Earnings Call Transcript - GLPG Q2 2021

Operator, Operator

Good day and thank you for joining us. Welcome to the webcast for the first half results of Galapagos. I will now turn the conference over to Sofie. Please proceed.

Sofie Van Gijsel, Investor Relations

Thank you and welcome all to the audio webcast of Galapagos' H1 2021 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 today. We 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 and our company, and possible changes in the industry and competitive environment. Because these forward-looking statements involve risks and uncertainties, Galapagos' actual results may differ materially from the results expressed or implied in these statements. Today's speakers will be Onno van de Stolpe, CEO; Dr. Walid Abi-Saab, CMO; and Bart Filius, COO and President. Onno will reflect on the operational highlights and Walid will speak to the top line results of our TYK2 and SIK2/3 programs released in July. Then Bart will go over the financial results and end with expected news flow for the year. You will see a presentation on screen. We estimate that the prepared remarks will take about 20 minutes. Then we'll open it up to Q&A with Onno, Walid, and Bart, joined by the rest of our management board. And with that, I'll now turn over to Onno.

Onno van de Stolpe, CEO

Thank you for the introduction. I appreciate everyone joining us during the summer. Let’s review the year-to-date. In the first quarter, we faced a significant setback when our ISABELA trial was halted due to toxicity signals and insufficient efficacy of our ziritaxestat drug, falling short of expectations in the IPF trial. This was a considerable blow for the company, highlighting the risks with new modes of action. On a positive note, we received promising data from the MANTA and MANTA-RAy studies, particularly regarding the interim analysis of our testicular toxicity study for filgotinib after 13 weeks. In the second quarter, Gilead extended the lockup period of their shares in our company until 2024, responding to requests from shareholders, which adds certain confidence in our collaboration. Filgotinib was also filed for ulcerative colitis in Japan during this quarter, building on its earlier filing in Europe by the end of 2020. In the third quarter, we had encouraging clinical readouts, especially from the Phase Ib TYK2 study in psoriasis, which yielded very promising data, prompting us to proceed to a Phase II study. Likewise, our Toledo program, targeting the SIK2/3 inhibitor, demonstrated encouraging biological activity in both psoriasis and ulcerative colitis, which Walid will cover in detail later. Given the challenges with filgotinib's approval in the U.S. and the clinical disappointment with 1972 and ziritaxestat, we decided to conduct a strategic review, and we are in the process of implementing that outcome. In our R&D efforts, we have refocused our pipeline, which will be elaborated on in the next slide. In business development, we are seeking significant opportunities to enhance our late-stage pipeline and are currently evaluating potential products or companies that fit our needs. We expect to act on this once clarity is achieved. Commercially, we are rolling out Jyseleca across Europe following the renegotiation of the filgotinib deal, which granted us all rights to Jyseleca in Europe, along with several employees from Gilead. Bart will also discuss this rollout presentation. Additionally, we have made budget cuts in light of recent setbacks, which will reflect in future savings in the second half of the year and beyond, also to be discussed by Bart. Although our pipeline is less advanced following some late-stage failures, it remains a promising and unique set of candidates focused on inflammation and fibrosis, with the addition of a program addressing kidney disease now in Phase II. Our pipeline is heavily centered on the Toledo program and SIK3 inhibition efforts, with other initiatives progressing towards clinical trials. We anticipate several new molecules reaching patients in the coming years. We also have an exciting TYK2 program entering Phase II trials for both psoriasis and ulcerative colitis next year. I won't delve into other programs in depth, but we still have many opportunities in these disease areas with innovative new action modes. We believe our portfolio now has a well-balanced risk profile in areas where we can truly make a difference, and we are optimistic about the developments ahead. With that, I will turn it over to Bart Filius, our President, and first to Walid.

