Galapagos - Q4 2022

Transcript

Operator (participant)

Good day and thank you for standing by. Welcome to the Galapagos full year 2022 financial results call and webcast. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. If you wish to withdraw your question, you can please press star one and one again. Please note that today's conference is being recorded. I would now like to hand over to you our first speaker, Sofie Van Gijsel. Please go ahead.

Sofie Van Gijsel (Senior Director of Investor Relations)

Thank you and welcome to the audio webcast of Galapagos's full year 2022 results. I'm Sofie Van Gijsel, investor relations, representing the reporting team at Galapagos. This recorded webcast is accessible via the Galapagos website homepage and will be available for download and replay later on today. I would like to remind everyone that we will be making forward-looking statements during today's webcast. These forward-looking statements include remarks concerning future developments of the pipeline in our company and possible changes in the industry and competitive environment. Because these forward-looking statements involve risks and uncertainties, Galapagos's actual results may differ materially from the results expressed or implied in these statements. Today's speakers will be Paul Stoffels, CEO, and Bart Filius, COO and President. Paul will reflect on the operational highlights of the year and provide an update on our oncology and immunology franchise.

Bart will go over the commercial and financial results. You will see a presentation on screen. We estimate that the prepared remarks will take about 20 minutes. We'll open it up to Q&A with Paul and Bart, joined by Michele Manto, Chief Commercial Officer, and Daniele D'Ambrosio, Head of Immunology. With that, I'll now turn it over to Paul.

Paul Stoffels (CEO)

Good morning, good afternoon, and welcome to our 2022 annual results reporting. Thank you for joining. It goes without saying that 2022 was an eventful year at Galapagos. We made significant progress with good sales performance and further rollout of the commercial organization. We entered a new therapeutic area with oncology, with the acquisition of AboundBio and CellPoint. We made significant progress in the regulatory review with Jyseleca on both on the testicular safety with the MANTA, CHMP positive opinion, as well as with the adoption of the PRAC regulation recommendations. In our Capital Markets Day, we shared with you our vision on 2028 and our new strategy focused on immunology, oncology, and accelerating time to market for drugs.

We also disclosed to you the further optimization of our organization with the structuring of 200 people out of the organization and a new organizational structure. Later in the year, we were able already to highlight the first good data of our ongoing trials with our CD19 in NHL. I'll also give you an update on the more recent data on CLL. Galapagos remains and position itself for strong growth in the future. We focus the pipeline on immunology and oncology, going in first in class to best in class, adding into that business development, new opportunities, external opportunities, and accelerated our entry in oncology with CAR-T and with new modalities.

We now have the ability to do cell therapy and also on top of the small molecules, we can do now biologicals in our modalities. We continue to build on a long-term Gilead collaboration, both on the R&D side, but also on BD, with multiple interactions and exchange of information between the two companies on the future for our collaboration. At the end of 2022, we had a cash position of EUR 4.1 billion, and that gives us a strong basis to continue to work for an accelerated path to market with many several products in our pipeline. Here you have a top-line view of our current pipeline. In filgotinib, unfortunately, Crohn's disease was taken out as we missed the co-primary endpoints in induction.

We are excited to announce the start of a phase 3 in axSpA. More of this will follow later in the presentation. In our immunology portfolio, we added a CD19 CAR-T program in refractory lupus. In onco, as I early indicated, we made good progress on our CD19 programs with NHL and CLL, as well as we are initiating imminently a study with BCMA in multiple myeloma program early this year. In our oncology roadmap for 2028, as we showed on the capital markets day, our short term is to validate decentralized CAR-T delivery models. We generated very encouraging initial data already in NHL CLL, as well as a very solid production method to be able to do this CAR-T production as point of care in hospitals.

In the medium term, the focus will be to further enhance the pipeline with best-in-class cell therapies, where we are looking both internally with our AboundBio research team as well as with business development opportunities, and further scale up the decentralized CAR-T platform globally with launching this year several centers in the United States. In the longer term, we can further leverage the capabilities we are building today in small molecules, antibodies, and also in CAR-Ts, and continue to address unmet medical needs, most likely including CAR-Ts in solid tumors. This is a top line of the more recent data on the EUPLAGIA-1 CD19 CAR-T Phase 1/2 in refractory relapsed refractory CLL.

