Details of the unaudited condensed consolidated interim results

Revenues and other income

Revenues

The following table summarizes our revenues for the six months ended 30 June 2018 and 2017.

The following table summarizes the revenue recognition of the upfront payments, license fees and milestones payments for the six months ended 30 June 2018 and 2017, as well as the impact of the adoption of IFRS 15. The revenues recognized for the six months ended 30 June 2018 are presented under the IFRS 15 standard as well as under the former applicable IAS 18 standard, with a comparison to the first six months of 2017  under the former applicable IAS 18 standard.

The adoption of IFRS 15 Revenue from contracts with customers resulted in a timing difference of revenue recognition between prior accounting standard and IFRS 15 which negatively impacted the accumulated losses and increased the amount of deferred income (contract liabilities) by an amount of €83.2 million, as shown in the table above (column “Deferred income reclassified from equity following adoption of IFRS 15”). We elected the modified retrospective method for the transition which foresees that prior period figures remain as reported under the previous standard and the cumulative effect of applying IFRS 15 is recognized as an adjustment to the opening balance of equity as at the date of initial application (beginning of the year 2018).

For the first six months of 2018, €65.4 million of deferred income related to the Gilead collaboration agreement were recognized in revenue under IFRS 15 in function of costs incurred, applying the percentage of completion method. This revenue recognition consisted of (i) €43.2 million related to the upfront license fee, (ii) €6.1 million related to the deferred income triggered by the accounting treatment of the share subscription agreement under IAS 39 Financial Instruments: recognition and measurement, (iii) €10.1 million related to milestone payments received prior to 31 December 2017, and (iv) €5.9 million related to milestone payments received in the first half of 2018. The outstanding balance of deferred income from the Gilead collaboration agreement at the end of June 2018 amounted to €204.9 million of which €55.0 million was reported as non-current deferred income.

For the first six months of 2018, €16.0 million of deferred income related to the AbbVie collaboration agreement were recognized in revenue under IFRS 15 in function of costs incurred, applying the percentage of completion method. This revenue recognition consisted of (i) €3.4 million related to the upfront license fee, (ii) €6.9 million related to milestone payments received in previous years and (iii) €5.7 million related to milestones achieved in the first half of 2018. The outstanding balance of deferred income from the AbbVie collaboration agreement at the end of June 2018 amounted to €37.3 million of which €12.4 million was reported as non-current deferred income.

We are currently reviewing our collaboration with AbbVie, but no conclusion has been reached. Consequently, our revenue recognition method remains unchanged.

Other revenues

Other revenues mainly consisted in service revenues from our fee-for-service business for €5.7 million, as reported under the segment information disclosure below.

Other income

The following table summarizes our other income for the six months ended 30 June 2018 and 2017.

Other income increased to €14.3 million for the first six months of 2018 from €12.1 million for the first six months of 2017, mainly driven by higher income from R&D incentives.

Segment information

We have two operating segments: R&D and our fee-for-service business Fidelta, located in Croatia.

The basis of accounting for any transactions between operating segments is consistent with transactions with third parties.

Liquid assets position

Cash and cash equivalents totaled €1,066.8 million on 30 June 2018.

Cash and cash equivalents at 30 June 2018 comprised cash and cash at banks, short term bank deposits and money market funds that are readily convertible to cash and are subject to an insignificant risk of changes in value. Our cash management strategy may allow short term deposits with an original maturity exceeding three months while monitoring all liquidity aspects. Cash and cash equivalents comprised €625.4 million of term deposits with an original maturity longer than three months but which are available upon one month notice period. Cash at banks were mainly composed of savings accounts and current accounts. We maintain our bank deposits in highly rated financial institutions to reduce credit risk. Cash invested in highly liquid money market funds represented €149.5 million and aim at meeting short-term cash commitments, while reducing the counterparty risk of investment.

On 30 June 2018, our cash and cash equivalents included $243.7 million held in U.S. dollars which could generate foreign exchange gain or loss in our financial results in accordance with the fluctuation of the EUR/U.S. dollar exchange rate as our functional currency is EUR. We expect to use this cash held in U.S. dollars to settle our future payables in U.S. dollars which will be primarily linked to our global collaboration with Gilead for the development of filgotinib.

Finally, our balance sheet held R&D incentives receivables from the French government (Crédit d’Impôt Recherche) amounting to €41.7 million as of 30 June 2018, to be received in four yearly tranches. Our balance sheet also held R&D incentives receivables from the Belgian Government amounting to €44.5 million as at 30 June 2018.

Capital increase

On 30 June 2018, Galapagos NV’s share capital was represented by 51,337,763 shares. All shares were issued, fully paid up and of the same class. The below table summarizes our capital increases for the half-year ended 30 June 2018.