Galapagos N.V. Q4 FY2025 earnings call

Galapagos had a transformative 2025, focusing on turning from cell therapy, having a new strategic direction, and a strong cash position of approx. EUR 3 billion at year-end. Assembled a new management team and evolved board composition. Actively evaluating business development opportunities, with collaboration with Gilead as a key advantage. Provided update on legacy R&D asset TYK2/GLPG3667 with top line Phase II results in dermatomyositis and SLE, evaluating strategic options including partnerships. CFO reviewed 2025 financial results with operating profit from continuing operations of EUR 295.1 million vs EUR 188.3 million loss in 2024, impacted by cell therapy wind down and strategic reorganization expenses. Mentioned cash and financial investments, and 2026 guidance including cell therapy wind down expected completion by end of Q3 2026, cash outflows, restructuring cash impact, and cash flow expectations.

Expect cell therapy wind down to be substantially completed by end of Q3 2026. Expect operating cash outflow of up to EUR 50 million in Q1 2026 and one-time restructuring cash impact of EUR 125 million - EUR 175 million in 2026 (reduced from prior range). Anticipate cash costs of approx. EUR 35 million - EUR 40 million for final implementation of 2025 restructuring. Costs related to TYK2 program up to EUR 40 million in 2026. Expect cash flow neutral to positive by end of 2026. Anticipate cash, cash equivalents and financial investments of approx. EUR 2.775 billion - EUR 2.850 billion at Dec 31, 2026 excluding business development activities or currency fluctuations.

Q: Just as you continue to progress on business development, just kind of curious if anything has evolved in terms of what you might be looking for? And then is there any deadline or any sort of change that we might expect based on the Gilead agreement if you're not able to identify assets to bring in by a certain time point?

A: Strategy focused on derisked late-stage clinical assets in i&i and oncology space, continuing to see good opportunity. No set deadline for specific deal, but OLCA expires in about 3 years and change, focused on getting transformative transaction done ahead of that.

Q: Our question is on GLPG3667. In the past, you've suggested that the bar to moving that forward internally and investing in it further would be rather high. We're curious to get an update on your thoughts there. I know you said you're pursuing all possible avenues of moving that forward. But how does management weigh developing that internally and investing in it versus out-licensing?

A: High bar for any asset, including GLPG3667. Still early, data still coming in, in process of talking to partners, as don't have full infrastructure to take into Phase III, working with partners can be more capital efficient and create more value.

Q: Can you speak to your current view on capital allocation, specifically as it relates to the pool of capital you aim to put forth for acquisitions for BD? And how much you need to reserve for operating expenses going forward and how the Gilead partnership informs deal sizing and optionality on that front?

A: Have EUR 3 billion in capital, working with Gilead can go beyond that as they may contribute in deal terms and development spend.

Q: Do you maybe expect that to lower further in the future? Or do you see any possibility in that?

A: Not providing future guidance, but updated one-time restructuring costs range from EUR 150 million - EUR 200 million to EUR 125 million - EUR 175 million, and will provide updated costs on future calls.

Q: I was wondering and coming back to the capital allocation and the decision you've been taking especially regarding the cash and the cash allocation, the move from euro to dollar, considering the fact that you didn't gain as much as financial income as last year. And so I was questioning about what was the rationale on the back of that? What was the exact timing for us to be clear? And shall we consider the breakup of, let's say, 2/3 U.S., 1/3 euro as being a picture for your next investment portfolio or for the picture we should have from your investment income in the near future?

A: Mid last year started transitioning more euros to dollars based on BD activity and cost base moving towards U.S. Providing range for cash, cash equivalents and financial investments at year end, and expect to continue transitioning to U.S. dollars as year progresses, still keeping portion in euros. Seeing higher earnings rates on U.S. dollars as rates in U.S. are higher than in euros.

Q: I was wondering if you have or if you can communicate any expectation regarding your -- the breakeven in terms of operating income?

A: Indicated expect to be cash flow neutral to positive by year-end, but hard to predict exact quarter for costs, but expect cash flow neutral and positive by year-end.