Details of the unaudited condensed consolidated interim results

Revenues and other income

Revenues

The following table summarizes our revenues for the three months ended 31 March 2021 and 2020.

Revenues (€113.9 million for the first three months of 2021, compared to €94.8 million for the first three months of 2020) were higher mainly driven by the increase in revenue recognition of upfront consideration and milestone payments received in the scope of the collaboration with Gilead for filgotinib amounting to €55.3 million for the first three months of 2021 (€35.4 million for the same period last year). The increased cost share and the additional upfront consideration as a consequence of the renegotiated arrangement between Gilead and Galapagos in December 2020, as well as the milestones for the approval of filgotinib in Europe and Japan achieved in the third quarter of 2020, all contributed to this increase in revenues.

The rollforward of the outstanding balance of the current and non-current deferred income between 1 January 2021 and 31 March 2021 can be summarized as follows:

Other income

Other income (€10.3 million for the first three months of 2021, compared to €8.7 million for the first three months of 2020) increased by €1.6 million, mainly driven by higher incentives income from the government for R&D activities.

Results from continuing operations

We realized a net loss from continuing operations of €12.8 million for the first three months of 2021, compared to a net loss of €52.3 million in the first three months of 2020.

We reported an operating loss amounting to €50.8 million for the first three months of 2021, compared to an operating loss of €46.2 million for the same period last year.

Our R&D expenditure in the first three months of 2021 amounted to €130.0 million, compared to €115.5 million in the first three months of 2020. This increase was due to an increase of €3.4 million in subcontracting costs primarily related to our filgotinib program, our Toledo program and other clinical programs, compensated by a decrease for ziritaxestat, the OA program with GLPG1972 and the AtD program with MOR106. Furthermore, personnel costs increased by €10.1 million from €30.3 million in the first three months of 2020 to €40.4 million in the first three months of 2021. This increase is explained by a planned headcount increase and increased costs of the subscription right plans.

The table below summarizes our R&D expenditure for the three months ended 31 March 2021 and 2020, broken down by program.

Our G&A and S&M expenses were €45.0 million in the first three months of 2021, compared to €34.3 million in the first three months of 2020. This increase mainly resulted from higher personnel costs for €9.6 million (€26.5 million in the first three months of 2021 compared to €16.9 million in the same period last year). This increase was due to a planned headcount increase following the commercial launch of filgotinib in Europe as well as higher costs of the subscription right plans.

In the first three months of 2021, we reported a non-cash fair value gain from the re-measurement of initial warrant B issued to Gilead, amounting to €2.0 million, mainly due to the decreased implied volatility of the Galapagos share price as well as its evolution between 31 December 2020 and 31 March 2021.  

Net other financial income in the first three months of 2021 amounted to €36.2 million (as compared to €14.8 million in the same period last year), which was primarily attributable to €45.5 million of currency exchange gains on our cash and cash equivalents and current financial investments in U.S. dollars (as compared to €34.3 million in the first three months of 2020) and €3.6 million negative changes in (fair) value of current financial investments (€14.5 million in the same period last year). The other financial expenses also contained the effect of discounting our long term deferred income for €2.4 million (€4.4 million in the same period last year) and the fair value loss of financial assets held at fair value through profit or loss of €2.9 million (€2.7 million in the same period last year).

Cash position

Cash and cash equivalents and current financial investments totaled €5,114.7 million on 31 March 2021 (€5,169.3 million on 31 December 2020, including the cash and cash equivalents included in the assets classified as held for sale).

A net decrease of €54.6 million in cash and cash equivalents and current financial investments was recorded during the first three months of 2021, compared to a net decrease of €58.4 million during the first three months of 2020. This net decrease was composed of (i) €127.7 million of operational cash burn, (ii) offset by €2.3 million of cash proceeds from capital and share premium increase from exercise of subscription rights in the first three months of 2021, (iii) €3.6 million of negative changes in (fair) value  of current financial investments and €45.7 million of mainly positive exchange rate differences, and (iv) €28.7 million cash in from disposal of subsidiaries, net of cash disposed of.

