Reporting on EU Taxonomy

EU Taxonomy 2023 statement

The European Commission’s action plan on financing sustainable growth led to the creation of an EU classification system for sustainable activities, also known as the EU taxonomy. As a listed company with more than 500 employees, Galapagos is in scope of the EU Taxonomy Regulation¹⁶. As indicated in the Delegated Regulation of (EU) 2021/2178, non-financial undertakings shall disclose the proportion of Taxonomy-eligible and alignment of economic activities in their total turnover, capital expenditure (“CapEx”), operational expenditure (“OpEx”) and the qualitative information starting from reporting year 2022, including comparative figures for eligibility related to climate change mitigation and adaptation. Starting in reporting year 2023, the proportion of Taxonomy eligibility shall be disclosed for all remaining objectives.

The EU Taxonomy introduces a classification system for environmentally sustainable activities, and an activity is deemed environmentally sustainable if it meets all of the following overarching criteria:

• substantially contributing to at least one of the six environmental objectives of the EU Taxonomy Regulation: (i) climate change mitigation; (ii) climate change adaptation; (iii) sustainable use and protection of water and marine resources; (iv) transition to a circular economy, (v) pollution prevention and control; and (vi) protection and restoration of biodiversity and ecosystems;
• not significantly harming any of these environmental objectives;
• complying with minimum safeguards; and
• complying with certain scientifically based technical screening criteria (‘TSCs’) established by the EU Commission.

The EU published a catalog of economic activities that can be considered as Taxonomy-eligible activities; the determination of eligibility happens on the basis of the description of activities. An eligible activity becomes Taxonomy-aligned when it meets all of the aforementioned overarching criteria, which includes that such activity should substantially contribute to at least one of the six environmental objectives.

Following a thorough analysis of the EU Taxonomy legal framework¹⁷, which was initiated by reviewing the company’s NACE codes in light of the EU Taxonomy identified activities, we do not consider our core business activities of discovering, developing and commercializing innovative medicines to be in scope of the Climate Delegated Act. Additionally, the newly added EU Taxonomy activities were screened (such as manufacturing of medicinal products), but not considered as within our control as Jyseleca^® is manufactured by a third party. 

Within the context of our ambition to become climate neutral by 2028, we screened the related activities and identified the following activities included in the EU Taxonomy:

• Acquisition and ownership of buildings
• Consultancy for physical climate risk management and adaptation
• Installation and operation of electric heat pumps
• Transport by motorbike, passenger cars and light commercial vehicles

For the determination of turnover, CapEx and OpEx during this analysis, we use the reported data in the 2023 consolidated financial statements included in this report:

• Turnover covers all continuing activities of Galapagos as of 31 December 2023 and the denominator can be reconciled with the 2023 IFRS total net revenues of €239.7 million as disclosed in note 7, being the revenues collaboration activities.
• CapEx consists of additions to tangible and intangible assets during the financial year 2023 considered before depreciation, amortization and any re-measurements recognized by Galapagos pursuant to IAS 38. The denominator (total CapEx) can be reconciled with the sum of the lines “Additions” disclosed in notes 14 and 15 (total €20.8 million) of the consolidated financial statements. The majority of CapEx is associated with software and databases, and property, plant and equipment (covering fully-owned and leased).
• OpEx, according to the EU Taxonomy, is determined by the direct non-capitalized costs of research and development, building renovation measures, short-term leases, maintenance and repair and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment by the undertaking or third-party outsources that are necessary to ensure the continued and effective functioning of such assets. These costs are for the majority associated with our R&D expenditure, as disclosed in note 8 (total €375.3 million).

Based on available data and the assessment of requirements, we report 0% Taxonomy eligible Turnover, and therefore 0% Taxonomy aligned. As a result of our climate neutral ambition by 2028 and the related investments we report 13.59% Taxonomy eligible CapEx, with 2.77% Taxonomy aligned, and 0.06% Taxonomy eligible and aligned OpEx (as presented in the tables in Appendix).

Please refer to the Appendix to this Annual Report for the disclosure on KPIs of non-financial undertakings as required by Annexes II of the Climate Delegated Act.

The limited “eligibility” under the EU Taxonomy refers to the fact that our core activities currently remain outside of the scope of the economic activities for which TSCs have been developed under the Delegated Regulations. 

We note that the required disclosures under the EU Taxonomy Regulation will keep evolving and that we will continue to consider its impact as well as future reporting obligations.