Earnings Call Transcript - GLPG Q3 2020

Elizabeth Goodwin, Investor Relations

Hi. Thank you all for joining us today for the third quarter results call. I'm Elizabeth Goodwin, Investor Relations, also representing our financial reporting to bring you this information today. This recorded webcast is accessible via the Galapagos website homepage and will be available for replay later today. Sell-side analysts and professional investors are invited to post their questions at the end of our call and can dial in at a series of numbers in our press release from last night. Here is one for Belgium, that's 32-2793-3847, and the code is 8542327, and I'll repeat that right before Q&A starts. I'd like to move now to our forward-looking statements and remind everyone that we will be making forward-looking statements during today's webcast. The statements include remarks concerning future developments of the pipeline, future financial results, growth of our company, and possible changes in the industry and competitive environment. Because these forward-looking statements involve risks and uncertainties, Galapagos' actual results may differ materially from the results expressed or implied in these statements. Outside of filgotinib and rheumatoid arthritis in Europe and Japan, none of our drug candidates are approved by any regulatory authority. Today's call will be like our other quarterly calls; CEO, Onno van de Stolpe, will cover operational highlights for the third quarter; Chief Business Officer, Andre Hoekema, will present our deal with OncoArendi announced last night; and Chief Operating and Financial Officer, Bart Filius will highlight our financial results and close with the outlook for the coming months. During their presentation, you'll see the slides progress on screen and this will be followed by a Q&A session with the executives at the end. And at this point, I'd now like to hand it over to Onno to talk about the third quarter operations.

Onno van de Stolpe, CEO

Thank you, Elizabeth, and welcome everybody. Good afternoon, good morning. We would like to start with the operational highlights. Clearly, the highlight of the year for us is the approval of Jyseleca so that filgotinib in the new better trial is in the EU and Japan, which of course is a hallmark moment for Galapagos. This was overshadowed by the complete response letter we received from the FDA for the U.S. approval. In the CRL, they listed two reasons. One, the MANTA/MANTA-RAy results that they are awaiting before making a decision on the approval, which is the testicular tox study that we're executing with Gilead. And they expressed their concerns about the risk-benefit of the 200 milligrams; very disappointing CRL, very unexpected, but the reality we got to face. And certainly for Jyseleca, we were pleased to announce the filing of Jyseleca in the EU for osteoarthritis, the second indication for this work that we are going for. Very nice to announce that the first shipments were made, both in Germany and the Netherlands; Germany started two weeks ago. And Ireland actually started on Monday; on Tuesday, the first shipment was out of the order coming in on Monday. So, we are off and now we got to get off to a good start in the various countries. The other European countries are going to follow shortly. If we look at the rest of the pipeline, clearly we had a number of other news items; we presented the full selection data of osteoarthritis for filgotinib trial at the conference that caused the front pages there because it's very good data that filgotinib showed in that trial. We also had positive top line results of ziritaxestat at 60-90 in a semi-closest innovator trial; we are pleased with that dataset that we're discussing how to proceed with the ziritaxestat indication. And then we had a very disappointing outcome of the 1972 molecule in the ROCCELLA study in osteoarthritis, a yearlong treatment, where we didn't see any difference between placebo and the drug, which means that 1972 osteoarthritis development is endless. We are bringing 1972 back to the lab to see if we can find additional indications, but we're not proceeding with this osteoarthritis; it's very disappointing. Last week, we did an extended science seminar on Toledo where we disclosed the SIK that we are focusing on. I think it was a very good science and development update for Toledo; the whole package is very convincing, the identification of the targets and the necessary evidence of the mechanism of SIK targets, all the preclinical data that you have in the various diseases that are extremely convincing and the very positive Phase 1 data that we saw; a nice target engagement with a proof of principle because of the effect of IL-10 and TNF in that trial. So, we clearly have a confirmation in humans that we have the mode of action, which is very, very reassuring. And from Phase 1, we saw that we have a very nice window with regard to safety, which is of course important in further development. We are now moving this forward in a number of different Phase 2 trials as we discussed at the seminar, and that will lead to quite some new flow in '21 and '22. So the first readouts of the POC three in '21 with 390-70; also our second molecule for Toledo targeting the SIK will move into the clinic and give a readout in '21, and then '22 we'll get a number of different readouts. Hopefully, we get the first Phase 3 readout in '22 so we can prepare for Phase 3 already in ’22. We have a development plan set up to bring this innovation, as this program has a lot of potential to patients as fast as possible. This is very important for the patients, but also for Galapagos. We believe that this is a once in a lifetime opportunity that we’re progressing. We’re extremely excited about the targets, the mechanism, as well as the first results that we have for 390-70 and 43-99. So, let's hope that the good data will continue to come in this program and you will hear much more about it in '21 and ’22. With that, I would like to hand it over to Andre Hoekema, our Chief Business Officer to talk about the deal that we announced in OncoArendi late last night.

