31. Share based payments

Subscription right plans

Presented below is a summary of subscription right activities for the reported periods. Various subscription right plans were approved for the benefit of our employees, for members of the Board of Directors and Executive Committee, and independent consultants of Galapagos NV.

The subscription rights offered to members of the Board of Directors vest over a period of 36 months at a rate of 1/36th per month. Effective 1 January 2020, we no longer grant subscription rights to members of the Board of Directors (non-executive directors), taking into account the stricter rules of the Belgian Companies Code.

Subscription rights issued and accepted before 2021 cannot be exercised before the end of the third calendar year following the year of the grant. In the event of a change of control over Galapagos NV, all outstanding subscription rights vest immediately and will be immediately exercisable.

Subscription rights under Subscription Right Plan 2021 BE cannot be exercised before the end of the third calendar year following the year of the grant. Subscription rights under Subscription Right Plan 2021 RMV and Subscription Right Plan 2021 ROW vest in instalments: with 25% of each grant being exercisable as of 1 January, 2022, 25% as of 1 January, 2023 and 50% (the remainder) as of 1 January, 2024.

During 2022, the Board of Directors issued subscription rights under several Subscription Right Plans:

• On 13 January 2022, the Board of Directors (formerly the Supervisory Board) issued 30,000 subscription rights (after acceptance by the beneficiary) within the framework of the authorized capital, for the benefit of a member of the personnel of the group under Subscription Right Plan 2022 (A). Subscription rights granted under Subscription Right Plan 2022 (A) vest in instalments: with 25% as of 1 January 2023, 25% as of 1 January 2024 and 50% (the remainder) as of 1 January 2025.
• On 26 January 2022, the Board of Directors (formerly the Supervisory Board) issued 1,000,000 subscription rights (after acceptance by the beneficiary) within the framework of the authorized capital, for the benefit of a member of the personnel of the group under Subscription Right Plan 2022 (B). Subscription rights granted under Subscription Right Plan 2022 (B) will in principle not vest prior to 1 January 2026.
• On 6 May 2022, the Board of Directors issued 2,091,239 subscription rights (after acceptance by the beneficiaries) within the framework of the authorized capital, for the benefit of the Executive Committee members and employees of the group under Subscription Right Plan 2022 BE, Subscription Right Plan 2022 RMV and Subscription Right Plan 2022 ROW. Subscription rights granted under Subscription Right Plan 2022 BE will in principle not vest prior to 1 January 2026 and subscription rights granted under Subscription Right Plan 2022 RMV and Subscription Right Plan 2022 ROW vest in instalments: with 25% of each grant as of 1 January 2024, 25% as of 1 January 2025 and 50% (the remainder) as of 1 January 2026.

The table below sets forth a summary of subscription rights outstanding and exercisable on 31 December 2022, per subscription right plan:

The table below sets forth the inputs into the valuation of the subscription rights.

The exercise price of the subscription rights is determined pursuant to the applicable provisions of the Belgian Law of 26 March 1999.

The weighted average estimated volatility is calculated on the basis of the implied volatility of the share price over the weighted average expected life of the subscription rights.

The weighted average expected life of the subscription right is calculated as the estimated duration until exercise, taking into account the specific features of the plans.

Our share-based compensation expense in 2022 in relation to subscription right plans amounted to €88,506 thousand (2021: €70,726 thousand).

The following table provides an overview of the outstanding subscription rights per category of subscription right holders on 31 December 2022 and 31 December 2021:

The outstanding subscription rights at the end of the accounting period have a weighted average exercise price of €83.12 (2021: €92.69) and a weighted average remaining life of 1,913 days (2021: 1,955 days).

Restricted stock units (RSUs)

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, in accordance with the terms and conditions of the relevant RSU program.

We currently have the following RSU programs:

Plan 2020.I, Plan 2021.I and Plan 2022.I: these plans are intended to provide a long-term incentive to certain of our employees and Executive Committee members and, as of 2020, replace the deferred portion of the bonus under the former Senior Management Bonus Scheme;

Plan 2019.II, Plan 2020.II, Plan 2021.II, Plan 2021.IV and Plan 2022.II: these plans are designed with the aim to retain a specific group of our key employees and Executive Committee members whose retention is considered so important for our future performance that an additional incentive is desirable. The beneficiaries are nominated by the Remuneration committee and the Board of Directors approves this list of beneficiaries. The four-year vesting period is designed to be aligned with long-term shareholder interests;

Plan 2019.I: this plan was granted at the discretion of the Board of Directors;

Plan 2019.III: this exceptional RSU grant took place in 2019 under an RSU Transaction Bonus Plan for the successful closing of the Gilead transaction;

Plan 2021.III and Plan 2022.III: these plans are intended to compensate employees who transferred from Gilead to us in the framework of the transfer of European commercialization rights, for the long-term incentive plans within Gilead under which unvested RSU awards lapse upon transfer out of the Gilead group. These employees received a one-time RSU grant from us.

The main characteristics of all these plans are as follows:

• the RSUs are offered for no consideration;
• generally four-year vesting period, with 25% vesting each year, except for some plans or some beneficiaries for which the RSUs will all vest at the same time three years after the offer date (bullet vesting); vest 50% after two years and 50% after three years or vest over three years with 34% vesting the first year and 33% in each of the remaining two years;
• payout will be in cash or shares, at Galapagos’ discretion, it being understood that in respect of members of the Executive Committee, any vesting prior to the third anniversary of the offer date will always give rise to a payment in cash rather than a delivery of shares as an incentive;
• any unvested RSUs are forfeited upon termination of service before the vesting date.

The table below sets forth a summary of RSUs outstanding at 31 December 2022, per RSU plan:

The RSUs are measured based on the volume-weighted average price of the Galapagos share on Euronext Brussels over the 30-calendar day period preceding the reporting period and they are re-measured at each reporting date. We recognize the corresponding expense and liability over the vesting period. The total liability relating to outstanding RSUs on 31 December 2022 amounted to €12.9 million (2021: €11.3 million).

The following table provides an overview of the outstanding RSUs per category of RSU holders on 31 December 2022 and 31 December 2021.