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Galapagos reports 2013 financial results

Maturing pipeline supported by very strong balance sheet

  • Group revenues €160 M (+4% over '12), equal to guidance
  • Group net loss €8.1 M ('12: €5.7 M)
  • Year-end cash €141.5 M, excluding €6.0 M in milestone receivables for 2013 revenues and also excluding €33 M under the CIR program of the French government
  • Expansions of GLPG0634 franchise with AbbVie for Phase 2 studies in RA & Crohn's disease
  • Major collaboration with AbbVie signed in cystic fibrosis, nomination of candidate potentiator GLPG1837
  • Three Phase 2 patient study readouts expected this year: topline 12 week Phase 2B data with GLPG0634 in rheumatoid arthritis in H2, psoriasis data from GSK2856184 and GLPG0974 data in ulcerative colitis in H1
  • Service division H2 '13 external revenues €34.1 M (+5% over normalized H2 '12)
  • Service division full year external revenues €63.2 M (+2% over normalized '12)
  • Management guidance for 2014 Group revenues of €180 M (+12.5% over '13)

Live audio webcast presentation at 10.00 CET, call number + 32-2290-1608, www.glpg.com

MECHELEN, Belgium, March 7, 2014 (GLOBE NEWSWIRE) -- Galapagos NV (Euronext: GLPG) presents audited financial results and highlights the key events for the full year 2013.

"In 2013, Galapagos delivered further validation of its strategy and scientific approach, both in the clinic and on the deal-making front. Galapagos' pipeline has matured further and is supported by the strongest balance sheet ever. The Company expects readouts from four patient studies between now and the end of 2015, with additional novel target based programs moving into pre-clinical and clinical stages in that period as well," CEO Onno van de Stolpe commented. "Galapagos is well-positioned to capitalize on its considerable R&D assets."

"Financially, 2013 was a very good year for the Company. We grew Group revenues 4% to €160 million, fully in line with our guidance. We limited our operating and net loss, notwithstanding the planned substantial increase in spending on Phase 2 clinical programs. The service division rallied in the second half of the year, delivering 5% external revenues growth in H2 2013 compared to H2 2012, normalized for the discontinuation of BioFocus' Basel operations. Despite the weak first half of 2013, the service division ended the full year with 2% external sales growth on a normalized basis. Galapagos' liquid assets position is solid with cash reserves of €141.5 million on 31 December 2013 plus €6.0 million in 2013 milestone receivables," said Guillaume Jetten, CFO of Galapagos.

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

31 Dec 2013 31 Dec 2012
Revenues1/2 159.5 153.0
Services cost of sales -41.3 -48.2
R&D expenditure -99.4 -80.3
General & administrative -26.4 -24.5
Sales & marketing -2.4 -2.1
Operating result before exceptional items -10.0 -2.1
Restructuring & integration -1.1 -2.5
Result on divestment - -2.0
Operating result -11.0 -6.6
Net result for the period -8.1 -5.7
Basic result per share (€) -0.28 -0.22
Cash and cash equivalents³ 141.5 94.7

Notes:
1) '13 Group revenues comprise R&D revenues of €96.4 M and Services revenues of €63.2 M.
2) '12 Group revenues comprise R&D revenues of €87.3 M, normalized Services revenues of €61.9 M and Basel revenues of €3.8 M.
3) Cash on 31 December 2013 did not include €6.0 million in receivables for revenues recognized in 2013 and also does not include €33 million in French CIR receivables.

Details of the financial results

Revenues

Galapagos' revenues for 2013 amounted to €159.5 million, an increase of 4% compared to 2012 and equal to management guidance. The R&D division reported total revenues of €96.4 million, reflecting milestone achievements in the R&D alliances, €45 million in revenue recognition from the $150 million upfront and the $20 million extension AbbVie payments for GLPG0634, and €6.8 million in revenue recognition from the $45 million upfront from AbbVie for cystic fibrosis. After a weak H1, the service division turned around performance to increase total external revenues in H2 by €5.0 million to €34.1 million, a 17% improvement over H1, and a 5% improvement over H2 2012 on a normalized basis. For the full year, the service division reported total external revenues of €63.2 million, an increase of 2% compared to €61.9 million last year on a normalized basis.

