Details of the unaudited condensed consolidated interim results

Revenues

Our revenues from continuing operations for the first nine months of 2021 amounted to €317.9 million, compared to €321.9 million for the first nine months of 2020.

Product net sales

We reported net sales of Jyseleca for the first nine months of 2021 amounting to €6.1 million (€5.7 million in the third quarter of 2021), which reflects the sales booked by Galapagos after the transition from Gilead.

Collaboration revenues

The following table summarizes our collaboration revenues for the nine months ended 30 September 2021 and 2020 and for the third quarter of 2021 and 2020.

Collaboration revenues (€311.7 million for the first nine months of 2021, compared to €321.9 million for the first nine months of 2020) were lower mainly driven by the decrease in revenue recognition of upfront consideration and milestone payments received in the scope of the collaboration with Gilead for filgotinib amounting to €136.4 million for the first nine months of 2021 (€145.9 million for the same period last year). The decrease in revenue recognition was primarily due to a negative cumulative catch up of revenue triggered by the recent agreement under which Galapagos will assume operational and financial responsibility for the ongoing DIVERSITY clinical study. This decrease was partly compensated by additional consideration from Gilead related to the renegotiated collaboration compared to the same period last year. The revenue recognition related to the exclusive access rights for Gilead to our drug discovery platform amounted to €173.3 million for the first nine months of 2021 (€170.7 million for the same period last year).

The rollforward of the outstanding balance of the current and non-current deferred income between 1 January 2021 and 30 September 2021 can be summarized as follows:

Results from continuing operations

We realized a net loss from continuing operations of €141.8 million for the first nine months of 2021, compared to a net loss of €251.8 million in the first nine months of 2020.

We reported an operating loss amounting to €175.7 million for the first nine months of 2021, compared to an operating loss of €167.7 million for the same period last year.

Cost of sales related to Jyseleca net sales in the first nine months of 2021 amounted to €0.7 million.

Our R&D expenditure in the first nine months of 2021 amounted to €378.0 million, compared to €392.2 million for the first nine months of 2020. This decrease was primarily explained by winding down of our ziritaxestat (IPF), MOR106 (atopic dermatitis), and GLPG1972 (OA) programs and by reduced spend on our other programs. This was partly offset by costs increases for our filgotinib and Toledo (SIKi) programs, on a nine months comparison basis. Personnel costs increased by €14.0 million from €120.3 million for the first nine months of 2020 to €134.3 million for the first nine months of 2021. This increase is primarily explained by a higher average 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 nine months ended 30 September 2021 and 2020 and for the third quarter of 2021 and 2020, broken down by program.

Our G&A and S&M expenses were €151.3 million in the first nine months of 2021, compared to €132.4 million in the first nine months of 2020. This increase was primarily due to an increase in personnel costs (€95.7 million for the first nine months of 2021 compared to €75.1 million for the same period last year) and other operating expenses mainly driven by the commercial launch of filgotinib in Europe. This increase was partly compensated by higher cost recharges from us to Gilead in the scope of our commercial cost sharing for filgotinib in Europe.

Other operating income (€36.3 million for the first nine months of 2021, compared to €35.0 million for the first nine months of 2020) increased by €1.3 million, mainly driven by higher grant income.

In the first nine months of 2021, we reported a non-cash fair value gain from the re-measurement of initial warrant B issued to Gilead, amounting to €3.0 million, mainly due to the decreased implied volatility of the Galapagos share price as well as its evolution between 31 December 2020 and 30 September 2021.  

Net other financial income in the first nine months of 2021 amounted to €30.6 million (as compared to net other financial loss of €75.3 million in the same period last year), which was primarily attributable to €54.9 million of currency exchange gain on our cash and cash equivalents and current financial investments in U.S. dollars (as compared to €51.3 million currency exchange losses in the first nine months of 2020) and €7.2 million negative changes in (fair) value of current financial investments (€13.3 million in the same period last year). The other financial expenses also contained the effect of discounting our long term deferred income of €7.2 million (€12.8 million in the same period last year), the fair value loss of financial assets held at fair value through profit or loss of €2.9 million (€0.7 million in the same period last year), as well as interest expenses of €8.5 million (€6.9 million in the same period last year).

Cash position

Cash and cash equivalents and current financial investments totaled €4,874.2 million on 30 September 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 €295.2 million in cash and cash equivalents and current financial investments was recorded during the first nine months of 2021, compared to a net decrease of €472.2 million during the first nine months of 2020. This net decrease was composed of (i) €376.7 million of operational cash burn, (ii) offset by €2.7 million of cash proceeds from capital and share premium increase from exercise of subscription rights in the first nine months of 2021, (iii) €7.2 million of negative changes in (fair) value of current financial investments and €57.3 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:

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 €1,684.0 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. 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 €1,061.8 million (€1,571.9 million on 31 December 2020) and are presented as current financial investments on 30 September 2021. The current financial investments also include treasury bills, amounting to €978.0 million on 30 September 2021 (€1,454.4 million on 31 December 2020). Our portfolio of treasury bills contains only AAA rated paper, issued by Germany. 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 30 September 2021, our cash and cash equivalents and current financial investments included $966.6 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 €83.5 million.

Our balance sheet also 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 €149.3 million as at 30 September 2021.

Capital increase

On 30 September 2021, Galapagos NV’s share capital was represented by 65,530,121 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 September 2021.

Note to the cash flow statement

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

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