Andre Hoekema, Chief Business Officer

Thank you, Onno. Good afternoon everybody. In our presentations, we often speak about our internal pipeline and here I would like to highlight how we also add external assets. There are actually two reasons to do that. First of all, we have a very strong balance sheet and we really want to use that not only to grow our internal pipeline and accelerate programs through the clinic but actually also add external assets to our R&D engine. Talking about the engine, both in discovery and in clinical, we have a lot of expertise that engine really fires on all cylinders. So in our view, it really makes a lot of sense to not only use it for internal molecules, but also add more tools from third-party stuff that we think really makes sense. Of course, in that effort, we’re really focused on inflammation and fibrosis, the core indication areas of the company, and it will not surprise you that when we talk about criteria, we really look for molecules that fit Galapagos; that means multiple modes of action, high-risk, high-reward. They should strengthen our pipeline. On the next slide, you will see the deals that we have signed this year. We signed a number of deals with molecules that hit all those criteria: Fibrocor and Scipher, both from North America, Canada, and Boston. Just a few words about it, Fibrocor has come up with noble targets in fibrosis based on patient samples; very complementary to what we do. We moved to the first program that we licensed in Fibrocor to a candidate drug, very pleased with that. Scipher is based on similar complimentary technologies operating from Boston. They identify targets based on the molecular signature in patients. We think that fits very well with our own internal programs. In Ryvu, they identified a novel inflammation target that we really liked; the company is located in Krakow, Poland, because we've seen a deal. Today, I'm really pleased to say a few words about the first clinical phase efforts that we licensed from the companies, also in Poland, in Warsaw, in fibrosis. So, let me first say a few words about the business deal. It's a collaboration on a really novel class of fibrosis targets, and currently getting ready for some breakthrough work in public in this target class; chitinase and chitinase play a role in fibrotic diseases, mainly in lungs, so that really fits with our interest. We have a fibrosis franchise underway; we believe there's a very nice niche where we can add another program. We decided to work with OncoArendi. You see the deal structure, an upfront 25 million, development, regulatory, and sales milestones for a total of 220 million plus royalties. We also negotiated the right to get access to other chitinase programs in case they fit our candidate as well. So, let me say a few words about this novel target class; chitinase are known to play a role in lung fibrosis and it is a very novel class. But at the same time, we like it because there's quite a bit of elevation. In knockout mice, you see that the mice that lack chitinase shows a very reduced disease burden in IPF models, and moreover, the molecule that OncoArendi has in development, OATD-01, has really reduced the disease burden in those mice. So the target class of chitinase, as I said, is very well validated; we are not aware of any competition, so it typically goes off first in class potential. We think there's really a lot of room to bring us into IPF and possibly other fibrosis disorders. At this point, Piet and Walid are preparing a Phase 2b study to bring this molecule forward. If I can have the next slide, just a bit of detail on the elevation that I just mentioned. Here you see some data that show what bleomycin, which is the standard animal model for IPF. Just on the left, you see healthy mice. On bleomycin treatment, you get a formation of lesions in the lungs, expressed by Ashcroft score. As you can see, the molecule from OncoArendi really reduces that net effect similar to the syndrome. This is one of the validations that I talked about, and we're really excited about this clinical asset that fits in right behind ziritaxestat, which is in a large Phase 3 study, as you all know, and troubled by where we report the Phase 2 data shortly. So, in summary, I am very happy to be adding this asset to our pipeline. With that, let me hand over to Bart to get through the Q3 financial data. Bart?

