Galapagos NV (GLPG.BR) Cash Position Of €232 M Provides Solid Basis For R&D Pipeline Investment
8/8/2014 9:11:12 AM
Net profit of €56 M for first half 2014
• Solid cash balance of €232 M on 30 June 2014, liquid assets position of €240 M
• Group revenues €63 M, including €18 M revenues from discontinued service operations
• Operating loss of continuing operations €15 M, reflecting planned increase in pipeline investment
• Group net profit €56 M, resulting from €68 M net gain on sale of service operations
• Mature clinical pipeline with multiple Phase 1 and 2 readouts expected over next 18 months
• Non-cash revision to full year revenue guidance: now €100 M, including €18 M from discontinued service operations
• Guidance for year end 2014 cash position increased to €175 M (was €170 M)
• GSK stops development of GSK2586184 in psoriasis and ulcerative colitis, explores other indications
Mechelen, Belgium; 8 August 2014 - Galapagos NV (Euronext: GLPG) announces its non-audited half year results and adjusts guidance for the full year 2014.
"Galapagos reported the largest first half cash balance in its history and a substantial profit at half year 2014, resulting from the sale of the service operations to Charles River. Moving forward, we invested more in our pipeline this half, delivering exciting results with our corrector series in cystic fibrosis, encouraging activity of GLPG1790 in melanoma, and full activity against MRSA with our novel antibiotic GLPG1492. We continue to execute on our novel targets, filling our pipeline with new opportunities," said Galapagos CEO Onno van de Stolpe. "Galapagos aims to deliver the 12 week data from DARWIN 1 with GLPG0634 in March 2015, starting a steady flow of Phase 2 readouts expected for GLPG0634 in rheumatoid arthritis and Crohn's next year and potentially triggering payments of $250 million from AbbVie. Galapagos is nearing some key valuation inflection points as it finishes up recruiting for these studies, with a healthy balance sheet to support further growth of our pipeline."
Key figures half year 2014
(€ millions, except net loss per share)
NOTE: Galapagos sold its BioFocus and Argenta service operations to Charles River Laboratories Inc. on 1 April 2014. As a result of this sale the service operations are reported as discontinued operations. Group results include both continuing and discontinued operations.
| || Continuing Operations|
| Continuing Operations|
| Revenues || 45.1 || 49.2 || 63.2 || 77.4 |
| Cost of sales || || || -11.3 || -20.1 |
| R&D expenditure || -52.8 || -48.0 || -52.8 || -48.0 |
| General & administrative costs || -6.4 || -5.9 || -10.5 || -12.9 |
| Sales & marketing costs || -0.7 || -0.6 || -0.9 || -1.1 |
| Restructuring & integration costs || -0.6 || -0.2 || -0.6 || -0.6 |
| Operating result || -15.4 || -5.4 || -12.9 || -5.2 |
| Net financial result || 1.1 || 0.3 || 1.5 || -0.2 |
| Result on divestment || || || 67.5 || |
| Taxes || || || -0.2 || 0.1 |
| Net result for the period || -14.3 || -5.1 || 55.9 || -5.4 |
| Basic profit/loss per share (€) || -0.48 || -0.19 || 1.87 || -0.19 |
| Cash and cash equivalents || NA || NA || 231.5 || 136.7 |
Details of the financial results
(NOTE: Galapagos sold its BioFocus and Argenta service operations to Charles River Laboratories Inc. on 1 April 2014. As a result of this sale the service operations are reported as discontinued operations. Group results include both continuing and discontinued operations.)
Galapagos' Group revenues for the first half of 2014 amounted to €63.2 million compared to €77.4 million in the same period of 2013. R&D revenues (€35.5 million vs €40.2 million last year) were lower due to the achievement of fewer milestones and a non-cash change in estimates of revenue recognition for the '634 program. Other R&D income (€9.6 million) increased in H1 '14, driven mainly by IWT grants from the Flemish government.
