30. Related parties

Relationship and transactions with entities with (joint) control of, or significant influence over, Galapagos

Gilead

Gilead is exercising significant influence over Galapagos as from the equity subscription on 23 August 2019. As a result of the equity subscription we received a transparency notification from Gilead on 28 August 2019 confirming they held 22.04% of the then issued and outstanding shares of Galapagos.

Furthermore, the extraordinary general meeting of shareholders of 22 October 2019 approved the issuance of Warrant A and initial warrant B to Gilead allowing them to further increase its ownership of Galapagos to up to 29.9% of the company’s issued and outstanding shares. Subsequent Warrant B is still subject to approval by an extraordinary general meeting of shareholders. This extraordinary general meeting of shareholders shall take place between 57 and 59 months of the closing of the subscription agreement and this warrant will have substantially similar terms, including as to exercise price, to the initial Warrant B. On 6 November 2019 Gilead exercised warrant A, which resulted in an additional equity investment of €368.0 million. By exercising Warrant A Gilead increased its ownership in Galapagos to 25.10% of the then outstanding shares. Gilead further increased its ownership to 25.84% at 31 December 2019. Gilead’s ownership then diluted to 25.54% at 31 December 2020, due to four capital increases resulting from the exercise of subscription rights under employee subscription right plans in the course of 2020. On 6 January 2021 we received a transparency notification from Gilead notifying a change in the chain of intermediary companies through which Gilead holds its shares in Galapagos and confirming they held 25.54% of the then issued and outstanding shares of Galapagos.

The presumption of significant influence is also confirmed by the fact that Gilead has the right, for as long as it holds more than 20% of Galapagos’ share capital, to appoint two investor board designees to Galapagos’ supervisory board.

The following balances are outstanding at the end of the reporting period in relation to Gilead:

The non-current trade receivables and the trade and other receivables balances mainly relate to a total of €160.0 million to receive in relation to the recently modified collaboration for filgotinib of which €110.0 million will be received in 2021 and €50.0 million in 2022. Additionally, the trade and other receivables contain €22.8 million of receivables relating to our collaborations for GLPG1690 and filgotinib. The outstanding liabilities mainly relate to the cross charges from Gilead for the development costs sharing of filgotinib in the fourth quarter of 2020 (€24.8 million).

Due to the approval of filgotinib, by both the Japanese and European authorities in September 2020, we received milestone payments of respectively $30.0 million (€25.8 million) and $75.0 million (€64.4 million) from Gilead that are recognized in revenue over time until the end of the development period.

During 2020 we recognized in revenue €229.6 million (€80.9 million for the year ended 31 December 2019) relating to the performance obligation for the drug discovery platform and a total of €228.1 million (€41.4 million for the year ended 31 December 2019) representing the total impact on our revenues coming from the filgotinib performance obligation. The latter consists of upfront payments and milestone payments that were recognized in accordance with the percentage of completion of the underlying performance obligation.

Additionally, we recognized royalty income for an amount of €16.2 million in relation to the commercialization of filgotinib.

Furthermore, we recognized €34.1 million (€17.7 million for the year ended 31 December 2019) of cost reimbursements from Gilead related to the development of GLPG1690 as a decrease of the related expenses (on the line research and development expenditure). An amount of €101.0 million (€72.0 million for the year ended 31 December 2019) relating to cross charges from Gilead relating to filgotinib was recognized as expense on the line research and development expenditure.

Finally, we recognized €4.7 million as a deduction of sales and marketing expenses and €3.1 million as a deduction of research and development expenditure (compared to €8.2 million additional sales & marketing expenses for the year ended 31 December 2019) mainly relating to our 50/50 profit/(cost) share mechanism with Gilead for direct sales of filgotinib in the shared territory and expenses incurred for the co-promotion activities for filgotinib.

As at 31 December 2020 we have two outstanding performance obligations under IFRS 15 towards Gilead, being the performance obligation related to our drug discovery platform and the performance obligation relating to filgotinib. This results in an outstanding deferred income balance of €2.0 billion for the drug discovery platform (including the warrant issuance liability relating to subsequent Warrant B) and €819 million for the performance obligation relating to filgotinib.

A detailed explanation of our transactions with Gilead in 2019 and 2020 can be found in the section titled Agreements with major Galapagos NV shareholders. There are no other shareholders or other entities who, solely or jointly, control Galapagos or exercise significant influence over Galapagos.

Relationship and transactions with subsidiaries

Please see note 31 for an overview of the consolidated companies of the group, which are all wholly-owned subsidiaries of Galapagos NV.

Intercompany transactions between Galapagos NV and its subsidiaries, and amongst the subsidiaries, have been eliminated in the consolidation and are not disclosed in this note.

Relationship and transactions with key management personnel

Our key management personnel consists of the members of the management board and members of the supervisory board. All amounts mentioned in this section are based on expenses recognized in the financial statements for the relevant financial year.

Remuneration of key management personnel

On 31 December 2020, our management board had six members: Mr. Onno van de Stolpe, Mr. Bart Filius, Dr. Piet Wigerinck, Dr. Andre Hoekema, Dr. Walid Abi-Saab and Mr. Michele Manto. They provide their services to us on a full-time basis. On 31 December 2020, our supervisory board consisted of eight members: Dr. Raj Parekh, Mr. Howard Rowe, Ms. Katrine Bosley, Dr. Mary Kerr, Mr. Peter Guenter, Mr. Daniel O’Day, Dr. Linda Higgins and Dr. Elisabeth Svanberg. With the implementation of the new two-tier governance structure, the mandate of Mr. Onno van de Stolpe as member of the board of directors ended on 28 April 2020, as it is not allowed to be a member of the supervisory board and the management board at the same time. Mr. Onno van de Stolpe continues his mandate as member and chairman of the management board and CEO.

Only the CEO was, prior to the implementation of the two-tier governance structure, a member of both the executive committee and the board of directors. Our CEO did not receive any special remuneration for his board membership, as this was part of his total remuneration package in his capacity as management board member. As from 1 January 2020, Galapagos no longer grants any subscription rights to supervisory board members, taking into account the stricter rules of the Belgian Companies Code. Prior to 2020, supervisory board members were granted subscription rights and hence the table below for 2019 contains disclosures for supervisory board members.

Reference is made to the Remuneration Report, which discloses the remuneration awarded to each supervisory board and management board member individually during 2020.

The remuneration package of the members of key management personnel comprises:

Other

No loans, quasi-loans or other guarantees were given by Galapagos NV or any of its subsidiaries to members of the supervisory board and of the management board. We have not entered into transactions with our key management personnel, other than as described above with respect to remuneration arrangements relating to the exercise of their mandates as members of the management board and the supervisory board.