Remuneration of Executive Committee members

Remuneration structure components

The total remuneration package of the CEO and other Executive Committee members consists of (i) fixed remuneration, being a base salary, pension and other benefits and (ii) variable remuneration, being a cash bonus, the grant of restricted stock units (“RSUs”) and subscription rights (“SRs”) that will be further outlined below. For the variable part of the Executive Committee members’ remuneration, performance criteria apply.

Performance criteria and evaluation methods for Executive Committee members

For 2022, the performance criteria considered in decision-making for cash bonuses (short-term incentive) and annual RSU grants (long-term incentive) include the elements identified in the table below, whereby each of the corporate objectives is further detailed in a clear and measurable way to enable robust evaluation by the Remuneration Committee as well as by the Board of Directors.

Our ambition is to continue establishing ourselves as a successful commercial stage biopharmaceutical company focused on the discovery, development and commercialization of innovative medicines in areas of unmet medical needs with the aim to improve the lives of people suffering from serious diseases. In order to achieve this long-term goal, we are striving for continued innovation in our research efforts and sound clinical progress year over year, while maintaining a healthy cash position. Considering our new strategy, we shifted from novel target-based discovery to patient-focused medical need research and development with a focus on our key therapeutic areas of immunology and oncology. In addition, our corporate development and business goals aim to foster the growth of the company and value creation for all shareholders, including via business development opportunities, to complement our internal pipeline. Finally, our commercial development goal intends to continue to build our filgotinib franchise throughout Europe, in order to become a commercially successful biopharmaceutical company which brings transformational medicines to patients (subject to having obtained governmental approvals).

The individual performance evaluation is supported by the group’s performance management system that assesses the performance of all employees (including Executive Committee members) over the calendar year against a set of objectives determined at the start of the year.

Taking all considerations into account, Galapagos’ policy is to grant a number of subscription rights each year based on a consideration of each Executive Committee member’s role, individual performance for the performance year as well as individual impact on long-term value creation.

The Remuneration Committee is responsible for evaluating the Executive Committee members’ performance in accordance with the principles set out above. The Remuneration Committee is composed exclusively of non-executive directors and a majority of its members qualify as independent Board members. This helps prevent the occurrence of conflicts of interest regarding the implementation of the remuneration policy in relation to the Executive Committee members. The members of the Executive Committee are not invited to take part in any discussions of the Remuneration Committee related to their own individual remuneration.

The level of achievement of the objectives for the CEO is assessed at the end of each year by the Remuneration Committee and discussed and finally established by the Board of Directors. The level of achievement of the objectives of the other members of the Executive Committee is assessed by the CEO at the end of the year, discussed by the Remuneration Committee and finally established by the Board of Directors.

Fixed remuneration

The Board of Directors, upon recommendation of the Remuneration Committee, decided that for the financial year 2022 each member of the Executive Committee, including the CEO, received the base salary (gross amount) as identified in the total remuneration table above. The fixed remuneration is a base salary designed to fit responsibilities, relevant experience and competences, in line with market rates for equivalent positions.

Variable remuneration

Galapagos’ policy is to grant a number of long-term incentives based on the individual performance for the performance year while also considering individual (future) impact on long-term value creation. Bonuses consist both of a short-term cash component and a long-term RSU component. Members of the Executive Committee were also offered subscription rights in 2022.

Under our remuneration policy, the CEO’s cash bonus can be maximum 75% of its base salary. The aggregate cash bonuses of the other members of the Executive Committee can be maximum 50% of the aggregate base salaries. An equivalent number of RSUs will be granted to the CEO and the other members of the Executive Committee under the RSU Annual Long-Term Incentive Plan.

(a) Short-term variable remuneration

Upon recommendation of the Remuneration Committee, the Board of Directors determined an overall achievement of 80% (out of a maximum of 100%) against the 2022 corporate objectives. In arriving at this determination, the Board considered that some of the objectives were not achieved, some had been met and some overachieved. This determination included an evaluation of activities that were either stopped, started or modified by the strategic reset that occurred during the course of the year following the appointment of our new CEO.

