Details of the unaudited condensed consolidated interim results

Notes
CSR report

Revenues and other income

Revenues

The following table summarizes our revenues for the six months ended 30 June 2021 and 2020.

 

Six months ended 30 June

(thousands of €)

Over time

Point in time

2021

2020

Recognition of non-refundable upfront payments and license fees

 

 

232,441

180,711

Gilead collaboration agreement for filgotinib

 

116,744

67,992

Gilead collaboration agreement for drug discovery platform

 

115,697

112,719

Milestone payments

 

 

19,369

6,996

Gilead collaboration agreement for filgotinib

 

19,369

6,996

Reimbursement income

 

 

-

6,628

Novartis collaboration agreement for MOR106

 

-

6,659

AbbVie collaboration agreement for CF

 

-

(31)

Other revenues

 

 

43

69

Other revenues

 

43

69

Commercial revenues

 

 

1,810

-

Sale of goods

 

456

-

Royalties

 

1,350

-

Other commercial revenues

 

4

-

Total revenues

 

 

253,664

194,404

Revenues (€253.7 million for the first six months of 2021, compared to €194.4 million for the first six 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 €136.1 million for the first six months of 2021 (€75.0 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 30 June 2021 can be summarized as follows:

(thousands of €)

Total

Gilead colla­boration agree­ment for filgotinib

Gilead colla­boration agree­ment for drug discovery platform(*)

Other deferred income (grants)

On 31 December 2020

2,809,133

818,654

1,990,412

67

 

 

 

 

 

Significant financing component(**)

4,770

4,770

 

 

 

 

 

 

 

Revenue recognition of upfront

(232,441)

(116,744)

(115,697)

 

Revenue recognition of milestones

(19,369)

(19,369)

 

 

 

 

 

 

 

Other movements

3,204

 

 

3,204

 

 

 

 

 

On 30 June 2021

2,565,292

687,310

1,874,714

3,270

(*)

The outstanding balance at 30 June 2021 and at 31 December 2020 comprises the issuance liability for the subsequent warrant B and the upfront payment allocated to the drug discovery platform.

(**)

With regard to the additional consideration received for the extended cost sharing for filgotinib, we assume the existence of a significant financing component reflecting the time value of money on the estimated recognition period.

Other income

Other income (€23.6 million for the first six months of 2021, compared to €22.8 million for the first six months of 2020) increased by €0.8 million, mainly driven by higher grant income.

Results from continuing operations

We realized a net loss from continuing operations of €77.2 million for the first six months of 2021, compared to a net loss of €169.2 million in the first six months of 2020.

We reported an operating loss amounting to €97.6 million for the first six months of 2021, compared to an operating loss of €134.4 million for the same period last year.

Our R&D expenditure in the first six months of 2021 amounted to €268.8 million, compared to €262.9 million in the first six months of 2020. This increase, primarily related to our filgotinib program and our Toledo program, was compensated by a decrease for ziritaxestat, the OA program with GLPG1972, and the AtD program with MOR106. Personnel costs increased by €11.7 million from €82.5 million in the first six months of 2020 to €94.2 million in the first six months of 2021. This increase is due to an increase in headcount compared to the same period last year, and increased costs of our subscription right plans.

The table below summarizes our R&D expenditure for the six months ended 30 June 2021 and 2020, broken down by program.

 

Six months ended 30 June

(thousands of €)

2021

2020

Filgotinib program

(87,840)

(65,541)

Ziritaxestat program

(19,418)

(29,790)

OA program with GLPG1972

(1,241)

(12,499)

Toledo program

(52,235)

(37,557)

AtD program with MOR106

(52)

(9,518)

Other programs

(108,040)

(107,997)

Total research and development expenditure

(268,826)

(262,901)

Our G&A and S&M expenses were €106.0 million in the first six months of 2021, compared to €88.7 million in the first six months of 2020. This increase mainly resulted from higher personnel costs for €15.3 million (€64.4 million in the first six months of 2021 compared to €49.1 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 six months of 2021, we reported a non-cash fair value gain from the re-measurement of initial warrant B issued to Gilead, amounting to €2.8 million, mainly due to the decreased implied volatility of the Galapagos share price as well as its evolution between 31 December 2020 and 30 June 2021.  

