Forward
with confidence
Annual Report 2020
CONTENTS
Contents
The Galapagos group
CSR report
Letter from the management ........................... 4
Our commitment .............................................. 63
COVID-19 impact ................................................ 9
Improving people’s lives .................................. 66
At a glance ......................................................... 11
Our employees ................................................. 72
Strategy ............................................................. 14
Conducting business ethically ........................ 80
Going concern statement ............................... 16
Environment, health, and safety .................... 84
Risk management and internal control ......... 16
CSR at Galapagos – Summary ......................... 86
The Galapagos share ....................................... 18
Overview of Galapagos NV ............................. 21
Corporate governance
Disclaimer and other information ................. 23
R&D
Policies ............................................................... 89
Supervisory board ............................................ 90
Committees ....................................................... 95
Our pipeline and drug discovery engine ....... 26
Management board ......................................... 96
Versatile target discovery platform ............... 27
Share capital and shares ................................. 99
Our inflammation franchise ........................... 29
Shareholders ................................................... 102
Our fibrosis portfolio ....................................... 46
Remuneration report ..................................... 105
Other pipeline .................................................. 50
Conflict of interests and related parties ...... 123
Risk factors
Commercialization ........................................... 52
Product development and regulatory
approval ............................................................ 52
Financial position and need for additional
capital ................................................................ 54
Reliance on third parties ................................. 54
Competitive position ....................................... 56
Intellectual property ........................................ 57
Organization, structure and operation ......... 58
Galapagos shares ............................................. 60
General statement ........................................... 61
Code of Business Conduct and Ethics ......... 124
Statement by the supervisory board ........... 125
Financial statements
Consolidated financial statements ............... 127
Notes to the consolidated financial
statements ...................................................... 134
Non-consolidated financial statements ....... 198
Auditor's report
Report of the statutory auditor .................... 200
Other information
Glossary of terms ........................................... 206
Financial calendar .......................................... 221
Colophon ......................................................... 221
Contact ............................................................ 222
2
Galapagos NV • Annual Report 2020
The
Galapagos
group
An overview of Galapagos,
its strategy and portfolio in 2020
Forward with confidence
THE GALAPAGOS GROUP
Letter from the management
Dear shareholder,
We are turning the page on an eventful 2020, followed by the ziritaxestat setback last month. This undoubtedly is
one of the most challenging periods in our history, and we are currently reviewing our plans for 2021. At the same
time, 2020 also brought us important scientific and commercial progress and opportunities, and we are confident
that we are well positioned to build on our strengths going forward. Also, we are encouraged by the recently
announced primary endpoint data from the ongoing MANTA and MANTA-RAy safety studies with filgotinib.
2020 was marked by the complete response letter (CRL) received in August by our collaboration partner Gilead
from the U.S. Food and Drug Administration (FDA) for filgotinib in rheumatoid arthritis (RA). Based on the
feedback received from the FDA during the NDA review process and in the Type A meeting, Gilead decided not
to pursue FDA approval of filgotinib for RA. While both Gilead and Galapagos continue to believe in the clinical
profile of the 200 mg dose, Gilead concluded that this dose was required to be competitive in RA in the U.S.
and that the 200 mg dose is unlikely to achieve approval for RA in the U.S. without conducting substantial
additional clinical studies. Consequently, we and Gilead decided to stop the global trials of filgotinib in psoriatic
arthritis (PsA), ankylosing spondylitis (AS), and non-infectious uveitis. Both companies continue to pursue the
inflammatory bowel disease (IBD) opportunity with filgotinib and the Phase 3 DIVERSITY program in Crohn’s
disease (CD) continues to recruit patients.
On the other hand, we made significant regulatory progress with filgotinib:
in September the approval of filgotinib was achieved for RA, from both the
Japanese and European authorities, with our first ever marketing
authorization granted in two key geographies. Both authorities approved
filgotinib 200 mg and 100 mg doses for the treatment of moderate to severe
RA. I am incredibly proud of the teams that made this a reality, and we
are thrilled to bring a new treatment option to patients suffering from this
debilitating condition. Moreover, following the positive Phase 3 results in
ulcerative colitis (UC), our collaboration partner Gilead and we filed for
approval in Europe, and we expect Gilead to submit for approval in Japan
in the first half of 2021.
From a commercial perspective, we opened up a significant opportunity
for Galapagos in Europe: in December, we renegotiated the collaboration
agreement for filgotinib, with Galapagos taking over all commercial
activities
in Europe. Through a phased transition period,
the majority of activities
supporting and
commercializing filgotinib in Europe are expected to be assumed by Galapagos by the end of 2021. Galapagos will
receive payments from Gilead in connection with changes in responsibility for the commercialization and
development of filgotinib in Europe, and Gilead will receive royalties from European sales of filgotinib starting in
2024. We have made tremendous progress in building our own European commercial organization, securing
reimbursement, and in preparing successful launches for filgotinib in RA. Filgotinib is now on the market in
Germany, Italy, and The Netherlands, with other European territories scheduled to follow in the course of 2021.
In the meantime, we made important progress in the remainder of our inflammation pipeline, and most
notably with our Toledo program. We revealed the target of our Toledo compounds as salt-inducible kinase (SIK)
inhibitors, and we observed its novel dual mode of action mechanism, stimulating anti-inflammatory cytokines
and inhibiting pro-inflammatory cytokines, across a series of preclinical models. For our most advanced Toledo
molecule, GLPG3970, a SIK2/SIK3 inhibitor, we have observed that dual mode of action mechanism in blood from
healthy volunteers, in a dose-dependent manner and with an encouraging tolerability profile. We are currently
4
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
conducting five Proof of Concept studies with GLPG3970, and we expect to report top line results in psoriasis, UC,
and RA in the second half of this year. Taking a programmatic approach, we continue to advance multiple Toledo
candidates across different selectivity profiles, targeting a range of inflammatory and even fibrotic indications.
In October, Servier and Galapagos announced that in the ROCCELLA Phase 2b study with GLPG1972 in
osteoarthritis (OA) patients, there was no difference observed between the active and placebo groups. As a result,
it was decided to stop the further development of GLPG1972 in OA.
Our fibrosis portfolio made progress in 2020, with positive topline results in our PINTA trial in IPF, preclinical
candidate nomination of a new Toledo compound directed towards IPF, and the inlicensing of promising early
molecules. Unfortunately, due to an insufficient risk-benefit profile observed in the ISABELA Phase 3 program, we
recently had to discontinue all development with ziritaxestat.
Given the recent setbacks in our late stage portfolio, we aim to assess lessons learned and will continue to reassess
the R&D portfolio in light of this learning. We again ended 2020 with a very strong balance sheet, providing
us with the capital to leverage the full potential of our R&D engine and to evaluate business development
opportunities. We landed our operational cash burn in 2020 in line with our guidance at €517 million, including
the milestones received for the approval of filgotinib in Europe and Japan. Following the recent discontinuation
of the ziritaxestat trials, we are currently performing a thorough strategic assessment, and we aim to provide an
updated cash burn guidance for 2021 upon conclusion of this review.
R&D
In the field of inflammation:
▪ Gilead received approval for filgotinib in RA in Europe and Japan
▪ Gilead received a CRL for filgotinib in RA from the FDA in the U.S. and decided not to resubmit in this
indication
▪ We and Gilead announced a new commercialization and development agreement for filgotinib in Europe,
and achieved our first sales in Germany and The Netherlands
▪ We and Gilead announced the achievement of the primary endpoint in the SELECTION Phase 3 trial with
filgotinib in UC
▪ Gilead submitted for approval of filgotinib in UC in Europe
▪ We and Gilead completed recruitment into the MANTA and MANTA-RAy trials with filgotinib
▪ We initiated three Proof of Concept trials with the Toledo compound GLPG3970, a SIK2/3 inhibitor, in psoriasis
(CALOSOMA), UC (SEA TURTLE) and RA (LADYBUG)
▪ We initiated a Phase 1b trial with GLPG3667, a TYK2 inhibitor, in patients with psoriasis
▪ We initiated a Phase 1b trial with GLPG0555, a JAK1 inhibitor administered via intra-articular injection, in
patients with OA
▪ We and Servier announced that the ROCCELLA Phase 2b trial with GLPG1972 in osteoarthritis patients showed
no signal of activity, and we decided to stop further development of the compound in this indication
▪ We announced collaborations with Ryvu and Scipher Medicine to discover and advance novel targets in
inflammation
In fibrosis:
▪ We continued recruitment into the ISABELA Phase 3 program with ziritaxestat in IPF, with over 1,300 patients
recruited and all nearly all study centers opened for recruitment by year-end 2020. All development with
ziritaxestat was discontinued in February 2021
▪ We announced positive topline results in the PINTA Phase 2a trial with GLPG1205, a GPR84 inhibitor, in IPF
patients
▪ We strengthened our IPF portfolio with GLPG4716, a chitinase inhibitor, inlicensed from OncoArendi, and
expanded our early-stage fibrosis pipeline through an expanded collaboration with Fibrocor
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Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
▪ We nominated our first novel preclinical candidate with an undisclosed mode of action from our
collaboration with Fibrocor, GLPG4586
▪ We nominated our first Toledo compound, GLPG4605, as a preclinical candidate directed toward fibrosis
Other clinical programs:
▪ We initiated the MANGROVE Phase 2 trial with investigational CFTR inhibitor GLPG2737 in patients with
autosomal dominant polycystic kidney disease (ADPKD)
▪ We started Phase 1 with GLPG4059 directed toward metabolic disease
Corporate:
▪ We agreed to sell fee-for-service business Fidelta to Selvita for a total of €37.1 million
▪ We raised €28.3 million from subscription right exercises
Post-period events:
▪ We and Gilead announced interim data on the primary endpoint of MANTA/RAy studies. 8.3% patients on
placebo and 6.7% patients on filgotinib had a 50% or more decline in sperm concentration at week 13
▪ We discontinued all development with ziritaxestat due to an insufficient risk-benefit profile observed in the
ISABELA Phase 3 program
▪ We initiated two additional Proof of Concept trials with the Toledo compound GLPG3970, a SIK2/3 inhibitor,
in systemic lupus erythematosus (TAPINOMA) and Sjögren’s syndrome (GLIDER)
▪ Gilead announced that the National Institute for Health and Care Excellence (NICE) recommends the use
of filgotinib in the UK for people with moderate to severe RA. Filgotinib is the first advanced therapy to be
recommended by NICE in patients with moderate RA
▪ We published the FINCH 1 Phase 3 data (Combe etal. 2021) and FINCH 3 Phase 3 data (Westhovens etal. 2021)
in the Annals of the Rheumatic Diseases
2020: Details of the financial results
Details of financial results
We previously held two operating segments. Due to the completion of the sale of our fee-for-service business
(Fidelta) to Selvita on the 4 January 2021 for a total consideration of €37.1 million (including the customary
adjustments for net cash and working capital), the results of Fidelta are presented as “Net results from
discontinued operations” in our consolidated income statements for the year 2020 and 2019.
Revenues and other income from continuing operations
Our revenues and other income from continuing operations for 2020 amounted to €530.3 million, compared to
€885.8 million in 2019. Revenues (€478.1 million in 2020 compared to €834.9 million in 2019) were lower due to the
one-time revenue recognition in 2019 of the upfront payment received from Gilead in August 2019 related to
ziritaxestat for €667.0 million. In 2020, our revenues from the Gilead collaboration (€473.9 million) related to (i)
the exclusive access to our drug discovery platform (€229.6 million), and (ii) the filgotinib revenue recognition
(€228.1 million). Additionally we have recognized royalty income from Gilead for filgotinib for €16.2 million.
Due to the approval of filgotinib, by both the Japanese and European authorities in September 2020, we received
a total milestone of $105.0 million (€90.2 million) from Gilead. As a consequence of the recently renegotiated
collaboration for filgotinib, we also have accrued for a €160 million payment expected from Gilead in our 2020
financial statements. Both amounts are recognized in revenue over time until the end of the development period.
Other income (€52.2 million in 2020 vs €50.9 million in 2019) mainly consisted of incentives income from the
government for our R&D activities.
6
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Results from continuing operations
We realized a net loss from continuing operations in 2020 of €311.0 million, compared to a net profit of
€148.7 million in 2019.
We reported a net operating loss in 2020 of €178.6 million, compared to a net operating profit of €368.7 million in
2019.
The net profit and operating profit in 2019 were mainly due to one-time recognition in revenue in 2019 of the
upfront payment received from Gilead related to ziritaxestat for €667.0 million.
Our R&D expenditure in 2020 increased by 25% in 2020 to €523.7 million compared to €420.1 million in 2019.
This planned increase was mainly due to an increase in subcontracting costs primarily related to our filgotinib
program, Toledo program and other clinical programs. Furthermore, personnel costs increased explained by a
planned headcount increase following the growth in our R&D activities and increased cost of our subscription
right plans. This factor, and the increased cost of the commercial launch of filgotinib in Europe, contributed
to the increase in our S&M and G&A expenses which were respectively €66.5 million and €118.8 million in 2020,
compared to €24.6 million and €72.4 million in 2019.
In 2020 we reported a non-cash fair value gain from the re-measurement of initial warrant B issued to Gilead,
amounting to €3.0 million, mainly due to evolution of the Galapagos share price as well as its implied volatility.
In 2019 we reported a non-cash fair value loss amounting to €181.6 million resulting from the re-measurement
of derivative financial instruments triggered by the share subscription agreement with Gilead and the warrants
granted to Gilead, primarily due to the increase in the Galapagos share price.
Net other financial loss in 2020 amounted to €134.2 million, compared to net other financial loss of €38.6 million
in 2019, and was primarily attributable to €106.4 million of unrealized exchange loss on our cash and cash
equivalents and current financial investments in U.S. dollars (€10.6 million of unrealized exchange loss in 2019),
and to €15.9 million of negative changes in (fair) value of current financial investments (€3.1 million of net
negative changes in (fair) value in 2019).
Group net results
The group realized a net loss in 2020 of €305.4 million, compared to a net profit of €149.8 million in 2019.
Cash, cash equivalents and current financial investments
Current financial investments and cash and cash equivalents totaled €5,169.3 million on 31 December 2020 as
compared to €5,780.8 million on 31 December 2019.
Total net decrease in current financial investments and cash and cash equivalents amounted to €611.5 million
in 2020, compared to an increase of €4,490.0 million in 2019. This net decrease was composed of (i) €517.4 million
of operational cash burn,1 (ii) €28.3 million of cash proceeds from capital and share premium increase from the
exercise of subscription rights in 2020, and (iii) €15.9 million of negative changes in (fair) value of current financial
investments and €106.4 million of unrealized negative exchange rate differences.
Furthermore, our balance sheet held a receivable from the French government (Crédit d’Impôt Recherche2), and
a receivable from the Belgian Government for R&D incentives, for a total of both receivables of €135.7 million.
1 We refer to note 19 of our consolidated financial statements for an explanation and reconciliation of this alternative performance measure
2 Crédit d’Impôt Recherche refers to an innovation incentive system underwritten by the French government
7
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Outlook for 2021
We anticipate a year filled with announcements on regulatory developments with filgotinib as well as progress in
our deep pipeline of novel target-based candidates.
In early 2021, filgotinib received a recommendation by NICE in the UK for use in moderate to severe active
RA patients. This is a landmark decision, as filgotinib is the first JAK inhibitor and first advanced therapy
recommended by NICE in the moderate disease population. Going forward, we anticipate reimbursement
decisions in most key European markets for filgotinib in RA this year, as we complete the transition to a full
European commercial operation by year-end. We anticipate a Committee for Medicinal Products for Human
Use (CHMP) opinion and a European Commission (EC) approval decision for filgotinib in UC, as well as Gilead’s
submission for approval of filgotinib in UC in Japan. We expect that our collaboration partner Gilead will
complete recruitment for the global DIVERSITY Phase 3 trial in Crohn’s disease this year.
Within our broader inflammation portfolio, we expect to report topline results from several trials, including
a Phase 1b trial with TYK2 inhibitor GLPG3667 in psoriasis, a Phase 1b trial with JAK1 inhibitor GLPG0555 via
intra-articular injection in OA, and three Proof of Concept studies with lead Toledo candidate SIK2/3 inhibitor
GLPG3970 in psoriasis, UC, and RA. Within our fibrosis portfolio, we expect to progress clinical compounds with
novel mechanisms of action, casting a wide net with the aim to develop novel treatments to help patients.
Following the recent discontinuation of the ziritaxestat trials, we aim to review our plans for 2021, after which
we expect to give cash burn guidance for 2021. We believe that we have the science, the people, and the capital to
weather this storm, and to look forward with confidence. We wish to thank all our shareholders for their support
as we review our plans and set a new course for growth of our company.
Respectfully,
Onno van de Stolpe
CEO
8
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
COVID-19 impact
As the COVID-19 pandemic continues, we continue to innovate to accommodate for the new situation and
minimize the impact to operations. We closely follow local governmental measures and apply these as
appropriate within our organization, guided and supported by our dedicated COVID-19 task force teams. All local
and global task force teams meet regularly and make recommendations directly to the COO.
We report the following impacts for 2020:
▪ Staff
We implemented strict measures to help prevent the spread of the virus and protect the health of our staff.
We rolled out our global and site business continuity plans and took appropriate recommended precautions,
including suspending almost all business travel. Over time, we learned most of the international travel
could be replaced by virtual meetings resulting in improved cost efficiency, a better work-life balance, and a
reduced carbon footprint. The positive impact of this forced way-of-working will therefore be retained in our
future habits and updated work place strategy, called "To the Next Normal."
During lock-down periods, we arranged for essential tasks to be carried out within our facilities. Employees
working on site needed an authorization letter signed by the line leader and site head. Consequently,
approximately 70% of our Research staff continued working from the offices/labs, with periodic exceptions
for local lockdowns during which no staff was allowed to come into the facilities. For those employees coming
to the office, we have stringent cleaning and sanitation protocols in place, and we strictly respect social
distancing policies at all times in order to minimize risk of exposure. Except for employees with laboratory
operations and safety roles which require an on-site presence, over 95% of our staff systematically worked
from home, supported by robust IT infrastructure and technologies that were rolled out globally to facilitate
remote forms of work. For our employees working from home, we provided additional IT materials and a
stipend to cover office expenses such as ink cartridges and paper.
It is in our culture to address what matters. During the COVID pandemic, we reached out to our employees
to understand how they are coping with the new situation and understand what support they needed from
the company. In May 2020, we carried out a “pulse check” employee survey. The results indicated that overall,
employees felt that our company supported them well during the pandemic. Key highlights included:
▪ Appreciation for the support from the line leader and the business leadership
▪ Increased ability to adapt to home working, thanks to strong IT infrastructure and support
▪ Employees perceive themselves to have a greater focus on the job after working in isolation at home
during the pandemic
The survey also underlined the continued need for our company to support our employees and to help
them find the right work-life balance (e.g. sufficient physical exercise, information on how to set-up an
ergonomic workstation at home, possibility to be ‘off-line’, more frequent short breaks). We helped them
to stay connected as a team by organizing virtual coffee corners and using interactive applications during
virtual meetings to increase engagement.
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Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Four key areas of focus were identified as part of an overarching program called "To The Next Normal," with
all its elements being fully linked to our workplace and digital strategies. This is a program intended to
accelerate application of the learnings over the last year in our company’s operations, investing in:
▪ Enhanced approach to flexibility
▪ Future-proof, greener approach to mobility
▪ Employee well-being
▪ Integrated digital and connected virtual collaboration
▪ Research portfolio
By prioritizing the most advanced projects very early on, increasing the flexibility of our staff in the labs
within projects, maintaining our hiring efforts as planned, and increasing our outsourcing, we sustained our
research delivery, kept the compound management facility running at all times, and continued our early
drug research and the implementation of new modalities for target or drug discovery.
The scorecard of the research department objectives shows a similar productivity compared to previous years,
indicating that we were able to minimize the impact, at least on the short term.
▪ Developmentportfolio
We have a business continuity plan for our clinical development programs. We closely monitor each program
in context of the current global and local situation of the pandemic and the associated specific regulatory,
institutional, and government guidance and policies related to COVID-19. Within the boundaries of these
guidances and policies, and in consultation with our CROs and clinical trial sites, we applied various
measures to minimize the impact of the COVID-19 pandemic on our clinical development programs, with the
primary aim to ensure the safety of our trial participants and to preserve the data integrity and scientific
validity of the trials. These measures were implemented on a case-by-case basis, tailored to the specific
study and country needs at any given time, with specific attention paid to vulnerable populations and the
use of investigational medicines with immunosuppressive properties. The measures include, amongst others,
increased, transparent communication to all stakeholders and the direct supply of investigational medicines
to patients. For each clinical trial, we actively monitor and document the impact of COVID-19 to mitigate the
study where necessary and to facilitate the interpretation and reporting of results.
▪ Filgotinibfiling processUC
As of publication of this report, our collaboration partner Gilead had not been informed by the regulatory
agencies in Europe of approval timeline delays.
▪ Manufacturing and supply chain
To date, there has been no COVID-19 impact to the commercial supply of filgotinib. Gilead also confirmed
that all sites involved in the manufacturing of filgotinib are established sites that currently manufacture
other Gilead marketed products and are in good standing with the FDA and are GMP certified. Under the
binding term sheet that we entered into in December 2020 to amend our arrangement with Gilead for
filgotinib in Europe, Galapagos plans to become the marketing authorization holder of filgotinib in Europe
by year-end 2021, and then become responsible for manufacturing. We intend to work with the same
manufacturing sites to ensure continuity.
▪ Commercial organization
The form of outreach of our commercial teams to physicians and hospitals was impacted by the COVID-19
pandemic and consequent travel restrictions, turning virtual instead. The teams invested in virtual channels
as part of the overall commercial build strategy, and these channels are being utilized during our commercial
launch today. We note as yet no material impact on our commercial operations due to travel restrictions,
nor has there been an impact of COVID-19 on our ability to engage in market access discussions thus far.
10
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
At a glance
Consolidated Key Figures
(thousands of €, if not stated otherwise)
INCOME STATEMENT (**)
Revenues
Other income
R&D expenditure
S, G&A expenses
Operating expenses
Operating profit/loss (-)
Net financial results
Taxes
Net profit/loss (-) from continuing operations
Net profit from discontinued operations, net of tax
Net profit/loss (-)
BALANCE SHEET
Cash and cash equivalents
Current financial investments
R&D incentives receivables
Assets
Shareholders' equity
Deferred income
Other liabilities
CASH FLOW
Operational cash flow/operational cash burn (-) (*)
Cash flow generated/used (-) in operating activities
Cash flow generated/used (-) in investing activities
Cash flow generated in financing activities
Increase in cash and cash equivalents
Transfer to current financial investments
Effect of currency exchange rate fluctuation on cash and cash
equivalents
Cash and cash equivalents on 31 December
Year ended 31
December 2020
Year ended 31
December 2019
Year ended 31
December 2018
478,053
52,207
(523,667)
(185,225)
(708,892)
(178,632)
(131,143)
(1,226)
(311,001)
5,565
(305,436)
2,135,187
3,026,278
135,728
5,717,731
2,670,355
2,809,133
238,242
(517,404)
(427,336)
757,288
22,040
351,994
-
(70,539)
2,143,071
834,901
50,896
(420,090)
(96,959)
(517,049)
368,748
(220,223)
165
148,689
1,156
149,845
1,861,616
3,919,216
115,356
6,068,609
2,875,658
3,000,646
192,305
3,162,809
3,208,617
(3,764,660)
1,335,751
779,708
(198,922)
(9,966)
1,861,616
278,666
29,000
(316,222)
(38,523)
(354,746)
(47,080)
15,662
(822)
(32,240)
2,981
(29,259)
1,290,796
-
84,646
1,439,496
1,214,249
149,801
75,446
(158,384)
(142,466)
(15,914)
287,876
129,497
-
10,089
1,290,796
Cash and cash equivalents from continuing operations
2,135,187
1,861,616
1,290,796
Cash and cash equivalents classified as assets held for sale
7,884
-
Current financial investments on 31 December
3,026,278
3,919,216
-
-
Total current financial investments and cash and cash
equivalents on 31 December
5,169,349
5,780,832
1,290,796
(*) We refer to note 19 of our consolidated financial statements for an explanation and reconciliation of this alternative performance measure.
(**) The 2019 and 2018 comparatives have been restated to consider the impact of classifying the Fidelta business as discontinued operations in
2020.
(***) The number of employees at 31 December 2020 includes 185 employees of Fidelta, which has been sold to Selvita on 4 January 2021.
11
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
(thousands of €, if not stated otherwise)
FINANCIAL RATIOS
Year ended 31
December 2020
Year ended 31
December 2019
Year ended 31
December 2018
Number of shares issued on 31 December
65,411,767
64,666,802
54,465,421
Basic income/loss (-) per share (in €)
Diluted income/loss (-) per share (in €)
Share price on 31 December (in €)
Total group employees on 31 December (number) (***)
(4.69)
(4.69)
80.48
1,489
2.60
2.49
186.50
1,003
(0.56)
(0.56)
80.56
725
(*) We refer to note 19 of our consolidated financial statements for an explanation and reconciliation of this alternative performance measure.
(**) The 2019 and 2018 comparatives have been restated to consider the impact of classifying the Fidelta business as discontinued operations in
2020.
(***) The number of employees at 31 December 2020 includes 185 employees of Fidelta, which has been sold to Selvita on 4 January 2021.
Employees per site
38
United Kingdom
168
The Netherlands
13
United States
271
France
32
Spain
63
Switzerland
14
Germany
674
Belgium
185
Croatia
31
Italy
12
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Number of employees Galapagos group
1,489
591
Men
gender:
education:
898
Women
181
Other
387
PhD
342
Bachelor
579
Master
Average age:
41.3
Number of employees
older than 45:
566
Nationalities:
50
Average years of service:
Employee turnover:
New hires in 2020:
3.9
2.2%
504
Total number of employees includes 185 employees from Fidelta, which was sold to Selvita on 4 January 2021, and includes consultants and temporary staff
13
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Strategy
Our mission is to develop and commercialize first-in-class medicines based on novel targets. Using human
primary cells, we discover which proteins ("targets") play a key role in disease pathways. We then identify and
develop small molecules that inhibit these targets, restore the balance, and thereby positively influence the
course of the disease. This approach is designed to address the root cause of the disease rather than just treating
symptoms.
In 2020 we achieved our longtime ambition to become a fully integrated biotech company, with the approval
and commercial launch of the first drug from our research platform, filgotinib for the treatment of RA. Moving
forward, we remain focused on the development and commercialization of novel medicines in inflammation &
fibrosis, with the ambition to commercialize additional therapies that are the result of our proprietary pipeline.
Our aim is to further enrich our internal pipeline with business development opportunities, including the in-
licensing of molecules, programs and modalities tailored to strengthen our research platform.
The key elements of our strategy include:
▪ Strengthen our innovation leadership in inflammation
We observed strong activity in various inflammatory preclinical models with compounds targeting the SIK
class of novel targets we discovered and code-named Toledo. Molecules inhibiting the SIK target family
effectuate a dual mode of action on inflammation by stimulating anti-inflammatory cytokines and
inhibiting pro-inflammatory cytokines. This brings a novel mode-of-action to the field of inflammation with
potential differentiation on both efficacy and safety versus currently available therapies. We are executing on
a broad and accelerated program to discover and develop multiple series of compounds acting on SIK targets,
aimed at activity across several conditions, including inflammation. We completed Phase 1 with GLPG3970
and initiated multiple Proof of Concept trials in inflammatory diseases in 2020. We expect to report first
topline results of three trials with GLPG3970 in the second half of this year. In addition, we initiated a Phase 1b
trial in psoriasis patients with TYK2 inhibitor GLPG3667, with topline results also expected in the second half
of 2021. Meanwhile, we continue to advance multiple preclinical candidates in inflammation, and to scale-up
our target and drug discovery productivity. We also explore additional modalities of drug therapies, and to
this aim, we actively collaborate with external research partners to further accelerate our progress.
▪ Further expand European commercial access to our first marketed product, filgotinib, and gain
market approval in additional inflammatory indications
Following the European regulatory approval of filgotinib in RA and our revised agreement for filgotinib
announced in December 2020 (see Notes to the consolidated financial statements), we and Gilead are securing
European market access while also transitioning all European commercial operations to us. Gilead remains
responsible for sales outside of Europe and obtained approval for filgotinib in RA in Japan in 2020. We and
Gilead are developing filgotinib in CD and UC. Gilead submitted the application for approval of filgotinib in
UC in Europe and is expected to submit the filing in Japan in the first half of 2021. Gilead is conducting Phase
3 clinical programs in CD (DIVERSITY) for which completion of recruitment is expected in the second half of
2021.
14
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
▪ Tackle IPF/fibrosis with our pioneering approach
We are building a diverse fibrosis franchise with what we believe are different and complementary modes of
action in IPF and other forms of fibrosis. To date, we reported positive topline results for the PINTA Phase 2a
trial with GPR84 inhibitor GLPG1205 in IPF patients and nominated a preclinical candidate from our Toledo
program. Recently we added GLPG4716, a chitinase inhibitor, to our IPF portfolio. This in-licensed compound
from OncoArendi is in preparation for a Phase 2 trial. We also in-licensed two early stage compounds (and
have an exclusive option to in-license a total of four additional novel target programs) with novel modes of
action in the field of fibrosis, thereby strengthening a growing portfolio of distinct mechanism approaches
to tackle IPF and fibrosis.
▪ Maximize and capture the value of our target discovery platform based on novel modes of action
Our platform has yielded many novel mode-of-action investigational therapies across multiple therapeutic
areas. Our most advanced preclinical programs are GLPG4586 (fibrosis), GLPG4605 (fibrosis), and GLPG4876
(inflammation). We aim to initiate a Phase 3 trial every other year and our ambition is to conduct three Proof
of Concept trials, deliver at least three preclinical product candidates and at least six new validated targets
every year.
R&D ambition – Maintaining an active portfolio of around 30 projects
▪ Build long-term value and accelerate our pipeline with our collaboration partner Gilead
Through our transformative R&D collaboration with Gilead signed in July 2019, we plan to strengthen
our discovery, development and commercial efforts to bring innovation to patients suffering from serious
diseases. We strongly believe that this is a mutually beneficial collaboration, as we gain access to Gilead’s
extensive experience in drug development and commercialization, and Gilead to our pioneering discovery
platform, with option rights to our current and future programs outside Europe. Gilead is subject to a 10-year
standstill, and made a $3.95 billion upfront payment plus a $1.5 billion equity investment (including the
exercise of Warrant A). In addition to retaining full European commercial rights, we are also eligible to
receive a $150 million opt-in fee per program, plus tiered royalties ranging from 20-24% on net sales of all our
products (ex filgotinib) licensed by Gilead. See the Notes to the consolidated financial statements.
15
Galapagos NV • Annual Report 2020
NEWTARGETSPRECLINICALCANDIDATESPROOFS-OF-CONCEPTPHASE 3STARTevery yearevery yearevery yearevery 2 years THE GALAPAGOS GROUP
Going concern statement
To date, we have incurred significant operating losses, which are reflected in the balance sheet showing
€334.7 million accumulated losses as at 31 December 2020. We realized a consolidated net loss of €305.4 million for
the year ended 31 December 2020. The supervisory board has examined the financial statements and accounting
policies. Based on conservative assumptions, we believe that our existing current financial investments and cash
and cash equivalents of €5,169.3 million at 31 December 2020 will enable us to fund our operating expenses and
capital expenditure requirements for the coming years (and at least for the next 12 months). The supervisory
board is also of the opinion that additional financing could be obtained, if required. Taking this into account, as
well as the potential developments of our drug discovery and development activities, the supervisory board is of
the opinion that it can submit the financial statements on a going concern basis. Whilst our current financial
investments and cash and cash equivalents are sufficient for the coming years (and at least for the next 12
months), the supervisory board points out that if the R&D activities go well, we may seek additional funding to
support the continuing development of our products or to be able to execute other business opportunities.
Risk management and internal control
Risk management is embedded in our strategy and is considered important for achieving our operational targets.
To safeguard the proper implementation and execution of the group’s strategy, our management board has set up
internal risk management and control systems within Galapagos. The supervisory board has delegated an active
role to the audit committee members to monitor the design, implementation and effectiveness of these internal
risk management and control systems. The purpose of these systems is to manage in an effective and efficient
manner the significant risks to which Galapagos is exposed.
The internal risk management and control system is designed to ensure:
▪ the careful monitoring of the effectiveness of our strategy
▪ Galapagos’ continuity and sustainability, through consistent accounting, reliable financial reporting and
compliance with laws and regulations
▪ our focus on the most efficient and effective way to conduct our business
We have defined our risk tolerance on a number of internal and external factors including:
▪ financial strength in the long run, represented by revenue growth and a solid balance sheet
▪ liquidity in the short run; cash
▪ business performance measures; operational and net profitability
▪ scientific risks and opportunities
▪ dependence on our alliance partners
▪ compliance with relevant rules and regulations
▪ reputation
The identification and analysis of risks is an ongoing process that is naturally a critical component of internal
control. On the basis of these factors and Galapagos’ risk tolerance, the key controls within Galapagos will be
registered and the effectiveness will be monitored. If the assessment shows the necessity to modify the controls
we will do so. This could be the situation if the external environment changes, or the laws or regulations or the
strategy of Galapagos change.
16
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
The financial risks of Galapagos are managed centrally. The finance department of Galapagos coordinates the
access to national and international financial markets and considers and manages continuously the financial
risks concerning the activities of the group. These relate to the following financial markets risks: credit risk,
liquidity risk, currency and interest rate risk. Our interest rate risk is limited because we have nearly no financial
debt. In case of decreasing interest rates we will face a reinvestment risk on our strong cash position. The group
does not buy or trade financial instruments for speculative purposes. For further reference on financial risk
management, see note 32 of the notes to the consolidated financial statements. We also refer to the Risk factors
section of the annual report for additional details on general risk factors.
The company’s internal controls over financial reporting are a subset of internal controls and include those
policies and procedures that:
▪ pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company
▪ provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with IFRS as adopted by the EU, and that receipts and expenditures of the company
are being made only by authorized persons
▪ provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements
Our internal control over financial reporting includes controls over relevant IT systems that have an impact on
financial reporting including accuracy and completeness of our account balances. Management takes appropriate
remediation and mitigation actions in case IT deficiencies would be identified. Our internal control over financial
reporting includes also additional layers of business process controls to mitigate all remaining risks associated
with IT deficiencies.
Since the company has securities registered with the U.S. Securities and Exchange Commission (SEC) and is a
large accelerated filer within the meaning of Rule 12b-2 of the U.S Securities Exchange Act of 1934, the company
needs to assess the effectiveness of internal control over financial reporting and provide a report on the results of
this assessment.
In 2020 management has reviewed its internal controls over financial reporting based on criteria established in
the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and engaged an external advisor to help assess the effectiveness of those controls.
As described in Section 404 of the U.S. Sarbanes-Oxley Act of 2002 and the rules implementing such act, we will
include the management and the statutory auditor’s assessment of the effectiveness of internal control over
financial reporting in our annual report on Form 20-F, which is expected to be filed with the SEC on or around
the publication date of the present annual report.
Management as well as the statutory auditor concluded that the group maintained, in all material respects,
effective internal control over financial reporting as of 31 December 2020.
17
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
The Galapagos share
Galapagos NV (ticker: GLPG) has been listed on Euronext Amsterdam and Brussels since 6 May 2005 and on
the Nasdaq Global Select Market since 14 May 2015. Galapagos NV forms part of the Bel20 index (top 20 listed
companies) on Euronext Brussels, the AMX Index (Amsterdam Midcap-index) on Euronext Amsterdam, and the
NBI (Nasdaq Biotechnology Index) on Nasdaq in New York. In 2019, Galapagos was added to the MSCI Global
Standard Index.
The Galapagos share in 2020
290
270
250
230
210
190
170
150
130
110
90
70
01.01.2020
01.04.2020
01.07.2020
01.10.2020
31.12.2020
GLPG.AM (in EUR)
GLPG.US (in USD)
In 2020, the average daily trading volume on Euronext was 521,824 shares and €80.8 million turnover. The daily
trading volume on Nasdaq in 2020 was 175,730 ADSs and $29.1 million turnover.
18
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Galapagos vs Next Biotech Index in 2020
1.4
1.2
1
0.8
0.6
0.4
0.2
0
01.01.2020
01.04.2020
01.07.2020
01.10.2020
31.12.2020
GLPG (Euronext)
Next Biotech Index
Galapagos vs Nasdaq Biotechnology Index in 2020
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0
01.01.2020
01.04.2020
01.07.2020
01.10.2020
31.12.2020
GLPG (Nasdaq)
Nasdaq Biotechnology Index
19
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Investor relations activities
We currently have sell-side coverage from >20 analysts and in 2020 we attracted additional sell-side analyst
coverage.
Our IR team presented at 48 (virtual) conferences in 2020 in Europe and the U.S. Several broker-organized and
self-organized roadshows and virtual meetings were held throughout the U.S., Europe, and Asia, during which we
held approximately 1,500 meetings.
We organized webcasts to present our 2019 Full Year, and our 2020 Q1, Half Year, and Q3 results, as well as our
Toledo Roundtable, and select conference presentations.
The main topics of discussion with investors in 2020 included the filgotinib development programs and
commercial strategy, the CRL and amended filgotinib agreement with collaboration partner Gilead, the R&D
collaboration agreement with Gilead, our Phase 3 study with ziritaxestat as well as the Phase 2 trial with GLPG1205
in IPF patients, our ROCCELLA global Phase 2b trial with collaboration partner Servier in OA, and our Toledo
program for inflammation. At the start of the pandemic, discussions were held on the influence of COVID-19 on
our business operations. For more information see COVID-19 impact.
20
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Overview statutory results of Galapagos NV
This overview only concerns the non-consolidated statutory results of Galapagos NV. These results are part
of the consolidated results as discussed in the letter from the management.
Galapagos NV’s operating income in 2020 amounted to €1,037.0 million compared to €1,324.3 million in 2019. This
decrease is due to the one-time revenue recognition in 2019 of the upfront payment received in August 2019
from Gilead related to ziritaxestat for €667.0 million, partly compensated by higher turnover for €323.0 million,
primarily due to increased milestone revenues, upfront payments and royalties related to the collaboration
agreement with Gilead. On the other hand there was also an increase due to internally generated intangible
assets – being capitalized R&D expenses – which contributed by €60.9 million more to operating income than
previous year. Other operating income amounted to €17.4 million, including €5.5 million of grants recognized for
R&D projects and €9.8 million recuperation of withholding taxes for scientists.
The operating costs of 2020 amounted to €1,146.0 million compared to €930.5 million in 2019. Services and other
goods increased substantially to €543.0 million compared to €444.1 million in 2019, primarily due to increased
internal and external subcontracting for our preclinical studies and clinical trials as well as increased fees for
insourced personnel.
Material purchases increased slightly from €7.5 million in 2019 to €10.3 million in 2020.
Personnel costs in 2020 amounted to €59.9 million compared to €52.2 million in 2019. The number of employees
at Galapagos NV at the end of 2020 amounted to 508 as compared to 361 at the end of 2019, excluding insourced
personnel.
Depreciation increased to €467.8 million in 2020, compared to €403.3 million in 2019, and related primarily to
amortization of R&D expenses.
Galapagos NV’s 2020 financial income decreased to €25.8 million compared to €27.5 million in 2019, while financial
costs increased to €139.9 million compared to €64.0 million in 2019. This can mainly be explained by higher non-
cash currency exchange losses on U.S. dollar in 2020. Non-recurring finance income consisted of €5.5 million of
gain on sale of financial assets.
Tax income recorded in 2020 of €21.6 million as compared to €21.6 million tax income in 2019, related to tax
incentives for investments in intangible fixed assets.
Galapagos NV capitalizes its incurred R&D expenses to the extent that the costs capitalized do not exceed a
prudent estimate of their value in use or their future economic benefits for the entity. The ability to recover the
capitalized amounts takes into account assumptions (e.g. future peak sales, market share, sale prices, attrition
rates regarding the successful completion of the different R&D phases) which have a highly judgmental nature
and depend on the outcome of uncertain factors which are beyond the control of the entity (e.g. test results). The
achievement of these assumptions is critical and may impact the recoverability of the amounts capitalized. R&D
expenses capitalized are fully amortized in the year in which they are capitalized.
Investments in fixed assets in 2020 amounted to €55.8 million, excluding the internally generated assets. They
consisted mainly of investments in intangible assets, being licenses and software, as well of costs for new
laboratory and IT equipment.
Non-current and current other receivables amounted to respectively €78.3 million and €71.8 million and included
the receivable for tax incentives amounting to respectively €78.3 million and €5.5 million in 2020, compared to
total other receivables for tax incentives of €67.0 million in 2019.
21
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Galapagos NV’s cash position at the end of 2020 amounted to €5,122.3 million.
The non-consolidated annual accounts of Galapagos NV which we submit for your approval were prepared in
accordance with Belgian accounting rules as well as with the legal and regulatory requirements. They show a
negative result. The financial year 2020 closed with a loss of €196.0 million compared to a profit of €379.0 million
in 2019. The non-consolidated annual accounts of Galapagos NV show accumulated losses of €276.5 million as at
31 December 2020; we refer to the Going concern statement for justification for the application of the valuation
rules under the going concern assumption.
In 2020, Galapagos NV did not make use of financial instruments, financial instruments are not actively used.
22
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
Disclaimer and other information
This report contains all information required by Belgian law.
Galapagos NV is a limited liability company organized under the laws of Belgium and has its registered office at
Generaal De Wittelaan L11 A3, 2800 Mechelen, Belgium. Throughout this report, the term “Galapagos NV” refers
solely to the non-consolidated Belgian company and references to “we,” “our,” “the group” or “Galapagos” include
Galapagos NV together with its subsidiaries.
This report is published in Dutch and in English. Galapagos is responsible for the translation and conformity
between the Dutch and English versions. In case of inconsistency between the Dutch and the English versions,
the Dutch version shall prevail.
This report, including the statutory financial statements of Galapagos NV, is available free of charge and upon
request to be addressed to:
Galapagos NV
Investor Relations
Generaal De Wittelaan L11 A3 2800 Mechelen
Belgium
Tel: +32 15 34 29 00
E-mail: ir@glpg.com
A digital version of this report, including the statutory financial statements of Galapagos NV, is available on our
website, www.glpg.com.
We will use reasonable efforts to ensure the accuracy of the digital version, but do not assume responsibility
if inaccuracies or inconsistencies with the printed document arise as a result of any electronic transmission.
Therefore, we consider only the printed version of this report to be legally valid. Other information on our website
or on other websites does not form a part of this report.
As a U.S. listed company, we are also subject to the reporting requirements of the U.S. Securities and Exchange
Commission, or SEC. An annual report will be filed with the SEC on Form 20‑F. The Form 20‑F is available in the
SEC’s EDGAR database (https://www.sec.gov/edgar.shtml) and a link thereto is posted on our website.
With the exception of filgotinib’s approval for the treatment of rheumatoid arthritis by the European
Commission and Japanese Ministry of Health, Labour and Welfare, our drug candidates mentioned in this report
are investigational; their efficacy and safety have not been fully evaluated by any regulatory authority.
Jyseleca®, Gilead and the Gilead logo are trademarks of Gilead Sciences, Inc. or its related companies.
Forward-looking statements
This report contains forward-looking statements, all of which involve certain risks and uncertainties. These
statements are often, but are not always, made through the use of words or phrases such as “believe,” “anticipate,”
“expect,” “intend,” “plan,” “seek,” “estimate,” “may,” “will,” “could,” “stand to,” “continue,” as well as similar
expressions. Forward-looking statements contained in this report include, but are not limited to, statements
made in the “Letter from the management”, the information provided in the section captioned “Outlook for
2021”, guidance from management, including the timing and/or outcome of the strategic re-evaluation and of the
expected operational cash burn during financial year 2021, financial results, statements regarding the amount
and timing of potential future milestones, opt-in and/or royalty payments by Gilead, Galapagos’ strategic R&D
23
Galapagos NV • Annual Report 2020
THE GALAPAGOS GROUP
ambitions and potential changes of such ambitions, our statements and expectations regarding commercial sales
of filgotinib, statements regarding the global R&D collaboration with Gilead and regarding the amendment of
our arrangement with Gilead for the commercialization and development of filgotinib, statements regarding
the expected timing, design and readouts of ongoing and planned clinical trials (i) with filgotinib in ulcerative
colitis, Crohn’s disease, inflammatory bowel disease and other indications (ii) with GLPG1205 and GLPG4716 in
IPF, (iii) with GLPG3312, GLPG3970, and GLPG4399 in inflammation, (iv) GLPG2737 in ADPKD, (v) GLPG4059 in
metabolic disease, (vi) with GLPG3970 in psoriasis, UC, RA and other indications, (vii) with GLPG3667 in psoriasis,
(viii) with GLPG0555 in OA and (ix) with the Toledo program in inflammation and fibrosis, statements regarding
data from Galapagos’ clinical research programs with ziritaxestat which may not support registration or further
development due to safety, efficacy or other reasons for IPF, SSc or any other indication, statements relating to
interactions with regulatory authorities, the timing or likelihood of additional regulatory authorities’ approval
of marketing authorization for filgotinib for RA, UC or any other indication, including UC and IBD indication
for filgotinib in Europe, Japan, and the U.S., such additional regulatory authorities requiring additional studies,
the timing or likelihood of pricing and reimbursement interactions for filgotinib, statements relating to the
build-up of our commercial organisation for filgotinib, the expected impact of COVID-19, and our strategy,
business plans and focus. We caution the reader that forward-looking statements are not guarantees of future
performance. Forward-looking statements may involve known and unknown risks, uncertainties and other
factors which might cause our actual results, financial condition and liquidity, performance or achievements,
or the development of the industry in which we operate, to be materially different from any historic or
future results, financial conditions, performance or achievements expressed or implied by such forward-looking
statements. In addition, even if our results of operations, financial condition and liquidity, and the development
of the industry in which we operate are consistent with such forward-looking statements, they may not be
predictive of results or developments in future periods. Among the factors that may result in differences are
that our expectations regarding our 2021 revenues and financial results and our 2021 operating expenses may be
incorrect (including because one or more of our assumptions underlying our revenue or expense expectations
may not be realized), the inherent uncertainties associated with competitive developments, clinical trial and
product development activities and regulatory approval requirements (including that data from our clinical
research programs in rheumatoid arthritis, Crohn’s disease, ulcerative colitis, psoriatic arthritis, ankylosing
spondylitis, idiopathic pulmonary fibrosis, osteoarthritis, and other inflammatory indications may not support
registration or further development of our product candidates due to safety, efficacy, or other reasons, including
ziritaxestat for IPF, systemic sclerosis or any other indication), our reliance on collaborations with third parties
(including our collaboration partner for filgotinib, Gilead), the timing of and the risks related to completing and
implementing the amendment of our arrangement with Gilead for the commercialization and development
of filgotinib, estimating the commercial potential of filgotinib and our product candidates, and Galapagos’
expectations regarding the costs and revenues associated with the transfer of European commercialization rights
to filgotinib may be incorrect, and the uncertainties relating to the impact of the COVID-19 pandemic. A further
list and description of these risks, uncertainties and other risks can be found in our Securities and Exchange
Commission filing and reports, including in our most recent annual report on Form 20‑F filed with the SEC
and our subsequent filings and reports filed with the SEC. We also refer to the “Risk Factors” section of this
report. 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. We
expressly disclaim any obligation to update any such forward-looking statements in this document to reflect any
change in our expectations with regard thereto or any change in events, conditions or circumstances on which
any such statement is based or that may affect the likelihood that actual results will differ from those set forth
in the forward-looking statements, unless specifically required by law or regulation.
24
Galapagos NV • Annual Report 2020
R&D
Research &
Development
Forward with confidence
RESEARCH & DEVELOPMENT
Our broad pipeline and innovative drug discovery
engine
We discover and develop small molecule medicines with novel modes of action, several of which are currently in
clinical development in multiple diseases with high unmet medical need. Our highly flexible discovery platform
is applicable across many therapeutic areas.
Having achieved approval for the first commercial drug from our novel target platform, we remain highly
committed to progressing our deep pipeline of candidates in inflammation, fibrosis, and other indications. With
our plans to initiate multiple patient trials in 2021, we set the stage for data-rich newsflow in coming years. Our
broad clinical pipeline includes: preferential JAK1 inhibitor filgotinib, which is approved for the treatment of RA
in Europe and Japan, filed for approval in UC in Europe, and currently in a Phase 3 trial in CD; GLPG1205, a GPR84
inhibitor which delivered positive topline results in the IPF PINTA Phase 2 trial in 2020; GLPG4716, a chitinase
inhibitor inlicensed from OncoArendi, in preparation for a Phase 2 study in IPF; and the Toledo molecule
GLPG3970, a SIK2/3 inhibitor, in Proof of Concept trials in 5 indications. In both our inflammation and fibrosis
portfolios we have multiple novel mechanism of action candidates in early research. Almost exclusively these
programs are based on inhibiting targets which were identified using our proprietary target discovery platform.
Filgotinib is partnered with Gilead. We have collaborations in place with OncoArendi for GLPG4716, with Fibrocor
for GLPG4586 and potentially other assets, and for earlier stage assets with Ryvu and Scipher Medicine. Below is
an overview of our current key pipeline assets:
Our clinical pipeline
26
Galapagos NV • Annual Report 2020
Phase 2Phase 1PreclinicalAssetTargetPhase 3ApprovalCD Ph3 ongoing, submitted UC in EU, approved for RA in EU & JapanToledo, PoCs in 5 indicationsPh1b PsoPh1b OAToledoToledoIPFToledoPCKDMetabolicJAK1SIK2/3TYK2JAK1SIK3JAK1/TYK2SIK2/3>10 novelGPR84IPFChitinaseUndisclosed7 novelSIK2/3CFTRNovelFilgotinib‘3970‘3667‘555‘4399‘3121‘4876Other ‘1205‘4716‘4586Other'4605‘2737‘4059InflammationFibrosisKidney diseasesOther RESEARCH & DEVELOPMENT
Versatile target discovery platform
Our target discovery platform provides a significant and substantial competitive advantage as it:
▪ closely mimics the in vivo situation through the use of primary human cells with a relevant trigger and
readout for a specific disease phenotype
▪ identifies possible points to intervene in a disease pathway by suppressing the expression of an individual
protein in these pathways; and
▪ enables us to rapidly analyze all of the druggable and non-druggable genes and select pharmaceutically
tractable protein targets directly by their ability to regulate key disease biology
A proof of success of this unique approach is demonstrated with filgotinib which acts on JAK1, a target whose role
in the specific disease was discovered by us using our discovery platform.
The human genome consists of tens of thousands of genes which code for the proteins that make up the human
body. Nearly all chronic diseases and disorders are caused by a disruption in the normal function of certain
proteins. The main goal of the industry is to discover and develop molecules that alter the activity or expression
of these proteins so that normal function returns and the cause of the disease is minimized or eliminated. One
of the main obstacles in discovering new drugs is to understand exactly which of the body’s tens of thousands
of proteins play a key role in a particular disease. Once these proteins are discovered, they become targets for
drug design. Finding these targets is one of the critical steps in the drug discovery process. Our approach to target
discovery is unique as our discovery platform focuses on target identification using primary human cells, which
we believe is the best way to study the effect that a protein might have on the disease in the human body.
In order to study proteins in human cells, we take advantage of the distinctive properties of adenoviruses in
combination with RNA interference. The adenovirus causing the common cold has the capability to infect almost
every type of human cell. The adenoviruses we work with have been engineered to act as a shuttle vehicle,
allowing the delivery of specific pieces of DNA into human cells. Additionally, these viruses have been made
replication incompetent, meaning they do not replicate in the human cells they infect, and thus they do not
interfere with the processes in the cell. We engineered the viruses to carry small pieces of DNA, specific for
individual human genes. When the virus enters the cell, this DNA piece leads to the production of a short
27
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
sequence of RNA that is processed in the cell to become “short interfering RNA,” or siRNA, which specifically
interferes with the mRNA of the protein it was designed for. By using these viruses, we can cause the cells to block,
or “knock-down,” the production of a certain protein and determine its impact on restoring normal function.
Our drug discovery research is based on the targets discovered using this technology. Originally, we focused on
6,000 human genes that belong to the small molecules druggable genome. We are in the process of expanding our
expertise with novel technologies such as oligonucleotide-based techniques (antisense (AS) or siRNA) and degrader
approaches (Proteolysis Targeting Chimeras or PROTACs). These additions enable us to go broader and explore
a total of 20,000 protein-coding genes. Once a target is validated, we will use the most suitable methodology to
develop a potential therapeutic drug.
When considering a small molecule approach, an assay developed to assess the activity of the target is subjected
to large collections of chemical small molecules allowing the identification of chemical structures that interact
with the target to block or activate its activity. These chemical structures are then modified to obtain a
preclinical candidate, and upon successful optimization and preclinical testing in animal models, the product
candidate is tested in humans. Other technologies to modulate relevant targets, such as oligonucleotides or
PROTACs are being explored. In both cases the end result is the removal of the target from the cells leading to the
prevention of its disease-contributing effects.
This discovery approach provides starting points for the discovery and development of drugs with new modes of
action. Since 2009, we have generated 47 preclinical candidates. Of these, 24 have entered first-in-human clinical
development, 18 of which are believed to have novel modes of action, and 15 entered into patient studies.
In addition to our pipeline of molecules in the clinic, we have multiple discovery programs advancing toward
clinical development.
28
Galapagos NV • Annual Report 2020
4715 1824preclinical candidatesentered clinicnovel modes of actionnovel modes of action in patient studies RESEARCH & DEVELOPMENT
Our inflammation franchise
Our filgotinib franchise
We have a collaboration agreement with Gilead to develop and commercialize filgotinib in multiple diseases.
Filgotinib is approved for use in RA in Europe and Japan in September 2020. Gilead decided not to advance the
approval application in RA in the U.S. following receipt of a CRL from and subsequent discussions with the U.S.
FDA in 2020. Filgotinib was submitted for approval in UC in Europe in 2020 and is in a Phase 3 clinical trial in CD.
Gilead expects to submit filgotinib for approval in UC in Japan in H1 2021. A regulatory path for approval in UC
and CD in the U.S. is pending review of the MANTA and MANTA-RAy data by the FDA.
At the end of 2020, we and Gilead entered into a binding term sheet pursuant to which we agreed to amend the
existing arrangement for the commercialization and development of filgotinib. We will assume sole commercial,
operational, and development responsibility in Europe for filgotinib in RA. Gilead will retain commercial rights
and remain marketing authorization holder for filgotinib outside of Europe, including in Japan where filgotinib
is approved and is co-marketed with Eisai. Gilead and we will continue to investigate the potential for filgotinib
to support patients living with inflammatory bowel disease (IBD). Gilead will retain operational responsibility for
the current trials in Crohn’s disease while we will assume operational responsibility for ongoing trials in UC. We
will receive payments from Gilead in connection with changes in responsibility for the commercialization and
development of filgotinib in Europe, and Gilead will receive royalties from European sales of filgotinib, starting in
2024. Please see the Notes to the consolidated financial statements for financial details of the revised agreement.
The European market for drugs that treat inflammatory diseases is considerable: we estimate that the
inflammation market today in the five largest European markets is approximately €5.7 billion, with about 60% of
the current market going to RA therapies and about 40% to UC and CD combined:
EU5 inflammation market today, €B
≈0.8
UC
≈1.7
CD
EU5
€5.7B
≈3.2
RA
RA: rheumatoid arthritis CD: Crohn’s disease UC: ulcerative colitis
Source: IQVIA Analytic Link (MAT to Q2 2020) – estimated value by disease at ex-manufacturer list prices. Estimates include all biologics and tsDMARDs.3
We have the ambition to achieve peak commercial sales of approximately €500 million in RA, UC, and CD in
Europe in the latter half of this decade, targeting an 8-12% share of the total estimated market for RA, UC, and CD
in the five largest markets in Europe.
