32. Related parties
Relationship and transactions with entities with control of, or significant influence over, Galapagos
Gilead
Gilead exercises 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.
By exercising Warrant A on 6 November 2019, 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 25.49% at 31 December 2021 and to 25.38% at 31 December 2022, due to seven capital increases resulting from the exercise of subscription rights under employee subscription right plans in the course of 2021 (four capital increases) and 2022 (three capital increases).
The presumption of significant influence is also confirmed by Gilead's right, for as long as it holds more than 20% of Galapagos’ share capital, to appoint two investor Board designees to Galapagos’ Board of Directors, out of a total of nine.
The following balances are outstanding at the end of the reporting period in relation to Gilead:
|
31 December |
|
|---|---|---|
(thousands of €) |
2022 |
2021 |
Relations with Gilead |
|
|
Trade and other receivables |
7,877 |
88,246 |
Trade and other payables |
- |
11,580 |
The trade and other receivables on 31 December 2021 mainly contained €50 million of receivables related to the in 2020 modified collaboration for filgotinib, €12.6 million related to the transfer of the sponsorship and operational and financial responsibility of the ongoing DIVERSITY clinical trial from Gilead to us and €23.8 million of profit and cost sharing receivables relating to our collaboration for filgotinib. All these amounts were paid during 2022. The outstanding receivables on 31 December 2022 mainly relate to development cost sharing receivables relating to our collaboration for filgotinib (€5.0 million) and €2.6 million of receivables relating to royalties.
During 2022 we recognized in revenue €230.4 million (€230.6 million for the year ended 31 December 2021) relating to the performance obligation for the drug discovery platform and a total of €174.4 million (€235.7 million for the year ended 31 December 2021) 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 in 2022 royalty income for an amount of €10.7 million in relation to the commercialization of filgotinib (€3.8 million for the year ended 31 December 2021).
Furthermore, we recognized €0.4 million (€18.1 million for the year ended 31 December 2021) 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). A net amount of €2.4 million (€81.3 million for the year ended 31 December 2021) relating to cross charges from and to Gilead relating to filgotinib was recognized as expense on the line research and development expenditure.
Finally, we recognized in 2022 €0.03 million as a deduction of sales and marketing expenses and €0.03 million as a research and development expenditure (compared to a deduction of €59.7 million of sales & marketing expenses and a deduction of €7.0 million of research & development expenditure for the year ended 31 December 2021) 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. This profit/(cost) share mechanism for sales and marketing expenses came to an end beginning of 2022, which explains the variance compared to 2021.
We purchased raw materials, semi-finished products and finished products of Jyseleca® from Gilead for an amount of €13.5 million for the year ended 31 December 2022 (€24.9 million for the year ended 31 December 2021).
As at 31 December 2022 we have two outstanding performance obligations under IFRS 15 towards Gilead, which are 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 €1.5 billion for the drug discovery platform (including the warrant issuance liability relating to subsequent warrant B) and €456 million for the performance obligation relating to filgotinib.
A detailed explanation of our transactions with Gilead in 2022 and 2021 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 33 for an overview of the consolidated companies of the group, which are all wholly-owned subsidiaries of Galapagos NV.
Relationship and transactions with key management personnel
Our key management personnel consists of the members of the Executive Committee and members of the Board of Directors. 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 2022, our Executive Committee had four members: Stoffels IMC BV (permanently represented by Dr. Paul Stoffels), Mr. Bart Filius, Dr. Walid Abi-Saab and Mr. Michele Manto. They provide their services to us on a full-time basis. On 31 December 2022, our Board of Directors consisted of nine members: Stoffels IMC BV (permanently represented by Dr. Paul Stoffels), Dr. Raj Parekh, Dr. Mary Kerr, Mr. Peter Guenter, Mr. Daniel O’Day, Dr. Linda Higgins, Dr. Elisabeth Svanberg, Mr. Jérôme Contamine and Dr. Dan Baker.
At the Annual Shareholders’ Meeting of 26 April 2022, the mandates of Howard Rowe and Katrine Bosley as members of the Board of Directors came to an end.
Effective from 1 January 2020, Galapagos no longer grants any subscription rights to members of the Board of Directors, taking into account the stricter rules of the Belgian Companies Code. Prior to 2020, Board members were granted subscription rights.
Effective from 26 April 2022, our new CEO, Stoffels IMC BV, permanently represented by Dr. Paul Stoffels, has been appointed as the Chairman of the Board of Directors of Galapagos. The CEO will only be remunerated for the performance of its executive functions as CEO and is not entitled to any additional remuneration for its mandates of Chairman of the Board of Directors or of any Committee.
