SOURCE: Galapagos NV

March 07, 2008 02:08 ET

Galapagos announces 2007 full year results

MECHELEN, BELGIUM--(Marketwire - March 7, 2008) -



* Revenues increased 87% to EUR 65.9 million, exceeding guidance
* Year-end cash position of EUR 49.3 million
* BioFocus DPI reported segment loss of EUR 3.9 million
* Net loss per share increased to EUR 1.06 from EUR 0.84 in 2006
* Guidance for 2008 revenues EUR 75-80 million, year end cash position of
  approximately EUR 25 million

Webcast audio conference presentation today on www.glpg.com
14.00 CET/8:00 AM EST, call number +32 2290 1608

Mechelen, Belgium; 7 March 2008 - Galapagos NV (Euronext: GLPG) announces its 2007 full year results and provides market guidance for 2008.

In 2007 Galapagos grew revenues by 87% and made sound progress toward entering the clinic with its bone and joint programs. In a year of restructuring and consolidation following the acquisitions made in 2006, the BioFocus DPI service division reported year-on-year growth in segment revenues of 39% to EUR 48.4 M. The Drug Discovery division showed outstanding results across all therapeutic areas, attracting big pharma partners for alliances in the rheumatoid arthritis and osteoporosis programs as well as for anti-infectives, the first alliance outside the Company's bone & joint diseases core area. By executing this partnering strategy, Galapagos can expand its internal drug discovery, while reducing the impact to cash burn in the years to come.

"In our third year as a public company we have made major steps towards building a European leader in drug discovery. We have delivered on our discovery research, secured long-term alliance partners for our therapeutic programs, and established BioFocus DPI as a leader in discovery services. We are proud of the results reached in 2007, showing a substantial growth in revenues and maintaining a healthy cash balance. Galapagos will continue to build on this momentum in 2008, with the anticipated entry into the clinic of our bone metastasis program and IND submission for rheumatoid arthritis," said Onno van de Stolpe, Chief Executive Officer of Galapagos.

"Galapagos has demonstrated that it can deliver its R&D milestones, with EUR 22.9 million in external revenues in its Drug Discovery division. Through its alliance strategy, Galapagos has established a model for financing expansion of R&D activities without incurring a corresponding impact to cash burn. Despite BioFocus DPI's segment loss, we believe the restructuring in 2007 will strengthen its leading position and bring the division back to profitability," said Leo Steenbergen, Chief Financial Officer of Galapagos.

Key figures 2007 (consolidated)
(EUR   millions, except net loss per share)

+----------------------------------------------------------+
|                            | Dec 31, 2007 | Dec 31, 2006 |
|----------------------------+--------------+--------------|
| Revenues                   |         65.9 |         35.2 |
|----------------------------+--------------+--------------|
| Cost of sales              |        -30.1 |        -19.6 |
|----------------------------+--------------+--------------|
| Gross profit               |         35.8 |         15,6 |
|----------------------------+--------------+--------------|
| Other income               |          1.5 |          3.0 |
|----------------------------+--------------+--------------|
| R&D expenditure            |        -30.6 |        -15.9 |
|----------------------------+--------------+--------------|
| General  & administrative  |        -19.4 |        -12.0 |
|----------------------------+--------------+--------------|
| Sales & marketing          |         -2.5 |         -1.9 |
|----------------------------+--------------+--------------|
| Restructuring & impairment |         -6.6 |         -0.6 |
|----------------------------+--------------+--------------|
| Operating result           |        -21.8 |        -11.8 |
|----------------------------+--------------+--------------|
| Net loss for the period    |        -21.9 |        -11.3 |
|----------------------------+--------------+--------------|
| Basic loss per share       |        -1.06 |        -0.84 |
|----------------------------+--------------+--------------|
|                            |              |              |
|----------------------------+--------------+--------------|
| Cash and cash equivalents  |         49.3 |         51.5 |
+----------------------------------------------------------+


(Link to financial highlights at the bottom of this message)


Operational overview

Drug Discovery division

The Drug Discovery division delivered exciting results across all core programs. The Company announced that its rheumatoid arthritis candidate drug demonstrates significant bone protection and reduced inflammation in the industry standard mouse model. The effect of this oral compound was at least equivalent to Enbrel® (etanercept), the injectable anti-TNF treatment for rheumatoid arthritis. In bone metastasis, Galapagos' candidate drug has shown reduction of bone metastasis and bone degeneration comparable to Zometa® (zolendronate), and superior prevention of metastases to other organs. Based on these encouraging results, Galapagos announced the initiation of pre-clinical development of both compounds, with the aim to file Investigational New Drug (IND) applications for each and begin with dosing the bone metastasis compound in humans in a Phase I clinical trial before the end of 2008. Galapagos aims to initiate a clinical Phase I trial in rheumatoid arthritis shortly thereafter.

Galapagos announced achievement of Proof of Concept (reduction of targeted symptoms) in pre-clinical models in its osteoarthritis program. Galapagos' osteoarthritis program has progressed from validated targets to a Proof of Concept in 18 months. The data generated thus far encourage the Company to aim for delivery of a pre-clinical candidate in osteoarthritis by end 2008.

In June 2007, Galapagos announced the expansion of the scope of the osteoarthritis alliance with GlaxoSmithKline (GSK) to include up to two drug discovery programs on selected GSK targets. Additionally, GSK made a EUR 4.4 million equity investment in Galapagos by way of a share issue. Galapagos also attracted world-leading partners for its remaining core programs, in addition to signing a first major alliance outside its core areas. In October 2007, Galapagos entered a major alliance with Janssen Pharmaceutica (a Johnson & Johnson company) to develop novel oral therapeutics in rheumatoid arthritis. In December 2007, Galapagos announced major alliances in osteoporosis with Eli Lilly and in infectious diseases with GSK.