3 tsDMARDs: targeted synthetic disease-modifying antirheumatic drugs
29
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Filgotinib in RA
RA is a chronic autoimmune disease that affects approximately more than three million patients in the United
States and Europe. RA is characterized by inflammation and degeneration of the joints. Patients suffer from
pain, stiffness, and restricted mobility due to a persistent inflammation of multiple joints, ultimately resulting
in irreversible damage of the joint cartilage and bone. The market for RA treatments in the EU5 currently is
approximately €3.2 billion, with 60% of patients treated with advanced therapies, including injectables, biological
therapies and tsDMARDS.
Despite there being many approved agents, considerable unmet need exists, as only one in five patients achieves
full remission in the first year of treatment.
Oral therapies targeting the Janus kinase (JAK) signaling pathway are approved to treat inflammatory diseases.
We discovered JAK1 in an inflammation target discovery assay in 2003 and subsequently developed filgotinib as a
small molecule inhibitor with preferential selectivity for JAK1.
Filgotinib is a once daily, oral, preferential JAK1 inhibitor that has undergone extensive testing in Phase 1 and
Phase 2 in RA, demonstrating a durable response with a consistent safety profile in RA patients. These studies
supported progression to Phase 3 trials in RA. DARWIN 3 (NCT02065700), a multi-center, open-label, long-term
follow up safety and efficacy trial of subjects who completed either DARWIN 1 or DARWIN 2 Phase 2b trials, is still
ongoing today.
FINCH Phase 3 program
The safety and efficacy of 100 mg and 200 mg filgotinib once daily were investigated in the FINCH clinical Phase
3 program which was initiated in August 2016 and which includes four Phase 3, randomized, multicenter studies
in patients with moderate to severe RA.
The studies were designed to characterize the efficacy and safety of filgotinib in several key patient populations
following the typical RA treatment pathway. These included:
▪ Patients who had an inadequate response to methotrexate (MTX) (FINCH 1, NCT02889796)
▪ Patients with difficult-to-treat RA and an inadequate response to biologic disease-modifying antirheumatic
drugs (bDMARDs) (FINCH 2, NCT02873936)
▪ MTX-naïve patients (FINCH 3, NCT02886728)
▪ Eligible patients could also roll-over into a long-term extension study which is still ongoing (FINCH 4,
NCT03025308)
In animal toxicology studies in the preclinical phase, filgotinib at a certain high dose induced adverse effects on
the male reproductive system. Consequently, Gilead and Galapagos are performing dedicated male patient semen
analysis trials in inflammation (RA, CD, UC, AS, and PsA) patients, called MANTA and MANTA-RAy, concurrent to
all Phase 3 programs.
Recently, we announced the interim results and the primary endpoint. In total, 248 patients were randomized
1:1 to receive filgotinib 200 mg once daily or placebo for an initial 13-week, double-blind treatment period. The
primary endpoint in both trials was the proportion of patients who had a reduction of 50% or more in sperm
concentration at week 13. Patients who met this endpoint discontinued study treatment at week 13, were switched
to standard of care treatment and were monitored for reversibility every 13 weeks for up to 52 weeks.
Out of the 248 randomized patients, 240 reached week 13 with two evaluable semen samples at baseline and week
13. Of those, 18 patients showed a ≥50% decline in sperm concentration, with 10/120 (8.3%) patients on placebo
and 8/120 (6.7%) patients on filgotinib. These studies, which were designed with the input of the relevant health
authorities, are not powered for statistical comparison between groups. These data will now be submitted to
relevant regulatory authorities.
30
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Beyond the double-blind, placebo-controlled, 13-week period, for which MANTA and MANTA-RAy results are
pooled, patients who did not meet the primary endpoint of 50% or more decline in sperm motility or morphology
could continue under their respective trial protocol on blinded treatment, receive open-label filgotinib or receive
standard of care therapy based on disease response, for another 13 weeks before entering a long-term extension
period. At any point, patients exhibiting a predetermined sperm decline enter a monitoring phase in which they
are assessed every 13 weeks for reversibility for up to 52 weeks.
As the MANTA and MANTA-RAy trials are ongoing, and to maintain data integrity, Galapagos and Gilead intend
to report additional results only after all patients in the monitoring phase have completed the protocol-defined
observation period.
When the MANTA and MANTA-RAy trials are completed, Galapagos and Gilead intend to submit the full results
for publication in a peer-reviewed medical journal.
FINCH 1 results
The FINCH1-study achieved its primary endpoint for both doses of filgotinib in the proportion of patients
achieving an American College of Rheumatology 20% response (ACR20) compared to placebo at week 12.
The FINCH 1 trial data were presented virtually at the 2020 Annual European Congress of Rheumatology (Combe
et al. 2020) and published in The Annals of the Rheumatic Diseases (Combe et al. 2021).
FINCH 2 results
In the difficult to treat bDMARD insufficient responder population, filgotinib achieved its primary endpoint
in the FINCH 2 trial in the proportion of patients achieving an American College of Rheumatology 20 percent
response (ACR20) at week 12. The clinical efficacy and quality of life outcomes assessed at week 12 and week 24
were presented at the Annual ACR meeting 2019 (Genovese et al.) and the FINCH 2 results were published in The
Journal of the American Medical Association, JAMA (Genovese et al. 2019).
FINCH 3 results
At week 24, the study achieved its primary endpoint of the proportion of patients achieving an American College
of Rheumatology 20 percent response (ACR20). The proportion of patients achieving the primary endpoint of
ACR20 response at week 24 was significantly higher for filgotinib 200 mg plus MTX and filgotinib 100 mg plus MTX
compared with MTX alone.
The FINCH 3 trial data were presented at the 2019 virtual European League Against Rheumatism annual meeting
(Westhovens et al. 2019) and published in The Annals of the Rheumatic Diseases (Westhovens et al. 2021).
FINCH safety data
We and Gilead presented integrated safety data from 7 RA studies at the Annual EULAR E-Congress of
Rheumatology 2020 (Winthrop et al). Data were integrated from 3 Phase 3 trials (FINCH 1–3), 2 Phase 2 trials
(DARWIN 1, 2), and 2 long-term extension (DARWIN 3, FINCH 4) trials including up to 5.5 years of filgotinib
exposure. In this pooled analysis, filgotinib was well-tolerated, and no new safety concerns were identified. Adverse
events of MACE and DVT/PE were rare and occurred in similar numbers among all treatment groups. Herpes
zoster reactivation was not increased in the filgotinib groups compared with the other treatment groups. The
data highlight the acceptable safety and tolerability profile of filgotinib as monotherapy and in conjunction with
MTX/csDMARDs4 in RA.
4 csDMARD, conventional synthetic disease-modifying antirheumatic drugs
31
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
In animal toxicology studies in the preclinical phase, filgotinib induced adverse effects on the male reproductive
system. Consequently, Gilead and Galapagos are performing dedicated male patient semen analysis trials in
inflammation (RA, CD, UC, AS, and PsA) patients, called MANTA and MANTA-RAy, concurrent to all Phase 3
programs. Primary endpoint data from week 13 from the MANTA and MANTA-RAy studies were reported in March
2021.
FINCH 4
FINCH 4 is a multi-center, open-label, long term extension study to assess the safety and efficacy of filgotinib in
subjects with RA, enrolling patients who completed either FINCH 1, FINCH 2, or FINCH 3 studies.
Post EC approval completed clinical studies with filgotinib
A DDI study (NCT04608344) was conducted in the form of an open-label, randomized, two-way, crossover study
in healthy adult volunteers (n=27), evaluating the effect of filgotinib on the pharmacokinetics of atorvastatin,
pravastatin, and rosuvastatin, which are sensitive substrates for the OATP-1B1/1B3, and the short-term safety
of administering filgotinib with or without statins. All study treatments were generally well tolerated. Co-
administration with filgotinib did not have a clinically meaningful impact on the exposure of atorvastatin,
pravastatin, and rosuvastatin.
Regulatory approvals of filgotinib in RA
Filgotinib (200 mg and 100 mg) was approved in the EU and Japan for the treatment of adult patients with
moderate to severe RA in September 2020. Filgotinib, a once-daily, oral, JAK1 preferential inhibitor was discovered
and developed by us using our target and drug discovery technology platform. Based on the robust clinical trial
results from the global FINCH Phase 3 and DARWIN Phase 2 programs, including more than 4,500 patient years
of RA clinical study experience, filgotinib has shown favorable results in terms of onset of action, efficacy, safety,
and tolerability. Patients receiving filgotinib once daily showed improvements in clinical signs and symptoms,
decreases in disease activity, and less progression of structural damage in joints. As only one in five RA patients
achieves full remission in the first year, despite there being many approved agents, filgotinib offers a welcome
new treatment option for adult patients struggling with this challenging and complex disease in Europe and
Japan.
In the U.S., a CRL was received from the U.S. FDA for the New Drug Application (NDA) for filgotinib. The FDA
requested data from the MANTA and MANTA-RAy studies before completing its review of the NDA. The MANTA
and MANTA-RAy studies are designed to assess whether filgotinib has an impact on sperm parameters. The FDA
also expressed concerns regarding the overall benefit/risk profile of the filgotinib 200 mg dose. After meetings
with the FDA following the CRL, Gilead decided not to advance with resubmission of filgotinib in the US for
approval as a treatment for RA.
32
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Commercialization of Jyseleca in RA
We and Gilead prepared to co-commercialize filgotinib in Europe, with Galapagos leading on the commercial
launches in 8 of the 27 countries. With the approval of filgotinib by the European Commission in September
2020, we and Gilead commenced negotiation of access for filgotinib in member countries. Following our revised
agreement with Gilead for filgotinib in Europe, we are in the process of taking over full commercial responsibility
for filgotinib in RA in all 27 countries in Europe, anticipated to be substantially completed by the end of 2021.
The graphic below describes the planned transition timing and relative importance of each region in Europe. See
details on the revised Gilead collaboration on filgotinib in the Notes to the consolidated financial statements.
European commercial organization
Market size
≈10%
No change to Belgium & NL
≈70%
≈15%
EU5: Transfer of full business
asap in ‘21
Alpine, Nordics & Ireland:
transfer by YE ‘21
≈5%
Rest of Europe: rights to GLPG
Transition to full European coverage by end 2021
Sources for market size figures: Decision Resources Group, Global Data, Galapagos Custom Research
The transition to take over full commercial operations in Europe has been planned to preserve launch
momentum. We are in the process of establishing a competitive sales force to support current and potential
future indications in Europe. Building this pan-European commercial operation is an acceleration of our
commercial strategy in place for products under the separate ten-year research and development collaboration
between us and Gilead, where we are responsible for all European commercialization.
33
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Filgotinib in IBD
Current treatments for IBD, including UC and CD, are dominated by anti-TNF agents.
We observed high activity and a favorable tolerability profile in a Phase 2 trial with filgotinib in CD, as reported
in TheLancet (Vermeire etal. 2016). We and Gilead reported that filgotinib achieved the primary endpoint in the
SELECTION Phase 3 trial in UC in 2020.
Should filgotinib be approved commercially for IBD indications, Galapagos will be lead commercial sales
responsible in Europe. All other countries ex-Europe will be Gilead’s commercial sales responsibility.
Global SELECTION Phase 3 program in UC
UC is an inflammatory bowel disease resulting in ulcerations and inflammation of the inner layer of the colon
and rectum. We estimate that the current market for UC treatments worldwide is $5 billion and in Europe €0.8
billion.
Although the introduction of advanced therapies has improved the treatment of some patients, 30% of patients
experience primary non-response,5 and 19% to 59% of initial responders do not sustain treatment response.6, 7 The
medical need for improved efficacy is high.
SELECTION was a global Phase 3 trial (NCT02914522) investigating efficacy and safety of 100 mg and 200 mg filgotinib
once-daily compared to placebo in 1,348 patients with moderately to severely active disease including those with prior
antibody therapy failure. Men and women in SELECTION were randomized to receive placebo, 100 mg, or 200 mg
filgotinib. Due to preclinical findings with filgotinib regarding semen parameters, in the U.S., randomization to 200
mg was restricted to male patients who have failed at least one anti-TNF therapy and vedolizumab, a monoclonal
anti-integrin antibody marketed by Takeda. Adjacent to the filgotinib Phase 3 programs, we and Gilead are conducting
dedicated studies evaluating potential impact of filgotinib on semen in male CD and UC patients (MANTA) and in RA,
PsA, and AS patients (MANTA-RAy).
We announced topline data from the SELECTION trial in May 2020. Filgotinib 200 mg achieved all primary
endpoints in the SELECTION study, inducing clinical remission at week 10 and maintaining clinical remission at
week 58 in a significantly higher proportion of patients compared with placebo. Filgotinib 100 mg did not achieve
statistically significant clinical remission at week 10.
In the SELECTION trial, clinical remission was defined as an endoscopic subscore of 0 or 1, rectal bleeding subscore
of 0, and ≥ 1 point decrease in stool frequency from baseline to achieve a subscore of 0 or 1. Among the biologic-
naïve cohort (Cohort A induction trial; n=659), 52 percent of patients had a baseline Mayo Clinic Score (MCS) of
nine or higher. In the biologically-experienced cohort (Cohort B induction trial; n=689), 74 percent of patients had
a baseline MCS of nine or higher, and 51 percent were previously treated with two different classes of biologics
(TNFα antagonists and an integrin receptor antagonist).
Rates of serious infections, herpes zoster, venous thrombosis, pulmonary embolism and gastrointestinal
perforation were low and comparable across treatment groups in both the induction and maintenance phases
of the study. Two deaths were observed in the filgotinib 200 mg treatment group in the maintenance trial. One
patient with pre-existing asthma died due to asthma exacerbation, and the second patient with pre-existing
atherosclerosis died due to left ventricular heart failure per autopsy report. Neither death was deemed as related
to study drug by the investigator.
5 Allez M et al. Report of the ECCO pathogenesis workshop on anti-TNF therapy failures in inflammatory bowel diseases: definitions, frequency and
pharmacological aspects. J Crohns Colitis. 2010 Oct;4(4):355-66
6 Ma C et al. Outpatient Ulcerative Colitis Primary Anti-TNF Responders Receiving Adalimumab or Infliximab Maintenance Therapy Have Similar Rates of
Secondary Loss of Response. J Clin Gastroenterol. 2015 Sep;49(8):675-82
7 Shmidt E et al. Predictors and Management of Loss of Response to Vedolizumab in Inflammatory Bowel Disease. Inflamm Bowel Dis. 2018 Oct 12;24(11):2461-2467
34
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
We recently announced the interim results and primary endpoint of the ongoing MANTA and MANTA-RAy
studies. The data are expected to be submitted to relevant regulatory authorities by our collaboration partner
Gilead.
Applications for approval of filgotinib in UC
We announced validation of the marketing application for filgotinib in the treatment of UC by the European
Medicines Agency in November 2020. We anticipate that Gilead will submit filgotinib for approval in UC to the
Japanese Ministry of Health, Labor, and Welfare (MHLW) in the first half of 2021. We and Gilead expect decisions
on potential approvals in Europe in the course of 2021 and in Japan in the first half of 2022.
A further, potential regulatory path for approval in UC and CD in the U.S. is pending the discussion of the MANTA
and MANTA-RAy semen parameter studies with FDA.
Commercialization of filgotinib in UC
We are responsible for commercial sales operations for UC in Europe, pending approval in that indication. We
anticipate an incremental increase in commercial costs in 2021 for this potential additional indication. Gilead
will be responsible for commercial sales outside Europe, should filgotinib be approved for UC outside of Europe.
FITZROY Phase 2 and global DIVERSITY Phase 3 program in CD
CD is an IBD of unknown cause, resulting in chronic inflammation of the gastrointestinal (GI) tract with a
relapsing and remitting course. We estimate that the global market size for CD treatments today is $14 billion, of
which approximately €1.7 billion in the five largest European markets
Today, with the most advanced therapies, 30-40% of CD patients on treatment achieve prolonged clinical
remission. There are currently no highly effective oral therapies approved for CD and, similar to RA, treatment
is dominated by injectable, biological treatments including anti-TNF therapies. Anti-TNF agents have improved
the management of CD; however, not all patients respond to these drugs, and secondary loss of response during
the first year is reported in up to 50% of patients per year in placebo-controlled trials. In data with more
recent compounds, the sustainability of response is decreased to 10-15% loss of efficacy per year. There continues
to be a considerable unmet need with these existing treatments. Dysregulation of the JAK signaling pathway
has also been associated with CD, which suggests that filgotinib, with its preferential selectivity for JAK1, is a
highly attractive candidate for the treatment of CD. It is hypothesized that with preferential inhibition of JAK1,
unwanted effects such as anemia may be reduced. This is of particular importance to IBD patients, who frequently
experience fecal blood loss.
Our FITZROY Phase 2 trial (NCT02048618) evaluated the efficacy and safety of once-daily filgotinib in 174 patients
with moderate to severe active CD and mucosal ulceration. Patients recruited were either anti-TNF naive or anti-
TNF failures. As reported in The Lancet (Vermeire et al. 2016), the FITZROY trial achieved the primary endpoint
of clinical remission at week 10 and filgotinib demonstrated a favorable tolerability profile consistent with the
DARWIN trials in RA.
Gilead initiated the Phase 3 DIVERSITY trial (NCT02914561) with filgotinib in CD in November 2016. The DIVERSITY
Phase 3 trial investigates the efficacy and safety of 100 mg and 200 mg filgotinib once-daily compared to placebo
in patients with moderate to severe active disease including those with prior antibody therapy failure. Gilead
will recruit approximately 1,300 patients from the United States, Europe, Latin America, Canada, and Asia/Pacific
regions. Men and women in the DIVERSITY trial will be randomized to receive placebo, 100 mg, or 200 mg
filgotinib. Due to preclinical findings with filgotinib regarding semen parameters, in the U.S. randomization to 200
mg was restricted to male patients who have failed at least one anti-TNF therapy and vedolizumab. Adjacent to
the filgotinib Phase 3 programs, we and Gilead are conducting dedicated studies evaluating the potential impact
of filgotinib on semen in male CD and UC patients (MANTA) and in male RA, PsA, and AS patients (MANTA-RAy).
We anticipate that Gilead will complete recruitment for DIVERSITY in 2021.
35
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
In March 2017, Gilead initiated a Phase 2 trial in small bowel CD (DIVERGENCE 1, NCT03046056) and a Phase 2
trial in fistulizing CD (DIVERGENCE 2, NCT03077412). Gilead stopped recruitment early for DIVERGENCE 1 in small
bowel CD, completing the randomized, placebo controlled trial to week 10 for 46 patients, 75% of whom were
biologic experienced. Filgotinib demonstrated a similar level of CDAI remission in DIVERGENCE 1 as in the TNF
experienced cohort of the FITZROY Phase 2 trial in CD.
CDAI remission in DIVERGENCE 1
% patients achieving
CDAI remission at
week 10
60
40
20
0
4/18
11/28
8/28
26/71
10/44
60/128
DIVERGENCE 1
75% bio-experienced
Placebo
200mg
FITZROY TNF-
experienced cohort
FITZROY overall
Placebo
200mg
Notes: data on file, CDAI remission = CDAI <150, recruitment for the DIVERGENCE 1 study was stopped early.
Gilead retains operational responsibility for the current trials in Crohn’s disease pursuant to the binding term
sheet for filgotinib which we entered into in December 2020.
Other indications with filgotinib
We and Gilead decided to stop the global development programs for filgotinib in PsA or AS. We at Galapagos are
evaluating potential development paths for filgotinib in PsA and AS for the European market.
36
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Our Toledo program
“Toledo” is our program name for a novel target class, the Salt-Inducible Kinases (SIKs), which we discovered with
our target discovery platform. The search for this novel target class started with the ambition to find new anti-
inflammatory drug candidates with a favorable efficacy and safety profile relative to existing therapies. Although
significant progress has been made with therapies in recent years, for instance in psoriasis, there remains a high
unmet need for diseases related to overactive inflammation in joints, the bowel, and other organs. Molecules
discovered by us and which inhibit the different members of the SIK family are expected to effectuate a dual
mode of action on inflammation by stimulating anti-inflammatory cytokines and inhibiting pro-inflammatory
cytokines. This potential master switch brings an opportunity to restore the immune balance that is typically out
of control in auto-immune diseases and is potentially differentiated from existing therapies that predominantly
act by suppressing the immune system (see figure below).
Restoring the immune balance
Healthy
Immune balance
Disease
Autoimmune
Immunoregulatory
Pro-inflammatory
Immunoregulatory
Pro-inflammatory
Immune balance restored
Immunoregulatory
Pro-inflammatory
Current therapies
Immune supression
Immunoregulatory
Pro-inflammatory
37
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Extensive Toledo portfolio
The family of SIKs contains three targets: SIK1, SIK2 and SIK3. In our search for compounds acting on these targets,
over 3,000 molecules were synthesized leading to more than 10 different chemical series with multiple selectivity
profiles. The lead molecule, GLPG3970, a SIK2/3 inhibitor, was prioritized over the first-generation compound
GLPG3312, a pan-SIK inhibitor, following Phase 1 completion, given its more suitable pharmacological profile.
GLPG3970 is currently being tested in five Phase 2 Proof of Concept trials. GLPG4399, a selective SIK3 inhibitor, is in
Phase 1, whereas GLPG4876 and GLPG4605 are advancing preclinically (see figure below). Several other compounds
with different profiles are being explored in discovery.
Optimization through innovative chemistry
SIK1
Optimization
SIK3
GLPG4399
Optimization
SIK2
GLPG3970
GLPG4605
GLPG4876
Toledo portfolio
Asset
Target
Preclinical
Phase 1
Phase 2
Phase 3
‘3970
‘4399
‘4876
SIK2/3
SIK 3
SIK2/3
Next compounds
'4605
SIK2/3
Next compounds
Inflammation
Fibrosis
The developed compounds were extensively tested in a broad panel of animal models for different inflammatory
diseases. Based on the collected data including cytokine profile analysis, we discovered that these SIK compounds
were able to modulate several aspects of the innate and adaptive immune system opening up a wide spectrum
of potential disease indications. Based on this information, combined on the findings on SIK selectivity as well as
individual compound profiles, we were able to match each compound with a set of potential disease indications.
The figure below describes the Toledo family of compounds with demonstrated activity in relevant preclinical
disease models for inflammation and fibrosis.
38
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
The discovery strategy for the Toledo program is to continue to advance multiple candidates across different
selectivity profiles. The broad panel of in vivo disease models guides clinical development.
Promising and broad in vivo activity
IBD
Pso
PsA
RA
SLE
OA
SSc
IPF
SIK2/3
‘3970
SIK3
‘4399
SIK2/3
‘4605
2021
SIK2/3
‘4876
Next SIK
compounds
2021
2021 - 2022
Activity demonstrated
No activity
2021
2021
IBD: inflammatory bowel disease; Pso: psoriasis; PsA: psoriatic arthritis; RA: rheumatoid arthritis; SLE: systemic lupus erythematosus; OA: osteoarthritis; SSc:
systemic sclerosis; IPF: idiopathic pulmonary fibrosis
GLPG3970: strong in vivo activity
The activity of GLPG3970 has been observed in vivo across different IBD models, as shown below.
Robust activity in vivo in 3 IBD models
DSS model
T-cell transfer model
MDR1 model
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39
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
As shown below, the analysis of diseased IBD colon tissue brings out the dual mode of action of GLPG3970, reducing
the pro-inflammatory cytokines (such as a decrease in TNFα levels), and inducing the anti-inflammatory
cytokines (such as an increase in IL-10 levels).
Impacting both sides of the balance in vivo
Multiplex cytokine analysis in IBD colon tissue (T-cell transfer model)
TNFα levels
IL-10 levels
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40
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
We also observed strong activity of GLPG3970 in RA and psoriasis models:
Robust activity across arthritis models
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***p < 0.001 (vs. diseased)
CIA: collagen induced arthritis; PsA: psoriatic arthritis
AUC: area under the curve
GLPG3970 activity in psoriasis model
Pso model
(IL-23-induced)
Day 5
Healthy
Diseased
Pos Control
GLPG3970
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Source: internal data on file
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41
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
GLPG3970: encourgaging data from a healthy volunteer study
Following these successful encouraging results across a range of preclinical models, we evaluated GLPG3970 in a
healthy volunteer study. The results from this Phase 1 single and multiple ascending dose study demonstrated
that GLPG3970 was well tolerated, with an encouraging pharmacokinetics (PK) profile. For pharmacodynamics
(PD) analysis, blood was drawn from the healthy volunteers on Day 1 and on Day 14 after administration of
different doses of GLPG3970 or placebo, after which the blood was stimulated ex vivo to measure effects on
cytokine release. The figure below shows a dose-dependent effect between GLPG3970 and two cytokines. The
pro-inflammatory cytokine, TNFα, decreased with increased compound dosing (left). The anti-inflammatory
cytokine, IL-10, increased (right) with increasing compound dosing, confirming the dual activity of GLPG3970.
Dual activity confirmed ex vivo
Mean per treatment
TNF levels
IL-10 levels
1
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0
0.5 1.0 2.0 4.0 8.0 24.0
0
0.5 1.0 2.0 4.0 8.0 24.0
hours
0
0.5 1.0 2.0 4.0 8.0 24.0
0
0.5 1.0 2.0 4.0 8.0 24.0
hours
Day 1
Day 14
Day 1
Day 14
placebo
dose 1
dose 2
dose 3
42
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
GLPG3970: five PoC signal detection studies currently ongoing
Following the completion of the first part of a Phase 1 trial, GLPG3970 progressed into a Phase 1b in psoriasis
and safety and “signal seeking” Phase 2 Proof of Concept trials in four additional indications, with the first three
topline readouts (CALOSOMA, SEA TURTLE, LADYBUG) expected in 2021.
Parallel Proof of Concept studies
2020
2021
Disease area
Psoriasis
Ulcerative colitis
Rheumatoid arthritis
Systemic lupus erythematosus
Primary Sjögren’s syndrome
Cohort 6 weeks
PoC 6 weeks
PoC 6 weeks
PoC 12 weeks
CALOSOMA
SEA TURTLE
LADYBUG
TAPINOMA
PoC 12 weeks
GLIDER
* Timelines subject to delays due to global COVID-19 pandemic
43
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Our TYK2 program with GLPG3667
GLPG3667 is a reversible and selective TYK2 kinase domain inhibitor discovered by us. In 2020, we tested the
molecule in a healthy volunteer study. This Phase 1 study was a randomized, double-blind, placebo-controlled
dose escalation study evaluating safety, tolerability, pharmacokinetics (PK) and pharmacodynamics (PD) of single
and multiple ascending oral doses for 13 days. Blood was drawn at multiple time points on Day 1 and on Day 10
and stimulated exvivo with several cytokines, including IFNα and IL-6, to analyze the level of inhibition in pSTAT
signaling obtained by GLPG3667. The Phase 1 data showed an encouraging PK profile for once-daily dosing and PD
activity:
1
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0.5
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24
hours
Day 1
Day 10
Day 1
Day 10
placebo
dose 1
dose 2
dose 3
In November 2020, we announced the first dosing in the Phase 1b trial with GLPG3667 in psoriasis patients.
This Phase 1b trial is a randomized, double-blind, placebo-controlled, multi-center study to evaluate the safety,
tolerability, efficacy, pharmacokinetics
(PK), and pharmacodynamics
(PD) of GLPG3667. A daily oral
administration of GLPG3667 at two different dose levels or a placebo is being investigated for a duration of 4 weeks
in 30 patients with moderate to severe plaque psoriasis. The primary endpoint is the change from baseline in
Psoriasis Area Severity Index (PASI) score at 4 weeks. Recruitment is based in Europe and topline data are expected
in 2021.
Pending successful completion of the Phase 1b study in psoriasis, we anticipate the evaluation of GLPG3667 in dose
range finding Phase 2 studies in psoriatic arthritis and other indications, potentially starting before year end 2021.
Our JAK1/TYK2 program with GLPG3121
We discovered GLPG3121 as a selective JAK1/TYK2 inhibitor. This asset is currently undergoing Phase 1 studies and
preclinical data point to potential application of GLPG3121 in inflammatory diseases.
44
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Inlicensing to further strengthen the inflammation franchise
In April 2020, we announced a global collaboration with Ryvu focused on the discovery and development of novel
small molecule drugs in inflammation. Under the terms of the agreement, we have an exclusive option to license
IP developed by Ryvu and to continue to develop this during the collaboration. Pending achievement of pre-
agreed criteria and utilizing our inlicensing option, we will be responsible for all further development of the
program.
In August 2020, we announced a global collaboration with Scipher Medicine to advance novel drug targets
identified by Scipher for the treatment of IBD. We will jointly validate a suite of novel IBD targets discovered by
Scipher, after which we have the exclusive option to progress up to five targets into further drug discovery and
development. Under the terms of the agreement, we will retain the rights for the discovery, development and
commercialization of therapeutics for the selected target(s).
GLPG1972 in OA
GLPG1972 is a drug candidate developed by us under our collaboration agreement with Servier. GLPG1972 acts
on ADAMTS-5, a key aggrecanase involved in the breakdown of aggrecan in joint cartilage. ADAMTS-5 has been
validated in the literature in both animal models and human explants, and ARGS, a byproduct of the cartilage
breakdown action of ADAMTS-5, has been shown to be elevated in the joints of OA patients.
ROCCELLA Phase 2b trial
ROCCELLA was a global, double-blind, placebo-controlled, dose ranging trial evaluating the efficacy and safety
of three different once-daily oral doses of GLPG1972/S201086 in 932 patients with knee osteoarthritis (OA) over 52
weeks of treatment. The study population was aged between 40 to 76 years (mean age was 63), mainly female (70%),
and with a mean disease duration of 7 years.
The primary objective of ROCCELLA was to demonstrate the efficacy of at least one dose of GLPG1972/S201086
compared to placebo after 52 weeks of treatment in reducing cartilage loss of the central medial tibiofemoral
compartment of the target knee via quantitative MRI.
The trial failed to meet the primary objective. The change from baseline to week 52 in cartilage thickness, in mm
(SD) was -0.116 (0.27) for the placebo group and -0.068 (0.20), -0.097 (0.27) and -0.085 (0.22), for the low, medium and
high dose, respectively. Statistically significant difference versus placebo was not reached in any of the treated
groups. There was no significant difference compared to placebo observed on secondary endpoints, including
clinical outcomes.
GLPG1972 was generally well-tolerated by patients in this Phase 2 trial.
Development of GLPG1972 subsequently was discontinued in OA.
45
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Our fibrosis portfolio
Fibrotic disorders represent an area of significant unmet need. In the area of lung fibrosis specifically, patients
have access to few drugs, which have limited benefit and side effects that often lead to discontinuation of
treatment. To address the unmet need, we are building a unique fibrosis candidate portfolio with compounds
that are active on different mechanisms involved in the pathogenesis of fibrosis. Our initial focus lies on IPF
and adjacent indications involving lung fibrosis, with the ambition to expand to other forms of organ and skin
fibrosis.
The onset of IPF starts with damaged lung epithelium, a layer that forms a protective barrier between the
environment and the underlying lung tissue. The injury that occurs at this level will trigger a wound healing
process, with on the immunity side the mediation of macrophages to promote tissue regeneration. To promote
the closure of the wound, the macrophages will attract and activate fibroblasts. These fibroblasts, however,
accumulate in an excessive way which leads to abnormal tissue repair and the deposition of extracellular matrix
components that aggravate the disease. Eventually this leads to respiratory failure. GLPG1205 (GPR84 inhibitor)
is believed to interfere with the immune response of lung fibrosis. In 2020, we in-licensed chitinase inhibitor
GLPG4716, in preparation for a Phase 2 in IPF, with demonstrated activity on the macrophage immune response
axis. In early stage development, we are advancing two other molecules from our Toledo portfolio aimed toward
the immune response, two additional novel GLPG targets with a role in fibroblast activation, and one GLPG
target and an in-licensed compound form Ryvu Therapeutics directed towards the extracellular matrix (see figure
below).
Casting a wide net in IPF
Aim to cover wide spectrum of fibrosis biology
Epithelium injury
Immune response:
macrophages
Fibroblast activation
Extracellular matrix
accumulation
‘1205
‘4716
2 Toledo molecules
‘4586
2 GLPG targets
GLPG target
Ryvu program
Fibrosis franchise
Asset
Target
Preclinical
Phase 1
Phase 2
‘1205
‘4716
‘4586
‘4605
Other
GPR84
Chitinase
IPF
IPF
Undisclosed
SIK2/3
7 novel
Toledo
46
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
About IPF
IPF is a chronic, relentlessly progressive fibrotic disorder of the lungs that typically affects adults over the age of
40. In 2018, 232,000 patients were diagnosed with IPF in the U.S., EU5 and Japan,8 and this population is expected
to grow, in part due to improved diagnosis. Furthermore, prevalence is expected to increase with the aging
population and worsening air pollution. The clinical prognosis of patients with IPF is poor, as the median survival
at diagnosis is two to four years. Currently, no therapies have been found to cure or stop the progression of IPF.
The current treatment strategy aims to slow disease progression and improve quality of life. Lung transplantation
may be an option for appropriate patients with progressive disease and minimal comorbidities.
Regulatory agencies have approved Esbriet (pirfenidone, marketed by Roche/Genentech) and Ofev (nintedanib,
marketed by Boehringer Ingelheim) for the treatment of mild to moderate IPF. Both Esbriet and Ofev have
been shown to slow the rate of functional decline in IPF and are gaining ground as the standard of care
worldwide. Combined sales of both drugs reached $2.8 billion in 2019.9 These regulatory approvals represent a
major breakthrough for IPF patients; however, neither drug stops the decline in lung function, and the disease
in most patients on these therapies continues to progress. Additionally, the adverse effects associated with these
therapies are considerable (e.g., diarrhea and liver function test abnormalities with Ofev; nausea and rash with
Esbriet). Therefore, there is still a large unmet medical need as IPF remains a major cause of morbidity and
mortality.
We estimate that the market of approved IPF drugs could grow to $5 billion by 2025.
Our IPF trials
ziritaxestat
Ziritaxestat (GLPG1690) is a potent and selective inhibitor of autotaxin (ATX), for which Gilead in-licensed the
ex-European rights in July 2019. ATX as a potential IPF target was identified in our target discovery platform and
further evaluated with ziritaxestat in a preclinical lung fibrosis model (bleomycin-treated mice).
Over the past years, we announced positive topline results for our Phase 2a FLORA trial in IPF, and the NOVESA
Phase 2a Proof of Concept trial in dcSSc with ziritaxestat. Ziritaxestat was found to be generally well-tolerated and
no deaths were reported in these studies. The FLORA Phase 2a results were published in The Lancet Respiratory
(Maher et al. 2018). In 2018, following the encouraging results from the FLORA trial, we announced the design of
our worldwide ISABELA Phase 3 program consisting of two identically designed trials, ISABELA 1 & 2, aiming to
enroll 1,500 IPF patients combined. Patients continued on their standard of care background treatment and were
randomized to either 200 mg or 600 mg ziritaxestat once daily or placebo. The primary endpoint was the rate of
decline of forced vital capacity (FVC) until week 52.
In February 2021, we discontinued the ISABELA Phase 3 trials in IPF. The decision was based on the
recommendation of the Independent Data Monitoring Committee which, following a regular review of unblinded
data, concluded that ziritaxestat’s benefit-risk profile no longer supported continuing the program. Detailed
data of the ISABELA studies will be presented at future medical meetings. All clinical trials with ziritaxestat are
discontinued, including the long-term extension of the Phase 2a NOVESA trial in systemic sclerosis.
GLPG1205
GLPG1205 is a clinical candidate for IPF that showed positive topline results in the Phase 2 PINTA trial.
GLPG1205 is a small molecule selectively antagonizing GPR84. We identified the GPR84 target using our proprietary
target discovery platform. The compound showed promising results in relevant preclinical models for IPF and
favorable tolerability in a healthy volunteer study.
8 Source: Decision Resources Group, Global Data, Galapagos Custom Research
9 Sales figures from Roche (pirfenidone; Esbriet®) and Boehringer Ingelheim (nintedanib; Ofev®)
47
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
PINTA Phase 2 in IPF
The PINTA trial was a randomized, double-blind, placebo-controlled trial investigating a 100 mg once-daily oral
dose of GLPG1205. The study recruited and included a total of 68 IPF patients. Participants were administered
the drug candidate or placebo (2:1 randomization) for 26 weeks and could remain on their standard of care
as background therapy, i.e. nintedanib, pirfenidone or neither. The primary objective of the trial was to assess
the change from baseline in FVC (in mL) over 26 weeks compared to placebo. Other measures included safety,
tolerability, time to major events, changes in functional exercise capacity, quality of life, pharmacokinetics,
pharmacodynamics and FRI.
In November 2020 we announced the positive topline results from the PINTA trial in IPF. At week 26, patients
receiving GLPG1205 on top of standard of care showed a smaller FVC decline, with a difference of 42mL versus
placebo on top of standard of care (-76mL on placebo; -34mL on treatment).
)
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Placebo
weeks
Although the study was not powered to show statistical significance, the FVC trend was consistent across the
three treatment strata. In addition, the change in pulmonary lobar volume, as measured by FRI, correlated with
the observed FVC decline.
No relevant safety signals were observed for GLPG1205 alone or on top of pirfenidone. The most frequently
reported adverse events on GLPG1205 alone were gastrointestinal disorders, especially nausea. In the treatment
arm of GLPG1205 on top of nintedanib, a higher rate of early discontinuations and higher rate of treatment
emergent adverse events (TEAEs) were observed. In that same arm, there was one death due to an exacerbation
of IPF, which was determined to be unrelated to study treatment.
GLPG4716
In 2020, an additional clinical product candidate was added to our fibrosis pipeline, GLPG4716, which is currently
in preparation for a Phase 2 trial.
GLPG4716 is a novel, small molecule CHIT1/AMCase dual-inhibitor targeting a key pathway implicated in
inflammation and tissue remodeling. We inlicensed GLPG4716 from OncoArendi in November 2020.
48
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Increased chitinase activity is strongly induced in multiple pulmonary diseases,
including IPF, SSc-ILD,
sarcoidosis, as well as in other diseases with inflammatory and/or fibrotic phenotype. In humans, CHIT1 is
mainly expressed by different lineages of activated blood and tissue macrophages and has been implicated in the
activation and polarization cascades of macrophages, as well as the indirect activation of other immune cells. It is
hypothesized that the inhibition of chitinase activity translates into a potential therapeutic benefit, as observed
in a range of preclinical models. GLPG4716 has demonstrated robust anti-fibrotic activity in multiple animal
models, when compared with the standard of care.
Below is the result for GLPG4716, in a preclinical IPF model, demonstrating activity comparable to one of the drugs
approved for IPF:
Activity in BLM therapeutic setting
e
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****p<0.001
*p<0.05
Our fibrosis collaborations
We have a global collaboration with Fibrocor focused on fibrosis. The collaboration was first announced in
January 2019 on a novel target in IPF and expanded a year later with four additional novel target programs.
Fibrocor is responsible for all research activity until lead optimization and we are responsible for the further
development and commercialization of the in-licensed programs. Galapagos took an undisclosed equity stake in
Fibrocor (privately held).
An exclusive collaboration and license agreement for the global development and commercialization of GLPG4716
was announced in November 2020 with OncoArendi Therapeutics. Under the terms of the agreement, we are
responsible for the further development and commercialization of the program. In addition, we receive the option
to initiate negotiations to obtain development or commercialization rights for selected preclinical candidate
molecules.
49
Galapagos NV • Annual Report 2020
RESEARCH & DEVELOPMENT
Other pipeline
Beyond our inflammation franchise and fibrosis portfolio, we continue to invest in our early stage pipeline built
from our pool of validated targets advancing toward clinical development. Within our deep portfolio, 13 programs
are in lead optimization, three preclinical programs are developed towards testing in humans and ten are in
clinical stage programs. Furthermore, in our early stage pipeline, three molecules are part of our Toledo portfolio.
In December 2020, we announced the first dosing in the Phase 2 MANGROVE trial with a CFTR inhibitor, GLPG2737,
in patients with autosomal dominant polycystic kidney disease (ADPKD).
Deep R&D portfolio
* LO: Lead optimization
50
Galapagos NV • Annual Report 2020
27validated targets13programs in LO10clinical stage programs3preclinical candidate programs Risk
factors
Description of the risks of which
investors should be aware
Forward with confidence
RISK FACTORS
Risks related to commercialization
The marketing and sale of filgotinib or future approved products may be unsuccessful or less successful than
anticipated. We are heavily dependent on the success of filgotinib, which is approved for the treatment of
rheumatoid arthritis in Europe and Japan, and under regulatory review in the European Union for the treatment
of ulcerative colitis.
The commercial success of filgotinib and of any future products will depend upon the degree of market
acceptance by physicians, healthcare payers, patients, and the medical community.
We have limited sales and distribution experience and are currently building a marketing and sales organization.
We expect to continue to invest significant financial and management resources to continue to build these
capabilities and to establish a European commercial infrastructure. To the extent any of our product candidates
for which we maintain commercial rights is approved for marketing, if we are unable to establish marketing and
sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may
not be able to market and sell any product candidates effectively, or generate product revenues.
Coverage and reimbursement decisions by third-party payers may have an adverse effect on pricing and
market acceptance. Legislative and regulatory activity may exert downward pressure on potential pricing and
reimbursement for any of our product candidates, if approved, that could materially affect the opportunity to
commercialize.
Risks related to product development and
regulatory approval
We operate adequate standard operating procedures to secure the integrity and protection of our research and
development activities and results, and the optimum allocation of our R&D budgets. The progress of the most
important research and development programs is continuously monitored by our management board; they are
discussed with the supervisory board at least once per quarter, and supervisory board members with expertise
in clinical and scientific matters occasionally attend meetings with our scientific staff to discuss and assess such
programs. Nevertheless, due to our limited resources and access to capital, we must and have in the past decided
to prioritize development of certain product candidates; these decisions may prove to have been wrong and may
adversely affect our business.
We are heavily dependent on the success of our product candidate filgotinib. We are also dependent on
the success of our other product candidates, such as GLPG1205, GLPG4716, GLPG3970, GLPG3667, GLPG3121, and
GLPG4399. Filgotinib is approved for use in RA in Europe and Japan and is currently under regulatory review for
use in UC in Europe. In addition, we are heavily investing in our early stage product pipeline, including our Toledo
early stage compounds, and these drug candidates must undergo rigorous preclinical and clinical testing, the
results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the
market.
We cannot give any assurance that any product candidate will successfully complete clinical trials or receive
regulatory approval, which is necessary before it can be commercialized.
52
Galapagos NV • Annual Report 2020
RISK FACTORS
Our business and future success is substantially dependent on our ability to develop successfully, obtain
regulatory approval for, and then successfully commercialize our product candidate filgotinib and our other
product candidates. We are not permitted to market or promote any of our product candidates before we receive
regulatory approval from the FDA, the EMA or any other comparable regulatory authority, and we may never
receive such regulatory approval for any of our product candidates. We cannot give any assurances that our
clinical trials for filgotinib or our other product candidates will be completed in a timely manner, or at all. If
filgotinib or any other product candidate is not approved and commercialized, we will not be able to generate any
product revenues for that product candidate.
The regulatory approval processes of the FDA, the EMA, the MHLW and other comparable regulatory authorities
are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory
approval for our product candidates, our business will be substantially harmed.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain.
Results of earlier studies and trials as well as data from any interim analysis of ongoing clinical trials may
not be predictive of future trial results, and failure can occur at any time during the clinical trial process. If
we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the
commercial prospects of our product candidates will be harmed, and our ability to generate product revenues
from any of these product candidates will be delayed. If filgotinib or any other product candidate is found to be
unsafe or has lack of efficacy, we will not be able to obtain regulatory approval for it and our business would be
materially harmed.
The rates at which we complete our scientific studies and clinical trials depend on many factors, including,
but not limited to, patient enrolment. Patient enrolment is a significant factor in the timing of clinical trials
and is affected by many factors including competing clinical trials, clinicians’ and patients’ perceptions as to
the potential advantages of the drug being studied in relation to other available therapies and the relatively
limited number of patients. Any of these occurrences may harm our clinical trials and by extension, our business,
financial condition and prospects.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent
their regulatory approval, limit the commercial profile of an approved label, or result in significant negative
consequences following marketing approval, if any.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt,
delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval
by the FDA, the EMA, the MHLW or other comparable regulatory authorities. The drug-related side effects could
affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product
liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
Filgotinib, if approved, may have a labeling statement warning for male patients. In preclinical studies, filgotinib
induced adverse effects on the male reproductive system. Adjacent to the filgotinib Phase 3 programs, we and
Gilead are conducting dedicated male semen analysis studies in CD and UC patients (MANTA) and in RA, PsA, and
AS patients (MANTA-RAy).
Even if filgotinib does receive regulatory approval or marketing authorization, the FDA or other regulatory
authorities may impose dosing restrictions that differ from the approved dosing regimen in other jurisdictions.
Box warnings, labeling restrictions, dose limitations and similar restrictions on use could have a material adverse
effect on our ability to commercialize filgotinib in those jurisdictions where such restrictions apply.
If we lose orphan product exclusivity or are not able to obtain such status for future product candidates for which
we seek this status, or if our competitors are able to obtain orphan product exclusivity before we do, we may not
be able to obtain approval for our competing products for a significant period of time.
53
Galapagos NV • Annual Report 2020
RISK FACTORS
Risks related to our financial position and need for
additional capital
We are a clinical-stage biotechnology company with a first commercial launch underway and have not yet
generated significant income. Our operations to date have been limited to developing our technology and
undertaking preclinical studies and clinical trials of our product candidates.
Since our inception, and with the exception of the year 2019, we have incurred significant operating losses.
We expect to continue incurring significant research, development and other expenses related to our ongoing
operations, and to continue incurring operating losses for the foreseeable future. We cannot be sure to generate
future revenues from the sales of filgotinib, our first product approved for commercialization in Europe and Japan
in the third quarter of 2020. Because of the numerous risks and uncertainties associated with pharmaceutical
product development, we are unable to predict the timing or amount of expenses and when we will be able to
achieve or maintain profitability, if ever.
We may require substantial additional future capital which may not be available to us on acceptable terms, or
at all, in order to complete clinical development and, if we are successful, to commercialize any of our current
product candidates. In addition, raising additional capital may cause dilution to our existing shareholders, restrict
our operations or require us to relinquish rights to our product candidates or technologies. The incurrence of
additional indebtedness could result in increased fixed payment obligations and could also result in certain
additional restrictive covenants that could adversely impact our ability to conduct our business.
For further reference on financial risks in particular, see note 32 of the notes to the consolidated financial
statements.
Risks related to our reliance on third parties
We are heavily dependent upon our collaboration arrangements with Gilead and certain other third parties for
the development and commercialization of our products and there can be no assurance that these arrangements
will deliver the benefits we expect.
In July 2019, we entered into a 10-year global research and development collaboration with Gilead. In connection
with our entry into the option, license and collaboration agreement, we received an upfront payment of
$3.95 billion and a €960 million ($1.1 billion) equity investment from Gilead. Under the option, license and
collaboration agreement, we will fund and lead all discovery and development autonomously until the end of the
relevant Phase 2 clinical study. After the completion of the Phase 2 clinical study (or, in certain circumstances, the
first Phase 3 study), Gilead will have the option to acquire an exclusive commercial license to that program in all
countries outside of Europe. If the option is exercised, we and Gilead will co-develop the compound and share costs
equally. In addition, we are heavily dependent on Gilead for the commercialization of filgotinib and the further
development of our product candidate filgotinib outside of Europe. Gilead may not devote sufficient resources
or give sufficient priority to the programs in respect of which it acquires a commercial license pursuant to the
option, license and collaboration agreement. Furthermore, Gilead may not be successful in the commercialization
of filgotinib outside of Europe and further development and commercialization of filgotinib or other programs
for which it acquires a commercial license, even when they do devote resources and prioritize their efforts for
such programs.
54
Galapagos NV • Annual Report 2020
RISK FACTORS
In addition, the terms of the collaboration with Gilead and any collaboration or other arrangement that we
may establish may not ultimately prove to be favorable to us or may not be perceived as favorable, which may
negatively impact the trading price of the ADSs or our ordinary shares. In addition, pursuant to the collaboration
with Gilead, we are entitled to certain option payments and tiered royalties, and milestone payments on certain
products. There can be no assurance that such payments will be sufficient to cover the cost of development of
the relevant product candidates.
We are subject to a number of additional risks associated with our dependence on our collaborations with
third parties, the occurrence of which could cause our collaboration arrangements to fail. In particular, the
collaboration we entered into in July 2019 is managed by a set of joint committees comprised of equal numbers
of representatives from each of us and Gilead. Conflicts may arise between us and Gilead, such as conflicts
concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial
provisions or the ownership of intellectual property developed during the collaboration, and there can be no
assurance that the joint committees will be able to resolve any such conflicts. If any such conflicts arise, Gilead
could act in a manner adverse to our best interests. Any such disagreement could result in one or more of the
following, each of which could delay or prevent the development or commercialization of product candidates
subject to the collaboration arrangements, and in turn prevent us from generating sufficient revenues to achieve
or maintain profitability:
▪ reductions or delays in the payment of milestone payments, royalties or other payments we believe are due;
▪ actions taken by Gilead inside or outside our collaboration which could negatively impact our rights or
benefits under our collaboration including termination of the collaboration for convenience; or
▪ unwillingness on the part of Gilead to keep us informed regarding the progress of its development and
commercialization activities or regulatory approval or to permit public disclosure of the results of those
activities.
In addition to our collaboration with Gilead, we may also enter into future collaborations which will give rise
to similar risks, although our ability to enter into such collaborations may be limited given the scale of our
collaboration with Gilead.
If our global research and development collaboration with Gilead or other collaborations on research and
development candidates do not result in the successful development and commercialization of products or if
Gilead or another one of our collaboration partners terminates its agreement with us, we may not receive any
future research funding or milestone or royalty payments under the collaboration. If we do not receive the
funding we expect under these agreements, our development of our product candidates could be delayed and we
may need additional resources to develop product candidates.
We may not be successful in establishing future development and commercialization collaborations, particularly
given the scale of our collaborations with Gilead, and this could adversely affect, and potentially prohibit, our
ability to develop our product candidates.
Developing pharmaceutical products, conducting clinical trials, obtaining regulatory approval, establishing
manufacturing capabilities and marketing approved products are expensive. Accordingly, we have sought and
may in the future seek to enter into collaborations with companies that have more resources and experience.
In the future, however, our ability to do so may be limited given the scale of the 10-year global research
and development collaboration that we entered into with Gilead in July 2019. If Gilead declines to exercise its
option and we are otherwise unable to obtain a collaboration partner for our product candidates, we may be
unable to advance the development of our product candidates through late-stage clinical development and
seek approval in any market. In situations where we enter into a development and commercial collaboration
arrangement for a product candidate, we may also seek to establish additional collaborations for development
and commercialization in territories outside of those addressed by the first collaboration arrangement for such
product candidate. If any of our product candidates receives marketing approval, we may enter into sales and
55
Galapagos NV • Annual Report 2020
RISK FACTORS
marketing arrangements with third parties with respect to otherwise unlicensed or unaddressed territories.
Furthermore, there are a limited number of potential collaboration partners, and we expect to face competition
in seeking appropriate collaboration partners. If we are unable to enter into any development and commercial
collaborations and/or sales and marketing arrangements on acceptable terms, or at all, we may be unable to
successfully develop and seek regulatory approval for our product candidates and/or effectively market and sell
approved products, if any.
We rely on third party suppliers for which a reliable supply of materials is required in order to avoid delays in
the drug discovery and development process. Most goods and services are provided by several different suppliers,
which mitigates the risk of loss of key suppliers.
Expanding the suppliers’ network can be time consuming as all source suppliers are subject to rigorous ethical
and quality control standards. Our suppliers are required to adhere to contractual terms that include anti-bribery
and anti-corruption provisions. Our general terms and conditions of purchase also contain a specific clause on
anti-bribery and anti-corruption. They can be found on our website.
We have relied on and plan to continue to rely on contract research organizations, or CROs, to monitor
and manage data for our preclinical and clinical programs. We and our CROs also rely on clinical sites and
investigators for the performance of our clinical trials in accordance with the applicable protocols and applicable
legal, regulatory and scientific standards. If CROs do not successfully carry out their contractual duties or
obligations or meet quality standards, regulatory requirements or expectations, our clinical trials may be
extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully
commercialize our product candidates. We do retain responsibility for all our studies and are required to and have
put in place measures to manage, oversee, and control our studies, including the CRO selection process, audits,
strong focus on deliverables, timelines, roles & responsibilities, and oversight of conduct of the studies.
We rely on clinical data and results obtained by third parties that could ultimately prove to be inaccurate or
unreliable. If the third-party data and the results that we rely on prove to be inaccurate, unreliable or not
applicable to our product candidates, we could make inaccurate assumptions and conclusions about our product
candidates and our research and development efforts could be materially adversely affected.
Risks related to our competitive position
We face significant competition for our drug discovery and development efforts, and if we do not compete
effectively, our commercial opportunities will be reduced or eliminated.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant
technological change. Our competitors may develop drug products that render our products obsolete or non-
competitive by developing more effective drugs or by developing their products more efficiently. In addition, our
ability to develop competitive products would be limited if our competitors succeeded in obtaining regulatory
approvals for drug candidates more rapidly than we were able to or in obtaining patent protection or other
intellectual property rights that limited our drug development efforts.
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Galapagos NV • Annual Report 2020
RISK FACTORS
Risks related to our intellectual property
Our ability to compete may decline if we do not adequately protect our proprietary rights.
We endeavor to protect our proprietary technologies and know-how by entering into confidentiality and
proprietary information agreements with our employees and partners, and by setting up special procedures (e.g.
with respect to the handling of the laboratory books).
Our commercial success depends on obtaining and maintaining proprietary rights to our product candidates,
as well as successfully defending these rights against third party challenges. We will only be able to protect
our product candidates, and their uses from unauthorized use by third parties to the extent that valid and
enforceable patents, or effectively protected trade secrets, cover them. If we fail to maintain to protect or to
enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our
results of operations.
Pharmaceutical patents and patent applications involve highly complex legal and factual questions, which, if
determined adversely to us, could negatively impact our patent position. Our success will depend in part on our
ability to operate without infringing the intellectual property and proprietary rights of third parties. We cannot
guarantee that our business, products and methods do not or will not infringe the patents or other intellectual
property rights of third parties. There is significant litigation activity in the pharmaceutical industry regarding
patent and other intellectual property rights. Such litigation could result in substantial costs and be a distraction
to management and other employees.
The patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions. The interpretation and breadth of claims allowed in some patents covering
pharmaceutical compositions may be uncertain and difficult to determine, and are often affected materially
by the facts and circumstances that pertain to the patented compositions and the related patent claims. The
standards of the United States Patent and Trademark Office, the European Patent Office, and other foreign
counterparts are sometimes uncertain and could change in the future. If we fail to obtain and maintain patent
protection and trade secret protection of our product candidates, we could lose our competitive advantage and
the competition we face would increase, reducing any potential revenues and adversely affecting our ability to
attain or maintain profitability.
We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we
may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek
protection.