Bart Filius, Chief Operating and Financial Officer

Thanks, Andre, and good morning everyone in the U.S., good afternoon in Europe. Happy to say a few words about the financial results for the quarter, and I'll finish off with an overview of the short term outlook in terms of events. But first on the financials, as you can see here on the slides, starting off with our cash position, healthy cash balance of €5.3 billion at the end of September 2020, which brings our cash burn for the first nine months of the year to €433 million. As usual, we exclude two particular categories of cash flows: both income and expense. On the cash income side, we are excluding €25 million that we received over the first nine months due to increases in capital as a result of warrant exercises. We also had a quarter, this is nine months total, but we had a quarter where we can significantly compare to euros. As we report in euros, we are incurring a translation effect, so this is not realized but it's a translation effect of our dollar position that we have on our balance sheets, which is roughly 20% to 25% of our overall cash balance. Obviously, one quarter goes up and the other goes down; it's not included in our cash burn nor is it in our guidance. So, 433 is the first nine months on cash burn in total; we retain our full year guidance of between €490 million and €520 million. For those of you that are doing the math, 433 for nine months, if you divide by three and multiply by four, you get up higher than the 520. The key thing that's happening in terms of cash in the fourth quarter is also the receipts of the milestones for the approval of filgotinib from Gilead; which by the way, we have been receiving a lot of October, which were $105 million. Hence, our cash run-rate to get from 433 to an extra 520 is a bit lower in the fourth quarter than it has been in the first nine months. Then on the P&L itself, let me highlight three categories: revenues, first of all, €370 million in revenues is to a large extent driven by accounting revenues for previous events, and those are related to our deferred income position on filgotinib and our deferred income on what we call the access rights to our platform. Both of which are consequences of the transactions as we recognize those receipts over time; they will be in one shot, to the largest extent. Hence, we have now recognized a big chunk of our total top-line in terms of accounting revenues here. In terms of cost, a bit over €500 million of operating expenses. That's an increase compared to the first nine months of last year. And that's driven along by the R&D investments that we're taking in filgotinib, Toledo, and in our earlier programs. It's also driven by increases in staff and most notably in the commercial area, where we're ramping up clearly for the launch of filgotinib in Europe and rebuilding our infrastructure in the key European countries. Then finally, the net results; there is between operating results and net results. There's a gap strategies within by financial expenses. I've already highlighted the currency effect, which you can find there. But there's also a bit of accounting to be done on this Gilead awards that are outstanding, which depending on the volatility of this year can be positive or negative from one quarter to the next. Here, you see the numbers that are in those line items. If I conclude this part of the prepared comments and the presentation, let me say a few words about the outlook in two categories: first of all on filgotinib, and I'm sure we'll discuss a little bit more detail in the Q&A as well. But we're still anticipating the type A meeting with the FDA in the fourth quarter of this year. We are looking further and also anticipating after the filing that we've done in Europe. In Q4, we anticipate the filing in Japan in the first half of next year. Also in the first half of next year, we should get a peak at the MANTA/MANTA-RAy data and get that understanding of what those are telling us. On the other programs still to come for the fourth quarter of the results in 1205 our PINTA program. We have first dosing in study for the molecule called 3667. We look at disclose the targets of that molecule, but we're doing the study in choices and we anticipate fulfilling in the fourth quarter. Finally, for Toledo as you know, we have already dosed a couple of folks last month as we were discussing in the webinar, but we're also anticipating in the beginning of next year, to dose further indications lupus and severance. For the first half of next year, a big milestone obviously is also the futility analysis on these events, so quite a lot of useful data in the next six to nine months coming up. Let me conclude there, and Elizabeth, if you can take over for the Q&A please.

Elizabeth Goodwin, Investor Relations

That does conclude the presentation. Today, we invite sell-side analysts and professional investors to pose their questions. Here's the dial-in number for Belgium, Country Code 32-2793-3847 and the code is 8542327. For those already dialed in, our first question comes from Lenny Van Steenhuyse from KBC Securities.

Lenny Van Steenhuyse, Analyst

Congrats on the interesting OncoArendi deal. You're looking to further position this one in IPF clinical trials mentioning Phase 2b trial. I was wondering if you could give some additional color on what we should expect in terms of clinical trial design as you were mentioning, a Phase 2b in that sense; we might not expect a better lifestyle, but perhaps something more extended. Could you perhaps elaborate a bit on that? And as a second question, 3Q report also mentioned the JAK-1 inhibitor Galapagos 0555 entering Phase 1 study again; I believe this compound also went through some safety studies quite some years ago. So I was wondering if this was what triggered the revival of this compound and what's the strategy and indication life for this one? Thanks.

Walid Abi-Saab, Chief Medical Officer

This is Walid. I'll take your question on the OncoArendi, otherwise known as 4716 now; extend that price today. Our plan is to do a study where we just multiple dosing, so that's we're calling it Phase 2b. We're still early in the design of the trial, but in a larger trial than PINTA, and the duration probably will be about the same. We're talking about a trial probably about 200 patients stored in the significant amount in the PINTA looking at patients with IPF with no background therapy and also on top of the continuity. So that is the current plans, but you will come back with more details as we get closer to starting the study. I'll turn over to Piet to talk about 555.

Piet Wigerinck, Chief Scientific Officer

Okay Walid, thank you. So 555 for those of you who follow us for a long time; triglycerides and molecules at GSK to convert, and after a while GSK gave back to us. We had a very interesting data package where they evaluated 555 in OA plans; the total package showed effect compared to JAK inhibitors, 555 did something special on the cartridge of OA patients. So, we've taken the package and now started in intraarticular; the whole game; during an intraarticular injection which will be done once every six months in the end, to see that we can pick up some senior info in a patient. Thank you.

Elizabeth Goodwin, Investor Relations

Our next question comes from Laura Sutcliffe from UBS.

Laura Sutcliffe, Analyst

I'd just like to pursue the OncoArendi deal a little bit more. We now got full IPF hormones at least, I think if we include the mentioned IPF in your Toledo presentation. Could you just sort of outline how all of these things fit together for us in a little more detail? And I just want to check one thing on your is a valid trial if that's the case, please. All those trials got 555 background therapies and if not should we be concerned about whether or not you can get a useful result from them?