Dr. Walid Abi-Saab, CMO

No worries, Onno. Good morning, good afternoon, everyone. Thank you. I hope you can hear me well. It's my pleasure to share some insights from our data on the TYK2 and the salt-inducible kinase inhibitors. I won't present each of the four studies in full detail, as that would take too much time today. I recommend reviewing the RPRs for safety dropout rates and other information, as I'll focus on specific elements of the studies. If you could please move to the next slide. Regarding TYK2, we're quite excited about this class, especially as it gains attention in the field of inflammation. TYK2 signals through the p-STAT TYK2 pathway and influences several mediators like interferon, IL-12, and IL-23. Consequently, inhibiting TYK2 may be beneficial for several autoimmune conditions, including psoriasis, inflammatory bowel disease, lupus, and other interferonopathies. We have a proprietary selective TYK2 inhibitor, 3667, which has progressed to the end of the Phase I program. Please go to the next slide. Here, we present data from our signal detection study, a four-week trial randomizing 31 patients in a 1:1:1 ratio between two doses of 3667 and a placebo. Our findings indicate that 3667 was generally safe and well tolerated. We observed a positive signal as reflected in changes in the PASI score, with four out of ten patients on the high dose achieving a PASI 50 or above response compared to one on placebo. Additional endpoints like body surface area showed consistent results. We also note, based on competitor data and our own trial curves, that the efficacy we see at four weeks is not at a plateau. We had initially intended to explore higher doses based on an expanded safety margin from long-term toxic studies completed earlier this year. That study is currently ongoing, allowing us to assess the full dose range in the upcoming studies for psoriasis and a Phase II study in ulcerative colitis, as mentioned earlier. On the next slide, I aim to illustrate the distribution of subjects based on baseline change and PASI score achieved at Week 4. You can see the PASI score on the X-axis and the proportion of subjects achieving it on the Y-axis. For the high dose, we have ten subjects, with each uptick representing one patient response. The low dose of 3667 comprises eleven patients, and you can see that we achieved significant results, with one patient scoring above 75 on the PASI. Four individuals on the high dose met the PASI 50 goal, compared to one on placebo. Overall, we are pleased with these results, which support further development of 3667 for psoriasis and potentially other inflammatory conditions like ulcerative colitis. On the next slide, I will discuss our salt-inducible kinase inhibitors. We're very enthusiastic about these as they present a potential new mechanism for addressing inflammation. Salt-inducible kinases signal through two different pathways, affecting both pro-inflammatory and regulatory mediators. This dual effect is encouraging because it could lead to a reduction in pro-inflammatory cytokines, such as TNF-alpha, while also enhancing regulatory mediators like IL-10. This profile could have meaningful implications for inflammation treatments, increasing efficacy while potentially minimizing long-term chronic immunosuppression seen with certain treatments. Galapagos has played a significant role in uncovering the potential of salt-inducible kinases in inflammation. We have several compounds with varying selectivity and potency, which we believe could have broad applications. On the next slide, I will summarize our experience with 3970, which we are advancing as a SIK2/3 inhibitor in three six-week signal detection studies. Overall, 3970 was found to be generally safe and well tolerated, which is promising for the platform. However, we recognize that 3970 had some dose-limiting toxicity, limiting the margin we could explore clinically. Nonetheless, we felt it was critical to start gathering data to guide future platform development, in which we've heavily invested. In the psoriasis CALOSOMA study, we noted clear evidence of clinical activity, with four out of thirteen patients achieving PASI 50 compared to none on placebo, and these outcomes were corroborated by various secondary endpoints in the trial. For the SEA TURTLE study in ulcerative colitis, while the Mayo score did not show evidence of efficacy, we observed promising signs of biological activity when examining objective measures like endoscopy and histology, which we will detail later. In rheumatoid arthritis, we faced challenges as preclinical models indicated much higher exposures were necessary for efficacy. This translated to the clinic, where we did not observe any signal in RA. I won't elaborate on that further today. On the next slide, we present a graph similar to the one for 3667, showcasing the proportion of subjects at the end of the six-week trial. We had a 2:2:1 randomization between drug and placebo, with some dropouts due to COVID and other reasons. Ultimately, we had thirteen on active treatment and ten on placebo. You can see how 3970 separates from placebo in this trial. On the next slide, we highlight the primary endpoint for the ulcerative colitis trial, a six-week study with a 2:2:1 randomization and a total of about twenty people on active treatment versus ten on placebo. The change from baseline on the Mayo score was quite large, indicating a substantial placebo response in this biologic- and JAK-naïve population. Moving to the next slide, we assess objective endpoints. On the left-hand graph, we examine endoscopic improvement criteria, which historically was termed mucosal healing. One out of nine patients had improvement on placebo, compared to seven out of eighteen on active treatment, suggesting a clear signal. Although this should be interpreted in the context of the lack of signal on the primary endpoint, each indication must be followed closely. Evaluating the endoscopic improvement patients further, we find that those on the drug showed favorable histology scores. Encouragingly, patients with the lowest histology scores also normalized their fecal calprotectin levels, an inflammation marker for ulcerative colitis. Overall, we are optimistic about these encouraging signs in ulcerative colitis, despite the significant placebo response in this naïve population. This bodes well for the overall platform. In summary, we are pleased with the biological activity observed with our salt-inducible kinase inhibitors in these short signal detection studies. It's not guaranteed that a novel mechanism will translate into clinical efficacy, and we have seen evidence of clinical activity in psoriasis, an important inflammatory condition. We have also noted significant signs of biological activity in ulcerative colitis. We recognize that 3970 lacks the necessary margin to fully explore SIK2/3 inhibition, and we intend to work on compounds currently in late-stage discovery to develop molecules with higher target engagement. We are excited by the data supporting the further development of our salt-inducible kinase portfolio, which shows potential in inflammatory indications, and aim to bring one of our more potent SIK2/3 inhibitors into healthy volunteer studies in 2022. I will now turn it over to Bart Filius. Thank you.