Filing, prosecuting and defending patents on our product candidates in all countries and jurisdictions throughout
the world would be prohibitively expensive, and our intellectual property rights in some countries could be less
extensive than those in the United States and Europe. Consequently, we may not be able to prevent third parties
from practicing our inventions in all countries, or from selling or importing products made using our inventions.
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Galapagos NV • Annual Report 2020
RISK FACTORS
Risks related to our organization, structure and
operation
Our future success depends on our ability to retain the members of our management board and to attract,
retain and motivate qualified personnel. If we are not successful in attracting and retaining highly qualified
personnel, we may not be able to successfully implement our business strategy. Attractive development and
training programs, adequate remuneration and incentive schemes and a safe and healthy work environment
mitigate this risk.
We expect that if we continue to build our development, medical and commercial organizations, we will require
significant additional investment in personnel, management and resources. Our ability to achieve our research,
development and commercialization objectives depends on our ability to respond effectively to these demands
and expand our internal organization, systems, controls and facilities to accommodate additional anticipated
growth. If we are unable to manage our growth effectively, our business could be harmed and our ability to
execute our business strategy could suffer.
We are currently further building our marketing and sales organization. To the extent any of our product
candidates for which we maintain commercial rights is approved for marketing, if we are unable to establish
marketing and sales capabilities or enter into agreements with third parties to market and sell our product
candidates, we may not be able to effectively market and sell any product candidates, or generate product
revenues.
Our information technology systems could face serious disruptions that could adversely affect our business.
Continuing an uninterrupted performance of our IT system is critical to the success of our business strategy
and operations. A recovery plan for data has been implemented, as well as a system for interception of power
failures. Fire walls and virus scanners provide an additional and adequate protection. Our personnel should
adhere to continuity plans and procedures regarding access rights and installation of different programs. Business
interruptions could delay us in the process of developing our product candidates. This risk has a high potential
impact, but is mitigated by policies and procedures such as surveillance of the buildings, annual appraisals and
bonuses, and monthly management meetings.
We have to comply with applicable data privacy laws, including the European General Data Protection Regulation,
or GDPR, which imposes strict obligations and restrictions on the collection and use of personal data. In the
ordinary course of our business, we collect and store sensitive data. Many third party vendors that support our
business processes also have access to and process sensitive information. Although we have taken preventative
measures and set up procedures regarding data processing, data breaches, loss of data and unauthorized access
could still occur. These could result in legal claims or proceedings, liability under laws that protect the privacy
of personal information, including the GDPR, and significant regulatory penalties, disrupt our operations and
damage our reputation.
Despite our efforts to monitor social media and comply with applicable rules, there is a risk that the use of
social media by us or our employees to communicate about our drug candidates or business may cause us to
be found in violation of applicable requirements. In addition, our employees may knowingly or inadvertently
make use of social media in ways that may not comply with our social media policy or other legal or contractual
requirements, which may give rise to liability, lead to the loss of trade secrets, or result in public exposure of
sensitive information. Furthermore, negative posts or comments in social media could seriously damage our
reputation, brand image, and goodwill.
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Galapagos NV • Annual Report 2020
RISK FACTORS
We may undertake strategic acquisitions in the future and any difficulties from integrating such acquisitions
could adversely affect our share price, operating results and results of operations. We may acquire companies,
businesses and products that complement or augment our existing business. We may not be able to integrate
any acquired business successfully or operate any acquired business profitably. Integrating any newly acquired
business could be expensive and time-consuming. Integration efforts often take a significant amount of time,
place a significant strain on managerial, operational and financial resources, result in loss of key personnel and
could prove to be more difficult or expensive than we predict. As part of our efforts to acquire companies, business
or product candidates or to enter into other significant transactions, we conduct business, legal and financial
due diligence with the goal of identifying and evaluating material risks involved in the transaction. Despite our
efforts, we ultimately may be unsuccessful in ascertaining or evaluating all such risks and, as a result, might not
realize the intended advantages of the transaction.
If we are unable to use tax loss carryforwards to reduce future taxable income or benefit from favorable tax
legislation, our business, results of operations and financial condition may be adversely affected. We may incur
unexpected tax charges, including penalties, due to the failure of tax planning or due to the challenge by tax
authorities on the basis of transfer pricing. Any changes to Belgian and international taxation legislation or the
interpretation of such legislation by tax authorities may influence our activities, financial situation and results.
Such potential changes and their impact are monitored carefully by management and its advisors.
Being active in research and development in Belgium, France and the Netherlands, we have benefited from
certain research and development incentives. If the Belgian and/or the French and/or the Dutch government
decide to eliminate, or reduce the scope or the rate of, the research and development incentive benefit, either of
which it could decide to do at any time, our results of operations could be adversely affected.
As a company active in research and development in Belgium, we also expect to benefit from the “innovation
income deduction” in Belgium. The innovation income deduction regime allows net profits attributable to
revenue from among others patented products (or products for which the patent application is pending) to be
taxed at a lower effective rate than other revenues. The effective tax rate can thus be reduced up to 3.75%. At 31
December 2020 we had €247.2 million of carryforward innovation income deduction in Belgium.
Our inability to qualify for the abovementioned advantageous tax regimes, as well as the introduction of the
minimum taxable base and any other future adverse changes of Belgian tax legislation, may adversely affect our
business, results of operations and financial condition.
We have received several technological innovation grants to date, to support various research programs from an
agency of the Flemish government to support technological innovation in Flanders. In 2020 we have also received
a grant from the National Institute for Health and Disability Insurance. If we fail to comply with our contractual
obligations under the applicable technological innovation grant agreements, we could be forced to repay all or
part of the grants received.
We annually establish a detailed budget that is submitted to the supervisory board for review and approval. Our
performance compared to the budget is continuously monitored by our management board and is discussed
with the supervisory board at least once per quarter. For the establishment of our financial information, we have
processes and methods in place that enable the preparation of consolidated financial statements for our annual
and quarterly reporting. Our management reporting systems – which include an advanced integrated ERP system
– secure the generation of consistent financial and operational information, allowing management to follow-up
our performance on a daily basis.
Our business may be adversely affected as a result of computer system failures. We may suffer data leaks or
become the target of cyber-attacks, as a result of which our financial assets, confidential information and/or
intellectual property may be materially negatively impacted. We may not be able to successfully protect our
computer systems against unauthorized access by third parties.
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Galapagos NV • Annual Report 2020
RISK FACTORS
The occurrence of unforeseen or catastrophic events, including extreme weather events and other natural
disasters, man-made disasters, or the emergence of epidemics, depending on their scale, may cause different
degrees of damage to the national and local economies and could cause a disruption in our operations and have a
material adverse effect on our financial condition and results of operations. Man-made disasters, pandemics, and
other events connected with the regions in which we operate could have similar effects. For example, the impact
of COVID-19 on our business is uncertain at this time and will depend on future developments, but prolonged
closures may disrupt our operations and the operations of our agents, contractors, consultants or collaborators,
which could negatively impact our business, results of operations and financial condition. Further, uncertainty
around these and related issues could lead to adverse effects on the economy of the United States and other
economies, which could impact our ability to develop and commercialize our products and raise capital going
forward.
Market risks relating to the Galapagos shares
We have identified the following major market risks:
▪ Possible volatility of share price
The market price of the shares might be affected by a variety of factors outside management control, such
as the global economic situation, the business development of competitors, sector mergers and acquisitions;
it is difficult to mitigate this risk.
▪ Economic risk due to failure in confidence
General public confidence about future economic conditions or performance of us or our suppliers or
customers may impact the ability or willingness of others to trade with us.
▪ Dilution through capital increases
Raising additional capital may cause dilution to our existing shareholders. By raising additional capital
through capital
increases with cancellation of the preferential subscription rights of our existing
shareholders, these shareholders will be diluted.
▪ Dilution through exercise of subscription right plans
The exercise of existing subscription rights can significantly increase the number of outstanding Galapagos
shares.
▪ Inability to distribute dividends
We have a limited operating history and future profitability cannot be guaranteed. Galapagos NV has
significant losses carried-forward and will thus not be able to distribute dividends in the near future. This
can cause people to refrain from investing in Galapagos shares.
▪ Reputational damage
High ethical standards are maintained throughout the entire organization at all levels. Laws and guidelines
are complied with. Our suppliers are required to adhere to contractual terms which include anti-bribery and
anti-corruption provisions. In addition, our external consultants are required to comply with our Code of
Business Conduct and Ethics and U.S. Foreign Corrupt Practices Act Policy.
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Galapagos NV • Annual Report 2020
RISK FACTORS
▪ Belgian law provisions
There are several provisions of Belgian company law and certain other provisions of Belgian law, such as the
obligation to disclose important shareholdings and merger control, that may apply to us and which may
make an unfriendly tender offer, merger, change in management or other change in control, more difficult.
These provisions could discourage potential takeover attempts that third parties may consider and thus
deprive the shareholders of the opportunity to sell their shares at a premium (which is typically offered in
the framework of a takeover bid).
General statement about Galapagos’ risks
According to our current assessment we consider the risks to be manageable and our going concern not to be
endangered at the time of the current report. Assuming no further deterioration of the global business, financial
and regulatory environment, we consider ourselves well prepared to meet all future challenges.
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Galapagos NV • Annual Report 2020
CSR
report
Improving lives
Forward with confidence
CSR REPORT
Our commitment
Our commitment to Corporate Social Responsibility (CSR) is intrinsically linked to our core mission: to discover
and develop novel modes of action medicines for diseases with large unmet medical needs, primarily in
inflammation and fibrosis, with the aim to improve the lives of patients worldwide.
On a daily basis, our goal is to make a valuable and sustainable contribution to society with our discovery, clinical
development, and commercialization efforts. Filgotinib and GLPG1205 are clinical examples of how our approach
to finding novel medicines may be able to make a difference for patients in a range of disease areas. Our unique
target discovery approach addresses the root cause of the disease rather than just treating the symptoms, and we
have a substantial, growing pipeline of novel candidate medicines in inflammation, fibrosis and beyond. In this
way, we aim to make a sustainable positive contribution to society.
In 2020, we received approval for our first innovative product, filgonitib in RA, in Europa and Japan. Filgotinib is
now being launched in these territories.
Implementing our CSR initiatives
Since our foundation more than 20 years ago, we focus on the discovery and development of innovative medicines
to treat severe diseases with high unmet medical needs.
Based on our core mission, in 2018, we defined the four material aspects of our corporate responsibility and
sustainability efforts through engagement with internal and external stakeholders across our different locations.
These material aspects help us to identify and prioritize the sustainability issues that matter most to our business
in terms of growth, risk and goals, and to our stakeholders, including patients, investors, analysts, employees, and
suppliers. The four material aspects have remained the four pillars that define our CSR strategy and action plans
in 2020 and ensure that we report on the most interesting and relevant matters. We also regularly re-evaluate
the reporting aspects for materiality to ensure they continue to be current and complete.
63
Galapagos NV • Annual Report 2020
CSR REPORT
The four priority topics and material CSR aspects that we put
forward are:
Improving people’s lives
▪ Science and innovation management
▪ Building partnerships to bring innovation to patients
▪ Access to our candidate medicines
Go to chapter, page 66
Our employees are the strength behind Galapagos
▪ Building a strong corporate culture
▪ Human capital management
▪ Employees engagement
Go to chapter, page 72
Conducting business ethically and responsibly
▪ Manage our operations with ethics and integrity
▪ Our Code of Business Conduct and Ethics
Go to chapter, page 80
We care about the environment, health and safety
▪ Environmental policy
▪ Eco-efficient operations
▪ Employee well-being
Go to chapter, page 84
To standardize our data collection, we use the Sustainable Development Goals (SDGs), also known as the Global
Goals, as our reference framework to link the material aspects to our areas of engagement. The SDGs were adopted
by all United Nations Member States in 2015 as a universal call to action to end poverty, protect the planet, and
ensure that all people enjoy peace and prosperity by 2030. This CSR report provides the non-financial information
required by articles 3:6 § 4 and 3:32 § 2 of the Belgian Companies Code. For a discussion on risks, please see the
section called Risk factors in this Annual Report.
64
Galapagos NV • Annual Report 2020
CSR REPORT
We have identified eight key SDG goals where we believe we can make a difference. The table below links our
material aspects and engagement areas to selected aspects of the SDG framework:
Good health and well-being
Health and improving lives
through our breakthrough
medicines are at the core of what
we do
Gender equality
We cultivate a corporate culture
where we strive for gender equality
Industry, innovation and
infrastructure
Our mission is to bring innovative
medicines to patients suffering
from severe diseases in areas of
high unmet medical needs in a
social and sustainable way
Climate action
We value our planet and take
initiatives to safeguard the
environment and incorporate
greener practices across our
organization
Quality education
We invest in our employees and
foster an inclusive, open and
supportive work environment
across our nine locations in Europe
and the U.S.
Decent work and economic
growth
We have achieved our long term
ambition of becoming a fully
integrated biopharmaceutical
company and currently employ
>1,300 people across our nine
locations in Europe and the U.S.
Reduced inequalities
We aim to develop a balanced
workforce across a number of
criteria, including gender,
nationality, ethnicity, experience
and disability
Partnerships for the goals
We embrace internal and external
partnerships to work towards our
mission to bringing much needed
innovation to patients
As part of our commitment to CSR, we monitor new developments and practices and will consider implementing
new priority goals that could further enhance our CSR activities in the future.
Our commitment and areas of engagement are described below in the discussion of the four materials aspects,
which are also linked to the eight SDGs that we consider important to the company.
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Galapagos NV • Annual Report 2020
CSR REPORT
Material aspect 1: Improving people’s lives
We strive to discover, develop, and eventually commercialize breakthrough medicines with novel modes of action,
addressing disease areas of high unmet medical need. At the core of our mission is the improvement of the lives
of patients suffering from severe diseases with medicines that offer novel treatment options.
We are pioneering for patients
There is a real need for medicines with novel mechanisms of action that address the underlying cause of a
disease. There are many diseases for which there is no approved therapy today and many more diseases for which
current therapies leave room for improvement in patient outcomes. New mechanism of action medicines offer
the opportunity for alternative new clinical options for caregivers and patients. At the same time, they potentially
decrease the burden for society, by lowering healthcare costs.
We create value through science
Read the Magazine, visit https://reports.glpg.com/annual-report-2020/en/magazine
Our highly flexible target and drug discovery platform has been applied across many therapeutic areas, and our
deep pipeline today covers a range of diseases, with a focus on inflammation and fibrosis candidate drugs across
all stages of development. Following the approval of our first product, filgotinib in RA, we have launched filgotinib
in a number of European territories, and expect to further accelerate the commercial roll-out in Europe in the
course of 2021. We hope to receive approval from the European authorities for a second indication, UC, later this
year as well, and look forward to bringing filgotinib to patients living with this debilitating disease throughout
Europe.
We think big
Work at Galapagos, visit www.workatgalapagos.com
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Galapagos NV • Annual Report 2020
CSR REPORT
R&D goal
We continue to invest heavily in R&D and aim to initiate a Phase 3 trial every other year, to conduct at least three
Proof of Concept trials, and deliver at least three preclinical product candidates and at least six new validated
targets annually. The impact of the ongoing COVID 19 pandemic on our R&D efforts at the time of publication of
this report is described here.
€524M
Research and
Development
Expenses in 2020
+25% vs 2019
Based on our powerful drug discovery engine, we are building a deep, early pipeline of novel product candidates
to ensure continued innovation, with potential benefits to patients, healthcare professionals and society.
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Galapagos NV • Annual Report 2020
NEWTARGETSPRECLINICALCANDIDATESPROOFS-OF-CONCEPTPHASE 3STARTevery yearevery yearevery yearevery 2 years CSR REPORT
R&D portfolio
* LO: Lead optimization
We aim to select promising programs for internal development and commercialization, and to establish ourselves
further as a fully integrated biopharmaceutical company. With filgotinib now launched and with a deep pipeline
of early to late stage programs, we continue to focus on our mission to deliver innovative medicines to patients.
Our clinical pipeline
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Galapagos NV • Annual Report 2020
27validated targets13programs in LO10clinical stage programs3preclinical candidate programsPhase 2Phase 1PreclinicalAssetTargetPhase 3ApprovalCD Ph3 ongoing, submitted UC in EU, approved for RA in EU & JapanToledo, PoCs in 5 indicationsPh1b PsoPh1b OAToledoToledoIPFToledoPCKDMetabolicJAK1SIK2/3TYK2JAK1SIK3JAK1/TYK2SIK2/3>10 novelGPR84IPFChitinaseUndisclosed7 novelSIK2/3CFTRNovelFilgotinib‘3970‘3667‘555‘4399‘3121‘4876Other ‘1205‘4716‘4586Other'4605‘2737‘4059InflammationFibrosisKidney diseasesOther CSR REPORT
Accelerating innovation through collaborations
We have a number of collaborations with leading pharmaceutical companies to significantly enhance our
R&D efforts and pursue innovation to the benefit of patients. We are very proud of the transformative R&D
collaboration with Gilead that we signed in 2019. This collaboration should enable us to substantially boost our
pipeline of novel product candidates.
To strengthen our inflammation pipeline further, in 2020, we entered into collaborations with Ryvu and Scipher
Medicine to discover and develop novel target drugs in inflammation. Within our fibrosis pipeline, we entered
into a collaboration with OncoArendi, to work jointly on innovative approaches to treat severe fibrotic diseases.
We evaluate new opportunities to add to our pipeline on a continuous basis, in order to bring innovation to
patients.
Access to our research publications
Open access publishing will best serve our aim to make our research freely available to the research community
and other stakeholders. We aim to contribute to society through discovery of breakthrough therapies for diseases
with large unmet medical need. By opening up access, we make our scientific research publications publicly
available.
Access to our candidate medicines
In pursuit of the development and commercialization of novel medicines that have the potential to improve
people’s lives, we encourage patients to participate in clinical trials whenever possible. These clinical trials are
critical to gather the information (or data) needed to evaluate investigational products and seek their approval
by health authorities, such as the FDA and the EMA.
Information about ongoing clinical trials for our investigational drugs is available on clinicaltrials.gov, a service
of the U.S. National Institutes of Health that provides details on clinical trials conducted worldwide.
Next to the information on clinicaltrials.gov, there are several patient information portals where more
information regarding Galapagos related Phase 3 studies can be found.
For example, our partner Gilead launched a study information portal regarding the Phase 3 studies with filgotinib
in Crohn’s disease (DIVERSITY).
In some rare cases, patients are unable to participate in clinical trials and have exhausted all available treatment
options. In these cases, Galapagos has a policy in place to assess whether the investigational product can be
offered to a patient outside of a clinical trial, through a program called “expanded access”. Expanded access is also
often referred to as “compassionate use”. A full copy of our Expanded Access Policy can be found on our website.
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Galapagos NV • Annual Report 2020
CSR REPORT
Actions in 2020
▪ We delivered 5 new validated targets, compared to our goal of 6
▪ We nominated 3 new preclinical candidates, all with a novel mechanism of action, compared to our
goal of 3
▪ We conducted 10 Proof of Concept trials, compared to our goal of 11
▪ We submitted 1 product candidate (filgotinib) for regulatory review in an additional indication in
Europe, compared to our goal of 1
▪ We received 1 regulatory approval for our product candidate (filgotinib) in Europe and Japan
▪ In June 2020, we set up a new Galapagos Medical Information service, and we received 272 inquiries
These efforts brought us to 47 preclinical candidates since 2009, most of which have novel modes of action.
Of these, 24 have entered the clinic, 18 of which are expected to have novel modes of action.
Future ambitions
▪ Report topline results of ongoing clinical trials, including our Proof of Concept trials from our Toledo
program
▪ Launch an information portal on our clinical trials for patients and physicians
▪ Invest in our target discovery capabilities, in order to broaden our pool of targets, which in turn
should deliver more validated targets and Proof of Concepts on a yearly basis
▪ Continue to seek win-win collaborations to bolster the early-stage pipeline
▪ Pending potential approval, we expect to launch in UC, an additional indication for our first
innovative product, filgotinib in Europe
▪ Further strengthen our European commercial organization to bring innovation to patients in need of
breakthrough medicines
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Galapagos NV • Annual Report 2020
4715 1824preclinical candidatesentered clinicnovel modes of actionnovel modes of action in patient studies CSR REPORT
Expand our target & drug workspace
6,000+
Drugable by
small
molecules
GLPG
2020
GLPG
2025
20,000+
Protein-encoding
genes
In order to increase our chances of finding novel targets, we aim to expand our target workspace, and not
only use the selected pool of 6,000 drugable genes, but the complete protein-coding genome of over 20,000
genes.
€5.17B
Current Financial
Investments, cash
and cash equivalents
at end 2020
A strong balance sheet
to ensure future
growth
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Galapagos NV • Annual Report 2020
CSR REPORT
Material aspect 2: Our employees are the strength
behind Galapagos
Attracting, nurturing, and retaining our employees is key to our success in developing novel mechanism of action
drugs that can make a difference for patients. The key to achieve this is to make Galapagos the coolest place to
work. Our approach to talent stems from our core corporate values and our strategic talent initiatives.
"MakeitHappen’" is core to our corporate culture: people feel they can make an impact in our organization, which
is highly motivating. We continue to ensure that this aspect is protected and managed as we continue to develop
as an organization.
We are dedicated to ensuring diversity of our workforce and are committed to fostering an inclusive, open and
supportive work environment across our locations in Europe and the U.S.
With the goal to conduct multiple clinical trials in 2021 and our ambition to boost commercialization of our
first product, filgotinib for the treatment of RA, across Europe, our organization continues to develop and build
expertise, and we are committed to maintaining our corporate DNA.
Gender Equality
We strive for gender equality across multiple dimensions, including talent attraction, female leadership and
talent pipeline development, equal pay, creation of an inclusive culture, and rigorous implementation of sexual
harassment policies. We are committed to supporting gender equality through policy development,
representation, and transparency.
For example, in 2020, we celebrated the International Day of Women and Girls in Science, endorsing equal access
to, and participation in science for women and girls. The talent and dedication of the 60% of our R&D colleagues
who are women are essential to helping patients now and in the future.
We also joined a consortium of companies working on STEM initiatives, with a key focus on girls and STEM
(Science, Technology, Engineering, and Mathematics) (www.dasgeniaal.be and www.cestgenial.be). One of the
initiatives taken in 2020 was making a movie documenting the visit of a highschool girl to our Mechelen
headquarters. She talks to Galapagos scientists about their passion for science, and about what scientific research
can mean for the world. The movie was broadcast on national television and featured on social media channels
(#STEMheroes). A version with English subtitles can be found here.
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In January 2021, Galapagos was included for the second year in the Bloomberg Gender Equality Index, tracking the
performance of public companies committed to disclosing efforts to support gender equality.
Galapagos is proud to be included the 2021 Bloomberg
Gender-Equality Index
The list encompasses 380 companies headquartered in
44 countries and regions, across 11 sectors
Diversity
Our approach to diversity is deeply routed in our culture. Our culture and values bind us further in everything we
do. This is evidenced in our decisions and actions while we aim to continue to develop an inclusive and diverse
workforce as our business further grows and evolves. We strive for diversity across gender, nationality, ethnicity,
experience level, and disability.
But no matter how diverse we are, we have an aligned purpose of pursuing medical breakthroughs to improve
people’s lives.
Our group in numbers
Number of employees Galapagos group
1,489
591
men
gender:
education:
898
women
181
other
387
PhD
342
Bachelor
579
Master
Average age:
41
Number of employees
older than 45:
566
Nationalities:
50
Average years of service:
Employee turnover:
New hires in 2020:
3.9
2.2%
504
Total number of employees includes 185 employees from Fidelta, which was sold to Selvita on 4 January 2021, and includes consultants and temporary staff.
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▪ We attracted 504 new employees in 2020, 58% of the hires were female
▪ We continue to attract people with various backgrounds and now have 50 different nationalities within the
Galapagos group
▪ Our supervisory board currently has eight members of whom four are female (we refer to the section
supervisory board of our Annual Report 2020 for further information on each board member)
▪ Our management board currently has six male members (we refer to the section management board of our
Annual Report 2020 for further information on each board member)
Total workforce:
Average years employed
by the company:
40%
men
60%
women
men
3.8 years
women
4.0 years
% of gender
Senior leadership:
% of gender in
Middle management:
% of gender in
Rest of employees:
56%
men
44%
women
34%
men
66%
women
56%
men
44%
women
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Human capital management
At Galapagos, we believe our strong culture is fundamental to our business success. Our spirit of challenging
ourselves without fear of failure underpins our work. While this bold attitude is naturally in our DNA – and we
recruit exceptional people who are the right fit – we have defined our culture in a behavioral framework.
▪ We act as a pioneer and are optimistic in our ambitions, motivated by innovation and attracted by the
unknown
▪ We positively embrace change and adapt to circumstances. Failing on occasion doesn’t deter us; it’s how we
pick ourselves up that matters
▪ We challenge ourselves and, in doing so, raise the bar of what is possible
▪ Together, we want to create value and improve lives through science – and we find ways to make it happen
As new people from different backgrounds join our adventure, we ensure our culture evolves in the right direction.
We continue to develop structured, integrated systems and practices that ensure we are all heading in the same
direction on our path of discovery – because our culture transcends everything we do.
Our employees are at the core of everything we do. In our continued efforts to enable a great work experience at
Galapagos, we offer our employees the platform to grow, develop, fail, learn and succeed. Our ambitious business
strategy offers great opportunities to push the boundaries continually, enhance skills & competencies with
the aim to continue delivering innovative science and breakthrough medicines. We honor our successes, while
constantly raising the bar and allowing room for trial & error to drive innovation. We encourage our people to
take ownership, be entrepreneurial, and make a difference.
At Galapagos, we offer a competitive and evolving remuneration package that aims to reward, recognize, develop,
and retain our employees in a way that aligns with the company strategy and culture. Employee compensation
packages include performance bonuses and, for many employees, also share-related opportunities, which help
drive sustainable performance and reward employees for their contributions to our success. The benefits we offer
vary from country to country, based on local practices, customs, and statutory conditions. Employee benefits
include cover for critical risks and key life events as well as provisions of different forms of leave in support of
proper work-life balance.
We aim to ensure an inclusive, open, and supportive professional work environment across our international
locations. We organize regular engagement meetings across all our business units to inspire and align the teams
behind our vision and ambition. We hold informal inspiration virtual sessions with members of our management
board for new and long-time employees across the different sites.
We listen to our people through formal and informal channels established to ensure adequate anonymity and
psychological safety. Surveys are conducted to evaluate our actions, impact, and agility of our people processes.
These and other indicators allow us to consider actions to optimize our work environment and enhance employee
experience.
During the global pandemic, we took a number of initiatives to help employees manage this unprecedented
crisis, including providing additional electronics to facilitate working from home, organizing online mindfulness
moments, and paying a stipend to cover the additional costs incurred at home. We also implemented
engagement initiatives to create team-cohesion and strengthen the feeling of belonging to the Galapagos family.
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Our involvement with local communities and charities
We want to be part of the community in which we work and live. In the light of the ongoing COVID-19 pandemic,
we transformed our annual Company Day, which traditionally includes a part dedicated to spending time with a
range of charity organizations, into a cross-site “We Care” initiative. We strongly believe that our contribution to
our communities is even more important than before.
Throughout our different locations, we engaged with various charity organizations supporting children and their
families. With all the gifts, cards, and donations collected, we wanted to help underprivileged people enjoy a warm
Holiday season.
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We promote a career in science through STEM initiatives
We actively engage in promoting science and a career in science. We joined a consortium of more than 18
international companies and local organizations with one joint objective: creating a spark for science, technology,
technics, math, production and design for children between 10 and 14 years old. Together with young people, we
are engaging parents, teachers and businesses to achieve this goal, and this with an inclusive and gender-sensitive
approach targeting schools, businesses, events and different online channels.
Our goals are to inspire children and young people, and to create low access to STEM related subjects:
▪ Demonstrate that major societal challenges such as biodiversity, climate change, vaccines, and digitization
can be solved with STEM knowledge
▪ Collaborate effectively with parents, teachers and businesses to get STEM online and offline, in order to bring
it home to the target audience
▪ Illustrate that STEM is for everyone, regardless of background knowledge, gender, and ethnicity, by giving due
attention to specific target groups
For more information: www.dasgeniaal.be and www.cestgenial.be
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Actions in 2020
▪ We engaged with local communities to give back to society
▪ We improved our talent-scouting model during COVID-19 to safeguard recruitment of candidates
fitting well with the DNA of Galapagos via increased use of recruitment tools, digital, and case-based
presentations
▪ We sharpened, digitized, and branded (“Your call for purpose”) the Galapagos career site to stimulate
interaction, insight, and candidate friendliness. We engaged with external candidates and pitched our
employer brand and value propositions at several career fairs
▪ We made our onboarding approach and program more efficient, robust, and attractive. To this end,
the different business units set up onboarding initiatives and strengthened the “buddy” concept.
In addition, an onboarding app was deployed to bring across the company values and assist with a
smooth and effective start
▪ Our performance management process embodies that talent is core and that employee development
is critical to our success. We foster peer engagement, internal lateral mobility, and an open feedback
culture to enhance performance and stimulate personal development. In 2020, about 79 employees (of
which 70%+ women) undertook new roles and assignments with increased responsibilities
▪ Our view that each and every employee is a talent stimulates focused learning interventions for
personal and domain excellence. In 2020, we focused on enhancing team experiences, a journey that
will continue in the coming years. We identified and prioritized capability development that meets
performance and prepares our talents for future challenges in line with both organizational strategy
and individual development ambitions
▪ Our Total Reward Center of Expertise led the creation and roll-out of local reward offerings in new
geographic markets, enabling the hiring, engagement, and retention of employees internationally.
This has been a key step to support our commercialization ambitions in the big 5 EU markets &
Benelux. In addition, as part of our evolving offering, we have made enhancements at both the
international and country level for the benefit of our employees, including the launch of annual
stock-based awards to drive further alignment between the company and our senior employees,
improvements to family leave policies, and the introduction of a financial support package enabling
remote working as part of our broader reimagination of the future of work
▪ 2.2% turnover of employees for the Galapagos group, excluding the termination of temporary and
consultancy contracts
▪ We set the platform to achieve digital ambitions at HR, by preparing the ground for the launch and
go-live of an SAP-based performance management tool by end 2020
▪ With growing offices in new European locations (Germany, Spain and Italy) we also established full
scale HR services and payroll for all employees
▪ We embarked on additional plans to stay close and connected to all our employees, supporting
leadership teams to address challenges and unknowns from COVID-19. Due care was awarded to our
workforce in the labs with frequent interactions. Our employees were empowered to discover new
ways of working and collaborating, employing agility, heart, and humility
▪ Faced with the setbacks in 2020, we invested even more in preparing strong communication plans,
with extensive Q&A provided to senior leaders to help them to be closer to their teams, be well
equipped, and supported. A continued transparent and open tone from the top, authentic
presentations during townhall meetings, and allowing questions and answers from all staff guided
employees on how to put the corporate news in perspective, and to build trust in our ability to
overcome these headwinds with a plan and commitment
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Future ambitions
▪ “We Care” is in our DNA and we continue to remain committed to impactful local communities and
charities, by, for example:
▪ supporting local STEM-initiatives throughout our different sites
▪ donating our depreciated IT materials to local organizations for educational support
▪ The team will continue to focus on proactivity and ensuring quality. We aim to improve our employer
branding position via campaigns that inspire: “Call for Purpose” and “In theory everything is possible -
In practice, we make it happen!” Internally, we plan to boost cross-department mobilization of talents
to build breadth of skills and expertise, while we create more connectivity and engagement to grow
internal talents
▪ Our leaders are stimulated to role model key behaviors, embody corporate values and to create the
context for their teams to excel and as such to improve the competitiveness of our talent and the
organization. Internal talent pipelines and succession plans will be refined where appropriate
▪ To ensure a straightforward, future proof and attractive employee value proposition, we have
embraced digital technology while constantly improving our core process. We continue to adopt
cutting edge digital solutions to boost candidate and employee experience, empowering people
processes across the whole organization
▪ We will continue to evolve our competitive remuneration package to attract, retain, and engage
talented employees. Remuneration is an area of focus, as it gives Galapagos a differentiation angle
and competitive advantage. In addition, we will look for further opportunities to bring to life our
remuneration principles, including reinforcing linkages between pay and performance, enabling
employees to share in the company’s success in alignment with shareholder interests, remaining
competitive in existing and new geographic markets, and supporting employees and their families
with locally relevant employee benefits
▪ We will continue to drive and enable both mindset and practice when it comes to organizational
agility. This starts with building a resilient organization, driving connections & collaborating with
empathy within the company. Sustaining in turbulent environment and being highly responsive to
our people has been our prime agenda and will continue. Further, leadership and line management
will be strengthened and internal mobility boosted along with our approaches to retain and grow our
talents across projects and programs
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Material aspect 3: Conducting business ethically and
responsibly
At Galapagos, our core business is the discovery and development of drugs with novel modes of action, and we
prioritize ethical behavior in all its aspects.
We believe that ethical behavior is particularly important and inherent to our business: preclinical and clinical
testing, access to our investigational medicines through our clinical trials, expanded access to drugs currently in
development for patients who are not eligible to enroll in clinical trials, and our codes of ethical conduct.
To ensure our business is compliant with regulatory and corporate policies, and that we conduct business in an
ethical way, we have developed a Compliance and Ethics Program that is available on our company intranet.
Animal welfare in drug development
It is not possible to examine the complex interactions in a living organism solely by use of modeling and invitro
studies. In vivo studies remain essential in discovery, development and production of new medicines. Moreover,
regulatory authorities worldwide require that new products have been evaluated in both animals and humans
in order to ensure the quality, safety and efficacy of these products before granting approval. Without animal
testing, no new medicines would be approved.
Galapagos explicitly forbids the unethical treatment of animals, such as animal neglect or cruelty, and strives
to offer the animals a high quality of life, while constantly seeking ways to make improvements. We have
implemented practices that demonstrate our commitment and responsibility to refine, reduce and replace non-
clinical testing involving use of animals to the greatest extent possible, and we will continue to research, promote,
and further implement alternative methods. For non-clinical development studies, including those that assess
efficacy and safety of our product candidates, we firmly stand behind the “Three Rs” principle: Refinement,
Reduction, and Replacement. The Three Rs principle is based on the premise that animals should be used only if
a scientist’s best efforts to find a non-animal alternative have failed, and that when animals are needed, only the
most humane methods should be used on the smallest number of animals required to obtain valid information.
To illustrate this point, we make more frequent use of in silico (computer modelling) and in vitro (cellular
testing) designs and approaches. Examples are the implementation of in silico software, and in vitro assays to
allow for the early assessment of potential safety issues. Other improvements include the implementation of
new pharmacological models reducing animal-based development or the review of procedures by the ethical and
animal welfare committees. We recently published an article on a novel insilico approach,10 which was awarded
by the Society of Toxicology. We are engaged in a number of partnerships, including the Virtual Human Platform,
an organization that aims to accelerate the transition to animal-free safety assessments through innovation in
data science, human tissue culture models and transition management.
10 Bercu J et al. A cross-industry collaboration to assess if acute oral toxicity (Q)SAR models are fit-for-purpose for GHS classification and labelling. Regulatory
Toxicology and Pharmacology 120 (2021) 104843
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Our focus on animal welfare triggers a continuous improvement of, amongst others, the housing conditions of
animals, better enrichment of the animal environment (food, games, social activities), reviewing any anomalies,
and the commitment to immediate action. We expect the same ethos from third parties we work with such as
Contract Research Organizations (CROs) and academia. We performed a thorough assessment of all third parties
and have regular interactions with them on, for example, the culture of care, enrichment best practices, group
housing vs single housing, and the size of cages.
In addition, we follow Directive 2010/63/EU in Europe with regards to animal testing. The requirement to be
compliant with Directive 2010/63/EU forms part of the pre-assessment and selection process of the European
laboratories that we use for non-clinical testing, and we monitor animal welfare in the European laboratories we
engage with on a regular basis.
We also follow the national regulations defining high standards for animal welfare for our internal studies in
France (GLPG internal facility). We systematically submit our projects to the National Authorities for ethical
approval, and are regularly inspected in order to maintain the highest accreditations. We subcontract our
preclinical safety studies to CROs that are committed to the highest standards in animal welfare and that
are regularly inspected by their respective National Authorities. We demand the same level of diligence and
compliance from all our suppliers, and perform regular audits.
Outside of the European Union, we require compliance with local animal welfare regulations in laboratories. In
the U.S., for example, we work only with laboratories that are accredited by the Association for Assessment and
Accreditation of Laboratory Animal Care.
We are proud that the Animal Welfare Committee we implemented in 2019 continues to put a framework in
place for future discussions, to enforce animal welfare best standards and to ascertain that our ethical values are
well understood. The Animal Welfare Committee reports directly to the Development Management Committee
and CEO of Galapagos, and in addition to its advisory role, the Committee will regularly organize audits to
assess animal study practices. Its mission's to conduct gap analyses on Galapagos’ expectations and to ensure
compliance in all our partnering animal facilities, to exchange and agree on best practices across all sites, to
develop key policies and SOPs, to define KPIs and monitor the effort and progress, and to communicate on our
ethical values, both internally and externally.
Our clinical trials ethics
Galapagos sponsors and conducts clinical trials in accordance with the applicable international standards.
The fundamental guidelines are the Declaration of Helsinki (and its amendments) and Good Clinical Practice
(including amendments), as well as Good Pharmacovigilance Practice guidelines of the International Council for
Harmonisation. Our adherence to these internationally recognized guidelines ensures the rights, safety and well-
being of participants in our clinical trials. In addition, other international guidelines like The Belmont Report,
Council for Coordination of International Medical Congresses guidelines, The Nuremberg Code, United National
Educational, Scientific and Cultural Organization’s (Declaration on Bioethics and Human Rights) form the ethical
foundation for our trial activities. We comply with laws and regulations in the countries/regions in which we are
conducting our trials, including the U.S. Code of Federal Regulations and the EU Directive on Clinical Trials.
Furthermore, we uphold our own internal procedures and standards for clinical trials, irrespective of the country
in which the trial is conducted.
Overall, it is our policy that the interest, safety, and well-being of trial participants and patients will always
supersede those of science, commerce, as well as those of society.
Our trials are only initiated if they are scientifically and medically justified and when they are externally
validated by clinical experts. Moreover, they will always be reviewed by local health authorities and ethical
committees before initiation. Trial participants (or their legally authorized representative) must give written
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consent after being properly informed of the trial, including of its risks and potential benefits. Participants are
duly informed that they are able to withdraw from the trial at any time, without any explanation, and then will
receive appropriate standard care.
We or our representatives conduct regular site monitoring visits to ensure that clinical trials are conducted in
accordance with the applicable approved study protocol.
Adverse events are monitored and reported to authorities and ethical committees as needed, and appropriate
actions are taken when needed. Our Safety Monitoring Committee enables timely evaluation of accumulating
safety data of ongoing studies, and adapts risk-management strategies to support safe and ethical conduct of
Galapagos studies. An Independent Data Monitoring Committee (IDMC) may be installed to act as an advisor to
Galapagos on whether to continue, modify, or terminate a trial based on periodic assessment of trial data. The
IDMCs remain independent from Galapagos and are composed of members with no relevant conflicts of interest.
Our trials ensure proper indemnification of participants in case a product candidate or trial procedure causes
bodily harm.
We favor transparency and make results from our clinical trials conducted in patients available independent of
the outcome – to physicians, and researchers, with full consideration for protection of patient data privacy and
commercial confidentiality. We report the outcome in accordance with the CONSORT Statement, or Consolidated
Standards of Reporting Trials, designed to improve transparency around clinical trials.
Clinical trials and summary results are registered on Clinicaltrials.gov and/or the EU Clinical Trials Register.
Starting 1 January 2021, we commited to registering Galapagos-sponsored Phase 1 to 4 clinical trials conducted in
any geographical territory. We commit to making a summary of the results of these Galapagos-sponsored Phase 2
to 4 clinical trials publicly available within 6 months of completion for pediatric studies and 12 months for adult
studies. We attempt to publish results in peer-reviewed journals, in accordance with Good Publication Practice
and the International Committee of Medical Journal Editor’s Uniform Requirements for Manuscripts Submitted
to Biomedical Journals, and at relevant scientific meetings and congresses. As a publicly listed company, we also
have the obligation to communicate trial results by other means to the investor community, such as via press
releases.
Our code of business conduct and ethics
We have established a Code of Business Conduct and Ethics (the "Code”) that outlines the binding principles of
business conduct and ethical behavior that is expected from all our staff and third parties working on behalf of
Galapagos.
Galapagos’ supervisory board is responsible for administering the Code. The supervisory board has delegated day-
to-day responsibility for administering and interpreting the Code to our General Counsel who has been appointed
as our Compliance Officer under this Code.
We expect our directors, officers and employees to exercise reasonable judgment when conducting our business.
We encourage our directors, officers and employees to refer to this Code frequently to ensure that they are acting
within both the letter and the spirit of this Code.
We expect our employees and third-party suppliers to conduct business with integrity, ethics and respect for
human rights. We expect them to turn away from conflicts of interest, corruption, and fraud. Our Code of Business
Conduct and Ethics is a mandatory training and is available on our website.
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Our suppliers are required to adhere to contractual terms that include anti-bribery and anti-corruption
provisions. We consider CSR criteria in our vendor selection process as appropriate for the type of vendor with
which we are working. Our general terms and conditions of purchase also contain a specific clause on anti-bribery
and anti-corruption.
Actions in 2020
▪ With regard to animal welfare, in 2020, we implemented our Animal Welfare Committee, and agreed
on KPIs. Its mission is to further exchange and agree on best animal welfare practices across all
sites, to develop key policies and SOPs, to define KPIs and monitor the effort and progress, and to
communicate on our ethical values, internally and externally
▪ The Animal Welfare Committee is composed of a diverse team of scientists and non-scientists, and
reports directly to the Development Management Committee and CEO of Galapagos. In addition to its
advisory role, the committee will regularly organize audits to assess the animal study practices
▪ The Animal Welfare Committee took more than 20 major “R” initiatives and made decisions that
supported our “Three Rs” philosophy, and included this in our selection process for non-clinical
partners
▪ In aiming to create value for patients around our clinical trial activities, several new roles were
created in 2020 to engage with patients and patient organizations
▪ 93.5% of our employees completed the training on our Code of Business Conduct and Ethics
▪ During the onboarding process of new employees, we emphasize the importance of our Compliance &
Ethics Program, our Code of Business Conduct and Ethics and all channels available for them to raise
questions and concerns
Future ambitions
▪ We will continue to evaluate our internal processes and KPIs with regard to animal welfare in the
Galapagos Animal Welfare Committee, for all our internal and external facilities
▪ We will monitor the progress made and report it yearly
▪ We will continue to maintain and expand our focus on patients, amongst others by co-creating
our Patient Partnership Charter with patient representatives, and by obtaining patient insights, for
example when designing new trials
▪ We will explore innovative tools and processes to reduce clinical trial burden on patients and sites
▪ We will share easy to understand study results with patients, per EU Clinical Trial Directive No 536/
2014
▪ We will further strengthen the Galapagos Compliance & Ethics Program to meet the changing needs
of our organization through:
▪ Developing and rolling out a new Code of Conduct - titled "Making It Happen The Right Way" to
reflect the ongoing changes that are relevant to Galapagos
▪ Promoting our culture of speaking up both internally and with external stakeholders
▪ Refining our third-party oversight through an enhanced risk assessment framework and due
diligence as we enter new geographies
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Material aspect 4: We care about the environment,
health, and safety
Our mission is to bring innovative medicines with novel modes of action to patients suffering from severe diseases
in the most sustainable way, caring about the health, safety and wellbeing of our employees and respecting our
planet by keeping our environmental footprint to a minimum.
In addition, we operate in a highly regulated sector and are hence subject to a strict set of laws and regulations
related to impact on the environment, and to the health, safety and well-being of employees.
To ensure adherence to our mission and compliance with legislation we established an EHS group department
responsible for the development of an Environmental, Health and Safety (EHS) management system based
on the international ISO 14001 and ISO 45001 standards, and for proposing an annual action plan to promote
environmentally sound practices and health, safety and well-being at work. Management guarantees the
implementation of this action plan and our EHS efforts are anchored in the shared responsibility of our staff:
every employee is responsible for protecting people and the environment in and around his or her workplace. We
perform internal and external audits to monitor compliance.
We promote initiatives to eliminate accidents and illness, and to provide a safe work environment and business
processes.
We maintain safety monitoring records, in compliance with applicable legislation, and ensure that training of
employees takes place on all handling of hazardous materials, laboratory and other safety aspects, and on other
relevant policies for conducting our business. In 2020, our three research centers jointly reported 2 lost time
incidents (one resulting from slip, trip & fall and one from a cut) which resulted in 6 lost calendar days.
We currently have no production sites, we do not own buildings, and our facilities have only minor
environmental liabilities such as waste handling and emissions from fume hoods. Nonetheless, we aim to reduce
our environmental impact further, for example by recycling and replacing paper by digital means to the extent
possible, and we are committed to selecting our production partners with care.
Other examples include the bikes at our facilities in Mechelen and Leiden used by employees who need to
commute between the buildings on site as well as the gradual greening of our car fleet.
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Actions in 2020
▪ We coordinated “license to work” conditions during the COVID-19 pandemic by performing risk
analysis and defining safe conditions to work on site as well as from home
▪ We strengthened our EHS Governance Structure and expert skills by:
▪ inviting the country leads to the corporate Site Operation Meetings,
led by our Head of
Operations, to align on EHS communications and accountabilities
▪ recruiting a colleague with health expertise and optimizing the involvement of the occupational
physician at our site in Mechelen
▪ adding a position for an EHS manager dedicated to our offices in Leiden, appointing a corporate
single point of contact to provide EHS support to our operations in the EU5 countries, the US
and Switzerland, and contracting external EHS providers to help ensure local EHS compliance at
current and new offices in the UK and Switzerland
▪ We further developed our EHS management system by implementing four new corporate EHS
Standard Operating Procedures related to the transportation of hazardous goods, emergency
preparedness, competences measurement and management of collective and personal protective
equipment
▪ Operational, site-specific highlights include:
▪ the re-authorization of biosafety and environmental permits for the buildings at our site in
Mechelen
▪ improved chemical safety by the implementation of software to support risk assessments for
dangerous chemicals at our site in Leiden
▪ improved recycling of electric and electronic laboratory waste material at our site in Romainville
▪ In order to protect and increase the bee population, we installed beehives on the roof of our building
in Mechelen
Future ambitions
▪ In 2021, we aim to execute on a workplace strategy, building on the "To The Next Normal" program
intended to accelerate the learnings of our COVID-driven new ways of working, in order to embed
how we want to operate as a company going forward, investing in:
▪ Enhanced approach to flexibility
▪ Future-proof greener approach to mobility
▪ Employee Wellbeing
▪ Integrated digital and connected virtual collaboration
▪ In light of COVID-19, we will continue to perform risk analysis and specifically provide guidance on
how to safely ensure business continuity at our research labs
▪ We will further strengthen our EHS management system by issuing EHS guidance related to
maintenance management, contractor management, work permits, and work equipment
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CSR at Galapagos – Summary
Material Aspect 1: Improving people’s lives
SDG
Areas of engagement
▪ We are pioneering for patients and our mission is to discover and develop innovative medicines that address
high unmet medical needs
▪ Our science and innovation are based on our flexible target discovery platform
▪ We commit to an ambitious R&D goal of maintaining an active portfolio of 30 projects
▪ We are building a deep early-stage R&D pipeline
▪ We aim to extend our commercial reach with filgotinib in Europe
▪ We aim to bring our innovation to patients suffering from severe diseases
▪ We accelerate innovation through win-win partnerships
Go to chapter, page 66
Material Aspect 2: Our employees are the strength behind Galapagos
SDG
Areas of engagement
▪ We strive for gender equality
▪ We aim to continue to develop an inclusive and diverse workforce
▪ We implemented an employee reward, recognition, and retention program
▪ We are involved with local communities and charities
▪ We promote a career in science by engaging in STEM initiatives
Go to chapter, page 72
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Material Aspect 3: Conducting business ethically and responsibly
SDG
Areas of engagement
▪ Animal welfare in drug development
▪ Our clinical trials ethics
▪ Access to our medicines
▪ Our code of business conduct and ethics
Go to chapter, page 80
Material Aspect 4: We care about the environment, health and safety
SDG
Areas of engagement
▪ We strive for a minimal environmental impact
▪ We are compliant with our sector rules and regulations
▪ We ensured our "license to work" during the COVID-19 pandemic
▪ We strengthened our company-wide EHS structure and management system
Go to chapter, page 84
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Corporate
governance
Corporate governance
at Galapagos in 2020
Forward with confidence
CORPORATE GOVERNANCE
Galapagos’ corporate governance policies
As a listed company with its registered office at Mechelen (Belgium), Galapagos is required to apply the Belgian
Companies Code and Belgian Corporate Governance Code.
In 2019, a new Belgian Companies Code (the “Belgian Companies Code“) was approved by the Belgian Parliament.
For existing companies like Galapagos NV, there was a transition regime providing for a staggered applicability of
the new provisions. Certain parts of the new code apply to Galapagos as of 1 January 2020 and the full transition
was completed on Galapagos’ extraordinary shareholders’ meeting of 28 April 2020, which resolved to amend our
articles of association as a consequence of the newly applicable Belgian Companies Code. The full text of the new
articles of association is made available on the company website (www.glpg.com).
In light of the new Belgian Companies Code, the Belgian Corporate Governance Committee adopted a new
Corporate
Governance
Code
(the
“2020
Code“)
(which
can
be
consulted
on
www.corporategovernancecommittee.be). The 2020 Code applies compulsorily to reporting years beginning on or
after 1 January 2020.
For the reporting year beginning on 1 January 2020, the 2020 Code was our reference code. Following the
amendment of our articles of association, Galapagos NV’s supervisory board approved on 28 April 2020 an updated
corporate governance charter (which is available on our website, www.glpg.com). The corporate governance
charter applies in addition to the law, Galapagos NV’s articles of association and the corporate governance
provisions included in the Belgian Companies Code and the 2020 Code.
For the reporting year beginning on 1 January 2020, the supervisory board strove to comply with the rules of the
2020 Code and no deviations from the provisions of 2020 Code occurred. As a result, this corporate governance
statement does not contain any section making reference to the “comply or explain” principle.
Introduction of a two-tier governance structure
Under the Belgian Companies Code, the executive committee in accordance with article 524bis of the old Belgian
Companies Code has been abolished. The Belgian Companies Code introduces (among other things) a two-tier
system, with two new governance bodies: the supervisory board and the management board.
The 2020 Code requires companies to make an explicit choice for one of the governance structures provided for
in the Belgian Companies Code. Upon proposal of the board of directors, the extraordinary shareholders’ meeting
of 28 April 2020 has resolved to introduce a two-tier governance structure as provided by the Belgian Companies
Code, with the supervisory board replacing the board of directors, and the management board replacing the
executive committee.
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Two-tier governance structure
SUPERVISORY BOARD
Non-executive directors
MANAGEMENT BOARD
Executive directors
COMPETENCES:
COMPETENCES:
Responsible for general policy
and strategy
Supervision of management board
Powers reserved to supervisory board
pursuant to Belgian Companies Code
All acts necessary or useful to the
realization of Galapagos’ object except
for those reserved to the supervisory board
Research, identification and development
of strategic possibilities and proposals
Supervision of actual performance compared
to strategic goals, plans and budgets
Management of the Galapagos group
Day-to-day management by CEO
The supervisory board is responsible for the general policy and strategy of the company and has all powers
which are specifically reserved for it under the Belgian Companies Code. The supervisory board also supervises
the management board. The management board exercises all powers which are not reserved for the supervisory
board in accordance with the Belgian Companies Code. Galapagos’ Corporate Governance Charter describes
the main aspects of our governance system, among others, the structure, composition and their roles and
responsibilities.
The supervisory board has established an audit committee and a nomination and remuneration committee, both
have an advisory function. Finally, the management board has delegated the daily management of the company
to one management board member, i.e. its Chief Executive Officer.
In addition to the information set out below, we refer to the Risk management and Risk factors sections of this
report for a description of the most important characteristics of our internal control and risk management
systems. The Risk management and Risk factors sections are incorporated by reference in this corporate
governance statement.
Supervisory board of Galapagos NV
Composition of the supervisory board
With the implementation of the new two-tier governance structure, the mandate of Mr. Onno van de Stolpe as
member of the board of directors ended on 28 April 2020, as it is not allowed pursuant to the Belgian Companies
Code to be a member of the supervisory board and the management board at the same time. Mr. Onno van de
Stolpe continues his mandate as member and chairman of the management board and CEO.
Our supervisory board exists of the following members:
Rajesh Parekh, MA, DPhil has served as the Chairman of our supervisory board since 2004. Dr. Parekh is a
General Partner at Advent Life Sciences LLP, which he joined in 2006. During an academic career at Oxford
University, he co-founded Oxford GlycoSciences PLC, where he served as Chief Scientific Officer and Chief
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Executive Officer from 1988 until its sale to Celltech Group PLC (now UCB SA) in 2003. He has founded or served
on the boards of several life sciences companies in the United States and Europe including Avila Therapeutics,
Inc., EUSA Pharma (Europe) Limited, Biocartis NV, Amsterdam Molecular Therapeutics (AMT) Holding NV (now
uniQure), Aura, Inc., Artax, Inc., and Project Paradise Limited. He was also a member of the supervisory board
of the Novartis Venture Fund. Dr. Parekh currently serves as a member of the board of directors of Advent Life
Sciences LLP, Aleta, Inc., Alpha Anomeric SA, Amphista Therapeutics Ltd., Arrakis, Inc., Aura Biosciences, Levicept
Limited, PE Limited, Pheno Therapeutics Ltd., Tridek-One Therapeutics SAS, and Zikani, Inc. He received his MA
in Biochemistry and DPhil in Molecular Medicine from the University of Oxford, where he has also been a Senior
Research Fellow and Professor.
Howard Rowe, JD has served as a member of our supervisory board since 2010. Mr. Rowe is Managing Director at
Hayfin Capital Management LLP. Prior to joining Hayfin Capital Management LLP, he was a Managing Director
with The Goldman Sachs Group, Inc. where he had multiple healthcare responsibilities over his 12 years at the
firm. His most recent roles at Goldman Sachs were as part of the European Special Situations and Principal
Strategies teams where he established and led the private healthcare investing effort. During that time he
served on the boards of EUSA Pharma (Europe) Limited, Healthcare Brands International Limited, SmallBone
Innovations, Inc., MedAvante, Inc. and Ikonisys, Inc. Prior to his investing activities, Mr. Rowe was a senior member
of the European Healthcare Investment Banking team, where he advised numerous corporate clients on M&A and
corporate finance activities. Before joining Goldman Sachs, he was a corporate lawyer with the law firm Sullivan
& Cromwell LLP. Mr. Rowe received his Bachelor of Science in Psychobiology from the University of Southern
California and his JD from Harvard Law School.
Katrine Bosley has served as a member of our supervisory board since 2013. Ms. Bosley served as the President,
Chief Executive Officer and member of the board of directors of Editas Medicine, Inc. from June 2014 to March
2019. Prior to joining Editas, she was the Entrepreneur-in-Residence at The Broad Institute from 2013 to 2014.
From 2009 to 2012, she was President, Chief Executive Officer and member of the board of directors of Avila
Therapeutics, Inc., which was acquired by Celgene Corporation in 2012. She served as President, Celgene Avilomics
Research at Celgene in 2012. Prior to her time at Avila Therapeutics she was Vice President, Strategic Operations
at Adnexus, a Bristol-Myers Squibb R&D Company, and was Vice President, Business Development at Adnexus
Therapeutics, Inc. before that. Ms. Bosley joined Adnexus Therapeutics from Biogen Idec, Inc. where she had roles
in business development, commercial operations and portfolio strategy in the United States and Europe. Ms.