Result

The Group incurred a net loss in 2013 of €8.1 million, or €0.28 loss per share, compared to a net loss of €5.7 million, or €0.22 loss per share in 2012.

The R&D division incurred a segment loss of €12.9 million in 2013, compared to a segment loss of €3.5 million last year. R&D expenses were €99.4 million, compared to €80.3 million last year. This planned increase was driven by the Phase 2B program and Phase 2 Crohn's disease study for GLPG0634, together with other clinical studies to support the pipeline.

The Service division reported a gross margin of 35.4% compared to 35.9% in 2012 on a normalized basis and a segment profit of €8.9 million, compared to €9.1 million on a normalized basis in 2012.

General and administrative costs for the Group increased to €26.4 million, compared to €24.5 million in 2012. General and administrative expenses as a share of group revenues increased to 16.6% compared to 16.0% in 2012.

Liquid assets position

Cash balance was €141.5 million on 31 December 2013, the highest year end cash balance the Company has ever had. Including €6.0 million in alliance related receivables for which revenues were recorded in 2013 and for which payment is expected in Q1 2014, the Company's liquid asset position was 147.5 million at year end 2013, compared to €115.4 million at year end 2012. In addition, Galapagos' balance sheet holds a receivable from the French government (Crédit d'Impôt Recherche)[1] amounting to €33 million, payable in four yearly tranches starting mid-2014. Payment of €8.6 million of this is expected in 2014, with equal tranches expected annually subsequent to that for three more years.

Operational highlights

R&D operations

  • In the field of inflammation:
    • expanded scope of Phase 2B program with GLPG0634 in rheumatoid arthritis
    • started Phase 2B program with GLPG0634 in patients with moderate to severe RA who do not respond to methotrexate (MTX). DARWIN 1: dose-range finding in up to 595 patients on background treatment with MTX. DARWIN 2: dose-range finding in up to 280 patients without MTX. Both studies are placebo controlled for first 12 weeks, plus 12 more weeks' treatment for longer term safety data. DARWIN 3: long term extension study. DARWIN 1 remains on track to deliver topline 12 week safety and efficacy data by end 2014
    • extended GLPG0634 collaboration with AbbVie to include Crohn's disease
    • started Phase 2 Crohn's study with GLPG0634
    • started Proof of Concept study with GLPG0974 in ulcerative colitis
    • reported positive Phase 1 results for GLPG1205 as part of its alliance with Janssen Pharmaceuticals NV
    • GSK moved GSK2586184 JAK1 molecule into multiple Phase 2 patient studies in 2013. GSK has since completed the psoriasis study with topline results expected in H1 2014, stopped the lupus study recently due to a lack of efficacy, and put the ulcerative colitis study on hold
  • In orphan diseases:
    • announced co-development of cystic fibrosis therapies with AbbVie
    • selected GLPG1837 as a pre-clinical candidate for cystic fibrosis
  • In the field of oncology:
    • discovered novel candidate drug GLPG1790 to treat breast cancer
  • In osteoarthritis:
    • delivered novel osteoarthritis molecules in the alliance with Servier
    • ended work on the pre-clinical candidate in the Servier osteoarthritis alliance due to toxicity findings of the molecule
  • Grants for research:

Service operations

  • BioFocus
    • extended collaboration with and received Rapid Response Innovation Award from the Michael J. Fox Foundation
    • signed agreement with Biogen Idec in scleroderma
    • signed collaboration with Boehringer Ingelheim
  • Argenta
    • signed collaboration with Boehringer Ingelheim in respiratory diseases
    • signed collaboration with Pcovery for the identification of novel anti-fungal agents
    • announced fourth extension of drug discovery collaboration with Genentech