Bart Filius, COO and President

Thank you, Walid, and good afternoon to everyone. Good morning to those in the U.S. time zones. I'll wrap up the presentation now and aim to take about five to ten minutes to discuss two additional topics: our commercial progress over the past quarter and our financials for the quarter. First, we've achieved considerable progress in the second quarter regarding reimbursements, aligning with our expectations and making notable advances. In Europe, the process is multi-faceted, requiring us to navigate each country to secure reimbursement, which is crucial for a successful launch. At the close of last quarter, we had Germany and the Netherlands in the market, and in the second quarter, we added France and the U.K., alongside reimbursement approvals in various smaller countries, including Belgium, Luxembourg, the Scandinavian nations, Austria, and Ireland. In total, we are now covered in eleven European countries. The reimbursement for France is pending a review of the MANTA data by the authorities, after which we should expand the reimbursement label there. It's also encouraging that the U.K. has recognized us as the first advanced therapy recommended by NICE for the moderate to severe RA population, which significantly supports our launch in that region. Both Germany and the U.K. launched in the last month of the quarter, so the sales numbers are currently modest, but we are pleased with the progress in gaining market access. Moving forward, reimbursement in Spain and Italy is expected, and by year-end, all major European markets should have our products available. Just a note: we haven't booked sales yet in Germany and the U.K. for the first and second quarters of this year; Gilead is still accounting for those sales. However, from Q3 onwards, we will start reflecting German sales in our own records as we began supplying ourselves in July, with other smaller countries following suit by the end of 2021. Therefore, by 2022, Galapagos will have full control of supply and sales across Europe, keeping us well on track with our reimbursement goals. Now, regarding market performance, the indications show that we are aligning with our expectations concerning market penetration. It’s still quite early in the process, especially since our presence in Germany has been more established. However, the JAK class as a whole is gaining traction in Europe, now accounting for sixteen percent of the advanced therapies market. We also observe a gradual decline in the share of anti-TNFs and other biologics. In Germany, our market share in the dynamic market, which includes patients switching from other advanced therapies or starting new treatments, has risen to over four percent, which we consider a positive development for both Germany and Europe overall. Michele Manto, our Chief Commercial Officer, is available for the Q&A to provide more numerical details. Switching to the financials, at the end of the second quarter, our cash balance stood above EUR 5 billion, reflecting a cash burn of EUR 223 million for the first half of the year. We typically exclude certain extraordinary items from this cash burn; in this case, positive factors included warrant exercises, the sale of our fee-for-service business, Fidelta, which had a cash impact of EUR 29 million, and favorable currency translation effects totaling about EUR 30 million. This results in a robust cash position of EUR 5 billion at the close of the first half of 2021. Regarding the P&L, more detailed information is available in our H1 report on our website. Our revenues for the first half reached EUR 277 million, primarily due to revenue recognition from filgotinib and our transactions with Gilead. We still have around EUR 2.6 billion in deferred revenue on our balance sheet, which will be recognized over the coming months and years. Operating costs have increased slightly; we have assumed more costs from Gilead regarding filgotinib since our transaction in December. Additionally, Toledo expenses are higher due to five clinical studies we’ve been conducting in the first half. SG&A has risen slightly due to our launch efforts across various European markets. Our net loss came to EUR 55 million, which includes the impact of currency fluctuations and the sale of Fidelta. On the topic of cash burn, which has been a significant point of discussion with our investors lately, I wanted to share how our current cash burn is constructed and where we see it heading. This isn’t formal guidance, as we can’t project that far ahead, but it provides a conceptual overview. We expect 2021 to be our peak cash burn year, with subsequent decreases in future years. Out of the projected EUR 600 million cash burn, around seventy percent is attributed to pure R&D expenses and thirty percent to our Jyseleca obligations, covering commercial forces, medical affairs, and costs associated with our Phase III studies. We anticipate our R&D burn will decline significantly over the next few years to around EUR 350 million, assuming all else remains constant. Jyseleca is expected to approach breakeven, and we believe we can achieve this with a fully loaded cost view by 2024. In peak sales years, we expect Jyseleca to contribute positively to offsetting our cash burn, providing a clearer picture of our cash management strategy moving forward. Finally, looking toward the remainder of 2021, we’re excited about the upcoming developments with our programs, including the CHMP and European Commission's decision regarding ulcerative colitis, which we hope will be positive in the second half of the year. Additionally, we expect to fully recruit for the diversity trial in Crohn's disease and the study for our kidney program, 2737, by year-end. With that, I conclude the presentation and turn it back to Sofie for the Q&A. Thank you.