Bosley graduated from Cornell University with a B.A. in Biology. She served on the board of the Biotechnology
Innovation Organization and currently serves on the boards of Genocea Biosciences, Inc., and of the Massachusetts
Eye and Ear Institute. Ms. Bosley also serves as chairman of the board of Arrakis Therapeutics.
Mary Kerr, Ph.D., is Chief Executive Officer of NeRRe Therapeutics, and member of the supervisory board (non-
executive director) of Galapagos NV since 26 July 2016. She was Co-Founder and CEO of KaNDy Therapeutics until
the company was acquired by Bayer in September 2020 for an upfront consideration of $425 million, and potential
development and regulatory milestone payments of up to $450 million, followed by potential additional triple
digit million sales milestone payments. Before her career in biotech, Dr. Kerr held a range of senior leadership
roles at GSK over more than 20 years, including Senior Vice President and Global Franchise leader for the
Immuno-inflammation and Infectious Diseases franchise. Dr. Kerr was a founding member and on the Corporate
Executive team of ViiV Healthcare. She has spent most of her career on the R&D commercial interface in global
strategy and regional operational roles, predominantly in the specialty and orphan space. Dr. Kerr gained a Ph.D.
in Pharmacology at the University of Bradford, did post-doctoral research at the Michigan Cancer Foundation in
Detroit, and has an MBA from the University of Kingston.
Peter Guenter has served as a member of our supervisory board since 30 April 2019. Mr. Guenter is a member of
the Executive Board of Merck KGaA and Chief Executive Officer of Healthcare since January 2021. Before joining
Merck, he served as Chief Executive Officer of Almirall from 2017 to 2020. Prior to joining Almirall, he worked at
Sanofi for 22 years, most recently as Executive Vice President Diabetes and Cardiovascular Global Business Unit.
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During his tenure at Sanofi, he held many senior positions including Vice President Eastern Europe and Northern
Europe, Vice President Business Management and Support, General Manager Germany, Senior Vice President
Europe, Executive Vice President Global Commercial Operations and Executive Vice President General Medicine
and Emerging Markets. He was a member of Sanofi’s Executive Committee from 2013 till August 2017. Before
joining Sanofi, he held different positions in sales and marketing at Smith Kline and Ciba Geigy. Mr. Guenter is
currently also a member of the board of the European Federation of Pharmaceutical Industries and Associations
(EFPIA). He is a Belgian citizen and holds a Master’s Degree in Physical Education from the Faculty of Medicine
and Health Sciences, University of Ghent.
Daniel O’Day has served as a member of our supervisory board since 22 October 2019. Daniel O’Day joined Gilead
in 2019 to lead the biopharmaceutical company, which has more than 11,000 employees around the world. Prior
to Gilead, Mr. O’Day served as the chief executive officer of Roche Pharmaceuticals. His career at Roche spanned
more than three decades, during which he held a number of executive positions in the company’s pharmaceutical
and diagnostics divisions in North America, Europe and Asia. During his time at Roche, Mr. O’Day demonstrated
vision and leadership, helping to engineer the acquisitions of Flatiron Health and Foundation Medicine in 2018.
He served as a member of the company’s Corporate Executive Committee, as well as on a number of public and
private boards, including Genentech. Mr. O’Day is currently the Chairman and Chief Executive Officer of Gilead
Sciences, Inc. and a member of the board of directors of Pharmaceutical Research and Manufacturers of America
(PhRMA). Mr. O’Day is a U.S. citizen and holds a bachelor’s degree in biology from Georgetown University and an
MBA from Columbia University in New York.
Linda Higgins, Ph.D. has served as a member of our supervisory board since 22 October 2019. Linda Slanec
Higgins, Ph.D., joined Gilead Sciences, Inc. in 2010 and is currently Sr. Vice President Research, External Innovation.
In her first nine years at Gilead she led Biology, significantly expanding the therapeutic area scope and capabilities
of the department. She previously served as the President & CEO of InteKrin Therapeutics and as Head of Research
at Scios, Inc., a Johnson & Johnson company, where she provided leadership for drug discovery, preclinical
development, and translational medicine. Dr. Higgins is passionate about biopharmaceutical discovery and
development, and has been dedicated to excellence in applied scientific research since 1991. She has led projects
and departments in multiple therapeutic areas including CNS, fibrosis, inflammation, cardiovascular, virology,
and oncology. Dr. Higgins built many of these as new areas at Scios and Gilead. Dr. Higgins is a U.S. citizen
and earned an A.B. in Behavioral Physiology from Kenyon College, a Ph.D. in Neurosciences from the University
of California, San Diego School of Medicine, and completed postdoctoral training in Molecular Genetics at the
Howard Hughes Medical Institute at the University of California, Berkeley. She has authored over 50 original peer
reviewed scientific papers and invited reviews and is an inventor of over a dozen patents.
Elisabeth Svanberg, MD, Ph.D. has served as a member of our supervisory board since 28 April 2020. Elisabeth
Svanberg received her MD and PhD from the University of Gothenburg, Sweden and is a board certified general
surgeon and associate professor of surgery. Dr. Svanberg joined Serono International in 2000, initially in the field
of metabolism and subsequently held roles of increasing responsibilities before joining Bristol Myers Squibb (BMS)
in the United States in 2007. At BMS, Dr. Svanberg served as development leader for a first in class novel diabetes
medicine and subsequently as Head of Medical Affairs for the Intercontinental region. In 2014, Dr. Svanberg
joined Janssen Pharmaceuticals (a Johnson & Johnson Company) as Vice President, Head of the Established
Products group managing a portfolio of 90 products, used by an estimated 150 million patients globally. Since
2016, Dr. Svanberg serves as the Chief Development Officer at Ixaltis SA, a specialty pharmaceutical company
developing proprietary therapeutics to treat genitourinary (GU) disorders with unmet medical need. Dr. Svanberg
serves as a non-executive director on the boards of Egetis AB (formerly PledPharma AB) (since 2017), Swedish
Orphan Biovitrum AB (SOBI, since 2018) and Pharnext SA (since 2020).
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About the supervisory board
Galapagos NV’s supervisory board consists of minimum five and maximum nine members. All supervisory board
members are non-executive directors, including the Chairman who does not hold the office of CEO. At least
three supervisory board members are independent. On 31 December 2020, the supervisory board consisted of eight
members, five of whom are independent within the meaning of article 7:87 of the Belgian Companies Code and
provision 3.5 of the 2020 Code.
The supervisory board members are appointed by the shareholders’ meeting upon the proposal of the supervisory
board, for a renewable term of up to four years. Members of the supervisory board whose mandate has come
to an end may be reappointed. When a position on the supervisory board becomes vacant, the remaining
members may temporarily fill the mandate until the next shareholders’ meeting appoints a new supervisory
board member. Each member of the supervisory board appointed this way by the shareholders’ meeting shall
complete the mandate of the member of the supervisory board he replaces, unless the shareholders’ meeting
decides otherwise. The nomination and remuneration committee nominates, for the approval of the supervisory
board, candidates to fill vacancies and advises on proposals for appointment originating from shareholders, in
each case taking into account Galapagos’ needs and the selection criteria determined by the supervisory board.
Supervisory board member
Position
Nationality
Year of
birth
Year of
initial
appointment
Independent
director(1)
Attendance
rate
Rajesh Parekh
Chairman
British
1960
2004
Howard Rowe
Katrine Bosley
Mary Kerr
Peter Guenter
Daniel O' Day
Linda Higgins
Elisabeth Svanberg(2)
Member
British and
U.S.
Member
U.S.
Member
British
Member
Belgian
Member
Member
U.S.
U.S.
Member
Swedish
1969
1968
1961
1962
1964
1962
1961
2010
2013
2016
2019
2019
2019
2020
●
●
●
●
●
93%
100%
93%
100%
93%
71%(3)
86%(3)
100%
(1) Independent director within the meaning of article 7:87 of the Belgian Companies Code and 2020 Code
(2) Member of the supervisory board from 28 April 2020
(3) Pursuant to the procedure of article 7:116, paragraph 4, of the Belgian Companies Code the supervisory board member, as a Gilead
representative, was not allowed to be present at two meetings and did not participate in the deliberation and voting by the supervisory board.
In 2020, the following persons, as identified in the table above, were members of the supervisory board: Dr. Parekh
(Chairman), Mr. Rowe, Ms. Bosley, Dr. Kerr, Mr. Guenter, Mr. O’Day, Dr. Higgins and Dr. Svanberg (from 28 April
2020). Mr. Rowe, Ms. Bosley, Dr. Kerr, Mr. Guenter and Dr. Svanberg were appointed as independent supervisory
board members within the meaning of article 7:87 of the Belgian Companies Code and provision 3.5 of the 2020
Code. Mr. Onno van de Stolpe (CEO) was a member of our board of directors until the implementation of the dual
governance structure and supervisory board on 28 April 2020.
In 2020, the supervisory board thus consisted of (i) four women (except between 1 January 2020 and 28 April 2020
when the board consisted of three women) and (ii) four men (except between 1 January 2020 and 28 April 2020
when the board consisted of five men), representing four different nationalities and different age categories.
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During 2020, Galapagos NV complied with the Law of 28 July 2011 with respect to gender diversification in the
supervisory board, and in accordance with article 7:106 of the Belgian Companies Code, the supervisory board will
continue to monitor future compliance. In proposing candidates, particular consideration is given to diversity
in gender, age, nationality, educational and professional background, as well as complementary skills, knowledge
and experience. The profiles of all supervisory board members are included in this report and available on
www.glpg.com.
4
men
Gender:
8
members
4
women
5
independent
Status:
8
members
3
non-
independent
The supervisory board’s role is to pursue the long-term success of Galapagos. The board does so by assuming
the authority and responsibilities assigned to it by Belgian corporate law and by combining entrepreneurial
leadership with appropriate risk assessment and management. Each of the supervisory board members’ expertise
and experience is exemplified by the varied professional activities they carry out and offices they hold. During
its meetings in 2020, the supervisory board dealt with matters pertaining to, among other things, our strategy
and growth, the new arrangement with Gilead for the commercialization and development of filgotinib, the
evaluation of other business development opportunities, the divesture of our Croatian subsidiary Fidelta,
convening of the shareholders’ meeting and preparation of resolutions to be submitted for approval to the
shareholders, and review and approval of our financial reporting.
In 2020, given the COVID-19 pandemic and all related safety measures, the supervisory board was unable to hold
regular in person meetings, which were instead replaced by digital meeting formats. Fourteen meetings took
place by telephone conference or videocall to discuss specific matters and one meeting in the presence of a notary
(relating to the issuance of Subscription Right Plan 2020 and Subscription Right Plan 2020 RMV). The meeting in
the presence of a notary was attended by Mr. Guenter and Mr. Van de Stolpe via telephone conference; all other
directors were represented by proxy. The attendance rate for the other meetings, as identified in the table above,
was as follows: Dr. Parekh: 93%; Mr. Van de Stolpe: 100% (from 1 January 2020 to 28 April 2020); Mr. Rowe: 100%; Ms.
Bosley: 93%; Dr. Kerr: 100%; Mr. Guenter: 93%; Mr. O’Day: 71%; Dr. Higgins: 86% and Dr. Svanberg: 100% (from 28 April
2020). The overall attendance rate was 93%. In addition, in 2020, three unanimous written resolutions have been
made by the supervisory board in accordance with article 7:113, second paragraph, of the Belgian Companies Code.
The supervisory board acts as a collegial body. A formal evaluation of the board of directors (now the supervisory
board) and its committees was carried out in March 2018. Each board member provided feedback through
individual assessment forms. The results were presented on an aggregate basis by the secretary of the board and
served as a basis for discussion by the full board. This evaluation specifically addressed the functioning of the
board, the size and composition of the board, the interaction between the board and the executive management,
and the functioning of the audit committee and the nomination and remuneration committee.
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Committees
Audit committee
Audit committee members
Howard Rowe
Mary Kerr
Peter Guenter
Function
Chairman
Member
Member
Independent
director(1)
Attendance rate
●
●
●
100%
100%
100%
(1) Independent director within the meaning of article 7:87 of the Belgian Companies Code and 2020 Code
The role of the audit committee is to follow up on financial reporting and verification of financial data,
safeguard the integrity of our financial reporting, verify and follow up on the internal control mechanisms,
evaluate and verify the effectiveness of the risk assessment systems, follow up on the internal and external audit
activities, review, monitor and evaluate the independence and performance of the external auditor and inform
the supervisory board on the results of the statutory audit. The audit committee also reviews corporate social
responsibility initiatives, as included in the CSR-report, which contains the non-financial information as required
by articles 3:6 § 4 and 3:32 § 2 of the Belgian Companies Code.
At the end of 2020, the audit committee consisted of the following three supervisory board members, as identified
in the table above: Mr. Rowe (chairman), Dr. Kerr and Mr. Guenter. All members of the audit committee are
non-executive directors, the majority of whom are independent within the meaning of article 7:87 of the Belgian
Companies Code and provision 3.5 of the 2020 Code. The chairman is an independent non-executive director. All
members of the audit committee have extensive experience in the life sciences industry. Mr. Rowe has relevant
expertise in financial matters (including general accounting and financial reporting) and in matters of audit,
internal control and risk control. The other members have extensive experience in these matters as well.
In 2020, the audit committee held seven meetings, in which it dealt with matters pertaining to, among other
things, audit review, risk management, monitoring financial reporting, the monitoring of Sarbanes-Oxley
compliant internal and external audit systems and assessing the need to have a formal internal audit function.
The audit committee acts as a collegial body. The overall attendance at the audit committee meetings in 2020
was 100%, as the committee member’s attendance rates were all 100%. Some of the meetings were attended by
the statutory auditor.
Nomination and remuneration committee
Nomination and remuneration committee members
Rajesh Parekh
Katrine Bosley
Howard Rowe(2)
Elisabeth Svanberg(3)
Function
Chairman
Member
Member
Member
Independent
director(1)
Attendance rate
●
●
●
100%
67%(4)
100%
100%
(1) Independent director within the meaning of article 7:87 of the Belgian Companies Code and 2020 Code
(2) Member from the nomination and remuneration committee until 28 April 2020
(3) Member from the nomination and remuneration committee from 28 April 2020
(4) Ms. Bosley was unable to join one of the three meetings of the nomination and remuneration committee in 2020 due to illness
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The nomination and remuneration committee’s role is twofold: providing recommendations to the supervisory
board regarding the remuneration policy of Galapagos and the remuneration of supervisory board members
and management board members, and selecting the appropriate candidates and making recommendations to
the supervisory board in relation to the appointment of supervisory board members and management board
members.
At the end of 2020, the nomination and remuneration committee consisted of the following three non-executive
directors, as identified in the table above: Dr. Parekh (chairman), Ms. Bosley and Dr. Svanberg, the majority of
whom are independent supervisory board members within the meaning of article 7:87 of the Belgian Companies
Code and provision 3.5 of the 2020 Code. Dr. Svanberg replaced Mr. Rowe on the nomination and remuneration
committee as from 28 April 2020. The committee has the necessary expertise in the area of remuneration policy.
The nomination and remuneration committee meets at least twice per year. In 2020, the nomination and
remuneration committee held three meetings, dealing with, among other things, matters pertaining to grants
of subscription rights, RSUs and bonuses, the nomination and remuneration of supervisory board members, the
nomination and remuneration of management board members, salary increases, the legislative changes to the
remuneration rules and Galapagos' remuneration policy. The nomination and remuneration committee acts as
a collegial body. The attendance rate at the nomination and remuneration committee meetings in 2020 for each
of its members is set forth in the above table. The CEO attended the meetings of this committee when the
remuneration of the other members of the management board was discussed.
Management board of Galapagos NV
Composition of the management board
Onno van de Stolpe founded our company in 1999 and has served as our
Chief Executive Officer. He was a member of our board of directors from
1999 to 2020. From 1998 to 1999, he was the Managing Director of Genomics
at IntroGene BV (later Crucell NV, which was acquired by Johnson &
Johnson Services, Inc. in 2011). Prior to joining IntroGene in 1998, he was
Managing Director of Molecular Probes Europe BV. He established the
European headquarters after joining Molecular Probes, Inc. in the United
States. Previously, he worked for The Netherlands Foreign Investment
Agency
in California, where he was
responsible
for
recruiting
biotechnology and medical device companies to locate in the Netherlands.
Mr. Van de Stolpe started his career as Manager of Business Development
at MOGEN International NV in Leiden. He received an MSc degree from
Wageningen University. Mr. Van de Stolpe has previously served as a
member of the board of directors of DCPrime BV and as a member of the
supervisory board of the Stichting Institute for Human Organ and Disease Model Technologies. In September 2020,
he was elected as non-executive member of the supervisory board of Leyden Laboratories BV and as of 15 March
2021 he is a member of the board of directors of European Biotech Acquisition Corp.
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Bart Filius, MBA has served as our Chief Financial Officer since December
2014 and as our Chief Operating Officer since September 2017. He is
appointed as our President and Chief Operating Officer, effective 15
February 2021. Prior to that, Mr. Filius worked over 13 years at Sanofi SA,
where he was the Chief Financial Officer of Sanofi Europe during the last
three years. Earlier at Sanofi, he was the Country Manager and Chief
Financial Officer of Sanofi in the Netherlands. Before that, he was Vice
President for Mergers & Acquisitions, during which time he led and
completed the divestiture of various franchises. Prior to joining Sanofi, he
was a strategy consultant at Arthur D. Little. Mr. Filius has an MBA degree
from INSEAD and a bachelor’s degree in business from Nyenrode Business
University. In May 2019, Mr. Filius was elected as non-executive director in
the supervisory board of ProQR Therapeutics NV.
Piet Wigerinck, Ph.D. joined us in April 2008 as SVP Development and was
appointed Chief Scientific Officer in 2012. Under his leadership, we have
developed a large pipeline of novel mechanism of action drug candidates.
He has supervised multiple successful Proof-of-Concept patient studies,
including filgotinib, GLPG1690, and MOR106. Prior to his tenure at
Galapagos, Dr. Wigerinck was Vice President, Drug Discovery, Early
Development and CM&C at Tibotec-Virco Comm VA (a subsidiary of
Johnson & Johnson Services, Inc.). Under his leadership at Tibotec, TMC114
(Prezista™) and TMC435 (Olysio™) were selected and moved forward into
clinical trials. Dr. Wigerinck played a key role in Tibotec’s expansion into
novel diseases such as Hepatitis C and advanced several compounds into
Phase 1 and Phase 2 clinical trials. Dr. Wigerinck has over 30 years of R&D
experience in the pharmaceutical industry and biotechnology. He holds a
Ph.D. from the University of Leuven, Belgium, and is inventor of more than
25 patent applications. In May 2018, Dr. Wigerinck was elected as an independent board member of Ipsen SA in
France.
Andre Hoekema, Ph.D. is responsible for M&A, licensing and Intellectual
Property at Galapagos as our Chief Business Officer. He joined Galapagos in
March 2005 from Invitrogen Corporation, where he was Managing Director
of Corporate Development Europe. He brings 20 years of biotech experience
from positions at Molecular Probes Europe BV (Managing Director), Crucell
NV (Director of Business Development), DSM Life Sciences NV and
Syngenta MOGEN BV (Research and Project Management) and Genentech,
Inc. (R&D). Dr. Hoekema has a Ph.D. degree from Leiden University and is
the inventor of over 20 series of patent applications, resulting in 15 patents
issued in the United States. Dr. Hoekema currently also serves as a
member of the supervisory board of Mimetas BV and has previously served
as a member of the supervisory board of VitalNext BV.
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Walid Abi-Saab, MD joined Galapagos as Chief Medical Officer in March
2017. Dr. Abi-Saab drives Galapagos’ overall medical strategy and is
responsible for late stage clinical development and operations, medical
and regulatory affairs, and safety. Before, Dr. Abi-Saab worked at Shire AG
where he held various clinical development leadership roles, most recently
as Group Vice President, Global Clinical Development – Therapeutic Area
Head, Gastro-intestinal, Endocrinology and Metabolism. Prior to that, he
led clinical development activities at Novartis Pharma AG, Abbott
Laboratories Inc. and Pfizer Inc., addressing a wide range of therapeutic
areas and leading teams throughout the clinical development process.
Under his leadership, more than 30 molecules have advanced through
clinical development leading to several approvals in the United States, the
EU and Canada. Prior to his pharma roles, Dr. Abi-Saab was Assistant
Professor of Psychiatry and Neurosurgery at Yale University Medical
School, where he headed their Schizophrenia Research at the Clinical Neuroscience Research Unit and the
Neurosurgery Epilepsy Microdialysis Research Program. Dr. Abi-Saab holds an MD degree from Université Saint
Joseph in Beirut, Lebanon.
Michele Manto was appointed Chief Commercial Officer in January 2020.
in September 2017 as Senior Vice President
He joined Galapagos
Commercial Operations
to build and lead Galapagos’ commercial
organization and capabilities. Previously, Mr. Manto held various
commercial leadership roles at AbbVie, most recently as General Manager,
Global Marketing Rheumatology and as General Manager
in the
Netherlands. Prior to this, he led AbbVie’s commercial activities and
launches in rheumatology, gastroenterology and dermatology in Germany
and other European countries. He started his professional career as a
management and strategy consultant at McKinsey & Company. Mr. Manto
holds an MBA from INSEAD and a degree in engineering from the
Politecnico of Milan.
About the management board
Management board members
Position
Nationality
Year of birth
Onno van de Stolpe
Chief Executive Officer
Dutch
Bart Filius
Andre Hoekema
Piet Wigerinck
Walid Abi-Saab
Michele Manto
Chief Financial Officer & Chief
Operating Officer
Chief Business Officer
Dutch
Dutch
Chief Scientific Officer
Belgian
Chief Medical Officer
U.S. & Lebanese
Chief Commercial Officer
Italian
1959
1970
1957
1964
1965
1973
Year of
appointment
1999
2014
2005
2012
2017
2020
The tasks of the management board include the following matters: the research, identification and development
of strategic possibilities and proposals which may contribute to our development in general, management of
the group, the supervision of the actual performance of the business compared to its strategic goals, plans and
budgets, and the support of the CEO with the day-to-day management of Galapagos.
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The management board meets regularly, and in principle once per month.
On 31 December 2020, the management board consisted of six people: Mr. Van de Stolpe (CEO and chairman of the
management board), Mr. Filius (CFO and COO), Dr. Wigerinck (CSO), Dr. Hoekema (CBO), Dr. Abi-Saab (CMO) and
Mr. Manto (CCO), representing five different nationalities and different age categories.
Mr. Bart Filius is appointed as President and Chief Operating Officer, effective 15 February 2021.
Furthermore, the management board members have different educational backgrounds, as can be read in each
of their profiles (above).
In proposing candidates for the management board, particular consideration is given to educational and
professional background, complementary skills, knowledge and experience, as well as to diversity in age, gender
and nationality.
Galapagos NV’s share capital and shares
Share capital increases and issue of shares by Galapagos NV in 2020
On 1 January 2020, the share capital of Galapagos NV amounted to €349,789,183.32 represented by 64,666,802 shares.
In the course of 2020 there were four capital increases resulting from the exercise of subscription rights under
employee subscription right plans, resulting in the issuance of 744,965 new shares, an increase of the share capital
by €4,030,260.65 and an increase of the issuance premium account by €24,257,385.05.
At the end of 2020, the share capital of Galapagos NV amounted to €353,819,443.97 represented by 65,411,767 shares.
On 17 April 2020, the board of directors (as the two-tier governance system was not yet in place) issued 2,173,335
subscription rights (after acceptance by the beneficiaries) within the framework of the authorized capital, for
the benefit of the management board members and employees of the group under new subscription right plans
(“Subscription Right Plan 2020” and “Subscription Right Plan 2020 RMV”).
The offer of subscription rights to our CEO, Mr. Onno van de Stolpe, under Subscription Right Plan 2020 was
approved by the annual shareholders’ meeting of 28 April 2020 – and solely to the extent that the extraordinary
shareholders’ meeting, to be held immediately after the annual shareholders’ meeting, did not approve the
proposed changes to the company’s articles of association. The subscription rights issued under Subscription
Right Plan 2020 and Subscription Right Plan 2020 RMV have a term of eight years as of the date of the offer and
an exercise price of €168.42 (the average closing price of the share on Euronext Amsterdam and Brussels during
the thirty days preceding the date of the offer).
Number and form of Galapagos shares
Of the 65,411,767 shares of Galapagos NV outstanding at the end of 2020, 5,181 were registered shares and 65,406,586
shares were dematerialized shares. All shares are issued and fully paid up and are of the same class.
Rights attached to Galapagos shares
Each share (i) entitles its holder to one vote at the shareholders’ meetings; (ii) represents an identical fraction of
the share capital and has the same rights and obligations and shares equally in the profit of Galapagos NV; and
(iii) gives its holder a preferential subscription right to subscribe to new shares, convertible bonds or subscription
rights in proportion to the part of the share capital represented by the shares already held. The preferential
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subscription right can be restricted or cancelled by a resolution approved by the shareholders’ meeting, or by the
supervisory board subject to an authorization of the shareholders’ meeting, in accordance with the provisions of
the Belgian Companies Code and Galapagos NV’s articles of association.
Galapagos NV’s authorized capital
In accordance with the articles of association, the extraordinary shareholders’ meeting of Galapagos NV
authorized the supervisory board to increase the share capital of Galapagos NV, in one or several times, and under
certain conditions set forth in extenso in the articles of association of Galapagos NV.
This authorization consists of two parts. A general authorization for capital increases up to 20% of the share
capital at the time of convening the shareholders’ meeting of 22 October 2019 (i.e. €67,022,402.04) was renewed and
is valid for a period of five years from the date of publication of this renewal in the Annexes to the Belgian State
Gazette, i.e. 13 November 2019. A specific authorization for capital increases of more than 20% and up to 33% of
the share capital at the time of the convening the shareholders’ meeting of 25 April 2017 (i.e. € 82,561,764.93), was
renewed and is valid for a period of five years from the date of publication of this renewal in the Annexes to the
Belgian State Gazette, i.e. 31 May 2017. This specific part of the authorized capital can, however, only be used in a
number of specific circumstances and upon a resolution of the supervisory board that all independent members
of the supervisory board (within the meaning of article 7:87 of the Belgian Companies Code) approve.
In 2020, Galapagos NV’s supervisory board made use of the right to increase the capital in the framework of the
authorized capital on one occasion: on 17 April 2020, in connection with the issuance of Subscription Right Plan
2020 and Subscription Right Plan 2020 RMV, under which a maximum of 2,280,500 new shares could be issued
for a total maximum capital increase of €12,337,505 (plus issuance premium). On 31 December 2020, an amount
of €55,264,659.69 still remained available under the general part of the authorized capital and an amount of
€13,717,929.80 remained available under the specific part of the authorized capital.
When increasing the share capital within the limits of the authorized capital, the supervisory board may,
in Galapagos NV’s interest, restrict or cancel the shareholders’ preferential subscription rights, even if such
restriction or cancellation is made for the benefit of one or more specific persons other than the employees of
the group.
Procedure for changes in Galapagos NV’s share capital
In accordance with the Belgian Companies Code, Galapagos NV may increase or decrease its share capital by
decision of the extraordinary shareholders’ meeting approved by a majority of 75% of the votes cast, at a meeting
where at least 50% of the share capital of Galapagos NV is present or represented. If the attendance quorum of 50%
is not met, a new extraordinary shareholders’ meeting must be convened at which the shareholders may decide
on the agenda items, irrespective of the percentage of share capital present or represented at such meeting. In
this respect, there are no conditions imposed by Galapagos NV’s articles of association that are more stringent
than those required by law.
Within the framework of the powers granted to it under the authorized capital, the supervisory board may also
increase Galapagos NV’s capital as specified in its articles of association.
Purchase and sale of Galapagos treasury shares
In accordance with the Belgian Companies Code, Galapagos NV may purchase, subject to the provisions of
the Belgian Companies Code, Galapagos NV’s own shares and dispose thereof by decision of the extraordinary
shareholders’ meeting approved by a majority of 75% of the votes cast, at a meeting where at least 50% of the
share capital of Galapagos NV is present or represented. If the attendance quorum of 50% is not met, a new
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extraordinary shareholders’ meeting must be convened at which the shareholders may decide on the agenda
items, irrespective of the percentage of share capital present or represented at such meeting. The aforementioned
rules are also applicable to the acquisition of shares of Galapagos NV by its subsidiaries.
The supervisory board has currently not been authorized by an extraordinary shareholders’ meeting to purchase
or sell its own shares.
On 31 December 2020, neither Galapagos NV nor any subsidiary of Galapagos NV held any shares in Galapagos NV,
nor did any third party hold any shares in Galapagos NV on behalf of Galapagos NV or any of its subsidiaries
either.
Anti-takeover provisions in Galapagos NV’s articles of association
Galapagos NV’s articles of association currently do not contain any anti-takeover provisions.
Anti-takeover provisions under Belgian law
Under Belgian law, public takeover bids for all outstanding voting securities of the issuer are subject to the
supervision of the FSMA. If the latter determines that a takeover violates Belgian law, it may lead to suspension
of the exercise of the rights attached to any shares that were acquired in connection with the envisaged takeover.
Pursuant to the Belgian Law of 1 April 2007 on public takeovers, a mandatory takeover bid must be made when,
as a result of its own acquisition or the acquisition by persons acting in concert with it, a person owns, directly
or indirectly, more than 30% of the securities with voting rights in a company with registered office in Belgium
whose securities are admitted to trading on a regulated or recognized market. The acquirer must offer to all other
shareholders the opportunity to sell their shares at the higher of (i) the highest price offered by the acquirer for
shares of the issuer during the 12 months preceding the announcement of the bid or (ii) the weighted average
price of the shares on the most liquid market of the last 30 calendar days prior to the date on which it became
mandatory for the acquirer to launch a mandatory takeover bid for the shares of all other shareholders.
Material contracts containing change of control clauses
The amended and restated license and collaboration agreement between Galapagos NV and Gilead Sciences,
Inc. (“Gilead”) dated 23 August 2019 contains provisions granting certain rights to Gilead upon the occurrence
of a public takeover bid on our shares or a change of control in respect of Galapagos NV, including clause 15.6
(Assignment; Industry Transaction; Acquired Programs), entitling Gilead in the event of an industry transaction
involving Galapagos, as a result of which a drug company of a certain minimum size acquires control over
Galapagos, to terminate our co-promotion rights, to disband all joint committees and undertake exclusive control
of their activities.
The second amended and restated collaboration agreement between Galapagos NV and AbbVie S.à r.l. (“AbbVie”)
dated 24 October 2018 contains provisions granting certain rights to AbbVie upon the occurrence of a public
takeover bid on our shares or a change of control in respect of Galapagos NV, including, but not limited to clause
11.2 (Change in Control of Galapagos), entitling AbbVie, to oblige Galapagos NV to take appropriate measures
to avoid the disclosure of confidential information, to limit AbbVie’s reporting obligations to Galapagos NV, or,
depending on the stage in which the change of control occurs, to terminate the agreement.
Procedure for amendments to Galapagos NV’s articles of association
Pursuant to the Belgian Companies Code, any amendment to the articles of association, such as an increase or
decrease in the share capital of Galapagos NV, and certain other matters, such as the approval of the dissolution,
merger or de-merger of Galapagos NV may only be authorized with the approval of at least 75% of the votes validly
cast at an extraordinary shareholders’ meeting where at least 50% of Galapagos NV’s share capital is present or
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represented. If the attendance quorum of 50% is not met, a new extraordinary shareholders’ meeting must be
convened at which the shareholders may decide on the agenda items, irrespective of the percentage of share
capital present or represented at such meeting.
Shareholders
Major shareholders of Galapagos NV
Based on the transparency notifications received by Galapagos NV under Belgian law and the statements of
acquisition of beneficial ownership filed with the U.S. Securities and Exchange Commission under U.S. securities
law, the shareholders owning 5% or more of Galapagos NV’s shares on 31 December 2020 were Gilead Therapeutics
A1 Unlimited Company (16,707,477 shares or 25.54%), Capital International Investors (6,311,001 shares or 9.65%) and
Van Herk Investments B.V. (4,893,235 shares or 7.48%).
Major shareholders on 31 December 2020
56.39%
Other shareholders
0.94%
Insiders
25.54%
Gilead
9.65%
Capital International Investors
7.48%
Van Herk Investments
At the end of 2020, our CEO owned 481,139 shares of Galapagos NV and 826,874 subscription rights. The other
members of our management board held an aggregate of 126,557 shares and 1,275,000 subscription rights. The
other members of our supervisory board held an aggregate of 6,907 shares and 157,560 subscription rights. Each
subscription right entitles its holder to subscribe to one share of Galapagos NV. Supervisory board members
Daniel O’Day and Linda Higgins are representatives of our major shareholder Gilead.
Agreements between Galapagos NV shareholders
On the date of this report, Galapagos NV had no knowledge of the existence of any shareholders’ agreements
between its shareholders.
Agreements with major Galapagos NV shareholders
On 14 July 2019, we and Gilead announced that we entered into a 10-year global research and development
collaboration. In the context of the transaction, Gilead also made an equity investment in Galapagos. We
also amended and restated the license agreement for filgotinib that we originally entered into with Gilead
on 16 December 2015. On 23 August 2019, the closing of the transaction took place and we received an upfront
payment of €3,569.8 million ($3.95 billion) and a €960.1 million ($1.1 billion) equity investment from Gilead.
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On 15 December 2020, we and Gilead announced that we agreed to amend our existing arrangement for the
commercialization and development of filgotinib again.
Terms of the equity investment
As part of the research and development collaboration, Gilead entered into a share subscription agreement with
us. On 23 August 2019, Gilead Therapeutics A1 Unlimited Company subscribed to 6,828,985 new Galapagos shares at
a price of €140.59 per share, including issuance premium.
Subject to the approval of Galapagos’ shareholders and certain other conditions, Gilead has the right under
the terms of the share subscription agreement to have two designees appointed to our board of directors. The
special shareholders’ meeting of 22 October 2019 approved the appointment of Daniel O’Day and Linda Higgins as
directors of Galapagos NV.
On 22 October 2019, our extraordinary shareholders’ meeting further issued a warrant to Gilead Therapeutics
A1 Unlimited Company, known as warrant A, that confers the right to subscribe for a number of new shares
sufficient to bring the number of shares owned by Gilead and its affiliates to 25.1% of the issued and outstanding
shares. Warrant A expires one year after the issue date and the exercise price per share is €140.59. On
6 November 2019, Gilead exercised warrant A and increased its ownership in Galapagos to 25.10% of the then
outstanding shares. Warrant A expired on 22 October 2020.
On 22 October 2019, Gilead Therapeutics A1 Unlimited Company was also issued another warrant, known as the
initial warrant B, that confers the right to subscribe for a number of new shares sufficient to bring the number of
shares owned by Gilead and its affiliates to 29.9% of the issued and outstanding shares. The warrant will expire on
23 August 2024. The exercise price per share will be the greater of (i) 120% multiplied by the arithmetic mean of
the 30-day daily volume weighted average trading price of the Galapagos shares preceding the date of the exercise
notice with respect to such exercise, and (ii) €140.59. Between 57 and 59 months of 23 August 2019, subject to and
upon approval by the shareholders’ meeting, Gilead Therapeutics A1 Unlimited Company will be issued a warrant
with substantially similar terms, including as to exercise price, to the initial warrant B. This subsequent warrant
B will expire on the earlier of the date that is five years after the fifth anniversary of the closing and the date that
the warrant is issued.
Gilead and Gilead Therapeutics A1 Unlimited Company are subject to certain standstill restrictions until the
date that is 10 years following the closing (23 August 2019). Among other things, during this time Gilead and its
affiliates and any party acting in concert with them may not, without our consent, acquire voting securities of
Galapagos exceeding more than 29.9% of the then issued and outstanding voting securities, and Gilead and Gilead
Therapeutics A1 Unlimited Company may not propose a business combination with or acquisition of Galapagos.
The standstill restrictions are subject to certain exceptions as provided in the share subscription agreement.
Pursuant to the terms of the share subscription agreement, Gilead and Gilead Therapeutics A1 Unlimited
Company also agreed to certain lock-up provisions. They shall not, and shall cause their affiliates not to, without
our prior consent, dispose of any equity securities of Galapagos prior to the second anniversary of the closing
(23 August 2019). During the period running from the date that is two years following the closing until the date
that is five years following the closing, Gilead and its affiliates shall not, without our prior consent, dispose of
any equity securities of Galapagos if after such disposal they would own less than 20.1% of the then issued and
outstanding voting securities of Galapagos. The lock-up restrictions are subject to certain exceptions as provided
in the share subscription agreement and may terminate upon certain events.
Terms of the global research and development collaboration
We will fund and lead all discovery and development autonomously until the end of Phase 2. After the completion
of a qualifying Phase 2 study (or, in certain circumstances, the first Phase 3 study), Gilead will have the option to
acquire a license to the compound outside Europe. If the option is exercised, we and Gilead will co-develop the
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compound and share costs equally. Gilead will maintain option rights to our programs through the 10-year term
of the collaboration. This term can be extended, at the discretion of Gilead, for up to an additional three years
thereafter for those programs, if any, that have entered clinical development prior to the end of the collaboration
term. On top, a final term extension can be granted in certain circumstances.
For all programs resulting from the collaboration (other than GLPG1972 and GLPG1690), Gilead will make a
$150 million opt-in payment per program and will owe no subsequent milestones. We will receive tiered royalties
ranging from 20 – 24% on net sales of all our products licensed by Gilead in all countries outside Europe as
part of the agreement. For GLPG1972, Gilead declined to exercise its option under the collaboration agreement in
November 2020. In February 2021, the development of GLPG1690 (ziritaxestat) was discontinued.
Revised filgotinib collaboration
Under the terms of the new arrangement, we will assume all development, manufacturing, commercialization
and certain other rights for filgotinib in Europe. Gilead will retain commercial rights and remain marketing
authorization holder for filgotinib outside of Europe, including in Japan. The transfer will be subject to applicable
local legal, regulatory and consultation requirements. We intend to transfer most activities by 31 December 2021
and complete the transition by 31 December 2022.
Beginning on 1 January 2021, we will bear the future development costs for certain studies, in lieu of the equal
cost split contemplated by the previous agreement. These studies include the DARWIN3, FINCH4, FILOSOPHY, and
Phase 4 studies and registries in RA, MANTA and MANTA-RAy, the PENGUIN1 and 2 and EQUATOR2 studies in
PsA, the SEALION1 and 2 studies in AS, the HUMBOLDT study in uveitis in addition to other clinical and non-
clinical expenses supporting these studies and support for any investigator sponsored trials in non-IBD conditions
and non-clinical costs on all current trials. The existing 50/50 global development cost sharing arrangement will
continue for the following studies: SELECTION and its long-term extension study (LTE) in UC, DIVERSITY and
its LTE, DIVERGENCE 1 and 2 and their LTEs and support for Phase 4 studies and registries in Crohn’s disease,
pediatric studies and their LTEs in RA, UC and Crohn’s disease, and support for investigator sponsored trials in
IBD.
All commercial economics on filgotinib in Europe will transfer to us as of 1 January 2022, subject to payment
of tiered royalties of 8 to 15 percent of net sales in Europe to Gilead, starting in 2024. In connection with
the amendments to the existing arrangement for the commercialization and development of filgotinib, Gilead
has agreed to irrevocably pay Galapagos €160 million, subject to certain adjustments for higher than budgeted
development costs. Gilead paid €35 million in January 2021 and will pay an additional €75 million in 2021 and
will pay €50 million in 2022. In addition, we will no longer be eligible to receive any future milestone payments
relating to filgotinib in Europe. However, we will remain eligible to receive tiered royalty percentages ranging
from 20% to 30% on Gilead’s global net sales of filgotinib outside of Europe and future development and regulatory
milestone-based payments of up to $295 million and sales-based milestone payments of up to $600 million.
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Remuneration report
Introduction: remuneration report 2020
Galapagos' remuneration policy
Galapagos’ remuneration policy was prepared in accordance with the Belgian Companies Code. Galapagos’
shareholders approved the current remuneration policy at the 2020 annual shareholders’ meeting with 68.21% of
shareholder votes. The policy applies for four years from the date of approval. The remuneration policy became
effective as of 1 January 2020.
Galapagos encourages an open and constructive dialogue with its investors to discuss its approach to governance,
including remuneration. The increased disclosure in this year’s remuneration report reflects the input received
from Galapagos’ shareholders over the years as well as developments in the legislative framework, including
individual disclosures for each supervisory and management board member. This year’s remuneration report
introduces new tables that provide additional insight into the total remuneration received by management and
supervisory board members.
The objective of our remuneration policy is to attract, motivate and retain the diverse qualified and expert
individuals who are key in order to achieving our strategic and operational objectives. We further aim to be
competitive in the labor market by benchmarking against relevant peer groups, incentivizing performance
at the highest possible level, allowing for differential rewards according to individual performance, avoiding
discrimination on any grounds other than performance, and reinforcing an open, fair, consistent and equitable
culture.
Peer group and benchmarking
Galapagos’ remuneration policy takes into account relevant benchmarks with appropriate peer companies and,
for the management board members, also the group’s performance management system. For the benchmarking
exercise executed in 2018, the nomination and remuneration committee worked with Willis Towers Watson as
external advisor. Willis Towers Watson also provided external support for the benefit of the nomination and
remuneration committee in 2020. The peer group taken into consideration consisted of publicly listed, early
stage high value biotechnology companies with a comparable market capitalization in the U.S. and biotechnology
and pharmaceutical companies in Europe. This benchmarking exercise indicated that in the biotechnology/
pharmaceutical subsector, the “transatlantic” gap is higher than in broader general industry and in the wider
health sciences sector. The observed gap in market pay levels between regional peer groups was attributable
to long-term incentives; in Europe, long-term incentives were materially smaller. Galapagos’ pay-mix for all
executive functions was broadly in line with market practice observed within the U.S. peer group, while in
comparison to the European peer group it was more leveraged toward long-term incentives. These findings
were in line with and reinforced remuneration committee priorities for executive compensation. The committee
found the U.S. benchmark to be more relevant than that of Europe given the majority of our competitors are
based in the U.S., we have a significant number of U.S. based shareholders whose views on remuneration are based
on U.S. practices, and the overall relevance of the U.S. market to the pharmaceutical industry.
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Remuneration of supervisory board members
Remuneration structure components
The remuneration of supervisory board members consists of (i) a fixed annual cash amount, and (ii) an equity-
based component. The remuneration of the supervisory board members does not contain a variable component,
and hence no performance criteria apply to their remuneration.
Cash
Cash
remuneration
remuneration
Equity-based
Equity-based
remuneration
remuneration
In accordance with the remuneration policy and the decision of the annual shareholders’ meeting of 28 April
2020, the remuneration of the supervisory board members for the exercise of their mandate during the financial
year ending 31 December 2020 consisted of the following components:
Supervisory board
Cash remuneration
Equity-based
remuneration
Audit committee
Nomination and
remuneration
committee
Chairman Member
Cash (gross
amount)
granted to
acquire
GLPG
shares(1)
Acquired
GLPG
shares(1)
Chairman Member Chairman Member
TOTAL
REMUNERATION
€ 100,000
€ 100,000
553
€ 20,000
€ 220,000
€ 50,000
€ 50,000
273
€ 20,000
€ 5,000
€ 125,000
€ 50,000
€ 50,000
€ 50,000
€ 50,000
€ 50,000
€ 50,000
€ 33,973
€ 33,835
287
273
287
194
-
-
€ 15,000
€ 15,000
€ 15,000
€ 115,000
€ 115,000
€ 115,000
€ 10,192
€ 78,000
N/A(5)
N/A(5)
Supervisory
board
members
Dr. Rajesh
Parekh
Mr. Howard
Rowe(2)
Ms. Katrine
Bosley
Dr. Mary
Kerr
Mr. Peter
Guenter(3)
Dr. Elisabeth
Svanberg(4)
Mr. Daniel
O’Day(5)
Dr. Linda
Higgins(5)
(1) The company grants a gross amount equal to the respective supervisory board member’s annual cash remuneration, to use the net amount
(after taxes) to acquire shares of Galapagos in the open market
(2) Member of the nomination and remuneration committee from 1 January 2020 until 28 April 2020
(3) In addition to the above total remuneration, Mr. Peter Guenter received tax advisory services for €5,218.43
(4) Member of the nomination and remuneration committee from 28 April 2020 onwards
(5) Mr. O’Day and Dr. Higgins, both Gilead representatives, do not receive any remuneration for their mandate as supervisory board members
Cash remuneration
The supervisory board members receive a fixed annual cash amount, irrespective of the number of board
meetings that are held during the year. These board fees are paid in quarterly installments at the end of each
calendar quarter.
For the financial year 2020 the chairman of the supervisory board received cash remuneration of €100,000 and
the other members €50,000 each. In addition, committee membership entitles the supervisory board members
to an additional €15,000 in cash and committee chairmanship to an additional €20,000 in cash.
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Equity based remuneration
In accordance with provision 7.6 of the 2020 Code, Galapagos also grants supervisory board members an equivalent
to remuneration in shares. During the financial year 2020, the supervisory board members received the following
additional cash compensation:
for the chairman of the supervisory board €100,000 and for the other
members €50,000 each, in each case subject to the requirement to use the net amount (after taxes) to acquire
Galapagos shares. These share purchases took place on 21 December 2020 and resulted in the number of shares
identified in the table above. The shares that each supervisory board member so acquires are to be held until at
least one year after the supervisory board member leaves the supervisory board and at least three years after the
time of acquisition. These latter payments make up the equivalent of an equity component of the supervisory
board members’ remuneration, as recommended by the 2020 Code.
Galapagos does not grant any subscription rights to supervisory board members (non-executive directors).
Remuneration of management board members
Remuneration structure components
The remuneration of management board members consists of (i) fixed remuneration consisting of base salary,
pension and other benefits and (ii) variable remuneration consisting of a cash bonus and the grant of restricted
stock units (“RSUs”) and subscription rights ("SRs"). For the variable part of the management board members’
remuneration, performance criteria apply.
Short-term incentive
Long-term incentives
Base salary
Pension &
other benefits
Cash bonus
RSUs
Subscription
rights
Performance criteria and evaluation methods for management
board members
For 2020, the performance criteria considered in decision-making for cash bonuses and annual RSU grants include
the elements identified in the table below, whereby each of the corporate objectives is further detailed in a clear
and measurable way to enable robust evaluation by the nomination and remuneration committee as well as
the supervisory board. Our ambition is to establish ourselves as a successful commercial stage biopharmaceutical
company focused on the development and commercialization of novel medicines in areas of unmet medical
needs to improve the lives of people suffering from serious diseases. In order to achieve this long-term goal,
we want to keep innovation in our research efforts while making sound clinical progress year over year and
maintaining a healthy cash position. In addition, our corporate development goals aim to foster the growth
of the company and the creation of value for all shareholders. Finally, our commercial development goal is
intended to bring us closer to becoming a commercially successful biopharmaceutical company which brings
novel medicines to market (subject to having obtained governmental approvals), by preparing and executing
successful commercial launches of our first product.
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CORPORATE OBJECTIVES
Each equally weighted
Cash position
Actual cash burn versus guidance
Corporate development
Achievement of business development transaction, organizational growth, and quality goals
Numbers of targets identified and pre-clinical candidates nominated
Research progress
Clinical trial progress
Target number of clinical trials initiated and completed
Commercial development
Filgotinib commercialization plan
Mid 2020, the management board determined that at departmental level some adjustments to the objectives
for the impact of COVID-19 would be made; no adjustments were made to the corporate level objectives. The
management board therefore adhered strictly to the pre-pandemic objectives for 2020 at corporate level.
In terms of the individual performance evaluation, this is supported by the group’s performance management
system that assesses the performance of all employees (including management board members) over the
calendar year against a set of objectives determined at the start of the year.
Finally, Galapagos’ policy is to grant a number of subscription rights each year based on a consideration of each
management board member’s role, individual performance for the performance year as well as individual impact
on long-term value creation.
The nomination and remuneration committee is responsible for evaluating the management board members’
performance in accordance with the principles set out above. The nomination and remuneration committee
is composed exclusively of non-executive directors and a majority of its members qualify as independent
supervisory board members. This helps prevent the occurrence of conflicts of
interest regarding the
implementation of the remuneration policy in relation to the management board members. The management
board members are not invited to take part in any discussions of the nomination and remuneration committee
related to their own individual remuneration.
108
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Total remuneration
Management
board
member
Onno van de
Stolpe(4)
Bart Filius
Andre
Hoekema
Piet
Wigerinck
Walid Abi-
Saab
Michele
Manto
Fixed remuneration
Variable remuneration
Base salary
Other
components(1)
Pension
One-year
variable(2)
Multi-year variable
Vested
RSUs
Granted
SRs(3)
Total
remuneration
Proportion of fixed
and variable
remuneration
€ 618,000
€ 37,563
€ 90,000
€ 140,400 € 1,205,820
€ -
€ 2,091,784
€ 416,500
€ 24,446
€ 60,000
€ 67,206
€ 844,131
€ -
€ 1,412,283
€ 366,750
€ 32,226
€ 54,000
€ 58,440
€ -
€ -
€ 511,416
€ 412,000
€ 14,409
€ 60,000
€ 55,518
€ 844,131
€ -
€ 1,386,058
€ 412,000
€ 14,965
€ 60,000
€ 55,518
€ 844,131
€ -
€ 1,386,614
€ 325,000
€ 14,509
€ 48,750
€ 55,518
€ 241,126
€ -
€ 684,903
Fixed: 35.64%
Variable: 64.36%
Fixed: 35.47%
Variable: 64.53%
Fixed: 88,57%
Variable: 11,43%
Fixed: 35.09%
Variable: 64.91%
Fixed: 35.12%
Variable: 64.88%
Fixed: 56.69%
Variable: 43.31%
(1) Other components are the value of the benefits and perquisites awarded, such as a company car, tax advisory services, health and disability
insurance
(2) The one-year variable is the short-term cash bonus awarded to each management board member in respect of 2020 and paid in April 2021
(3) The value of the subscription rights ("SRs") granted during the financial year 2020 is calculated by comparing the exercise price with the average
share price of the share as quoted on Euronext Brussels and Amsterdam during the financial year 2020
(4) Mr. Onno van de Stolpe's base salary is €618,000, including €18,859.44 in the form of personal pension contributions. The €90,000 pension
amount does not include the amount of €18,859.44, which is part of Mr. Onno van de Stolpe's fixed base salary
Fixed remuneration
The supervisory board, for the CEO upon recommendation of the nomination and remuneration committee and
for the other management board members upon proposals of the CEO, decided that for the financial year 2020
each management board member received the base salary (gross amount) as identified in the total remuneration
table above. The fixed remuneration is a base salary designed to fit responsibilities, relevant experience and
competences, in line with market rates for equivalent positions.
Variable remuneration
Galapagos’ policy is to grant a number of long-term incentives based on the individual performance for the
performance year while also considering individual impact on long-term value creation. Bonuses consist both of
a short-term cash component and a long-term RSU component. Management board members were also offered
subscription rights in 2020.
Under our remuneration policy, the CEO’s cash bonus can be maximum 75% of the fixed part of his annual
remuneration of the year for which the bonus is awarded. The aggregate cash bonuses of the other members of
the management board can be maximum 50% of the total amount of the fixed part of their aggregate annual
remuneration of the year for which the bonus is awarded. An equivalent number of RSUs will be granted to the
CEO and the other members of the management board under the RSU Annual Long-Term Incentive Plan.
(a) Short-term variable remuneration
The supervisory board determined an overall achievement of 60% (out of a maximum of 100%) against the 2020
corporate objectives. Factors reducing the achievement included actual cash burn being higher than our expected
internal goal, as a result of not achieving milestones in the U.S. after Gilead's receipt of the CRL from the FDA for
RA, and overall delay in program timelines due to COVID-19.
Mid 2020, the management board determined that at departmental level some adjustments to the objectives for
the impact of COVID-19 would be made, however no adjustments were made to the corporate level objectives. The
management board therefore adhered strictly to the pre-pandemic objectives for 2020 at the corporate level.
109
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Taking into account 2020 company performance more broadly, the supervisory board determined that a 30%
funding level, rather than the 60% achieved, would be appropriate for the management board. The supervisory
board, for the CEO upon recommendation of the nomination and remuneration committee and for the other
management board members upon proposals of the CEO, considered this level of funding together with individual
performance of management board members in order to determine the individual cash bonus outcomes for
2020 set out in the total remuneration table above: Mr. Onno van de Stolpe (€140,400; 22.50% of 2020 base salary),
Mr. Bart Filius (€67,206; 15.93% of 2020 base salary), Dr. Andre Hoekema (€58,440; 15.84% of 2020 base salary), Dr.
Piet Wigerinck (€55,518; 13.35% of 2020 base salary), Dr. Walid Abi-Saab (€55,518; 13.35% of 2020 base salary) and Mr.
Michele Manto (€55,518; 17.08% of 2020 base salary). These 2020 bonuses will be paid in April 2021, and an equivalent
number of RSUs will be granted under the 2021 RSU Annual Long-Term Incentive Plan as long-term variable
remuneration.
(b) Long-term variable remuneration
In 2020 the management board members were offered new subscription rights under Subscription Right Plan
2020 and each accepted all subscription rights granted as per the following: Mr. Onno van de Stolpe: 85,000
subscription rights, Mr. Bart Filius: 50,000 subscription rights, each of Dr. Piet Wigerinck and Dr. Walid Abi-Saab:
40,000 subscription rights and each of Dr. Andre Hoekema and Mr. Michele Manto: 30,000 subscription rights.
Further reference is made to the Equity components of the remuneration, which contains, among others, a
description of the 2020 grant of subscription rights.
The total remuneration table above sets forth the value of the number of RSUs vested and paid out in 2020
for each management board member. Each RSU represents the right to receive, at Galapagos’ discretion, one
Galapagos share or a payment in cash of an amount equivalent to the volume-weighted average price of the
Galapagos share on Euronext Brussels over the 30-calendar day period preceding the relevant vesting date.
As part of the management board’s long-term variable remuneration, a number of RSUs equivalent to the 2020
short-term cash bonuses (based on the average share price of the Galapagos share on Euronext Amsterdam
during the month of April 2021) will be granted under the 2021 RSU Annual Long-Term Incentive Plan.
For a description of the RSU grants to the management board members in 2020, reference is made to the Equity
components of the remuneration. This section also sets out the main characteristics of the different RSU plans
issued by Galapagos to its management board members in 2019 and 2020.
The 50% deferred part of the bonus awarded and relating to the financial year 2017 was entirely forfeited and not
paid out in 2020 as a result of the share performance of Galapagos NV’s share over the period 2017 – 2020 relative
to the Next Biotech Index (which tracks Euronext-listed biotech companies) as per the provisions of the Senior
Management Bonus Scheme.
Pension and other components
In addition, the management board members enjoy a number of benefits such as a retirement plan, insurance
programs (covering life insurance, disability, travel insurance and health), company cars and the provision of
tax advisory services. The aforementioned retirement plan is set up as a defined contribution arrangement and
is in line with market practice in Belgium. The pension and other components of the remuneration of each
management board member are summarized in the total remuneration table above.
Equity components of the remuneration
Subscription rights awarded, exercised or expired
In 2020, we issued two subscription right plans for the benefit of employees of the group and of management
board members: Subscription Right Plan 2020 and Subscription Right Plan 2020 RMV. The management board
members were offered new subscription rights under Subscription Right Plan 2020, subject to acceptance.