What you see on the slide is the Phase 1/2 design in CLL with point of care, which we presented at the recent EBMT EHA meeting in Rotterdam 2 weeks ago, where we have the 2 dose levels, which are currently being tested. If you look at the slide, you see we have 3 dose levels tested in a dose escalation study, that is followed by a dose expansion when of particular doses we select to do that for. We aim to present the top-line data around mid of this year. Next slide shows you the encouraging results we have. Overall, the response rate of the first 7 patients, 6 out of 7 had an objective response rate and had a complete response.

6 out of 7 had a complete response. On the right scan, you see a patient with Richter's transformation that is in complete remission at day 28 of the treatment with 1 dose of CAR T. This is based on a PET scan evaluation, which can be done 28 days after start of therapy. Going more in details of these results, here you can see that the swim lane plots where 4 patients out of the 7 with CLL had Richter transformation. Richter transformation is manifest as an aggressive lymphoma with a very poor prognosis. Our mutational alterations, where CLL transform into a more aggressive DLBCL. Today, the unmet need remains very high, and there are no currently available treatments, and overall survival is between 6 and 12 months when patients receive this diagnosis.

What you see here in those level 1 and 2, that 4 out of 4 patients with Richter's transformation got a complete response within 4 to 8 weeks. That is in 1 out of the 7 patients with CLL got a CD19 negative escape. Overall, this is very encouraging and gives us good hope that we can progress this GLPG5201 CD19 into further clinical expansion cohorts as well as into pivotal studies later in the year. If you go to the safety, you see that so far, safety-wise, we see a very encouraging profile. No CRS above Grade 2 and no ICANS were observed. This is in line with the safety data for the CD19 in NHL, where we saw similar data as we presented last year.

Now going through the Crohn's disease DIVERSITY study. Unfortunately, in the induction phase, the 2 cohorts missed the co-primary endpoint of clinical remission and endoscopic response at week 10. Maintenance looked much better. Filgotinib 200 mg achieved the co-primary endpoints of clinical remission and endoscopic response at week 58. Safety was generally consistent with the known profile of filgotinib, with no new safety effects. Based on the data, we decided not to submit for approval with regulatory authorities in Europe. We remain fully committed to filgotinib in the approved indications RA and UC, and now to the development of axSpA. On this slide, you see a progress in axSpA.

First of all, the positive data from TORTUGA, the phase 2 trial in axSpA, which was published in The Lancet in 2018, where we saw immediate response starting from week one with a very good continued response up to week two and at the endpoint of the study. The axSpA is an indication in spine and sacroiliac joint, a very heterogeneous clinical feature. It's a high medical need. Only 15% to 20% of the patients get into remission and limited options are available, as well as no new mode of actions are expected in the next few years. There is a real opportunity for us to expand filgotinib into that area. Here you see the design of the study.

It's going to be a study in radiographic and non-radiographic axSpA, comparing filgotinib 200 milligram with placebo. 238 patients will be enrolled and either treated with active or placebo. The endpoint ASAS40 will be scored at week 16 and there will be an open label up to week 52. The start is anticipated in Q2 this year and top-line data are expected in 2025. This concludes my remarks on the clinical side. Bart, leave it to you for the financial.

Bart Filius (COO and President)

Thank you, Paul, good morning everyone in the US. Good afternoon in Europe. Happy to be with you for the annual results and happy to also give you some color to the numbers that we've completed the year with. Let me start off with something that we're extremely proud of at Galapagos, which is the European performance of our commercial teams with Jyseleca. As you can see here, we are landing now the year at EUR 88 million in terms of sales of Jyseleca in Europe. As you remember, we've been able to increase our guidance twice during the year, and also this number is at the top end of that guidance range.

That within a year where there was the Article 20 review of the entire class, we are extremely proud with this achievement. We're treating now 18,000 patients across Europe, and that number is increasing. Two noteworthy events in addition. First of all, we got the feedback from the EMA or the CHMP opinion on the MANTA and MANTA-RAy studies and how we can adjust the label for that. That opinion was positive and we'll be able to, in the course of this year, update the label accordingly. We're very pleased with that that point is off the table for the European markets.

Secondly, we've also seen the outcome of the Article 20 review process, and it has confirmed that Jyseleca remains available for both biologic refractory and biologic-naive patients, and that any limitations are indicated for high-risk patients. We're also pleased with that outcome for the entire class because we believe the class is a very strong class for patients with RA and UC. I'll give a bit further detail on guidance in a few slides, in a few seconds. Indeed next year, this year, I should say, in 2023, we anticipate sales to go up again between EUR 140 million and EUR 160 million as a range is what we're forecasting.

