On track for building sizeable pipeline while maintaining strong cash position
Click here to access the live audio webcast presentation at 10.00 CET today,
call number +32.2290.1791
Mechelen, Belgium; 5 August 2011 - Galapagos NV (Euronext: GLPG) announces its half year results and maintains guidance for the full year 2011.
"Revenues in the first half were lower than last year, caused by timing of alliance milestones. The service division had a good first half, attaining 15% external growth," said Galapagos CEO, Onno van de Stolpe. "In addition to moving our 50 plus R&D programs forward in the first half, Galapagos' portfolio now has four clinical trials which are expected to deliver efficacy or Proof-of-Mechanism data by year end. Galapagos is in a cycle where many of our business objectives are achieved in the last months of the year. With a potential new alliance in the pipeline and a number of achievable discovery milestones scheduled for the last quarter, we see opportunities to reach our full year 2011 guidance, but with the intrinsic challenges of R&D."
Key figures half year 2011
(€ millions, except net loss per share)
| Continuing Operations 30 June 2011 | Continuing Operations 30 June 2010 | Group Total 30 June 2011 | Group Total 30 June 2010 | |
| Revenues | 39.7 | 45.4 | 42.1 | 49.9 |
| Services cost of sales | -18.0 | -14.7 | -19.8 | -16.6 |
| Gross profit | 21.7 | 30.7 | 22.3 | 33.3 |
| R&D expenditure | -42.4 | -33.1 | -42.4 | -33.1 |
| General & administrative | -11.0 | -9.6 | -11.6 | -10.3 |
| Sales & marketing | -1.1 | -1.2 | -1.1 | -1.4 |
| Restructuring & integration costs | - | -0.4 | - | -0.4 |
| Result on divestment | 5.9 | - | 2.9 | - |
| Operating loss | -26.8 | -13.5 | -29.9 | -11.9 |
| Net loss for the period | -27.7 | -12.2 | -30.8 | -10.5 |
| Basic loss per share (€) | -1.05 | -0.51 | -1.17 | -0.45 |
| Cash and cash equivalents | NA | NA | 49.8 | 27.2 |
Note: In the above table, continuing operations exclude the compound management business of BioFocus (Compound Focus Inc., based in South San Francisco, CA, USA) which was sold on 31 May 2011.
Details of the financial results
Revenues
Galapagos' revenues from continuing operations for the first half of 2011 amount to €39.7 M compared to €45.4 M in the same period of 2010. The R&D division reported revenues of €19.3 M (including €3.6 M intersegment revenues), compared to €27.4 M in the same period last year (-39% on external revenue). This is a consequence of most alliance milestones for 2011 being scheduled to be reached in the last months of the year. The service division revenues showed 10% organic growth and 15% external revenues growth for the period, allowing for 5 months revenues from Argenta in 2010. Services revenues from continuing operations amount to €30.0 M (including €6.0 M in intersegment revenues) in the first half of 2011, compared to €25.9 M (including €6.0 M in intersegment revenues) for continuing operations in the same period last year.
Results
The group net loss from continuing operations for the first half-year of 2011 was €27.7 M, compared to the loss of €12.2 M for the first six months of 2010. The operating profit for the continuing service operations over the first six months of the year was €2.9 M. Gross margins of the continuing service operations were 33%, compared to 28% in the first half of last year.
The R&D division reported an operating loss of €27.0 M, compared to €11.5 M the first six months of 2010. R&D expenses for the Group in the first half-year of 2011 were €42.4 M compared to €33.1 M in the same period of 2010. This planned increase can be explained by the acquisition of GlaxoSmithKline's research centre in Zagreb, Croatia in September 2010 and by increasing development costs for Galapagos' maturing pipeline. The increased R&D expenses also reflect expenditures incurred for a number of potential success-based payments which are anticipated in the second half of 2011.
General and administrative (G&A) expenses of the Group's continuing operations were €11.0 M in the first half of 2011, compared to €9.6 M in the first six months of 2010. This increase in G&A expenses (from 21% to 28% of revenues) is due to increased costs for intellectual property, G&A for the acquired operations Argenta and Zagreb, and the reclassification of a number of R&D employees into G&A costs.
Cash flow and cash position
A net increase of €9.4 M in cash and cash equivalents was recorded during the first half of 2011, compared to a decrease of €20.2 M in the same period last year. This increase is mainly due to the collection of €25 M in milestones which were achieved at the end of 2010. A portion of the net cash increase can be attributed to the disposal of Compound Focus for which Galapagos received €9.4 M in cash after deduction of costs associated to the sale. Galapagos' cash and cash equivalents amount to €49.8 M on 30 June 2011.
Disposal of subsidiary
On 1 June 2011 Galapagos sold its facility in South San Francisco (Compound Focus Inc.), the compound management business of BioFocus, to a subsidiary of Evotec AG. This facility has been part of BioFocus, together with Argenta the service division of the Galapagos Group, since the acquisition of the Discovery Partners International assets by Galapagos in July 2006. For the sale of all shares in Compound Focus, Galapagos received a cash upfront of €10.25 M with an additional €2.25 M in potential earn out payments. These earn out payments are considered to be contingent assets and have consequently not yet been recognized in accordance with IAS 37. The realized gain on the sale of Compound Focus amounts to €2.9 M.
Operational overview
R&D division
Service division
Corporate
Outlook 2011
Galapagos has shown a consistent past performance of delivering the majority of its full-year revenues in the second half of the year. Management considers the full-year 2011 guidance figures achievable yet conditional upon reaching certain R&D revenues: Group revenues of €146 M, a positive operational result and cash flow and a positive net result.
The Company continues to advance toward achievement of its strategic objectives for 2011:
Interim Report 2011
The electronic version of Galapagos' Interim Report for half year 2011 is now available online at www.glpg.com/investor/financial_reports.htm. Printed versions of the report can be requested by e-mailing ir@glpg.com.
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 2011
3Q11 interim update 11 November 2011
Full year results 2011 2 March 2012
Annual shareholders meeting 24 April 2012
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 six programs in development and over 50 discovery programs. Through risk/reward-sharing alliances with GlaxoSmithKline, Lilly, Janssen Pharmaceutica, Roche and Servier, Galapagos is eligible to receive up to €2.5 billion in downstream milestones, plus royalties. The Galapagos Group has about 800 employees and operates facilities in six countries, with global headquarters in Mechelen, Belgium. More info at: www.glpg.com
CONTACT
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.