The Group realized a net profit for the first half of 2014 of €55.9 million, compared to a loss of €5.4 million in the first six months of 2013.
R&D expenses for the Group in the first half-year of 2014 were €52.8 million compared to €48.0 M in 2013. This planned increase is mainly due to increased efforts on CF and internal programs.
General and administrative expenses of the Group were €10.5 million in the first half of 2014, compared to €12.9 million in the first half of 2013.
Following the sale of the service operations, the Group reported a net profit from discontinued operations of €70.2 million in the first half of 2014. The service operations reported revenues of €18.2 million and a net profit of €2.5 million for the first three months of 2014. Galapagos recorded a result on divestment of €67.5 million.
Liquid assets position
Galapagos' cash and cash equivalents amounted to €231.5 million on 30 June 2014. The Company's liquid asset position of €240.1 million on 30 June 2014 (€147.5 million at year end 2013) included €8.5 million in alliance related receivables for which revenues were recorded in H1 2014, and payment was or is to be received in Q3 2014. A net increase of €90.1 million in cash and cash equivalents was recorded during the first half of 2014, compared to an increase of €42.1 million in the same period last year. The increase this year is due to the €130.8 million net cash proceeds from the sale of the service operations to Charles River Laboratories Inc. in April 2014. Furthermore, Galapagos' balance sheet holds an unconditional and unrestricted receivable from the French government (Crédit d'Impôt Recherche) now amounting to €28 million, payable in three yearly tranches.
o With GLPG0634, we expect topline 12 week results for DARWIN 1 (595 patients, methotrexate add-on) in March 2015 and DARWIN 2 (280 patients, monotherapy) topline 12 week results in Q2 2015, with complete 24 week data package in Q3 2015
o We initiated a 20 week, 180 patient Phase 2 study with GLPG0634 in Crohn's disease, the topline results of which we expect to disclose in Q2 2015
o We presented results for GLPG0634 at EULAR, DDW, and ECCO (abstracts, posters and presentations available on our website)
o Regarding GSK2586184, Galapagos' Jak1 inhibitor licensed to GSK, GSK informed Galapagos that [quote]"GSK have assessed the overall risk:benefit profile of GSK2586184 and have elected to terminate all current indications where GSK2586184 is administered orally for chronic immunoinflammatory diseases (SLE, UC, psoriasis). As disclosed in February 2014, futility was demonstrated in SLE at an early interim analysis of an adaptive phase 2a/b study. For ulcerative colitis and psoriasis, GSK has elected to terminate development principally as a result of the statin drug-drug interaction (DDI) study. Development options for GSK2586184 in other potential indications are presently being explored by GSK."[end quote] Galapagos' other Jak1 inhibitor, GLPG0634, presents a low risk of interference with statin and other drugs concomitantly administered to patients, as Galapagos disclosed at EULAR 2014 (abstract available on our website)
o With GLPG0974, the first selective antagonist of FFA2 in clinical development, we completed a Phase 2 proof-of-concept study in 45 ulcerative colitis (UC) patients. Patients on treatment tolerated it well and showed decreases in two established biomarkers of disease severity. This did not translate to improvement in signs and symptoms during this four week study. Galapagos is performing subgroup analyses, exploring additional indications, and discussing further development of GLPG0974 with potential partners
o We achieved a partial milestone by the nomination of a pre-clinical candidate GLPG1792 in the osteoarthritis alliance with Servier
o In the alliance with MorphoSys, partiese selected MOR106 as the first pre-clinical candidate antibody
o Cystic fibrosis
o We reported new in vitro cellular data showing multiple series of corrector compounds which, in combination with our novel potentiator GLPG1837, restore up to 65% of wild-type CFTR function in f508del mutation, the largest patient group in CF. GLPG1837 is expected to enter the clinic, and a pre-clinical candidate corrector is expected to be nominated, both by end 2014