Walid Abi-Saab, Chief Medical Officer

So let's start from the first question. We have Galapagos saying that we've been quite interested in building a franchise in fibrosis and IPF is always an indication that we are, we have a number of compounds in development here. IPF is a very serious disease with a very poor prognosis; essentially, patients after diagnosis, the immediate survival is about two to five years. There's a huge unmet medical need to essentially stop the progression of the disease. Consequently, when you develop medicines, the idea is to develop a combination therapy, particularly when you have molecules with very good safety and tolerability profiles, to combine them together with the ambition to stop the progression of the disease. Hopefully, patients with this stimulus will no longer have to worry about dying from IPF and actually live with a disease that won't progress anymore; that is our ambition. It's a tall ambition, but it's our ambition. So, we need multiple shots on goal. It's beyond the scope of our discussion today, but we look to target market literature, looking at various cellular mechanisms, biological mechanisms from fibrosis to inflammation, to have complementary efficacy you just spoke. Our plan is to advance the molecules, and as they show efficacy, as they lend themselves to combining with each other some biological mechanisms, as I mentioned, and also from safety and tolerability. This plan will allow us to combine them together. Coming to the ISABELA program, ISABELA is certified between the treatment on the ziritaxestat and you stratify based on background therapy either on your background on the internet or on PET; we do certification on those plans. Just to remind you, based on our discussions with the FDA, this phase type will be with them and also, especially with the FDA. This type of design will allow us to get indication for the treatment of IPF. I hope I answered your question.

Elizabeth Goodwin, Investor Relations

Okay, thanks very much, Laura. Our next question comes from Emily Field from Barclays. Go ahead, Emily.

Emily Field, Analyst

On Gilead's recent call, they seemed to indicate that, at least, they expect that they could learn something somewhat definitive from this type A meeting regarding the path forward. For filgotinib in RA, it seems to indicate that perhaps there could be some indication of whether there remains a path forward for the 200 milligram. I was just wondering if you could give any thoughts on that? When we would expect that meeting to occur? And then just what exactly will be communicated to investors? Then also, if you have any insights into one decision that was made to pause the other trials for our PSA, ASN, uveitis. When we could expect or what the bar will be to get those trials restarted? Thank you.

Onno van de Stolpe, CEO

Okay, thank you. I hope you guys can hear me better now; I was told that my voice before was not as great. The type A meeting will take place, as Bart said a few minutes ago, still this year before the end of the year. In terms of what we'll be getting out of it, there could be a number of potential ways forward. Gilead's CMO talked about this a few days ago; there will be an effort to seek clarity about the path forward for the CRL to address the concerns the agency has on the risk-benefit as well as medical, and also specifically, the exact data that is necessary to be shared about the MANTA program. Based on that, coming out of the meeting, I think Gilead will have a sense about the prospects of filgotinib and how that will dictate whether or not the trials that were paused will be able to resume. I think that will guide right after that meeting, based on the outcome of the meeting.

Emily Field, Analyst

And that meeting is expected to occur before the end of the year?

Onno van de Stolpe, CEO

That's correct.

Elizabeth Goodwin, Investor Relations

All right. Thank you very much for that. Our next question comes from Nick Nieland from Citi. Go ahead, Nick.

Nick Nieland, Analyst

So, this is a quick one on Gilead the OncoArendi assets. Secondly, for Bart, to the rest of the questions on the breakdown of your R&D spend, please. Firstly, do you expect your filgotinib spend in '21 to be lower than 2020? Secondly, you've spent less on the taxes that in 2018 you did in '19? I was wondering why that was and will that be more interesting in 2021? Toledo spend looks like it will nearly double this year; what growth can we expect for that in 2021? Can you just describe what's good in the other programs that's nearly half your spend, and which is growing at over 50% so far this year? A very quick question on the accounting question on the $105 million milestones; over what period will these be recognized in your revenue? Thank you.

Onno van de Stolpe, CEO

Bart, can you take those?