Sofie Van Gijsel, Investor Relations

Thank you very much, Bart. That concludes the presentation portion of today's webcast. And I would now like to ask the operator to open the lines for Q&A. Thank you, Christina.

Operator, Operator

And your first question comes from Brian Abrahams from RBC Capital Markets.

Brian Abrahams, Analyst

Question on filgotinib, Jyseleca in Europe. I was wondering if you could talk a little bit about the ongoing review there in ulcerative colitis, the role that the MANTA data are playing there. How much you shared with them and continue to share with them and whether you've had any additional discussion with the regulators in Europe on that data set?

Dr. Walid Abi-Saab, CMO

Yes, the review is ongoing, as is the case. We have included the data from the interim analysis that we showed, including all the available data. As you can imagine when there’s an ongoing review, we provide as much up-to-date information to the reviewing agency as possible. The review is progressing according to plan. At this point, I have nothing more to add except that we share the data with them, and we are in discussions with them. I’m going to leave it at that.

Laura Sutcliffe, Analyst

Big picture question, please. You talked about sticking with your core expertise in immuno-inflammation and fibrosis after your strategic review. But is it all about large target populations for Galapagos, or would you consider some of the more niche areas within those therapeutic spaces, either with the assets you have or from a BD perspective?

Onno van de Stolpe, CEO

Let me begin, and then Walid can provide additional insights. We are definitely interested in exploring smaller indications and potentially using them as initial tests for some of our new mechanisms of action. However, we're not focusing solely on the large-scale projects that require extensive trials over a long time. If we can find a condition where we can modify the trial to be conducted in a shorter timeframe with fewer patients, that would certainly be appealing. We could then look to expand once we receive positive results from that initial trial. Walid, would you like to add anything?

