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Galapagos NV (NASDAQ:GLPG)
Q4 2019 Earnings Call
Feb 21, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Galapagos Full Year 2019 Results Webcast and Conference Call. At this time, I would like to turn the conference over to Elizabeth Goodwin. Please go ahead.

Elizabeth Goodwin -- Vice President of Investor Relations

Thank you and welcome all to the audio webcast of Galapagos' full year 2019 results. I'm Elizabeth Goodwin, Investor Relations. This recorded webcast will be accessible via the Galapagos website home page and will be available for replay later today. So that your questions can be included, we request that you call in to one of the telephone numbers given in last night's press release. Here's the one for Belgium, 322-404-0659 and the code is 8371984.

I'd 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; and Bart Filius, COO and CFO. Onno will go through the operational highlights and Bart will explain the financial results, and we'll end with the expected future news flow. You'll see a PowerPoint presentation on-screen. We estimate that this presentation will take no more than about 15 minutes and then we'll open up the call to a Q&A session, including Bart and Onno, who will be joined by Walid Abi-Saab, CMO; Piet Wigerinck, CSO; and Michele Manto, Chief Commercial Officer.

And with that, I would now like to hand over to Onno. Please go ahead.

Onno van de Stolpe -- Chief Executive Officer

Thank you, Elizabeth. Good morning, good afternoon. What a fantastic year we have had. Our anniversary year, 20 years, has been a hallmark year for the Company. We saw fantastic, great clinical progress in our programs, exciting research results and a substantial growth of the organization, with the real hallmark moment of the year was the announcement of the strategic alliance with Gilead for a 10-year period.

You see on the slides the data on that alliance. For us, it's very important that we now have a 10-year independent future as a company where we can build out into a global leader in this sector. Gilead obtained an option to licensing programs after Phase 2b for the whole world, except for Europe. In Europe, we will build our own commercial organization. They paid us an upfront of almost $4 billion. They paid $1.5 billion as an equity investments to get up to 25% of stock in Galapagos. And we made a very nice option arrangement where, when they are in-licensing the program, they pay us an milestone and they pay us royalties between 20% and 24%.

This deal is unique in the life sciences and it's really a science-related deal. We are going -- jointly going to work on new mode of actions that we're going to move to the clinic as fast as possible. Galapagos is in the lead in any therapeutic area that we choose up to the end of Phase 2, after which Gilead has the option to opt-in and after that, it's joint program. We are very, very excited about it. We believe this will greatly accelerate our programs and help to build pipeline for Gilead that really for us to build first European organization and in the end a global organization to market our new mode of actions.

So, if you look at the pipeline development, we saw really good progress in all the programs. Of course, with filgotinib, we saw the FINCH 1 and 3 data in rheumatoid arthritis, which really supports the potential best-in-class profile of the filgotinib molecule based on the FINCH data we submitted or Gilead submitted for approval in Europe, US and Japan. And so, in the US and Europe, we expect filgotinib to be entered into the market after this summer. We also initiated with Gilead the Phase 3 program in psoriatic arthritis, the PENGUIN program.

But we also saw a lot of other progress in other programs. In osteoarthritis, the ROCCELLA trial was fully recruited and we are expecting readout in the second half of this year. Same with the NOVESA 1690 trial in systemic sclerosis. We are expecting the readout in the second half of this year. This program is the second indication for 1690 after IPF, the program that is ongoing, so really expanding the opportunity for this molecule. And in IPF, we saw the second molecule in Phase 2 1205 going into PINTA trial, of which we're also expecting the results in the second half.

ISABELA, the Phase 3 program in 1690, is going extremely well. The recruitment at the end of this year, we had over 600 patients recruited already and we are on track to reach full recruitment in near the end of this year. And then our Toledo program, the program with the code name TOLEDO, of which we will give more information after this summer, we are moving forward with a number of different molecules. And actually, the first two molecules hit the clinic last year, 3312, 3970. We're very excited about that program. And of course, there's much more behind this. We're seeing a very nice progression in the research activities, and you can expect significant news flow in 2020.

So filgotinib, if you look at the pipeline now, clearly has reached the point of approval, but many different disease indications are being tested. Look at IPF and fibrosis, where we have multiple programs in research, Phase 1, Phase 2. In osteoarthritis, the 1972 program, we're waiting for the outcome, but we also initiated research activities there that hopefully is going to bring multiple molecules for OA also into the clinic. TOLEDO already discussed it in a number of different programs, and then in the research -- in various different research areas, we have over 30 programs. So very exciting pipeline that we're extremely proud about.

If we go to the next slide, look at our commercial organization build up. Last year we have made a very good progress in building the commercial organization in Holland and Belgium, and France, Italy and Spain, and we are completing that commercial organization in the coming months to be prepared for the launch of filgotinib in rheumatoid arthritis. So that is our first step into commercialization. Then when filgotinib is hopefully getting approved in ulcerative colitis in '21, we will market filgotinib for that area in the Benelux as well as in England and the UK and Germany. So we do a step-wise approach in building the commercial organization and that should then be followed up, hopefully, with 1690 IPF where we are going to market all over Europe, so that will be beyond 2022.

