5. Discontinued operations and assets held for sale
On 30 October 2023 we announced that we had signed a letter of intent contemplating a transfer of the Jyseleca® business to Alfasigma, including the European and UK Marketing Authorizations, the commercial, medical and development activities for Jyseleca® and approximately 400 positions in 14 European countries.
On 30 December 2023 we signed a final share and asset purchase agreement with Alfasigma.
On 31 December 2023, the transaction was still subject to certain closing conditions such as the finalization of the consultation process with the workers councils and FDI clearance in Italy, France and Denmark. The transaction was closed on 31 January 2024, upon obtaining all necessary approvals. We received a €50.0 million upfront payment in 2024, and are entitled to potential sales-based milestone payments totalling €120.0 million and mid-single to mid-double-digit royalties on European sales. We will contribute up to €40.0 million to Alfasigma by June 2025 for Jyseleca® related development activities.
On 31 January 2024, we also signed a transition agreement with Alfasigma enacting the responsibilities and services that will be provided by the parties during a transition period for the transfer of the business. The gradual transfer of our remaining inventories to Alfasigma is also governed by this contract.
The transfer of our Jyseleca® business has been determined to meet the criteria to be classified as held for sale and discontinued operations in our financial statements for the year ended 31 December 2023.
The post-tax result from discontinued operations can be disaggregated in the following items:
(i) Financial performance
|
Year ended 31 December |
|
|---|---|---|
(thousands of €, except per share data) |
2023 |
2022 |
Product net sales |
112,339 |
87,599 |
Collaboration revenues |
431,465 |
176,432 |
Total net revenues |
543,804 |
264,031 |
|
|
|
Cost of sales |
(18,022) |
(12,079) |
Research and development expenditure |
(190,177) |
(245,286) |
Sales and marketing expenses |
(113,356) |
(144,075) |
General and administrative expenses |
(17,989) |
(9,776) |
Other operating income |
13,003 |
10,721 |
|
|
|
Operating profit/loss (-) |
217,262 |
(136,464) |
|
|
|
Fair value adjustments and net currency exchange differences |
(13) |
(25) |
Other financial income |
679 |
15 |
Other financial expenses |
(167) |
(7,825) |
|
|
|
Profit /loss (-) before taxes |
217,761 |
(144,298) |
|
|
|
Income taxes |
(2,076) |
(2,272) |
|
|
|
Net profit/loss (-) |
215,685 |
(146,570) |
|
|
|
Basic and diluted earnings/loss (-) per share from discontinued operations |
3.27 |
(2.23) |
Weighted average number of shares - Basic |
65,884 |
65,699 |
Weighted average number of shares - Diluted |
65,933 |
65,699 |
Jyseleca® product net sales in Europe amounted to €112.3 million in 2023, compared to €87.6 million in 2022, of which €8.1 million realized in Belgium (€7.3 million in 2022).
Collaboration revenues in discontinued operations related to revenue recognition of the collaboration agreement with Gilead for the filgotinib development amount to €429.4 million in 2023 compared to €174.4 million last year.
Effective 31 January 2024, following the closing of the transaction between us and Alfasigma to transfer the Jyseleca® business to Alfasigma, we assigned our rights and obligations under the filgotinib collaboration with Gilead to Alfasigma, except for our right to receive royalties from Gilead on net sales in the Gilead Territory under a separate agreement between Gilead and us entered into in October 2023. As a consequence, our performance obligation towards Gilead for the development of filgotinib will come to its end, and the total estimated remaining costs to complete the filgotinib development was substantially reduced leading to a major increase in the percentage of completion of our performance obligation (applying the “cost-to-cost” input model) and a considerable positive catch-up of revenue explaining the increase in revenue recognition for the year 2023 compared to 2022.
We refer to note 2 for a general description of our collaboration with Gilead.
On 31 December 2023, the remaining deferred income related to the filgotinib development amounts to €26.3 million which will mainly be released in revenue in 2024.
The following major classes of assets and liabilities relating to these operations have been classified as held for sale in the consolidated statement of financial position on 31 December 2023:
(ii) Assets and liabilities held for sale
|
31 December |
|---|---|
(thousands of €) |
2023 |
Property, plant and equipment |
4,194 |
Deferred tax assets |
292 |
Other non-current assets |
598 |
Inventories |
737 |
Trade and other receivables |
15,786 |
Cash and cash equivalents |
7 |
Other current assets |
471 |
Total assets in disposal group classified as held for sale |
22,085 |
|
|
Retirement benefit liabilities |
1,160 |
Non-current lease liabilities |
2,327 |
Other non-current liabilities |
329 |
Current lease liabilities |
1,308 |
Trade and other liabilities |
25,619 |
Current tax payable |
1,242 |
Current deferred income |
59 |
Total liabilities directly associated with assets in disposal group classified as held for sale |
32,044 |
|
|
Net liability held for sale |
(9,959) |
This disposal group mainly contains all assets and liabilities of the Galapagos subsidiaries that were fully dedicated to the Jyseleca® business and that will be transferred to Alfasigma in the current transaction. The divestiture includes 100% of the shares of the following subsidiaries, including most of the employees: Galapagos Biotech Limited (UK), Galapagos Biopharma Belgium BV, Galapagos Biopharma GmbH, Galapagos Biopharma Italy S.r.l., Galapagos Biopharma Netherlands B.V., Galapagos Biopharma Spain S.L.U., Galapagos Biopharma Denmark ApS, Galapagos Biopharma Sweden AB, Galapagos Biopharma Finland Oy, Galapagos Biopharma Ireland Ltd., Galapagos Biopharma Norway AS, Galapagos Biopharma Austria GmbH. In addition, and as part of the same transaction, we will transfer all assets, liabilities and employees directly related to the Jyseleca® business but belonging to Galapagos NV or other Galapagos subsidiaries, of which the main asset is the worldwide IP relating to Jyseleca®. Our inventories were not considered as part of the disposal group as these did not transfer to Alfasigma on closing of the transaction on 31 January 2024 but will gradually transfer to Alfasigma during the coming years and we will bear the risks associated with it as long as it is not transferred.
Held for sale assets are stated at their carrying amount, which is lower than the fair value less costs to sell. We concluded that the expected present value of the purchase price to be obtained from Alfasigma for the sale of the Jyseleca® business approximates the fair value less costs to sell of the disposal group.
(iii) Cash flow from discontinued operations
(thousands of €) |
2023 |
2022 |
|---|---|---|
Net cash flow used in operating activities |
(175,627) |
(191,095) |
Net cash flow used in investing activities |
(105) |
(136) |
Net cash flow used in financing activities |
(1,928) |
(1,841) |
Net cash flow used in discontinued operations |
(177,660) |
(193,072) |