Dr. Walid Abi-Saab, CMO

I think you pretty much covered it, Onno. I think the idea was for us to operate from an area that we know well and in a position of strength and know-how, which is the immunology and fibrosis space that we’ve been working in. But again, Galapagos has always been opportunistic in our quest to look for opportunities. From a BD perspective, we will be expanding and evaluating specific maybe niche areas or specialized disease areas within that space. But I think Onno covered this point also very well.

Dane Leone, Analyst

I would like to focus on the main themes of our conversations with investors this year. Can you discuss how you are planning to improve the process of advancing research molecules into development stages? There has been a recent update regarding your salt-inducible kinase program and the TYK2 program, and unfortunately, the investor response has not been favorable, as reflected in the stock movement. What can we anticipate regarding your target selection process that could help build confidence among investors that the investment in these Phase I/II studies is a wise use of time and capital? Specifically, when we review the pipeline you presented at the start of the call, such as the GLPG 555 JAK1 inhibitor, we often receive inquiries about the decision to initiate a Phase I study in osteoarthritis, especially considering the higher risk of venous thromboembolism in that patient group. We receive many questions about how the selection process is conducted, so any insights you could provide would be appreciated.

Bart Filius, COO and President

Well, look, I think it's a fair question. As you've been communicating for the past few months that we've been taking a long and hard look, critical look at the way we've been doing things. We've also been working with some external experts to help us with that. It's premature for us to come up with a finalized theme, but we will be communicating on that. But I can tell you that there are some initial themes that are emerging. I think it's very clear that as we are focusing on novel targets, it's going to be important that we spend much more time better understanding the link of these targets to our diseases and invest more time in derisking these going forward. One of the things that maybe we've been a bit guilty of is that you get excited about what we've been working on and putting more valence on speed and wanting to go quickly to the clinic with some of the molecules that we have. The problem is that when you're working with novel targets, you're already dealing with a high risk. When you compound that with the fact that maybe you're not spending as much time to elucidate the biology and the link to the disease, and then later take on molecules that might have a little bit more liability on their own for the molecule itself, now you're compounding your risk and you're decreasing your likelihood of success. We’re going to take a critical look at the way we do things. You will see that we will advance molecules with better pharmacologic profiles, better margins than what we've done before. You'll also see that we will be doing studies that are more robust, maybe representing patient populations that will be more in line with where we're going to be ending up marketing the drug and probably longer, more robust studies. I think you will see that our risk-taking is going to decrease a bit so that we can afford to continue working on novel therapies, which is truly what we are interested in doing because that’s how we can address the patient’s unmet need and be able to bring something that is meaningful. I’m sorry, I cannot give you a lot more detail because we’re in the midst of it, and we’re not ready yet, but I hope I gave you a flavor a bit as to our thinking and the direction we’re taking.

Rosie Turner, Analyst

So two, please. The TYK2 and 3667 going into UC, just wondering what the rationale for that was. Is this going to be pre-clinical studies that give you confidence in that indication? And then does that mean it's going to overlap with the kind of JAK 162 program you also have running? Are they basically looking at the same indication? And then 4399, I think we've now got confirmation it is 63. I'm just wondering if you're able to give us any more detail in terms of what indication is that from your standpoint.

Onno van de Stolpe, CEO

Let me start with the last one, 4399. This is a SIK3 inhibitor currently in Phase I development. We have not completed our Phase I program yet, but we expect to provide more guidance on this by the end of the year. In preclinical discussions, we mentioned that this molecule appears to be more effective for rheumatologic-type indications rather than IBD, unlike what we observed with SIK2/3. However, it is too early to share more details. We will provide additional information once we complete the Phase I study for this compound. Regarding TYK2, the preclinical data is quite strong, indicating that TYK2 plays a role in ulcerative colitis by signaling to IL-23, which can be inhibited through TYK2 inhibition. As you know, baricitinib from BMS is also being evaluated in the UC study. The data, both preclinical and regarding the IL-23 aspect, suggests that TYK2 has a role in ulcerative colitis. Concerning the JAK1 TYK2 3121 that you mentioned, this molecule targets both JAK1 and TYK2 and is taken orally, releasing locally in the colon. The key question is whether such a molecule can achieve a significant local effect in the colon, especially in ulcerative colitis, without causing significant systemic exposure and thus reducing the potential risks associated with globally inhibiting JAK1 and TYK2. If successful, this could lead to a more favorable risk-benefit profile. Naturally, the concept of local release in the colon and producing better efficacy still needs clinical validation, but it’s feasible. If Phase I data supports the profile we are aiming for, the next step will be to conduct an appropriate Phase II study in ulcerative colitis to evaluate the risk-benefit of this molecule.