Net other financial income in the first six months of 2021 amounted to €17.1 million (as compared to net other financial loss of €13.0 million in the same period last year), which was primarily attributable to €33.4 million of currency exchange gains on our cash and cash equivalents and current financial investments in U.S. dollars (as compared to €5.5 million currency exchange gains in the first six months of 2020) and €5.8 million negative changes in (fair) value of current financial investments (€12.5 million in the same period last year). The other financial expenses also contained the effect of discounting our long term deferred income of €4.8 million (€8.7 million in the same period last year) as well as the fair value loss of financial assets held at fair value through profit or loss of €2.9 million (€0.4 million in the same period last year).

Cash position

Cash and cash equivalents and current financial investments totaled €5,006.6 million on 30 June 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 €162.7 million in cash and cash equivalents and current financial investments was recorded during the first six months of 2021, compared to a net decrease of €214.3 million during the first six months of 2020. This net decrease was composed of (i) €223.2 million of operational cash burn, (ii) offset by €2.6 million of cash proceeds from capital and share premium increase from exercise of subscription rights in the first six months of 2021, (iii) €5.8 million of negative changes in (fair) value  of current financial investments and €35.0 million of mainly positive exchange rate differences, and (iv) €28.7 million cash in from disposal of subsidiaries, net of cash disposed.

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:

 

Six months ended 30 June

(thousands of €)

2021

2020

Increase in cash and cash equivalents (excluding effect of exchange differences)

477,448

523,222

Less:

 

 

Net proceeds from capital and share premium increases

(2,583)

(23,268)

Net sale of current financial investments

(669,365)

(730,439)

Cash in from disposal of subsidiaries, net of cash disposed of

(28,696)

-

Total operational cash burn

(223,196)

(230,486)

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 €1,411.7 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 €1,060.3 million (€1,571.9 million on 31 December 2020) and are presented as current financial investments on 30 June 2021. The current financial investments also include treasury bills, amounting to €1,303.7 million on 30 June 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.

 

30 June

31 December

(thousands of €)

2021

2020

Cash at banks

1,230,956

1,239,993

Term deposits

1,411,683

895,194

Cash and cash equivalents from continuing operations

2,642,639

2,135,187

Cash and cash equivalents included in assets classified as held for sale

-

7,884

Total cash and cash equivalents

2,642,639

2,143,071

On 30 June 2021, our cash and cash equivalents and current financial investments included $973.3 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 €81.9 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 €142.7 million as at 30 June 2021.

Capital increase

On 30 June 2021, Galapagos NV’s share capital was represented by 65,522,521 shares. All shares were issued, fully paid up and of the same class. The below table summarizes our capital increases for the period ended 30 June 2021.

(thousands of €, except share data)

Number of shares

Share capital

Share premium

Share capital and share premium

Aver­age exer­cise price sub­scrip­tion rights (in €/ sub­scrip­tion right)

Closing share price on date of capital in­crease (in €/ share)

On 1 January 2021

65,411,767

291,312

2,727,840

3,019,153

 

 

 

 

 

 

 

 

 

19 March 2021: exercise of subscription rights

99,814

540

1,718

2,258

22.62

68.48

 

 

 

 

 

 

 

7 June 2021: exercise of subscription rights

10,940

59

266

325

29.73

61.78

 

 

 

 

 

 

 

On 30 June 2021

65,522,521

291,912

2,729,824

3,021,736

 

 

Note to the cash flow statement

 

Six months ended 30 June

(thousands of €)

2021

2020

Adjustment for non-cash transactions

 

 

Depreciations, amortizations and impairment

20,996

9,008

Share-based compensation expenses

44,568

39,641

Increase in retirement benefit obligations and provisions

190

174

Unrealized exchange gains (-)/losses and non-cash other financial result

(26,537)

