Galapagos NV
AMS : GLPGA
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August 05, 2011 01:35 ET

Galapagos announces half year results 2011

MECHELEN, BELGIUM--(Marketwire - Aug 5, 2011) -


On track for building sizeable pipeline while maintaining strong cash position

· Initiated four clinical trials to deliver efficacy or Proof-of- Mechanism data by year end

· Full year guidance EUR146 M in revenues, positive operating result and cash flow, and net profitability: achievable but conditional upon reaching certain R&D revenues

· Stronger cash position of EUR49.8 M on 30 June 2011 compared to EUR27.2 M on 30 June 2010

· Service division organic revenues growth 10%, external revenues growth 15%

· Service division profit EUR2.9 M

· Group revenues from continuing operations EUR39.7 M compared to EUR45.4 M last year

· Group net loss from continuing operations EUR27.7 M compared to EUR12.2 M loss last year

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

(EUR millions, except net loss per share)

+----------------------------+-------------+-------------+--------+-------+
|                            |             |             |   Group|  Group|
|                            |   Continuing|   Continuing|   Total|  Total|
|                            |   Operations|   Operations| 30 June|30 June|
|                            | 30 June 2011| 30 June 2010|    2011|   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                   |          5.9|            -|     2.9|      -|
|divestment                  |             |             |        |       |
+----------------------------+-------------+-------------+--------+-------+
|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 (EUR)  |        -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 EUR39.7 M compared to EUR45.4 M in the same period of 2010. The R&D division reported revenues of EUR19.3 M (including EUR3.6 M intersegment revenues), compared to EUR27.4 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 EUR30.0 M (including EUR6.0 M in intersegment revenues) in the first half of 2011, compared to EUR25.9 M (including EUR6.0 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 EUR27.7 M, compared to the loss of EUR12.2 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 EUR2.9 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 EUR27.0 M, compared to EUR11.5 M the first six months of 2010. R&D expenses for the Group in the first half- year of 2011 were EUR42.4 M compared to EUR33.1 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 EUR11.0 M in the first half of 2011, compared to EUR9.6 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 EUR9.4 M in cash and cash equivalents was recorded during the first half of 2011, compared to a decrease of EUR20.2 M in the same period last year. This increase is mainly due to the collection of EUR25 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 EUR9.4 M in cash after deduction of costs associated to the sale. Galapagos' cash and cash equivalents amount to EUR49.8 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 EUR10.25 M with an additional EUR2.25 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 EUR2.9 M.

Operational overview

R&D division

  * Initiated Phase Ib trial for GLPG0187 in cancer patients

      * dose escalation trial on track

  * Terminated Phase II trial for GLPG0259 due to limited efficacy

      * focus resources on 11 other rheumatoid arthritis programs

  * Initiated a Phase II Proof-of-Concept trial for GLPG0634, a selective
    JAK1 inhibitor

      * >60% of patients recruited

  * Progressed second Phase I Proof-of-Mechanism study in immuno-
    inflammation alliance with GlaxoSmithKline on track to deliver results
    in Q4 2011
  * Initiated Phase I Proof-of-Mechanism study for cachexia candidate drug
    GLPG0492
  * Received a two-year grant from the Flemish government agency IWT to
    progress Galapagos' proprietary anti-viral programs
  * Advanced around 50 discovery programs, including five antibody programs
    with MorphoSys, and Alzheimer's and cystic fibrosis drug discovery
    programs
  * US patent granted for GLPG0492, European patent granted for GLPG0187

Service division

· Streamlined the offering by selling BioFocus' compound management business to Evotec for EUR12.5 M

· Signed an agreement between Argenta and Dr Reddy's Laboratories of India for drug discovery services

· Signed a target discovery agreement between BioFocus and Ono Pharma in the field of autoimmune disease

· Delivered a panel of validated oncology targets in BioFocus' collaboration with Janssen Research & Development

· Signed a target discovery agreement between BioFocus and Astellas Pharma

· Extended BioFocus' collaboration with Usher III Initiative, a non-profit organization focused on developing treatments for Usher syndrome type III, a rare genetic disorder that causes the loss of hearing and vision

· Entered into a collaboration between BioFocus and The Michael J. Fox Foundation for Parkinson's Research, a not-for-profit organization focused on developing therapies for Parkinson's disease

· Signed a two-year, integrated services agreement between Argenta and Pulmagen

Therapeutics in respiratory diseases

· Extended Argenta's alliance with PRECOS to offer world-class oncology services

Corporate

  * Harvard professor Vicki Sato joined Galapagos' Board of Directors,
    while Ronald Brus resigned from the Board due to policies of his new
    employer
  * Raised EUR0.5 M through warrant exercises, resulting in the issuance of
    60,882 new shares

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 EUR146 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:

· Progress six programs in development and around 50 discovery programs: o Phase II efficacy data from GLPG0634, Phase I Proof-of-Mechanism data from GLPG0778, and Phase I Proof-of-Mechanism data from GLPG0492 o deliver new pre-clinical candidates

· Sign a new R&D alliance

· Outlicense one internal program

· Increase cash and profit contribution of service division

Interim Report 2011

The electronic version of Galapagos' Interim Report for half year 2011 is now available online atwww.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 EUR2.5 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

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.

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Source: Galapagos NV via Thomson Reuters ONE

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