Galapagos reports record revenues and increased profitability in 2010

  • Revenues €136.6 M (+29%)
  • Net profit €4.4 M (’09: €3.0 M)
  • Operating profit €1.0 M (’09: €1.7 M)  
  • Year end cash €40.4 M
  • Over 50 R&D programs, including 7 programs in clinical development
  • 2011 guidance: operational and net profitability, positive cash-flow, revenues at least €150 M

Click here to access the live audio webcast presentation at 10.00 CET,
call number +32 2290 1791

Mechelen, Belgium; 4 March 2011 – Galapagos NV (Euronext: GLPG) presents audited financial results for the full year 2010 and highlights the successful execution of its business strategy.

“No other company in the world can discover drug targets the way Galapagos does.  We have a unique ability to create new medicines from these targets; this satisfies the patient need for breakthrough therapies in major diseases, at a time when pharmaceutical companies struggle to deliver.  Galapagos has grown into a profitable biotech company that is seen as one of the major successes in the industry.  The combined cash flow from our services and our pharma alliances enable Galapagos to build a broad pipeline of new mode-of-action drugs.  With plans to show results in two patient studies, 2011 will be a pivotal year for the Company,” said Galapagos’ CEO Onno van de Stolpe.

Guillaume Jetten, Galapagos’ CFO, added, “Galapagos achieved its second year of operational and net profitability in 2010, despite the ending of our alliances with Merck.  This proves that our business model forms a solid basis for financing our operations.  We have a flexible and tightly controlled cost base, we generate milestones on a regular basis and have steady income from fee-for-service deals.  This combination enables us to fund over 50 R&D programs, including 7 in clinical development.”

Key figures (consolidated)
(€ millions, except basic result per share)

  31 Dec 2010 31 Dec 2009
Revenues 136.6 106.0
Negative goodwill 5.0 –
Total operating income 141.6 106.0
Cost of sales -31.4 -25.1
R&D expenditure -84.7 -60.0
General & administrative -21.5 -16.9
Sales & marketing -2.6 -2.1
Restructuring & integration -0.4 -0.3
Operating profit 1.0 1.7
Net profit for the period 4.4 3.0
Basic profit per share 0.18 0.14
Cash and cash equivalents 40.4 47.4

Notes:

  1. Cash and cash equivalents on 31 December 2010 did not include €25.0 million in receivables for revenues recognized in 2010. 
  2. The results of Argenta and Zagreb have been integrated into the full year 2010 financial reporting.
  3. Negative goodwill was recorded for the Zagreb Research Center. It represents the difference between the net estimated fair value of the net assets acquired and the purchase price.

Details of the financial results
Revenues
Galapagos’ revenues for the full year 2010 grew 29% to €136.6 million.  The service operations generated €65.8 million in revenues (+30%), including €15.0 million intra-company revenues, which are eliminated in the consolidation.  The R&D division increased its revenues by 41% to €89.9 million, including €3.6 million intra-company revenues. 

Result
The Group net profit for the full year 2010 was €4.4 million, or €0.18 earnings per share, compared to €3.0 million, or €0.14 earnings per share in 2009.  R&D investment increased from €60.0 million to €84.7 million, making Galapagos’ R&D budget one of the largest in European biotech. 

The 2010 segment report was impacted by a transfer pricing study, changing the distribution of the operating result between the two divisions.  Consequently, the R&D result improved to almost break even.  The BioFocus and Argenta service operations reported a gross margin of 33% and a positive segment result of €4.8 million using the new transfer pricing.  The service operations showed improved results in the second half of 2010; this was attributable to the acquisition of Argenta, better capacity utilization, and the initiation of work on the two largest service deals to date. 

General and administrative costs increased to €21.5 million due to the acquisition of Argenta and the Zagreb Research Center, but remained at an unchanged 16% of revenues.  The group net result was positively impacted by recognition of €3.8 million in deferred tax assets.

Cash position
Galapagos’ cash and cash equivalents amounted to €40.4 million on 31 December 2010, compared to €47.4 million at the end of 2009.  The 2010 cash flow benefited from a share placement of €28.7 million.  Although cash flow for the full year was negative, milestones leading to payments totaling €25.0 million were achieved and recognized as revenue in 2010.  They are included in accounts receivable on the balance sheet and will be collected in the first quarter of 2011.

