29. Warrant plans

29. Warrant plans

Presented below is a summary of warrant activities for the reported periods. Various warrant plans were approved for the benefit of our employees, and for directors and independent consultants of Galapagos NV. For warrant plans issued prior to 2011, the warrants offered to the employees and independent consultants vest according to the following schedule: 10% of the warrants vest on the date of the grant; an additional 10% vest at the first anniversary of the grant; an additional 20% vest at the second anniversary of the grant; an additional 20% vest at the third anniversary of the grant; and an additional 40% vest at the end of the third calendar year following the grant.

The warrants granted under warrant plans created from 2011 onwards vest at the end of the third calendar year following the year of the grant, with no intermediate vesting, with the exception of the warrants granted under Warrant Plan 2015 (B), Warrant Plan 2015 RMV, and Warrant Plan 2016 (B), which vest on the third anniversary of the notary deed enacting the acceptance and issuance of the warrants.

The warrants offered to directors vest over a period of 36 months at a rate of 1/36th per month.

Warrants cannot be exercised before the end of the third calendar year following the year of the grant, except for warrants granted under Warrant Plan 2015 (B), Warrant Plan 2015 RMV, and Warrant Plan 2016 (B), which become exercisable on the third anniversary of the notary deed enacting the acceptance and issuance of the warrants. In the event of a change of control over Galapagos NV, all outstanding warrants vest immediately and will be immediately exercisable.

After the reverse 4:1 share split approved by the extraordinary shareholders’ meeting of 29 March 2005, four warrants under Warrant Plan 2002 Belgium entitle the warrant holder to subscribe for one ordinary share. For the warrant plans created from 2005 onwards, one warrant entitles the warrant holder to subscribe for one ordinary share. In the summaries and tables below, the numbers of warrants issued under Warrant Plan 2002 Belgium are divided by four to avoid confusion in entitlements and rights.

The table below sets forth a summary of warrants outstanding and exercisable at 31 December 2017, per warrant plan:

Warrant plan

Allocation date

Expiry date

Exercise price (€)

Outstanding per 1 January 2016

Granted during the year

Exercised during the year

Forfeited during the year

Expired during the year

Outstanding per 31 December 2017

Exercisable per 31 December 2017

2002 B

31.01.2005

30.01.2017

6.76

25,000

 

(25,000)

 

 

2005

04.07.2005

03.07.2018

6.91

90,000

 

(60,000)

 

 

30,000

30,000

2005

15.12.2005

14.12.2018

8.60

12,500

 

(5,000)

 

 

7,500

7,500

2006 BNL

04.05.2007

03.05.2020

9.22

7,500

 

(7,500)

 

 

2006 BNL

28.06.2007

27.06.2020

8.65

735

 

 

 

 

735

735

2006 BNL

21.12.2007

20.12.2020

7.12

1,050

 

 

 

 

1,050

1,050

2007

28.06.2007

27.06.2020

8.65

48,909

 

 

 

 

48,909

48,909

2007 RMV

25.10.2007

24.10.2020

8.65

37,650

 

(5,050)

 

 

32,600

32,600

2008

26.06.2008

25.06.2021

5.60

79,600

 

(2,500)

 

 

77,100

77,100

2009

01.04.2009

31.03.2017

5.87

7,500

 

(7,500)

 

 

2010

27.04.2010

26.04.2018

11.55

53,000

 

(10,500)

 

 

42,500

42,500

2011

23.05.2011

22.05.2019

9.95

59,100

 

(6,600)

 

 

52,500

52,500

2012

03.09.2012

02.09.2020

14.19

247,160

 

(37,270)

 

 

209,890

209,890

2013

16.05.2013

15.05.2021

19.38

432,240

 

(171,280)

 

(400)

260,560

260,560

2013 (B)

18.09.2013

17.09.2021

15.18

30,000

 

(30,000)

 

 

2014

25.07.2014

24.07.2022

14.54

536,660

 

 

 

 

536,660

 

2014 (B)

14.10.2014

13.10.2022

11.93

150,000

 

 

 

 

150,000

 

2015

30.04.2015

29.04.2023

28.75

517,053

 

 

 

 

517,053

 

2015 (B)

22.12.2015

21.12.2023

49.00

399,000

 

 

 

 

399,000

 

2015 RMV

22.12.2015

21.12.2023

49.00

97,500

 

 

 

 

97,500

 

2016

01.06.2016

31.05.2024

46.10

514,250

 

 

 

 

514,250

 

2016 RMV

01.06.2016

31.05.2024

46.10

120,000

 

 

 

 

120,000

 

2016 (B)

20.01.2017

19.01.2025

62.50

 

150,000

 

 

 

150,000

 

2017

17.05.2017

16.05.2025

80.57

 

595,500

 

 

 

595,500

 

2017 RMV

17.05.2017

16.05.2025

80.57

 

127,500

 

 

 

127,500

 

Total

 

 

 

3,466,407

873,000

(368,200)

(400)

3,970,807

763,344

 

Warrants

Weighted average exercise price (€)

Outstanding on 31 December, 2015

2,805,692

16.22

Exercisable on 31 December, 2015

720,749

 

 

 

 

Granted during the period

1,130,750

 

Forfeited during the year

(48,500)

 

Exercised during the period

(419,035)

 

Expired during the year

(2,500)

 

Outstanding on 31 December, 2016

3,466,407

27.06

Exercisable on 31 December, 2016

669,704

 

 

 

 

Granted during the period

873,000

 

Forfeited during the year

 

Exercised during the period

(368,200)

 

Expired during the year

(400)

 

Outstanding on 31 December, 2017

3,970,807

39.32

Exercisable on 31 December, 2017

763,344

 

The table below sets forth the inputs into the valuation of the warrants.

Warrant plans

 

2017

2017 RMV

2016 (B)

2016

2016 RMV

 

17 May

17 May

20 January

1 June

1 June

Exercise price (€)

80.57

80.57

62.50

46.10

46.10

Share price at acceptance date (€)

68.67

68.67

75.18

48.71

47.63

Fair value on the acceptance date (€)

26.85

26.80

37.27

21.95

21.16

Estimated volatility (%)

40.06

40.08

40.33

40.69

40.69

Time to expiration (years)

8

8

8

8

8

Risk free rate (%)

0.33

0.29

0.51

0

0

Expected dividends

None

None

None

None

None

The exercise price of the warrants is determined pursuant to the applicable provisions of the Belgian Companies Code.

The estimated volatility is calculated on the basis of the historical volatility of the share price over the expected life of the warrants, validated by reference to the volatility of a representative biotech index.

The time to expiration of the warrant is calculated as the estimated duration until exercise, taking into account the specific features of the plans.

The warrants were accounted for in accordance with International Financial Reporting Standard 2 on Share Based Payments. IFRS 2 takes effect for all warrants offered after 7 November 2002.

Our warrants expense in 2017 amounted to €16,536 thousand (2016: €11,034 thousand).

The following table provides an overview of the outstanding warrants per category of warrant holders at 31 December 2017 and 31 December 2016.

 

31 December

Category (number of warrants)

2017

2016

Non-executive directors

216,060

165,240

Executive team

2,039,374

1,676,874

Other

1,715,373

1,624,293

Total warrants outstanding

3,970,807

3,466,407

The outstanding warrants at the end of the accounting period have an average exercise price of €39.32 (2016: €27.06) and a weighted average remaining expected life of 1,441 days (2016: 1,482 days).