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Annual Report 2024

Report of the Statutory Auditor

STATUTORY AUDITOR’S REPORT TO THE GENERAL MEETING OF GALAPAGOS NV FOR THE YEAR ENDED 31 DECEMBER 2024 (CONSOLIDATED FINANCIAL STATEMENTS)

In the context of the statutory audit of the consolidated financial statements of Galapagos NV (‘the Company’) and its subsidiaries (together referred to as 'the Group'), we hereby present our statutory auditor’s report. It includes our report of the consolidated financial statements and the other legal and regulatory requirements. This report is an integrated whole and is indivisible.

We have been appointed as statutory auditor by the general meeting of April 25, 2023, following the proposal formulated by the administrative body issued upon recommendation of the Audit Committee and upon presentation by the works council. Our statutory auditor’s mandate expires on the date of the General Meeting deliberating on the financial statements closed on December 31, 2025. We have performed the statutory audit of the consolidated financial statements of the Group for two consecutive years.

REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

Unqualified opinion

We have performed the statutory audit of the Group’s consolidated financial statements, which comprise the consolidated statement of financial position as at December 31, 2024, and the consolidated income statement and statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes, comprising material accounting policy information and other explanatory information, and which is characterised by a consolidated statement of financial position total of 4,135,719 thousand EUR and for which the consolidated income statement shows a profit for the year of 74,082 thousand EUR.

In our opinion, the consolidated financial statements give a true and fair view of the Group’s net equity and financial position as at December 31, 2024, as well as of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with the IFRS Accounting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.

Basis for unqualified opinion

We conducted our audit in accordance with International Standards on Auditing (ISA) as applicable in Belgium.

Our responsibilities under those standards are further described in the 'Statutory auditor's responsibilities for the audit of the consolidated financial statements' section in this report. We have complied with all the ethical requirements that are relevant to the audit of consolidated financial statements in Belgium, including those concerning independence.

We have obtained from the administrative body and company officials the explanations and information necessary for performing our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Disposal of the Jyseleca® business to Alfasigma and valuation of the related contingent consideration receivable

Key Audit Matter Description

As described in note 4 and 5 to the consolidated financial statements, on January 31, 2024, the Company completed the sale of the Jyseleca® business to Alfasigma and entered into a transition agreement with Alfasigma that specifies the responsibilities and services to be provided by both parties during a transition period following the completion of the sale. On that date, the Company recognized a gain on disposal of 52.5 million EUR, an upfront cash receipt of 50.0 million EUR, contingent consideration receivable estimated at 47.0 million EUR and a liability related to a contribution for research and development costs to Alfasigma of 40.0 million EUR.

The accounting for the disposal of the Jyseleca® business to Alfasigma was identified as a critical audit matter due to the judgement in identifying the different elements of the total consideration, determining the fair value of the contingent consideration receivable, and accounting for the transition agreement.

Auditing the fair value of the contingent consideration receivable was complex due to the significant judgment required in estimating the fair value. In particular, the fair value estimate required the use of a valuation methodology that was sensitive to certain significant assumptions, including net sales forecasts and the discount rate used in the model. Additionally, we exercised considerable judgment in auditing the research and development costs payable to Alfasigma, as required by the transition agreement, which was recognized as part of the overall gain from the divestiture of the Jyseleca® business. Variations in these judgments and estimates could notably affect the fair value of the contingent consideration receivable and the final gain realized from the disposal of the Jyseleca® business.

How the Key Audit Matter Was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included:

  • Testing the design and operating effectiveness of controls over management’s accounting treatment for the disposal of the Jyseleca® business, the derecognition of the disposal group, the calculation of the total consideration, including the development of the significant assumptions used in the valuation model of the contingent consideration receivable, related to: (i) estimates in the forecasts of future net sales and (ii) discount rate applied to the forecasts.
  • Evaluating management’s judgements over the identification of all assets and liabilities belonging to the disposal group by reading relevant agreements and assessing the Company’s ongoing involvement during the transition period as agreed with Alfasigma.
  • Verifying the components of the gain on disposal of the Jyseleca® business, including the identification of disposed off assets and liabilities, the determination of the contingent consideration received and recognition of liability for research and development costs payable by the Company to Alfasigma.
  • Assessing the reasonableness of significant inputs and assumptions used by management in the valuation model of the contingent consideration receivable, based on historical data and internal projections of Jyseleca® sales.
  • Utilizing professionals with specialized skills and knowledge to assist in evaluating the appropriateness of the discount rate applied to the contingent consideration receivable.

Impairment of goodwill and indefinite-lived intangibles assets

Key Audit Matter Description

As described in notes 13 and 14 to the consolidated financial statements, the Company reports a goodwill balance of 70.0 million EUR and indefinite-lived intangible assets valued at 28.2 million EUR associated with its CAR-T/Cell therapy operations. The Company conducted an impairment test on the CAR-T/Cell therapy cash generating unit at December 31, 2024, using a discounted cash flow model to determine its fair value less cost of disposal.

Auditing the Company’s impairment tests for goodwill and indefinite-lived intangibles was complex and required a high degree of judgment, largely due to the significant estimates needed to determine the fair value less cost to sell, of the cash-generating unit CAR-T/Cell therapy. The fair value estimates are specifically based on assumptions tailored to CAR-T research and development activities and its product candidates. These assumptions critically impact the significant uncertainty involved in reaching clinical development milestones. Essential factors, such as the timing of anticipated future cash flows, long-term sales projections driven by patient volumes, market share and pricing, and the discount rate, are pivotal to these estimates.