So that is how we are moving forward in the commercial activities. And with that, I would like to hand it over to Bart to talk about the financials. Bart?

Bart Filius -- Chief Operating Officer and Chief Financial Officer

Thank you, Onno, and good morning, everyone in the US, good afternoon for those listening in here in Europe. Pleasure to give some color to the financials as well as give some perspective on what the year 2020 is going to bring us both in terms of numbers and in terms of scientific activities.

As you can see here on the first slide, let's start off with what we believe still is the most important KPI for Galapagos, which is the cash position. And we've ended the year, as you have seen, with a very strong cash position of EUR5.8 billion. It's called cash and current financial investments, so some of these are invested in short-term money market funds, hence qualification current financial investments here. Some smaller items that are, as usual, excluded from the cash burn definition itself are the cash proceeds from warrant exercises and some currency translation effects.

But then, we get into the more meaningful elements that have given rise to the increase in the cash balance during 2019. First of all, as Onno was pointing out, the investments by Gilead in terms of equity in the Company, these are all euro denominated, so EUR1.3 billion. And then the actual cash flow consist of two buckets. On one hand, there is the cash flow from the upfronts from Gilead, that's a net of EUR3.5 billion. And then the remainder and for transparency purposes, we've taken a separation of the two as I've done also in the third quarter reporting because our guidance was focusing on the cash burn excluding the income from the Gilead collaboration. And we've landed that number at EUR334 million, within the range that we were guiding for throughout the year of EUR320 million to EUR340 million. So a very healthy balance sheet position that we have to invest in future years into our R&D platform.

I would understand that the accounting of the transaction is a bit complex, and I've explained and clarified some of this as part of the Q3 results. But let me reiterate a couple of points there as well. And let's first start with the upfront -- the allocation of the upfront transaction price. So we started off with about $4 billion, in euros translated to EUR3.5 billion. There is some accounting for the equity investment that Gilead has put into Galapagos, most notably the premium of EUR85 million on the shares, which would also go into our deferred income total. And then on the other hand, there was a set of warrants that we've given as part of this transaction to Gilead, one, to get to the 25% level and, the second one, to get to the 29.9% level, and that is basically resulting in a liability of about EUR60 million, which is again a decrease of the total purchase price that we need to allocate.

So that gives us EUR3.6 billion of purchase price to be allocated at three key components. They are in, first of all in terms of immediate recognition, the license that Gilead has taken on 1690 is there for EUR667 million. And then the two others are actually going to be recognized over the next years. First of all filgotinib. For filgotinib, we have allocated EUR640 million and this will be recognized as long as the, let's say, development plan of filgotinib is still active, so as long as we are still involved in participating in those expenses. And we estimate this to be for a period of four to five years, given all the other indications that we're working on with filgotinib.

So this recognition will be over the next years in function of the completion of that development program and then the remainder, about EUR2.3 billion, is allocated to the rest of our platform, the rest of our R&D activities and we will recognize this linearly over the next 10 years. So you would expect every year to find EUR230 million of this in our top line in our P&L numbers. Overall, at this moment, we have about EUR3 billion of deferred income on our balance sheets, but the EUR3 billion is still to be recognized over the next 10-years.

Then, let me get to the full year results themselves. And here as well, I've broken out both the results as reported on the far right and in orange the impact of the Gilead collaboration. And I'll do a deep dive on that orange part in a second. But as reported, we are reporting a profit this year with EUR150 million of net results and we are reporting a top line of close to EUR900 million.

If we do a deep dive actually on the next slide on the orange column, you see the various numbers that are the result of the Gilead collaboration. And first of all, in revenues, the big impact there is the recognition, as I just pointed out, on 1690, EUR667 million that we recognized in 2019 in one shot. Then there is some movements on the remainder. On filgotinib, it's actually a negative, which might sound a little bit awkward. But this is because we are combining the 2015 agreement that we had with Gilead on filgotinib with the current agreements on filgotinib and we are reassessing the overall completion, and that's led to some derecognition of previous upfront and milestones from the 2015 agreement. So that's a negative, the one-time negative in 2019. And as I was just pointing out, we will be recognizing filgotinib in deferred income over the next four to five years. And then the platform itself for the four months that we had the deal closed, we've recognized EUR81 million on the platform.

Operating expenses, there is a smaller adjustment there. But the two key components are, on one hand, that we're sharing now cost for 1690 50:50. So that is actually a positive of EUR18 million. On the other hand, for filgotinib, we went from 20% to 50% of cost share, and that's in the negative of EUR33 million. Bonuses and fees has also had a negative effect of total of EUR23 million on the operating expenses.

And then the last is on financial results. And this is all related to derivative accounting and FX accounting, which is, to a large extent, non-cash. And I already reported that also back in the Q3 webcast. We are recognizing derivative accounting negative of EUR140 million connected to the evolution of the share price of Galapagos between the signing of the deal and the closing of the deal. And the other EUR40 million are recognition of the evolution of the Galapagos share price between the approval of the warrants at the AGM in October and the actual exercise that Gilead has done in the month of November. So it's all accounting non-cash related, but this is the way to appropriately account for both those instruments and are both the result of an increase of the Galapagos per share price.