Corporate

  • Average daily trading volumes and value were 80,179 shares/€1.3 million
  • Private placement and warrant exercises raised €56 million
  • NYSE Liffe listed options in Galapagos shares (ticker: GLS)
  • David Smith appointed as CEO Services
  • Katrine Bosley joined the Galapagos Supervisory Board

Outlook 2014

The Phase 2B clinical program for GLPG0634 is on track to deliver the 12 week topline efficacy and safety data for DARWIN 1 in late 2014. Further topline results are expected from GSK's Phase 2 psoriasis study with GSK2586184 as well as Galapagos' Phase 2 Proof-of-Concept study with GLPG0974 in ulcerative colitis. The Company expects to make significant progress in both partnered and non-partnered R&D programs as the pipeline continues to mature across a broad range of therapeutic areas, resulting in multiple additional clinical and pre-clinical stage programs by end 2014. Management guides for €180 million in Group revenues in 2014, representing a 12.5% increase over 2013.

Annual Financial Report 2013

Galapagos is currently finalizing its financial statements for the year ended 31 December 2013. The auditor has confirmed that his audit procedures, which are substantially completed, have not revealed any material corrections required to be made to the financial information included in this press release. Should any material changes arise during the audit finalization, an additional press release will be issued. Galapagos expects to be able to publish its fully audited Annual Financial Report for the full year 2013 on or around 28 March 2014.

Conference call and webcast presentation

Galapagos will conduct a conference call open to the public today at 10:00 Central European Time (CET), which will also be webcast. To participate in the conference call, please call +32-2290-1608 ten minutes prior to commencement. A question and answer session will follow the presentation of the results. Go to www.glpg.com to access the live audio webcast. The archived webcast will also be available for replay shortly after the close of the call.

Financial calendar

29 April 2014 Annual General Meeting of Shareholders in Mechelen
16 May 2014 First Quarter 2014 Business Update
8 Augustus 2014 First Half 2014 Results
14 November 2014 Third Quarter 2014 Business Update
6 March 2015 Full Year 2014 Results

About Galapagos

Galapagos (Euronext: GLPG; OTC: GLPYY) is specialized in novel modes-of-action, with a large pipeline comprising of six Phase 2 studies (three led by GSK), one Phase 1 study, six pre-clinical, and 20 discovery small-molecule and antibody programs in cystic fibrosis, inflammation, antibiotics, metabolic disease, and other indications. In the field of inflammation, AbbVie and Galapagos signed a worldwide license agreement whereby AbbVie will be responsible for further development and commercialization of GLPG0634 after Phase 2B. GLPG0634 is an orally-available, selective inhibitor of JAK1 for the treatment of rheumatoid arthritis and potentially other inflammatory diseases, currently in Phase 2B studies in RA and in Phase 2 in Crohn's disease. Galapagos has another selective JAK1 inhibitor in Phase 2 in ulcerative colitis and psoriasis, GSK2586184 (formerly GLPG0778, in-licensed by GlaxoSmithKline in 2012). GLPG0974 is the first inhibitor of FFA2 to be evaluated clinically for the treatment of IBD; this program is currently in a Proof-of-Concept Phase 2 study. GLPG1205 is a first-in-class molecule that targets inflammatory disorders and has completed Phase 1. AbbVie and Galapagos signed an agreement in CF where they work collaboratively to develop and commercialize oral drugs that address two mutations in the CFTR gene, the G551D and F508del mutation. Potentiator GLPG1837 is at the pre-clinical candidate stage. The Galapagos Group, including fee-for-service companies BioFocus, Argenta and Fidelta, has around 800 employees and operates facilities in five countries, with global headquarters in Mechelen, Belgium. Further information at: www.glpg.com

CONTACT

Elizabeth Goodwin, Head of Corporate Communications & Investor Relations
Tel: +31 6 2291 6240
ir@glpg.com

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

[1] Crédit d'Impôt Recherche refers to an innovation incentive system underwritten by the French government

2013 financial tables http://hugin.info/133350/R/1767054/600212.PDF

HUG#1767054

Source:Galapagos NV