The operational cash burn (or operational cash flow if this performance measure is positive) is a financial measure that is not calculated in accordance with IFRS. Operational cash burn/cash flow is defined as the increase or decrease in our cash and cash equivalents (excluding the effect of exchange rate differences on cash and cash equivalents), minus:

i. the net proceeds, if any, from share capital and share premium increases included in the net cash flows generated from/used in (–) financing activities

ii. the net proceeds or cash used, if any, in acquisitions or disposals of businesses; the movement in restricted cash and movement in current financial investments, if any, included in the net cash flows generated from/used in (–) investing activities.

This alternative performance measure is in our view an important metric for a biotech company in the development stage.

The following table represents a reconciliation of the operational cash burn (–)/operational cash flow:

Cash and cash equivalents and current financial investments comprised cash at banks, short-term bank deposits, treasury bills 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 monitors and optimizes our liquidity position. Our cash management strategy allows short-term deposits with an original maturity exceeding three months while monitoring all liquidity aspects. Cash and cash equivalents comprised €1,358.0 million of term deposits which all had an original maturity longer than three months. All cash and cash equivalents are available upon maximum three months notice period and without significant penalty. Cash at banks were mainly composed of notice accounts and term deposits. Our credit risk is mitigated by selecting a panel of highly rated financial institutions for our deposits.

Cash invested in highly liquid money market funds represented €1,107.4 million (€1,571.9 million on 31 December 2020) and are presented as current financial investments on 31 March 2021. The current financial investments also include treasury bills, amounting to €1,453.3 million on 31 March 2021 (€1,454.4 million on 31 December 2020). Our portfolio of treasury bills contains only AAA rated paper, issued by Germany and The Netherlands. Our money market funds portfolio consists of AAA short-term money market funds with a diversified and highly rated underlying portfolio managed by established fund management companies with a proven track record leading to an insignificant risk of changes in value.

On 31 March 2021, our cash and cash equivalents and current financial investments included $1,007.9 million held in U.S. dollars ($1,418.9 million on 31 December 2020) which could generate foreign exchange gains or losses in our financial results in accordance with the fluctuation of the EUR/U.S. dollar exchange rate as our functional currency is EUR. The foreign exchange loss (–)/gain in case of a 10% change in the EUR/U.S. dollar exchange rate amounts to €86.0 million.

Finally, our balance sheet held R&D incentives receivables from the French government (Crédit d’Impôt Recherche), to be received in four yearly tranches, and R&D incentives receivables from the Belgian Government, for a total of €142.3 million as at 31 March 2021.

Capital increase

On 31 March 2021, Galapagos NV’s share capital was represented by 65,511,581 shares. All shares were issued, fully paid up and of the same class. The below table summarizes our capital increases for the period ended 31 March 2021.

Note to the cash flow statement

Fair value re-measurements

Gilead warrants B

The issuance of initial warrant B was approved on 22 October 2019 by the extraordinary general meeting of shareholders and is not yet exercised by Gilead at 31 March 2021. Initial warrant B has been valued on the basis of a Longstaff-Schwartz Monte Carlo model. The input data used in the model were derived from market observations (volatility, discount rate and share price) and from management estimates (number of shares to be issued and applied discount for lack of marketability). The recognized fair value gain of €2.0 million was mainly the result of a decrease in the implied volatility of our share price as well as its evolution between 31 December 2020 and 31 March 2021. The fair value of the financial liability related to the initial warrant B amounted to €1.2 million on 31 March 2021 and was presented as a current financial instrument.

Subsequent warrant B is still subject to approval by an extraordinary general meeting of shareholders and is therefore still presented as issuance liability in our deferred income.

Discontinued operations

The following disclosure illustrates the result of our discontinued operations, related to the sale of our fee-for-service business (Fidelta) to Selvita on 4 January 2021.

1. Disposal of subsidiaries (discontinued operations)

1.1. Consideration received

1.2. Analysis of assets and liabilities over which control was lost

1.3. Gain on disposal of subsidiaries

1.4. Net cash inflow on disposal of subsidiaries

2. Result from discontinued operations

3. Cash flows from discontinued operations