Then on FX, EUR58 million. Of this, EUR35 million is realized FX and the remainder is non-realized on the dollar position that we maintain after the Gilead collaboration. And the realized FX basically represents the slight strengthening. It's basically $1.12 to EUR1.11 [Phonetic] of the dollar on the euro between signing and closing of the deal over summer and was already reported in our nine months data. So overall, we see a lot of impact from the Gilead collaboration. I'm happy to take any questions on this if that's useful either during the webcast or later on as well.

Then, let me move to the operating cash burn look out for 2020. We are guiding for a cash burn between EUR420 million and EUR450 million. This basically is an increase compared to the EUR334 million that I was mentioning in 2019. But it also includes an estimated milestone of $200 million, or I should say milestones because it's multiple estimated $200 million of milestones upon approval in RA for filgotinib in the US, Europe and Japan. So actually the underlying cash burn is increasing more than just $100 million [Phonetic] compared to the 2019 number that I just presented.

And there is really three key components to highlight here. Two are connected to research and development, and one is connected to the commercial launch. Research and development costs we anticipate for the year 2020 to be increasing between 35% and 40% on the P&L basis, which is actually a similar percentage as we've done in 2019 vis-a-vis 2018 as well. And therein, there is two elements. One is mechanical, that's the filgotinib cost share. It's going up from 20% to 50%. So as a result of that, obviously, we are increasing our R&D spend on filgotinib. And the other one is to investment in or two additional investments, I should say in discovery and early developments. And finally, the third bucket of -- that's driving the increase in cash burn is the preparation for the commercial launch in SG&A expenses, which is, obviously, ramping up now as we are getting ourselves ready for launch in EU5 and the Benelux.

Then if I go to the next slide, I'll pass on the financials and I'll move to the more qualitative elements of 2020 and the thing to highlight and Onno mentioned that already is the significant number of data readouts that we're going to be having during 2020. We're actually expecting no less than five patients datasets during the year to start off with ulcerative colitis filgotinib in Phase 3, which will come in the second quarter. And then in the second half of this year, we anticipate the results of the PINTA study, PINTA study, the ROCCELLA study and finally, also our first patient datasets on TOLEDO. The activity level in 2020 is increasing significantly. We are anticipating to be executing over 80 clinical trials in 2020 on more than 10 different molecules. So, this includes Phase 1, Phase 2, Phase 3 plus supporting clinical trials to all of the molecules that we have in our rich pipeline.

And then finally, certainly least but not -- last but not least, expected approvals for filgotinib in RA in US, Europe and Japan will make this also a transformational year again 2020 for Galapagos. Let me close with that and open the floor to questions.

Elizabeth Goodwin -- Vice President of Investor Relations

Thank you very much, Bart. That does conclude the presentation part. We are going to open up the line now to callers. We don't manage the queue at Galapagos. So I do ask that everyone limit themselves to one question to give everyone an opportunity to ask. So with that, Elaine, our operator, can explain what the procedure is to pose a question over the phone. Go ahead, Elaine.

Questions and Answers:

Operator

Thank you, Elizabeth. [Operator Instructions] We will take our first question from Dane Leone from Raymond James. Please go ahead.

Dane Leone -- Raymond James -- Analyst

Hi, thank you very much and congrats on a stellar year. I just wanted to get some more color in terms of some of the readouts that were coming up. Could you just provide a bit more around what depth and detail we would expect from the ulcerative colitis program as it reads out? And I guess I'll just leave one follow-up. Can you provide a little bit more out of what we would see around the Toledo program this year. You said you will give more color in the second half of the year, but I guess what are you hoping to entail or what type of unveil would that actually look like? Thank you.

Walid Abi-Saab -- Chief Medical Officer

Hi, Dane. This is Walid. I will take your question on filgotinib. So, as usual we and Gilead have been or actually Gilead has been leading this. The way that we disclose top line on our Phase 3 trials as to give the high level picture for efficacy, but also the key safety elements. And I think that's what we should be expecting. And then the details of this will be shared at an upcoming scientific meeting.

And with that, I'll turn over to Piet.

Piet Wigerinck -- Chief Scientific Officer

Thank you, Walid. Hey, Dane, thanks for the questions. So for the Toledo program, 2020 is an important year. We have an extremely ambitious program to run. So -- and that will include the selection of next PCCs and typically we plan for more than one, the start of Phase 1 for 49 [Phonetic]. And then we plan as well to generic patients data, so we have two assets there running, both 3312 and 3970. And when we present or around the moment when we present the first patient data, we as well plan to disclose the target to the public. That's what we have on the agenda for the TOLEDO this year. Thank you.

Dane Leone -- Raymond James -- Analyst

Thank you.

Operator

We will take our next question from Rushee Jolly from Bernstein. Please go ahead.

Rushee Jolly -- Bernstein -- Analyst

Hi. Rushee Jolly, Bernstein. And so, on filgo, we kind of see the UC data in 2Q and Crohn's next year. And so, would you be able to talk through what you consider your internal bar for success to be in each indication, but also how you think of potential positioning with respect to the TNF and also Entyvio? Thanks.

Walid Abi-Saab -- Chief Medical Officer

I don't know if, Michele, you want to take the positioning part and I'll take on the first part.

