| Galapagos
announces sharp revenue increase and
profitability of service division in its half-year 2006 results •
Revenues of €11 M, up +78% on pro forma basis Mechelen, Belgium; 4 August 2006 - Galapagos NV (Euronext & LSE: GLPG), an integrated drug discovery company, announces its financial results for the first half of 2006 and reiterates revenue guidance for the second half of 2006. Galapagos’ first half 2006 operational and strategic highlights include: • Galapagos
drug discovery accelerates toward clinical development, led
by the rheumatoid arthritis program. Galapagos expanded its
portfolio and improved potency of molecules that target proprietary
targets in bone and joint disease, on track for clinical testing
in 2008. “Our achievements in the first half of 2006 will transform Galapagos into a leading European biotechnology company. The broad osteoarthritis alliance with GSK is a strong validation of our technology, and the acquisition of DPI’s operations have propelled BioFocus DPI to the top tier in our sector of drug discovery services. Galapagos is right on track with the execution of its strategic goals for 2006,” said Onno van de Stolpe, Galapagos’ CEO. “The services
business generated a €2.4 million segment profit in the
first six months of 2006. This underscores the value of our
hybrid business model,” added David Smith, Galapagos’
CFO “BioFocus is progressing as planned toward delivering
annual organic sales growth of between 40-70%. Including DPI
sales in the second half of 2006, BioFocus DPI more than tripled
the consolidated 2005 revenues.” Note: BioFocus plc, a listed company based in the United Kingdom was acquired by Galapagos on 17 October 2005. The interim financial statements for the six months ended 30 June 2005 therefore exclude the operating activities for BioFocus plc. Although not formally part of the interim financial statements, the following information is provided for illustration purposes, showing the results of the group had the combination occurred at the beginning of 2005. Cash payment for the DPI operations and their operational results will be consolidated starting from 6 July 2006.
Revenues for the first six months of 2006 totaled €11.0 million, an increase of 78% compared to €6.2 million pro forma revenues in the first six months of 2005. BioFocus revenues in the first six months of 2006 amounted to €10.2 million, a 96% increase compared to €5.2 million pro forma revenues in the same period last year. Income from government grants in the first half of 2006 was €0.8 million, compared to €1.0 million in the first half of 2005. Gross margins more than doubled from 21% to 47%. BioFocus contributed a segment profit of €2.4 million to the result of the Group in the first half of the year, compared to a loss of €0.4 million in the first half of 2005. Total research and development expenses in the first six months of 2006 amounted to €4.0 million, compared to €2.8 million on a pro forma basis in 2005. The loss before taxes for the first half year 2006 was €5.6 million, a 31% decrease compared to the €8.1 million pro forma loss in the first six months of 2005. Bone and joint programs The increased investment in R&D strengthened the drug discovery portfolio, progressing programs in bone and joint disease toward preclinical development. A step change in potency was achieved on the most advanced drug candidates in rheumatoid arthritis. The team delivered promising additional drug candidates using the fast follower approach, and a third rheumatoid arthritis target now has a compound series showing dual activity against cytokines as well as T-cell activation. In the osteoporosis program, a new biological model was developed to accelerate the analysis of bone development; the recently announced IWT grant for €1.8 million will fund development of more such models. Importantly, the Company remains on track to enter the clinic in 2008. Acquisition of the operations of Discovery Partners International On 13 June 2006, Galapagos announced the acquisition of the drug discovery operations of Discovery Partners International for €4.3 million in cash. This acquisition propels the new BioFocus DPI service division to the top tier in drug discovery services and provides additional capacity to deliver on the GSK osteoarthritis alliance. Integration of DPI’s operations is already well underway. The acquisition cash payment as well as the operational results of the DPI operations will be consolidated starting from 6 July 2006. Major collaborations • Galapagos
and GSK entered into a broad alliance to discover and develop
novel drugs in osteoarthritis. In this multi-year, multi-program
alliance, Galapagos will develop molecules based on proprietary
targets and take these all the way through to clinical Proof
of Concept (Phase IIA), with the option for GSK’s CEEDD
(Center of Excellence for External Drug Discovery) to further
develop and market the resulting drugs. This alliance builds
on Galapagos’ internal target and drug discovery program
in osteoarthritis and could result in €137 million in payments
by GSK based on up-front fees, success dependent milestone payments
and equity investments, plus up to double digit royalties on
worldwide sales. Notably, this was the first European alliance
for GSK’s CEEDD and only its second since inception. With
this deal, the total downstream milestones that Galapagos could
benefit from have now grown to well over €220 million. Consolidated results Note: Results are unaudited and include BioFocus results from 1 October 2005. Cash payment for the DPI operations and their operational results will be consolidated starting from 6 July 2006.
Consolidated revenues for the first six months of 2006 totaled €11.0 million, compared to €2.2 million in the first six months of 2005. Collaborative revenue in the first six months of 2006 amounted to €10.2 million, compared to €1.2 million in the same period last year. Income from government grants in the first half of 2006 was €0.8 million, compared to €1.0 million in the first half of 2005. The net loss for the half year 2006 was €5.5 million, or €0.42 per share, compared to €3.4 million, or €0.51 per share for the half year 2005. Total research and development expenses in the first six months of 2006 amounted to €4.0 million, compared to €2.8 million in 2005. Cash burn for the first six months of 2006 amounted to €3.6 million, as planned. Galapagos’ cash and cash equivalents totaled €20.0 million on 30 June 2006. Financial outlook second half of 2006 When Galapagos announced the acquisition of DPI’s drug discovery assets on 13 June 2006, guidance for 2006 full-year revenues was increased to a range of €33 to €38 million, a 200 - 240% increase over consolidated revenues of €11.2 million in 2005. Previously, Galapagos has given guidance on its investment in R&D in 2006. As a result of the GSK alliance, R&D investments in the second half of 2006 will further increase, and the Company now expects a R&D investment for 2006 of €12.0 million, a 79% increase over 2005. Interim report half year 2006 The electronic version of Galapagos’ Interim Report for half year 2006 is now available online at www.glpg.com/investor/financial_reports.htm. Printed versions of the report can be requested by e-mailing ir@glpg.com.
Galapagos will conduct a conference call open to the public today at 09.30 Central European Time (CET), which will also be webcast. To participate in the conference call, please call +32 2290 1608 ten minutes prior to commencement. A question and answer session will follow the presentation of the results. The live audio webcast can be accessed via Galapagos’ website at www.glpg.com. The archived webcast also will be available for replay shortly after the close of the call. About Galapagos
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