A couple of words on the next slide on the actual financial results. Let me start off as usual with the cash position. As you know, we focus on cash burn, and our guidance was between EUR 480 and EUR 520. We've landed at EUR 514, which you can see here in dark green. We always exclude from the cash burn, cash out from acquisitions. The EUR 150 here reflects the acquisitions of CellPoint and AboundBioBio earlier this year. We also exclude currency effects from cash burn, which was a EUR 50 million positive compared to the Q3 results. Obviously, that number is a bit lower.

We've seen the dollar fluctuate quite a bit during the year, very positively in the first 9 months, a little bit in the other direction in the last 3 months of the year, but overall still a positive EUR 51 million contribution to our cash balance from the dollar-euro exchange rates. We're landing the year at EUR 4.1 billion of cash on our balance sheets, which as a reminder, reflects a good EUR 62 a share. On the next slide, a couple of words on the P&L. We focus always on product sales and cash burn because we believe that these are the strong metrics to focus on to evaluate Galapagos. A lot of other things are going on in the P&L.

Some of these are accounting, for those of you that are following the story longer, you see a couple of these things coming back every quarter. We always assess the development costs for filgotinib until the end of the development period. Based on that, we recognized the income that we received from Gilead over the last couple of years. We recognize that, let's say, over that period, and that has generated EUR 174 million of revenues in the year 2022. Also the remainder of the Gilead transaction from 2019 is a recognition that we see every year coming back in our numbers, EUR 230 million on a straight line basis.

As a reminder, there is still in our balance sheet about EUR 2 billion of revenues still to be recognized over the next couple of years, one and a half on the platform and half a billion on Jyseleca. The product sales we discussed. On top of that, we have also royalties coming from the Japan business and a couple of sales milestones from our partnership with Sobi. On the operating cost side, we've seen an increase in operating costs. There's a couple of things happening under the hood, if you like. As part of the discontinuation of some of the programs in fibrosis and kidney, we've also taken some impairments in the last quarter. Total impairment charge for the year is about EUR 55 million.

Some of this was already in previous quarters, but that's a what I would call cleanup of the intangibles on our balance sheet from some of the discontinued programs. What also is happening here is that we've put some restructuring costs into our P&L for 2022. As Paul was alluding to before, we've downsized our organization quite meaningfully, and as a result, we've taken a charge in the 2022 P&L for this. Finally, another important one that has been already noted several times during the previous quarters is that this year, 2022, we've had for the first time, no cost share with Gilead on the commercial and medical affairs expenses. That is no longer part of income or reduction of operating costs.

As a result, you see sales and marketing costs going up a bit from year 2021 to 2022. Net loss comes at EUR 200 million negative, which includes the ethics income, as I pointed out before. Guidance for the next year. Already spoke about sales, so between EUR 140 million and EUR 160 million, we believe is feasible. That does reflect, I think, the current growth trends year-over-year that we've seen in 2022 and also now coming back in 2023. It also does include further launches in some countries in Europe. We know that UC has been launched in quite a few countries, but there are still a couple to go, or a couple are also very early days in the launch.

We anticipate also some further UC launches throughout Europe to help us achieve that number. On cash burn guidance, obviously this has been a big focus for us to make sure that we spend our cash wisely. When we did the R&D day, I indicated that we would be reducing our cash burn compared to 2022. Actually, I'm happy to report that we're actually going to be able to reduce it by more than EUR 100 million to land at, if I take the midpoint, EUR 400 million of cash outs for the year. That's a result of the program discontinuations that we highlighted. Also, the Jyseleca performance, obviously, the organizational restructuring. We have a bit more friendly interest rate environment.

On the other hand, we're also investing in the other direction, in the oncology buildup. Net-net, we should be able to significantly reduce our cash burn in 2023 compared to 2022. A few words on the overall business case for Jyseleca. Obviously, we were very disappointed with the readout of the DIVERSITY trial, and therefore we have had to take out Crohn's from our peak sales estimates. We now believe that we're gonna be landing around EUR 400 million at peak. That includes RA and UC, which are already on the market, but also axial spondyloarthritis, which we plan to launch in a couple of years' time.

EUR 400 million is the net-net outcome of taking out Crohn's, adding axSpA, but also taking into account any impact from the Article 20 outcomes of the review that was done last year. We still believe that the contribution margin can stay at 50% or even a bit better than that. Net-net, if you look at the peak year, previously we were estimating EUR 500 million at 50%. We're now guiding for EUR 400 million at 50%. The net-net impact of losing Crohn's in Europe from our business case is about EUR 50 million at peak. Full commercial structure is in place. Breakeven product contribution, we're shifting it one year backwards. It's quite a small adjustment, but in full transparency, we're just not gonna be there at breakeven in 2024.