Michele Manto -- Chief Commercial Officer

Yes, that's OK, Walid.

Walid Abi-Saab -- Chief Medical Officer

Yes. I mean, I think for us, as you know, we do not have any data with filgotinib in UC. However, we have data in Crohn's but also we have seen how other JAK1s have performed in UC and also how they performed in other inflammatory indications like RA, PsA, and AS. And if you look at the totality of the data that we have so far from Phase 2 and also from Phase 3, with filgotinib you can expect what level of efficacy you would see that would be on top of the range when it comes to the JAKs that are being tested in that space and safety to be best-in-class, which is what we have seen so far. So we expect that those would be the type of data that we will see in UC by sort of taking this on performance and other indications, particularly also with Crohn's [Phonetic] we have very good data with FITZROY.

And with that, I'll turn it over to Michele for positioning.

Michele Manto -- Chief Commercial Officer

Yes. So, thank you for the question. So in UC, there is still a high unmet need. So we have one out of eight patients that are already treated with advanced treatment, so there is clear need there. And as Walid, indicators so there are still questions to be addressed with the readouts. But with the profile, we can see that some of these unmet needs can be addressed with a drug like the potential of filgotinib. So, on the durability of response, the safety profile, the quick onset of action, all needs that the patient have in UC. And we are really comfortable that we'll have a good -- very good opportunity there.

Rushee Jolly -- Bernstein -- Analyst

Thank you very much.

Operator

We will now move to Christopher Marai from Nomura Instinet. Please go ahead.

Christopher Marai -- Nomura Instinet -- Analyst

Hi, thanks for the question. Just with respect to your IPF programs, could you elaborate on the type of update we might get from the futility analysis for 1690 in IPF? And what was the efficacy based only or we also get some sense of safety? And then just remind us the duration of exposure that patients will have to 1690 at the time of the futility analysis? Like what duration they've been exposed to the drug?

And then secondarily, with respect to your PINTA program in IPF, how does this asset compare to other GPR84 programs out there? And then how would you look at potential combinations with 1690 and/or running one program versus another based on success, would you continue both programs? Thank you.

Walid Abi-Saab -- Chief Medical Officer

All right, thanks, Chris. So let me start on the first part of the question. So, with the futility, actually what we will be sharing is just simply whether it's a go or a no go. Just to remind you, this program is a program with 1,500 patients where the primary endpoint is after 52 weeks of treatment. However, patients will continue on whatever drug they were randomized to, placebo or active, until the last patient finishes the 52 weeks.

By the time we will have the cut-off for the futility, I think we have about a third of the patients who would have been exposed to 52 weeks. And probably, the majority, if not all the patients, would have been recruited in the trial. It's hard for me to guess exactly the duration of exposure. But you can look at when we started, which was earlier this year -- earlier last year, I should say, we're in 2020 now, and kind of guess a little bit of where we would be.

Also just from a safety perspective, because I think you asked a bit of a question on that, on a regular basis, we've been looking at a safety us on a blinded way but the external data monitoring committee in an unblinded matter. And on a regular basis, we've been getting, of course, the thumbs-up, keep going the way it is. And we don't have any safety signal.

So I think, I hope I answered all of your pieces around the ISABELA program, and I'll let Piet tackle the question on PINTA.

Piet Wigerinck -- Chief Scientific Officer

Okay, thanks for the question and allowing me to shed some light on 1205. 1205 is our small molecule GPR84 antagonist, which we developed indeed in Phase 2 for IPF. You asked to compare to other GPR84. So I assume you want to compare GLPG1205 with the Prometic compound PBI-4050, I believe. We tried our best and it's virtually impossible to -- on a scientific level compared with two other quite different agents. So 1205 is a nanomolar antagonist of GPR84.

The Prometic is a micromolar compound acting on GPR84, that's quite clear whether it's an antagonist or an agonist, we could not figure out in our assays. Our assays are not fitted to have an clear sensitive measurement on agonist versus antagonist. And it's also a dual compound. It has dual mechanism of action. So it's a very hard and frustrating also for us but also for you to understand that to compare those two compounds at face value, because it is not a single assay where both show in the result. So that is for the competitors.

Combining with 1690 is a great question. So, as you know, we have a plan to really play big in IPF. We really believe patients deserve much better treatment than the one that currently are there. And probably, we'll need to build up cocktails with one component after the other. So indeed it's in our mind if the data 1205 are as good as we hope that at a certain stage we can go and combine that with 1690. But there is no actual study in the planning currently, because we probably, first we'll await the Phase 3 data of 1690 before we start on a combination study. Having said that, as soon as we have the data and 1205 is good, we will do whatever is needed and best to bring to the market and patients as quickly as we can. Thank you.

Christopher Marai -- Nomura Instinet -- Analyst

Thank you.

Operator

We'll take our next question from James Quigley from JPMorgan.

James Quigley -- JPMorgan -- Analyst

Thanks for taking my questions. Just one for Michele really. On the commercial build out of the teams, how are you progressing and how are you leveraging the Gilead sales force and the Gilead influence? And is there anything that you haven't got or that you need to sort of -- to progress and to move forward in order to be competitive versus AbbVie? And I also love to get your view on the class black box warning and how this could affect the uptake across the inflammatory conditions? Thank you.

