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Galapagos reports record revenues and net profit for 2009, foresees sustained profitability

05 March 2010 at 07:30 CET

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

Mechelen, Belgium; 5 March 2010 - Galapagos NV (Euronext: GLPG) presents financial results for the full year 2009 and highlights the successful execution of its business and R&D strategy.

Galapagos surpassed its financial goals in 2009.  Group revenues for the full year 2009 were 106.0 million, or a 34% growth compared to 2008 on a pro forma restated basis[1].  The R&D division delivered record revenues of 63.8 million, an increase of 76% over 2008.  The service division reported external sales of 43.1 million, or an organic growth of 13% compared to 2008 on a pro forma restated basis,1 and a segment result of 7.9 million, more than double the 2008 segment result of 2.9 million.  Substantially increased alliance payments, combined with service division profits, led the Group to achieve an operating profit of 1.7 million, a positive swing of 10 million when compared to 2008.  This operating profit, together with recognition of deferred tax assets from the UK operations, resulted in a net profit of 3.0 million for the Group, 15.2 million above the 2008 results.  Galapagos concluded 2009 with 47.4 million in cash, 9.4 million higher than guidance.

For 2010, management reiterates guidance for Group revenues of at least 135 million, with profitability and a positive operating result and cash flow.

Galapagos made significant advances in its R&D and service operations during the course of 2009.  The Company successfully completed Phase I trials for its lead program, GLPG0259, with plans to initiate Phase II trials in rheumatoid arthritis patients in the second half of 2010.  In total, Galapagos advanced 4 programs into clinical development, delivered 2 pre-clinical candidates and progressed more than 40 discovery programs in 2009.  Galapagos signed new strategic alliances with Merck and Roche in 2009, allowing the Company to capitalize further on its risk/reward sharing alliance strategy.  Galapagos also expanded her arthritis alliance with GSK, the third expansion since its initiation in 2006.  The seven alliances with major pharmaceutical companies have delivered more than 110 million in payments since 2006.  Service division BioFocus benefited from its premium positioning through the extension of ongoing partnerships and the establishment of new collaborations to achieve an increase in operating margins. 

"2009 was a fantastic year for Galapagos.  Following the continued profitability of our BioFocus service operations, we have now reached the point in the Company's development where we believe we have achieved sustainable net profitability for the entire Group," said Guillaume Jetten, Galapagos' Chief Financial Officer.  "Galapagos will continue to generate cash, with a continuing growth of revenues from milestones in our pharma alliances plus sales from our services."

"In 2009, we achieved what we set out to do ten years ago when we started to build this company - create a self-reliant biotech with a pipeline of novel mode-of-action drugs," said Onno van de Stolpe, CEO and founder of Galapagos.  "Through this financial self-reliance, we are now able to focus on the next level of the Company's development - building a portfolio of novel orphan disease drugs.  In 2010, we aim to advance our innovative pipeline, and build further on the foundations of one of the most successful biotech companies in Europe."

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

  31 Dec 2009 Pro forma
31 Dec 2008*
Reported
31 Dec 2008
Revenues 106.0 78.9 77.0
Cost of sales -25.1 -24.4 -27.8
Gross profit 81.0 54.5 49.2
Other income - - 0.8
R&D expenditure -60.0 -38.3 -38.7
General  & administrative -16.9 -19.1 -21.1
Sales & marketing -2.1 -2.2 -2.3
Restructuring & integration -0.3 -3.1 -3.1
Operating profit/loss 1.7 -8.3 -15.2
Net profit/loss for the period 3.0 -12.2 -14.6
Basic profit/loss per share 0.14 -0.58 -0.69
       
Cash and cash equivalents 47.4 27.3 27.3

*Figures exclude BioFocus' San Diego operations and reclassify French tax rebates on research activities and other income as revenues

Financial information
Revenues
Galapagos' revenues for the full year 2009 grew 34% to 106.0 million (pro forma restated 2008: 78.9 million).   BioFocus generated 56.5 million in revenues (+6%), including 13.4 million intra-company revenues eliminated in the consolidation.  The service operations achieved organic sales growth of 13%, indicating the resiliency of BioFocus' premium positioning.  The R&D division increased its revenues by 76% to 63.8 million, driven by success-based payments in all alliances. 

Result
The Group net profit for the full year 2009 was 3.0 million, or 0.14 earnings per share, a positive turnaround of 15.2 million when compared to a loss of 12.2 million, or 0.58 per share, on a pro forma restated basis for 2008.  Research and development costs increased from 38.7 million to 60.0 million, making Galapagos' R&D budget one of the largest in European biotech in 2009.  BioFocus reported a positive segment result of 7.9 million, compared to 2.9 million in 2008.  The service division's substantially improved recurring result was mainly attributable to better gross margins, particularly in the biology division, and to higher capacity utilization.  General and administrative costs decreased to 16.9 million (16% of revenues), as compared to 19.1 million (24% of revenues).  The group net result was also impacted by recognition of 1.3 million in deferred tax assets from the UK operation, as per early adoption of IFRS 3R and IAS 27R.

Cash position
Galapagos' cash and cash equivalents amounted to 47.4 million on 31 December 2009, compared to 27.3 million at the end of 2008.  The positive cash flow from both the R&D and service operations, in combination with the successful 18.2 million private placement in October 2009, resulted in a year-end 2009 cash position of 47.4 million.  This is 9.4 million better (25%) than the updated guidance of 38.0 million given in November following the successful private placement.

Operational highlights

R&D division

Service operations

Corporate

  
Outlook 2010
Galapagos' acquisition of Argenta Discovery 2009 Ltd in February 2010 created one of the world's largest drug discovery contract research operations.  Forecasted revenue from Galapagos' seven alliances with pharmaceutical companies and visibility into the BioFocus and Argenta order books encourage management to give guidance for 2010 Group revenues above 135 million, with profitability and a positive operating income and cash flow for full year 2010.  The Company anticipates having six programs in clinical trials in 2010, including a Phase II study with GLPG0259, its first-in-class candidate medicine in rheumatoid arthritis.

Annual Financial Report 2009
Galapagos is currently finalizing its financial statements for the year ended 31 December 2009.  The auditor has confirmed that his audit procedures, which are substantially completed, have not revealed any material corrections that are required to be made to the financial information included in this press release.  Should any material changes arise during the audit finalization, an additional press release will be issued.  Galapagos expects to be able to publish its fully audited Annual Financial Report for the year 2009 on or before 1 April 2010. 

Conference call and webcast presentation

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

Financial calendar
27 April 2010                 Annual general meeting of shareholders
14 May 2010                  First quarter 2010 business update
6 August 2010                First half 2010 results
12 November 2010         Third quarter 2010 business update
4 March 2011                 Full year 2010 results

About Galapagos
Galapagos (Euronext: GLPG; OTC: GLPYY) is a mid-size biotechnology company specialized in the discovery and development of small molecule and antibody therapies with novel modes-of-action.  The Company is progressing one of the largest pipelines in biotech, with four clinical and over 40 small molecule discovery/pre-clinical programs.  Through risk/reward-sharing alliances with GlaxoSmithKline, Lilly, Janssen Pharmaceutica, Merck & Co. and Roche, Galapagos is eligible to receive up to 3 billion in downstream milestones, plus royalties.  With the acquisition of Argenta, Galapagos now has more than 650 employees and operates facilities in six countries, with global headquarters in Mechelen, Belgium.  More info at: www.glpg.com

CONTACT

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

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

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

 

 

[1]2008 figures have been restated for the sale of the San Diego service operations as well as the reclassification of subsidies and French tax rebates on research activities as revenues for transparency and common industry practice.

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