We're losing a milestone on Crohn's in 2024, which was foreseen, and we're also paying a little bit higher royalties to our partner, Gilead, as a result of the loss of DIVERSITY. Net-net, we're gonna be slightly negative in 2024 still, but we should be positive in 2025. That gives us an additional 10 years of patent exclusivity to benefit from the proceeds of Jyseleca to our company. I'll conclude with an outlook on the clinical side for 2023 before we give it over to Sofie for Q&A. Key top-line results that we're anticipating are the results in NHL and CLL with our 2 CD19 programs at the point of care.

We've had some initial results there already, but we will be excited to look at the full top-line results later this year. In terms of regulatory process, also in the oncology space, we plan to have a submission for IND for the CD19 program, but also clinical trial approval for the BCMA program. Trial initiations, quite a few. The axSpA first patient, first visit is anticipated, as well as for 3667, our TYK2 inhibitor in dermatomyositis and lupus. We're also excited to start a program with our CD19 in lupus, and we'll initiate that trial also in the course of this year. We'll initiate the expansion cohort in NHL and CLL. Finally, the BCMA program will also get off the ground in the course of 2023.

A lot going on the clinical front. I'm sure that we're gonna have a little bit of discussion of that in the Q&A as well. We're still very much looking out for additional business development deals, both for clinical programs and preclinical programs. We believe that that's gonna be an important part of the transformation journey that Galapagos is on currently. With that, I conclude the opening remarks and suggest to go to Sophie and the operator for the Q&A. Thank you very much.

Sofie Van Gijsel (Senior Director of Investor Relations)

Thank you, Paul and Bart. That concludes the presentation of today's audio conference call. I would now like to ask the operator to open up the lines for Q&A.

Operator (participant)

Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, you can please press star one and one again. Once again, it's star one and one for any questions or comments that you may have. We are now going to proceed with our first question. The question's come from the line of Matthew Harrison from Morgan Stanley. Please ask your question. Your line is opened.

Juan Zhang (Analyst)

Hi, this is Juan Zhang from Matthew's team. Thanks for taking our questions. I am curious about the potential efficacy bar of the CAR-T program. What would you see a potential response rate in a larger cohort and the potential duration of response that could beat the current SOC? Thank you.

Bart Filius (COO and President)

I think from a, what we can say based on the very small numbers, 2 times 7 patients, which we have today, fast expanding in clinical, that the initial response rate and complete response rates are very high. Probably has to do with a good quality of cells and a very good expansion of the cells. What we don't know is the duration, because most of the time the failure is happening because of CD19 escape.

The fact that we have very good complete response rates is predicting that we might expect a good overall durability. The clinical trials have to show that. I think so far so good. The clinical trial results mid-year, where we'll have the full dose finding as well as some of the expansion cohorts, will give a good indication on duration. For now, we stay with the response rates we see in the small cohorts, what we have observed in NHL and CLL.

Juan Zhang (Analyst)

Cool. Just follow up with the CD19 program. Can you talk about the case to use the CD19 in lupus, and are you looking at other autoimmune indications?

Paul Stoffels (CEO)

Yeah, there was a study, which was done by a German group, which was published, and that, I think that's very well known in five patients, where to many of us were very surprised with the very positive outcome of that study with full responses in these people with very advanced lupus. It's an exploratory study, and so we are going to try to repeat those results with our drug. There's a good chance that this type of medicine, this type of indication, can be tackled with a CD19 CAR T, to be confirmed.

Far, we know of five patients with good results, five on five, not our drug, and a drug developed by Erlangen, a university in Germany. It's an initial study exploring efficacy in lupus with our CD19.

Juan Zhang (Analyst)

Okay, thank you.

Paul Stoffels (CEO)

Thank you.

Operator (participant)

We are now going to proceed with our next question. The next question comes from the line of Philip Nadeau from Cowen. Please ask your question. Your line is open.

Philip Nadeau (MD and Senior Research Analyst)

Good morning. Thanks for taking our question. Congrats on the progress last year. Sticking on the theme of the CD19 CAR Ts, can you discuss what you think the regulatory requirements will be for CMC, for point-of-care manufacturer? Is there any visibility on what the regulators will require in terms of their site visits, inspections, or verification, in order to get the CD19s approved? Thanks.