110
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Subscription rights is the new term for instruments formerly referred to as “warrants” under the new Belgian
Companies Code. The final number of accepted subscription rights under Subscription Right Plan 2020 was
enacted by notary deed of 2 July 2020. The table below sets forth the numbers of subscription rights offered and
accepted by each management board member in 2020 under Subscription Right Plan 2020.
The main characteristics of the subscription right plans are as follows:
▪ The subscription rights are offered for no consideration;
▪ The subscription rights typically have a lifetime of eight years and a vesting period of three years after the
year of grant;
▪ Forfeiture rules apply in case of termination prior to the end of the vesting period; and
▪ The subscription rights are not transferable.
Under Subscription Right Plan 2020, the subscription rights have a lifetime of eight years and an exercise price of
€168.42. Each subscription right gives the right to subscribe for one new Galapagos share. For all the beneficiaries,
the subscription rights vest only and fully on the first day of the fourth calendar year following the calendar year
in which the grant was made. The subscription rights can in principle not be exercised prior to 1 January 2024.
The table below sets forth the main characteristics for subscription right plans issued during previous years.
As from 1 January 2020, Galapagos no longer grants any subscription rights to supervisory board members, taking
into account the stricter rules of the Belgian Companies Code and provision 7.6 of the 2020 Code, which stipulates
that non-executive directors should not be entitled to receive stock options. Prior to 2020, supervisory board
members were granted subscription rights and hence the table below also contains disclosures for supervisory
board members.
No subscription rights expired for management board or supervisory board members in 2020.
The table below sets forth the subscription rights outstanding and exercisable per 31 December 2020 for the
management board and supervisory board members, the subscription rights awarded to the management board
members during 2020 and exercised by the management board or supervisory board members in 2020:
111
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Plan(1)
Grant
date
Vesting
period
Exercise
period
Exercise
price
Number
of SRs
out-
stan-
ding per
31/12/
2020
Number
of SRs
exer-
cisable
per 31/
12/2020
SRs
offered
& acce-
pted
during
2020
SRs
exer-
cised
during
2020
SRs
expi-
red in
2020
Supervisory board members
WP 2016 16/08/2016
Dr. Rajesh
Parekh
WP 2017 30/08/2017
WP 2018 24/08/2018
WP 2019 12/07/2019
WP 2012 09/03/2012
WP 2013 16/05/2013
WP 2014 25/07/2014
WP 2015 30/04/2015
Mr. Howard
Rowe
WP 2015.B 02/03/2016
WP 2016 16/08/2016
WP 2017 30/08/2017
WP 2018 24/08/2018
WP 2019 12/07/2019
WP 2015 30/04/2015
WP 2015.B 02/03/2016
Ms. Katrine
Bosley
WP 2016 16/08/2016
WP 2017 30/08/2017
WP 2018 24/08/2018
WP 2019 12/07/2019
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
(1) Warrant Plan (WP) and Subscription Right Plan (SR Plan)
01/01/2020 –
31/05/2024
€ 46.10
15,000
2,520
2,520
01/01/2021 –
16/05/2025
01/01/2022 –
18/04/2026
01/01/2023 –
10/04/2027
€ 80.57
15,000
€ 79.88
15,000
€ 95.11
15,000
01/01/2016 –
02/09/2020
€ 14.19
01/01/2017 –
15/05/2021
€ 19.38
01/01/2018 –
24/07/2022
01/01/2019 –
29/04/2023
02/03/2019 –
21/12/2023
01/01/2020 –
31/05/2024
01/01/2021 –
16/05/2025
01/01/2022 –
18/04/2026
01/01/2023 –
10/04/2027
01/01/2019 –
29/04/2023
02/03/2019 –
21/12/2023
01/01/2020 –
31/05/2024
01/01/2021 –
16/05/2025
01/01/2022 –
18/04/2026
01/01/2023 –
10/04/2027
€ 14.54
2,520
2,520
€ 28.75
2,520
2,520
€ 49.00
7,500
7,500
€ 46.10
7,500
7,500
€ 80.57
7,500
€ 79.88
7,500
€ 95.11
7,500
€ 28.75
2,520
2,520
€ 49.00
7,500
7,500
€ 46.10
7,500
7,500
€ 80.57
7,500
€ 79.88
7,500
€ 95.11
7,500
112
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Plan(1)
Grant
date
Vesting
period
Exercise
period
Exercise
price
Number
of SRs
out-
stan-
ding per
31/12/
2020
Number
of SRs
exer-
cisable
per 31/
12/2020
SRs
offered
& acce-
pted
during
2020
SRs
exer-
cised
during
2020
SRs
expi-
red in
2020
WP 2017 30/08/2017
WP 2018 24/08/2018
WP 2019 12/07/2019
WP 2019 12/07/2019
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
01/01/2021 –
16/05/2025
01/01/2022 –
18/04/2026
01/01/2023 –
10/04/2027
01/01/2023 –
10/04/2027
€ 80.57
7,500
€ 79.88
7,500
€ 95.11
7,500
€ 95.11
7,500
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Dr. Mary
Kerr
Mr. Peter
Guenter
Dr. Elisabeth
Svanberg
Dr. Linda
Higgins
Mr. Daniel
O'Day
Management board members
WP 2012 11/02/2012
WP 2013 29/07/2013
WP 2014 14/10/2014
WP 2015 29/06/2015
WP 2015.B 02/03/2016
Mr. Onno
van de
Stolpe
WP 2016 31/07/2016
WP 2017 30/08/2017
WP 2018 18/06/2018
WP 2019 12/07/2019
SR Plan 2020 16/06/2020
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
36 months
1/36 per
month
100% 3rd
year after
year of grant
01/01/2024
(1) Warrant Plan (WP) and Subscription Right Plan (SR Plan)
01/01/2016 –
02/09/2020
€ 14.19
55,000
01/01/2017 –
15/05/2021
01/01/2018 –
24/07/2022
01/01/2019 –
29/04/2023
02/03/2019 –
21/12/2023
01/01/2020 –
31/05/2024
01/01/2021 –
16/05/2025
01/01/2022 –
18/04/2026
01/01/2023 –
10/04/2027
01/01/2024 –
17/04/2028
€ 19.38
41,874
41,874
30,000
€ 14.54 100,000 100,000
€ 28.75 100,000 100,000
€ 49.00 100,000 100,000
€ 46.10 100,000 100,000
€ 80.57 100,000
€ 79.88 100,000
€ 95.11 100,000
€ 168.42
85,000
85,000
0
0
0
0
0
0
0
0
0
0
113
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Plan(1)
Grant
date
Vesting
period
Exercise
period
Exercise
price
Number
of SRs
out-
stan-
ding per
31/12/
2020
Number
of SRs
exer-
cisable
per 31/
12/2020
SRs
offered
& acce-
pted
during
2020
SRs
exer-
cised
during
2020
SRs
expi-
red in
2020
WP 2015.B 02/03/2016
WP 2016 31/07/2016
Mr. Bart
Filius
WP 2017 30/08/2017
WP 2018 18/06/2018
WP 2019 12/07/2019
SR Plan 2020 16/06/2020
WP 2012 11/02/2012
WP 2013 29/07/2013
WP 2014 14/10/2014
WP 2015 29/06/2015
Dr. Andre
Hoekema
WP 2015.B 02/03/2016
WP 2016 31/07/2016
WP 2017 30/08/2017
WP 2018 18/06/2018
WP 2019 12/07/2019
SR Plan 2020 16/06/2020
100% 3rd
year after
year of grant
02/03/2019
100% 3rd
year after
year of grant
01/01/2020
100% 3rd
year after
year of grant
01/01/2021
100% 3rd
year after
year of grant
01/01/2022
100% 3rd
year after
year of grant
01/01/2023
100% 3rd
year after
year of grant
01/01/2024
100% 3rd
year after
year of grant
01/01/2016
100% 3rd
year after
year of grant
01/01/2017
100% 3rd
year after
year of grant
01/01/2018
100% 3rd
year after
year of grant
01/01/2019
100% 3rd
year after
year of grant
02/03/2019
100% 3rd
year after
year of grant
01/01/2020
100% 3rd
year after
year of grant
01/01/2021
100% 3rd
year after
year of grant
01/01/2022
100% 3rd
year after
year of grant
01/01/2023
100% 3rd
year after
year of grant
01/01/2024
(1) Warrant Plan (WP) and Subscription Right Plan (SR Plan)
02/03/2019 –
21/12/2023
€ 49.00
01/01/2020 –
31/05/2024
€ 46.10
01/01/2021 –
16/05/2025
€ 80.57
60,000
01/01/2022 –
18/04/2026
€ 79.88
80,000
01/01/2023 –
10/04/2027
€ 95.11
65,000
01/01/2024 –
17/04/2028
€ 168.42
50,000
50,000
01/01/2016 –
02/09/2020
€ 14.19
01/01/2017 –
15/05/2021
€ 19.38
50,000
60,000
20,000
20,000
01/01/2018 –
24/07/2022
01/01/2019 –
29/04/2023
02/03/2019 –
21/12/2023
01/01/2020 –
31/05/2024
€ 14.54
30,000
30,000
10,000
€ 28.75
30,000
30,000
49
40,000
40,000
€ 46.10
55,000
55,000
01/01/2021 –
16/05/2025
€ 80.57
60,000
01/01/2022 –
18/04/2026
€ 79.88
50,000
01/01/2023 –
10/04/2027
€ 95.11
50,000
01/01/2024 –
17/04/2028
€ 168.42
30,000
30,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
114
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Plan(1)
Grant
date
Vesting
period
Exercise
period
Exercise
price
Number
of SRs
out-
stan-
ding per
31/12/
2020
Number
of SRs
exer-
cisable
per 31/
12/2020
SRs
offered
& acce-
pted
during
2020
SRs
exer-
cised
during
2020
SRs
expi-
red in
2020
WP 2013 15/07/2013
WP 2014 09/23/2014
WP 2015 29/06/2015
WP 2015.B 02/03/2016
Dr. Piet
Wigerinck
WP 2016 16/08/2016
WP 2017 30/08/2017
WP 2018 18/06/2018
WP 2019 12/07/2019
SR Plan 2020 16/06/2020
100% 3rd
year after
year of grant
01/01/2017
100% 3rd
year after
year of grant
01/01/2018
100% 3rd
year after
year of grant
01/01/2019
100% 3rd
year after
year of grant
02/03/2019
100% 3rd
year after
year of grant
01/01/2020
100% 3rd
year after
year of grant
01/01/2021
100% 3rd
year after
year of grant
01/01/2022
100% 3rd
year after
year of grant
01/01/2023
100% 3rd
year after
year of grant
01/01/2024
(1) Warrant Plan (WP) and Subscription Right Plan (SR Plan)
01/01/2017 –
15/05/2021
€ 19.38
01/01/2018 –
24/07/2022
€ 14.54
01/01/2019 –
29/04/2023
€ 28.75
10,000
40,000
30,000
02/03/2019 –
21/12/2023
01/01/2020 –
31/05/2024
€ 49.00
40,000
40,000
10,000
€ 46.10
60,000
60,000
01/01/2021 –
16/05/2025
€ 80.57
60,000
01/01/2022 –
18/04/2026
€ 79.88
60,000
01/01/2023 –
10/04/2027
€ 95.11
50,000
01/01/2024 –
17/04/2028
€ 168.42
40,000
40,000
0
0
0
0
0
0
0
0
0
115
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Plan(1)
Grant
date
Vesting
period
Exercise
period
Exercise
price
Number
of SRs
out-
stan-
ding per
31/12/
2020
Number
of SRs
exer-
cisable
per 31/
12/2020
SRs
offered
& acce-
pted
during
2020
SRs
exer-
cised
during
2020
SRs
expi-
red in
2020
WP 2016.B 06/04/2017
WP 2017 30/08/2017
Dr. Walid
Abi-Saab
WP 2018 18/06/2018
WP 2019 12/07/2019
SR Plan 2020 23/06/2020
WP 2017 30/08/2017
Mr. Michele
Manto
WP 2018 18/06/2018
WP 2019 12/07/2019
SR Plan 2020 16/06/2020
100% 3rd
year after
year of grant
06/04/2020
100% 3rd
year after
year of grant
01/01/2021
100% 3rd
year after
year of grant
01/01/2022
100% 3rd
year after
year of grant
01/01/2023
100% 3rd
year after
year of grant
01/01/2024
100% 3rd
year after
year of grant
01/01/2021
100% 3rd
year after
year of grant
01/01/2022
100% 3rd
year after
year of grant
01/01/2023
100% 3rd
year after
year of grant
01/01/2024
(1) Warrant Plan (WP) and Subscription Right Plan (SR Plan)
06/04/2020 –
19/01/2025
€ 62.50
10,000
10,000
140,000
01/01/2021 –
16/05/2025
€ 80.57
45,000
01/01/2022 –
18/04/2026
€ 79.88
60,000
01/01/2023 –
10/04/2027
€ 95.11
50,000
01/01/2024 –
17/04/2028
€ 168.42
40,000
40,000
01/01/2021 –
16/05/2025
€ 80.57
60,000
01/01/2022 –
18/04/2026
€ 79.88
30,000
01/01/2023 –
10/04/2027
€ 95.11
40,000
01/01/2024 –
17/04/2028
€ 168.42
30,000
30,000
0
0
0
0
0
0
0
0
0
At the end of 2020, Mr. Onno van de Stolpe held 481,139 shares of Galapagos NV and 826,874 subscription rights,
Mr. Bart Filius held 25,000 shares and 255,000 subscription rights, Dr. Piet Wigerinck held 55,200 shares and 310,000
subscription rights, Dr. Walid Abi-Saab held 2,500 shares and 205,000 subscription rights, Dr. Andre Hoekema held
42,857 shares and 345,000 subscription rights, and Mr. Michele Manto held 1,000 shares and 160,000 subscription
rights.
116
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
RSUs awarded to, vested or expired for the management board
members
In 2020, the management board were offered new RSUs under 2020 RSU Annual Long-Term Incentive Plan and
the 2020 RSU Retention Plan, subject to acceptance. The members of the management board accepted all RSUs
offered to them. The grant under the 2020 RSU Annual Long-Term Incentive Plan is the long-term portion of
the bonus for 2019 and this RSU grant will vest in full three years after the offer date. The second RSU grant has
a four-year vesting period, with 25% vesting each year and a first vesting date on 1 May 2021. The RSUs are not
transferable. The table below sets forth the number of RSUs offered to and accepted by each management board
member: Mr. Onno van de Stolpe: 18,317 RSUs, Mr. Bart Filius: 12,600 RSUs, Dr. Piet Wigerinck and Dr. Walid Abi-
Saab: 12,080 RSUs each, Dr. Andre Hoekema: 832 RSUs and Mr. Michele Manto: 5,920 RSUs.
The main characteristics of the RSU plans for the management board members are as follows:
▪ The RSUs are offered for no consideration;
▪ Three or four year vesting periods apply, as set forth per plan in the table below;
▪ In case of termination of service before the vesting date, forfeiture rules apply.
Each RSU represents the right to receive, at Galapagos’ discretion, one Galapagos share or a payment in cash of an
amount equivalent to the volume-weighted average price of the Galapagos share on Euronext Brussels over the
30-calendar day period preceding the relevant vesting date. However, in respect of management board members,
any vesting prior to the third anniversary of the offer date will always give rise to a payment in cash rather than
a delivery of shares as an incentive.
No RSUs expired during financial year 2020. The table below sets forth the main characteristics of RSU plans
issued to the management board members in 2019 and 2020, the number of RSUs awarded to each management
board member under the respective RSU Plan, and the number of RSUs vested for and paid out to each
management board member during 2020:
117
Galapagos NV • Annual Report 2020
Number of RSUs
granted
RSUs vested
during 2020
15,000
25,606
6,401
16,922
2,392
15,925
5,000
17,924
4,481
16,922
1,452
11,148
16/10/2022
01/05/2020
01/05/2021
01/05/2022
01/05/2023
16/10/2021
16/10/2022
06/05/2023
01/05/2021
01/05/2022
01/05/2023
01/05/2024
16/10/2022
01/05/2020
01/05/2021
01/05/2022
01/05/2023
16/10/2021
16/10/2022
06/05/2023
01/05/2021
01/05/2022
01/05/2023
01/05/2024
16/10/2022
3,000
16/10/2021
16/10/2022
06/05/2023
16/10/2022
01/05/2020
01/05/2021
01/05/2022
01/05/2023
16/10/2021
16/10/2022
06/05/2023
01/05/2021
01/05/2022
01/05/2023
01/05/2024
16,922
832
5,000
17,924
4,481
10,153
932
11,148
CORPORATE GOVERNANCE
Management
board member
Plan
Offer date
Vesting period
Vesting date
Mr. Onno van de
Stolpe
Mr. Bart Filius
Dr. Andre Hoekema
Dr. Piet Wigerinck
Plan 2019.I
16/10/2019
Plan 2019.II
16/10/2019
Plan 2019.III
16/10/2019
Plan 2020.I
06/05/2020
Plan 2020.II
06/05/2020
Plan 2019.I
16/10/2019
Plan 2019.II
16/10/2019
Plan 2019.III
16/10/2019
Plan 2020.I
06/05/2020
Plan 2020.II
06/05/2020
Plan 2019.I
16/10/2019
Plan 2019.III
16/10/2019
Plan 2020.I
06/05/2020
Plan 2019.I
16/10/2019
Plan 2019.II
16/10/2019
Plan 2019.III
16/10/2019
Plan 2020.I
06/05/2020
Plan 2020 II.
06/05/2020
100% three years
after offer date
25% / year
Four-year vesting
period
50% two years after
offer date
50% three years
after offer date
100% three years
after offer date
25% / year
Four-year vesting
period
100% three years
after offer date
25% / year
Four-year vesting
period
50% two years after
offer date
50% three years
after offer date
100% three years
after offer date
25% / year
Four-year vesting
period
100% three years
after offer date
50% two years after
offer date
50% three years
after offer date
100% three years
after offer date
100% three years
after offer date
25% / year
Four-year vesting
period
50% two years after
offer date
50% three years
after offer date
100% three years
after offer date
25% / year
Four-year vesting
period
118
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Management
board member
Plan
Offer date
Vesting period
Vesting date
Dr. Walid Abi-Saab
Plan 2019.I
16/10/2019
Plan 2019.II
16/10/2019
Plan 2019.III
16/10/2019
Plan 2020.I
06/05/2020
Plan 2020.II
06/05/2020
Plan 2019.II
16/10/2019
Mr. Michele Manto
Plan 2020.I
06/05/2020
Plan 2020.II
06/05/2020
100% three years
after offer date
25% / year
Four-year vesting
period
50% two years after
offer date
50% three years
after offer date
100% three years
after offer date
25% / year
Four-year vesting
period
25% / year
Four-year vesting
period
100% three years
after offer date
25% / year
Four-year vesting
period
16/10/2022
01/05/2020
01/05/2021
01/05/2022
01/05/2023
16/10/2021
16/10/2022
06/05/2023
01/05/2021
01/05/2022
01/05/2023
01/05/2024
01/05/2020
01/05/2021
01/05/2022
01/05/2023
06/05/2023
01/05/2021
01/05/2022
01/05/2023
01/05/2024
Number of RSUs
granted
RSUs vested
during 2020
5,000
17,924
4,481
10,153
932
11,148
5,121
1,280
612
5,308
119
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Evolution of remuneration and company performance
The below table shows the annual change of remuneration of each individual supervisory and management
board member, of the performance of the company and of average remuneration on a full-time equivalent basis
of Galapagos’ employees, other than supervisory and management board members, over the five most recent
financial years.
Comparative table of remuneration and company performance
2020
%
change
2019
%
change
2018
%
change
2017
%
change
2016
Director's remuneration(1)
Management board(2)(3)
Mr. Onno van de
Stolpe, CEO
Mr. Bart Filius,
COO/CFO
Dr. Andre
Hoekema, CBO
Dr. Piet Wigerinck,
CSO
Dr. Walid Abi-Saab,
CMO(4)
Mr. Michele Manto,
CCO(5)
Supervisory board(6)(7)
Dr. Rajesh Parekh
Mr. Howard Rowe
Ms. Katrine Bosley
Dr. Mary Kerr
Mr. Peter
Guenter(8)
Dr. Elisabeth
Svanberg(9)
Mr. Daniel O’Day
Dr. Linda Higgins
€ 758,400
-82%
€ 4,322,105
209%
€ 1,398,236
€ 2,091,784
-73%
€ 7,666,471
242%
€ 2,242,627
-2%
49%
€ 1,422,880
5%
€ 1,361,375
€ 1,503,607
-11%
€ 1,696,742
€ 483,706
-86%
€ 3,558,571
275%
€ 948,675
109%
€ 453,270
6%
€ 428,420
€ 1,412,283
-75%
€ 5,747,118
251%
€ 1,636,303
210%
€ 527,571
-19%
€ 648,500
€ 425,190
-87%
€ 3,346,490
360%
€ 728,244
€ 511,416
-90%
€ 5,071,465
320%
€ 1,207,775
€ 467,518
-81%
€ 2,461,071
179%
€ 882,807
€ 1,386,058
-66%
€ 4,127,775
195%
€ 1,400,211
26%
83%
18%
74%
€ 579,764
-8%
€ 633,417
€ 661,725
-22%
€ 853,371
€ 745,795
18%
€ 634,704
€ 805,999
€ 467,518
-77%
€ 2,075,500
277%
€ 550,542
-26%
€ 745,795
€ 1,386,614
-63%
€ 3,790,471
250%
€ 1,082,398
-51%
€ 2,206,938
€ 380,518
€ 684,903
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-5%
N/A
N/A
N/A
N/A
€ 846,077
N/A
N/A
N/A
N/A
€ 120,000
33%
€ 90,000
0%
€ 90,000
0%
€ 90,000
0%
€ 90,000
€ 220,000
-62%
€ 577,950
183%
€ 204,300
127%
€ 90,000
-30%
€ 127,800
€ 75,000
36%
€ 55,000
5%
€ 52,500
17%
€ 45,000
0%
€ 125,000
-58%
€ 298,975
173%
€ 109,650
144%
€ 45,000
-30%
€ 65,000
44%
€ 45,000
0%
€ 45,000
0%
€ 45,000
0%
€ 115,000
-60%
€ 288,975
183%
€ 102,150
127%
€ 45,000
-30%
€ 65,000
44%
€ 45,000
3%
€ 43,750
9%
€ 40,000
125%
€ 115,000
-60%
€ 288,975
186%
€ 100,900
152%
€ 40,000
125%
€ 65,000
117%
€ 30,000
€ 115,000
-58%
€ 273,975
€ 44,164
€ 77,999
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
€ 45,000
€ 63,900
€ 45,000
€ 63,900
€ 17,782
€ 17,782
N/A
N/A
N/A
N/A
N/A
N/A
120
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Comparative table of remuneration and company performance
2020
%
change
2019
%
change
2018
%
change
2017
%
change
2016
Company performance
Financial KPIs (thousands of €, except for the stock price and number of employees)
Operational Cash
burn (-) /
operational cash
flow
R&D
expenditure(10)
Cash position on
31 Dec(11)
# of employees on
31 Dec(12)
Stock price
performance (Last
tradying day FY)
Operational KPIs
# of new validated
targets
# of new PCCs
# of PoC toplines
-517,400 -116%
3,162,804 2097%
-158,379
-3%
-154,089 -166%
231,881
531,354
24%
427,320
32%
322,875
48%
218,502
57%
139,573
5,169,349
-11%
5,780,832
348%
1,290,796
12%
1,151,211
18%
973,241
1,489
48%
1,003
38%
725
21%
600
18%
508
80.48
-57%
186.50
132%
80.56
2%
78.98
30%
60.94
5
3
3
6
3
3
1
2
4
4
2
9
5
2
0
6
5
3
2
# of Ph3 starts
Average remuneration of employees on FTE basis(13)
0
Employees of the
Group
€ 104,290
4%
€ 100,682
4%
€ 97,139
4%
€ 93,726
8%
€ 86,809
(1) The directors' remuneration overview contains for each individual management board and supervisory board member two separate rows,
whereby the first row sets out their cash remuneration, being the annual base salary, cash bonus and (if any) exceptional bonus, to enable the
comparison with the average remuneration of employees on FTE basis, and the second row sets out their total remuneration, including equity-
related remuneration such as granted SRs and vested RSUs
(2) The first row shows the cash remuneration of each management board member, being the annual base salary, cash bonus and (if any)
exceptional bonus
(3) The second row shows the total remuneration of each management board member, including equity-based remuneration such as RSUs vested
and subscription rights granted during the year. The value of the subscription rights is calculated by comparing the exercise price of the
subscription right plan with the average share price as quoted on Euronext Brussels and Amsterdam during the respective financial year. For
example, for financial year 2020 the exercise price of the Subscription Right Plan 2020 is compared with the average share price as quoted on
Euronext Brussels and Amsterdam during the financial year 2020
(4) Management board member from 1 January 2017. The total remuneration for FY 2017, as set out on the second row for FY 2017, includes Dr.
Walid Abi-Saab's hiring grant of subscription rights under Warrant Plan 2016 (B)
(5) Management board member from 1 January 2020
(6) The first row shows the total cash remuneration of each supervisory board member, consisting of the board fees
(7) The second row shows the total remuneration of each supervisory board member, including equity-based remuneration such as SRs granted
during the year. As from 1 January 2020, Galapagos no longer grants any SRs to supervisory board members
(8) Supervisory board member from 30 April 2019
(9) Supervisory board member from 28 April 2020
(10) R&D expenditure presented on this line is reflecting the total Group related expenditure including Fidelta, our fee-for-service business sold to
Selvita on 4 January 2021, classified as discontinued operations in our 2020 consolidated financial statements. R&D expenditure of our
continuing operations presented in our consolidated financial statement were €523,667 thousands for the year ended 31 December 2020,
€420,090 thousands for the year ended 31 December 2019 and €316,222 thousands for the year ended 31 December 2018
(11) Cash position on 31 December 2020 includes €7,884 thousands of cash held in Fidelta and classified as assets held for sale in our 2020
consolidated financial statements
(12) The number of employees per 31 December includes employees and insourced personnel (external contractors)
(13) The average remuneration of employees is calculated on FTE basis, excluding trainees and internships, for employees employed for the full
applicable financial year. It takes into account the employees' base salary, annual cash bonus and (if any) exceptional cash bonus during the
respective financial year. During 2019, all Galapagos' employees received an exceptional bonus as a result of the Gilead transaction. Annual
cash bonuses are included in the year upon which performance is based and not in the year in which they are paid. Due to the timing of the
2020 year-end process, the actual annual figures for employees had not been finalized by the date of this report. Therefore, 2020 annual bonus
figures represent target figures multiplied by the applicable approved organizational bonus funding scores, being the company’s best estimate
of actual bonus outcomes
121
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Ratio between the highest and lowest remuneration
The ratio between the highest and lowest remuneration at Galapagos during financial year 2020 is: 1:27.
The ratio is calculated on the basis of the lowest FTE pay, excluding trainees and internships. The remuneration
which has been taken into account in this exercise includes the annual base salary, annual cash bonus and (if
any) exceptional bonus; annual cash bonus is included in the year upon which performance is based and not in
the year in which it is paid. Due to the timing of the 2020 year-end process, the actual annual bonus figures for
employees below the management board level had not been finalized by the date of this report. Therefore, target
figures for these employees were used, multiplied by the applicable approved organizational bonus funding scores,
being the company’s best estimate of 2020 actual bonus outcomes.
Minimum share ownership
From financial year 2020, the remuneration policy has set a minimum threshold of shares to be held at any time
by the CEO to the number of shares equivalent to one year of the CEO’s annual base salary and by the other
management board members to the number of shares equivalent to six months’ of the relevant management
board member’s annual base salary.
Management board members
Onno van de Stolpe, CEO
Bart Filius, COO & CFO
Andre Hoekema, CBO
Piet Wigerinck, CSO
Walid Abi-Saab, CMO
Michele Manto, CCO
Minimum share
ownership
objective for 2020
Actual share
ownership per 31/
12/2020
3,218
1,073
966
1,073
1,073
746
481,139
25,000
42,857
55,200
2,500
1,000
Severance clauses and payments
Contractual provisions regarding compensation for severance for
management board members
The contracts between Galapagos NV and the management board members do not provide for severance
compensation. They do not contain notice periods that exceed six months. However, Galapagos NV entered into
undertakings with Mr. Onno van de Stolpe, Mr. Bart Filius, Dr. Andre Hoekema, Dr. Piet Wigerinck and Dr. Walid
Abi-Saab, providing that in case their contract with the group is terminated as a result of a change of control
of Galapagos, they would be entitled to a severance compensation of 12 months’ base salary for the CEO and
9 months’ base salary for the other management board members.
Severance payments for departing management board members
Not applicable; in 2020 no management board members left Galapagos.
Claw-back right of Galapagos relating to variable remuneration
As from financial year 2020, contractual provisions apply to each management board member to ensure that
Galapagos has the right to have each management board member forfeit any unvested RSUs, deferred portions of
previous cash bonuses or unvested subscription rights in the event of a restatement of the financial statements
that has a material negative effect on Galapagos or a material breach of our Code of Conduct and Ethics.
122
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
The RSU plans and 2020 subscription rights plan contain bad leaver provisions that can result in forfeiture of
any unvested RSU and/or subscription rights grants in case the beneficiary leaves Galapagos prior to the relevant
vesting date.
During the financial year 2020 no claw-back events occurred.
Deviations from the remuneration policy
During the financial year 2020, the supervisory board did not decide to deviate from any items of the Galapagos’
remuneration policy and no deviations did occur.
Conflict of interests and related parties
We consider that Gilead became a related party of Galapagos in 2019 because of Gilead’s then 25.84% shareholding
(now: 25.54%) in Galapagos and the fact that Gilead is entitled to propose two candidates to be appointed to our
supervisory board under the share subscription agreement.
On 15 December 2020, we entered into a related party transaction with Gilead within the meaning of article 7:116
of the Belgian Companies Code, by agreeing to amend the structure of our agreement relating to the development
and commercialization of filgotinib in Europe. The press release issued on 15 December 2020, available on our
website, contains the disclosures required under article 7:116 of the Belgian Companies Code. Daniel O’Day and
Linda Higgins recused themselves from the supervisory board meetings held on 3 December 2020 and 15 December
2020 regarding this related party transaction, since they are representatives of Gilead.
A more detailed explanation of our transactions with Gilead in 2020 can be found in the section titled Agreements
with major Galapagos NV shareholders. We further refer to note 30.
In the event of a transaction where a supervisory board member’s interest conflicts with the interest of Galapagos
NV, the board member shall notify the board in advance of the conflict and will act in accordance with the
relevant rules of the Belgian Companies Code (i.e. article 7:115 of the Belgian Companies Code for supervisory board
members). In the event of a transaction where a management board member’s interest conflicts with the interest
of Galapagos NV, the management board shall refer the decision regarding such transaction to the supervisory
board.
In addition, Galapagos’ Corporate Governance Charter and Galapagos’ Related Person Transaction Policy contain
procedures for transactions between Galapagos and its supervisory board members, management board
members, major shareholders or any of their immediate family members and affiliates. Without prejudice
to the procedure defined in articles 7:115 and 7:117 of the Belgian Companies Code, these policies provide that
all transactions between Galapagos and its supervisory board members, management board members or its
representatives need the approval of the audit committee and the supervisory board, which approval can only be
provided for transactions at normal market conditions. Moreover, conflicts of interest, even in the event they are
not a conflict of interest within the meaning of articles 7:115 and 7:117 of the Belgian Companies Code, are enacted
in the meeting minutes, and the relevant board member cannot participate in the voting.
In 2020, the following conflicts of interests between Galapagos NV and a director within the meaning of article
7:115 of the Belgian Companies Code were noted:
123
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
▪ in a meeting of the board of directors held on 17 February 2020, the following was reported in accordance with
article 7:115 of the Belgian Companies Code in connection with the proposed amendment of the remuneration
practices for the members of the executive committee: the chairman declared that Mr. Onno van de Stolpe
had informed the board of directors of a potential conflict of interest, concerning the proposed amendment
of the remuneration practices for the members of the executive committee. The board considered that
said compensation review was based on a benchmark exercise, and that the proposed amendments aim to
align the remuneration practices with the practices among other Belgian listed companies. The review of
the remuneration practices will have no material impact on the financial position of the company. The
board shared the opinion of the remuneration committee that the proposed amendments are justified and
reasonable. Mr. van de Stolpe did not take part in the deliberation and the vote concerning this decision.
▪ in a meeting of the board of directors held on 24 March 2020, the following was reported in accordance with
article 7:115 of the Belgian Companies Code in connection with the grant of RSUs to the CEO: the chairman
declared that Onno van de Stolpe had informed the board of directors of a conflict of interest, concerning
the proposed award to him of RSUs. Further to the resolutions of the board of directors of 17 December 2019,
a bonus equal to 75% of his 2019 salary was awarded to Mr. Van de Stolpe in cash and an equivalent number
of RSUs (based on the average share price of the Galapagos share on Euronext Amsterdam during the month
of April 2020) to be granted under the Annual Long-Term Incentive Plan 2020. In addition, the grant of RSUs
under the RSU Retention Plan 2020 to Mr. Van de Stolpe was approved by the board. The board considered
that said RSU grants are a justified reward for the results achieved by Mr. Van de Stolpe in 2019. Furthermore,
the board deemed the grant of RSUs to be an important tool in the retention of Mr. Van de Stolpe as CEO of
the company. The RSU grants will have no material impact on the financial position of the company. The
board shared the opinion of the remuneration committee that the RSU grants are justified and reasonable.
Mr. Van de Stolpe did not take part in the deliberation and the vote concerning this decision.
Code of Business Conduct and Ethics
We have established a Code of Business Conduct and Ethics to ensure that our supervisory board members,
management board members and employees are making ethical and legal decisions when conducting Galapagos’
business and performing their day-to-day duties. We expect our supervisory board members, management board
members and employees to conduct business with integrity, ethics and respect for human rights. We expect them to
turn away from conflicts of interest, corruption and fraud. To this end, we give trainings on this Code to our employees,
including our subsidiaries’ employees. So far, 93.5% of our employees from Galapagos R&D have completed the training.
The Code of Business Conduct and Ethics is available at https://www.glpg.com/governance-information.
One breach of our Code of Business Conduct and Ethics was reported to the audit committee in 2020.
124
Galapagos NV • Annual Report 2020
CORPORATE GOVERNANCE
Statement by the supervisory board
The supervisory board of Galapagos NV, represented by all its members, declares that, as far as it is aware, the statutory
accounts and consolidated financial statements, prepared according to the applicable standards for financial statements,
give a true and fair view of the equity, financial position and the results of Galapagos as of 31 December 2020.
The supervisory board of Galapagos NV, represented by all its members, further declares that, as far as it is aware,
this report to the shareholders for the financial year ending on 31 December 2020, gives a true and fair view on the
development, results and position of Galapagos and on the most important risks and uncertainties with which Galapagos
is confronted.
The supervisory board will submit proposed resolutions to the shareholders’ meeting to approve the annual
accounts for the financial year 2020, and to release the supervisory board members and the statutory auditor
from liability for the performance of their mandate during the financial year ended 31 December 2020.
Mechelen, 23 March 2021
On behalf of the supervisory board
Howard Rowe
Chairman of the audit committee
Raj Parekh
Chairman of the supervisory board
125
Galapagos NV • Annual Report 2020
Financial
statements
Consolidated and non-
consolidated financial
statements for 2020
Forward with confidence
FINANCIAL STATEMENTS
Consolidated financial statements
Consolidated statements of income and comprehensive income/loss (-)
Consolidated income statement
(thousands of €, except per share data)
Revenues
Other income
Total revenues and other income
Research and development expenditure
Sales and marketing expenses
General and administrative expenses
Total operating expenses
Year ended 31 December
2020
478,053
52,207
530,260
(523,667)
(66,468)
(118,757)
(708,892)
2019(*)
834,901
50,896
885,797
(420,090)
(24,577)
(72,382)
(517,049)
Operating profit/loss (-)
(178,632)
368,748
Fair value re-measurement of share subscription agreement
and warrants
Other financial income
Other financial expenses
3,034
18,667
(152,844)
(181,644)
21,389
(59,968)
Profit/loss (-) before tax
(309,775)
148,525
Income taxes
(1,226)
165
Net profit/loss (-) from continuing operations
(311,001)
148,689
Net profit from discontinued operations, net of tax
5,565
1,156
Net profit/loss (-)
(305,436)
149,845
Net profit/loss (-) attributable to:
Owners of the parent
Basic income/loss (-) per share
Diluted income/loss (-) per share
Basic income/loss (-) per share from continuing operations
Diluted income/loss (-) per share from continuing
operations
(305,436)
149,845
(4.69)
(4.69)
(4.78)
(4.78)
2.60
2.49
2.58
2.47
Notes
6
6
7
7
7
9
10
10
11
25
12
12
(*) The 2019 comparatives have been restated to consider the impact of classifying the Fidelta business as discontinued operations in 2020.
The accompanying notes form an integral part of these financial statements.
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FINANCIAL STATEMENTS
Consolidated statement of comprehensive income / loss (-)
(thousands of €)
Net profit/loss (-)
Items that will not be reclassified subsequently to profit or
loss:
Year ended 31 December
2020
(305,436)
2019(*)
149,845
Notes
Re-measurement of defined benefit obligation
(6,065)
(4,107)
Items that may be reclassified subsequently to profit or
loss:
Translation differences, arisen from translating foreign
activities
Realization of translation differences upon liquidation of
foreign operations
Other comprehensive loss, net of income tax
(1,024)
415
(1,023)
(8,112)
(3,692)
Total comprehensive income/loss (-) attributable to:
Owners of the parent
(313,548)
146,154
Total comprehensive income/loss (-) attributable to owners
of the parent arises from:
Continuing operations
Discontinued operations
Total comprehensive income/loss (-)
(318,841)
5,293
(313,548)
145,050
1,104
146,154
(*) The 2019 comparatives have been restated to consider the impact of classifying the Fidelta business as discontinued operations in 2020.
The accompanying notes form an integral part of these financial statements.
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FINANCIAL STATEMENTS
Consolidated statements of financial position
(thousands of €)
Assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Non-current trade receivables
Non-current R&D incentives receivables
Other non-current assets
Non-current assets
Trade and other receivables
Current R&D incentives receivables
Current financial investments
Cash and cash equivalents
Other current assets
31 December
2020
2019
Notes
67,565
103,378
4,475
50,000
111,624
11,343
348,384
148,418
24,104
3,026,278
2,135,187
11,953
24,927
66,052
4,205
93,407
14,091
202,682
54,009
21,949
3,919,216
1,861,616
9,138
Current assets from continuing operations
5,345,941
5,865,927
Assets classified as held for sale
23,406
-
Total current assets
5,369,347
5,865,927
Total assets
5,717,731
6,068,609
Equity and liabilities
Share capital
Share premium account
Other reserves
Translation differences
Accumulated losses
Total equity
Retirement benefit liabilities
Non-current lease liabilities
Other non-current liabilities
Non-current deferred income
Non-current liabilities
291,312
287,282
2,727,840
2,703,583
(10,907)
(3,189)
(334,701)
2,670,355
14,996
23,035
8,096
2,365,974
2,412,101
(4,842)
(1,142)
(109,223)
2,875,658
8,263
19,558
6,989
2,586,348
2,621,158
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Galapagos NV • Annual Report 2020
13
14
21
17
16
15
17
16
18
19
17
25
20
20
22
23
24
FINANCIAL STATEMENTS
(thousands of €)
Current lease liabilities
Trade and other liabilities
Current tax payable
Current financial instruments
Current deferred income
Current liabilities from continuing operations
Liabilities directly associated with assets classified as held for
sale
Total current liabilities
Total liabilities
Total equity and liabilities
31 December
2020
6,401
2019
5,826
172,386
143,434
1,248
3,164
443,159
626,357
8,917
635,274
2,037
6,198
414,298
571,793
-
571,793
3,047,375
5,717,731
3,192,951
6,068,609
The accompanying notes form an integral part of these financial statements.
Notes
22
23
11
9
24
25
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FINANCIAL STATEMENTS
Consolidated cash flow statements
(thousands of €)
Net profit/loss (-) of the year
2020
(305,436)
2019
149,845
Notes
26
26
26
26
24
14
13
14
18
18
18
15
15
22
20
20
20
20
Adjustment for non-cash transactions
230,723
248,027
Adjustment for items to disclose separately under operating
cash flow
4,067
(7,731)
Adjustment for items to disclose under investing and
financing cash flows
Change in working capital other than deferred income
Increase/decrease (-) in deferred income
(2,472)
(146,092)
(207,787)
(5,061)
12,698
2,804,202
Cash generated/used (-) in operations
(426,998)
3,201,980
Interest paid
Interest received
Corporate taxes paid
(9,033)
10,054
(1,358)
(1,158)
7,852
(57)
Net cash flows generated/used (-) in operating activities
(427,336)
3,208,617
Purchase of property, plant and equipment
Purchase of and expenditure in intangible fixed assets
Proceeds from disposal of property, plant and equipment
(42,522)
(48,793)
49
(22,385)
(23,300)
-
Purchase of current financial investments
(4,574,206)
(4,787,284)
Interest received related to current financial investments
3,500
5,059
Sale of current financial investments
5,415,316
1,063,344
Acquisition of financial assets
Proceeds from sale of financial assets held at fair value
through profit or loss
(2,681)
6,626
(177)
82
Net cash flows generated/used (-) in investing activities
757,288
(3,764,660)
Payment of lease liabilities
(6,247)
(5,091)
Proceeds from capital and share premium increases, gross
amount
Issue costs paid related to capital and share premium
increases
Proceeds from capital and share premium increases from
exercise of subscription rights
Proceeds from capital and share premium increases from
exercise of warrant A by Gilead
-
-
28,287
960,087
(4,447)
17,167
-
368,035
Net cash flows generated in financing activities
22,040
1,335,751
Increase in cash and cash equivalents
351,994
779,708
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
(thousands of €)
2020
2019
Notes
Cash and cash equivalents at beginning of year
1,861,616
1,290,796
19
Transfer to current financial investments
-
(198,922)
Increase in cash and cash equivalents
351,994
779,708
Effect of exchange rate differences on cash and cash
equivalents
(70,539)
(9,966)
Cash and cash equivalents at end of the year
2,143,071
1,861,616
19
(thousands of €)
Current financial investments
Cash and cash equivalents
Cash and cash equivalents classified as assets held for sale
Current financial investments and cash and cash
equivalents
31 December
2020
3,026,278
2,135,187
7,884
2019
3,919,216
1,861,616
5,169,349
5,780,832
Notes
18
19
25
The accompanying notes form an integral part of these financial statements.
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FINANCIAL STATEMENTS
Consolidated statements of changes in equity
(thousands of €)
On 1 January 2019
Change in accounting policy (modified
retrospective application IFRS 16)
Share capital
Share
premium
account
Translation
differences
Other
reserves
Accumul.
losses
Total
236,540
1,277,780
(1,557)
(735)
(297,779)
1,214,249
416
416
Restated total equity at 1 January 2019
236,540
1,277,780
(1,557)
(735)
(297,363)
1,214,665
Net profit
Other comprehensive income/loss (-)
Total comprehensive income/loss (-)
Share-based compensation
Derecognition of financial liability from
share subscription agreement and
warrant A
Issue of new shares
Share issue costs
135,702
36,945
923,142
(4,447)
Exercise of warrant A by Gilead
14,162
353,873
Exercise of subscription rights
4,082
13,085
149,845
149,845
415
415
(4,107)
(3,692)
(4,107)
149,845
146,154
38,297
38,297
135,702
960,087
(4,447)
368,035
17,167
On 31 December 2019
287,282
2,703,583
(1,142)
(4,842)
(109,223)
2,875,658
On 1 January 2020
287,282
2,703,583
(1,142)
(4,842)
(109,223)
2,875,658
Net loss
Other comprehensive loss
Total comprehensive loss
Share-based compensation
Exercise of subscription rights
4,031
24,257
(305,436)
(305,436)
(2,047)
(6,065)
(8,112)
(2,047)
(6,065)
(305,436)
(313,548)
79,959
79,959
28,288
On 31 December 2020
291,312
2,727,840
(3,189)
(10,907)
(334,701)
2,670,355
The accompanying notes form an integral part of these financial statements.
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FINANCIAL STATEMENTS
Notes to the consolidated financial statements
1. General information
Galapagos NV is a limited liability company incorporated in Belgium and has its registered office at Generaal De
Wittelaan L11 A3, 2800 Mechelen, Belgium. In the notes to the consolidated financial statements, references to
“we”, “us,” “the group” or “Galapagos” include Galapagos NV together with its subsidiaries.
R&D
The R&D operations are specialized in the discovery and development of small molecules. Our ambition is to
become a leading global biotechnology company focused on the development and commercialization of novel
medicines. Our strategy is to leverage our unique and proprietary target discovery platform, which facilitates our
discovery and development of therapies with novel modes of action.
The components of the operating result presented in the financial statements include the following companies:
Galapagos NV, Galapagos Biopharma Belgium BV, Galapagos Real Estate Belgium BV (Mechelen, Belgium);
Galapagos SASU (Romainville, France); Galapagos B.V., Galapagos Biopharma Netherlands B.V. and Galapagos Real
Estate Netherlands B.V. (Leiden, the Netherlands); Galapagos, Inc. and its subsidiary Xenometrix, Inc. (United
States); Galapagos GmbH (Basel, Switzerland); Galapagos Biotech Ltd. (Cambridge, UK); Galapagos Biopharma
Germany GmbH (München, Germany); Galapagos Biopharma Spain S.L.U.
(Madrid, Spain) and Galapagos
Biopharma Italy S.r.l. (Milan, Italy).
Our continuing operations had 1,304 employees on 31 December 2020 working in the operating facilities in
Mechelen (the Belgian headquarters), the Netherlands, France, Switzerland, Germany, Italy, Spain, the United
States, and United Kingdom.
On 23 November 2020 we signed a share purchase agreement with Selvita S.A. in relation to the disposal of Fidelta
d.o.o. (our fee-for-service segment). Fidelta d.o.o. had 185 employees on 31 December 2020 working in the operating
facilities in Croatia. As net assets associated with our fee-for-service business will be recovered principally through
a sale transaction rather than through continuing use, we classified these assets and the associated liabilities as
held for sale in our financial statements for the year ended 31 December 2020. The transaction was completed
on 4 January 2021 for a total consideration of €37.1 million (including the customary adjustments for cash and
working capital).
Impact of COVID-19 on the financial statements
To date, we have experienced limited impact on our financial performance, financial position, cash flows and
significant judgements and estimates, although we continue to face additional risks and challenges associated
with the impact of the outbreak.
2. Summary of significant transaction
On 14 July 2019 we and Gilead announced that we entered into a 10-year global research and development
collaboration. Through this agreement, Gilead gained exclusive access to our innovative portfolio of compounds,
including clinical and preclinical programs and a proven drug discovery platform.
At inception of this collaboration in 2019, we received an upfront payment €3,569.8 million ($3.95 billion) and a
€960.1 million ($1.1 billion) equity investment from Gilead. On 6 November 2019 Gilead exercised warrant A, which
resulted in an additional equity investment of €368.0 million.
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At inception of this collaboration, we identified the following three performance obligations: (i) the transfer of
an extended license on GLPG1690, (ii) the granting of exclusive access to our drug discovery platform (i.e. the IP,
technology, expertise and capabilities) during the collaboration period and exclusive option rights on our current
and future clinical programs after Phase 2 (or, in certain circumstances, the first Phase 3 study) outside Europe
and (iii) an increased cost share from 20/80 to 50/50 on the global development activities of filgotinib, as a result
of the revised license and collaboration agreement.
As part of the collaboration, Gilead also received option rights for GLPG1972, a Phase 2b candidate for
osteoarthritis, in the United States. In November 2020, Gilead however declined to exercise its option for GLPG1972.
Since 22 October 2019, Gilead has had two representatives on the supervisory board of Galapagos (Daniel O’Day
and Linda Higgins).
During Q4 2020, Gilead decided not to pursue FDA approval of the RA indication for filgotinib in the U.S. as a
result of Complete Response Letter (CRL) from the Food and Drug Administration (FDA). Due to this, Gilead and
we agreed to amend our existing collaboration for the commercialization and development of filgotinib. Under
the new arrangement, we will assume sole responsibility in Europe for filgotinib in RA and in all other potential
future indications and will fully support the costs of certain of the development activities. In connection with
the changes in responsibility for the commercialization and development of filgotinib in Europe, we received a
payment of €35.0 million ($42.5 million) from Gilead in January 2021 and are entitled to additional payments of
€125.0 million ($151.8 million), of which €75.0 million will be paid in 2021 and €50.0 million will be paid in 2022. In
addition, we will no longer be eligible to receive future milestone payments relating to filgotinib in Europe and
we will pay royalties on net sales of filgotinib in Europe to Gilead as from 1 January 2024.
This modification to the collaboration with Gilead did not result in the creation of new performance obligations,
and only the performance obligation related to the development activities for filgotinib has been reassessed.
We retain the following three performance obligations, of which the first one was satisfied completely in 2019;
(i) the transfer of an extended license on GLPG1690, (ii) the granting of exclusive access to our drug discovery
platform (i.e. the IP, technology, expertise and capabilities) during the collaboration period and exclusive option
rights on our current and future clinical programs after Phase 2 (or, in certain circumstances, the first Phase
3 study) outside Europe and (iii) an increased cost share from 20/80 to 50/50 to 100/0 (for certain agreed
activities (Group A activities)) on the global development activities of filgotinib, until we complete the remaining
development activities.
We refer to the critical accounting judgments and key sources of estimation uncertainty section (note 4)
explaining critical judgments and estimates in applying accounting policies.
Terms of the collaboration
We will fund and lead all discovery and development autonomously until the end of Phase 2. After the completion
of a qualifying Phase 2 study (or, in certain circumstances, the first Phase 3 study), Gilead will have the option
to acquire a license to the compound outside Europe. If the option is exercised, we and Gilead will co-develop
the compound and share costs equally. Gilead will maintain option rights to our programs through the 10-year
term of the collaboration. This term can be extended for up to an additional three years thereafter for those
programs, if any, that have entered clinical development prior to the end of the collaboration term. In addition,
a final term extension can be granted in certain circumstances. If GLPG1690 had been approved in the United
States, Gilead would have paid us an additional $325 million regulatory milestone fee. Development of GLPG1690
was discontinued in February 2021.
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For GLPG1972, after the completion of the ongoing Phase 2b study in osteoarthritis, Gilead had the option to pay
a $250 million fee to license the compound in the United States but declined to exercise its option in November
2020. If certain secondary efficacy endpoints for GLPG1972 had been met, Gilead would have paid us up to an
additional $200 million. Following opt-in on GLPG1972, we would have been eligible to receive up to $550 million
in regulatory and sales based milestones. In November 2020, Gilead declined to exercise its option to GLPG1972.
For all other programs resulting from the collaboration, Gilead will make a $150 million opt-in payment per
program and will owe no subsequent milestones. We will receive tiered royalties ranging from 20 – 24% on net
sales of all our products licensed by Gilead in all countries outside Europe as part of the agreement.
Revised filgotinib collaboration
Under the revised agreement, we will assume all development, manufacturing, commercialization and certain
other rights for filgotinib in Europe, providing the opportunity to build a commercial presence on an accelerated
timeline. The transfer will be subject to applicable local legal, regulatory and consultation requirements. The
parties intend to transfer most activities by 31 December 2021 and complete the transition by 31 December 2022.
Beginning on 1 January 2021, we will bear the future development costs for certain studies (defined as “Group
A activities”), in lieu of the equal cost split contemplated by the previous agreement. These studies include the
DARWIN3, FINCH4, FILOSOPHY, and Phase 4 studies and registries in RA, MANTA and MANTA-RAy, the PENGUIN1
and 2 and EQUATOR2 studies in PsA, the SEALION1 and 2 studies in AS, the HUMBOLDT study in uveitis in addition
to other clinical and non-clinical expenses supporting these studies and support for any investigator sponsored
trials in non-IBD conditions and non-clinical costs on all current trials. The existing 50/50 global development
cost sharing arrangement will continue for the following studies (defined as “Group B activities”): SELECTION
and its long-term extension study (LTE) in UC, DIVERSITY and its LTE, DIVERGENCE 1 and 2 and their LTEs and
support for Phase 4 studies and registries in Crohn’s disease, pediatric studies and their LTEs in RA, UC and Crohn’s
disease, and support for investigator sponsored trials in IBD. All commercial economics on filgotinib in Europe will
transfer to us as of 1 January 2022, subject to payment of tiered royalties of 8 to 15% of net sales in Europe to Gilead,
starting in 2024. In connection with the amendments to the existing arrangement for the commercialization
and development of filgotinib, Gilead has agreed to irrevocably pay us €160 million, which will be split between a
€110 million payment in 2021 (of which €35 million has been received in January 2021) and a €50 million payment
in 2022 and is subject to certain adjustments for higher than budgeted development costs. In addition, we will no
longer be eligible to receive any future milestone payments relating to filgotinib in Europe. Other terms of the
original license agreement remain in effect, including the remaining $295 million in development and regulatory
milestones (excluding the remaining approval milestones in Europe that became forfeited), sales-based milestone
payments of up to $600 million and tiered royalties ranging from 20 – 30% payable in territories outside Europe
(whereas before it was applicable for all countries outside of Belgium, France, Germany, Italy, Luxembourg, the
Netherlands, Spain and the United Kingdom).
In addition, we achieved two regulatory approval milestones in 2020 totaling $105 million.
Terms of the equity investment
As part of the research and development collaboration of 2019 Gilead also entered into a share subscription
agreement with us. Gilead’s equity investment consisted of a subscription for new Galapagos shares at a price
of €140.59 per share, representing on 14 July 2019 a 20% premium to Galapagos’ 30-day, volume-weighted average
price. This equity subscription took place at closing of the transaction, on 23 August 2019 and increased Gilead’s
stake in Galapagos from approximately 12.3% to 22.04% of the then issued and outstanding shares in Galapagos. In
addition, the extraordinary general meeting of shareholders of 22 October 2019 approved the issuance of warrant
A and initial warrant B allowing Gilead to further increase its ownership of Galapagos to up to 29.9% of the
company’s issued and outstanding shares. The initial warrant B has a term of five years and an exercise price
per share equal to the greater of (i) 120% multiplied by the arithmetic mean of the 30-day daily volume weighted
average trading price of Galapagos’ shares as traded on Euronext Brussels and Euronext Amsterdam, and (ii) EUR
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
140.59. Subsequent warrant B is still subject to approval by an extraordinary general meeting of shareholders. This
extraordinary general meeting of shareholders shall take place between 57 and 59 months of the closing of the
subscription agreement and this warrant will have substantially similar terms, including as to exercise price,
to the initial warrant B. The agreement also includes a 10-year standstill restricting Gilead’s ability to propose
a business combination with or acquisition of Galapagos or increase its stake in Galapagos beyond 29.9% of the
company’s issued and outstanding shares, subject to limited exceptions. On 6 November 2019, Gilead exercised
warrant A and increased its ownership in Galapagos to 25.10% of the then outstanding shares. Gilead did not
exercise any of its warrants during 2020 and warrant A came to maturity in October 2020. Gilead’s ownership
slightly diluted to 25.54% at 31 December 2020.
3. Significant accounting policies
Our principal accounting policies are summarized below.