Bart Filius, Chief Operating and Financial Officer

Yes, I'll take those questions. I was just keeping notes to make sure I track all the points that you raised, Nick. First, clearly noted your advice on R&D, and the answer is yes. As with all our compounds, both licensed and self-developed, at the end of Phase 2b, there's a milestone for Gilead, for which they will share the rest of the R&D expenses 50-50. On your R&D breakdown, a couple of points you raised. It's a bit difficult to assess at the moment, as there are some question marks around PsA, AS, and uveitis; that's obviously a driving factor in the expenses for 2021 as well, depending on whether those studies are resumed or paused. So, I cannot give you more detail today. On 555 it's less, but that's only mechanical; last year, before the collaboration, we were taking 100% of the cost of 555, but we started to share this 50-50 only as of September 2019. So, one should look at the comparison of the first nine months this year versus last year; you'll see a decline, but it reflects an underlying increase contributing to the actual expense whether it's shared with Gilead. Some extent that happens on filgotinib going in the other direction; their costs are increasing. But that's also reflecting that we are spending 20% of those costs in 2019 at least in the first six months and then 50% in the remainder of the year. On Toledo growth, it is indeed growing significantly this year compared to last year. We do anticipate further growth; as those proof-of-concept studies are getting online as we speak. Indeed for Toledo, you should expect some further increases. Then finally, other portfolio; that's really the whole portfolio that's in development, both in preclinical development and in the clinic. That includes the molecules we referred to earlier in the call, such as 3667. 555 as people highlighted, and at the moment, I think we have in PCC and Phase 1 status, somewhere between 5 and 10 different programs that we're running. That explains why this other category is meaningful and is also growing. Lastly, your accounting treatment for the milestones; it's treated together with all the other filgotinib income we have received in the past and will receive in the future. We are basically ramping them all together, spreading them out over the period of the regulatory development program for filgotinib. This program is currently estimated to be around the next three to four years. So it's a complicated accounting treatment, but we don't recognize everything of the $105 million immediately; we're spreading that out over the periods. I hope I have answered your questions.

Elizabeth Goodwin, Investor Relations

And our next question will come from Peter Welford from Jefferies.

Peter Welford, Analyst

I've got two. Firstly, just to return to Gilead, if we can just read the comments they made on rheumatoid arthritis; if you just curious here how this works as far as this is now a 50-50 cost again? Obviously Gilead does understand they have a focus on the U.S. But clearly for these indications as well, those trials are essential for other geographies. I guess I'm curious to understand the thinking behind pausing these studies given this is an FDA specific problem, and how Galapagos thinks about this, considering the potential challenges in the U.S., particularly the significant opportunities there are elsewhere? Secondly, on chitinase inhibitors. I'm curious if you have tried addressing this target with your internal drug discovery platform efforts? If so, I guess I'm curious why you think this particular asset is differentiated? Or perhaps why they've done something that you couldn't do, if that's the case or why you haven't pursued it, I guess, internally. A quick one for Bart; is the €27 million you're paying to OncoArendi, I presume that's within the cash burn guidance for this year. Could you just clarify that that is right? Thank you.

Onno van de Stolpe, CEO

Let me take the first question on Gilead. Look, I think these programs on psoriasis, ankylosing spondylitis, and uveitis were designed with the idea to address the global regulatory situation. As the U.S. situation is less clear, Gilead decided to pause these in consultation with us, and we were aligned with that because we need to have clarity about what is happening in the U.S. and what the future plan is before we can decide whether the studies that are designed would address the geographies where we're interested and where we can have a way forward. It seemed like a sensible way to go forward to have this much more influence or reform by discussing with the FDA; there needs to be some changes made and that's why it stopped. We'll see where we go from there after we have that meeting and we can adjust accordingly. We will be talking with much more clarity at that point.

Elizabeth Goodwin, Investor Relations

This is Elizabeth. I just think it might be helpful to add that it's a pause in enrollment only, is that correct?

Onno van de Stolpe, CEO

Yes. That's correct.

Elizabeth Goodwin, Investor Relations

Thank you. We had a question on the kinase inhibitors, why they're differentiated?

Onno van de Stolpe, CEO

Peter, given the kinases, the answer is no. The subtle reason is that this target is expressed only in active macrophages. We never did the type of target; we never did the target in the facts of cells for fibrosis. In that sense, as we did screen macrophages for fibrosis, we didn't set up to find it. We were impressed with the data; it's a completely target, makes a great sense in the disease, and bored the compound data and the local data. It makes great sense. We believe it nicely complements our internal IPF portfolio. That's why we did it.

Walid Abi-Saab, Chief Medical Officer

Yes, that's mine. So Peter, I can confirm your question. The €27 million that is paid to OncoArendi is part of our cash burn forecast of between 490 and 520.

Elizabeth Goodwin, Investor Relations

Our next question will come from Rushee Jolly at Bernstein. Go ahead, Rushee.

Rushee Jolly, Analyst

My question is on the small molecule 4059 into the clinic and in the quarter. In the last year of your R&D essay, we showed preclinical based on the aspects and demonstrated the impact on triglycerides rate in blood. I appreciate the mechanism of undisclosed presence and it's very early. But could you talk a little about that there are many aspects of the molecules that you feel may be particularly differentiated? Given that we have several diabetes drugs on the market, with the fact that stretch beyond weight and blood sugar range? Prior to that, SIK also seems to be an interesting target for diabetes and obesity. Do you have any plans to furnish any Toledo assets into these diseases as well? Thank you.