Paul Stoffels (CEO)

Yeah, it's very early, of course, to explain full CMC requirements. What we see in the clinical trial today, we are able to do a CD19 in point of care, fresh cells, seven days vein to vein, with all the necessary quality controls and quality release to make the release happen in a clinical trial environment. We are further automating and simplifying the quality control testing. We have a combination of a point-of-care system combined with a digital data system, which records all of the quality, the quality control testing as well as the manufacturing parameters. Under the clinical trial agreements with the government today, we can do this in point of care. What is required is a GMP environment because certain handlings have to be done in a GMP environment.

We select, at the moment, the centers based on GMP capabilities, and that works really well. They are, at least in Europe, they are expected by the authorities. There, I think we are safe. We are in a good position. In the U.S., most likely the strengthening of GMP capabilities in hospitals need to happen. That's not that a big step. It's doable. From that perspective, I think it's important that GMP capabilities are there. What we'll have to discuss with the regulators at the time of approval is the release criteria on potency, on sterility, and also in our phase 3 critical clinical trials on what will be required to release in point of care the testing. Work.

This is all in the making, but currently in clinical trials, we are able to do it in a very practical and pragmatic way with approval of the authorities. Mm-hmm.

Philip Nadeau (MD and Senior Research Analyst)

That's very helpful. Thanks for taking our question.

Operator (participant)

We are now going to proceed with our next question. The question's come from the line of Peter Widdop from Citi. Please ask your question. Your line is open.

Peter Widdop (Analyst)

Yeah, thanks. Good afternoon, Pete Widdop from Citi. two questions, please. Paul, just wondering if you've done any early in the team, early postmortem on DIVERSITY and reasons for the failure. anything you could share there, any thoughts there would be helpful. Then secondly, just on, you know, BD, would you like to I mean, we're approaching a year, of your tenure. Would you have liked to done more, or could you characterize the environment for doing, for doing BD? how conducive or not is it in terms of finding the sort of assets you're looking for? Thank you.

Paul Stoffels (CEO)

Thank you. miss on the first one.

Peter Widdop (Analyst)

You want me to repeat the first question?

Paul Stoffels (CEO)

Yes. No, that's too early. We went into a deep dive. It's very recent. We went into a deep dive on the data to be able to come to the conclusions. We are now looking at what happened in the study, why negative, why the induction was negative, but also the maintenance was positive. More to follow on that. More work to be done on the details of the data before coming with a conclusion there. On the BD side, we have done, and we are doing, very extensive evaluations. First, as you know, we have done CellPoint and AboundBio already back in June in the We brought them on board. They are now fully integrated.

We are building on that capability of cell therapy to get to next-gen cell therapy potential, where we are evaluating multiple opportunities in the world. I think that's one. On top of that, we are evaluating multiple opportunities in other modalities in oncology as well as in immunology. The team is very busy. The environment is good for us, I think. It's also how much can you take on with the company in a very short time with going through a restructuring as well as bring onboarding significant new teams. I think it's going well. More to follow. The next year will be a year of onboarding, acquiring, and onboarding more assets.

Peter Widdop (Analyst)

Thank you.

Operator (participant)

We are now going to proceed with our next question. The question's come from the line of Brian Abrahams from RBC Capital Markets. Please ask your question.

Brian Abrahams (Analyst)

Hi there. Thanks for taking my question. I was wondering if you could expand a little bit more upon, like, what we should be looking for from the full NHL and CLL top-line CD19 CAR-T data this year in terms of maybe a little bit more in terms of the dose levels, patient numbers, and duration of follow-up. And then what's the latest on how you guys are thinking about a potential registrational path? Is there still an opportunity to accelerate development and perhaps a more niche indication, or do you plan to go broad? Thanks.

Paul Stoffels (CEO)

Well, the two studies, CLL and NHL are progressing in parallel. Each of them go with the study of 50 patients in the dose in the dose escalation where we study a low, medium, and high dose. Depending on the doses we choose, 30 patients per cohort in the expansion. You could expect around in the range of 45 patients if you have one in each of the different in the two spaces. That is what we could expect. The studies, the first NHL study is ongoing from, let's say, mid this year in last year, 2022. There we'll have up to 1-year response.

The CLL started somewhat later, but at the same time, I think 9-12 month response time, data you can see. In total, between each of the two disease areas, CLL, NHL, we will present that type of top-level data mid this year. What we see with the use of the point of care is that it allows physicians to treat very sick, very advanced patients with very short life expectancy. That is an area where many of the centralized produced CAR-Ts don't have an answer for because of the time the patient doesn't have any more to receive their therapies. We are going to discuss with the regulators to see what is the... what can we...

what type of study do we need to do in the really urgent need, high medical need, where there is no good solution anymore for patients. We see patients with 1, 2, 3 months of life expectancy still getting good outcome with a 7-days vein-to-vein therapy in the hospital. That's where the first step of our programs will focus on, is the extreme high medical need, where we have a differentiated product which we can bring with life-saving prospect. What is very particular in the CLL is that this Richter's transformation is a disease today which is not solved by any therapy. That gives us an ability to look into, is that an indication we can pursue for accelerated review, breakthrough designation, accelerated review with authorities to be discussed.

