5. Total revenues and other income

Revenues

The following table summarizes the revenues for the years ended 31 December 2016 and 2015.

Total revenues increased by €90.0 million, or 227%, to €129.5 million for the year ended 31 December 2016, from €39.6 million for the year ended 31 December 2015. This increase was mainly driven by a substantial increase in milestone payments, as explained below.

Revenue recognized in 2015 from upfront non-refundable payments related to the CF collaboration agreement with AbbVie signed in September 2013 and the contract signed with AbbVie in February 2012 for our filgotinib program (including the extension signed in March 2013). Those upfront payments were fully recognized into revenues by the end of August 2015.

In September 2015 AbbVie decided not to opt in, which ended the collaboration agreement regarding our filgotinib program and consequently the period of our involvement. There are no outstanding commitments for us regarding this terminated collaboration for our filgotinib program.

On 16 December 2015, we entered into a global collaboration with Gilead Sciences, Inc. for the development and commercialization of the JAK1-selective inhibitor filgotinib for inflammatory indications. On 19 January 2016, we completed the closing of the global collaboration agreement with Gilead, in the framework of which Gilead made a $425 million (or €392 million) equity investment in Galapagos NV by subscribing to new shares at a price of €58 per share, including issuance premium. This resulted in Gilead owning 6,760,701 ordinary shares of Galapagos NV, representing 14.75% percent of the then-outstanding share capital of Galapagos. We also received a license fee of $300 million. In addition, we are still eligible to receive payments of up to $695 million in additional¹In 2016 $60 million of development milestones was already achieved and paid by Gilead. development and regulatory milestones and $600 million in sales milestones, with tiered royalties starting at 20% and a profit split in co-promotion territories. Furthermore, development costs of the licensed product will be split 20-80. As such Galapagos will support 20% of all development costs. As we do not expect to have a statutory taxable base in the foreseeable future, we did not recognize any additional deferred tax asset following the signing of this new collaboration.

The global collaboration with Gilead foresees continuous involvement from us, since we will perform certain R&D activities in the development phase of the filgotinib program; therefore, management assessed that the upfront payment of $300 million (or €275.6 million) received in January 2016 from Gilead should be spread as a function of the costs incurred for this program, applying the percentage of completion method. In the year ended 31 December 2016, €25.6 million revenues were recognized regarding this upfront payment.

In connection with the agreement with Gilead, we recognized a deferred income and an offsetting short-term financial asset (derivative) of €39 million upon signing of the share subscription agreement with Gilead, as required under IAS 39. We refer to note 8 for further details. The deferred income will be recognized in function of the costs incurred for this program, applying the percentage of completion method, along with the upfront payment. In the year ended 31 December 2016, €3.6 million revenues were recognized in the income statement.

In 2016, Galapagos signed a license agreement with ThromboGenics for an integrin antagonist (formerly GLPG0187), for which an upfront payment of €1 million was invoiced and fully recognized, as Galapagos has no further involvement or obligation in the contract.

The following table summarizes the upfront payments recognition for years ended 31 December 2016 and 2015.

Milestone revenues increased substantially by €77.9 million to €81.8 million for the year ended 31 December 2016 compared to €3.8 million for the year ended 31 December 2015. Milestones in 2016 related to the filgotinib program with Gilead in Crohn’s disease and UC, and the CF program with AbbVie.

Reimbursement income increased by €5.9 million or 155%, to €9.7 million for the year ended 31 December 2016 compared to €3.8 million for the year ended 31 December 2015, due to higher reimbursements in relation with the CF program with AbbVie and the filgotinib program with Gilead (which was partnered with AbbVie in 2015). The reimbursement of certain research and development costs related to the development work under the Galapagos’ collaboration agreements amounted to €5.9 million for our CF program with AbbVie and €3.5 million for our filgotinib program with Gilead for the year ended 31 December 2016.

Other revenues increased by €2.3 million, or 41%, to €7.8 million for the year ended 31 December 2016 compared to €5.5 million for the year ended 31 December 2015, principally due to higher revenues from fee-for-service activities.

Other income

The following table summarizes other income for the years ended 31 December 2016 and 2015.

Total other income was composed of grant income and other income and increased by €1.1 million, or 5%, from €21.0 million for the year ended 31 December 2015 to €22.1 million for the year ended 31 December 2016.

Grant income decreased by €0.8 million, or 25%, from €3.1 million for the year ended 31 December 2015 to €2.3 million for the year ended 31 December 2016. The majority of this grant income was related to grants from a Flemish agency, representing approximately 88% of all reported grant income in 2016 (2015: 94%). In many cases these carry clauses which require us to maintain a presence in the same region for a number of years and invest according to pre-agreed budgets.

The decrease in grant income was more than offset by an increase in other income of €1.8 million, or 10%, from €17.9 million for the year ended 31 December 2015 to €19.8 million for the year ended 31 December 2016. Other income was primarily composed of:

• Income from an innovation incentive system of the French government, which represented €9.5 million of other income for the year ended 31 December 2016 compared to €8.7 million for the year ended 31 December 2015
• Income from Belgian R&D incentives with regard to incurred R&D expenses, which represented €5.8 million of other income for the year ended 31 December 2016 compared to €5.3 million for the year ended 31 December 2015
• Tax rebates on payroll withholding taxes of R&D personnel in Belgium and the Netherlands, representing €3.8 million of other income for the year ended 31 December 2016 compared to €3.0 million for the year ended 31 December 2015

¹ In 2016 $60 million of development milestones was already achieved and paid by Gilead.