Walid Abi-Saab, Chief Medical Officer

Okay, I'll take both questions. Let just start from the consolidated metabolic an easy one. We are aware of those publications and we follow up with every molecule in every animal model whether we see something that points us in that direction as potential application for the Toledo platform. If we decide at a certain moment that this is a path forward, we will hear from us, but it's well known, and it's on our radar. On 4059, sort of composites to Phase 1, it's a completely novel target. In that sense, on its own already working in a complete different way than older and more recent drugs. We want to see what it does in Type 2 diabetes; we believe it has good positioning of its own. We've compared it heavily to older and newer drugs. With the profile we see, it is different from what is out there. So the moment we move into Phase 2, we will update you more fully on how we see this fitting altogether.

Elizabeth Goodwin, Investor Relations

Our next question comes from Evan Seigerman at Credit Suisse. Go ahead, Evan.

Evan Seigerman, Analyst

Thanks, Elizabeth. Thank you for taking my question today. So one for Bart, can you expand on some of the differences that EMA and FDA have between the JAK class? I think in the U.S. we don't realize how more open the European regulators are to JAK, and I think that might help put into context the launch that you're starting with filgotinib?

Bart Filius, Chief Operating and Financial Officer

Yes, let me transfer that question, Evan, to Michele, our Chief Commercial Officer who is also on the line and I think he's happy to take it.

Michele Manto, Chief Commercial Officer

Yes, this is Michele Manto. We've noticed a significant change in the uptake of the molecule. In Europe, particularly with sclerosis, the classes are really experiencing strong growth. Previously, we only observed this trend with organic sellers in the market. The seeds have a 15% market share, and we are also seeing earlier market entry; for instance, in Germany, the share increased to 20%. The class continues to grow without cannibalizing other molecules, which sets a solid foundation for our ongoing launch. In dynamic markets like Germany, 20% of bio-naive patients are using JAK inhibitors, and one-third of those patients are opting for JAK inhibitors, varying in usage days. Additionally, the U.S. market is also robust, indicating strong demand. However, there's a regulatory difference between the FDA and EMA, which Toledo is addressing. The next update we are looking forward to is regarding the type A meeting outlook, as mentioned before. This addresses your question.

Evan Seigerman, Analyst

No, that is helpful. I mean, just I guess one more thing to follow-up there. Do they look at the risk benefit of JAKs differently in Europe, which seems that EMA is a little more conservative when you look at baricitinib and filgotinib, whereas you have approvals in Europe?

Bart Filius, Chief Operating and Financial Officer

Walid, would you like to take that one on the regulatory side?

Walid Abi-Saab, Chief Medical Officer

Yes, sure. I think that's a fair assessment. ToGMA can compare; the situation is very similar between Europe and the U.S.; I pointed to that direction. I'm not sure what more to add to it. Honestly, these agencies form their own opinions based on the review of the same data. Sometimes they talk to each other, but in the end, their decisions can differ. In this case, we see Europe going in one direction, and the U.S. in a different direction. Let's hope filgotinib will prove that theory wrong, and we'll get it approved with those doses in the U.S. and see which way we go forward from there.

Elizabeth Goodwin, Investor Relations

Thanks, Evan. We now turn to Brian Abrahams at RBC. Go ahead, Brian.

Brian Abrahams, Analyst

Thanks so much for taking my questions. On filgotinib, I guess two questions for me. First off, can you talk about the potential for approval of the 200-milligram dose for a more narrow, say, TNF refractory RA population? Is this something that's playing for discussion of the type A meeting? Would you want to potentially commercialize it in RA in the U.S. with that kind of label if your partner Gilead does not wish to? Secondly, can you frame for us expect your expectations and I guess specifically in the possible durations of follow-up necessary for the MANTA/MANTA-RAy studies, and how that might shape your and your partners' go-forward decisions on filgotinib? Thanks.

Walid Abi-Saab, Chief Medical Officer

Let me take the political questions, the regulatory questions, and I'll ask Michele to answer the hypothetical commercial question. This type A meeting is meant to engage with the FDA to see what potential avenues we can have going forward. The FDA, as we've said before and Gilead has said, raised questions about the risk-benefit of the 200 milligrams and the target indication. That is potentially a way forward. When you look at patients where the risk-benefit is a bit more different, essentially people who have biologic incomplete responders where the difference between 1000 and 200 efficacy is a bit more prominent; those patients are usually in need of new medicines. So, that's a potential way forward, and it's something that will be discussed, whether that will be a way forward or not, whether Gilead would be excited about it, all of these are part of the myriad of potential outcomes of a faculty meeting. It's challenging to speculate on this. Regarding MANTA, I think those studies have been designed with clear collaboration with the FDA and are slightly dictated by them; as they describe those studies in a white paper, there is a similar study that was done with a compound by Pfizer called pregabalin. So, those studies are well designed and are standard. The primary endpoint of the study will be 315 although, the double-blind portion of the study is 26 weeks of treatment as we talked about. As with any studies, we do follow the patients afterward for those who might have a reduction in sperm count; we follow them for a period of year after the end of the 2016 or until they reverse, and we stop following them. That's how the studies are designed. I think those are also explained on clinical trials. For the commercial question, I'll turn it over to Michele.

Michele Manto, Chief Commercial Officer

On the bioIR, it's a growing segment in the U.S., causing the number of therapies we see also in the JAK inhibitors also taking place there. On top of that, we've seen in institutional the 200 milligram high-risk profile for filgotinib. The commercial scenario depends significantly on the actual outcome, and the different combination that would come out of the label. It's important to have a straightforward answer here. We'll need to see what was type A and the outcome discussion with the FDA will bring us.

Elizabeth Goodwin, Investor Relations

Thank you. Our next question comes from Matthew Harrison at Morgan Stanley. Go ahead, Matthew.

Matthew Harrison, Analyst

Great, thanks, Elizabeth. Can you just remind us of the steps for commercialization in Japan and pricing relative to some other geographies? Secondly, can you provide any updates or clear thoughts on when we could see the futility analysis for ISABELA? I remember there was a piece around further enrollment that influenced that. Thanks very much.

Piet Wigerinck, Chief Scientific Officer

Hi, Matthew. Thanks. I think the first one will be commercialization in Japan. They are doing nice that Gilead owns and where they act. Pricing will be a decision they take. They operate in collaboration with their local companies, which maximize the operations there—an indication of the opportunity to maximize market share with the presence ISA has in the metrology market.

Michele Manto, Chief Commercial Officer

In terms of facility for ISABELA, I think currently we are still planning to have the futility in the first half of next year. With the big caveat of the uncertainty around corona reflecting that applies to all of our pipelines just like any other company right now. We'll see how that's going to evolve, but so far, we're sticking with our plan. We'll be guiding in the future if we have any changes?

Elizabeth Goodwin, Investor Relations

And now next up is Phil Nadeau from Cowen. Go ahead, Phil.

Phil Nadeau, Analyst

My question is actually on the Toledo Phase 2 trials. Reviewing the designs, the structure is a bit small. It looks like in each of the trials and right sizes, and you see only about 15 to 20 patients will actually get 3970. When we compare that to the Phase 2 proof-of-concept study with filgotinib, these trials were more like somewhere between 100 and 150 participants. What's the rationale for the small efficient numbers in the Toledo program? Do you think those trials are each large enough to give you a clear signal for efficacy and safety in the different indications?

Onno van de Stolpe, CEO

Piet, will you take that?

Piet Wigerinck, Chief Scientific Officer

This is our approach as Galapagos; the way we develop our medicines in general. We cast a wide net and in the indication of Toledo, we really want to learn from the lead compound to inform the whole platform and build the bridge from the preclinical data to the Phase 1 type of dynamic data we shared with you to the proof-of-concept data that we see and verify whether our story, as we build it based on the biology frequently on the models we observe, holds when we go to the clinic. If you want to do larger studies, then it will be a significant investment. As such, you need to choose wisely; we think that you lose the ability to explore the wide array of potential diseases that could benefit from the adaptive approach. We shared with you last time; we could lower the costs. That's why we do smaller studies, where you can achieve one of the outcomes; you see nothing, hence it's not worthwhile continuing; or you see something very impressive, allowing you to take a decisive next step. Or you can get something giving a signal that's worthwhile pursuing by maybe changing types of patients, possibly going to sub-population, or changing endpoints. That's the approach we take for these trials. With the five proof-of-concepts that you see across psoriasis, UC, RA, Sjögren, and lupus; in the case of psoriatic arthritis, because of the mACT, we jumped straight into those range finding studies in psoriasis, psoriatic arthritis. That's because it has a chance of bringing this particular class of medicines to patients fastest.

Elizabeth Goodwin, Investor Relations

Our next question comes from Dane Leone from Raymond James. Go ahead, Dane.

Dane Leone, Analyst

Before your second top-line results of the PINTA 1205 study in IPF. Just points of interest on that one based on clinical trials.gov that study completed in August. I just wanted some color in terms of, it's now being November, what analysis is being done or kind of the context that you're putting in from that study, to then deliver the top-line results? Secondly, and I'm not sure how much you can get into it, but there have been questions around the PK profile of 1205 from the IBD studies, or the healthy volunteer studies maybe, they were dosed descending. There was accumulation of the drug given a long half life. Could you just comment in terms of how that might be different in terms of the dosing strategy, whether you just need to use lower doses in IPF relative to IBD that have been explored?