We are not yet there to submit the data, but that could be an opportunity to go fast and bring something to patients which is really transformational, life-saving, and addressing a very high medical need. Top line, mid-next year, we'll have a good answer on all of the things I just lined up here in the discussion.

Brian Abrahams (Analyst)

Thanks so much for the detailed answer. Really helpful, Paul.

Operator (participant)

We are now going to proceed with our next question. The question's come from the line of, Jason Gerberry from Bank of America. Please ask your question.

Chi-Fong Wong (Analyst)

Hi. Good morning. Good afternoon. This is Chi for Jason. Thanks for taking the questions. I guess first one to Galapagos. I'm hoping you can provide a bit more color on the guidance change on peak sales. Early in the call you mentioned old guidance baking EUR 50 million peak sales for Crohn's and new guidance factor and impact from Article 20. Could you help us understand your assumptions on the contribution of parse among the three indications? Then second, on the 3667, arguably the TYK2 landscape has evolved quite a bit over the past 6 to 12 months following the deucravacitinib label. Could you talk about the potential point of differentiation with 3667?

Does it have any distinctive molecular features, say selectivity, potency, or PK, that you think could stand out well as the two competitive programs? Thanks.

Paul Stoffels (CEO)

Michele will take the first question on Jyseleca, Chi. Then, Daniele, you can maybe chime in on the question on the TYK2.

Michele Manto (Chief Commercial Officer)

Yeah. Sure. On the Jyseleca model, I think first, the change is from peak sales EUR 500 million to EUR 400 million, and that's a difference of EUR 100 million. Then the contribution margin at peak is 50%, so that EUR 100 million sales transfers into EUR 50 million contribution. I think that's the EUR 50 million that Bart mentioned before. To give the context of the EUR 50 million. Of course, we moved from 500 to 400. The moving parts are, I mean, the big blocks are Crohn's going out, access back coming in, and I would say some marginal adjustments because, of course, of the impact of Article 20. Let me give some colors on these three components.

Crohn's going out, we did not give specific details on the composition of the EUR 500 million before. As a reference, we also shared that we see the market of EUR 3 billion for RA, EUR 2 billion for Crohn's, EUR 1 billion for UC. Crohn's basically accounting from 1/3 of that market, that gives a sense of direction of how much Crohn's was part of the EUR 500 million. That's what we lose by not approving in that indication. On top, we come with the axSpA. In Europe, axSpA, we can forecast at the time of launch, will be a market worth about EUR 1 billion.

There also we remain with the previously mentioned 8%-12% market share to capture in that market. That's the positive that comes in. Well, the last part is, of course, Article 20 that came in and it's now the label about to be approved. The outcome is ultimately a positive outcome because it doesn't bring the limitations that the FDA, for example, brought in the U.S., but still gives some attention to patients with risk factors. That, of course, has a marginal impact on our potentials in RA UC and ultimately access path. That gives the negative further adjustments that ultimately lands on the EUR 400 million. Daniele?

Daniele D'Ambrosio (Head of Immunology)

Thank you. Yes. On 3667, yes. Of course, as you said, we were very encouraged by seeing, you know, the outcome of the label with deucravacitinib, with the TYK2, which differentiates clearly from the other JAKs. On our compound itself, you know, we have a kinase domain inhibitor selected for TYK2. That's different from some of the allosteric inhibitors that, of course, have been developed now by uncertain or by uncertain.

What's interesting is when we actually profile our compound in relevant biological systems, and particularly of cells and looking at cytokine signaling, we do see a unique cytokine inhibition profile with our compound where, and where we see a very strong inhibition of interferon alpha at the doses and the exposure that would correspond to our clinical dose, which performed very well in our initial clinical study in psoriasis. We were encouraged by that. Basically, based on those data, we felt that the best indication, the best fit for the profile that we have in our hand are diseases which are driven by interferon alpha.