How the Key Audit Matter Was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included:

  • Critically evaluating and challenging the design and operating effectiveness of the Company's internal controls surrounding the goodwill and indefinite-lived intangible asset impairment exercise.
  • Assessing the appropriateness of the valuation methodology used by the Company to estimate the fair value less cost of disposal of the CAR-T/Cell Therapy.
  • Evaluating the Company’s rationale for defining the cash generating unit CAR-T/Cell therapy and examined the proper allocation of assets to the cash generating unit.
  • Scrutinizing the key assumptions and estimates used by the Company, such as projected cash flows, discount rates, and probability of success of achieving clinical development milestones. We compared these assumptions with industry reports to assess their reasonableness and consistency with external market conditions.
  • Involving professionals with valuation expertise to provide an independent evaluation of discount rate used.
  • Examining the sensitivity analyses performed by the Company to understand the impact of changes in key assumptions on the impairment assessment and performing our own sensitivity calculations.

Responsibilities of the administrative body for the drafting of the consolidated financial statements

The administrative body is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the IFRS Accounting Standards as adopted by the European Union and with the legal and regulatory provisions applicable in Belgium, and for such internal control as the administrative body determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

In preparing the consolidated financial statements, the administrative body is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the administrative body either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Statutory auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a statutory auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

When executing our audit, we respect the legal, regulatory and normative framework applicable for the audit of the consolidated financial statements in Belgium. However, a statutory audit does not guarantee the future viability of the Group, neither the efficiency and effectiveness of the management of the Group by the administrative body. Our responsibilities regarding the continuity assumption applied by the administrative body are described below.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;
  • Evaluate the appropriateness of accounting policy information used and the reasonableness of accounting estimates and related disclosures made by the administrative body;
  • Conclude on the appropriateness of the administrative body’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our statutory auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our statutory auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern;
  • Evaluate the overall presentation, structure and content of the consolidated financial statements and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the management, the supervision and the performance of the Group audit. We assume full responsibility for the auditor’s opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control identified during the audit.

We also provide the Audit Committee with a statement that we respected the relevant ethical requirements relating to independence, and we communicate with them about all relationships and other issues which may influence our independence, and, if applicable, about the related measures to guarantee our independence.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year, and are therefore the key audit matters. We describe these matters in our statutory auditor’s report, unless law or regulation precludes public disclosure about the matter.

OTHER LEGAL AND REGULATORY REQUIREMENTS

Responsibilities of the administrative body

The administrative body is responsible for the preparation and the contents of the director’s report on the consolidated financial statements, including the sustainability information and for the other information included in the annual report on the consolidated financial statements.

Responsibilities of the statutory auditor

In the context of our mission and in accordance with the Belgian standard (draft version 2025) which is complementary to the International Standards on Auditing (ISA) as applicable in Belgium, it is our responsibility to verify, in all material aspects, the director’s report on the consolidated financial statements and the other information included in the annual report on the consolidated financial statements, and to report on these elements.

Aspects relating to the director’s report on the consolidated financial statements and to the other information included in the annual report on the consolidated financial statements

The director’s report on the consolidated financial statements contains the consolidated sustainability statements that are subject to our separate limited assurance report. This section does not concern the assurance on the consolidated sustainability statements included in the director’s report. For this part of the director’s report on the consolidated financial statements, we refer to our separate limited assurance report on this matter.

In our opinion, after having performed specific procedures in relation to the director’s report, this director’s report is consistent with the consolidated financial statements for the same financial year, and it is prepared in accordance with article 3:32 of the Code of companies and associations.

In the context of our audit of the consolidated financial statements, we are also responsible for considering, in particular based on the knowledge we have obtained during the audit, whether the director’s report on the consolidated financial statements and the other information included in the annual report on the consolidated financial statements, contain a material misstatement, i.e. information which is inadequately disclosed or otherwise misleading. Based on the procedures we have performed, there are no material misstatements we have to report to you.

Statement concerning independence

  • Our audit firm and our network did not provide services which are incompatible with the statutory audit of the consolidated financial statements and our audit firm remained independent of the Group during the term of our mandate.
  • The fees related to additional services which are compatible with the statutory audit as referred to in article 3:65 of the Code of companies and associations were duly itemised and valued in the notes to the consolidated financial statements.

European Single Electronic Format (ESEF)

In accordance with the draft standard of the Institute of Bedrijfsrevisoren concerning the audit of conformity of the annual report with the European Single Electronic Format (hereinafter “ESEF”), we also audited the conformity of the ESEF format with the regulatory technical standards established by the European Delegated Regulation 2019/815 of December 17, 2018 (hereinafter: “Delegated Regulation”) and with the royal decree of November 14, 2007, concerning the obligations of issuers of financial instruments that are admitted to trade on a regulated market.

The administrative body is responsible for preparing an annual report in accordance with ESEF requirements, including the consolidated financial statements in the form of an electronic file in ESEF format (hereinafter "digital consolidated financial statements").

It is our responsibility to obtain sufficient and appropriate supporting information to conclude that the format of the annual report and mark-up language XBRL of the digital consolidated financial statements comply in all material aspects with the ESEF requirements under the Delegated Regulation and with the royal decree of November 14, 2007.

Based on our work, we believe the digital format of the annual report and the tagging of information in the official Dutch version of the digital consolidated financial statements included in the annual report of Galapagos NV as at December 31, 2024, and which will be available in the Belgian official mechanism for the storage of regulated information (STORI) of the FSMA, are in all material respects in accordance with the ESEF requirements pursuant to the Delegated Regulation and the royal decree of November 14, 2007.

Other statements

This report is in compliance with the contents of our additional report to the Audit Committee as referred to in article 11 of regulation (EU) No 537/2014.

 

Zaventem, March 27, 2025

 

BDO Bedrijfsrevisoren BV
Statutory auditor
Represented by Ellen Lombaerts*
Auditor

*Acting for a company