Matthew Harrison, Analyst

How do you expect the FDA review of JAK safety to potentially impact filgotinib or the new market from a commercial standpoint? Also, could you provide any updates on the ASH 2 potential licensing and whether we can expect progress this year?

Onno van de Stolpe, CEO

Again, would you like to tackle the first question?

Dr. Walid Abi-Saab, CMO

Yes. So I'll take the first part. What you have seen in Europe also in the past is that the influences will relate to the reaction of local European and national authorities, which Historically hasn’t really acted as the way that local prescribers and authorities have looked at the market.

Bart Filius, COO and President

Let me say then a quick word on BD. It's always difficult to say a lot on BD when these processes are still ongoing. I echo the comments from Onno before that this is clearly a priority for the company to work on BD, which could be licensing or it could be M&A. We're very active on that front, but today, there's nothing to report in terms of any transactions, but clearly, that's a priority for us at the management.

Jason Gerberry, Analyst

So just on your TYK2, I was wondering if you could talk a little bit about how you differentiate from a pharmacologic perspective versus the other TYK2s that are a little bit further ahead in terms of TYK2 selectivity as we start to think about the unmet need that you'd be solving for in psoriasis. Just sort of curious if you can frame how you're seeing this molecule as you think about advancing into a Phase IIb dose-ranging?

Dr. Walid Abi-Saab, CMO

Look, I think in our hands, our 3667 is selective based on all of our assays that we have conducted. In the clinic, we do not see anything that makes us worry about our target activity. It's very difficult to compare to the others because we don't have all the data that they're basing it on. In the end, it doesn't matter because what matters are the clinical data that you can attribute to activity or off-target activity. When we look at the data that's available from the most advanced compound, I would think Ducra is the only one. The others are virtually in the same area where we are in terms of how advanced they are in development. The only data we have is what they've been publishing on the Phase IIb in psoriasis. The Phase III study, I don't think we've gotten a lot of the details. This will become much more transparent once the file has been approved, and the drug has been approved, you can look at the details of it. One of the things that caught our eye is that you can see in the Phase IIb study, they've used doses that are higher than those they've used in Phase III. And in Phase III, they had apparently a bit less efficacy than we have seen what they've seen in Phase IIb in psoriasis. Could that be because you go from a smaller Phase IIb to a larger Phase IIB or could it be that the doses they use in Phase III, which is lower than what you used in Phase IIb, are the reason why it has less efficacy? Without knowing all the details and the rationale for why they didn't pick the higher doses to go into Phase III, it's really very difficult to compare, to be honest with you. The best way we can do this is to conduct a Phase IIb study that's very similar to the Phase IIb that Ducra has conducted, and I think that's going to bring us the closest to being able to see whether we have a competitive profile at the end of that trial. Beyond that, it would be just speculation on our part, to be honest.

Lenny Van Steenhuyse, Analyst

As of course, there’s a lot of focus on the inflammation pipeline. I was wondering if you could provide us sort of a brief overview on the IPF portfolio and timeline going forward, specifically on 4716, which was expected to add into Phase IIB. What's the status on that one? Is there still some dose-finding or still some safety studies ongoing with that compound, and when should we expect another clinical study to commence with this compound?