Basically, when you look at basically dermatomyositis and lupus, we know, we understand that, you know, interferon alpha plays a very important role in the pathogenesis and the development of these diseases. That is why we decided to focus on those. We believe that, of course, we have to run the studies, but we believe we have a very good profile to fit. That's why we are gonna run the studies soon to have the first patient in offering dermatomyositis first, and then followed by with lupus.

Chi-Fong Wong (Analyst)

Okay. Great. Thanks.

Daniele D'Ambrosio (Head of Immunology)

Sure. Thank you.

Operator (participant)

We are now going to proceed with our next question. The questions come from the line of Rosie Turner from Jefferies. Please ask your question.

Rosie Turner (Equity Analyst)

Hi, good afternoon. Thank you so much for taking my questions. Maybe just following up on Pete's question around business development. Can we just clarify, are you still looking at kind of very much earlier-stage assets, or is there a potential that it could be something kinda mid-stage? Thinking about your Richter's transformation patients, was it a conscious decision for targeting that population within these kind of two early-stage trials? Are you aware of anybody else who is... I mean, I appreciate there's nothing currently on the market for these patients. Are you aware of anyone else that is looking at this area? Thank you.

Michele Manto (Chief Commercial Officer)

Yes, Rosie. Let me first take the question on BD. Then Paul, you'll take the question on the Richter's patients. I think it's unchanged compared to focus what we've expressed before. We're very much interested to do either licensing or M&A in a stage of development where there's still value creation to be made by Galapagos. You'll not find us very quickly in a major competitive bidding process for a late-stage asset at high values. We think we should be more on the early clinical. I would not rule out mid stage, as you say, so I think phase 2 is definitely part of the equation.

Ultimately, what also matters here is time to market and not just the actual precise stage of the molecule. We do also wanna make sure that we have some assets in our pipeline that still can get to approval stage within the decade, like is the case for our existing pipeline. Maybe that helps. All in all, still early stage, phase 1, phase 2, definitely still be on the agenda. We're also looking at preclinical opportunities because in some areas that definitely could also.

Interesting. Lastly, and finally, also the European, let's say assets for, let's say leveraging our commercial infrastructure are very much also part of the focus of our BD teams. Paul?

Paul Stoffels (CEO)

Yeah. On Richter's transformation, what we observe is that because of the point of care and availability of a 7-day vein to vein, at the moment in the studies, people are brought to the hospitals where we are able to treat those. That is a first an observation. If you ask would we only target Richter's, most likely not. It would be the aggressive form of CLL, whatever that definition embraces, as well as Richter's transformation. Those people who have a short life expectancy with very aggressive disease who can benefit from the point of care, advantage of having a 7-day vein to vein in the hospital available. Currently, we are not aware of anybody focusing on Richter's.

Maybe with our data, some other companies would start doing that, I think the very important thing is the seven-day vein to vein, the very short time access for very advanced people, which is difficult to match with centralized production. That is where we. Good product combined with the decentralized and seven days vein to vein, using fresh cells is probably the combination which gives the benefit to these patients.

Chi-Fong Wong (Analyst)

Thank you. Very clear.

Operator (participant)

As a reminder, once again, if you have any questions or comment, please press star one and one on your telephone and wait for your name to be announced. Once again, it's star one and one on your telephone, and wait for your name to be announced. If you wish to withdraw your question, you can please press star one and one again. We are now going to proceed with our next question. The questions come from the line of Dane Leone from Raymond James. Please ask your question.

Dane Leone (Managing Director and Senior Biotech Analyst)

Hi. Thank you for taking the questions and congrats on all the progress. I just want to follow up on a TYK2 question. I know there's been some questions earlier in the call, but let me pose the question this way. You know, clearly there's a growing investment in the space as a drug class that might be a better oral solution in certain autoimmune inflammatory disorders and what was able to be achieved with JAK inhibitor class. You know, later this year we'll get proof of concept in Crohn's and ulcerative colitis from the deucravacitinib effort over at Bristol Myers Squibb. Clearly, Takeda is going to put a lot of investment behind the Nimbus asset that they've recently acquired.

The question for your team is, you know, currently we're waiting on the start of the dermatomyositis study, but there really has not been a lot of messaging on how that program would expand around that. Is your view that, one, it needs to be more of a measured approach to developing the Galapagos' TYK2 inhibitor, maybe given the experience with filgotinib? Is there going to be an approach where you're looking to go in indications maybe that the other two players are not going to be pushing into, that might be a lower investment from both money and time to get to market? Any insight there would be greatly appreciated. Thank you.

