Details of the unaudited condensed consolidated interim results

Product net sales

We reported net sales of Jyseleca^® for the first six months of 2023 amounting to €54.3 million (€35.4 million in the first six months of 2022).

Related cost of sales in the first half-year of 2023 amounted to €7.8 million.

Collaboration revenues

The following table summarizes our collaboration revenues for the six months ended 30 June 2023 and 2022:

The rollforward of the outstanding balance of the current and non-current deferred income between 1 January 2023 and 30 June 2023 can be summarized as follows:

Operating costs and other operating income

Operating costs

Research and development expenditure

The following table summarizes our research and development expenditure for the six months ended 30 June 2023 and 2022:

The decrease in depreciation and impairment for the first six months of 2023 is primarily due to an impairment of €26.7 million in the first six months of 2022 of previously capitalized upfront fees related to our collaboration with Molecure on the dual chitinase inhibitor OATD-01.

The table below summarizes our R&D expenditure for the six months ended 30 June 2023 and 2022, broken down by program.

Sales and marketing expenses

The following table summarizes our sales and marketing expenses for the six months ended 30 June 2023 and 2022:

General and administrative expenses

The following table summarizes our general and administrative expenses for the six months ended 30 June 2023 and 2022:

Other operating income

The following table summarizes our other operating income for the six months ended 30 June 2023 and 2022:

Financial income/expenses

The following table summarizes our financial income/expenses (–) for the six months ended 30 June 2023 and 2022:

Cash position

Cash and cash equivalents and current financial investments totaled €3,874.9 million on 30 June 2023 (€4,094.1 million on 31 December 2022).

Cash and cash equivalents and current financial investments comprised cash at banks, term deposits, treasury bills and money market funds. 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.

All cash and cash equivalents are available upon maximum three months notice period and without significant penalty. Cash at banks were mainly composed of current accounts. Our credit risk is mitigated by selecting a panel of highly rated financial institutions for our deposits.

Current financial investments comprised €1,735.3 million of term deposits which all had an original maturity longer than three months and which are not available on demand within three months. Our current financial investments also comprised money market funds and treasury bills. Our portfolio of treasury bills contains only AAA rated paper, issued by France and Belgium. 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.

On 30 June 2023, our cash and cash equivalents and current financial investments included $900.9 million held in U.S. dollars ($906.9 million on 31 December 2022) 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 €82.9 million.

Capital increase

On 30 June 2023, Galapagos NV’s share capital was represented by 65,897,071 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 2023.

Note to the cash flow statement

Details of the NovAliX transaction

We completed the integrated drug discovery collaboration transaction with NovAliX on 30 June 2023, effective as from 1 July 2023. Under the terms of the agreement, Galapagos’ drug discovery and research activities conducted in Romainville, France, and Galapagos’ employees in Romainville, which are exclusively dedicated to the operation of these activities, are transferred to NovAliX who will assume all ongoing research and discovery activities in Romainville. In return, Galapagos is committed to utilizing the research capabilities and expertise of NovAliX through a five year-collaboration and within the context of the company’s R&D portfolio, resulting in a total commitment of €73.8 million.

The collaboration agreement and sale and purchase agreement were negotiated as a package with one single commercial objective and with an agreed consideration for the transaction as a whole.

Galapagos’ drug discovery and research activities conducted in Romainville, France, and Galapagos’ employees in Romainville, which were exclusively dedicated to the operation of these activities, were transferred to NovAliX for no consideration at closing of the transaction and the impact thereof (reference is made to the table below) is treated as an advance for future services to be obtained from NovaliX throughout the five years collaboration. This advance has been presented in the statement of financial position on 30 June 2023 as other current asset (€2.8 million) and other non-current asset (€6.8 million) and this advance will gradually be released through profit or loss, in line with the purchase commitment towards NovAliX over the five year period of the collaboration between us and NovAliX.

Furthermore we made an upfront payment to NovAliX of €8.3 million on closing of the transaction which is a prepayment for the future purchase commitment for the following five years. This has been presented in our statement of financial position on 30 June 2023 as other current asset (€2.4 million) and other non-current asset (€5.9 million).

Financial risk management

The following table summarizes the categories of financial assets and liabilities held at fair value through profit or loss:

We consider that the carrying amount of all other financial assets and liabilities approximate their fair value, except for the treasury bills for which the fair value amounts to €738.4 million (carrying value of €739.8 million).

Current financial investments measured at fair value through profit or loss included money market funds in EUR and USD, which all classify for Level 1 fair value measurement.

The contingent consideration arrangement relating to the acquisition of CellPoint requires us to pay the former owners of CellPoint additional considerations up to €100.0 million. This amount is due when certain sequential development (€20.0 million), regulatory (€30.0 million) and sales-based (€50.0 million) milestones would be achieved. Total fair value at 30 June 2023 of these milestones amounted to €21.5 million.

The fair value measurement is based on significant inputs that are not observable in the market, which are classified as Level 3 inputs. Key assumptions in the valuation at 30 June 2023 include a discount rate of 12.5%, an appropriate probability of success of reaching these milestones and expected timing of these milestones. A change in probabilities of success of each milestone by 5 percentage points would result in a change of €3.0 million in the total contingent consideration liability on 30 June 2023.

As per 30 June 2023 the only change made to the key assumptions as compared to 31 December 2022 was the expected timing of the milestones. This impact, together with the discounting effect, was recognized in the financial results.