Basis of preparation and going concern assumption
The consolidated financial statements are prepared in accordance with the International Financing Reporting
Standards (IFRS), as adopted by the EU. The consolidated financial statements provide a general overview of
our activities and the results achieved. They give a true and fair view of our financial position, our financial
performance and cash flows, on a going concern basis.
New standards and interpretations applicable for the annual period beginning on
January 1, 2019
IFRS 16 Leases
The above new applicable standard affected the consolidated financial statements as follows:
We adopted IFRS 16 on 1 January 2019, in accordance with the transitional provisions of IFRS 16, using the modified
retrospective approach. Consequently, the cumulative effect of adopting IFRS 16 was recognized as an adjustment
to the opening balance of retained earnings as at 1 January 2019, with no restatement of the comparative figures.
On adoption of IFRS 16, we recognized lease liabilities in relation to leases which had previously been classified
as ‘operating leases’ under IAS 17. These liabilities were measured at the present value of the remaining lease
payments and discounted using our incremental borrowing rate as of 1 January 2019. Our weighted average
incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 1.55%.
The differences between our total operating lease commitments as reported in our consolidated financial
statements of 31 December 2018 and the total lease liabilities recognized in our statement of financial position as
at 1 January 2019 are summarized below.
(thousands of €)
Operating lease commitments disclosed as at 31 December 2018
Less: discounting effect using the lessee's incremental borrowing rate at the date of initial application
Less: other
Lease liability recognized as at 1 January 2019
Of which are:
current lease liabilities
non-current lease liabilities
27,704
(1,223)
(569)
25,912
4,516
21,396
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
The change in accounting policy affected the statement of financial position as at 1 January 2019 as follows:
(thousands of €)
Property, plant and equipment (right-of-use assets)
Other current assets (prepaid expenses)
Effect on total assets
Accumulated losses
Lease liabilities (current and non-current)
Deferred income
Effect on total equity and liabilities
1 January
2019
26,406
(494)
25,912
416
25,912
(416)
25,912
We applied the following practical expedients, as permitted by IFRS 16, on transition date:
▪ Reliance on the previous definition of a lease (as provided by IAS 17) for all contracts that existed on the date
of initial application;
▪ The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
▪ Reliance on previous assessments on whether leases are onerous instead of performing an impairment
review;
▪ The accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019
as short-term leases;
▪ No recognition of right-of-use assets and liabilities for leases of low value assets.
We refer to our updated accounting policy on leases as a result of the adoption of IFRS 16.
Other new standards and interpretations applicable for the annual period beginning on 1 January 2019 did not
have any impact on our consolidated financial statements.
New standards and interpretations applicable for the annual period beginning on
1 January 2020
New standards and interpretations applicable for the annual period beginning on 1 January 2020 did not have
any impact on our consolidated financial statements.
Standards and interpretations published, but not yet applicable for the annual period
beginning on 1 January 2020
A number of new standards are effective for annual periods beginning on or after 1 January 2021 with earlier
adoption permitted. However we have not early adopted new or amended standards in preparing our consolidated
financial statements. Of the standards that are not yet effective, we expect no standard to have a material impact
on our financial statements in the period of initial application.
Consolidated reporting
The consolidated financial statements comprise the financial statements of Galapagos NV and entities controlled
by Galapagos NV. Control is achieved where Galapagos NV has the power to direct the relevant activities of
another entity so as to obtain benefits from its activities. The results of subsidiaries are included in the income
statement and statement of comprehensive income from the effective date of acquisition up to the date when
control ceases to exist. Where necessary, adjustments are made to the financial statements of subsidiaries to
ensure consistency with our accounting policies. All intra-group transactions, balances, income and expenses are
eliminated when preparing the consolidated financial statements.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Intangible assets
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
An internally generated intangible asset arising from our development activities is recognized only if all of the
following conditions are met:
▪ Technically feasible to complete the intangible asset so that it will be available for use or sale
▪ We have the intention to complete the intangible assets and use or sell it
▪ We have the ability to use or sell the intangible assets
▪ The intangible asset will generate probable future economic benefits, or indicate the existence of a market
▪ Adequate technical, financial and other resources to complete the development are available
▪ We are able to measure reliably the expenditure attributable to the intangible asset during its development
(i) Internally generated intangible assets
The amount capitalized as internally generated intangible assets is the sum of the development costs incurred
as of the date that the asset meets the conditions described above. Because of risks and uncertainties inherent to
the regulatory authorizations and to the development process itself, management estimates that the conditions
for capitalization are not met until we obtain regulatory approval from the competent authorities.
Currently we recognize all development costs as an expense in the period in which they are incurred, even for
approved products because they do not generate separately identifiable incremental future economic benefits
that can be reliably measured.
(ii) Licenses, patents & know-how
Acquired in-process
research and development obtained through in-licensing agreements, business
combinations, collaboration agreements or separate acquisitions are capitalized as an intangible asset provided
that they are separately identifiable, controlled by us and expected to provide economic benefits. As the
probability criterion in IAS 38 is always considered to be satisfied for separately acquired research and
development assets, upfront and milestone payments to third parties for products or compounds for which
regulatory approval has not yet been obtained are recognized as intangible assets. We consider such intangible
assets as not yet available for use until the moment that the underlying asset is approved and commercially
launched. Amortization will commence when the underlying asset is approved for commercialization and the
asset will be amortized over its useful life.
Licenses, patents and know-how will be amortized over their useful life (generally between 5 and 20 years), using
the straight-line method.
Intangible assets may also consist of upfront fees paid to third party institutions in exchange for an option to
negotiate a license to any of the third party’s rights in technology resulting from the collaboration. The upfront
fee paid in exchange for this option is capitalized as intangible asset and amortized over the expected duration of
the option.
In the event an asset has an indefinite life, this fact is disclosed along with the reasons for being deemed to have
an indefinite life. Intangible assets with an indefinite useful life and intangible assets which are not yet available
for use are tested for impairment annually, and whenever there is an indication that the asset might be impaired.
(iii) Software
Acquired software is recognized at cost less accumulated amortization and any impairment loss. Amortization is
recognized so as to write off the cost of assets over their useful lives (generally between 3 and 5 years), using the
straight-line method.
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(iv) Contract costs
Contract costs are those costs we incur to obtain a contract with a customer that we would not have incurred
if the contract has not been obtained and are capitalized as intangible assets only if they are expected to be
recoverable. Capitalized contract costs are amortized on a systematic basis that reflects the pattern of transfer
of the related promised goods or services to the customer. Costs that we would have incurred regardless of
whether the contract is obtained or those costs that are not directly related to obtaining a contract would not be
capitalized.
Property, plant and equipment
Property, plant and equipment are recognized at cost less accumulated depreciation and any impairment loss.
Depreciation of an asset begins when it is available for use, ie when it is in the location and condition necessary
for it to be capable of operating in the manner intended by management.
Depreciation is recognized so as to write off the cost of assets over their useful lives, using the straight-line
method, on the following bases:
▪ Installation & machinery: 3 – 15 years
▪ Furniture, fixtures & vehicles: 4 – 10 years
Leasehold improvements are depreciated over the term of the lease, unless a shorter useful life is expected.
The other tangible assets category mainly consists of assets under construction. Assets under construction are
not depreciated.
Any gain or loss incurred at the disposal of an asset is determined as the difference between the sale proceeds
and the carrying amount of the asset and is recognized in profit or loss.
Leases
All leases are accounted for by recognizing a right-of-use asset and a corresponding lease liability except for:
▪ Leases of low value assets; and
▪ Leases with a duration of 12 months or less
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the lease payments that are not paid at the commencement date, discounted using the rate
implicit in the lease. If this rate cannot be readily determined, we will apply the incremental borrowing rate. The
lease payments can include fixed payments, variable payments that depend on an index or rate known at the
commencement date, expected residual value guarantees, termination penalties and extension option payments
or purchase options if we are reasonably certain to exercise this option.
After initial recognition, the lease liability is measured at amortized cost using the discount rate determined
at commencement and will be re-measured (with a corresponding adjustment to the related right-of-use asset)
when there is a change in future lease payments in case of renegotiation, changes of an index or rate or in case
of reassessment of options.
At the commencement date, the right-of-use assets are measured at cost, comprising the amount of the initial
lease liability, initial direct costs and the expected dismantling and removing costs (when we incur an obligation
for these costs), less any lease incentives received from the lessors.
After initial recognition, the right-of-use assets are measured at cost and depreciated over the shorter of the
underlying asset’s useful life and the lease term on a straight-line basis. The right-of-use assets will be adjusted
for any re-measurements of the lease liability as a result of lease modifications. The right-of-use assets are subject
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to impairment testing if there is an indicator for impairment, as for property, plant and equipment. The right-of-
use assets are presented in the statement of financial position under the caption “Property, plant and equipment”
and the lease liabilities are presented as current and non-current lease liabilities.
In determining the lease term, we consider all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. We only include extension options (or periods
after termination options) in the lease term if the lease is reasonably certain to be extended (or not terminated).
The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects
this assessment and that is within our control.
Each lease payment is allocated between the liability and financial expenses. The finance cost is charged to the
income statement over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Financial instruments
Financial assets and financial liabilities are recognized on our balance sheet when we become a party to the
contractual provisions of the instrument. We do not actively use currency derivatives to hedge planned future
cash flows, nor do we make use of forward foreign exchange contracts, outside of the Gilead transaction, fully
settled at 31 December 2019. Additionally, we don’t have financial debts at 31 December 2020.
(i) Financial assets
Financial assets are initially recognized either at fair value or at their transaction price. All recognized financial
assets are subsequently measured at either amortized cost or fair value under IFRS 9 on the basis of both our
business model for managing the financial assets and the contractual cash flow characteristics of the financial
asset.
▪ a financial asset that (i) is held within a business model whose objective is to collect the contractual cash
flows and (ii) has contractual cash flows that are solely payments of principal and interest on the principal
amount outstanding is measured at amortized cost (net of any write down for impairment), unless the asset
is designated at fair value through profit or loss (FVTPL) under the fair value option;
▪ a financial asset that (i) is held within a business model whose objective is achieved both by collecting
contractual cash flows and selling financial assets and (ii) has contractual terms that give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding,
is measured at fair value through other comprehensive income (FVTOCI), unless the asset is designated at
FVTPL under the fair value option;
▪ all other financial assets are measured at FVTPL;
A financial asset is classified as current when the cash flows expected to flow from the instrument mature within
one year.
We derecognize a financial asset when the contractual rights to the cash flows from the asset expire, or we
transfer the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred.
We classify non-derivative financial assets into the following categories:
▪ financial assets at fair value through profit or loss (equity instruments, current financial investments and
cash equivalents)
▪ financial assets at amortized cost (receivables, current financial investments and cash and cash equivalents).
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(a) Financial assets at fair value through profit or loss
Financial assets are designated at fair value through profit or loss if we manage such investments and make
purchase and sale decisions based on their fair value in accordance with our investment strategy. Attributable
transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss
are measured at fair value, and changes therein, which take into account any dividend income, are recognized in
profit or loss.
Equity instruments
We hold investments in equity instruments, which based on IFRS 9, are designated as financial assets at fair value
through profit or loss. The fair value of listed investments is based upon the closing price of such securities on
Euronext at each reporting date. If there is no active market for an equity instrument, we establish the fair value
by using valuation techniques.
Current financial investments measured at fair value through profit or loss
Current financial investments include financial assets measured at fair value through profit or loss and may
comprise short term bond funds that have a maturity equal or less than 12 months, and money market funds.
Cash equivalents measured at fair value through profit or loss
Cash equivalents measured at fair value through profit or loss may comprise short-term deposits, bonds and
money market funds that are readily convertible to cash and are subject to an insignificant risk of changes in
value.
(b) Financial assets at amortized cost
Receivables
Receivables are designated as financial assets measured at amortized cost. They are initially measured either at
fair value or at transaction price, in the absence of a significant financing component.
All receivables are subsequently measured in the balance sheet at amortized cost, which generally corresponds to
nominal value less expected credit loss provision.
Receivables mainly comprise trade and other receivables and current/non-current R&D incentives receivables.
The R&D incentives receivables relate to refunds resulting from R&D incentives on research and development
expenses in France and Belgium. Research and development incentives receivables are discounted over the period
until maturity date according to the appropriate discount rates.
Current financial investments measured at amortized cost
Current financial investments measured at amortized cost include treasury bills that have a maturity equal or
less than 12 months. We apply settlement date accounting for the recognition and de-recognition of current
financial investments measured at amortized cost.
Cash
Cash are financial assets measured at amortized cost and comprise cash balances and short-term deposits with
maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes
in their value.
Cash equivalents measured at amortized costs
Cash equivalents measured at amortized cost comprise short-term deposits that are readily convertible to cash
and are subject to an insignificant risk of changes in value.
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Cash and cash equivalents exclude restricted cash, which is presented in the line other non-current assets in the
statement of financial position.
(ii) Financial liabilities
Financial liabilities are initially measured either at fair value or at their transaction price. Subsequent to initial
recognition, financial liabilities are measured at amortized cost.
Financial liabilities mainly comprise trade and other liabilities.
Trade and other liabilities are comprised of liabilities that are due less than one year from the balance sheet
date and are in general not interest bearing and settled on an ongoing basis during the financial year. They also
include accrued expense related to our research and development project costs.
We derecognize a financial liability when our contractual obligations are discharged, cancelled or expire.
(iii) Financial instruments: derivative assets/liabilities
Financial assets and financial liabilities are recognized on our balance sheet when we become a party to the
contractual provisions of the instrument.
Derivative assets and liabilities are initially measured at fair value. After initial measurement we will measure
the derivatives at fair value through profit or loss.
Taxation
Income tax in the profit or loss accounts represents the sum of the current tax and deferred tax.
Current tax is the expected tax payable on the taxable profit of the year. The taxable profit of the year differs
from the profit as reported in the financial statements as it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never taxable or deductible. Our liability for
current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred income tax is provided in full, using the liability-method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred
income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit nor loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by
the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled. Deferred tax assets are recognized to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be utilized. As such, a deferred
tax asset for the carry forward of unused tax losses will be recognized to the extent that is probable that future
taxable profits will be available.
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Foreign currencies
▪ Functional and presentation currency
Items included in the financial statements of each of our entities are valued using the currency of the
primary economic environment in which the entity operates. The consolidated financial statements are
presented in Euros, which is our presentation currency
▪ Transactions and balances in foreign currency
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of transaction. We use monthly transaction rates based on the closing exchange rates of the
foreign currencies on the last business day of the month preceding the date of the transaction. Foreign
currency gains and losses resulting from the settlement of such transactions and from the translation at
closing rates of monetary assets and liabilities denominated in foreign currencies are recognized in the
financial result in the income statement.
Non-monetary assets and liabilities measured at historical cost that are denominated in foreign currencies
are translated using the exchange rate at the date of the transaction.
▪ Financial statements of foreign group companies
The results and financial position of all our entities that have a functional currency different from Euro are
translated as follows:
▪ Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of
that balance sheet
▪ Income and expenses for each income statement are translated at average exchange rates
▪ All resulting cumulative exchange differences are recognized as a separate component of equity
▪ Such cumulative exchange differences are recognized in profit or loss in the period in which the foreign
operation is disposed of.
Recognition of expenses linked to clinical trial milestones
We recognize expenses specifically linked to clinical trial milestones with regard to patient recruitment and
patient treatment (i.e. completion), incurred in carrying out clinical trials, in line with actual patient recruitment
or treatment at each period end, in reference to the milestone targets for patient recruitment or treatment.
This involves the calculation of clinical trial accruals at each period end, for which an estimation of the expected
full clinical trial milestone cost is required, as well as the current stage of patient recruitment or treatment.
Clinical trials usually take place over extended time periods and typically involve a set-up phase, a recruitment
phase and a completion phase which ends upon the receipt of a final report containing full statistical analysis
of trial results. Accruals for patient recruitment and patient completion are prepared separately for each clinical
trial in progress and take into consideration the stage of completion of each trial including the number of
patients that have entered the trial and the number of patients that have been treated in the trial. In all cases,
the full cost of each trial is expensed by the time the final report is received.
Revenue recognition
Revenues to date have consisted principally of milestones, license fees, non-refundable upfront fees and royalties
received in connection with collaboration and license agreements. We also generated revenue from our fee-for-
service activities, which is reported as discontinued operations per 31 December 2020.
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The revenue recognition policies can be summarized as follows:
We recognize revenue when our customer obtains control of promised goods or services, in an amount that
reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue
recognition for agreements that we determine are within the scope of IFRS 15, we perform the following five steps:
(i) identify the contract
In our current agreements with customers we are mainly transferring licenses on our IP and in some cases
this is combined with access rights and/or providing research and development services and/or cost sharing
mechanisms. In some cases our collaborations also include an equity subscription component. If this is the case,
we analyze if the criteria to combine contracts, as set out by IFRS 15, are met.
(ii) identify the performance obligations in the contract
Depending on the type of the agreement, there can be one or more distinct performance obligations under
IFRS 15. This is based on an assessment of whether the promises in an agreement are capable of being distinct and
are distinct from the other promises to transfer goods and/or services in the context of the contract. For some
of our agreements we combine the transfer of the license with the performance of research and development
activities because we consider that the license is not capable of being distinct and is not distinct in the context
of the contract.
(iii) determine the transaction price
Collaboration and license agreements with our commercial partners for research and development activities
generally include non-refundable upfront fees; milestone payments, the receipt of which is dependent upon
the achievement of certain clinical, regulatory or commercial milestones; license fees, royalties on sales and
sometimes reimbursement income or profits sharing arrangements.
(a) License fees or upfront payments
If the license to our intellectual property is determined to be distinct from the other performance obligations
identified in the arrangement, we recognize revenues from non-refundable upfront fees allocated to the license
at the point in time the license is transferred to the customer and the customer has the right to use the license.
For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined
performance obligation to determine whether the combined performance obligation is satisfied over time or at a
point in time. If the performance obligation is satisfied over time, revenue is recognized based on a pattern that
best reflects the transfer of control of the service to the customer.
(b) Milestone payments other than sales based milestones
A milestone payment is only included in the transaction price to the extent that it is highly probable that
a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. Where milestone payments are included in
the transaction price we estimate the amount to be included in the transaction price using the most likely
amount method. The transaction price is allocated to each performance obligation on a stand-alone selling price
basis. We recognize revenue as or when the performance obligations under the contract are satisfied. At the end of
each subsequent reporting period, we re-evaluate the probability of achievement of relevant milestones and any
related constraint. If necessary we adjust our estimate of the overall transaction price. Any such adjustments are
recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment.
(c) Reimbursement income for R&D services
Collaboration and license agreements may include reimbursement or cost sharing for research and development
services: such as outsourcing costs and payment for full-time equivalents at contractual rates. R&D services are
performed and satisfied over time given that the customer simultaneously receives and consumes the benefits
provided by us.
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Such costs reimbursements received are recognized in revenues when costs are incurred and agreed by the parties
when we are acting as a principal in the scope of our stake of the R&D activities. If the later condition is not
fulfilled, costs reimbursements are accounted for as a decrease of the related expenses.
(d) Sales based milestone payments and royalties
License and collaboration agreements include sales-based royalties, including commercial milestone payments
based on the level of sales, and the license has been deemed to be the predominant item to which the royalties
relate. Related revenue is recognized as the subsequent underlying sales occur.
(iv) allocate the transaction price to the performance obligations in the contract
We allocate the transaction price to each performance obligation identified in the contract based upon stand-
alone selling price. The stand-alone selling price of each performance obligation is estimated by using one of
the following methods: adjusted market assessment approach, the expected cost plus a margin approach or
the residual approach. If management assesses that there is only one single performance obligation, the entire
transaction price would be allocated to this performance obligation.
(v) recognize revenue when (or as) the entity satisfies a performance obligation
Revenue is recognized when our customer obtains control of the goods and/or services foreseen in the contracts.
The control can be transferred over time or at a point in time – which results in recognition of revenue over time
or at a point in time.
In case of revenue recognition over time, we use either an input model that considers estimates of the percentage
of total research and development costs that are completed each period compared to the total estimated costs
(percentage of completion method) or we apply an output method to measure the progress of the satisfaction of
the underlying performance obligation. In other cases, depending on specific circumstances, we recognize revenue
on a straight-line basis over the estimated term of the performance obligation.
We refer to note 6 for detailed information per agreement and to our Critical accounting judgments and key
sources of estimation uncertainty for more information.
Other income
Grants and R&D incentives
As we carry out extensive research and development activities, we benefit from various grants and R&D incentives
from certain governmental agencies. These grants and R&D incentives generally aim to partly reimburse
(approved) expenditures incurred in our research and development efforts and are credited to the income
statement, under other income, when the relevant expenditure has been incurred and there is reasonable
assurance that the grants or R&D incentives are receivable.
Equity instruments
Equity instruments issued by us are measured by the fair value of the proceeds received, net of direct issue costs.
Employee benefits
(i) Defined contribution plans
Contributions to defined contribution pension plans are recognized as an expense in the income statement as
incurred.
(ii) Defined benefit plans
For defined retirement benefit plans, the cost of providing benefits is determined using the projected unit credit
method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement,
comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return
on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or
credit recognized in other comprehensive income in the period in which they occur. Re-measurement recognized
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in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit
or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated
by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are categorized as follows:
▪ Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and
settlements)
▪ Net interest expenses or income
▪ Re-measurement
The retirement benefit obligation recognized in the consolidated statement of financial position represents the
actual deficit or surplus in our defined benefit plans. Any surplus resulting from this calculation is limited to the
present value of any economic benefits available in the form of refunds from the plans or a reduction in future
contributions to the plans. A liability for a termination benefit is recognized at the earlier of when we can no
longer withdraw the offer of the termination benefit and when we recognize any related restructuring costs.
(iii) Staff bonus plan
We recognize an expense in the income statement for staff bonus plans.
(iv) Management bonus plan
(a) Bonuses which were granted for performance years until 2018
The management board members, together with other senior managers, are eligible to receive bonuses under
the Senior Management Bonus Scheme established in 2006. Pursuant to the rules of the Senior Management
Bonus Scheme, 50% of the bonus is paid immediately around year-end and the payment of the remaining 50% is
deferred for three years. The deferred 50% component is dependent on the Galapagos share price change relative
to the Next Biotech Index (which tracks Euronext-listed biotech companies). The Galapagos share price and the
Next Biotech Index at the start and end of the 3‑year period is calculated by the average price over the preceding
and last month of the 3‑year period, respectively.
▪ If the Galapagos share price change is better than or equal to the change in the Next Biotech Index, the
deferred bonus will be adjusted by the share price increase/decrease percentage and paid out
▪ If the Galapagos share price change is up to 10% worse than the change in the Next Biotech Index, 50% of
the deferred bonus will be adjusted by the share price increase/decrease percentage and paid out, and the
remainder will be forfeited
▪ If the Galapagos share price change is more than 10% worse than the change in the Next Biotech Index the
deferred bonus will be forfeited
We recognize the possible payment of the deferred component of the Senior Management Bonus Scheme within
three years at the moment that the bonus amount is determined, based on the fair value of the liability at each
reporting period. The fair value of the liability is measured by use of the Monte Carlo valuation model taking into
consideration (a) the average reference price of the Galapagos share and Next Biotech Index, (b) the average price
of the reporting period of the Galapagos share and the Next Biotech Index, (c) the simulation of the evolution
of the Galapagos share price and the Next Biotech Index based on their volatility and correlation until maturity
of the bonus, (d) the applicable discount rates at the end of the reporting period and (e) the probability of the
number of beneficiaries assumed to stay with us until maturity of the bonus. The changes in fair value are
recognized in profit or loss for the period.
(b) Bonuses which were granted for performance year 2019 and beyond
The management board members, together with other senior managers are eligible to receive a bonus based on
achievement of personal and corporate objectives. This bonus is paid in cash.
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Share-based payments
(i) Equity-settled share-based payments
We grant equity-settled incentives to certain employees, members of the supervisory board and consultants
in the form of subscription rights. Equity-settled subscription rights are measured at fair value at the date of
acceptance. The fair value determined at the acceptance date of the subscription rights is expensed over time
until the end of the vesting period, based on our estimate of subscription rights that are expected to be exercised.
Fair value is measured by use of the Black & Scholes model. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioral
considerations.
(ii) Long-term incentive plans in RSUs (Restricted Stock Units)
Management board members and other employees were granted RSUs in 2019 and 2020. An RSU is a grant that
takes the form of a promise that employees will receive Galapagos stock in the future and it will be payable, at
the company’s discretion in cash or in shares, upon completion of a certain vesting period. Each RSU reflects the
value of one Galapagos share.
The RSUs are measured based on the volume weighted average share price over the 30-calendar day period
preceding the measurement date. We recognize the corresponding expense and liability over the vesting period.
The fair value of the liability is re-measured at each reporting date because currently it is management’s
intention to settle the RSUs in cash.
Provisions
Provisions are recognized on the balance sheet when we have a present obligation as a result of a past event; when
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations
and a reliable estimate can be made of the amount of the obligations. The amount recognized as a provision is
the best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the
effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of the money and, when appropriate, the risk specific to
the liability.
Impairment
(i) Financial assets
The impairment loss of a financial asset measured at amortized cost is calculated based on the expected loss
model.
For trade receivables, in the absence of a significant financing component, the loss allowance is measured at an
amount equal to lifetime expected credit losses. Those are the expected credit losses that result from all possible
default events over the expected life of those trade receivables.
Impairment losses are recognized in the consolidated income statement.
(ii) Property, plant and equipment and intangible assets
For intangible assets with an indefinite life or intangible assets not available for use yet, we perform an
impairment test at least on an annual basis. Furthermore we review at each balance sheet date the carrying
amount of our tangible and intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that
are independent from other assets, we estimate the recoverable amount of the cash-generating unit to which
the asset belongs. If the recoverable amount of an asset or cash generating unit is estimated to be less than the
carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognized as an expense immediately.
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When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined, had no impairment loss been recognized for the asset in prior years.
A reversal of an impairment loss resulting from a sale of a subsidiary is recognized as income. In other cases
impairment losses of goodwill are never reversed.
Net income/loss per share
Basic net income/loss per share is computed based on the weighted average number of shares outstanding
during the period. Diluted net income per share is computed based on the weighted average number of shares
outstanding including the dilutive effect of subscription rights, if any.
Segment reporting
The group had two reportable segments, R&D and fee-for-service business. Due to the disposal of Fidelta d.o.o.
(our fee-for-service segment), we have reported this segment as discontinued operations at 31 December 2020.
Galapagos is therefore operating as a single operating segment.
Assets held for sale and discontinued operations
A discontinued operation is a component of an entity that either has been disposed of, or that is classified as held
for sale. It must either: represent a major separate line of business or geographical area of operations; be part of a
single coordinated disposal plan; or be a subsidiary acquired exclusively with a view to resale.
Intercompany transactions between continuing and discontinued operations are eliminated against
discontinuing operations.
Non-current assets and disposal groups are classified as assets held for sale if their carrying amount is to be
recovered principally through a sale transaction rather than through continuing use. This condition is regarded
as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in
its present condition.
They are stated at the lower of carrying amount and fair value less costs to sell with any resulting impairment
recognized. Assets related to discontinued operations and assets of disposal group held for sale are not depreciated.
The prior-year consolidated balance sheet is not restated.
On 23 November 2020, we signed a share purchase agreement in relation to the sale of our fee-for-service
business. As the net assets associated with our fee-for-service business will be recovered principally through a sale
transaction rather than through continuing use, we classified these assets and the associated liabilities as held
for sale in our financial statements for the year ended 31 December 2020.
On 4 January 2021, we concluded the sale of our fee-for-service business to Selvita S.A.
Where applicable and in accordance with IFRS 5, we have restated the 2019 comparatives in the consolidated
income statement and in the notes to consider the impact of classifying the Fidelta business as discontinued
operations in 2020.
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4. Critical accounting judgments and key sources of estimation
uncertainty
In the application of the accounting policies, we are required to make judgments, estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to
be relevant. Actual results may differ from these estimates.
Our estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period
of the revisions and future periods if the revision affects both current and future periods.
The following are the critical judgments that we have made in the process of applying the accounting policies
and the key sources of estimation uncertainty that have the most significant effect on the amounts recognized
in the consolidated financial statements presented elsewhere in this annual report.
Critical judgments in applying accounting policies
IFRS 15 – Revenue recognition Gilead
Our critical judgments were as follows:
Identification of the contract
▪ Although formal executive contracts are still being finalized with Gilead, we assessed that the impact of the
modification must already be accounted for in our consolidated financial statements for the year ended
31 December 2020 given the legally binding and enforceable character of the term sheet that was signed
between us and Gilead on 15 December 2020 as a consequence of both parties’ decision to amend our existing
agreement for the commercialization and development of filgotinib.
▪ Despite our obligation to pay future sales-based royalties to Gilead and a change in the governance structure
for the development activities, we concluded that all activities are still beneficial for the further development
of filgotinib, for which Gilead still owns the ex-Europe rights. The contract modification has thus been
analyzed following the requirements of IFRS 15 as we concluded that Gilead is still to be considered as a
customer. This is also supported by the fact that we subsequently concluded that there continues to be only
one performance obligation with respect to filgotinib after the contract modification.
Identification of the performance obligation
▪ The modification did not give rise to new performance obligations. There was only a change in scope and
price of the existing filgotinib performance obligation, which was only partly satisfied at the time of the
modification. The Group A and Group B development activities (see note 2 for more details) still to be
performed are interrelated and thus cannot be seen as separate performance obligations. Based on this, the
contract modification has been treated on a cumulative catch-up basis under IFRS 15.
Allocation of the total transaction price
▪ The increased fixed consideration as result of the modification has been allocated in its entirety to the
filgotinib performance obligation. We assessed that the contract modification only changes the scope of
the filgotinib performance obligation and the change in both fixed and variable consideration is reflective
of the updated stand-alone selling price for the remaining activities of this performance obligation. If we
would have concluded that the increased consideration was not, or only partially, related to the filgotinib
performance obligation, the consideration would have been potentially allocated to other performance
obligations in the contract, which would alter the timing of revenue recognition.
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FINANCIAL STATEMENTS
▪ The denominator used in the calculation of the percentage of completion reflects our best estimate of the
total costs to complete the filgotinib performance obligation. These costs were assessed considering that all
ongoing and planned clinical trials (including long term extension trials) would be completed until their final
stage.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that have the most significant effect on the amounts
recognized in our consolidated financial statements for the year ended 31 December 2020.
Costs to complete the filgotinib performance obligation
▪ The denominator used in the calculation of the percentage of completion reflects our best estimate of the
total costs to complete the filgotinib performance obligation. As our estimate of the costs is depending on the
evolution of the development activities, it may be subject to change in the future. If the outcome of certain
activities would be different from the assumptions that we made, it could lead to a material adjustment to
the total estimated costs, resulting in a reallocation of revenue between current and future periods. Our total
deferred income balance related to this filgotinib performance obligation amounts to €818.7 million on 31
December 2020.
5. Segment information
Operational segmentation
The group had two reportable segments, R&D and fee-for-service business. Due to the disposal of Fidelta d.o.o. (our
fee-for-service segment), we reported this segment as discontinued operations. Galapagos is therefore operating
as a single operating segment.
Geographical information
In 2020 our continuing operations were mainly located in Belgium, France and the Netherlands and our top
3 customers represented 99.9% of the revenues. Our client base in 2020 and 2019 included three of the largest
pharmaceutical companies in the world.
Following table summarizes our revenues by destination of customer:
(thousands of €)
United States of America
Europe
Total revenues
Year ended 31 December
2020
472,445
5,607
478,053
2019
793,873
41,028
834,901
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FINANCIAL STATEMENTS
Following table summarizes our revenues by major customers:
Gilead
United States of America(1)
Europe(1)
AbbVie
Europe
Novartis
Europe
Total revenues from major customers
Year ended 31 December
2020
2019
(thousands of €)
% (thousands of €)
472,445
1,460
99%
0%
793,873
-4,570
(52)
0%
26,356
4,125
477,978
1%
100%
19,177
834,836
%
95%
-1%
3%
2%
100%
(1) Following the contract amendment with Gilead in 2019, the revenue recognized for filgotinib for the year ended 31 December 2019, included a
negative catch-up effect on closing date of €245.9 million resulting from the decrease in the percentage of completion applied to previously
received upfront and milestones for that program.
On 31 December 2020, we held €171 million (€91 million in 2019) of property, plant and equipment and intangible
assets distributed as follows:
(thousands of €)
Belgium
France
The Netherlands
Croatia
Switzerland
Spain
Other
Total
31 December
2020
113,524
18,398
28,210
-
7,668
2,755
388
2019(1)
57,007
18,102
7,951
6,182
1,057
-
681
170,943
90,979
(1) In accordance with IFRS 8 we only present the total of the property, plant and equipment and intangible assets in this disclosure note. This is a
change in presentation compared to the amounts that were published in this disclosure note for the year ended 31 December 2019. We elected
to adjust the historical consolidated financial information presented in this disclosure note to reflect this change in presentation.
As the net assets associated with Fidelta d.o.o. (Croatia) will be recovered principally through a sale transaction
rather than through continuing use, we have classified these assets and the associated liabilities as held for sale
in our financial statements for the year ended 31 December 2020.
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FINANCIAL STATEMENTS
6. Total revenues and other income
Revenues
The following table summarizes details of revenues for the years ended 31 December 2020 and 2019 by
collaboration and by category of revenue: upfront payments and license fees, milestone payments,
reimbursement income, other revenues and commercial revenues.
Disaggregation of revenues
(thousands of €)
Over time
Point in time
2020
2019
Year ended 31 December
Recognition of non-refundable upfront payments
and license fees
Gilead collaboration agreement for ziritaxestat
Gilead collaboration agreement for filgotinib(1)
Gilead collaboration agreement for drug discovery
platform
AbbVie collaboration agreement for CF
Milestone payments
Gilead collaboration agreement for filgotinib(1)
AbbVie collaboration agreement for CF
Reimbursement income
Novartis collaboration agreement for MOR106
AbbVie collaboration agreement for CF
Other revenues
Other revenues
Commercial revenues
Sale of goods
Royalties
Other commercial revenues
411,417
-
181,816
229,601
-
46,261
46,261
-
4,073
4,125
(52)
70
70
16,232
2
16,227
2
812,058
666,968
62,602
80,918
1,569
2,878
(21,187)
24,065
19,900
19,177
723
66
66
-
-
-
-
Total revenues
478,053
834,901
(1) Following the contract amendment with Gilead in 2019, the revenue recognized for filgotinib for the year ended 31 December 2019 included a
negative catch-up effect on closing date of €245.9 million resulting from the decrease in the percentage of completion applied to previously
received upfront and milestones for that program.
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FINANCIAL STATEMENTS
The below table summarizes the transaction price of our collaboration with Gilead:
Allocation of transaction price
Mile-
stones
achieved
during
2015-2019
Filgotinib
agreement
2015
Option,
License
and Colla-
boration
agreement
(14 July
2019) 31 December 2019
Other
movements
in 2020
Filgotinib amend-
ment
(15 December 2020) 31 December 2020
275,558
3,569,815
3,845,373
160,000
4,005,373
104,171
104,171
-
90,192
16,227
39,003
85,601
124,604
314,561
104,171 3,655,416
4,074,148
106,419
160,000
(43,311)
(2,545)
(16,184)
8,325
314,561
104,171 3,655,416
4,012,108
114,744
160,000
314,561
104,171
641,663
1,060,395
106,419
160,000
666,967
666,967
2,284,747
2,284,747
8,325
194,363
16,227
124,604
4,340,567
(43,311)
(2,545)
(7,859)
4,286,852
666,967
1,326,814
2,293,072
(thousands of €)
Upfront
consideration
Milestones
achieved
Royalties
Impact initial
valuation of share
subscription
Less:
Warrant issuance
liabilities
Warrant A
Initial warrant B
Subsequent
warrant B
Allocation to
performance
obligations
Ziritaxestat
Filgotinib(1)
Drug discovery
platform (10
years)
(1) With regard to the additional consideration received as a result of the Option, License and Collaboration agreement (14 July 2019) allocated to
the filgotinib performance obligation, we assumed the existence of a significant financing component estimated to €44.5 million as of 31
December 2019 reflecting the time value of money on the estimated recognition period. This financing component was reassessed to €55.3
million as of 31 December 2020, considering the effects of the amendment of 15 December 2020.
On the closing date of the transaction (23 August 2019) we concluded that the upfront payment implicitly included
a premium for the future issuance of warrant A and initial and subsequent warrant B. The expected value of the
warrants to be issued is treated as a contract liability (“warrant issuance liability”) and reduces the transaction
price until approval date of the issuance of the underlying warrants. As from approval date, the allocation
of the upfront payment to the respective warrant becomes fixed and future changes in the fair value of the
respective warrant will be recognized in profit or loss. As such, the part of the upfront payment allocated to
the warrant A and initial warrant B reflects the fair value of these financial liabilities at the warrant approval
date (22 October 2019). Subsequent warrant B is still subject to approval by an extraordinary general meeting of
shareholders and is therefore still presented as warrant issuance liability in our deferred income (we refer to
note 24 for more information). The value initially allocated to the subsequent warrant B reflects the fair value
of the underlying liability on 31 December 2019. On 31 December 2020 the value of the subsequent warrant B
decreased to €7.9 million, driven by the decrease of our share price in 2020, partly compensated by an increase in
the implied volatility.
On 15 December 2020 we and Gilead signed a term sheet modifying our existing collaboration for filgotinib.
As a result of this modification an additional consideration of €160.0 million was allocated to the filgonitib
performance obligation.
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FINANCIAL STATEMENTS
A summary of all current contracts with customers is given below:
Collaboration with Gilead
On 14 July 2019 we and Gilead announced that we had entered into a 10-year global research and development
collaboration. Through this agreement, Gilead gained exclusive access to our innovative portfolio of compounds,
clinical and preclinical programs and a proven drug discovery platform.
As part of this deal, our existing license and collaboration agreement for filgotinib with Gilead was amended
for the first time. Under this revised filgotinib agreement, we obtained greater involvement in filgotinib’s
global strategy and participate more broadly in the commercialization of the product in Europe, providing the
opportunity to build a commercial presence on an accelerated timeline.
On 15 December 2020 our license and collaboration agreement for filgotinib with Gilead was amended a second
time. Under the new arrangement, we will assume sole responsibility in Europe for filgotinib in RA and in all
future indications.
We retain the following three performance obligations, of which the first one was satisfied completely in 2019;
(i) the transfer of an extended license on GLPG1690, (ii) the granting of exclusive access to our drug discovery
platform (i.e. the IP, technology, expertise and capabilities) during the collaboration period and exclusive option
rights on our current and future clinical programs after Phase 2 (or, in certain circumstances, the first Phase 3
study) outside Europe and (iii) an increased cost share from 20/80 to 50/50 to 100/0 (for Group A activities only) on
the global development activities of filgotinib, until we complete the remaining development activities (Group A
and Group B activities).
We concluded as follows:
Determination of the total transaction price
▪ In connection with this agreement with Gilead, we recognized a deferred income and an offsetting current
financial asset (derivative) of €85.6 million upon signing of the share subscription agreement with Gilead in
2019 as required under IFRS 9. The deferred income has been added to the transaction price at inception
of the agreement because it is considered to be part of the overall consideration received for the three
performance obligations.
▪ We considered that the transaction price included a premium paid by Gilead (through the upfront payment)
to acquire warrants (warrant A and warrant B) in the future, upon approval by the shareholders. We
measured both warrants at fair value and recognized a warrant issuance liability at closing of the transaction
for the same amount (as part of the current deferred income line). This liability is re-measured at each
reporting period with a corresponding impact on the allocation of the transaction price to the performance
obligation relating to the drug discovery platform as long as the warrants are not approved by the
shareholders. Due to the fact that warrant A and initial warrant B were already approved in 2019, only the
remeasurement of subsequent warrant B still has an impact on the transaction price considered for the
revenue recognition of the performance obligation relating to the drug discovery platform.
▪ We assessed that the contract modification of 15 December 2020 only changes the scope of the filgotinib
performance obligation and the change in both fixed and variable consideration is reflective of the updated
stand-alone selling price for the remaining activities of this performance obligation. As a consequence, the
increase in the transaction price of €160.0 million as a result of this modification has been allocated in its
entirety to the filgotinib performance obligation.
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FINANCIAL STATEMENTS
Financing component
▪ There are two performance obligations determined in the agreement with Gilead for which the period
between the transfer of the promised goods/services to Gilead and the payment of the underlying
consideration by Gilead exceeds one year, being the performance obligation relating to the drug discovery
platform and the performance obligation resulting from the filgotinib amendment. Although the
consideration paid for the drug discovery platform will be recognized over a period of 10 years as from
receipt of the funds, management concluded not to consider any financing component for this performance
obligation as the granting of an exclusive access and option rights on day one is the predominant value of
the drug discovery platform performance obligation. As a consequence, management has considered it is
only appropriate to adjust the part of the transaction price that was allocated to the filgotinib performance
obligation, for the time value of money. The additional consideration as a result of the contract modification
of 15 December 2020 has also been adjusted for the time value of money.
License on GLPG1690
▪ The transaction price allocated to this performance obligation reflects our assessment of the stand-alone
selling price of this performance obligation and was valued based on a discounted cash flow approach
including, amongst others, assumptions on the estimated market share and size, peak sales and probability
of success.
▪ This performance obligation is completely satisfied at 31 December 2019. Following the very recent
discontinuation of the ziritaxestat trials, we don’t expect future milestone payments or royalties.
▪ After granting the license for GLPG1690, we shared Phase 3 costs equally with Gilead. Any cost reimbursement
from Gilead was not recognized as revenue but accounted as a decrease of the related expenses.
Filgotinib amendment
▪ There is one single performance obligation under IFRS 15: the transfer of a license combined with
performance of R&D activities. This is because we considered that the license is not distinct in the context of
the contract.
▪ The standalone selling price of the filgotinib amendment was determined through the cost-plus-margin
approach. Management estimated that an appropriate margin is indirectly embedded in the increased
involvement in the development and global strategy of filgotinib, our sole responsibility for filgotinib in
Europe and the accompanying increase in the risk.
▪ The transaction price is currently composed of a fixed part, being non-refundable upfront and license fees
and a variable part, being milestone payments, sales based milestones and sales based royalties, and cost
reimbursements for R&D activities delivered. Milestone payments are included in the transaction price of
the arrangement to the extent that it is highly probable that a significant reversal of revenue will not occur.
Milestone payments received from Gilead are recognized in revenue over time till the end of the development
plan. Sales based milestones and sales based royalties are also part of the arrangement and are recognized
as revenues at a point in time at the moment they occur. During 2020 we reported €16.2 million of revenues
from royalties from Gilead.
▪ Revenues, excluding sales based milestones and sales based royalties, are recognized over time through
satisfaction of the performance obligation. The “cost-to-cost” input model is applied to measure the progress
of the satisfaction of this performance obligation. The estimated costs to complete the performance
obligation have been reassessed as a result of the contract modification from 2020 leading to a small
decrease in the percentage of completion. Nevertheless, we recognized higher revenues in financial year
2020 as compared to financial year 2019 for filgotinib because the total transaction price increased due to
the contract modification (€160.0 million) and the milestone payments obtained in 2020 for the regulatory
approval of filgotinib for RA in Europe and Japan for a total amount of $105 million (€90.2 million).
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FINANCIAL STATEMENTS
Access rights to the drug discovery platform, option rights and R&D activities
▪ The revenue allocated to the drug discovery platform will be recognized over time as Gilead receives exclusive
access to our drug discovery platform and option rights on our current and future pipeline as well as R&D
activities during the collaboration term. Management concluded that an equal spread over the collaboration
period is the most reliable and appropriate recognition method.
▪ At inception of the collaboration (July 2019) we assessed the appropriate period over which to recognize the
drug discovery platform revenue to be 10 years. This is because we granted exclusive rights over a 10-year
period. However, if at the end of the 10-year period, some programs in existence as of this time would have
reached the clinic (i.e. IND filed with regulatory authorities), the rights for those specific programs may be
extended, for a maximum of three years. This critical estimate is reassessed at each year-end based on the
evolution of our pipeline and is still valid per 31 December 2020.
Collaboration with Novartis
Together with our collaboration partner MorphoSys, we closed a license agreement with Novartis for MOR106 in
July 2018. MorphoSys and we received an equal share of an upfront payment of €95 million and were entitled
to potential future milestone payments and royalties. Novartis would bear all future research, development,
manufacturing and commercialization costs related to MOR106. Costs reimbursements received from Novartis
were recognized in revenues when costs were incurred and agreed by the parties as we were acting as a principal
in the scope of the performance of the R&D activities.
On 28 October 2019, we announced the end of the clinical development program of MOR106 in AtD.
On 17 December 2019, Novartis sent us a termination notice, informing us of its decision to terminate the
agreement in its entirety. The termination became effective in 2020.
Collaboration with AbbVie
We concluded as follows for the related revenue recognition:
▪ There was one single performance obligation under IFRS 15: the transfer of a license combined with
performance of R&D activities. This was because we considered that the license was not capable of being
distinct and was not distinct in the context of the contract.
▪ The transaction price of our agreement with AbbVie was composed of a fixed part, being upfront license
fees, and a variable part, being milestone payments and cost reimbursements for R&D activities delivered.
Milestone payments were only included in the transaction price to the extent that it was highly probable that
a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty
associated with the variable consideration is subsequently resolved. Given the nature of our industry, we only
consider this once the milestone event is achieved. Sales based milestones and sales based royalties are a part
of our arrangement but are not yet included in our revenues.
▪ The transaction price was allocated to the single performance obligation and revenues were recognized over
the estimated service period based on a pattern that reflects the transfer of the license and progress to
complete satisfaction of the R&D activities. This is because we considered that there is a transformational
relationship between the license and the R&D activities to be delivered.
▪ We chose an input model to measure the satisfaction of the single performance obligation that considers
a percentage of costs incurred for this program that are completed each period (percentage of completion
method).
▪ Costs reimbursements received from AbbVie were recognized in revenues when costs were incurred and
agreed by the parties as we were acting as a principal in the scope of our stake of the R&D activities of these
license and collaboration agreements.
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FINANCIAL STATEMENTS
▪ The second amended and restated collaboration agreement signed on 24 October 2018 was assessed to be a
contract modification including a change in scope and in pricing as the remaining goods or services were
not distinct and form part of the single performance obligation that was partially satisfied at the date
of the contract modification. We concluded that we must account for this second amended and restated
collaboration agreement as if it was part of the existing contract and recognized an adjustment to reflect the
contract modification on the transaction price and on the measure of progress towards satisfaction of the
performance obligation.
The performance obligation related to this agreement was considered fully satisfied on 31 December 2019.
Other income
The following table summarizes other income for the years ended 31 December 2020 and 2019.
(thousands of €)
Grant income
R&D incentives
Other
Total other income
Year ended 31 December
2020
5,452
45,951
804
52,207
2019
6,549
43,923
425
50,896
The majority of the grant income was related to grants from a Flemish agency and the national government,
representing approximately 99% of all reported grant income in 2020 (2019: 99%). In many cases these carry clauses
which require us to maintain a presence in the same region for a number of years and invest according to
pre-agreed budgets. In 2020, we also received a grant of €5.0 million from the National Institute for Health and
Disability Insurance (2019: €5.5 million). This grant aims to incentivize innovative Belgian biotech companies who
are performing research and development activities in order to identify new medicines.
R&D incentives income was primarily composed of:
▪ Income from an innovation incentive system of the French government, which represented €12.4 million of
other income for the year ended 31 December 2020 compared to €12.4 million for the year ended 31 December
2019
▪ Income from Belgian R&D incentives with regard to incurred R&D expenses, which represented €21.7 million
of other income for the year ended 31 December 2020 compared to €21.7 million for the year ended
31 December 2019
▪ Tax rebates on payroll withholding taxes of R&D personnel in Belgium and the Netherlands, representing
€11.9 million of other income for the year ended 31 December 2020 compared to €9.9 million for the year
ended 31 December 2019
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FINANCIAL STATEMENTS
7. Operating costs
Operating result has been calculated after charging (–)/crediting:
Research and development expenditure
The following table summarizes research and development expenditure for the years ended 31 December 2020
and 2019.
(thousands of €)
Personnel costs
Subcontracting
Disposables and lab fees and premises costs
Depreciation
Professional fees
Other operating expenses
Total research and development expenditure
Year ended 31 December
2020
(161,509)
(301,841)
(22,349)
(11,707)
(12,692)
(13,570)
(523,667)
2019
(118,875)
(255,725)
(19,573)
(9,330)
(1,834)
(14,753)
(420,090)
The R&D expenditure increase reflects the increase of our investments to advance our R&D programs. This
increase was principally due to:
▪ Increased R&D personnel costs were explained by an enlarged workforce following the growth in our R&D
activities as well as increased costs of the subscription right plans.
▪ The increase in subcontracting costs is mainly due to increased expenditure for filgotinib development due
to the increased cost share. Moreover expenditures have further increased as we advance our Toledo program
and our other programs.
▪ Professional fees increased due to additional consulting expenses related to the implementation of new
software applications.
The table below summarizes our research and development expenditure for the years ended 31 December 2020
and 2019, broken down by program:
(thousands of €)
Filgotinib program
Ziritaxestat program
OA program on GLPG1972
Toledo program
CF program
AtD program on MOR106
Other programs
Total research and development expenditure
Year ended 31 December
2020
2019
(126,879)
(100,032)
(55,902)
(22,966)
(87,107)
(69)
(7,618)
(223,126)
(523,667)
(75,951)
(19,958)
(47,204)
(3,897)
(24,051)
(148,997)
(420,090)
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FINANCIAL STATEMENTS
Sales and marketing expenses
The following table summarizes the sales and marketing expenses for the years ended 31 December 2020 and 2019.
(thousands of €)
Personnel costs
Depreciation
External outsourcing costs
Professional fees
Other operating expenses
Total sales and marketing expenses
Year ended 31 December
2020
(31,727)
(140)
(27,174)
(3,420)
(4,007)
(66,468)
2019
(7,558)
(61)
(15,721)
(459)
(777)
(24,577)
The increase in our sales and marketing expenses in 2020 is mainly due to the preparation of the commercial
launch for filgotinib and is primarily explained by an increase in personnel costs due to recruitments and
increased costs of subscription right plans, as well as related increase in outsourcing costs. The latter was mainly
due to additional costs incurred relating to our co-promotion activities with Gilead for filgotinib, for which
we have recharged €4.7 million to Gilead, which was recorded as a deduction of sales and marketing expenses
(compared to €8.2 million recharges by Gilead to us for the year ended 31 December 2019).
General and administrative expenses
The following table summarizes the general and administrative expenses for the years ended 31 December 2020
and 2019.
(thousands of €)
Personnel costs
Depreciation
Legal and professional fees
Other operating expenses
Total general and administrative expenses
Year ended 31 December
2020
(70,110)
(5,147)
(25,592)
(17,908)
(118,757)
2019
(51,204)
(1,421)
(11,568)
(8,190)
(72,382)
The increase in our general and administrative expenses in 2020 was mainly due to a planned increase in the
staff supporting the growth of the company, higher costs related to the subscription right plans and additional
legal and professional fees.
8. Staff costs
The table below summarizes the number of our employees of our continuing operations on 31 December 2020
and 2019:
Number of employees on 31 December
Total
2020
1,304
1,304
2019
845
845
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
The average number of employees of our continuing operations during the years 2020 and 2019 was:
Members of the management board
Research and development
Commercial
Corporate and support
Total
Their aggregate remuneration comprised:
(thousands of €)
Wages and salaries
Social security costs
Retirement benefit costs
Costs related to subscription right plans
Other personnel costs
Total personnel costs
Year ended 31 December
2020
6
611
144
335
1,096
2019
5
523
27
156
711
Year ended 31 December
2020
2019
(139,681)
(113,660)
(26,471)
(7,337)
(79,959)
(9,897)
(14,566)
(4,715)
(38,297)
(6,399)
(263,345)
(177,636)
9. Fair value re-measurement of share subscription agreement and
warrants granted to Gilead
Total fair value re-measurement for the years ended 31 December 2020 and 31 December 2019 can be split up as
follows:
(thousands of €)
Fair value re-measurement of the share subscription agreement
Fair value re-measurement of warrant A
Fair value re-measurement of initial warrant B
Total fair value re-measurement of share subscription agreement and warrants
granted to Gilead
Year ended 31 December
2020
-
-
3,034
3,034
2019
(142,350)
(35,642)
(3,653)
(181,644)
Gilead share subscription agreement
On 23 August 2019 , the closing date of the contract, Gilead made a €960.1 million equity investment in Galapagos
NV by subscribing to 6,828,985 new ordinary shares at a price of €140.59 per share, including issuance premium.
The equity subscription was accounted for as a financial asset at signing date of the contract on 14 July 2019 and
changes in fair value were recorded through profit or loss until closing date, when the financial liability was
derecognized.
In the year ended 31 December 2019 we recognized a fair value loss of €142.4 million, which reflects the increase in
the Galapagos share price between signing and closing of the Gilead agreement. On 23 August 2019, the fair value
of the financial liability amounting to €56.7 million was derecognized through the share premium account in
equity.
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FINANCIAL STATEMENTS
(thousands of €)
Fair value of financial asset at signing date
Change in fair value recorded in profit or loss
Fair value of financial liability at closing date
Derecognition at closing date
Fair value on 31 December 2019
Gilead warrants A and B
Year ended 31 December
2019
85,601
(142,350)
(56,749)
56,749
-
We measured the warrants (warrant A and initial and subsequent warrant B) at fair value and recognized a
warrant issuance liability at closing date of the transaction. Upon approval of the issuance of warrant A and
initial warrant B on 22 October 2019 (warrant approval date) the variable consideration was re-measured with
a corresponding impact on the transaction price allocated to the performance obligation relating to our drug
discovery platform, and the warrant issuance liability became a financial liability measured at fair value with
changes through profit or loss as from that moment.
On 6 November 2019 Gilead exercised warrant A and as such increased its ownership in Galapagos to 25.10% of the
then outstanding shares.
Between the warrant approval date and the exercise of warrant A our share price increased significantly, resulting
in a fair value loss of €35.6 million recognized in profit or loss in 2019. On 6 November 2019 the related financial
liability, amounting to €79.0 million was derecognized through the share premium account in equity.
Management assessed that the financial liability relating to this warrant A had no remaining fair value on 31
December 2019 mainly because Gilead further increased its ownership to 25.84% on 31 December 2019. Gilead’s
ownership did not materially decrease during 2020 and the warrant A expired on 22 October 2020.
(thousands of €)
Fair value of financial liability at warrant approval date
Change in fair value recorded in profit or loss
Derecognition at warrant A exercise date
Fair value on 31 December 2019
Year ended 31 December
2019
(43,311)
(35,642)
78,953
–
The issuance of initial warrant B was approved on 22 October 2019 by the extraordinary general meeting of
shareholders and is not yet exercised by Gilead at 31 December 2020. The fair value measurement of this financial
liability is categorized as level 3 in the fair value hierarchy. Initial warrant B has been valued on the basis of a
Longstaff-Schwartz Monte Carlo model. The input data used in the model were derived from market observations
(volatility, discount rate and share price) and from management estimates (number of shares to be issued and
applied discount for lack of marketability). The recognized fair value gain of €3.0 million is mainly the result
of the decrease of our share price in 2020, partly compensated by an increase in the implied volatility. The fair
value of the financial liability related to the initial warrant B of €3.2 million on 31 December 2020 (€6.2 million
at 31 December 2019) is presented as current financial instrument in our consolidated statement of financial
position and will be re-measured at each reporting period.