Walid Abi-Saab, Chief Medical Officer

I'll take the question on PINTA. In PINTA, in the 26-week study patients with three different backgrounds, and we report out on SCC and FRI. FRI on its own is a massive dataset, and we are making our way through that. One must understand that we want to be 100% sure that we are ready when we present those data. The PK profile for 1205 in compound; just to city state level; we did PINTA with a single dose. We can go over based on targets for which we can go over; we do not anticipate a difference between IBD patients and IPF patients with the data.

Elizabeth Goodwin, Investor Relations

Our next question comes from Jason Gerberry from Bank of America. Go ahead.

Jason Gerberry, Analyst

I guess first one for me, one of the hypothetical Gilead talked about on their call was a potential path forward or moving forward with UC but not RA. I just want to make sure I understand that correctly, because that would presume that you have an approval for the 200 mg for UC, but not perhaps RA? Is there a rationale there, essentially that you need to push those with UC or maybe an inherent predisposition of RA patients to blood clots that presuppose that scenario? Secondly, my question is just the European launch; realizing that there's probably a lot of nuance at the country level, but how do you guys think about order of entry effectively, kind of third, amongst the next generation JAKs? Do you look at the competitive dynamics at launch? Do you think that as later entrants come into the market that pricing negotiation considerations come into play? Just wanted to know if you can clarify some of the order of entry considerations with the broader EU launch? Thanks.

Walid Abi-Saab, Chief Medical Officer

Thanks, Jason. I'll take your first question. It is accurate that we've seen, and we know from the biology and prior molecules, that in UC, you often need a higher dose than what you have in RA. Also, I want to clarify that the FDA never said that the 200-milligram in RA is not approvable because of a specific safety concern with that dose. However, the FDA has reiterated that they believe that the risk-benefit of the 200 milligrams compared to the 100 milligrams is of concern, especially in that indication. A different scenario is true in UC also as the population differs. Recently, when data was shared from selection, you will witness that the efficacy and safety profiles continue to look very good in this patient population. I think the agency will have to make that determination on its own. They're not going to completely ignore all the data from other indications but won't necessarily use all that as a read-through.

Michele Manto, Chief Commercial Officer

On European launch, of course, the differences in the different countries on the healthcare system, reimbursement, and et cetera; the first thing is that we really started after you approve, with all the procedures, to really be on fees, and get there, representative and access as soon as possible. The pricing process is key as it will be a crucial decision on how we navigate the system without demanding complexities or new things, which again can play on timing on parking lots; similar to their investments. In terms of order of entry, we have systems in different countries that are now going to be prepared for negotiation discussions. This will help us not to jeopardize our options and timelines across various markets.

Elizabeth Goodwin, Investor Relations

Thank you, Michele. Our last question will come from Benoit Louage at Degroof Petercam. Go ahead, Benoit.

Benoit Louage, Analyst

Hello, good afternoon. Thank you for taking my questions. I have two related to the IPF franchise, more specifically for 1205. I was just wondering, now awaiting the PINTA trial readouts, if this trial will be positive, on which timeframe approximately could we expect you communicating on the next terms going forward with this compound in IPF and actually in systemic sclerosis? As a follow-up, what would be your view, and Gilead's view, in the speed of trying to evaluate 1205 and ziritaxestat in a combination therapy setting in Phase 3? Would that be something for within the very near future to look into and to initiate? Or would you wait for some monotherapy evaluation in Phase 3 first before taking that strategy?

Walid Abi-Saab, Chief Medical Officer

Thank you, Benoit. This is Walid. I'll take those questions. We've talked a little bit about our plans for the OncoArendi program to evaluate this in dose-range finding in Phase 2 to program. The idea would be depending on the results of PINTA. If the results are fantastic, we can jump straight into the ISABELA program Phase 3. If they are somewhere in the middle, we can propose something like the OncoArendi or 4716 program going forward. Regarding the question on timing, again, it's really hard to predict these ahead of time. The scenario plays for all these we prepare, but until you see the data, it's hard to predict. If it's straightforward, then the delay will be short because we usually plan ahead of time. If the data requires us to scratch our heads, we require a bit longer to come up with a clear path forward as to what we want to do. Combination 1690, that's always been an option. But again, if you have two experimental drugs and you don't know the dose of neither, doing factorial designs becomes prohibitive as we must think cleverly about it. We are starting to do some preclinical work.

Elizabeth Goodwin, Investor Relations

All right, thank you very much. That wraps up today's conference call. Please reach out to the IR team, Sofie Van Gijsel or myself, if you have any questions. Looking ahead, we'll be webcasting executive presentations at the Jefferies Healthcare Conference later this month and at the JPMorgan Healthcare Conference in January. Our next scheduled financial results call will be for the full year 2020 results on February 19, 2021. We thank all callers for participating today, and please stay safe and well. Thank you. Bye-bye.

Operator, Operator

That does conclude our conference for today. Thank you for participating. You may all disconnect.