(4,015)

Discounting effect of deferred income

4,770

8,728

Fair value re-measurement of warrants

(2,828)

21,118

Net change in (fair) value of current financial investments

5,833

12,484

Fair value adjustment financial assets held at fair value through profit or loss

2,913

354

Other non-cash expenses

405

233

Total adjustment for non-cash transactions

50,310

87,724

 

 

 

Adjustment for items to disclose separately under operating cash flow

 

 

Interest expense

4,425

2,602

Interest income

(1,434)

(5,121)

Tax income (-)/tax expense

(473)

709

Total adjustment for items to disclose separately under operating cash flow

2,518

(1,810)

 

 

 

Adjustment for items to disclose under investing and financing cash flows

 

 

Gain on disposal of subsidiaries

(22,191)

-

Loss on sale of fixed assets

1

83

Realized exchange gain on sale of current financial investments

(6,645)

-

Interest income on current financial assets

(8)

(2,447)

Total adjustment for items to disclose separately under investing and financing cash flow

(28,843)

(2,363)

 

 

 

Change in working capital other than deferred income

 

 

Increase in inventories

(1,419)

(47)

Decrease in receivables

107,041

19,056

Increase/decrease (-) in liabilities

(24,263)

36,290

Total change in working capital other than deferred income

81,359

55,299

Discontinued operations

The following disclosure illustrates the result from 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

(thousands of €)

 

Consideration received in cash and cash equivalents

37,080

Total consideration received

37,080

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

(thousands of €)

4 January 2021

Intangible assets

21

Property, plant and equipment

10,050

Other non-current assets

160

Trade and other receivables

4,428

Cash and cash equivalents

7,884

Other current assets

863

Total assets

23,406

 

 

Non-current lease liabilities

4,115

Other non-current liabilities

70

Trade and other liabilities

4,479

Current lease liabilities

727

Income tax payable

356

Total liabilities

9,747

 

 

Net assets disposed of

13,658

1.3. Gain on disposal of subsidiaries

(thousands of €)

 

Consideration received

37,080

Net assets disposed of

(13,658)

Effect of cumulative translation adjustments reclassified from equity on loss of control

(731)

Costs associated to the sale

(500)

Gain on disposal

22,191

1.4. Net cash inflow on disposal of subsidiaries

(thousands of €)

 

Consideration received in cash and cash equivalents

37,080

Less: cash and cash equivalents balances disposed of

(7,884)

Total consideration received, net of cash disposed of

29,196

Costs associated to the sale

(500)

Cash in from disposal of subsidiaries, net of cash disposed of

28,696

2. Result from discontinued operations

 

Six months ended 30 June

(thousands of €, except share and per share data)

2021

2020

Revenues

-

7,369

Other income

-

-

Total revenues and other income

-

7,369

 

 

 

Gain on disposal of subsidiaries

22,191

 

 

 

 

Research and development expenditure

-

(2,976)

Sales and marketing expenses

-

 

General and administrative expenses

-

(801)

Total operating expenses

-

(3,777)

 

 

 

Operating profit

22,191

3,592

 

 

 

Other financial income

-

74

Other financial expenses

-

(65)

 

 

 

Profit before tax

22,191

3,601

 

 

 

Income taxes

-

-

 

 

 

Net profit

22,191

3,601

 

 

 

Basic income per share from discontinued operations

0.34

0.06

Diluted income per share from discontinued operations

0.34

0.05

Weighted average number of shares - Basic (in thousands of shares)

65,470

64,834

Weighted average number of shares - Diluted (in thousands of shares)

66,109

68,151

3. Cash flows from discontinued operations

 

Six months ended 30 June

(thousands of €)

2021

2020

Net cash flows generated from operating activities

-

3,031

Net cash flows generated from/used in (-) investing activities

28,696

(953)

Net cash flows used in financing activities

-

(352)

Net cash flows from discontinued operations

28,696

1,726