Daniele D'Ambrosio (Head of Immunology)

Yeah, thank you. Maybe I can take this question again. you know, the as you said, there will be inflection points and information that will come during the course of the year. We'll obviously look at that very carefully. At this point, given the data we have in our hands and having seen the data from the competitors so far, we believe the best scenario for our molecule is the indication we are currently pursuing. That doesn't mean that we are not going to reevaluate as new data accrue potential other opportunities. We really feel based on what we understand of the qualified way in our hands and the competitors, that the two indications have the very good benefit risk profile, very high unmet need.

I think, again, a good fit with the mechanism of action that we see with our molecule. The preferential inhibition of interferon alpha versus, for example, interleukin-10, which is an anti-inflammatory cytokine, which we've seen differently inhibited by the other molecules. We really feel this is the best home for this compound at this point in time. This might change of course, with new data accrue. This is the current, the current situation.

Bart Filius (COO and President)

Maybe if I can add one or two words on this one beyond the clinical choices. I would say indeed, Dane, that we're carefully selecting now the indication that we go after for the reasons that Daniele had just described. We believe going now, for example, after psoriasis five years after Otezla, given the state that we are in today, is not the most logical thing to do. We are very keen obviously to first see the data in both dermatomyositis and lupus to understand exactly what we have in hand, before we make final choices and further choices in terms of development. Just to say we're very keen and interested in this field. We like the asset that we have a lot.

We welcome the fact that the big players are also stepping in to this field. We'll make sure that we develop this wisely and make our choices over time. I hope that helps.

Operator (participant)

We are now going to proceed with our next question. The questions come from the line of Sebastiaan van de Schoot from Kempen. Please ask your question.

Suzanne Raaijmakers (Analyst)

Hi there. This is Suzanne on for Sebastiaan. Thanks for taking our questions. First regarding the mid 2023 data sets that you will present for NHL and CLL, can you clarify what number of patients we should be expecting to be included in those data cuts? Should we expect that all dose expansion patients are included next to the dose escalation, even though there will be shorter follow-up for those?

Bart Filius (COO and President)

Well, the final data of the dose finding will be presented there and then whatever data we have on the dose expansion will be included on the safety side. We hope to be able to have already significant durability data from the dose findings mid in the year that the point where we have that. Towards the end of the year, we'll have more data on the longitudinal follow-up of the expansion cohorts. Mm-hmm.

Suzanne Raaijmakers (Analyst)

Got it. Got it. Just to double check, should we also be expecting an announcement on the recommended phase 2 dose for those two studies in between now and the mid 2023 data presentation?

Bart Filius (COO and President)

Not between now and the mid-2023 data presentation. That will be part of the regulatory discussions happening later next year.

Suzanne Raaijmakers (Analyst)

Got it. Maybe a final question, regarding your break even point being moved out to 2025 versus, 2024 previously. Just to understand, given Crohn's was not expected to be a large contributor, to 2024 per se, can you elaborate on the dynamics that led you to adjust your forecast and, if it's more relating to lower sales expectations or higher sales and marketing costs?

Bart Filius (COO and President)

No. Hi, Suzanne. No, it's actually related to the fact that in 2024 we were anticipating also a milestone on Crohn's approval that we're not gonna have. We're also as part of the 2021 agreement with Gilead, we're also paying a slightly higher royalty to them now that the total market potential is a bit lower. Those two effects would basically dip us just below the break even and therefore we need to extend it to 2025. It's not big numbers. I would say up to maximum EUR 50 million negative for 2024. These are, let's say small adjustments, but in full transparency we wanted to indicate that to the streets.

By the way, this does not affect the overall cash burn perspective that I laid out back in November at the R&D day in New York, because we do believe that our actual cash spent on the rest of the business, as we've now indicated, the reduction of more than EUR 100 million for this year, can definitely offset that extension of the break-even point. Overall cash profile for Galapagos is unchanged. Diminishing cash burn for the short and medium term up to a level where ultimately Jyseleca can contribute roughly EUR 200 million a year in terms of cash. That number, as I indicated earlier, is a bit lower than what we had anticipated when Crohn's was still around. I hope that clarifies.

Suzanne Raaijmakers (Analyst)

Got it. Got it. Thank you very much.

Operator (participant)

We have no further questions at this time. I will now hand the conference back to Sofie Van Gijsel for closing remarks. Hello, Sofie, you're back to you.

Sofie Van Gijsel (Senior Director of Investor Relations)

Thank you very much, operator. That concludes today's earnings call. Please feel free to reach out to the IR team if you still have questions. Our next financial results call will be our Q1 2023 results on May fifth. Thank you all for participating and have a great rest of your day.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.