Bart Filius, COO and President

You're right. We spent a lot of time discussing information. Regarding IPF, there were some significant learnings, and there is some disappointment with ziri. Currently, we are working on how to reduce risks in our programs moving forward without conducting a large Phase II study that would cost millions and take several years to yield answers, especially given the uncertainties involved. As you know, FDC as an endpoint is somewhat risky. To be honest, we are still collecting data from ISABELA, and we have not received everything yet. We are trying to determine if we can identify certain patient populations that may be rapid progressors or find specific signatures to help us select and enrich our population for future studies. We are also using this time to increase our understanding of the mechanism of action of 4716 and kinase inhibitors in IPF and other lung fibrotic diseases. Additionally, we are conducting drug interaction studies, learning from both the Gilead program and our own, especially regarding the significant concomitant applications we need to address before progressing further. All of these preparations are taking place this year. I expect that by early next year, we will have a clearer idea regarding a Phase II study. I am uncertain whether this will lead directly into a Phase IIb study or if it will be more of a mechanistic Phase II study. We are still deliberating this as part of our efforts to balance the risks we wish to take. We aim to find biomarkers that boost our confidence and success before making further investments. We are committed to the IPF area, which has a significant unmet medical need. We have gained a lot of knowledge from the ISABELA program, and we intend to leverage that knowledge to make more informed decisions about the next steps with 4716.

Phil Nadeau, Analyst

Two brief ones for us. First, on Jyseleca. Gilead didn't actually break out the revenue recorded in Europe when reported a couple of weeks ago. I was curious if you could let us know what was recorded in Q2 for Jyseleca revenue in the EU? And then second, can you remind us on 4399, how the potency of its target engagement for 63 compares to the target engagement of 3970 for SIK2/3. Is it significantly more potent or is it more on parity?

Bart Filius, COO and President

And let me quickly answer the question on the revenues. It's correct, Phil. We will be booking sales as of July, and we will be reporting sales ourselves as of the third quarter. Gilead is not detailing those sales levels in their reporting. But once we do the Q3 updates, we'll make sure to give you a full perspective on sales of the compounds also on a year-to-date basis. On 4399, I give that to Walid.

Dr. Walid Abi-Saab, CMO

So on 4399, let me ask Pete to comment specifically on the potency. I believe it's in the same ballpark as 3970, but that's not the key point. The key point is whether the margin that we can inhibit the SIK3 enzyme will be identified. We will not know until we finish Phase I. We expect a good coverage of the biomarker in Phase I, but that’s an ongoing study. So give us a little bit of time to report out on those.

Wimal Kapadia, Analyst

Can I actually ask about 2737, please, for PKD. I know the asset was previously investigated in cystic fibrosis, but didn't show any significant improvement in pulmonary function. I'm curious what gives you the confidence to start the Phase II trial? Just to get a sense of your conviction will be great, given some of your earlier comments on risk appetite within drug development.

Dr. Walid Abi-Saab, CMO

Yes. So I'll start, and if Pete wants to chime in based on the animal data, but this is a compound that, as you know, we've known for some time, and we were working on it in cystic fibrosis. Through the action on the CFTR channel, we were able to surmise that it's going to work in this indication. Our preclinical data were quite solid, supporting this, both on its own and using also tolvaptan as an active control, but also in addition to, and based on those, we elected to do the study. This is a long disease. The studies are long. There's enormous unmet medical need, and this is our first foray into that space. There is an element of learning involved there, but I think the pre-clinical data are quite supportive. Pete, do you want to add some more color to the preclinical data?

Unidentified Company Representative, Company Representative

So 2737 is a CFTR blocker. So the disease we are investigating, ADPKD, is a disease where processes go wrong in the kidney and swell. We expect a compound to block the swelling of the system to completely break one of those channels that make those grow. In that sense, we've seen clear target engagement in the CF program, and we believe that it's going to be sufficient to engage the target in the kidney in those ADPKD patients. We've tested in multiple in vitro systems and in vivo systems. We're always coming up with an efficacy close to the only approved drug currently. That's where we stand today.

Sofie Van Gijsel, Investor Relations

Thank you. So that’s all we have time for on today’s call. Of course, please feel free to reach out to the IR team if you have any further questions, we’re happy to help. Our next financial results call will be the Q3 2021 results on November 4. Thank you all for participating today, and have a great day. Bye.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.