Michele Manto -- Chief Commercial Officer

Yes. Hi. Thank you for the question. That's the first point from the -- on the commercial buildup. On that, I'd say, I'm really pleased with the progression that we're having on the buildup on our European commercial organization. And we are really attracting and keep attracting strong talent with deep expertise in the field in RA, in inflammation in the countries at the international level. So with knowledge of the scientific community, the payers environment, the competitive arena and that's progressing very well, so that we'll be ready for the approval and then the reimbursement processes, the registration, the pre-launch activities.

And we are doing that, of course, as Galapagos, because we want to build our commercial footprint as Onno illustrated at the beginning. And we are doing together with Gilead, which is also a big opportunity to put resources together also the different type of companies we are as a biotech and a very established strong organization as Gilead is in the country, so that there's a lot of synergies and common learnings we can have in this process.

On your question about competition. Well, I know that competition very well. I've been in this field of immunology for more than 10 years. And of course, it's something that we take seriously. At the same time, we see two things. There is one and still big unmet need also in rheumatoid arthritis, still very few patients, 20%, 30% of the patients achieved a real sustained remission. So there is need there for newer therapies, better therapies and I would say, also newer JAKs in that sense. So the space is there. And at the same time, also we want to play smart. We are building, I'd say, a strong commercial and medical infrastructure where we want to leverage the strong data we have on filgotinib, the potential best-in-class we have there and play it smart in the payer environment, play it with the patient who can benefit most and take that competitive edge.

Does that answer your question?

James Quigley -- JPMorgan -- Analyst

It does. Thank you very much.

Michele Manto -- Chief Commercial Officer

Welcome.

Operator

We will now move to our next question from Adam Walsh from Stifel. Please go ahead.

Adam Walsh -- Stifel -- Analyst

Hey, thanks for taking my questions. Let me add my congrats on all the success over the past year. On 1690, real quick, the Phase 2 in systemic sclerosis, can you just remind us what we'll be looking for when those data mature? And whether or not you think there's any read-through between any of the efficacy data points in that trial and what we might hope to see in IPF? Thank you.

Walid Abi-Saab -- Chief Medical Officer

Hey, Adam, it's Walid. Thank you for the question. The -- just to kind of give a little bit of background. This is a small exploratory Phase 2 study in 30 patients in systemic sclerosis. It will be six months in duration double-blind placebo-controlled. We will have a 2:1 randomization on drug versus placebo. So we expect 20 patients on drug and 10 patients on placebo.

The primary endpoint will be the modified Rodnan skin score. We will also look at other endpoints that are commonly used in systemic sclerosis. We will also look at FVC but we don't expect there to be a lot of changes because we didn't specifically select patients who have SSc-ILD. So we didn't select patients who have interstitial lung disease [Technical Issues] in systemic sclerosis. And since we were looking at those patients, we measured FVC. So from a read-through perspective, I think there will be -- literally, I -- my expectations are very low because, again, it's a -- we're dealing with a read-through for IPF because this is a small study to give us an initial signal or foray into the systemic sclerosis space.

If you've been following that space, it's really a very difficult disease. It's heterogeneous in terms of progression of the disease, but also the endpoint, which is the modified Rodnan score, is notoriously variable. And also, it goes one way in the early part of the disease and another way in the later part of the disease. So you have to be very careful when you select your patients.

So all of this is to tell you that this is our initial foray exploration into that space. We would -- obviously, if we have positive data, we would be very excited that we'll determine the next step. But if the data are not positive from the perspective of a p-value that's being hit, because it's an exploratory, it will still guide us to see whether we want to continue looking in this patient population and certain sub-populations in that group and things of that sort going forward.

I hope I addressed your comments.

Adam Walsh -- Stifel -- Analyst

You did. Thank you.

Walid Abi-Saab -- Chief Medical Officer

Thanks, Adam.

Operator

We will take our next question from Emily Field from Barclays.

Emily Field -- Barclays -- Analyst

Hi. Thank you. Yes. I was just wondering, which of the readouts expected in 2020 could lead to an opt-in decision from Gilead? I'm assuming that 1205 could result in that decision. And then also, would the PoC in 3312 qualify? And also just kind of on that same topic, do you expect to continue developing 3312 into commercialization, or while the sign [Phonetic] is that more be kind of used to inform the development of the rest of the Toledo program? Thank you.

Bart Filius -- Chief Operating Officer and Chief Financial Officer

Hi. This is -- Hi, Emily. This is Bart speaking. Let me give you a perspective on the opt-in of these five and then I'll have -- ask Piet to comment on the progress on 3312 and whether we take that forward onto commercialization. So in the five readouts we have filgotinib, which obviously is already part of the Gilead license. We have also 1690, so the NOVESA trial, and it's a license by molecule, so that's also already part of the alliance. And then the others, the one that is definitely a triggering clinical trial, as we call it, is 1972, the OA program, so that will lead to a decision by Gilead whether they opt-in or not.