Dr. Hoekema retired from Galapagos and was our Chief Business Officer and an Executive Committee member until 31 October 2022 and hence the table below for financial year 2022 contains disclosures on his remuneration until the aforementioned date.
Dr. Walid Abi-Saab departed Galapagos and was our Chief Medical Officer and an Executive Committee member until 31 December 2022; hence the table below for financial year 2022 contains disclosures on his remuneration.
Reference is made to the Remuneration Report, which discloses the remuneration awarded to each member of the Board of Directors and Executive Committee during 2022.
The remuneration package of the members of key management personnel comprises:
|
Year ended 31 December |
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Thousands of € (except for the number of subscription rights and RSUs) |
2022 |
2021 |
||||||||||||||||||
Remuneration of key management personnel: |
|
|
||||||||||||||||||
Short-term benefits |
3,444 |
4,264 |
||||||||||||||||||
Executive Committee members as a group(1) |
|
|
||||||||||||||||||
Gross salary |
2,341 |
2,621 |
||||||||||||||||||
Cash bonus(2) |
997 |
1,172 |
||||||||||||||||||
Other short-term benefits |
106 |
471 |
||||||||||||||||||
Long-term benefits for Executive Committee members as a group(3) |
- |
- |
||||||||||||||||||
Board fees and other short-term benefits for members of the |
|
|
||||||||||||||||||
Stofffels IMC BV (permanently represented by Dr. Paul Stoffels) |
|
|
||||||||||||||||||
Raj Parekh |
165 |
220 |
||||||||||||||||||
Howard Rowe(4) |
39 |
120 |
||||||||||||||||||
Katrine Bosley(4) |
21 |
65 |
||||||||||||||||||
Mary Kerr |
115 |
115 |
||||||||||||||||||
Peter Guenter |
115 |
115 |
||||||||||||||||||
Jérôme Contamine(5) |
102 |
|
||||||||||||||||||
Dan Baker(5) |
68 |
|
||||||||||||||||||
Elizabeth Svanberg |
115 |
115 |
||||||||||||||||||
Daniel O’Day(6) |
- |
- |
||||||||||||||||||
Linda Higgins(6) |
- |
- |
||||||||||||||||||
Post-employment benefits(7) |
240 |
399 |
||||||||||||||||||
Total benefits excluding subscription rights and RSUs |
4,424 |
5,413 |
||||||||||||||||||
Severance payments(8) |
|
802 |
||||||||||||||||||
Number of subscription rights granted in the year |
|
|
||||||||||||||||||
Executive Committee members as a group(1) |
1,124,000 |
275,000 |
||||||||||||||||||
Onno van de Stolpe |
- |
85,000 |
||||||||||||||||||
Stofffels IMC BV (permanently represented by Dr. Paul Stoffels) |
1,000,000 |
|
||||||||||||||||||
Bart Filius |
68,000 |
50,000 |
||||||||||||||||||
Piet Wigerinck |
- |
40,000 |
||||||||||||||||||
Andre Hoekema |
- |
30,000 |
||||||||||||||||||
Walid Abi-Saab |
32,000 |
40,000 |
||||||||||||||||||
Michele Manto |
24,000 |
30,000 |
||||||||||||||||||
Total number of subscription rights granted in the year |
1,124,000 |
275,000 |
||||||||||||||||||
Total cost of subscription rights granted in the year under IFRS 2 |
27,010 |
5,629 |
||||||||||||||||||
Number of RSUs granted in the year(9) |
|
|
||||||||||||||||||
Onno van de Stolpe |
- |
63,830 |
||||||||||||||||||
Stofffels IMC BV (permanently represented by Dr. Paul Stoffels) |
74,408 |
|
||||||||||||||||||
Bart Filius |
61,442 |
62,730 |
||||||||||||||||||
Piet Wigerinck |
- |
835 |
||||||||||||||||||
Andre Hoekema |
- |
51,433 |
||||||||||||||||||
Walid Abi-Saab |
37,274 |
44,038 |
||||||||||||||||||
Michele Manto |
27,354 |
31,694 |
||||||||||||||||||
Total number of RSUs granted in the year |
200,478 |
254,657 |
||||||||||||||||||
|
||||||||||||||||||||
Other
No loans, quasi-loans or other guarantees were given by Galapagos NV or any of its subsidiaries to members of the Board of Directors and of the Executive Committee. 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 or termination of their mandates as members of the Executive Committee and the Board of Directors.