Through its alliance strategy, Galapagos is eligible to receive in excess of EUR 1.7 billion in success-dependent downstream milestone revenues plus up to double-digit royalties on commercial products. Galapagos will be progressing over 40 target-based programs in R&D, the majority of which are partnered with leading pharmaceutical companies.

BioFocus DPI service division

BioFocus DPI has long-standing relationships with more than 35 partners, including most of the large pharma and biotech companies. BioFocus DPI continued to win new business from existing partners and developed several new relationships in 2007 in a highly competitive market. To establish a cost structure for future profitability, the division consolidated operations in 2007 by integrating sites in Cambridge, moving the Heidelberg operations into the Basel site and moving into new facilities in Leiden.

Details of the financial results

Revenue

Galapagos' revenues for the full year 2007 grew 87% to EUR 65.9 million (2006: EUR 35.2 million). Of these revenues, EUR 48.4 million were generated by BioFocus DPI, including EUR 5.4 million inter-company revenues that were eliminated in the consolidation. The Drug Discovery division contributed EUR 22.9 million to Group external revenues.

Results

The Group net loss for the full year 2007 was EUR 21.9 million, or EUR 1.06 per share, compared to EUR 11.3 million, or EUR 0.84 per share for 2006. The main contributing factor to the increase of the net loss was an increase in research and development costs from EUR 15.9 million to EUR 30.6 million. The BioFocus DPI segment result, before restructuring and one-off costs, was a loss of EUR 3.9 million, mainly due to lower than expected sales in biology services and compound libraries as well as to the effect of site consolidations. Medicinal chemistry services exceeded expectations. The order book for biology services has since shown improvement, with the recent EUR 7.6 million collaboration with Janssen Pharmaceutica as an illustration. General and administrative costs amounted to EUR 19.4 million, including EUR 1.4 million for stock-based compensation and other IFRS adjustments. As a percentage of revenue, general and administrative costs were reduced from 34% in 2006 to 29% in 2007. Restructuring costs and impairment amounted to EUR 6.6 million, including costs related to the restructuring and consolidation of operations in Romainville and Chesterford Park, the consolidation of Heidelberg into Basel, and a EUR 1.6 million write-off of intangible assets related to ProSkelia.

Cash flow and cash position

Galapagos' cash and cash equivalents amounted to EUR 49.3 million on 31 December 2007, compared to EUR 51.5 million at the end of 2006. In 2007, EUR 4.8 million in cash was received through capital increases. Strong cash flow in the second half of the year was related to upfront and milestone payments received from Galapagos' alliance partners Janssen Pharmaceutica, GSK and Eli Lilly.

Outlook 2008

Galapagos anticipates continued growth in revenues from milestones in its Drug Discovery division and an increase in sales from BioFocus DPI, resulting in a full-year revenue guidance of between EUR 75-80 million in 2008. Management is confident that the restructuring and consolidation efforts in BioFocus DPI will start to pay off in 2008 and will contribute to bringing the division back into profitability. R&D expenditure is expected to increase to approximately EUR 50 million as a result of progressing its drug candidates towards the clinic, delivering a pre-clinical candidate in osteoarthritis and advancing its other R&D programs. The R&D expenditure is expected to be substantially offset by anticipated milestones from its alliance partners. Full year cash burn in 2008 should be limited to around EUR 25 million, leading to a year end cash position of approximately EUR 25 million.

Annual Financial Report 2007

Galapagos is currently finalizing its financial statements for the year ended 31 December 2007. 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. We expect to be able to publish our fully audited Annual Financial Report for the year 2007 before the end of April 2008.

Conference call and webcast presentation

Galapagos will conduct a conference call open to the public today at 14.00 Central European Time (CET)/8:00 AM US Eastern Standard Time (EST), which will also be webcast. To participate in the conference call, please call +32 2290 1608, or toll free in the US +1 866 225 8754, ten minutes prior to commencement. A question and answer session will follow the presentation of the results. The live audio webcast can be accessed via Galapagos' website at www.glpg.com. The archived webcast also will be available for replay shortly after the close of the call.

About Galapagos

Galapagos (Euronext Brussels: GLPG; Euronext Amsterdam: GLPGA; OTC: GLPYY) is a drug discovery company with pre-clinical programs in bone and joint diseases and bone metastasis. Its division BioFocus DPI offers a full suite of target-to-drug discovery products and services to pharmaceutical and biotech companies, encompassing target discovery and validation, screening and drug discovery through to delivery of pre-clinical candidates. BioFocus DPI also provides adenoviral reagents for rapid identification and validation of novel drug targets, compound libraries for drug screening as well as chemogenomics and ADMET database products to select targets and compounds. Galapagos currently employs 450 people and operates facilities in six countries, with global headquarters in Mechelen, Belgium. More information about Galapagos and BioFocus DPI can be found at www.glpg.com and www.biofocusdpi.com.


CONTACTS

Galapagos NV
Onno van de Stolpe, CEO
Tel: +31 6 2909 8028
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. Nothing in this disclaimer is intended to nor does it affect the obligations and responsibilities of Galapagos pursuant to the rules of the exchanges on which Galapagos' shares are admitted for trading, including the AIM Rules for Companies.


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