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FINANCIAL STATEMENTS
(thousands of €)
Fair value of financial liability at 1 January
Fair value of financial liability at warrant approval date
Change in fair value recorded in profit or loss
Fair value on 31 December
Year ended 31 December
2020
(6,198)
-
3,034
(3,164)
2019
-
(2,545)
(3,653)
(6,198)
Subsequent warrant B is still subject to approval by an extraordinary general meeting of shareholders and is
therefore still presented as warrant issuance liability in our deferred income (we refer to note 24 for more
information). Subsequent warrant B has been valued on the basis of a Longstaff-Schwartz Monte Carlo model. The
input data used in the model were derived from market observations (volatility, discount rate and share price)
and from management estimates (number of shares to be issued and applied discount for lack of marketability).
10. Other financial income/expenses
The following table summarizes other financial income and expenses for the years ended 31 December 2020 and
2019.
(thousands of €)
Other financial income:
Interest income
Effect of discounting long term R&D incentives receivables
Currency exchange gain
Fair value gain on financial assets held at fair value through profit or loss
Fair value gain on current financial investments
Gain upon sale of financial assets held at fair value through profit or loss
Other finance income
Total other financial income
Other financial expenses:
Interest expenses
Effect of discounting long term deferred income
Currency exchange loss
Loss upon sale of financial assets held at fair value through profit or loss
Fair value loss on current financial investments
Other finance charges
Total other financial expenses
Year ended 31 December
2020
2019
10,030
93
4,697
2,397
-
-
1,450
18,667
(9,389)
(16,278)
(110,416)
(88)
(15,901)
(773)
(152,844)
14,305
93
775
5,355
611
2
248
21,389
(1,268)
(6,900)
(47,720)
-
(3,700)
(380)
(59,968)
Total net other financial expenses
(134,177)
(38,579)
The currency exchange loss in 2020 of €110.4 million primarily consisted of an unrealized exchange loss of
€106.4 million on deposits and current financial investments held in U.S. dollars, as compared to a realized
currency exchange loss in 2019 of €34.9 million on the U.S. dollars upfront payment from Gilead and an unrealized
exchange loss in 2019 of €10.6 million on deposits and current financial investments held in U.S. dollars. We
163
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
have cash, cash equivalents and current financial investments held in U.S. dollars, which could generate foreign
currency exchange gain or loss in our financial results in accordance with the fluctuation of the EUR/U.S. dollar
exchange rate as our functional currency is EUR.
Net currency exchange loss amounted to €105.7 million for the year ended 31 December 2020, compared to a net
currency exchange loss of €46.9 million for the year ended 31 December 2019.
Interest expenses were related to interests on term deposits, treasury bills that came to maturity and on leases
of buildings and cars. Other financial expense for 2020 also included €16.3 million of costs (€6.9 million for the
year ended 31 December 2019) linked to the accounting under IFRS 15 for a financing component embedded in the
upfront consideration received from Gilead in connection with the revised agreement for filgotinib.
Interest income was related to interests on term deposits, notice accounts and current financial investments.
For the year ended 31 December 2020, fair value gain on financial assets held at fair value through profit or
loss consisted of positive effects from the fair value re-measurement of financial assets classified as equity
investments which qualify for level 1 fair value measurement based upon the closing price of such securities at
each reporting date. The fair value loss on the current financial investments reflects the interest on the treasury
bills which have not yet expired and the effect of the re-measurement at fair value of our money market funds on
31 December 2020. These fair value losses are mainly the result of the negative returns on the EUR denominated
money market funds.
11. Income taxes
The following table summarizes the income tax recognized in profit or loss for the years ended 31 December 2020
and 2019.
(thousands of €)
Current tax
Deferred tax
Total income taxes
Year ended 31 December
2020
(1,069)
(157)
(1,226)
2019
(1,372)
1,537
165
Current tax, consisting of corporate income taxes, and deferred tax income/cost (–) related to subsidiaries working
on a cost plus basis.
Tax liabilities
The below table illustrates the tax liabilities related captions in the consolidated statement of financial position
as at 31 December 2020 and 2019.
(thousands of €)
Current tax payable
Total tax liabilities
31 December
2020
1,248
1,248
2019
2,037
2,037
On 31 December 2020, the tax liabilities were primarily related to our subsidiaries operating on a cost plus basis.
164
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Taxes recognized in profit or loss
For the purpose of the disclosure below corporation tax was calculated at 25% (2019: 29.58%) – which is the tax
rate applied in Belgium – on the estimated assessable profit for the year. The applied tax rate for other territorial
jurisdictions was the tax rate that is applicable in these respective territorial jurisdictions on the estimated
taxable result of the accounting year.
Year ended 31 December
(thousands of €)
Profit/loss (-) before tax
Income tax debit/credit (-), calculated using the Belgian statutory tax rate on the
accounting profit/loss (-) before tax (theoretical)
Tax expenses/income (-) in income statement (effective)
Difference in tax expenses/income to explain
Effect of tax rates in other jurisdictions
Effect of non-taxable revenues
Effect of share-based payment expenses without tax impact
Effect of expenses/income (-) not subject to tax
Effect of non-tax-deductible expenses
Effect of recognition of previously non recognized deferred tax assets
Effect of tax losses (utilized) reversed
Effect from under or over provisions in prior periods
Effect of non-recognition of deferred tax assets
Effect of derecognition of previously recognized deferred tax assets
Effect of use of investment deduction
Effect of use of IID
Total explanations
2020
(309,775)
(77,444)
1,226
78,670
184
(10,196)
19,990
(639)
1,053
(475)
(150)
(25)
69,141
157
(370)
-
78,670
2019
148,525
43,934
(165)
(44,097)
960
(13,079)
10,318
53,394
724
(2,286)
(136)
30
47,413
-
-
(141,435)
(44,097)
Non-taxable revenues for the years ended 31 December 2020 and 2019 were related to non-taxable subsidies
and tax credits. Expenses/income (–) not subject to tax for the years ended 31 December 2020 and 2019 mainly
consisted of the fair value re-measurement of the derivative financial liabilities related to share subscription
agreement and the warrants granted to Gilead in 2019 (see note 9).
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
12. Income/loss (–) per share
Basic income/loss (–) per share is calculated by dividing the net income/loss (–) attributable to owners of the
parent by the weighted average number of ordinary shares outstanding during the year. Diluted income/loss (–)
per share is calculated based on the weighted average number of shares (diluted) also considering outstanding
subscription rights, for which our average share price of the year was higher than the exercise price. The possible
increase in the number of shares resulting from the outstanding initial warrant B has not been included in the
calculation of the diluted income per share as at 31 December 2019 because they were antidilutive.
Net profit/loss (-) attributable to owners of the parent (thousands of €)
Year ended 31 December
2020
(305,436)
2019
149,845
Number of shares (thousands)
Weighted average number of shares for the purpose of basic income / loss (-) per
share
65,075
57,614
Basic income/loss (-) per share (€)
(4.69)
2.60
Net profit/loss (-) attributable to owners of the parent (thousands of €)
(305,436)
149,845
Number of shares (thousands)
Weighted average number of shares for the purpose of diluted income / loss (-) per
share
Number of dilutive potential ordinary shares
65,075
-
57,614
2,498
Diluted income/loss (-) per share (€)
(4.69)
2.49
As we reported a net loss in 2020, the outstanding subscription rights (specified in note 29) have an anti-dilutive
effect rather than a dilutive effect. Consequently, basic and diluted loss per share is the same for 2020.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Software &
databases
Brands,
licenses,
patents &
know-how
Contract costs
Total
9,111
5,463
(64)
31
14,541
9,494
(17)
(159)
(143)
2,719
2,453
-
-
5,172
39,299
-
(38)
(1)
-
15,384
-
-
15,384
-
-
-
11,832
23,300
(64)
31
35,099
48,793
(17)
(197)
(144)
23,717
44,432
15,384
83,534
7,250
816
(63)
31
8,034
2,303
(17)
(143)
(142)
10,034
949
678
-
-
1,626
2,289
-
(33)
-
3,883
-
512
-
-
512
1,538
-
-
-
8,200
2,006
(63)
31
10,173
6,130
(17)
(176)
(142)
2,050
15,968
6,507
13,683
3,546
40,549
14,872
13,334
24,927
67,565
13. Intangible assets
(thousands of €)
Acquisition value
On 1 January 2019
Additions
Sales and disposals
Translation differences
On 31 December 2019
Additions
Sales and disposals
Reclassifications to assets held for sale
Translation differences
On 31 December 2020
Amortization and impairment
On 1 January 2019
Amortization
Sales and disposals
Translation differences
On 31 December 2019
Amortization
Sales and disposals
Reclassifications to assets held for sale
Translation differences
On 31 December 2020
Carrying amount
On 31 December 2019
On 31 December 2020
New additions in 2020 primarily related to the capitalization of in-licensing fees and milestones paid for
acquired in process research and development and option rights for a total amount of €39.3 million and software
acquisitions for a total amount of €9.5 million.
On 31 December 2020, our balance sheet did not hold any internally generated assets capitalized as intangible
asset.
167
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
14. Property, plant and equipment
Fully owned
(thousands of €)
Acquisition value
On 1 January 2019
Additions
Sales and disposals
Reclassifications
Reclassifications to right-of-use
Translation differences
On 31 December 2019
Additions
Sales and disposals
Reclassifications
Reclassifications to assets held for
sale
Translation differences
On 31 December 2020
Depreciations and impairment
On 1 January 2019
Depreciations
Sales and disposals
Reclassifications to right-of-use
Translation differences
On 31 December 2019
Depreciations
Sales and disposals
Reclassifications
Reclassifications to assets held for
sale
Translation differences
On 31 December 2020
Carrying amount
On 31 December 2019
On 31 December 2020
Land &
leasehold
improvements
Installation &
machinery
Furniture,
fixtures &
vehicles
Other tangible
assets
5,011
273
5,284
885
(51)
10,625
(2)
(2)
16,739
2,686
394
3,080
654
(51)
46
(1)
3,728
38,031
6,382
(1,521)
1,792
(30)
44,655
3,737
(1,096)
(623)
(8,938)
(127)
37,607
23,403
4,018
(1,521)
(15)
25,885
3,587
(1,058)
(1,675)
(4,327)
(61)
22,350
3,452
649
(97)
3
22
4,028
1,824
(81)
2,084
(484)
(19)
7,352
1,819
399
(99)
2,119
1,418
(77)
1,629
(448)
(13)
4,628
4,827
15,076
(1,795)
(251)
17,856
32,218
(12,086)
(686)
(30)
37,273
275
7
(251)
31
7
(39)
-
Total
51,321
22,380
(1,618)
-
(251)
(8)
71,823
38,664
(1,228)
-
(10,110)
(178)
98,972
28,184
4,818
(1,620)
(251)
(15)
31,117
5,666
(1,186)
-
(4,814)
(75)
30,708
2,204
13,011
18,770
15,257
1,909
2,724
17,825
37,273
40,707
68,264
The other tangible assets mainly consist of assets under construction, which are not yet available for use and
therefore not yet depreciated as per 31 December 2020.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Land &
building
Installation &
machinery
Furniture,
fixtures &
vehicles
Right-of-use
(thousands of €)
Acquisition value
On 1 January 2019
Change in accounting policy (modified
retrospective application IFRS 16)
Restated balance on 1 January 2019
Additions
Reclassifications
Translation differences
On 31 December 2019
Additions
Sales and disposals
Reclassifications to assets held for sale
Translation differences
On 31 December 2020
Depreciations and impairment
On 1 January 2019
Depreciations
Reclassifications
Translation differences
On 31 December 2019
Depreciations
Sales and disposals
Reclassifications to assets held for sale
Translation differences
On 31 December 2020
Carrying amount
On 31 December 2019
On 31 December 2020
Carrying amount
(thousands of €)
Property, plant and equipment fully owned
Right-of-use
Total property, plant and equipment
-
24,056
24,056
3,270
38
27,364
18,341
(5,940)
(88)
39,678
-
4,666
4
4,670
5,350
(1,334)
(36)
8,651
22,694
31,027
-
219
219
84
251
554
186
(6)
-
734
-
91
251
342
128
(6)
464
212
270
169
Galapagos NV • Annual Report 2020
Total
-
26,406
26,406
4,530
251
38
31,225
21,459
(167)
(6,202)
(90)
46,225
-
5,624
251
4
5,879
6,883
(167)
(1,448)
(36)
11,111
-
2,130
2,130
1,176
3,307
2,932
(161)
(263)
(3)
5,812
-
867
867
1,405
(161)
(115)
(1)
1,995
2,440
3,817
25,345
35,113
31 December
2020
68,264
35,113
103,378
2019
40,707
25,345
66,052
FINANCIAL STATEMENTS
Due to adoption of IFRS 16 on 1 January 2019 we recognized an opening balance of right-of-use assets of
€26.4 million on the balance sheet.
There are no pledged items of property, plant and equipment. There are also no restrictions in use on any items
of property, plant and equipment.
15. Other non-current assets
Other non-current assets consisted of non-current restricted cash, financial assets held at fair value through
profit or loss, and other non-current assets.
(thousands of €)
Non-current restricted cash
Financial assets held at fair value through profit or loss
Other non-current assets
Total other non-current assets
31 December
2020
1,482
8,951
910
11,343
2019
1,418
11,275
1,399
14,091
Restricted cash on 31 December 2020 was composed of bank guarantees on real estate lease obligations in Belgium
and in the Netherlands for €1.0 million. and €0.5 million, respectively.
Financial assets held at fair value through profit or loss consisted of equity instruments of both listed and non-
listed companies. We have no restrictions on the sale of these equity instruments and the assets are not pledged
under any of our liabilities. These instruments are designated as financial assets held at fair value through profit
or loss. The fair value of the equity instrument of the listed company is determined by reference to the closing
price of such securities on Euronext at each reporting date (classified as level 1 in the fair value hierarchy). The
fair value of the equity instrument in the non-listed company has been determined mainly by reference to the
initial transaction price (classified as level 3 in the fair value hierarchy).
Fair value changes on financial assets with fair value through profit or loss are recognized in other financial
income/other financial expenses.
The table below illustrates these financial assets held at fair value through profit or loss as at 31 December 2020
and 2019.
(thousands of €)
Cost at 1 January
Acquisitions of the year
Disposals of the year
Cost at 31 December
Fair value adjustment at 1 January
Cancellation of fair value adjustment following disposal
Fair value adjustment of the year
Fair value adjustment at 31 December
Net book value at 31 December
31 December
2020
4,736
1,994
(2,820)
3,910
6,539
(3,894)
2,397
5,042
8,951
2019
4,818
-
(82)
4,736
1,182
2
5,355
6,539
11,275
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
16. Research and development incentives receivables
The table below illustrates the R&D incentives receivables related captions in the balance sheet as at 31 December
2020, and 2019.
(thousands of €)
Non-current R&D incentives receivables
Current R&D incentives receivables
Total R&D incentives receivables
31 December
2020
111,624
24,104
135,728
2019
93,407
21,949
115,356
The increase in R&D incentives receivables is explained by additional R&D incentives reported in 2020 for
€34.1 million (€12.4 million related to French incentives and €21.7 million related to Belgian incentives), by the
release of discounting profit of €0.1 million, decreased by the setup of tax provisions in France and Belgium for
respectively €0.4 million and €0.2 million and decreased by the payments received in 2020 related to French and
Belgian incentives amounting to respectively €8.6 million and €4.7 million. The R&D incentives receivables are
future expected refunds or tax deductions resulting from tax incentives on research and development expenses
in France and Belgium. Non-current R&D incentives receivables are reported at their net present value and are
therefore discounted over the period until maturity date.
The table below provides detailed information on the maturity of the non-current R&D incentives receivables
reported in our balance sheet on 31 December 2020.
31 December 2020
Maturity date
(thousands of €)
2022
2023
2024
2025
2026 - 2030
Total
French non-current R&D
incentives receivables - discounted
value
Belgian non-current R&D
incentives receivables - discounted
value
Total non-current R&D incentives
receivables - discounted value
10,223
11,911
11,722
33,856
6,647
8,429
11,078
13,716
37,898
77,768
16,870
20,340
22,800
13,716
37,898
111,624
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
17. Trade and other receivables and other current assets
(thousands of €)
Non-current trade receivables
Trade receivables
Prepayments
Other receivables
Trade and other receivables
Inventories
Accrued income
Deferred charges
Other current assets
31 December
2020
50,000
134,632
219
13,568
148,418
355
1,096
10,502
11,953
2019
-
39,603
292
14,114
54,009
255
4,443
4,439
9,138
Total trade and other receivables & other current assets
210,371
63,147
Non-current and current trade and other receivables increased primarily due to the outstanding receivable as at
31 December 2020 of €160.0 million on Gilead related to the recently renegotiated agreement of December 2020 for
filgotinib. We refer to note 2 Summary of significant transaction for more details.
We consider that the carrying amount of trade and other receivables approximates their fair value.
The other current assets mainly included accrued income from subsidy projects and deferred charges.
On 31 December 2020, we did not have any provision for expected credit losses.
18. Current financial investments
On 31 December 2020, our current
financial
investments amounted to €3,026.3 million compared to
€3,919.2 million on 31 December 2019. On 31 December 2019 these current financial investments included a short-
term bond fund and money market funds. On 31 December 2020 these current financial investments included
treasury bills (€1,454.4 million) and money market funds (€1,571.9 million). Our portfolio of treasury bills contains
only AAA rated paper, issued by Germany and The Netherlands. Our money market funds portfolio consists
of AAA short-term money market funds with a diversified and highly rated underlying portfolio managed by
established fund management companies with a proven track record leading to an insignificant risk of changes
in value. The funds have an important daily liquidity and can be easily converted to cash.
On 31 December 2020, our current financial investments included $524.6 million held in USD, which could
generate a foreign currency exchange gain or loss in our financial results in accordance with the fluctuation of
the EUR/USD exchange rate as our functional currency is EUR.
We refer to note 32 for more information on these current financial investments.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
19. Cash and cash equivalents
(thousands of €)
Cash at banks
Term deposits
31 December
2020
1,239,993
895,194
2019
907,939
953,677
Cash and cash equivalents from continuing operations
2,135,187
1,861,616
Cash and cash equivalents included in assets classified as held for sale
7,884
-
Total cash and cash equivalents
2,143,071
1,861,616
We discuss the evolution of our cash and cash equivalents including the cash and cash equivalents classified as
held for sale.
Cash and cash equivalents may comprise cash at banks, short term bank deposits and money market funds that
are readily convertible to cash and are subject to an insignificant risk of changes in value. Our cash management
strategy monitors and optimizes our liquidity position. Our cash management strategy allows short term deposits
with an original maturity exceeding 3 months while monitoring all liquidity aspects. Cash and cash equivalents
comprised €895.2 million of term deposits which all had an original maturity longer than 3 months. All cash and
cash equivalents are available upon maximum three month notice period and without significant penalty. Cash
at banks were mainly composed of notice accounts and current accounts. Our credit risk is mitigated by selecting
a panel of highly rated financial institutions for our deposits.
On 31 December 2020, our cash and cash equivalents included $894.3 million held in USD, which could generate a
foreign currency exchange gain or loss in our financial results in accordance with the fluctuation of the EUR/USD
exchange rate as our functional currency is EUR.
The net increase in cash and cash equivalents of €281.5 million was composed of (i) €517.4 million of operational
cash burn, offset by (ii) €28.3 million of cash proceeds from capital and share premium increase from exercise
of subscription rights in 2020, (iii) the net sale of current financial investments of €841.1 million, and less (iv)
€70.5 million of negative unrealized exchange differences.
Operational cash burn (or operational cash flow if this performance measure is positive) and net cash inflow from
the Gilead transaction are financial measures that are not calculated in accordance with IFRS. Operational cash
burn/cash flow is defined as the increase or decrease in our cash and cash equivalents (excluding the effect of
exchange rate differences on cash and cash equivalents), minus:
1.
the net proceeds, if any, from share capital and share premium increases included in the net cash flows
generated/used (–) in financing activities
2.
the net proceeds or cash used, if any, in acquisitions or disposals of businesses; the movement in restricted
cash and movement in current financial investments, if any, included in the net cash flows generated/used
(–) in investing activities.
This alternative performance measure is in our view an important metric for a biotech company in the
development stage.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
The following table presents a reconciliation of operational cash flow, net cash inflow from the Gilead transaction
and the operational cash burn adjusted for the Gilead transaction, to the closest IFRS measures, for each of the
periods indicated:
(thousands of €)
Increase in cash and cash equivalents (excluding effect of exchange differences)
Less:
2020
351,994
2019
779,710
Net proceeds from capital and share premium increases
(28,287)
(1,340,842)
Net purchase/sale (-) of current financial investments
Total operational cash flow/cash burn (-)
Upfront consideration received from Gilead
Realized exchange loss on Gilead upfront
Costs associated to the transaction with Gilead
Net operational cash proceeds from the Gilead transaction
Operational cash burn adjusted for Gilead transaction
20. Share capital
(841,110)
(517,404)
-
(517,404)
3,723,940
3,162,809
3,569,815
(34,853)
(37,849)
3,497,113
(334,304)
The share capital of Galapagos NV, as set forth in the articles of association, reconciles to ‘share capital’ on the
balance sheet as follows:
(thousands of €)
On 1 January
Share capital increase
Costs of capital increase
Share capital on 31 December
Aggregate share capital
Costs of capital increase (accumulated)
Share capital on 31 December
31 December
2020
287,282
4,031
-
291,312
353,819
(62,507)
291,312
2019
236,540
55,189
(4,447)
287,282
349,789
(62,507)
287,282
Costs of capital increases are netted against the proceeds of capital increases, in accordance with IAS 32 Financial
instruments: disclosure and presentation.
History of share capital
The history of the share capital of Galapagos NV between 1 January 2019 and 31 December 2020 is as follows:
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Share capital
increase new
shares
(in thousands €)
Share capital
increase due to
exercise
subscription rights
(in thousands €)
Number of
shares issued
(in thousands
of shares)
Aggregate
number
of shares after
transaction
(in thousands
of shares)
Aggregate share
capital after
transaction
(in thousands €)
54,466
294,600
36,945
808
1,127
1,632
14,162
515
824
2,356
467
384
149
208
6,829
302
2,618
95
152
436
86
71
64,667
349,789
64,667
349,789
65,412
353,819
Date
1 January 2019
20 March 2019
20 June 2019
23 August 2019
19 September 2019
6 November 2019
25 November 2019
31 December 2019
1 January 2020
17 March 2020
28 May 2020
18 September 2020
4 December 2020
31 December 2020
On 31 December 2020, Galapagos NV’s share capital amounted to €353,819 thousand, represented by 65,411,767
shares. All shares were issued, fully paid up and of the same class.
All of the share issuances listed above were for cash consideration.
The below table summarizes our capital increases for the years 2020 and 2019.
(thousands of €, except share
data)
Number of
shares
Share
capital
Share
premium
Average
exercise price
subscription
rights (in €/
subscription
right)
Closing share
price on date
of capital
increase (in
€/ share)
Share capital
and share
premium
On 1 January 2020
64,666,802
287,282
2,703,583
2,990,865
17 March 2020: exercise of
subscription rights
28 May 2020: exercise of
subscription rights
18 September 2020: exercise of
subscription rights
4 December 2020: exercise of
subscription rights
152,220
824
4,531
5,355
35.18
141.40
435,540
2,356
15,558
17,914
41.13
186.60
86,280
467
1,936
2,403
27.85
117.70
70,925
384
2,232
2,616
36.88
100.30
On 31 December 2020
65,411,767
291,312
2,727,840
3,019,153
175
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
(thousands of €, except share
data)
Number of
shares
Share
capital
Share
premium
Average
exercise price
subscription
rights (in €/
subscription
right)
Closing share
price on date
of capital
increase
(in €/ share)
Share
capital and
share
premium
On 1 January 2019
54,465,421
236,540
1,277,780
1,514,320
20 March 2019: exercise of
subscription rights
20 June 2019: exercise of
subscription rights
23 August 2019: share
subscription by Gilead
149,370
808
2,673
3,481
23.30
90.32
208,310
1,127
3,198
4,325
20.76
113.55
Ordinary shares (fully paid)
6,828,985
36,945
923,142
960,087
Derecognition of financial liability
from share subscription
agreement
Underwriter discounts and
offering expenses (paid)
Total share subscription by
Gilead
19 September 2019: exercise of
subscription rights
6 November 2019: exercise of
warrant A by Gilead
56,749
56,749
(4,447)
(4,447)
6,828,985
32,498
979,891
1,012,389
148.90
301,745
1,632
5,043
6,675
22.12
145.25
Exercise of warrant A
2,617,791
14,162
353,873
368,035
Derecognition of financial liability
related to warrant A
Total exercise of warrant A by
Gilead
25 November 2019: exercise of
subscription rights
78,953
78,953
2,617,791
14,162
432,826
446,988
140.59
170.75
95,180
515
2,172
2,687
28.23
172.95
On 31 December 2019
64,666,802
287,282
2,703,583
2,990,865
The supervisory board is authorized for a period of five years starting from the date of publication in the Annexes
to the Belgian State Gazette of the shareholders’ resolution that granted the renewed authorization to increase
the share capital of Galapagos NV within the framework of the authorized capital through contributions in kind
or in cash, with limitation or cancellation of the shareholders’ preferential subscription rights. Said authorization
can be renewed. The authorized capital of Galapagos consists of two parts. A general authorization for capital
increases up to 20% of the share capital at the time of convening the shareholders’ meeting of 22 October 2019
(i.e. €67,022,402.04) was renewed and is valid for a period of five years from the date of publication of this
renewal in the Annexes to the Belgian State Gazette, i.e. 13 November 2019. A specific authorization for capital
increases of more than 20% and up to 33% of the share capital at the time of the convening the shareholders’
meeting of 25 April 2017 (i.e. €82,561,764.93), was renewed and is valid for a period of five years from the date of
publication of this renewal in the Annexes to the Belgian State Gazette, i.e. 31 May 2017. This specific part of the
176
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
authorized capital can, however, only be used in a number of specific circumstances and upon a resolution of
the supervisory board that all independent supervisory board members (within the meaning of article 7:87 of the
Belgian Companies Code and 2020 Code) approve. The supervisory board is currently not authorized to increase
the share capital after notification by the FSMA (Financial Services and Markets Authority) of a public takeover
bid on Galapagos NV’s shares.
As of 31 December 2020, an amount of €55,264,659.69 still remained available under the general part of the
authorized capital and an amount of €13,717,929.80 remained available under the specific part of the authorized
capital.
21. Deferred tax
(thousands of €)
Recognized deferred tax assets and liabilities
Assets
Liabilities
31 December
2020
2019
4,475
-
4,205
-
Deferred tax assets unrecognized
365,639
289,833
Deferred taxes in the consolidated income statement
Tax benefit arising from previously unrecognized tax assets used to reduce
deferred tax expense (+)
Deferred tax expenses relating to temporary differences
Deferred tax expenses relating to use or derecognition of previously recognized
deferred tax assets
(157)
581
(44)
(695)
1,537
1,537
-
-
The consolidated tax losses, innovation income deduction, dividend received deduction and investment deduction
carried forward and the deductible temporary differences on 31 December 2020 amounted in total to
€1,485.8 million (2019: €1,179.0 million), €2.7 million were related to tax losses with expiry date between 2026 and
2034.
The available statutory tax losses carried forward that can be offset against future statutory taxable profits
amounted to €478.6 million on 31 December 2020 (€374.1 million on 31 December 2019). These statutory tax losses
can be compensated with future statutory profits for an indefinite period except for an amount of €2.7 million
in the United States and the Netherlands with expiry date between 2026 and 2034. On 31 December 2020, the
available tax losses carried forward in Galapagos NV (Belgium) amounted to €416.6 million (2019: €307.7 million).
In addition to the latter, Galapagos NV (Belgium) also benefits from the Belgian innovation income deduction
regime which led to report, on 31 December 2020, a carried forward tax deduction amounting to €247.2 million
(2019: €224.7 million) that can also be offset against future statutory taxable results. In addition, Galapagos NV
(Belgium) also has available investment deduction carried forward of €1 million (2019: €1 million) and dividend
received deduction carried forward of €8.4 million (2019: nil) that can be offset against future taxable profits.
There is no limit in time for the innovation income deduction, the dividend received deduction and investment
deduction carried forward.
With the exception of 2019, we have a history of losses. We forecast to continue incurring taxable losses in
the foreseeable future as we continue to invest in clinical and preclinical development programs and discovery
platforms. Consequently, no deferred tax asset was set up as at 31 December 2020, except for four subsidiaries
operating on a cost plus basis , for which deferred tax assets were recognized for €4.5 million (2019: €4.2 million).
177
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
22. Lease liabilities
Due to adoption of IFRS 16 on 1 January 2019 we recognized lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under IAS 17.
(thousands of €)
Lease liabilities
Within one year
In the second to fifth years inclusive
After five years
Less future finance charges
Present value of lease obligation
Lease payments
Present value of lease payments
31 December
31 December
2020
2019
2020
2019
6,401
19,833
3,201
29,436
5,826
15,783
3,775
25,384
6,772
20,399
3,214
30,385
949
29,436
6,189
16,320
3,844
26,353
969
25,384
Less amount due for settlement within 12 months
Amount due for settlement after 12 months
6,401
23,035
5,826
19,558
23. Trade and other liabilities
(thousands of €)
Trade and other liabilities
Other non-current liabilities
Accrued charges
31 December
2020
171,316
8,096
1,070
2019
142,510
6,989
923
Total trade and other liabilities
180,482
150,422
The increase in trade and other liabilities is mainly due to higher trade liabilities on 31 December 2020, reflecting
the intensification of our investments in our R&D programs, and higher personnel payables due to the increase
in the number of staff.
178
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
24. Deferred income
The movement in the non-current and current deferred income is detailed in the table below.
Gilead
collaboration
agreement
for filgotinib
Gilead
collaboration
agreement
for
ziritaxestat
Total
Gilead
collaboration
agreement
for drug
discovery
platform(2)
AbbVie
collaboration
agreement
for CF
Deferred
income
related to
contracts in
our fee-for-
service
segment
Other
deferred
income
(grants)
149,801
145,798
-
-
3,224
471
308
3,655,416
641,663
666,967
2,346,787
49,727
27,317
22,410
6,900
6,900
(1,009,663)
(260,207)
(666,967)
(80,918)
(1,570)
(51,156)
(27,092)
(24,064)
245,883
245,883
(thousands of €)
On 1 January 2019
Upfront received and impact
of initial valuation of share
subscription
Milestones received
Significant financing
component(3)
Revenue recognition of
upfront
Revenue recognition of
milestones
Catch-up effect on closing
date(1)
Other movements
(46,262)
(45,856)
(109)
(297)
On 31 December 2019
3,000,646
780,261
-
2,220,013
-
362
10
Upfront payments
Milestones received
Significant financing
component(3)
Revenue recognition of
upfront
Revenue recognition of
milestones
160,000
160,000
90,192
90,192
16,278
16,278
(411,417)
(181,816)
(229,601)
(46,261)
(46,261)
Other movements
(305)
(362)
On 31 December 2020
2,809,133
818,654
1,990,412
-
-
(1) Following the contract amendment, the revenue recognized for filgotinib for the year ended 31 December 2019 included a negative catch-up
effect resulting from the decrease in the percentage of completion applied to previously received upfront and milestones for that program.
(2) The upfront received and the outstanding balance on 31 December 2020 and on 31 December 2019 comprise the issuance liabilities for the
warrants and the upfront payment allocated to the drug discovery platform. Other movements in 2019 include the derecognition of warrant
issuance liabilities through the share premium account.
(3) With regard to the additional consideration received for the extended cost sharing for filgotinib, we assume the existence of a significant
financing component reflecting the time value of money on the estimated recognition period.
57
67
We refer to note 6 for a detail of the allocation of the transaction price paid by Gilead.
179
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
25. Discontinued operations
On 23 November 2020 we signed a share purchase agreement with Selvita S.A. in relation to the disposal of Fidelta
d.o.o. (our fee-for-service segment). As net assets associated with our fee-for-service business will be recovered
principally through a sale transaction rather than through continuing use, we have classified these assets and
the associated liabilities as held for sale in our financial statements for the year ended 31 December 2020.
The transaction was completed on 4 January 2021 for a total consideration of €37.1 million (including the
customary adjustments for cash and working capital). Fidelta will continue performing drug discovery services
for us for the next five years for which we have purchase commitments for an aggregate amount of €27.0 million.
Held for sale assets are stated at their carrying amount, which is lower than the fair value less costs to sell.
As we expect to continue to purchase services from Fidelta d.o.o. after the closing of the transaction, we eliminated
the intragroup revenue and cost in discontinued operations.
(i) Financial performance
(thousands of €, except share and per share data)
Revenues
Other income
Total revenues and other income
Research and development expenditure
General and administrative expenses
Total operating expenses
Year ended 31 December
2020
16,140
-
16,140
(7,685)
(2,000)
(9,685)
2019
10,084
8
10,092
(7,229)
(1,319)
(8,548)
Operating profit
6,455
1,544
Other financial income
Other financial expenses
Profit before tax
Income taxes
Net profit
Basic income per share from discontinued operations
Diluted income per share from discontinued operations
Weighted average number of shares (in thousands of shares)
Weighted average number of shares - Diluted (in thousands of shares)
179
(176)
93
(102)
6,458
1,535
(893)
(379)
5,565
1,156
0.09
0.08
65,075
67,572
0.02
0.02
57,614
60,112
180
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
(ii) Assets and liabilities
The following assets and liabilities were classified as held for sale in relation to the discontinued operations:
(thousands of €)
Intangible assets
Property, plant and equipment
Other non-current assets
Trade and other receivables
Cash and cash equivalents
Other current assets
Total assets classified as held for sale
Non-current lease liabilities
Other non-current liabilities
Trade and other liabilities
Current lease liabilities
Income tax payable
Liabilities associated with assets classified as held for sale
Net assets
(iii) Cash flow
(thousands of €)
Net cash flows generated in operating activities
Net cash flows used in investing activities
Net cash flows used in financing activities
Net cash flows from discontinued operations
2020
21
10,050
160
4,428
7,884
863
23,406
4,115
70
3,649
727
356
8,917
14,488
2019
2,911
(1,350)
(709)
852
2020
7,173
(2,284)
(664)
4,225
181
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
26. Note to the cash flow statement
(thousands of €)
Adjustment for non-cash transactions
Depreciation and amortization
Share-based compensation expenses
Decrease in retirement benefit obligations and provisions
Unrealized exchange losses and non-cash other financial result
Discounting effect of deferred income
Fair value re-measurement of share subscription agreement and warrants
Net change in (fair) value of current financial investments
Fair value adjustment financial assets held at fair value through profit or loss
Other non-cash expenses
2020
2019
18,682
79,959
(260)
105,055
16,278
(3,034)
15,900
(2,396)
539
12,448
38,297
(156)
11,169
6,900
181,644
3,081
(5,355)
Total adjustment for non-cash transactions
230,723
248,027
Adjustment for items to disclose separately under operating cash flow
Interest expense
Interest income
Tax expense
Total adjustment for items to disclose separately under operating cash flow
Adjustment for items to disclose under investing and financing cash flows
Gain (-)/loss on sale of fixed assets
Interest income on current financial assets
9,424
(7,476)
2,119
4,067
82
(2,554)
1,302
(9,247)
214
(7,731)
(2)
(5,059)
Total adjustment for items to disclose separately under investing and financing
cash flow
(2,472)
(5,061)
Change in working capital other than deferred income
Increase (-)/decrease in inventories
Increase in receivables
Increase in liabilities
Total change in working capital other than deferred income
(100)
(177,155)
31,163
(146,092)
20
(67,263)
79,940
12,698
182
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
27. Off-balance sheet arrangements
Contractual obligations and commitments
We entered into lease agreements for offices, laboratories and cars. As a consequence of the adoption of IFRS 16
Leases, on 1 January 2019, lease obligations in the scope of the new standard are presented as lease liabilities in
the statements of financial position and no longer disclosed separately as off-balance sheet commitments. We
refer to note 22 for a breakdown of our lease liabilities.
On 31 December 2020, we had outstanding obligations for future purchase commitments, which become due as
follows:
(thousands of €)
Total
Less than
1 year
1 – 3 years
3 – 5 years
More than
5 years
Purchase commitments
347,873
271,922
73,009
2,870
72
On 31 December 2019, we had outstanding obligations for purchase commitments, which become due as follows:
(thousands of €)
Total
Less than
1 year
1 – 3 years
3 – 5 years
More than
5 years
Purchase commitments
251,670
175,006
70,675
5,989
-
On 31 December 2019 we were committed to two leases which had not yet started. The total future cash outflows
for leases that had not yet commenced were as follows:
(thousands of €)
Lease commitments not commenced
Total
8,986
Less than
1 year
1 – 3 years
3 – 5 years
More than
5 years
5,793
1,502
1,502
188
In addition to the tables above, we have a contractual cost sharing obligation related to our collaboration
agreement with Gilead for filgotinib. The contractual cost sharing commitment amounted to €614.1 million at 31
December 2019.
On 31 December 2020, after the recent renegotiation of the filgotinib collaboration, our estimate of this cost
sharing commitment amounts to €493.4 million, for which we have direct purchase commitments of €18.1 million
at 31 December 2020 (€27.5 million at 31 December 2019) reflected in the tables above.
183
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
28. Contingent assets and liabilities
On 4 January 2021, we closed the sale of our Croatian subsidiary Fidelta. Selvita acquired 100% of the outstanding
shares in Fidelta for a total consideration of €37.1 million including customary adjustments for net cash and
working capital. In accordance with common practice, we gave representations and warranties which are capped
and limited in time.
In December 2015, we entered into a license and collaboration agreement to co-develop filgotinib with Gilead in
rheumatoid arthritis, Crohn’s disease, ulcerative colitis and other indications. This agreement was revised a first
time in August 2019 and in December 2020, we agreed to further revise this agreement. Under the terms of the
new arrangement, we will assume all development, manufacturing, commercialization and certain other rights
for filgotinib in Europe. Beginning on 1 January 2021, we will bear the future development costs for certain studies,
in lieu of the equal cost split contemplated by the previous agreement. The existing 50/50 global development
cost sharing arrangement will continue for certain other studies.
All commercial economics on and commercialization responsibilities for filgotinib in Europe will transfer to us
as of 1 January 2022, subject to payment by us of tiered royalties of 8 to 15% of net sales in Europe to Gilead,
starting in 2024. In connection with the amendments to the existing arrangement for the commercialization and
development of filgotinib, Gilead has agreed to irrevocably pay us €160 million, subject to certain adjustments
for higher than budgeted development costs. Gilead paid €35 million and will pay an additional €75 million in
2021 and will pay €50 million in 2022. In addition, we will no longer be eligible to receive any future milestone
payments relating to filgotinib in Europe. However, we will remain eligible to receive tiered royalty percentages
ranging from 20% to 30% on Gilead’s global net sales of filgotinib outside of Europe and future development
and regulatory milestone-based payments of up to $295 million and sales-based milestone payments of up
to $600 million. We achieved two milestones under the first revised agreement in September 2020 totaling
$105 million.
As a result of the Option, License and Collaboration agreement signed with Gilead in July 2019, we share further
development costs for GLPG1690 equally with Gilead. We were also entitled to an additional milestone for
GLPG1690 upon approval in the United States and we were eligible to receive tiered royalties ranging from 20 –
24% on net sales of GLPG1690 by Gilead in all countries outside Europe. In February 2021, we and Gilead announced
our decision to discontinue all ongoing development activities with GLPG1690.
As explained in the summary of the significant transaction in note 2 to our consolidated financial statements,
Gilead received exclusive option rights to acquire a license on compounds. Exercising such an option would
trigger an opt-in payment, a 50 – 50 cost share mechanism for the future development activities, potential future
development and sales based milestones and royalties.
184
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
29. Share based payments
Subscription right plans
Presented below is a summary of subscription right activities for the reported periods. Various subscription right
plans were approved for the benefit of our employees, and for members of the supervisory board and independent
consultants of Galapagos NV.
The subscription rights granted under subscription right plans created from 2011 onwards vest at the end of the
third calendar year following the year of the grant, with no intermediate vesting.
The subscription rights offered to members of the supervisory board vest over a period of 36 months at a rate of
1/36th per month. As of 2020, we no longer grant subscription rights to supervisory board members.
Subscription rights cannot be exercised before the end of the third calendar year following the year of the grant.
In the event of a change of control over Galapagos NV, all outstanding subscription rights vest immediately and
will be immediately exercisable.
The table below sets forth a summary of subscription rights outstanding and exercisable on 31 December 2020,
per subscription right plan:
Outstanding
per
1 January
2020
Granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Expired
during
the year
Outstanding
per
31 December
2020
Exercisable
per
31 December
2020
Subscription
right plan
Allocation
date
Expiry
date
Exercise
price (€)
BNL (2006)
21.12.2007 20.12.2020
2007 RMV
25.10.2007 24.10.2020
2008
2012
2013
2014
2015
26.06.2008 25.06.2021
03.09.2012 02.09.2020
16.05.2013 15.05.2021
25.07.2014 24.07.2022
30.04.2015 29.04.2023
2015 (B)
22.12.2015 21.12.2023
2015 RMV
22.12.2015 21.12.2023
2016
01.06.2016 31.05.2024
2016 RMV
01.06.2016 31.05.2024
2016 (B)
20.01.2017 19.01.2025
2017
17.05.2017 16.05.2025
2017 RMV
17.05.2017 16.05.2025
7.12
8.65
5.60
14.19
19.38
14.54
28.75
49.00
49.00
46.10
46.10
62.50
80.57
80.57
(1,050)
(14,980)
(80,040)
(64,770)
(83,000)
(63,000)
(68,000)
(17,500)
(161,625)
(51,000)
(140,000)
1,050
14,980
1,365
80,040
120,434
252,340
282,473
329,500
57,500
504,250
120,000
150,000
595,500
127,500
2018
19.04.2018 18.04.2026
79.88
1,085,245
2018 RMV
19.04.2018 18.04.2026
79.88
137,500
2019
10.04.2019 09.04.2027
95.11
1,486,690
2019 RMV
10.04.2019 09.04.2027
95.11
194,750
2020
17.04.2020 16.04.2028
168.42
2020 RMV
17.04.2020 16.04.2028
168.42
- 1,925,185
- 248,150
(2,000)
(8,850)
(1,750)
(19,151)
(8,625)
-
-
1,365
-
55,664
169,340
219,473
261,500
40,000
-
-
1,365
-
55,664
169,340
219,473
261,500
40,000
342,625
342,625
69,000
10,000
595,500
127,500
1,083,245
137,500
1,477,840
193,000
1,906,034
239,525
69,000
10,000
-
-
-
-
-
-
-
-
Total
5,541,117 2,173,335 (744,965)
(40,376)
-
6,929,111
1,168,967
185
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Subscription rights
Weighted average
exercise price (€)
4,626,782
882,734
1,699,690
(30,750)
(754,605)
-
5,541,117
1,139,682
2,173,335
(40,376)
(744,965)
-
6,929,111
1,168,967
53.30
14.05
95.11
88.92
22.75
70.09
30.16
168.42
144.79
37.97
-
103.95
37.84
Outstanding on 31 December, 2018
Exercisable on 31 December, 2018
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding on 31 December, 2019
Exercisable on 31 December, 2019
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding on 31 December, 2020
Exercisable on 31 December, 2020
The table below sets forth the inputs into the valuation of the subscription rights.
2020
2020 RMV
2019
2019 RMV
17 April 2020
17 April 2020
10 April 2019
10 April 2019
Exercise Price (€)
168.42
168.42
95.11
95.11
Weighted average share price at acceptance date
(€)
Weighted average fair value on the acceptance
date (€)
Weighted average estimated volatility (%)
Weighted average expected life of the
subscription right (years)
Weighted average risk free rate (%)
Expected dividends
178.95
178.95
107.05
107.45
86.45
51.30
6
(0.44)
None
85.79
51.32
6
(0.44)
None
40.04
35.86
6
(0.27)
None
40.05
35.63
6
(0.28)
None
The exercise price of the subscription rights is determined pursuant to the applicable provisions of the Belgian
Law of 26 March 1999.
The weighted average estimated volatility is calculated on the basis of the implied volatility of the share price
over the expected life of the subscription rights.
The weighted average expected life of the subscription right is calculated as the estimated duration until exercise,
taking into account the specific features of the plans.
Our share based compensation expense in 2020 amounted to €79,959 thousand (2019: €38,297 thousand).
186
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FINANCIAL STATEMENTS
The following table provides an overview of the outstanding subscription rights per category of subscription right
holders on 31 December 2020 and 31 December 2019:
Category (in number of subscription rights)
Supervisory board members
Management board members
Other
Total subscription rights outstanding
31 December
2020
157,560
2,101,874
4,669,677
6,929,111
2019
222,600
2,171,874
3,146,643
5,541,117
The outstanding subscription rights at the end of the accounting period have a weighted average exercise price of
€103.95 (2019: €70.09) and a weighted average remaining life of 2,050 days (2019: 2,023 days).
Restricted stock units (RSUs)
Each RSU represents the right to receive one Galapagos share or a payment in cash of an amount equivalent to
the volume-weighted average price of the Galapagos share on Euronext Brussels over the 30-calendar day period
preceding the relevant vesting date, in accordance with the terms and conditions of the relevant RSU program.
We currently have the following types of restricted stock unit (RSU) programs:
▪ Plan 2020.I, under which the grants are intended to be made every year, subject to a decision of the
supervisory board. This plan is intended to provide a long-term incentive to certain of our employees and
management board members and replaces the deferred portion of the bonus under the former Senior
Management Bonus Scheme;
▪ Plan 2019.II and Plan 2020.II These plans are aimed at retaining a specific set of our employees and
management board members whose retention is deemed so important for the future performance of
Galapagos that an additional incentive is desired. The beneficiaries are nominated by the nomination and
remuneration committee and the supervisory board approves the list of beneficiaries. The four-year vesting
period is designed to be aligned with long-term shareholder interests;
▪ Plan 2019.I This plan was granted at the discretion of the supervisory board, as announced in our
remuneration policy included in the annual report relating to financial year 2018 under the header
“Information on the remuneration policy for the next two years”;
▪ Plan 2019.III This exceptional RSU grant took place in 2019 under an RSU Transaction Bonus Plan for the
successful closing of the Gilead transaction.
The main characteristics of all these plans are as follows:
▪ the RSUs are offered for no consideration;
▪ four-year vesting period, with 25% vesting each year, except for the RSUs granted under the Plan 2019.I and,
solely for beneficiaries who are management board members, the RSUs granted under the Plan 2020.I, that
will all vest at the same time three years after the offer date and the RSUs granted under Plan 2019.III, of
which 50% vests after two years and 50% vests after three years;
▪ payout will be in cash or shares, at Galapagos’ discretion, it being understood that in respect of members of
the management board, any vesting prior to the third anniversary of the offer date will always give rise to a
payment in cash rather than a delivery of shares as an incentive;
▪ in case of termination of service before the vesting date, forfeiture rules apply.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
The table below sets forth a summary of RSUs outstanding at 31 December 2020, per RSU plan:
RSU plan
Plan 2019.I
Plan 2019.II
Plan 2019.III
Plan 2020.I
Plan 2020.II
Total
(in number of RSUs)
Outstanding at 1 january
Granted during the year
Forfeited during the year
Paid in cash during the year
Outstanding at 31 December
Outstanding
at 1 January
2020
Granted
during the
year
Forfeited
during the
year
Paid in cash
during the
year
Offer date
16.10.2019
33,000
16.10.2019
109,075
16.10.2019
71,072
-
-
-
-
-
-
06.05.2020
07.05.2020
-
-
55,928
72,841
(1,052)
-
-
(27,268)
-
-
-
Outstanding
at 31
December
2020
33,000
81,807
71,072
54,876
72,841
213,147
128,769
(1,052)
(27,268)
313,596
31 December
2020
213,147
128,769
(1,052)
(27,268)
313,596
2019
-
213,147
-
-
213,147
The RSUs are measured based on the volume-weighted average price of the Galapagos share on Euronext Brussels
over the 30-calendar day period preceding the reporting period and they are re-measured at each reporting date.
We recognize the corresponding expense and liability over the vesting period.
The following table provides an overview of the outstanding RSUs per category of RSU holders on 31 December
2020 and 31 December 2019.
Category (in number of RSUs)
Management board members
Other
Total outstanding RSUs
30. Related parties
31 December
2020
229,276
84,320
313,596
2019
188,571
24,576
213,147
Relationship and transactions with entities with (joint) control of, or significant influence over, Galapagos
Gilead
Gilead is exercising significant influence over Galapagos as from the equity subscription on 23 August 2019.
As a result of the equity subscription we received a transparency notification from Gilead on 28 August 2019
confirming they held 22.04% of the then issued and outstanding shares of Galapagos.
Furthermore, the extraordinary general meeting of shareholders of 22 October 2019 approved the issuance of
Warrant A and initial warrant B to Gilead allowing them to further increase its ownership of Galapagos to
up to 29.9% of the company’s issued and outstanding shares. Subsequent Warrant B is still subject to approval
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FINANCIAL STATEMENTS
by an extraordinary general meeting of shareholders. This extraordinary general meeting of shareholders shall
take place between 57 and 59 months of the closing of the subscription agreement and this warrant will have
substantially similar terms, including as to exercise price, to the initial Warrant B. On 6 November 2019 Gilead
exercised warrant A, which resulted in an additional equity investment of €368.0 million. By exercising Warrant
A Gilead increased its ownership in Galapagos to 25.10% of the then outstanding shares. Gilead further increased
its ownership to 25.84% at 31 December 2019. Gilead’s ownership then diluted to 25.54% at 31 December 2020, due to
four capital increases resulting from the exercise of subscription rights under employee subscription right plans
in the course of 2020. On 6 January 2021 we received a transparency notification from Gilead notifying a change
in the chain of intermediary companies through which Gilead holds its shares in Galapagos and confirming they
held 25.54% of the then issued and outstanding shares of Galapagos.
The presumption of significant influence is also confirmed by the fact that Gilead has the right, for as long
as it holds more than 20% of Galapagos’ share capital, to appoint two investor board designees to Galapagos’
supervisory board.
The following balances are outstanding at the end of the reporting period in relation to Gilead:
Relations with Gilead
(thousands of €)
Non-current trade receivables
Trade and other receivables
Trade and other payables
31 December
2020
50,000
132,825
27,699
2019
-
31,645
39,100
The non-current trade receivables and the trade and other receivables balances mainly relate to a total of
€160.0 million to receive in relation to the recently modified collaboration for filgotinib of which €110.0 million
will be received in 2021 and €50.0 million in 2022. Additionally, the trade and other receivables contain
€22.8 million of receivables relating to our collaborations for GLPG1690 and filgotinib. The outstanding liabilities
mainly relate to the cross charges from Gilead for the development costs sharing of filgotinib in the fourth
quarter of 2020 (€24.8 million).
Due to the approval of filgotinib, by both the Japanese and European authorities in September 2020, we received
milestone payments of respectively $30.0 million (€25.8 million) and $75.0 million (€64.4 million) from Gilead that
are recognized in revenue over time until the end of the development period.
During 2020 we recognized in revenue €229.6 million (€80.9 million for the year ended 31 December 2019) relating
to the performance obligation for the drug discovery platform and a total of €228.1 million (€41.4 million for
the year ended 31 December 2019) representing the total impact on our revenues coming from the filgotinib
performance obligation. The latter consists of upfront payments and milestone payments that were recognized
in accordance with the percentage of completion of the underlying performance obligation.
Additionally, we recognized royalty income for an amount of €16.2 million in relation to the commercialization
of filgotinib.
Furthermore, we recognized €34.1 million (€17.7 million for the year ended 31 December 2019) of cost
reimbursements from Gilead related to the development of GLPG1690 as a decrease of the related expenses (on
the line research and development expenditure). An amount of €101.0 million (€72.0 million for the year ended
31 December 2019) relating to cross charges from Gilead relating to filgotinib was recognized as expense on the
line research and development expenditure.
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FINANCIAL STATEMENTS
Finally, we recognized €4.7 million as a deduction of sales and marketing expenses and €3.1 million as a deduction
of research and development expenditure (compared to €8.2 million additional sales & marketing expenses for the
year ended 31 December 2019) mainly relating to our 50/50 profit/(cost) share mechanism with Gilead for direct
sales of filgotinib in the shared territory and expenses incurred for the co-promotion activities for filgotinib.
As at 31 December 2020 we have two outstanding performance obligations under IFRS 15 towards Gilead, being
the performance obligation related to our drug discovery platform and the performance obligation relating to
filgotinib. This results in an outstanding deferred income balance of €2.0 billion for the drug discovery platform
(including the warrant issuance liability relating to subsequent Warrant B) and €819 million for the performance
obligation relating to filgotinib.
A detailed explanation of our transactions with Gilead in 2019 and 2020 can be found in the section titled
Agreements with major Galapagos NV shareholders. There are no other shareholders or other entities who, solely
or jointly, control Galapagos or exercise significant influence over Galapagos.
Relationship and transactions with subsidiaries
Please see note 31 for an overview of the consolidated companies of the group, which are all wholly-owned
subsidiaries of Galapagos NV.
Intercompany transactions between Galapagos NV and its subsidiaries, and amongst the subsidiaries, have been
eliminated in the consolidation and are not disclosed in this note.
Relationship and transactions with key management personnel
Our key management personnel consists of the members of the management board and members of the
supervisory board. All amounts mentioned in this section are based on expenses recognized in the financial
statements for the relevant financial year.
Remuneration of key management personnel
On 31 December 2020, our management board had six members: Mr. Onno van de Stolpe, Mr. Bart Filius, Dr. Piet
Wigerinck, Dr. Andre Hoekema, Dr. Walid Abi-Saab and Mr. Michele Manto. They provide their services to us on
a full-time basis. On 31 December 2020, our supervisory board consisted of eight members: Dr. Raj Parekh, Mr.
Howard Rowe, Ms. Katrine Bosley, Dr. Mary Kerr, Mr. Peter Guenter, Mr. Daniel O’Day, Dr. Linda Higgins and Dr.
Elisabeth Svanberg. With the implementation of the new two-tier governance structure, the mandate of Mr. Onno
van de Stolpe as member of the board of directors ended on 28 April 2020, as it is not allowed to be a member
of the supervisory board and the management board at the same time. Mr. Onno van de Stolpe continues his
mandate as member and chairman of the management board and CEO.
Only the CEO was, prior to the implementation of the two-tier governance structure, a member of both the
executive committee and the board of directors. Our CEO did not receive any special remuneration for his board
membership, as this was part of his total remuneration package in his capacity as management board member.
As from 1 January 2020, Galapagos no longer grants any subscription rights to supervisory board members,
taking into account the stricter rules of the Belgian Companies Code. Prior to 2020, supervisory board members
were granted subscription rights and hence the table below for 2019 contains disclosures for supervisory board
members.
