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 2022 and 2021.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2022 |
2021 |
Personnel costs |
(190,085) |
(165,239) |
Subcontracting |
(214,906) |
(251,085) |
Disposables and lab fees and premises costs |
(21,356) |
(24,025) |
Depreciation and impairment |
(54,462) |
(17,518) |
Professional fees |
(15,167) |
(15,862) |
Other operating expenses |
(19,107) |
(17,978) |
Total research and development expenditure |
(515,083) |
(491,707) |
The variance in our R&D expenditure in 2022 compared to 2021 was principally due to the following elements:
- Depreciation and impairment costs in 2022 amounted to €54.5 million (€17.5 million in 2021). This increase was primarily due to an impairment of €26.7 million of previously capitalized upfront fees related to our collaboration with Molecure on the dual chitinase inhibitor OATD-01 (GLPG4716) in fibrosis and impairments of intangible assets related to other discontinued projects recorded in 2022 for an amount of €8.9 million.
- Personnel costs increased from €165.2 million in 2021 to €190.1 million in 2022 primarily explained by increases in restructuring costs and accelerated non-cash cost recognition for subscription right plans related to good leavers.
- Subcontracting costs decreased from €251.1 million in 2021 to €214.9 million in 2022 following the evolution of our programs.
The table below summarizes our research and development expenditure for the years ended 31 December 2022 and 2021, broken down by program:
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2022 |
2021 |
Filgotinib program |
(245,286) |
(171,204) |
Ziritaxestat program |
(1,096) |
(26,725) |
SIKi program |
(47,727) |
(91,957) |
TYK2 program on GLPG3667 |
(24,467) |
(27,141) |
CAR-T programs in oncology |
(29,999) |
- |
Other programs |
(166,507) |
(174,680) |
Total research and development expenditure |
(515,083) |
(491,707) |
The increase in R&D expenditure in 2022 was primarily explained by cost increases for our filgotinib program and new investments in 2022 in CAR-T programs in oncology. This was partly offset by cost decreases due to the winding down of the ziritaxestat (IPF) program and reduced spend on our SIKi, TYK2 and other programs.
Sales and marketing expenses
The following table summarizes the sales and marketing expenses for the years ended 31 December 2022 and 2021.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2022 |
2021 |
Personnel costs |
(71,878) |
(59,102) |
Depreciation |
(2,473) |
(504) |
External outsourcing costs |
(54,057) |
(62,321) |
Sales and marketing expenses recharged to Gilead |
31 |
59,699 |
Professional fees |
(4,222) |
(532) |
Other operating expenses |
(14,956) |
(7,196) |
Total sales and marketing expenses |
(147,555) |
(69,956) |
Major part of the increase in our sales and marketing expenses in 2022 is due to the termination of our 50/50 filgotinib co-commercialization cost sharing agreement with Gilead as from 1 January 2022 explaining €59.7 million of the variance. Personnel costs increased by €12.8 million in 2022 compared to 2021, explained by an increase in salaries and benefits following the growth of the commercial work force from 248 average FTEs in 2021 to 305 average FTEs in 2022 driven by the commercial launch of filgotinib in Europe.
Other operating expenses increased from €7.2 million in 2021 to €15.0 million in 2022 largely due to increased travel expenses.
External outsourcing costs decreased by €8.3 million primarily explained by lower costs for marketing studies and materials.
General and administrative expenses
The following table summarizes the general and administrative expenses for the years ended 31 December 2022 and 2021.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2022 |
2021 |
Personnel costs |
(85,034) |
(71,190) |
Depreciation and impairment |
(8,631) |
(16,621) |
Legal and professional fees |
(24,368) |
(26,072) |
Other operating expenses |
(26,898) |
(27,016) |
Total general and administrative expenses |
(144,931) |
(140,899) |
The increase in our general and administrative expenses in 2022 was mainly explained by an increase in personnel expenses primarily due to accelerated non-cash cost recognition for our subscription right plans related to good leavers, and higher restructuring costs. This was partly offset by a decrease in depreciation and impairment costs largely due to an impairment cost in 2021 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).
Other operating income
The following table summarizes other operating income for the years ended 31 December 2022 and 2021.
|
Year ended 31 December |
|
|---|---|---|
(thousands of €) |
2022 |
2021 |
Grant income |
1,873 |
7,334 |
R&D incentives |
38,527 |
44,888 |
Other |
6,448 |
1,526 |
Total other operating income |
46,848 |
53,749 |
The grant income in 2022 and 2021 were 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 also included a grant of €5.4 million from the National Institute for Health and Disability Insurance (2022: nil). This grant aimed 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 €11.4 million for the year ended 31 December 2022 compared to €12.4 million for the year ended 31 December 2021
- Income from Belgian R&D incentives with regard to incurred R&D expenses, which represented €17.3 million for the year ended 31 December 2022 compared to €20.9 million for the year ended 31 December 2021
- Tax rebates on payroll withholding taxes of R&D personnel in Belgium and the Netherlands, representing €9.9 million for the year ended 31 December 2022 compared to €11.7 million for the year ended 31 December 2021.
Other income increased from €1.5 million in 2021 to €6.4 million in 2022 mainly due to rental income and a one-off sale of side products from our R&D activities.