Financial highlights

On 30 June 2023, we had 1,233 employees (including the 121 employees in our Galapagos entity in France that were transferred to NovAliX on 1 July 2023 as a result of the closing of the integrated drug discovery collaboration transaction).

H1 2023 financial results

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

Cost of sales related to Jyseleca^® net sales in the first six months of 2023 amounted to €7.8 million.

Collaboration revenues amounted to €274.5 million for the first six months of 2023, compared to €238.6 million for the first six months of 2022.

Revenues recognized related to the collaboration agreement with Gilead for the filgotinib development were €154.9 million in the first six months of 2023 compared to €115.3 million for the same period last year. This increase is primarily driven by a positive catch up of revenue explained by a decrease in the total estimated remaining costs to complete the filgotinib development. This was a consequence of the topline results from Phase 3 DIVERSITY trial of filgotinib in CD and our decision not to submit a Marketing Authorization Application in Europe.

The revenue recognition related to the exclusive access rights for Gilead to our drug discovery platform amounted to €115.2 million for the first six months of 2023 (€114.9 million for the same period last year).

We have recognized royalty income from Gilead for Jyseleca® for €3.5 million in the first six months of 2023 (compared to €6.3 million in the same period last year of which €3.6 million royalties on milestone income for UC approval in Japan).

Additionally, we recorded a milestone receivable of €1.0 million triggered by the first sale of Jyseleca® in Poland by our distribution and commercialization partner Sobi, in the first half-year of 2023.

Our deferred income balance on 30 June 2023 includes €1.4 billion allocated to our drug discovery platform that is recognized linearly over the remaining period of our 10 year collaboration, and €0.3 billion allocated to filgotinib development that is recognized over time until the end of the development period.

Our R&D expenditure in the first six months of 2023 amounted to €211.9 million, compared to €249.5 million for the first six months of 2022. Depreciation and impairment amounted to €13.1 million for the first six months of 2023 (€32.6 million for the same period last year). This decrease was 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 (GLPG4716), as it was decided to return all rights to OATD-01 to Molecure. The decrease in R&D expenditure was also explained by a decrease in subcontracting costs from €104.1 million in the first half-year of 2022 to €90.3 million in the first half-year of 2023, primarily due to reduced spend on our SIKi-program, filgotinib and other programs. This was partly offset by costs increase for our CAR-T program and TYK2 program, on a six month basis compared to the same period in 2022. Personnel costs decreased from €86.0 million in the first half of 2022 to €80.5 million for the same period this year.

Our S&M expenses were €58.3 million in the first six months of 2023, compared to €71.0 million in the first six months of 2022. The cost decrease was explained by a decrease in personnel costs (€29.1 million for the first six months of 2023 compared to €35.7 million for the same period last year) primarily explained by a decrease in the cost for bonuses and our subscription right plans. External outsourcing costs also decreased from €25.7 million in the first six months of 2022 to €20.0 million in the first six months of 2023.

Our G&A expenses were €63.3 million in the first six months of 2023, compared to €63.0 million in the first six months of 2022.

Other operating income (€23.8 million for the first six months of 2023, compared to €17.6 million for the first six months of 2022) increased by €6.2 million, mainly driven by higher grant and rent income.

We reported an operating profit amounting to €11.3 million for the first six months of 2023, compared to an operating loss of €97.5 million for the same period last year.

Net financial income in the first six months of 2023 amounted to €30.6 million (as compared to net financial income of €67.7 million in the same period last year) and consisted mainly of €33.4 million interest income (as compared to €3.6 million interest income in the same period last year) due to the increased interest rates. Net financial income in the first six months of 2023 also included €11.4 million of unrealized currency exchange loss on our cash and cash equivalents and current financial investments at amortized cost in U.S. dollar (as compared to €57.4 million currency exchange gain on cash and cash equivalents and current financial investments in the first six months of 2022), as a result of the fluctuation of the U.S. dollar, and €12.7 million positive changes in (fair) value of current financial investments (€11.8 million positive changes in the same period last year). The other financial expenses also contained the effect of discounting our long term deferred income of €2.4 million (€3.8 million in the same period last year).

We had €13.6 million of tax expenses for the first six months of 2023 (as compared to €2.5 million for the same period last year). This increase was primarily due to the re-assessment of net deferred tax liabilities and corporate income tax payables as a result of a one-off intercompany transaction.  

We reported a group net profit for the first six months of 2023 of €28.3 million, compared to a net loss of €32.3 million for the same period last year.

Cash, cash equivalents and current financial investments

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).

A net decrease of €219.1 million in cash and cash equivalents and current financial investments was recorded during the first six months of 2023, compared to a net decrease of €274.2 million during the first six months of 2022. This net decrease was composed of (i) €224.3 million of operational cash burn, (ii) €9.3 million of mainly negative exchange rate differences, offset by (iii) €1.8 million of cash proceeds from capital and share premium increases from exercise of subscription rights in the first six months of 2023, and (iv) €12.7 million of positive changes in (fair) value of current financial investments.

The operational cash burn (or operational cash flow if this liquidity 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, the loans and advances given to third parties, if any, included in the net cash flows generated from/used in (–) investing activities

iii. the cash used for other liabilities related to the acquisition of businesses, if any, included in the net cash flows generated from/used in (–) operating activities.

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

The following table provides a reconciliation of the operational cash burn: