundation 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.
Speaker 3
Yes, I'll take the last question, Emily, regarding your regarding the cash position. Obviously, we feel comfortable with the current balance sheet of almost €1,300,000,000 even with the increasing spend this year. We are in a good position I think also at the 2019. So 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. So 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. But we are comfortable with the current position.
Speaker 14
Thanks very much.
Speaker 0
We will now take our next question from Dane Leone of Raymond James. Your line is open, please go ahead.
Speaker 15
Thank you for taking the questions. A few Just from one on the IPF. I think in your own words you said that you started kind of a daring Phase II based off of a somewhat limited Phase one 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 dataset. Could you just kind of 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.
Speaker 4
Thanks, Dane. Thank you for your question. You're probably off by one phase in in your question. We started getting phase three based on on on good data from a phase two study. Great.
Well, look, in that in that trial, we we were looking to to find evidence of target engagement and a safety profile that would look good. If you recall that the the treatments that are available currently on the market suffer significantly from from adverse events. And, actually, despite the fact that these patients unfortunately have a deadly disease that is as bad as certain severe form of cancer, they choose not to be on the drug. They take about a quarter drop out every year from treatment. So 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, you know, functional vital capacity, which is one of the with the primary endpoint that the FDA looks at, and there were clearly a trend between us and placebo. It hit significance at 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, you know, by chance that that you managed to pick up when you saw these patients on few occasions in the office. And then when we use the more sensitive imaging technique of FRI, we also managed to detect a signal that indicates that our patients are stabilizing on drug. And and on placebo, they continue to to deteriorate.
So 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 the next stage. And then when we when we thought about the next stage, we we we balanced the the unmet medical need that's out there with the potential risk that we would be taking by by engaging in it. But we 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 these investments, we felt that this was a 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 two b than a phase three and an engagement, you know, and getting into 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 of action by another company, which is BMS. So they they've done a trial, which I recently published, and drug works downstream from us on targeting the l p a one a one receptor.
And and there was a nice dose dependent effect that that demonstrated a validation of this target. Now, unfortunately, for for that molecule and actually for the patients as well, this compound will not move forward because they've seen some target off target activity, I should say, and they led them to stop it. But for us, it was a great external validation of of really the decision that we made based on the FLORA data.
Speaker 15
Great. Thank you so much for that clarification color. I just want to follow-up with a quick question on the Toledo program. So 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, 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 confidence in versus what's kind of the unknown variable at this point.
Speaker 10
Okay. Thank you for the question on the to lead the program, it's it's quite clear that it's something completely novel. So, as part of the phase one, 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 to the patient. It's also completely novel. We'll watch carefully safe safety as well, but it's it's it's it's a complete novel mechanism of action.
We don't have anything external there where we can hook our signs up to, so we we have to develop itself ourselves so there is an an target engagement biomarker included, and that's that's that's going to be the first anchor point. And from there, we will move on, and, that's that's the primary goal of, for the first compound. For the second compound, once we've done that translation, we should we should be able of of of moving faster, and I just in in in in include that probably in in in the first two units, more as a as a check with less data points and move them more more quicker to the indications, which are of most interest. So, thank you.
Speaker 9
Okay. Thank you.
Speaker 1
Okay. Thanks, Dean, and and everyone who's asked a question today. I'm afraid we've run out of time. And so if you have any questions that you were not able to ask, please send them to me or Sophie von Geisel and the IR team, and we'll try to get answers for you. So that does wrap up for today.
Please look for publication of our annual report 2018 on or around March 29. And we thank everyone for participating today. Look forward to speaking with you all soon. Bye bye.