On PINTA, it's not strictly speaking a triggering clinical trial, but it might still lead to an opt-in. We'll see what that data set will bring. And finally, the Toledo program will definitely not be an opt-in moment that will be later on. As usual, the contract defines the opt-in to be after a Phase 2b program and we're not there yet with the Toledo program.

So Piet, maybe you can comment on 3312 and the path forward there.

Piet Wigerinck -- Chief Scientific Officer

Yes. Thank you, Bart. So 3312, I always make the comparison to filgotinib. At the moment we saw filgotinib as the best drug we ever saw in our models of RA. So 3312 is the best drug we've ever seen in our models for IBD. So in that sense, I'm here with the hopeful guide that the -- hopes that this drug can make into market, because it's simply the best. So whether we will get there, it depends on many clinical studies we still need to do, but good drugs typically make sure that they get to the market. So we're hopeful that we can do that. Thank you.

Emily Field -- Barclays -- Analyst

Thank you.

Operator

We will take our next question from Ellie Merle from Cantor Fitzgerald.

Ellie Merle -- Cantor Fitzgerald -- Analyst

Hey, guys. Thanks so much for taking my question. Just on ulcerative colitis, curious about how you're thinking about this phase compared to the S1P1 class. [Indecipherable] positive Phase 2 readouts this year, what do you think are the key advantages or key points of differentiation for JAKs versus S1P given the potential for both being orals in the space? Thanks.

Walid Abi-Saab -- Chief Medical Officer

It's Walid. You broke up initially. I think I got the gist of your question, comparing the JAKs to [Phonetic] S1Ps. I mean, I think, the S1P data that I have seen so far, there are a couple of things that actually stood out for us. One is the speed of onset. I think, also by virtue of their mechanism of action, you would expect that, that it would be a bit slower. So I would imagine that there would be a potential differentiation for the JAKs. We've seen the JAKs work quite rapidly and actually at the very first time what they look at the changes in symptoms, you can see an improvement in these patients. So I would imagine that would be a positive differentiating factor.

The second part and we'll have to see is, what is the liability -- the cardiovascular liability with S1Ps. I know, historically, they've been plagued with questions about slowing heart rate. The distribution of these receptors in the heart are well documented. And it remains to be seen in larger trials, whether we do still see some slowing of the heart rate and potential exclusion of certain portion of the population. And what would be the safety longer term, will have to be seen. It's a bit too early to really comment on that part.

Ellie Merle -- Cantor Fitzgerald -- Analyst

Thanks.

Operator

We will now move to Lenny Van Steenhuyse from KBC Securities.

Lenny Van Steenhuyse -- KBC Securities -- Analyst

Hi. And thanks for taking my question. Some weeks ago we saw the first equity investment in a third-party with Fibrocor. I was wondering if we can expect these smaller participations as now a fundamental part of the future strategy looking for external innovation and if we can expect similar deals going forward in 2020? Thank you.

Onno van de Stolpe -- Chief Executive Officer

Yes, I'll take this question. This is Onno. Yes, clearly, we have said when we did the deal with Gilead that acquisitions are going to be a strategy going forward. So we are looking at opportunities out there. But, clearly, we will take our time, look how it fits within our organization and in our pipeline. There will be no major acquisitions. There will be bolt-on acquisitions to what we currently have. We have a great pipeline. We have a great R&D organization. So it's not that we have a lack of programs, but in the areas where we are active, we're always looking at additional molecules that could complement our own efforts to build a stronger franchise. So we're always looking to the outside world and see if there are no mode of actions there that could complement our own efforts and the Fibrocor deal was clearly in that direction. And you might -- and you can expect more acquisitions going forward.

Lenny Van Steenhuyse -- KBC Securities -- Analyst

Okay. Thank you.

Operator

We will take our next question from Brian Abrahams from RBC Capital Markets.

Brian Abrahams -- RBC Capital Markets -- Analyst

Hey, guys. Thanks so much for taking my questions. Two quick ones on TOLEDO. I was wondering if you could talk about any additional insights on the activity and therapeutic window that you've gained from the ongoing pre-clinical and healthy volunteer work that you're doing? And then on filgotinib, just curious you're level in -- of confidence in the potential for priority review based on the voucher and when you'd expect to hear back from the FDA on potential filings [Indecipherable]? Thanks.

Piet Wigerinck -- Chief Scientific Officer

Piet here. So on the TOLEDO, we typically bring forward drugs we believe are safe as far as we typically comment on the terms of safety margins with any of our novel drugs. And that's where I would like to keep it with the TOLEDO as well. Thank you.

Walid Abi-Saab -- Chief Medical Officer

So the question on TOLEDO, I think we can confirm that indeed the FDA has accepted the filing for filgotinib and classified it as a priority review with the goal date in the second half of this year.

Brian Abrahams -- RBC Capital Markets -- Analyst

Great. Thanks so much.

Walid Abi-Saab -- Chief Medical Officer

Thanks.

Operator

We will now move to Patrick Trucchio from Berenberg Capital Markets.

Patrick Trucchio -- Berenberg Capital Markets -- Analyst

Thanks. Good morning and good afternoon. My question is regarding the more than 80 clinical trials in 2020. Can you frame for us what proportion of these trials are evaluating novel mechanisms and what proportion are improving on existing mechanisms?