The performance highlights over 2022 included: (i) the acquisition of CellPoint & AboundBio, propelling us into the field of oncology, and next generation CAR-Ts and biological drug modalities, (ii) Jyseleca® performance beyond expectations, with actual full year net sales of €87.6 million, at the upper end of the guidance of €80 – 90 million and above the initial 2022 net sales guidance of €65 – 75 million – reaching 18,000 patients in Europe and reimbursed for RA in 15 countries, and for UC in 11 countries, (iii) regulatory progress, including completion of the PRAC article 20 procedure for all JAK inhibitors in Europe to treat certain inflammatory disorders, including filgotinib, and separately, a positive CHMP opinion on the type II variation application for filgotinib based on the MANTA and MANTA-RAy studies, resulting in a label update of the European label for RA and UC, (iv) the launch of our new Forward, Faster strategy involving the transformation of our R&D organization into a fit-for-purpose R&D organization, built around our key therapeutic areas oncology and immunology and (v) initial encouraging safety and efficacy results from ongoing Phase 1/2 study in refractory/relapsed non-Hodgkin’s lymphoma with CD19 CAR-T candidate, GLPG5101, manufactured at point-of-care. 

The 80% corporate funding level is applicable to the wider Galapagos workforce for the corporate component of their bonus funding, including the members of the Executive Committee. The Board of Directors, for the CEO upon recommendation of the Remuneration Committee and for the other Executive Committee members upon proposals of the CEO, considered this level of funding, as applied to the wider workforce, together with individual performance of Executive Committee members in order to determine the individual cash bonus outcomes for 2022 set out in the total remuneration table above: Stoffels IMC BV, permanently represented by Dr. Paul Stoffels (€337,500; 60% of 2022 base salary)²⁸, Mr. Bart Filius (€230,000; 45% of 2022 base salary), and Mr. Michele Manto (€164,300; 47% of 2022 base salary). Our former Executive Committee members have the following cash bonus outcomes: Dr. Andre Hoekema (€100,000; 31% of 2022 base salary) and Dr. Walid Abi-Saab (€165,000; 38% of 2022 base salary). These 2022 cash bonuses will be paid in April 2023. With the exception of the retired Chief Business Officer and Chief Medical Officer, each of the members of the Executive Committee will be granted an equivalent number of RSUs under the 2023 RSU Annual Long-Term Incentive Plan as long-term variable remuneration. 

(b) Long-term variable remuneration

In 2022, our (new) CEO, Stoffels IMC BV (permanently represented by Dr. Paul Stoffels), was offered 1,000,000 subscription rights under Subscription Right Plan 2022 (B) as a sign-on remuneration given the strategic importance of hiring Dr. Stoffels as CEO, his knowledge and experience in the pharmaceutical sector and leadership capabilities. He accepted all the granted subscription rights.

The members of the Executive Committee were offered new subscription rights under Subscription Right Plan 2022 BE and each accepted all subscription rights granted as per the following: Mr. Bart Filius: 68,000 subscription rights, Dr. Walid Abi-Saab: 32,000 subscription rights and Mr. Michele Manto: 24,000 subscription rights. Further reference is made to the Equity components of the remuneration section, which contains, among others, a description of the 2022 grant of subscription rights.

The total remuneration table above sets forth the value of the number of RSUs vested and paid out in 2022 for each member of the Executive Committee. Each RSU represents the right to receive, at Galapagos’ discretion, one Galapagos share or a payment in cash of an amount equivalent to the volume-weighted average price of the Galapagos share on Euronext Brussels over the 30-calendar day period preceding the relevant vesting date. During 2022, there were RSU vestings under five different RSU plans: Plan 2019.I, Plan 2019.II, Plan 2019.III, Plan 2020.II and Plan 2021.IV. The pay-outs to the Executive Committee members occurred accordingly and the aggregate amounts are set forth in the total remuneration table above. Reference is made to the Equity components of the remuneration section.

For a description of the RSU grants to the Executive Committee members in 2022, reference is made to the Equity components of the remuneration section. This section also sets out the main characteristics of the different RSU plans issued by Galapagos to its members of the Executive Committee in 2019, 2020, 2021 and 2022.

Pension and other components

In addition, the members of the Executive Committee enjoy a number of benefits in line with our remuneration policy such as a retirement plan, insurance programs (covering life insurance, disability, travel insurance and health), company cars and the provision of certain tax services. The aforementioned retirement plan is set up as a defined contribution arrangement and is in line with market practice in Belgium. The pension and other components of the remuneration of each Executive Committee member are summarized in the total remuneration table above.