Overview statutory results of Galapagos NV
Galapagos NV’s operating income in 2020 amounted to €1,037.0 million compared to €1,324.3 million in 2019. This decrease is due to the one-time revenue recognition in 2019 of the upfront payment received in August 2019 from Gilead related to ziritaxestat for €667.0 million, partly compensated by higher turnover for €323.0 million, primarily due to increased milestone revenues, upfront payments and royalties related to the collaboration agreement with Gilead. On the other hand there was also an increase due to internally generated intangible assets – being capitalized R&D expenses – which contributed by €60.9 million more to operating income than previous year. Other operating income amounted to €17.4 million, including €5.5 million of grants recognized for R&D projects and €9.8 million recuperation of withholding taxes for scientists.
The operating costs of 2020 amounted to €1,146.0 million compared to €930.5 million in 2019. Services and other goods increased substantially to €543.0 million compared to €444.1 million in 2019, primarily due to increased internal and external subcontracting for our preclinical studies and clinical trials as well as increased fees for insourced personnel.
Material purchases increased slightly from €7.5 million in 2019 to €10.3 million in 2020.
Personnel costs in 2020 amounted to €59.9 million compared to €52.2 million in 2019. The number of employees at Galapagos NV at the end of 2020 amounted to 508 as compared to 361 at the end of 2019, excluding insourced personnel.
Depreciation increased to €467.8 million in 2020, compared to €403.3 million in 2019, and related primarily to amortization of R&D expenses.
Galapagos NV’s 2020 financial income decreased to €25.8 million compared to €27.5 million in 2019, while financial costs increased to €139.9 million compared to €64.0 million in 2019. This can mainly be explained by higher non-cash currency exchange losses on U.S. dollar in 2020. Non-recurring finance income consisted of €5.5 million of gain on sale of financial assets.
Tax income recorded in 2020 of €21.6 million as compared to €21.6 million tax income in 2019, related to tax incentives for investments in intangible fixed assets.
Galapagos NV capitalizes its incurred R&D expenses to the extent that the costs capitalized do not exceed a prudent estimate of their value in use or their future economic benefits for the entity. The ability to recover the capitalized amounts takes into account assumptions (e.g. future peak sales, market share, sale prices, attrition rates regarding the successful completion of the different R&D phases) which have a highly judgmental nature and depend on the outcome of uncertain factors which are beyond the control of the entity (e.g. test results). The achievement of these assumptions is critical and may impact the recoverability of the amounts capitalized. R&D expenses capitalized are fully amortized in the year in which they are capitalized.
Investments in fixed assets in 2020 amounted to €55.8 million, excluding the internally generated assets. They consisted mainly of investments in intangible assets, being licenses and software, as well of costs for new laboratory and IT equipment.
Non-current and current other receivables amounted to respectively €78.3 million and €71.8 million and included the receivable for tax incentives amounting to respectively €78.3 million and €5.5 million in 2020, compared to total other receivables for tax incentives of €67.0 million in 2019.
Galapagos NV’s cash position at the end of 2020 amounted to €5,122.3 million.
The non-consolidated annual accounts of Galapagos NV which we submit for your approval were prepared in accordance with Belgian accounting rules as well as with the legal and regulatory requirements. They show a negative result. The financial year 2020 closed with a loss of €196.0 million compared to a profit of €379.0 million in 2019. The non-consolidated annual accounts of Galapagos NV show accumulated losses of €276.5 million as at 31 December 2020; we refer to the Going concern statement for justification for the application of the valuation rules under the going concern assumption.
In 2020, Galapagos NV did not make use of financial instruments, financial instruments are not actively used.