And then secondly, with the early stage pipeline broadening substantially in 2020, how many Phase 2 and 3 clinical trials could Galapagos have up and running in two or three years from now? Thanks.

Walid Abi-Saab -- Chief Medical Officer

I guess we've been discussing who needs to answer this question, because it spans a bunch of things. I think we can say that those are actually -- when we say 80 clinical trials, it encompasses everything. So the trials that we have ongoing that you're familiar with Phase 3 and Phase 2 plus a lot of the supporting Phase 1 studies, the drug-drug interactions and so on and so forth. But we mentioned this number to give a scope of the amount of work and how the pipeline is actually progressing. I don't -- I'm not sure what you mean by improving on molecules that we have.

I think Galapagos has been consistently going after sort of novel mechanism of action with all these programs that we have and we will be seeing over the next two to three years, I would say, upwards of maybe 20 different Phase 2 trials and novel indications. I think we've talked also about TOLEDO by itself evaluating about 10-plus indications that we're going to be going after. So I think it's a very healthy combination of Phase 2, evaluating new diseases, new pharmacology plus also all the supporting Phase 1 studies to enable us to move these programs from Phase 1 to Phase 2 to Phase 3 as well, as we're moving forward.

Operator

We will now move to Phil Nadeau from Cowen & Co. Please go ahead.

Phil Nadeau -- Cowen & Co -- Analyst

Good morning. Thanks for taking my question. Just a follow-up to Brian's question on the Toledo program. Do you still expect to disclose the mechanism when 3312 starts the UC proof-of-concept trial at some point this year? Could you give us maybe a little bit more clarity on exactly when that disclosure will happen? And maybe could you remind us how 3312 versus 3970 and 4399 differ? What should we expect to see different between a pan-TOLEDO versus a TOLEDO 2/3 and TOLEDO 3? Thanks.

Walid Abi-Saab -- Chief Medical Officer

Thank you, Phil for the question. So Onno promised that we will disclose a target this year, so that's a promise from us to all of the investors. So the mystery will be there for a number of months, but we will help you out of your dream there and bring you back to the reality in course of this year. That's a promise.

I can spend I think too much time to really explain the difference between all of the different profiles. I think 3970, as I said before, is a compound that behaves well across tissues. So it has intrinsically the same pharmaco profile than 3312, but behaves much more different after oral dosing in every tissue and that means skin, joints, GI tract. 3312 is a compound which has the same mechanism of action, but really only scores well in -- scores much better in GI versus other tissues. So that's why we target this to the IBD space. For 390 [Phonetic] it's a complete [Indecipherable] part of TOLEDO but only has the anti-inflammatory activity. It does not push the pro-inflammatory cytokines. So it's really a different compound as it's only pushing down the cytokine and that currently we have only a couple of diseases in mind for that compound. But that whole explanation could take me an hour as well, which we don't have over here now. Thank you.

Phil Nadeau -- Cowen & Co -- Analyst

That's helpful. Thank you.

Operator

We will take our next question from Peter Welford from Jefferies.

Peter Welford -- Jefferies -- Analyst

Hi. Thanks. Couple for Bart on the financial side, if you don't mind. Firstly just on the revenues. Is it possible at all to give us the 238 [Phonetic] or so, whatever split [Indecipherable] as far as where the sources of those revenues came from during 2019, just to help us with modeling purposes.

And then also, just with regards to the European collaboration for the profit share, where should we think about as that launches your share of profit? Is that going to be booked as an offset to your sales and marketing expense, or how should we think of that? And can you perhaps give us some sort of idea? I think sales and marketing expenses ticked up quite a lot in the fourth quarter. I appreciate the color on R&D, P&L expense. Is it possible to give us any insight as well into how we should think about that line given, clearly, I imagine there's quite a lot of ambition to expand by the sound of it, the headcount there? So how should we think about that line going into 2020? Thank you.

Bart Filius -- Chief Operating Officer and Chief Financial Officer

Hey, Peter. Thanks for the questions. Let me try and give you a couple of answers. Hopefully, I'm capturing them properly. In terms of revenues split out for 2019, the revenues itself, I explained I think in the earlier slides, are highly driven by the EUR670 million of the license on 1690. And then there is the filgotinib revenue recognition. In addition, there are some other income that we have, which is about EUR50 million in 2019, which is mainly connected to grants and tax credits from the French and Belgium governments, and we have a bit of income as well in revenues from our fee-for-service subsidiary, Fidelta.

In terms of guidance for 2020 and specifically the sales and marketing line, what I've been trying to do in the guidance is to give you the three key drivers. So two of those are in R&D and represents the 35% to 40% of increase on the R&D line. The third is in SG&A and all three are, let's say, of similar size. Don't want to get into more precision now, because sometimes our numbers are influenced by some accounting entries here and there.

They are non-cash, but similar size the three buckets, two of which are in R&D and the last one in SG&A. And that's clearly connected to indeed the build-out in the commercial infrastructure. The way we're going to be accounting for that going forward is that we have both our own expenses, which will show up in operating expenses and we will have the share of, let's say, the profit share, which will be initially the lost share from the Gilead sites. So to the extent, it will become a profit-share, it'll end up obviously in the top line to the extent there will be still a loss, which is what's going to be in 2020 is going to show up in our cost of sales lines as well.

Peter Welford -- Jefferies -- Analyst

Thank you.

Operator

We will take our next question from Matthew Harrison from Morgan Stanley.

Connor Meehan -- Morgan Stanley -- Analyst

Hi everyone. This is Connor on for Matthew. Thanks for taking the question. You touched on this briefly before, but on PINTA, could you just provide some more detail on what kind of data you need to see out of 1205 to move it into further study? And then, would you expect to wait Phase 3 data from 1690 to start a Phase 3, or would you potentially consider a combination study between the two as a first step? Thank you.

Walid Abi-Saab -- Chief Medical Officer

Okay. Thank you for the question on PINTA. So PINTA is a Phase 2 study with 60 patients, so they are well balanced in terms of background treatment where one-third is on nintedanib models, one-third on pirfenidone, one-third on local standard of care in countries where none of these two is -- none of these drugs is readily used. So, we have a well-balanced study.

We'll have readouts in terms of FVC and as well we have included FRI. So that will give us the sufficient readouts to decide, whether it is on its own is a promising drug and whether we see that this is on its own for IPF is a promising drugs, we will move it forward. Certain stage, we will for sure try the combination with 1690, but it is not the first thing that we need to do next, but it's really on our agenda as soon as we have the Phase 3 readout of 1690 that we can start and study the combination of those two assuming, of course, that both have been successful after that stage. Thank you.

Operator

We will now take our next question from Benoit Louage from Degroof Petercam.

Benoit Louage -- Degroof Petercam -- Analyst

Hello, good afternoon and good morning. Thank you for taking my questions. Mine relates to the ROCCELLA trial. I was wondering, whether the primary endpoint on cartilage thickness would be the main decision-maker in order to go -- and decide to go into a Phase 3 or whether you would also aim to achieve a certain level of pain relief? And also, maybe, what the current regulatory perspective is on novel disease-modifying drugs for osteoarthritis? Thank you.

Walid Abi-Saab -- Chief Medical Officer

Yes. Thank you very much for that question, Ben. Yes, indeed the primary endpoint and the way the study is powered is to detect whether we do have a change on cartilage thickness and the medial part of the knee as measured by MRI. Of course, moving forward and getting regulatory approval would require both demonstrating effects on structure as well as on function or pain. So, those endpoints actually will be looked at as part of the trial. But again, the trial itself was powered on the structural changes.

In terms of what will it take to take us to Phase 3, I think, obviously we need to see a clear effect on the structure. But also, we need to see some trend on either pain, as you indicated, or on function as well. And that's why, it's really very difficult to [Indecipherable] set the guidelines very clearly for this because the results could come out in very different flavors and it could very well be that certain subset of patients looked into in order to progress this forward.

This is a very huge unmet medical need. And the agency, just as the scientific community and also the pharmaceutical industry, are working together to figure out a path forward. Often it's like the chicken or the egg. You almost need data of a compound that actually is able to move the needle, so that you can have fruitful discussion concretely with the health authorities about what will constitute the next step forward. And that's really what we intend to do. We're working with the best academic collaborators. Our partner, Servier is also very well versed in this space and we will be putting our heads together and talking to regulatory authorities based on our data to figure out a clear way forward for the Phase 3 program.

So, I hope that answers your question.

Benoit Louage -- Degroof Petercam -- Analyst

Yes, very helpful. Thank you, very much.

Walid Abi-Saab -- Chief Medical Officer

Thank you.

Elizabeth Goodwin -- Vice President of Investor Relations

Okay. And with that, I'm afraid we're going to have to call this a day. I realize there might be some folks who had some questions that we were unable to get in. Please reach out to the IR team and we'll make sure you get your answers. Our next scheduled call will be for the Q1 2020 results at 8:00 a.m. Eastern on the May 8, and we thank everybody for their participation today and wish everyone an excellent weekend. Thank you. Goodbye.

Duration: 57 minutes

Call participants:

Elizabeth Goodwin -- Vice President of Investor Relations

Onno van de Stolpe -- Chief Executive Officer

Bart Filius -- Chief Operating Officer and Chief Financial Officer

Walid Abi-Saab -- Chief Medical Officer

Piet Wigerinck -- Chief Scientific Officer

Michele Manto -- Chief Commercial Officer

Dane Leone -- Raymond James -- Analyst

Rushee Jolly -- Bernstein -- Analyst

Christopher Marai -- Nomura Instinet -- Analyst

James Quigley -- JPMorgan -- Analyst

Adam Walsh -- Stifel -- Analyst

Emily Field -- Barclays -- Analyst

Ellie Merle -- Cantor Fitzgerald -- Analyst

Lenny Van Steenhuyse -- KBC Securities -- Analyst

Brian Abrahams -- RBC Capital Markets -- Analyst

Patrick Trucchio -- Berenberg Capital Markets -- Analyst

Phil Nadeau -- Cowen & Co -- Analyst

Peter Welford -- Jefferies -- Analyst

Connor Meehan -- Morgan Stanley -- Analyst

Benoit Louage -- Degroof Petercam -- Analyst

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