o Galapagos' fully proprietary narrow spectrum antibiotic with a novel mode-of-action against Methicillin-resistant Staphylococcus aureus, GLPG1492, is expected to be dosed in first volunteers (Phase 1) in early 2015. Pre-clinical data with GLPG1492 showing in vitro cidality and in vivo efficacy were disclosed, with broad coverage of all known MRSA strains. Galapagos has discovered that the mode of action for GLPG1492 can be utilized as a platform for addressing gram positive and gram negative bacteria posing major public health threats, including the ESKAPE pathogens
o We disclosed new data showing high sensitivity to GLPG1790 in metastatic melanoma, including wild-type BRAF. GLPG1790 is fully proprietary to Galapagos
o We disclosed novel target EPHA2 of GLPG1790 at AACR (poster available on our website)
o We initiated a Phase 1 First-In-Human study with GLPG1690, a compound with a novel mode of action from the alliance with Janssen Pharmaceutica NV. GLPG1690 has a novel mode of action discovered by Galapagos, with potential application in pulmonary diseases. This achievement triggered a €6.6 million milestone payment to Galapagos
o We announced two grant awards from Flemish IWT: €2.9 million for cystic fibrosis research and €2.3 million for fibrosis research
• Galapagos sold its service operations to Charles River Laboratories on 1 April 2014 for cash consideration of €129 million, excluding an earnout of €5 million upon achievement of certain commercial targets within one year, and excluding working capital and net cash/debt adjustments
• Van Herk Investments disclosed 5.3% shareholding in Galapagos
• Raised €2.4 million cash through warrant exercises
• Guillaume Jetten resigned as CFO
The Phase 2B clinical program in RA for GLPG0634 is expected to deliver 12 week topline efficacy and safety data for DARWIN 1 in March 2015. The Company expects to make significant progress in 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. With a solid cash balance, Galapagos is very well positioned to support this pipeline development.
Based on the forecast for the remainder of the year, the year-end cash guidance is increased from €170 million to €175 million.
Revenue recognition for AbbVie's payments in 2012 and 2013 for '634 was adjusted in accordance with updated project timelines, and revenue recognition for AbbVie's 2013 CF upfront non-refundable payment was now deferred over a longer period as a result of a change in estimate relative to the period of continuous involvement by Galapagos (in the remaining R&D process). These changes lead management to give new guidance for Group revenues of €100 million, including €18 million revenues from the discontinued service operations. This adjusted revenue guidance has no cash impact.
The statutory auditor, Deloitte Bedrijfsrevisoren/Reviseurs d'Entreprises, represented by Gert Vanhees, confirms that the limited review, which has been substantially completed, did not reveal any significant adjustments to the consolidated half-year financial information included in this press release.
Interim Report 2014
The electronic version of Galapagos' Interim Report for half year 2014 is now available online at www.glpg.com/index.php/companyoverview/financialskey-financials/financial-reports/. Printed versions of the report can be requested by e-mailing email@example.com.
Financial calendar 2014
Full year results 2014 6 March 2015
Annual shareholders meeting 28 April 2015
Galapagos (Euronext: GLPG; OTC: GLPYY) is specialized in novel modes-of-action, with a large pipeline comprising three Phase 2 studies, two Phase 1 studies, five 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 an agreement for the development and commercialization of GLPG0634. 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, 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 has completed a Proof-of-Concept Phase 2 study. GLPG1205 is a first-in-class molecule that targets inflammatory disorders and has completed Phase 1. GLPG1690 is a first-in-class compound that targets pulmonary diseases and is currently in a Phase 1 study. AbbVie and Galapagos signed an agreement in cystic fibrosis to develop and commercialize molecules that address mutations in the CFTR gene. Potentiator GLPG1837 is at the pre-clinical candidate stage. The Galapagos Group, including fee-for-service subsidiary Fidelta, has around 400 employees, operating from its Mechelen, Belgium headquarters and facilities in The Netherlands, France, and Croatia. Further information at: www.glpg.com
Elizabeth Goodwin, Head of Corporate Communications & IR
Tel: +31 6 2291 6240
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