Reference is made to the Remuneration Report, which discloses the remuneration awarded to each supervisory
board and management board member individually during 2020.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
The remuneration package of the members of key management personnel comprises:
Remuneration of key management personnel
Thousands of € (except for the number of subscription rights and RSUs)
2020
2019
Year ended 31 December
Short-term benefits
Management board members as a group(1)
Gross salary
Employer social security on gross salary
Cash bonus
Exceptional bonus
Employer social security on exceptional bonus
Other short-term benefits
Long-term benefits for management board members as a group(2)
Board fees and other short-term benefits for supervisory board members
Raj Parekh
Howard Rowe
Werner Cautreels(3)
Katrine Bosley
Christine Mummery(3)
Mary Kerr
Peter Guenter(4)
Daniel O'Day(5)
Linda Higgins(5)
Elisabeth Svanberg(6)
Post-employment benefits(7)
Total benefits excluding subscription rights and RSUs
3,102
2,531
-
433
-
-
138
-
220
125
-
115
-
115
115
-
-
78
392
4,262
14,129
2,121
61
1,230
10,500
108
109
1,874
90
55
15
45
13
45
30
-
-
-
323
16,618
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Thousands of € (except for the number of subscription rights and RSUs)
2020
2019
Year ended 31 December
Number of subscription rights granted in the year
Management board members as a group
Onno van de Stolpe
Bart Filius
Andre Hoekema
Piet Wigerinck
Walid Abi-Saab
Michele Manto
Supervisory board members as a group
Raj Parekh
Howard Rowe
Werner Cautreels(3)
Katrine Bosley
Christine Mummery(3)
Mary Kerr
Peter Guenter(4)
Daniel O'Day(5)
Linda Higgins(5)
Elisabeth Svanberg(6)
Total number of subscription rights granted in the year
Total cost of subscription right plans granted in the year under IFRS 2
Number of RSUs granted in the year(8)
Onno van de Stolpe
Bart Filius
Andre Hoekema
Piet Wigerinck
Walid Abi-Saab
Michele Manto
Total number of RSUs granted in the year
275,000
85,000
50,000
30,000
40,000
40,000
30,000
-
-
-
-
-
-
-
-
-
-
-
275,000
22,921
18,317
12,600
832
12,080
12,080
5,920
61,829
315,000
100,000
65,000
50,000
50,000
50,000
40,000
45,000
15,000
7,500
-
7,500
-
7,500
7,500
-
-
-
360,000
14,236
57528
39846
19922
33077
33077
5121
188,571
(1) Mr. Manto was appointed as Chief Commercial Officer and member of the management board, effective as of 1 January 2020. As a result the
management board consisted of six persons in 2020
(2) Only management board members are granted long-term benefits. Pursuant to the Senior Management Bonus Scheme, these consist of the
deferred part of the bonus from 3 years ago. For FY2020 the deferred part of the bonus is not paid out.
(3) Director's mandate expired on 30 April 2019
(4) Mr. Guenter's supervisory board mandate began on 30 April 2019
(5) Supervisory board member's mandate began on 22 October 2019
(6) Supervisory board member's mandate began on 28 April 2020
(7) Only management board members are granted post-employment benefits
(8) This is the sum of the RSUs awarded during the respective financial year, excluding the RSUs representing the deferred portion of the bonus for
2019 in FY2019 and for 2020 in FY2020 (each time to be granted in the following financial year). Only management board members were
awarded RSUs
Other
No loans, quasi-loans or other guarantees were given by Galapagos NV or any of its subsidiaries to members
of the supervisory board and of the management board. We have not entered into transactions with our key
management personnel, other than as described above with respect to remuneration arrangements relating to
the exercise of their mandates as members of the management board and the supervisory board.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
31. Consolidated companies as of 31 December 2020
Name of the subsidiary
Biofocus DPI AG (liquidated)
Galapagos Biopharma Belgium BV
Country
Switzerland
Belgium
Galapagos Biopharma Netherlands B.V.
The Netherlands
Galapagos Biopharma Spain S.L.U
Galapagos Biopharma Italy S.r.l.
Galapagos Biopharma Germany GmbH
Galapagos Biotech Ltd.
Galapagos BV
Galapagos GmbH
Galapagos, Inc.
Galapagos NV
Galapagos Real Estate Belgium BV
Spain
Italy
Germany
United Kingdom
The Netherlands
Switzerland
United States
Belgium
Belgium
Galapagos Real Estate Netherlands B.V.
The Netherlands
Galapagos SASU
Fidelta d.o.o.
France
Croatia
Xenometrix, Inc. in liquidation
United States
% voting right
Galapagos NV
(directly
or indirectly
through
subsidiaries)
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Parent company
100%
100%
100%
100%
100%
Change in % voting
right previous period
(2020 vs 2019)
(100%)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In the course of 2020 we merged Galapagos Real Estate 2 BV with Galapagos Real Estate 1 BV, with the latter being
the surviving entity whose company name changed into Galapagos Real Estate Belgium BV. Our dormant Swiss
subsidiary BioFocus DPI AG was deconsolidated in 2020 and the final actions for its liquidation were completed in
2020. In 2021 solely its deregistration from the Swiss commercial register still needs to occur.
On 23 November 2020 we signed a share purchase agreement for the sale of our subsidiary Fidelta d.o.o. (Zagreb,
Croatia). As we expect that the net assets associated with Fidelta d.o.o. will be recovered principally through a sale
transaction rather than through continuing use, we have classified these assets and the associated liabilities as
held for sale in our financial statements for the year ended 31 December 2020. On 4 January 2021 we closed the
sale of our fee-for-service business Fidelta. Selvita S.A. acquired 100% of the outstanding shares in Fidelta.
There are no significant restrictions on the group’s ability to access or use assets, or settle liabilities, of one of the
group’s subsidiaries.
32. Financial risk management
Financial risk factors
Our financial risks are managed centrally. Our finance department coordinates the access to national and
international financial markets and considers and manages continuously the financial risks concerning our
activities. These relate to the following financial markets risks: credit risk, liquidity risk, currency and interest
rate risk. Our interest rate risk is limited because we have nearly no financial debt. In case of decreasing interest
rates we will face a reinvestment risk on our strong cash and cash equivalents and current financial investments
balance. We do not buy or trade financial instruments for speculative purposes.
193
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Categories of financial assets and liabilities:
(thousands of €)
Financial assets held at fair value through profit or loss
Equity instruments
Current financial investments
Financial assets at amortized cost
Current financial investments
Cash and cash equivalents
Other non-current assets
Restricted cash (current and non-current)
Trade receivables
Total financial assets
31 December
2020
2019(1)
8,951
11,275
1,571,858
3,919,216
1,454,420
2,135,187
907
1,482
184,632
-
1,861,616
1,399
1,418
39,603
5,357,438
5,834,526
Financial liabilities held at fair value through profit or loss
Current financial instruments
3,164
6,198
Financial liabilities at amortized cost
Trade payables
Lease liabilities
Total financial liabilities
134,905
29,436
167,505
116,749
25,384
148,331
(1) The historical consolidated financial information for 2019 presented in this disclosure note has been adjusted mainly to correct for the amounts
of other receivables and other payables that are outside the scope of IFRS 9.
The carrying amounts of trade payables and trade receivables are considered to be the same as their fair values,
due to their short-term nature.
Financial assets held at fair value through profit or loss
Financial assets held at fair value through profit or loss consisted of equity instruments of listed/non-listed
companies and current financial investments.
We have no restrictions on the sale of these equity instruments and the assets are not pledged under any of our
liabilities. These instruments are classified as financial assets held at fair value through profit or loss. The equity
investments in listed companies qualify for level 1 fair value measurement based upon the closing price of such
securities on Euronext at each reporting date.
The market price of those shares might face fluctuations and might be affected by a variety of factors, such as
the global economic situation, the business development of competitors, sector mergers and acquisitions; it is
difficult to mitigate this risk.
The fair value of the equity instrument in the non-listed company has been determined mainly by reference to
the initial transaction price (classified as level 3 in the fair value hierarchy).
Current financial investments include money market funds in EUR and USD, which all classify for level 1 fair
value measurement.
194
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Liquidity risk
Current financial investments and cash and cash equivalents amounted to €5,169.3 million on 31 December 2020.
Management forecasts our liquidity requirements to ensure that we have sufficient cash to meet operational
needs. We have no credit lines. Such forecasting is based on realistic assumptions with regard to milestone and
upfront payments to be received, taking into account our past track record, including the assumption that not
all new projects that are being planned will be realized.
All our current financial investments and cash and cash equivalents have only an insignificant liquidity risk as
they are all convertible upon a maximum three month notice period and without incurring a significant penalty
in normal market circumstances.
Credit risk
The term “credit risk” refers to the risk that counterparty will default on its contractual obligations resulting in
financial loss for us.
The trade receivables consist of a limited amount of creditworthy customers, many of which are large
pharmaceutical companies, spread over different geographical areas. To limit the risk of financial losses, we have
developed a policy of only dealing with creditworthy counterparties.
We grant credit to our clients in the framework of our normal business activities. Usually, we require no
pledge or other collateral to cover the amounts due. Management continuously evaluates the client portfolio for
creditworthiness. All our receivables are considered collectable.
We applied the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all receivables. To measure the expected credit losses, receivables have been grouped based on credit
risk characteristics and the days past due. The provision for expected credit losses was not significant given that
there have been no credit losses over the last three years and the high quality nature of our customers.
Aging balance of receivables that are due, but that are still considered collectable:
(thousands of €)
60 - 90 days
90 - 120 days
more than 120 days
31 December
2020
-
-
-
2019
87
-
-
Our cash and cash equivalents are invested primarily in current, notice and term accounts. For banks and
financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted at the
beginning of the term. Our current financial investments are also kept within different financial institutions and
include money market funds and treasury bills with an AAA rating. The money market funds are invested in a
well-diversified portfolio of highly rated assets.
Interest rate risk
The only variable interest-bearing financial instruments are cash and cash equivalents and current financial
investments. Our interest rate income is impacted by the negative interest rate environment in EUR, and the low
interest rate environment in USD.
Changes in interest rates may cause variations in interest income and expenses resulting from short-term
interest-bearing assets. Management does not expect the short-term interest rates to decrease significantly in the
immediate foreseeable future, which limits the interest exposure on our cash and cash equivalents and current
financial investments.
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Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
Effect of interest rate fluctuation
A 100 basis points increase in interest rates at balance sheet date would have increased profit or loss, and
equity, by approximately €51.7 million (2019: €57.8 million); a 100 basis points decrease in interest rates would have
decreased profit or loss, and equity, by approximately €51.7 million (2019: €57.8 million). These scenarios assume
our entire cash portfolio would immediately reprice at the new interest rates.
Foreign exchange risk
We are exposed to foreign exchange risk arising from various currency exposures. Our principal functional
currency is euro, but we receive payments from our main collaboration partner Gilead in U.S. dollars and acquire
some consumables and materials in U.S. dollars, Swiss francs, GB pounds and Croatian kuna.
To limit this risk, we attempt to align incoming and outgoing cash flows in currencies other than EUR. In
addition, contracts closed by our different entities are mainly in the functional currencies of that entity, except
for the alliance agreement signed with Gilead for which payments are denominated in U.S. dollars.
The exchange rate risk in case of a 10% change in the exchange rate amounts to:
Net book value (thousands of €)
Increase in Euros - U.S. Dollars
Increase in Euros - GB Pounds
Increase in Euros - CH Francs
Increase in Euros - HR Kunas
Increase in U.S. Dollars - GB Pounds
31 December
2020
2019
(116,690)
(133,373)
303
2,013
-
-
113
538
650
(894)
The exchange rate risk on the U.S. dollar is primarily related to our cash and cash equivalents and current
financial investments held in U.S. dollars.
Capital risk factors
We manage our capital to safeguard that we will be able to continue as a going concern. At the same time, we
want to ensure the return to our shareholders through the results from our research and development activities.
Our capital structure consists of current financial investments, cash and cash equivalents, financial debt (as of
31 December 2020, we only have leasing liabilities ), and equity attributed to the holders of our equity instruments,
such as capital, reserves and results carried forward, as mentioned in the consolidated statement of changes in
equity.
We manage our capital structure and make the necessary adjustments in the light of changes of economic
circumstances, the risk characteristics of underlying assets and the projected cash needs of the current research
and development activities.
The adequacy of the capital structure will depend on many factors, including scientific progress in the research
and development programs, the magnitude of those programs, the commitments to existing and new clinical
CROs, the ability to establish new alliance or collaboration agreements, the capital expenditures, the new
commercial activities, market developments and any future acquisition.
Neither Galapagos NV nor any of its subsidiaries are subject to any externally imposed capital requirements, other
than those imposed by generally applicable company law requirements.
196
Galapagos NV • Annual Report 2020
FINANCIAL STATEMENTS
33. Statutory auditor’s remuneration
The statutory auditor’s fees for carrying out his mandate at group level amounted to €1,202.8 thousand in 2020
(2019: €1,406.8 thousand). The fees for audit-related services executed by the statutory auditor, related to the
performance of the audit or review of the company’s affiliates financial statements, amounted to €23.9 thousand
(2019: €29.2 thousand). Audit-related services executed by persons related to the statutory auditor for carrying
out an auditor’s mandate at the level of the Company’s affiliates, amounted to €29.2 thousand in 2020 (2019:
€29.2 thousand). Other fees related to audit-related fees, which generally the auditor provides, amounted to €161.3
thousand in 2020 (2019: €43.0 thousand). Other fees related to non-audit services executed by the statutory auditor
amounted to €47.7 thousand in 2020 (2019: €148.2 thousand). Other fees related to non-audit services executed by
persons related to the statutory auditor amounted to €890.7 thousand in 2020 and related to IT services and CSV
services (2019: €46.6 thousand). The audit committee and the supervisory board are of the opinion that these
non-audit services do not affect the independence of the statutory auditor in the performance of his audit. The
abovementioned additional fees were fully approved by the audit committee in accordance with article 3:64 of
the Belgian Companies Code.
34. Events after balance sheet date
On 19 March 2021, 99,814 subscription rights were exercised (with an average exercise price of €22.62 per
subscription right), of which 41,874 subscription rights were exercised by our CEO, 10,000 subscription rights by
other members of our management board, and 5,040 subscription rights by former members of our supervisory
board. This resulted in a share capital increase (including issuance premium) of €2,258,042.82 and the issuance of
99,814 new ordinary shares. The closing price of our share on 19 March 2021 was €68.48.
On 10 February 2021, we announced the discontinuation of all development with ziritaxestat due to an insufficient
risk-benefit profile observed in the ISABELA Phase 3 program.
On 4 January 2021, we completed the sale of Fidelta to Selvita S.A. for a total consideration of €37.1 million
(including the customary adjustments for cash and working capital). Fidelta will continue performing drug
discovery services for us for the next five years for which we have purchase commitments for an aggregate
amount of €27.0 million.
Our consolidated financial statements were approved by the supervisory board and authorized for publication, on
23 March 2021. They were signed on behalf of the supervisory board by:
(signed)
Raj Parekh
Chair of the supervisory board
23 March 2021
Howard Rowe
Chair of the audit committee
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FINANCIAL STATEMENTS
Non-consolidated financial statements
Income statement
(thousands of €)
Turnover
Internally generated intangible assets
Other operating income
Year ended 31 December
2020
2019
558,798
460,802
17,407
902,817
399,874
21,655
Operating income
1,037,007
1,324,346
Raw materials, consumables and goods for resale
Services and other goods
Remuneration, social security costs and pensions
Depreciation, impairment and other amounts written off on constitution costs,
intangible and tangible assets
Increase in provisions
Other operating charges
Non-recurring operating costs
(10,349)
(543,041)
(59,947)
(7,522)
(444,088)
(52,231)
(467,807)
(403,311)
(11,210)
(53,495)
(105)
-
(23,301)
(38)
Operating profit/loss (-)
(108,947)
393,855
Finance income
Non-recurring finance income
Finance cost
25,787
5,476
(139,863)
27,511
-
(63,967)
Profit /loss (-) before taxes
(217,548)
357,399
Taxes
21,577
21,619
Profit/loss (-) for the year
(195,971)
379,018
Loss brought forward
(80,528)
(459,547)
Accumulated losses to be carried forward
(276,499)
(80,528)
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Balance sheet
(thousands of €)
Assets
Non-current assets
Intangible fixed assets
Tangible fixed assets
Financial fixed assets
Non-current trade and other receivables
Current assets
Inventories
Trade and other receivables
Deferred costs
Accrued income
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Share capital and reserves
Share premium account
Accumulated losses
Liabilities
Non-current liabilities
Provisions
Other non-current liabilities
Current liabilities
Trade and other payables
Tax, payroll and social security liabilities
Accrued costs
Deferred income
Total equity and liabilities
31 December
2020
2019
258,820
147,221
54,806
14,544
61,183
128,287
11,137
9,507
64,361
62,215
5,340,351
5,856,271
355
207,387
9,723
572
5,122,314
5,599,171
252
88,623
4,103
3,710
5,759,583
6,003,491
2,729,348
2,897,031
353,819
2,652,028
(276,499)
349,789
2,627,771
(80,528)
2,869,823
3,106,459
11,211
11,211
-
3,361
-
3,361
2,858,613
3,103,098
217,868
12,780
1,149
2,626,816
5,599,171
227,243
12,061
1,089
2,862,705
6,003,491
The non-consolidated annual accounts of Galapagos NV were prepared in accordance with Belgian accounting rules as
well as with the legal and regulatory requirements. They show a negative result. The financial year 2020 closed with a loss
of €196.0 million compared to a profit of €379.0 million in 2019. The non-consolidated annual accounts of Galapagos NV
show accumulated losses of €276.5 million as at 31 December 2020; we refer to the Going concern statement for justification
for the application of the valuation rules under the going concern assumption.
Following common practice, Galapagos NV has given customary representations and warranties which are capped and
limited in time.
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Report of the statutory auditor
Statutory auditor’s report to the shareholders’ meeting for the year
ended 31 December 2020 – Consolidated financial statements
The original text of this report is in Dutch
In the context of the statutory audit of the consolidated financial statements of Galapagos NV (“the company”)
and its subsidiaries (jointly “the group”), we hereby submit our statutory audit report. This report includes our
report on the consolidated financial statements and the other legal and regulatory requirements. These parts
should be considered as integral to the report.
We were appointed in our capacity as statutory auditor by the shareholders’ meeting of 28 April 2020, in
accordance with the proposal of the supervisory board issued upon recommendation of the audit committee. Our
mandate will expire on the date of the shareholders’ meeting deliberating on the financial statements for the
year ending 31 December 2022. We have performed the statutory audit of the consolidated financial statements
of Galapagos NV for 15 consecutive periods. We are the statutory auditor of Galapagos NV for 21 consecutive years.
Report on the consolidated financial statements
Unqualified opinion
We have audited the consolidated financial statements of the group, which comprise the consolidated statement
of financial position as at 31 December 2020, the consolidated statement of income and comprehensive income/
loss, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then
ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated
statement of financial position shows total assets of 5 717 731 (000) EUR and the consolidated statement of income
and comprehensive income/loss shows a loss for the year then ended of 305 436 (000) EUR.
In our opinion, the consolidated financial statements give a true and fair view of the group’s net equity and
financial position as of 31 December 2020 and of its consolidated results and its consolidated cash flow for the year
then ended, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union and with the legal and regulatory requirements applicable in Belgium.
Basis for the unqualified opinion
We conducted our audit in accordance with International Standards on Auditing (ISA), as applicable in Belgium.
In addition, we have applied the International Standards on Auditing approved by the IAASB applicable to the
current financial year, but not yet approved at national level. Our responsibilities under those standards are
further described in the “Responsibilities of the statutory auditor for the audit of the consolidated financial
statements” section of our report. We have complied with all ethical requirements relevant to the statutory audit
of consolidated financial statements in Belgium, including those regarding independence.
We have obtained from the supervisory board and the company’s officials the explanations and information
necessary for performing our audit.
We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our opinion.
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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 period. 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.
Determination of the accounting treatment for the amendment to the license and collaboration
agreement for filgotinib - Refer to Notes 2, 4, 6, and 24 to the financial statements
Key Audit Matter Description
On December 15, 2020, the Company entered into a binding term sheet with Gilead Sciences, Inc. (“Gilead”) (the
“December 2020 Amendment”) to amend the license and collaboration agreement for filgotinib previously signed
with Gilead in August 2019 (“the 2019 Collaboration”) and to agree on the transfer of development, manufacturing,
commercialization and certain other rights to filgotinib in Europe.
As part of the IFRS-15 Revenue from Contracts with Customers (“IFRS 15”) analysis, the accounting treatment for
the December 2020 Amendment required judgment in respect of the following:
▪ Timing of the contract modification: management’s assessment of the legally binding and enforceable
nature of the term sheet resulted in management accounting for the contract modification in 2020;
▪ Determining the appropriate IFRS standard: the contract modification has been analysed under the
requirements of IFRS 15, as Gilead is still considered to be a customer;
▪ Identification of performance obligations: no new or additional performance obligations were identified
within the contract modification, resulting in only the partly satisfied filgotinib performance obligation
being impacted via the cumulative catch-up method;
▪ Allocation of the total transaction price: the increased fixed consideration as a result of the modification has
been allocated in its entirety to the filgotinib performance obligation, with the Company concluding that the
change in the scope of the filgotinib performance obligation and the change in both the fixed and variable
consideration are reflective of the updated stand-alone selling price for the remaining activities under this
performance obligation;
▪ Determination of the percentage of completion: in the process of estimating the costs to complete the
Company considered that all ongoing and planned clinical trials (including the long term extension trials)
would be completed through their final stage.
The evaluation of the reasonableness of management’s estimates and assumptions related to these specific
critical judgments and accounting estimates require a high degree of auditor judgment and a significant degree
of extra audit effort, including the need to involve our accounting specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures to address all critical judgments related to the December 2020 Amendment included reading
the binding term sheet and management’s accounting position paper to understand the terms of this contract
and evaluate management’s conclusions.
In relation to management’s critical judgments related to the December 2020 Amendment, our audit procedures
included the following:
▪ We tested the effectiveness of controls over the accounting treatment of significant unusual transactions,
which is one of management’s controls over the application of IFRS 15.
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▪ With the assistance of our accounting specialists:
▪ We evaluated the legally binding and enforceable nature of the term sheet to assess the date of the
contract modification;
▪ We tested management’s identification of the applicable IFRS standard and the distinct performance
obligations by evaluating whether the underlying goods, services, or both were highly interdependent
and interrelated with one or both of the performance obligations that were partly satisfied at the time
of the contract modification.
▪ We read minutes of board and committee meetings as well as management’s position paper to
understand the parties intended use of the licenses and other obligations included in the December 2020
Amendment;
▪ We evaluated whether the change in the scope of the filgotinib performance obligation resulting from
the December 2020 Amendment and the change in both the fixed and variable consideration are
reflective of the updated stand-alone selling price for the remaining activities under this performance
obligation.
▪ We assessed the assumptions made in estimating the costs to complete the filgotinib development activities
by comparing these with management’s past experience, external information (including information from
Gilead) and other observable evidence and by performing sensitivities on the current year’s revenue
recognition resulting from changes to these estimates.
IT systems which impact financial reporting
Key Audit Matter Description
During the year, the group implemented various new IT systems, including a new ERP-system and a new
reporting and consolidation system. These IT systems form a critical component of the group’s financial
reporting activities and impact all account balances. The group places significant reliance on its IT systems and
the associated controls.
We have identified the IT systems, which impact financial reporting as a key audit matter because of the:
▪ Implementation of new key IT systems during the year;
▪ Reliance on these systems within the group;
▪ Importance of the IT controls over the systems to maintaining an effective control environment. A key
interdependency exists between the ability to rely on IT controls and the ability to rely on system configured
automated controls and system reports;
▪ Pervasive nature of these systems;
▪ Considerable involvement of our IT specialists; and
▪ Additional effort needed from the audit team to test compensating controls, evaluate management’s
mitigating or remediating actions or perform additional substantive testing in response to any unaddressed
IT risks.
The key IT systems impact a range of business processes, including General Ledger, Procurement and Financial
Consolidation.
We refer to the section “Risk management and internal control” of the Annual Report for the related
management disclosure.
How the Key Audit Matter Was Addressed in the Audit
With the assistance of our IT specialists, we performed the following risk assessment and audit procedures to test
IT controls over the in scope IT systems, which are those systems that we considered key for financial reporting
purposes:
▪ Identified the IT risks for each IT system based on our understanding of the flows of transactions and the IT
environment;
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▪ Determined whether each general IT control, individually or in combination with other controls, is
appropriately designed to address the associated IT risk; and
▪ Tested the effectiveness of the relevant general IT controls.
Where there were deficiencies in the IT controls, we tested additional manual business process controls that
addressed the related IT risks. If no such manual business controls were identified, we performed additional
testing such as evaluating management’s mitigating actions or expanding the scope and nature of our direct
testing procedures on the account balances that were impacted by these IT deficiencies.
Responsibilities of the supervisory board for the preparation of the consolidated
financial statements
The supervisory board is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union and with the legal and regulatory requirements applicable in Belgium and for such internal control as the
supervisory board determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the supervisory board is responsible for assessing the group’s
ability to continue as a going concern, disclosing, as applicable, matters to be considered for going concern and
using the going concern basis of accounting unless the supervisory board either intends to liquidate the group or
to cease operations, or has no other realistic alternative but to do so.
Responsibilities of the statutory auditor 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 is not a guarantee that an audit
conducted in accordance with ISA 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.
During the performance of our audit, we comply with the legal, regulatory and normative framework as
applicable to the audit of consolidated financial statements in Belgium. The scope of the audit does not comprise
any assurance regarding the future viability of the company nor regarding the efficiency or effectiveness
demonstrated by the supervisory board in the way that the company’s business has been conducted or will be
conducted.
As part of an audit in accordance with ISA, 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 an 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 policies used and the reasonableness of accounting estimates and
related disclosures made by the supervisory board;
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▪ conclude on the appropriateness of the use of the going concern basis of accounting by the supervisory
board 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 and business
activities within the group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with the audit committee regarding, amongst other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethical requirements
regarding independence, and we communicate with them about all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the audit committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key
audit matters. We describe these matters in our report unless law or regulation precludes any public disclosure
about the matter.
Other legal and regulatory requirements
Responsibilities of the supervisory board
The supervisory board is responsible for the preparation and the content of the directors’ report on the
consolidated financial statements , the statement of non-financial information attached to the directors’ report
on the consolidated financial statements and other matters disclosed in the annual report on the consolidated
financial statements.
Responsibilities of the statutory auditor
As part of our mandate and in accordance with the Belgian standard complementary to the International
Standards on Auditing (ISA) as applicable in Belgium, our responsibility is to verify, in all material respects, the
director’s report on the consolidated financial statements , the statement of non-financial information attached
to the directors’ report on the consolidated financial statements and other matters disclosed in the annual report
on the consolidated financial statements, as well as to report on these matters.
Aspects regarding the directors’ report on the consolidated financial statements and
other information disclosed in the annual report on the consolidated financial
statements
In our opinion, after performing the specific procedures on the directors’ report on the consolidated financial
statements, this report is consistent with the consolidated financial statements for that same year and has been
established in accordance with the requirements of article 3:32 of the Code of companies and associations.
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In the context of our statutory audit of the consolidated financial statements we are responsible to consider,
in particular based on information that we became aware of during the audit, if the directors’ report on the
consolidated financial statements and other information disclosed in the annual report on the consolidated
financial statements, are free of material misstatements, either by information that is incorrectly stated
or otherwise misleading. In the context of the procedures performed, we are not aware of such a material
misstatement.
The non-financial information as required by article 3:32, § 2 of the Code of companies and associations, has
been disclosed in the directors’ report on the consolidated financial statements that is part of the section
on corporate social responsibility of the annual report (section “CSR Report”). This non-financial information
has been established by the company in accordance with the United Nations’ Sustainable Development Goals
(“SDG’s”). In accordance with article 3:80 § 1, 5° of the Code of companies and associations we do not express any
opinion on the question whether this non-financial information has been established in accordance with these
SDG’s.
Statements regarding independence
Our audit firm and our network have not performed any prohibited services and our audit firm has remained
independent from the group during the performance of our mandate.
The fees for the additional non-audit services compatible with the statutory audit, as defined in article 3:65 of
the Code of companies and associations, have been properly disclosed and disaggregated in the notes to the
consolidated financial statements.
Other statements
▪ This report is consistent with our additional report to the audit committee referred to in article 11 of
Regulation (EU) No 537/2014.
Signed at Zaventem, March 25, 2021
The statutory auditor
Deloitte Bedrijfsrevisoren/Réviseurs d’Entreprises CVBA/SCRL
Represented by Nico Houthaeve
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OTHER INFORMATION
Glossary of terms
100 points clinical response
Percentage of patients achieving a 100-point decrease in CDAI score during a clinical trial in CD patients
ACR
American College of Rheumatology
ACR20 (ACR 20/50/70)
American College of Rheumatology 20% response rate signifies a 20% or greater improvement in the number of
swollen and tender joints as well as a 20% or greater improvement in three out of five other disease-activity
measures. ACR50 and ACR70 reflect the same, for 50% and 70% response rates, respectively
ADAMTS-5
ADAMTS-5 is a key enzyme involved in cartilage breakdown (Larkin 2015)
Adenovirus
A common virus that causes cold-like symptoms and is used as a research tool for the lab in the discovery of
new drugs
ADPKD
Autosomal dominant polycystic kidney disease, a disease where typically both kidneys become enlarged with
fluid-filled cysts, leading to kidney failure. Other organs may be affected as well
ADS
American Depositary Share; Galapagos has a Level 3 ADS listed on Nasdaq with ticker symbol GLPG and CUSIP
number 36315X101. One ADS is equivalent to one ordinary share in Galapagos NV
AFM
Dutch Authority for the Financial Markets
Anemia
Condition in which the patient has an inadequate number of red blood cells to carry oxygen to the body’s
tissues
Ankylosing spondylitis (AS)
AS is a systemic, chronic, and progressive spondyoloarthropathy primarily affecting the spine and sacroiliac
joints, and progressing into severe inflammation that fuses the spine, leading to permanent painful stiffness of
the back
Anti-TNF
Tumor necrosis factor. An anti-TNF drug acts by modulation of TNF
Assays
Laboratory tests to determine characteristics
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OTHER INFORMATION
Atopic dermatitis (AtD)
Also known as atopic eczema, atopic dermatitis is a common pruritis inflammatory condition affecting the skin,
which most frequently starts in childhood
ATS
ATS, the American Thoracic Society improves global health by advancing research, patient care, and public
health in pulmonary disease, critical illness, and sleep disorders
Attrition rate
The historical success rate for drug discovery and development, based on publicly known development paths.
Statistically seen, investment in at least 12 target-based programs is required to ensure that at least one of these
will reach a Phase 3 study. Most new drug R&D programs are discontinued before reaching Phase 3 because they
are not successful enough to be approved
Autotaxin (ATX)
An enzyme important for generating the signaling molecule lypophosphatidic acid (LPA). Ziritaxestat targets
autotaxin for IPF and SSc
BID dosing
Twice-daily dosing (bis in die)
Bioavailability
Assessment of the amount of product candidate that reaches a body’s systemic circulation after (oral)
administration
Biomarker
Substance used as an indicator of a biological process, particularly to determine whether a product candidate
has a biological effect
Black & Scholes model
A mathematical description of financial markets and derivative investment instruments that is widely used in
the pricing of European options and subscription rights
Bleomycin model
A preclinical model involving use of bleomycin (a cancer medication) to induce IPF symptoms
Bridging trial
Clinical trial performed to "bridge" or extrapolate one dataset to that for another situation, i.e. to extrapolate
data from one population to another for the same drug candidate, or to move from IV to subcutaneous dosing
CALOSOMA
Phase 1 program with GLPG3970 in psoriasis
Cash position
Current financial investments and cash and cash equivalents
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OTHER INFORMATION
CDAI
Crohn’s Disease Activity Index, evaluating patients on eight different factors, each of which has a pre-defined
weight as a way to quantify the impact of CD
CDAI remission
In the FITZROY trial, the percentage of patients with CD who showed a reduction of CDAI score to <150
CFTR
Cystic fibrosis transmembrane conductance regulator (CFTR) is a membrane protein and chloride channel in
vertebrates that is encoded by the CFTR gene. It is hypothesized that inhibition of the CFTR channel might
reduce cyst growth and enlargement for patients with ADPKD. GLPG2737 is a CFTR inhibitor
CHIT1/AMCase
Chitotriosidase (CHIT1) is a protein coding gene, and AMCase is an inactive acidic mamalian chitinase. CHIT1 is
predominantly involved in macrophage activation. Inhibition of chitinase activity translates into a potential
therapeutic benefit in lung diseases like IPF, as shown in preclinical models. GLPG4716 is a CHIT1/AMCase
inhibitor targeting a key pathway in tissue remodeling
CHMP
Committee for Medicinal Products for Human Use is the European Medicines Agency's (EMA) committee
responsible for human medicines and plays a vital role in the authorization of medicines in the European
Union (EU)
CIR
Crédit d’Impôt Recherche, or research credit. Under the CIR, the French government refunds up to 30% of the
annual investment in French R&D operations, over a period of three years. Galapagos benefits from the CIR
through its operations in Romainville, just outside Paris
Clinical Proof of Concept (PoC)
Point in the drug development process where the product candidate first shows efficacy in a therapeutic setting
Complete Response Letter (CRL)
A letter send by the FDA to indicate that the review cycle for an application is complete and the application is
not ready for approval in its present form
Compound
A chemical substance, often a small molecule with drug-like properties
Contract research organization (CRO)
Organization which provides drug discovery and development services to the pharmaceutical, biotechnology and
medical devices industry
Corticosteroids
Any of a group of steroid hormones produced in the adrenal cortex or made synthetically. They have various
metabolic functions and some are used to treat inflammation
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Crohn's disease (CD)
An IBD involving inflammation of the small and large intestines, leading to pain, bleeding, and ultimately in
some cases surgical removal of parts of the bowel
CRP
C-reactive protein is a protein found in the blood, the levels of which rise in response to inflammation
Cystic fibrosis (CF)
A life-threatening genetic disease that affects approximately 80,000 people worldwide. Although the disease
affects the entire body, difficulty breathing is the most serious symptom as a result of clogging of the airways
due to mucus build-up and frequent lung infections
Cytokine
A category of small proteins which play important roles in signaling in processes in the body
DARWIN
Phase 2 program for filgotinib in RA. DARWIN 1 explored three doses, in twice-daily and once-daily
administration, for up to 24 weeks in RA patients with insufficient response to methotrexate (MTX) and who
remained on their stable background treatment with MTX. DARWIN 2 explored three once-daily doses for up to
24 weeks in RA patients with insufficient response to methotrexate (MTX) and who washed out of their
treatment with MTX. DARWIN 1 and 2 were double-blind, placebo-controlled trials which recruited
approximately 900 patients globally and for which results were reported in 2015. DARWIN 3 is a long term
extension trial in which all patients are on 200 mg filgotinib, except for U.S. males who are on 100 mg. The week
156 results from DARWIN 3 were reported in 2019
DDI study
Drug-drug interaction study. This type of study will assess if there is a change in the action or side effects of a
drug caused by concomitant administration with another drug
Deep venous thrombosis (DVT)
The formation of one or more blood clots in one of the body's large veins, most commonly in the lower limbs.
The blood clots can travel to the lung and cause a pulmonary embolism
Degradation
The process by which proteins are lost through the use of drugs such as PROTACs or small molecules
Development
All activities required to bring a new drug to the market. This includes preclinical and clinical development
research, chemical and pharmaceutical development and regulatory filings of product candidates
Discovery
Process by which new medicines are discovered and/or designed. At Galapagos, this is the department that
oversees target and drug discovery research through to nomination of preclinical candidates
Disease-modifying
Addresses the disease itself, modifying the disease progression, not just the symptoms of the disease
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DIVERGENCE
Phase 2 programs with filgotinib in Crohn's disease. DIVERGENCE 1 was an exploratory study in small bowel CD
and DIVERGENCE 2 in fistulizing CD
DIVERSITY
Phase 3 program evaluating filgotinib in CD
DLCO
DLCO (diffusion capacity of the lung for carbon monoxide) is the extent to which oxygen passes from the air sacs
of the lungs into the blood. This is measured in IPF patients
DMARDs
Disease modifying anti rheumatic drugs; these drugs address the disease itself rather than just the symptoms
Dose-range finding study
Phase 2 clinical study exploring the balance between efficacy and safety among various doses of treatment in
patients. Results are used to determine doses for later studies
Double-blind
Term to characterize a clinical trial in which neither the physician nor the patient knows if the patient is
taking placebo or the treatment being evaluated
Efficacy
Effectiveness for intended use
EMA
European Medicines Agency, in charge of European market authorization of new medications
Endoscopy
A non-surgical procedure involving use of an endoscope to examine a person’s digestive tract
EQUATOR
A Phase 2 trial with filgotinib in psoriatic arthritis patients
Esbriet
An approved drug (pirfenidone) for IPF, marketed by Roche
Fast Track
A designation by the FDA of an investigational drug for expedited review to facilitate development of drugs
which treat a serious or life-threatening condition and fill an unmet medical need
FDA
The U.S. Food and Drug Administration is an agency responsible for protecting and promoting public health and
in charge of American market approval of new medications
Fee-for-service
Payment system where the service provider is paid a specific amount for each procedure or service performed
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Fibrotic score
The Ashcroft fibrotic score involves measuring pulmonary fibrosis through examination of histopathology tissue
FIH
First-in-human clinical trial, usually conducted in healthy volunteers with the aim to assess the safety,
tolerability and pharmacokinetics of the product candidate
Filgotinib
Formerly known as GLPG0634, commercial name is Jyseleca. Small molecule preferential JAK1 inhibitor,
approved in RA in Europa and Japan. In the U.S. a CRL was received in RA. Application for approval for ulcerative
colitis was filed in Europe. Filgotinib is partnered with Gilead. Filgotinib currently is in Phase 3 trials in CD
FINCH
Phase 3 program evaluating filgotinib in RA
Fistulizing CD
Fistulae are inflammatory tracts that most often occur between the distal colon and the perianal region.
Fistulae are one of the most severe sequelae of luminal CD and the lifetime risk of occurrence is close to 50% of
those with active CD
FITZROY
A double-blind, placebo controlled Phase 2 trial with filgotinib in 177 CD patients for up to 20 weeks. Full results
were published in The Lancet in 2016
FLORA
A double-blind, placebo-controlled exploratory Phase 2a trial with ziritaxestat in up to 24 IPF patients; topline
results were reported in August 2017
FORM 20-F
Form 20-F is an SEC filing submitted to the US Securities and Exchange Commission
FRI
Functional respiratory imaging is a technology which enhances 3D visualization and quantification of a
patient’s airway and lung geometry
FSMA
The Belgian market authority: Financial Services and Markets Authority, or Autoriteit voor Financiële Diensten
en Markten
FTE
Full-time equivalent; a way to measure an employee’s involvement in a project. For example, an FTE of 1.0
means that the equivalent work of one full-time worker was used on the project
Futility analysis
Analysis of the likelihood of a trial to meet its primary endpoint, based on a subset of the total information to
be gathered. The term 'futility' is used to refer to the low likelihood of a clinical trial to achieve its objectives. In
particular, stopping a clinical trial when the interim results suggest that it is unlikely to achieve statistical
significance can save resources that could be used on more promising research
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FVC
Forced vital capacity is the amount of air which can be forcibly exhaled from the lungs after taking the deepest
breath possible. FVC is used to help determine both the presence and severity of lung diseases such as IPF
G&A expenses
General & administrative expenses
Genome
An organism's complete set of genetic information needed to build that organism and allow it to grow and
develop
GLIDER
Phase 2 Proof of Concept trial with SIK2/SIK3 inhibitor GLPG3970 in Sjögren's syndrome
GLPG0555
A JAK1 inhibitor currently in Phase 1b in osteoarthritis
GLPG0634
Molecule number currently known as filgotinib and Jyseleca
GLPG1205
A GPR84 inhibitor discovered by us. We reported topline results in 2020 from the PINTA Phase 2 patient trial
with GLPG1205 in IPF
GLPG1690
Autotaxin inhibitor discovered by us and currently known as ziritaxestat. All development with ziritaxestat was
discontinued in February 2021
GLPG1972/S201086
GLPG1972/S201086, also referred to as GLPG1972, is part of the OA collaboration with Servier. Galapagos and
Servier reported there was no signal of activity in the ROCCELLA global Phase 2b trial with GLPG1972/S201086
GLPG2737
A compound currently in Phase 2 in PKCD. This compound is part of the CF collaboration with AbbVie but
Galapagos regained rights outside of CF
GLPG3121
A compound currently in Phase 1 targeting JAK1/TYK2 directed toward inflammation
GLPG3312
A SIK1/SIK2/SIK3 inhibitor directed towards inflammation (IBD). Work on this molecule is discontinued
GLPG3667
A TYK2 kinase inhibitor discovered by us, currently in Phase 1b in psoriasis
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GLPG3970
A SIK2/SIK3 inhibitor currently in multiple Phase 2 Proof of Concept studies. Currently the lead molecule in the
Toledo program
GLPG4059
A compound currently in Phase 1 with undisclosed mode of action directed toward metabolic diseases
GLPG4399
A SIK3 inhibitor currently in the preclinical phase directed toward inflammation
GLPG4586
A compound with undisclosed mode of action currently in the preclinical phase directed toward fibrosis. This is
the first preclinical candidate to emerge from the collaboration with Fibrocor
GLPG4605
A SIK2/SIK3 inhibitor in the preclinical phase, currently directed toward fibrosis
GLPG4716
A chitinase inhibitor inlicensed from OncoArendi, directed toward fibrosis
GLPG4876
A SIK2/SIK3 inhibitor in the preclinical phase, currently directed toward inflammation
GPR84 inhibitor
Drug candidate aimed at inhibiting or blocking G-protein coupled receptor 84. GLPG1205 is a GPR84 inhibitor
aimed at IPF
HDL
High-density lipoprotein. HDL scavenges and reduces low-density lipoprotein (LDL) which contributes to heart
disease at high levels. High levels of HDL reduce the risk for heart disease, while low levels of HDL increase the
risk of heart disease
Hemoglobin
A protein inside red blood cells that carries oxygen from the lungs to tissues and organs in the body and carries
carbon dioxide back to the lungs
Histology
Study of the microscopic structures of tissues
Histopathology
Microscopic examination of tissues for manifestations of a disease
IBD
Inflammatory Bowel Disease. This is a general term for an autoimmune disease affecting the bowel, including
CD and UC. CD affects the small and large intestine, while UC affects the large intestine. Both diseases involve
inflammation of the intestinal wall, leading to pain, bleeding, and ultimately, in some cases, surgical removal of
part of the bowel
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In-/out-licensing
Receiving/granting permission from/to another company or institution to use a brand name, patent, or other
proprietary right, in exchange for a fee and/or royalty
In vitro
Studies performed with cells outside their natural context, for example in a laboratory
In vivo
Studies performed with animals in a laboratory setting
Inflammatory diseases
A large, unrelated group of disorders associated with abnormalities in inflammation
Inspiratory capacity
Total lung capacity or the amount of gas contained in the lung at the end of a maximal inhalation
Intellectual property
Creations of the mind that have commercial value and are protected or protectable, including by patents,
trademarks or copyrights
Intersegment
Occurring between the different operations of a company
Investigational New Drug (IND) Application
United States Federal law requires a pharmaceutical company to obtain an exemption to ship an experimental
drug across state lines, usually to clinical investigators, before a marketing application for the drug has been
approved. The IND is the means by which the sponsor obtains this exemption, allowing them to perform
clinical studies
IPF
Idiopathic pulmonary fibrosis. A chronic and ultimately fatal disease characterized by a progressive decline in
lung function. Pulmonary fibrosis involves scarring of lung tissue and is the cause of shortness of breath.
Fibrosis is usually associated with a poor prognosis. The term “idiopathic” is used because the cause of
pulmonary fibrosis is still unknown
ISABELA
Phase 3 clinical program investigating ziritaxestat in IPF patients. All development with ziritaxestat was
discontinued in February 2021
JAK
Janus kinases (JAK) are critical components of signaling mechanisms utilized by a number of cytokines and
growth factors, including those that are elevated in RA. Filgotinib is a preferential JAK1 inhibitor
Jyseleca®
Jyseleca® is the brand name for filgotinib
LADYBUG
Phase 2 program with GLPG3970 in rheumatoid arthritis
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LDL
Low-density lipoprotein. LDL contributes to heart disease at high levels
Lipoprotein
Lipoproteins are substances made of protein and fat that carry cholesterol through your bloodstream. There are
two main types of cholesterol: High-density lipoprotein (HDL), or "good" cholesterol and Low-density lipoprotein
(LDL), or "bad" cholesterol
Liver enzymes
Inflamed or injured liver cells secrete higher than normal amounts of certain chemicals, including liver
enzymes, into the bloodstream
LPA
Lysophosphatidic acid (LPA) is a signaling molecule involved in fibrosis
Lymphocyte
Type of white blood cell that is part of the immune system
MACE
Major adverse cardiovascular events; a composite endpoint frequently used in cardiovascular research
MANTA
A Phase 2 semen parameter trial with filgotinib in male patients with CD or UC
MANTA-RAy
Phase 2 semen parameter trial with filgotinib in male patients with RA, PsA, or AS
MHLW
Japanese Ministry of Health, Labor and Welfare (MHLW), in charge of Japanese market authorization of new
medications
Milestone
Major achievement in a project or program; in our alliances, this is usually associated with a payment
Modulation
The process by which the function of proteins is changed through the use of drugs such as small molecules,
peptides, antibodies or cell therapy
Molecule collections
Chemical libraries, usually consisting of drug-like small molecules that are designed to interact with specific
target classes. These collections can be screened against a target to generate initial “hits” in a drug discovery
program
MTX
Methotrexate; a first-line therapy for inflammatory diseases
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NDA
New Drug Application
Neutrophil
Type of immune system cell which is one of the first cell types to travel to the site of an infection in the body.
Neutrophils are another type of white blood cell which fight infection by ingesting and killing microorganisms
NK cells
Natural killer cells, type of white blood cell with granules of enzymes which can attack tumors or viruses
NOVESA
A Phase 2 trial to evaluate ziritaxestat in systemic sclerosis (SSc). All development with ziritaxestat was
discontinued in February 2021
Ofev
An approved drug (nintedanib) for IPF, marketed by Boehringer Ingelheim
Oligonucleotide
Short DNA or RNA molecule that can be used as research tools or therapeutic drug to change protein expression
Oral dosing
Administration of medicine by the mouth, either as a solution or solid (capsule, pill) form
Osteoarthritis (OA)
The most common form of arthritis, usually occurring after middle age, marked by chronic breakdown of
cartilage in the joints leading to pain, stiffness, and swelling
Outsourcing
Contracting work to a third party
PCKD
Polycystic kidney disease is a genetic disorder in which the renal tubules become structurally abnormal,
resulting in the development and growth of multiple cysts within the kidney
Pharmacokinetics (PK)
Study of what a body does to a drug; the fate of a substance delivered to a body. This includes absorption,
distribution to the tissues, metabolism and excretion. These processes determine the blood concentration of the
drug and its metabolite(s) as a function of time from dosing
Phase 1
First stage of clinical testing of an investigational drug designed to assess the safety and tolerability,
pharmacokinetics of a drug, usually performed in a small number of healthy human volunteers
Phase 2
Second stage of clinical testing, usually performed in no more than several hundred patients, in order to
determine efficacy, tolerability and the dose to use
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Phase 3
Large clinical trials, usually conducted in several hundred to several thousand patients to gain a definitive
understanding of the efficacy and tolerability of the candidate treatment; serves as the principal basis for
regulatory approval
Phenotypic screening
Phenotypic screening is a strategy used in drug discovery to identify molecules with the ability to alter a cell’s
disease characteristics. Animal models and cell-based assays are both strategies used to identify these molecules.
In contrast to target-based drug discovery, phenotypic screening does not rely on knowing the identity of the
specific drug target or its hypothetical role in the disease. A key benefit this approach has over target-based
screening, is its capacity to capture complex biological mechanisms that are not otherwise achievable
PINTA
Phase 2 trial with GPR84 inhibitor GLPG1205 in IPF patients
Pivotal trials
Registrational clinical trials
Placebo-controlled
A substance having no pharmacological effect but administered as a control in testing a biologically active
preparation
Preclinical
Stage of drug research development, undertaken prior to the administration of the drug to humans. Consists of
in vitro and in vivo screening, pharmacokinetics, toxicology, and chemical upscaling
Preclinical candidate (PCC)
A new molecule and potential drug that meets chemical and biological criteria to begin the development
process
Product candidate
Substance that has satisfied the requirements of early preclinical testing and has been selected for development,
starting with formal preclinical safety evaluation followed by clinical testing for the treatment of a certain
disorder in humans
Proof of Concept (POC)
A clinical trial in which first evidence for efficacy of a candidate drug is gathered. A Proof of Concept trial is
usually with a small number of patients and for short duration to get a first impression of drug activity
Proof of Concept study
Phase 2 patient study in which activity as well as safety in patients is evaluated, usually for a new mechanism of
action
PROTAC
Proteolysis targeting chimera, a special small molecule capable of removing unwanted proteins that play a role
in disease processes
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Psoriasis
A chronic skin disease which results in scaly, often itchy areas in patches.
Psoriatic arthritis (PsA)
Psoriatic arthritis or PsA is an inflammatory form of arthritis, affecting up to 30% of psoriasis patients. Psoriatic
arthritis can cause swelling, stiffness and pain in and around the joints, and cause nail changes and overall
fatigue
Pulmonary embolism
A blockage in one of the pulmonary arteries in the lungs
QD dosing
Once-daily dosing (qd from the Latin quaque die)
R&D operations
Research and development operations; unit responsible for discovery and developing new product candidates for
internal pipeline or as part of risk/reward sharing alliances with partners
Replication
The process by which DNA is copied to produce two identical DNA molecules during the process of cell division
Rheumatoid arthritis (RA)
A chronic, systemic inflammatory disease that causes joint inflammation, and usually leads to cartilage
destruction, bone erosion and disability
ROCCELLA
Global Phase 2b trial, together with our collaboration partner Servier, with GLPG1972/S201086 (GLPG1972) in
osteoarthritis (OA). In 2020, Galapagos and Servier reported that no signal of efficacy was found in the ROCCELLA
trial, and have stopped further development of GLPG1972 in this indication
Screening
Method usually applied at the beginning of a drug discovery campaign, where a target is tested in a biochemical
assay against a series of small molecules or antibodies to obtain an initial set of “hits” that show activity against
the target. These hits are then further tested or optimized
SEA TURTLE
Phase 2 program with GLPG3970 in ulcerative colitis
SEC
Securities and Exchange Commission in the US
SELECTION
Phase 3 program evaluating filgotinib in UC patients
SES-CD scores
Simple endoscopic score for CD, involving review of five pre-defined bowel segments, assigning values from 0
(unaffected) to 3 (highly affected)
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Short interfering RNA
A research tool that is used to silence the activity of specific genes
SIK
Salt-inducible kinase. This is the target family for the portfolio of molecules in the Toledo program
Sjögrens syndrome
Sjögren’s Syndrome is a systemic inflammatory disease which can be felt throughout the body, often resulting
in chronic dryness of the eyes and mouth
S&M expenses
Sales and marketing expenses
Small bowel CD (SBCD)
CD causes chronic inflammation and erosion of the intestines. It can affect different regions of gastrointestinal
tract including the stomach and small and large intestines. While isolated SBCD is an uncommon presentation
of CD, involvement of some portion of the small bowel, particularly the ileum, is common
Statin
Statins are a class of lipid-lowering medications that reduce illness and mortality in those who are at high risk
of cardiovascular disease. They are the most common cholesterol-lowering drugs. Low-density lipoprotein (LDL)
carriers of cholesterol play a key role in the development of atherosclerosis and coronary heart disease via the
mechanisms described by the lipid hypothesis
Systemic lupus erythematosus
An autoimmune disease, with systemic manifestations including skin rash, erosion of joints or even kidney
failure.
Systemic sclerosis (SSc)
Systemic sclerosis (SSc) or scleroderma is an autoimmune disease. One of the most visible manifestations is
hardening of the skin. In diffuse cutaneous SSc, which has one of the highest mortality rates among rheumatic
diseases, fibrosis occurs in multiple organs, such as the lung
TAPINOMA
Phase 2 Proof of Concept trial with SIK2/SIK3 inhibitor GLPG3970 in SLE
Target
Proteïn that has been shown to play a role in a disease process and that forms the basis of a therapeutic
intervention or discovery of a medicine
Target discovery
Identification and validation of proteins that have been shown to play a role in a disease process
TEAE
Treatment Emergent Adverse Event, is any event not present prior to the initiation of the treatments or any
event already present that worsens in either intensity or frequency following exposure to the treatments
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Technology access fee
License payment made in return for access to specific technology (e.g. compound or virus collections)
Toledo
Toledo is the program name for the target family of SIK inhibitors
Topical corticosteroids
Corticosteroids which are administered through the skin using an ointment
Transcription
The process of making an RNA copy of a DNA gene sequence
Translation
The process by which a protein is synthetized from mRNA
TYK
Tyrosine kinase is an enzyme that can transfer a phosphate group from ATP to the tyrosine residues of specific
proteins inside a cell. It functions as an "on" or "off" switch in many cellular functions. Tyrosine kinases belong
to a larger class of enzymes known as protein kinases which also attach phosphates to other amino acids such
as serine and threonine. GLPG3667 is a reversible and selective TYK2 kinase domain inhibitor
Ulcerative colitis (UC)
UC is an IBD causing chronic inflammation of the lining of the colon and rectum (unlike CD with inflammation
throughout the gastrointestinal tract)
Uveitis
Uveitis is the term that refers to inflammation inside the eye. This inflammation can be caused by infection,
autoimmune reaction, or by conditions confined primarily to the eye
Venous thrombotic events
When a blood clot breaks loose and travels in the blood, this is called a venous thromboembolism (VTE). The
abbreviation DVT/PE refers to a VTE where a deep vein thrombosis (DVT) has moved to the lungs (PE or
pulmonary embolism)
Ziritaxestat
Formerly known as GLPG1690. Ziritaxestat is a novel drug candidate targeting autotaxin; all development with
ziritaxestat was discontinued in February 2021
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Financial calendar
Colophon
28 April 2021
Annual Shareholders’ Meeting in Mechelen,
Belgium
06 May 2021
First quarter 2021 results
05 August 2021
Half year 2021 results
04 November 2021
Third quarter 2021 results
24 February 2022
Full year 2021 results
Concept, design and online programming
nexxar GmbH, Vienna – Online annual reports
and online sustainability reports
www.nexxar.com
Photography – Management board
Frank van Delft
Photography – Our employees
Frederik Beyens
Animation ‘Embarking on an era of patient
partnership’
Morse studio & Deep Thought Productions
Video ‘Together we make it happen - Emma
Chaffin, UK’
Darren Wilson & Deep Thought Productions
Magazine Copy
Gerard Ivall, Rob Buiter
Copy deadline: 25 March 2021
This report is also available in Dutch and
available for download in the Downloads section
of this report or at www.glpg.com
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Contact
Elizabeth Goodwin
Vice President Investor Relations
Sofie Van Gijsel
Senior Director Investor Relations
Sandra Cauwenberghs
Director of Investor Relations
Galapagos NV
Galapagos NV
Galapagos NV
Generaal De Wittelaan L11 A3
Generaal De Wittelaan L11 A3
Generaal De Wittelaan L11 A3
2800 Mechelen, Belgium
2800 Mechelen, Belgium
2800 Mechelen, Belgium
Tel +1 781 460 1784
Email: ir@glpg.com
Tel. +32 485 19 14 15
Email: ir@glpg.com
Tel. +32 15 34 29 00
Email: ir@glpg.com
Carmen Vroonen
Global Head of Communications
Kyra Obolensky
Senior Director Corporate
& Public Affairs
Galapagos NV
Communications
Galapagos NV
Generaal De Wittelaan L11 A3
Generaal De Wittelaan L11 A3
2800 Mechelen, Belgium
2800 Mechelen, Belgium
Tel. +32 473 82 48 74
Tel. +32 491 92 64 35
Email:
Email:
communications@glpg.com
communications@glpg.com
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