Operational highlights
R&D operations

  • Achieved milestones across all alliances
  • Increased total number of programs in development to eight (two in Phase II, five in Phase I, and one in pre-clinical development)
    • initiated Phase II studies for RA candidate drug GLPG0259 in September 2010
    • completed first-in-human clinical studies for both metastasis candidate drug GLPG0187 and cachexia candidate drug GLPG0492
    • initiated Phase I clinical studies for two arthritis candidate drugs, GLPG0634 and GLPG0778
    • delivered new candidate drug in arthritis alliance with GSK
  • Advanced 50 discovery programs, including five antibody programs with MorphoSys, and Alzheimer’s and cystic fibrosis drug discovery programs
  • Awarded two major grants to progress research in cystic fibrosis and antiviral drug discovery
  • Announced a strategic alliance with Roche in chronic lung disease and broadened this alliance to include fibrosis
  • Signed strategic alliance with Servier in osteoarthritis
  • Acquisition of R&D center in Zagreb, providing increased capacity
  • Ended strategic alliances with Merck in February 2011, regaining all rights to targets and assays

Service operations

  • Acquired Argenta’s service operations, solidified lead position in Western drug discovery services
  • Delivered candidate drug in Wellcome Trust funded, anti-aging program
  • Capitalized on long-term, integrated service agreements
    • both companies signed their largest deals ever in 2010, for five-year contracts with CHDI (BioFocus) and Janssen Pharmaceutica (Argenta)
    • extended/expanded existing deals with, among others, Amgen, Chiesi and Genentech
  • Signed new target, drug discovery deals with Dr. Reddy’s, Ono Pharmaceutical, Usher III Patient Foundation and University of Bristol
  • Announced compound management agreements with U.S. National Institutes of Health, National Cancer Institute and Lundbeck

Corporate

  • Appointed Howard Rowe and Ronald Brus to Galapagos Board
  • Raised €28.7 million through private placement of 2,389,347 new shares
  • Increased average daily trading volumes and amounts from 53,000 shares/€0.4 million in 2009 to 85,000 shares/€0.9 million in 2010
  • Grew from 500 to more than 800 employees in the course of 2010

Outlook 2011
Management anticipates an interim analysis of the Phase II clinical study for GLPG0259 in the second quarter of this year, with top-line results for this trial expected by the end of 2011.  The Company expects to make significant progress in both partnered and non-partnered R&D programs as the pipeline continues to mature across a broad range of therapeutic areas.  Management also anticipates signing a new alliance and outlicensing one non-partnered program in 2011.  The service operations are expected to increase their cash and profit contribution in 2011.  Continued growth from alliance revenues and service contracts, and partnering of a proprietary program, encourage management to give guidance of at least €150 million in revenues, sustained operational and net profitability, and positive cash flow in 2011.

Annual Financial Report 2010
Galapagos is currently finalizing its financial statements for the year ended 31 December 2010.  The auditor has confirmed that his audit procedures, which are substantially completed, have not revealed any material corrections that are required to be made to the financial information included in this press release.  Should any material changes arise during the audit finalization, an additional press release will be issued.  Galapagos expects to be able to publish its fully audited Annual Financial Report for the full year 2010 on or before 1 April 2011. 

Conference call and webcast presentation

Galapagos will conduct a conference call open to the public today at 10.00 Central European Time (CET), which will also be webcast.  To participate in the conference call, please call +32 2290 1791 ten minutes prior to commencement.  A question and answer session will follow the presentation of the results.  Click here to access the live audio webcast.  The archived webcast also will be available for replay shortly after the close of the call.

Financial calendar
15 April 2011                 R&D Update in Leiden (NL)
26 April 2011                 Annual general meeting of shareholders in Mechelen (BE)
13 May 2011                  First quarter 2011 business update
5 August 2011                First half 2011 results
10 November 2011         Third quarter 2011 business update
2 March 2012                 Full year 2011 results

About Galapagos
Galapagos (Euronext: GLPG; OTC: GLPYY) is a mid-size biotechnology company specialized in the discovery and development of small molecule and antibody therapies with novel modes-of-action.  The Company is progressing one of the largest pipelines in biotech, with seven clinical and over 50 discovery programs.  Through risk/reward-sharing alliances with GlaxoSmithKline, Eli Lilly, Janssen Pharmaceutica, Roche and Servier, Galapagos is eligible to receive up to €2.5 billion in downstream milestones, plus royalties.  The Galapagos Group has over 800 employees and operates facilities in seven countries, with global headquarters in Mechelen, Belgium.  More info at: www.glpg.com

CONTACT

Galapagos NV
Onno van de Stolpe, CEO
Tel: +31 6 2909 8028

Elizabeth Goodwin, Director Investor Relations
Tel: +31 6 2291 6240
ir@glpg.com

This release may contain forward-looking statements, including, without limitation, statements containing the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “seeks,” “estimates,” “may,” “will,” “could,” “stands to,” and “continues,” as well as similar expressions. Such forward-looking statements may involve known and unknown risks, uncertainties and other factors which might cause the actual results, financial condition, performance or achievements of Galapagos, or industry results, to be materially different from any historic or future results, financial conditions, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, the reader is advised not to place any undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date of publication of this document. Galapagos expressly disclaims any obligation to update any such forward-looking statements in this document to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless required by law or regulation.