28. Warrant plans

Notes to the consolidated financial statements

Presented below is a summary of warrant activities for the reported periods. Various warrant plans were approved for the benefit of our employees, and for directors and independent consultants of Galapagos NV. For warrant plans issued prior to 2011, the warrants offered to the employees and independent consultants vest according to the following schedule: 10% of the warrants vest on the date of the grant; an additional 10% vest at the first anniversary of the grant; an additional 20% vest at the second anniversary of the grant; an additional 20% vest at the third anniversary of the grant; and an additional 40% vest at the end of the third calendar year following the grant.

The warrants granted under warrant plans created from 2011 onwards vest at the end of the third calendar year following the year of the grant, with no intermediate vesting, with the exception of the warrants granted under Warrant Plan 2015 (B), Warrant Plan 2015 RMV, and Warrant Plan 2016 (B), which vest on the third anniversary of the notary deed enacting the acceptance and issuance of the warrants.

The warrants offered to directors vest over a period of 36 months at a rate of 1/36th per month.

Warrants cannot be exercised before the end of the third calendar year following the year of the grant, except for warrants granted under Warrant Plan 2015 (B), Warrant Plan 2015 RMV, and Warrant Plan 2016 (B), which become exercisable on the third anniversary of the notary deed enacting the acceptance and issuance of the warrants. In the event of a change of control over Galapagos NV, all outstanding warrants vest immediately and will be immediately exercisable.

The table below sets forth a summary of warrants outstanding and exercisable at 31 December 2019, per warrant plan:

Warrant plan

Allocation date

Expiry date

Exercise price (€)

Outstanding per 1 January 2019

Granted during the year

Exercised during the year

Forfeited during the year

Expired during the year

Outstanding per 31 December 2019

Exercisable per 31 December 2019

2006 BNL

21.12.2007

20.12.2020

7.12

1,050

 

 

 

 

1,050

1,050

2007

28.06.2007

27.06.2020

8.65

29,374

 

(29,374)

 

 

2007 RMV

25.10.2007

24.10.2020

8.65

24,550

 

(9,570)

 

 

14,980

14,980

2008

26.06.2008

25.06.2021

5.60

77,100

 

(75,735)

 

 

1,365

1,365

2011

23.05.2011

22.05.2019

9.95

37,500

 

(37,500)

 

 

2012

03.09.2012

02.09.2020

14.19

110,040

 

(30,000)

 

 

80,040

80,040

2013

16.05.2013

15.05.2021

19.38

195,560

 

(75,126)

 

 

120,434

120,434

2014

25.07.2014

24.07.2022

14.54

347,560

 

(95,220)

 

 

252,340

252,340

2014 (B)

14.10.2014

13.10.2022

11.93

60,000

 

(60,000)

 

 

2015

30.04.2015

29.04.2023

28.75

515,053

 

(232,580)

 

 

282,473

282,473

2015 (B)

22.12.2015

21.12.2023

49.00

399,000

 

(69,500)

 

 

329,500

329,500

2015 RMV

22.12.2015

21.12.2023

49.00

97,500

 

(40,000)

 

 

57,500

57,500

2016

01.06.2016

31.05.2024

46.10

504,250

 

 

 

 

504,250

 

2016 RMV

01.06.2016

31.05.2024

46.10

120,000

 

 

 

 

120,000

 

2016 (B)

20.01.2017

19.01.2025

62.50

150,000

 

 

 

 

150,000

 

2017

17.05.2017

16.05.2025

80.57

595,500

 

 

 

 

595,500

 

2017 RMV

17.05.2017

16.05.2025

80.57

127,500

 

 

 

 

127,500

 

2018

19.04.2018

18.04.2026

79.88

1,097,745

 

 

(12,500)

 

1,085,245

 

2018 RMV

19.04.2018

18.04.2026

79.88

137,500

 

 

 

 

137,500

 

2019

10.04.2019

09.04.2027

95.11

 

1,504,940

 

(18,250)

 

1,486,690

 

2019 RMV

10.04.2019

09.04.2027

95.11

 

194,750

 

 

 

194,750

 

Total

 

 

 

4,626,782

1,699,690

(754,605)

(30,750)

5,541,117

1,139,682

 

Warrants

Weighted average exercise price (€)

Outstanding on 31 December, 2017

3,970,807

39.32

Exercisable on 31 December, 2017

763,344

13.71

 

 

 

Granted during the period

1,235,245

79.88

Forfeited during the year

(12,000)

43.21

Exercised during the period

(567,270)

13.50

Expired during the year

 

Outstanding on 31 December, 2018

4,626,782

53.30

Exercisable on 31 December, 2018

882,734

14.05

 

 

 

Granted during the period

1,699,690

95.11

Forfeited during the year

(30,750)

88.92

Exercised during the period

(754,605)

22.75

Expired during the year

 

Outstanding on 31 December, 2019

5,541,117

70.09

Exercisable on 31 December, 2019

1,139,682

30.16

The table below sets forth the inputs into the valuation of the warrants.

Warrant plans

 

2019

2019 RMV

2018

2018 RMV

 

10 April 2019

10 April 2019

19 April 2018

19 April 2018

Exercise Price (€)

95.11

95.11

79.88

79.88

Weighted average share price at acceptance date (€)

107.05

107.45

84.88

84.88

Weighted average fair value on the acceptance date (€)

40.04

40.05

38.39

38.39

Weighted average estimated volatility (%)

35.86

35.63

39.44

39.44

Weighted average expected life of the warrant (years)

6.02

6.00

8

8

Weighted average risk free rate (%)

(0.27)

(0.28)

0.51

0.51

Expected dividends

None

None

None

None

The exercise price of the warrants is determined pursuant to the applicable provisions of the Belgian Companies Code.

The weighted average estimated volatility is calculated on the basis of the implied volatility of the share price over the expected life of the warrants.

The weighted average expected life of the warrant is calculated as the estimated duration until exercise, taking into account the specific features of the plans.

Our share based compensation expense in 2019 amounted to €38,297 thousand (2018: €26,757 thousand).

The following table provides an overview of the outstanding warrants per category of warrant holders at 31 December 2019 and 31 December 2018.

 

31 December

Category (in number of warrants)

2019

2018

Non-executive directors

222,600

216,780

Executive team

2,171,874

2,139,374

Other

3,146,643

2,270,628

Total warrants outstanding

5,541,117

4,626,782

The outstanding warrants at the end of the accounting period have an average exercise price of €70.09 (2018: €53.30) and a weighted average remaining expected life of 1,439 days (2018: 1,500 days).