5. Total revenues and other income

Revenues

The following table summarizes the revenues for the years ended 31 December 2017 and 2016.

Total revenues decreased by €2.4 million, or 2%, to €127.1 million for the year ended 31 December 2017, from €129.5 million for the year ended 31 December 2016. The decrease in milestone payments and reimbursement income was partly compensated by an increase in revenue recognition of upfront payments, as explained below.

The global collaboration with Gilead foresees continuous involvement from us, since we will perform certain R&D activities in the development phase of the filgotinib program; therefore, management assessed that the upfront payment of $300 million (or €275.6 million) received in January 2016 from Gilead should be spread in function of the costs incurred for this program, applying the percentage of completion method. In the year ended 31 December 2017, €62.5 million revenues were recognized regarding this upfront payment, compared to €25.6 million in the year ended 31 December 2016.

In connection with the agreement with Gilead, we recognized a deferred income and an offsetting short-term financial asset (derivative) of €39 million upon signing of the share subscription agreement with Gilead, as required under IAS 39 Financial Instruments: recognition and measurement. We refer to note 8 for further details. The deferred income of €39 million will be recognized in function of the costs incurred for this program, applying the percentage of completion method, along with the upfront payment. In the year ended 31 December 2017, €8.8 million revenues were recognized in the income statement, compared to €3.6 million in the year ended 31 December 2016.

In July 2017, Servier exercised its option to license our compound in osteoarthritis which triggered a license fee payment of €6 million. Since we will perform certain R&D activities in the next development phase of the program, management assessed that the license fee payment should be spread over the next development phase on a straight line basis. In the year ended 31 December 2017, €0.6 million were recognized regarding this license fee revenue.

The following table summarizes the upfront payments recognition for years ended 31 December 2017 and 2016.

Milestone revenues decreased substantially by €38.8 million or 47%, to €43.0 million for the year ended 31 December 2017 compared to €81.8 million for the year ended 31 December 2016. This decrease can be mainly explained by the achievement in 2016 of an important milestone of $50 million (€45.7 million) for the initiation of the Phase 3 trial in CD in our filgotinib program. Milestones in 2017 and 2016 were related to the filgotinib program with Gilead and the CF program with AbbVie.

Reimbursement income decreased by €6.4 million or 66%, to €3.3 million for the year ended 31 December 2017 compared to €9.7 million for the year ended 31 December 2016, due to lower reimbursements in relation with the CF program with AbbVie and the filgotinib program with Gilead. The reimbursement of certain research and development costs for the year ended 31 December 2017 were related to our collaboration agreements with AbbVie and Servier.

Other revenues increased by €1.1 million, or 14%, to €8.9 million for the year ended 31 December 2017 compared to €7.8 million for the year ended 31 December 2016, principally due to higher revenues from fee-for-service activities.

Other income

The following table summarizes other income for the years ended 31 December 2017 and 2016.

Total other income was composed of grant income and other income and increased by €6.7 million, or 30%, from €22.1 million for the year ended 31 December 2016 to €28.8 million for the year ended 31 December 2017.

Grant income decreased by €1.3 million, or 55%, from €2.3 million for the year ended 31 December 2016 to €1.0 million for the year ended 31 December 2017. The majority of this grant income was related to grants from a Flemish agency, representing approximately 93% of all reported grant income in 2017 (2016: 88%). In many cases these carry clauses which require us to maintain a presence in the same region for a number of years and invest according to pre-agreed budgets.

The decrease in grant income was more than offset by an increase in other income of €8.0 million, or 41%, from €19.8 million for the year ended 31 December 2016 to €27.8 million for the year ended 31 December 2017. Other income was primarily composed of:

• Income from an innovation incentive system of the French government, which represented €10.3 million of other income for the year ended 31 December 2017 compared to €9.5 million for the year ended 31 December 2016
• Income from Belgian R&D incentives with regard to incurred R&D expenses, which represented €11.2 million of other income for the year ended 31 December 2017 compared to €5.8 million for the year ended 31 December 2016
• Tax rebates on payroll withholding taxes of R&D personnel in Belgium and the Netherlands, representing €5.3 million of other income for the year ended 31 December 2017 compared to €3.8 million for the year ended 31 December 2016