7. Operating costs and other operating income
Operating costs
Research and development expenditure
The following table summarizes research and development expenditure for the years ended 31 December 2021 and 2020.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2021 |
2020 |
Personnel costs |
(165,239) |
(161,509) |
Subcontracting |
(251,085) |
(301,841) |
Disposables and lab fees and premises costs |
(24,025) |
(22,349) |
Depreciation and impairment |
(17,518) |
(11,707) |
Professional fees |
(15,862) |
(12,692) |
Other operating expenses |
(17,978) |
(13,570) |
Total research and development expenditure |
(491,707) |
(523,667) |
The decrease in our R&D expenditure was principally due to reduced subcontracting costs primarily due to the winding down of the programs with ziritaxestat (IPF), MOR106 (atopic dermatitis) and GLPG1972 (OA) and to reduced spend on our other programs. This was partly offset by costs increases for our filgotinib, Toledo (SIKi) and TYK2 programs, on a yearly comparison basis.
This decrease was partly offset by:
- A slight increase in personnel costs explained by an increase in salaries driven by higher average number of FTEs on a yearly comparison basis, mainly driven by an increase in our Medical Affairs staff. This increase was partly offset by decreased costs of the subscription right plans and by a reassessment of the defined benefit accounting of our employee benefit plans under IFRS.
- Impairment of capitalized in-licensing fees, and increase in professional fees due to additional consulting expenses related to the implementation of new R&D software applications.
- Increase in other operating expenses, mainly software and license expenses.
The table below summarizes our research and development expenditure for the years ended 31 December 2021 and 2020, broken down by program:
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2021 |
2020 |
Filgotinib program |
(171,204) |
(126,879) |
Ziritaxestat program |
(26,725) |
(55,902) |
OA program on GLPG1972 |
(2,285) |
(22,966) |
Toledo program |
(91,957) |
(87,107) |
TYK2 program on GLPG3667 |
(27,141) |
(20,199) |
AtD program on MOR106 |
(112) |
(7,618) |
Other programs |
(172,284) |
(202,996) |
Total research and development expenditure |
(491,707) |
(523,667) |
Sales and marketing expenses
The following table summarizes the sales and marketing expenses for the years ended 31 December 2021 and 2020.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2021 |
2020 |
Personnel costs |
(59,102) |
(31,727) |
Depreciation |
(504) |
(140) |
External outsourcing costs |
(62,321) |
(31,885) |
Sales and marketing expenses recharged to Gilead |
59,699 |
4,711 |
Professional fees |
(532) |
(3,420) |
Other operating expenses |
(7,196) |
(4,007) |
Total sales and marketing expenses |
(69,956) |
(61,757) |
The increase in our sales and marketing expenses for the year ended 31 December 2021, is due to the commercial launch of filgotinib in Europe.
Personnel costs increased explained by an increase in the commercial work force from 99 average FTEs in 2020 to 248 average FTEs in 2021. External outsourcing costs increased primarily explained by increased costs for marketing campaigns and information, market research and promotional expenses. This was partially offset by additional cost recharged by us to Gilead in the scope of our co-commercialization cost sharing for filgotinib in Belgium, the Netherlands, Luxembourg, France, Italy, Spain, Germany and Great Britain, for which we have recharged €59.7 million to Gilead in 2021 (compared to €4.7 million recharges for the year ended 31 December 2020). This was due to the shift of commercial activities from Gilead to us in the course of 2021.
As from 1 January 2022, the 50/50 filgotinib co-commercialization cost sharing agreement with Gilead will come to its end and we will therefore bear all commercialization costs for Europe.
General and administrative expenses
The following table summarizes the general and administrative expenses for the years ended 31 December 2021 and 2020.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2021 |
2020 |
Personnel costs |
(71,190) |
(70,110) |
Depreciation and impairment |
(16,621) |
(5,147) |
Legal and professional fees |
(26,072) |
(25,592) |
Other operating expenses |
(27,016) |
(17,908) |
Total general and administrative expenses |
(140,899) |
(118,757) |
The increase in our general and administrative expenses in 2021 was mainly due to an exceptional impairment cost of €9.3 million on other tangible fixed assets following our decision to reassess the construction project of our new future headquarter location in Mechelen (Belgium), as well as higher costs for our insurance programs (an increase of €4.0 million compared to 2020) and the newly applicable tax on securities accounts in 2021 in Belgium for an amount of €4.3 million, both reported as other operating expenses. The Belgian tax on securities accounts is an annual tax of 0.15% which is levied on securities accounts of which the average value calculated according to certain principles would exceed €1.0 million.
Other operating income
The following table summarizes other operating income for the years ended 31 December 2021 and 2020.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2021 |
2020 |
Grant income |
7,334 |
5,452 |
R&D incentives |
44,888 |
45,951 |
Other |
1,526 |
804 |
Total other operating income |
53,749 |
52,207 |
The grant income in 2021 was fully related to grants from a Flemish agency and the Belgian government. In many cases these grant agreements 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. Grant income in 2021 included a grant of €5.4 million from the National Institute for Health and Disability Insurance (2020: €5.0 million). This grant aims to incentivize innovative Belgian biotech companies who are performing research and development activities in order to identify new medicines.
R&D incentives income was primarily composed of:
- Income from an innovation incentive system of the French government, which represented €12.4 million of other operating income for the year ended 31 December 2021 compared to €12.4 million for the year ended 31 December 2020
- Income from Belgian R&D incentives with regard to incurred R&D expenses, which represented €20.9 million of other operating income for the year ended 31 December 2021 compared to €21.7 million for the year ended 31 December 2020
- Tax rebates on payroll withholding taxes of R&D personnel in Belgium and the Netherlands, representing €11.7 million of other operating income for the year ended 31 December 2021 compared to €11.9 million for the year ended 31 December 2020.