Galapagos announces 2005 annual results

Friday, 03. March 2006 08:00

* Full year 2005 revenues increase 44% to € 11.2 M
* Net loss of € 6.5 M in 2005
* BioFocus profitable in Q4 '05, contributing € 1 M to Galapagos
* Operating cash burn of € 4.7 M in 2005, lower than guidance
* Solid year-end cash position of € 23.6 M
* Strategic acceleration via successful IPO and acquisition of
BioFocus
* Substantially expanded customer base
* In vivo results from rheumatoid arthritis program validated drug
discovery engine

Mechelen, Belgium; 3 March 2006 - Galapagos NV (Euronext & LSE:
GLPG), a genomics-based drug discovery company, announces its full
year results for 2005 and provides guidance for 2006.

Total revenue for 2005 increased with 44% to € 11.2 million,
including the BioFocus plc acquisition, compared to € 7.8 million in
2004. The increase is the result of fourth quarter revenues
generated by BioFocus plc, which was acquired October 17, 2005 and
consolidated as of that date in Galapagos' revenues. The net loss
for 2005 increased as planned to € 6.5 million from € 3.6 million
last year, reflecting stepped up R&D program investment. Full year
cash burn (excluding IPO and BioFocus acquisition costs) was € 4.7
million, compared to € 2.7 million reported in 2004. Cash and cash
equivalents amounted to € 23.6 million on December 31, 2005, compared
to € 10.3 million on December 31, 2004.

"Galapagos made several bold moves in 2005. As a result, the Company
has grown strongly and has come to be recognized as an important
European biotechnology company. We find ourselves in a phase of
acceleration that continues into 2006," said Onno van de Stolpe,
Galapagos' CEO. "By joining forces with BioFocus plc, Galapagos has
achieved critical mass in drug discovery and has become an integrated
player spanning all workflows from target discovery to the selection
of drug candidates. Furthermore, we have made considerable progress
in our in-house drug discovery programs for bone and joint diseases
and are accelerating these compounds toward clinical development."

"The integration activities from Q4 are bearing fruit. The order
book is strong and we have good visibility on 2006 performance," said
David Smith, CFO Galapagos. "Our confidence in the revenue streams
allows us to provide guidance on 2006 of between € 25 and € 30
million, a significant step change on 2005 pro forma revenues of €
17.5 million."
Key figures 2005
(€ thousand, except net loss per share)


+-----------------------------------------------------------------+
| | Dec 31, 2005 | Dec 31, 2004 |
|---------------------------+----------------------+--------------|
| Revenues | 11,240 | 7,777 |
|---------------------------+----------------------+--------------|
| Cost of sales | -4,829 | -1,288 |
|---------------------------+----------------------+--------------|
| Gross profit | 6,411 | 6,489 |
|---------------------------+----------------------+--------------|
| R&D expenditure | -6,700 | -5,443 |
|---------------------------+----------------------+--------------|
| Sales, general, & admin | -6,158 | -4,654 |
|---------------------------+----------------------+--------------|
| Integration costs | -281 | |
|---------------------------+----------------------+--------------|
| Other | 187 | 19 |
|---------------------------+----------------------+--------------|
| Net loss for the period | -6,541 | -3,589 |
|---------------------------+----------------------+--------------|
| Basic loss per share (€) | -0.73 | -0.60 |
|---------------------------+----------------------+--------------|
| | | |
|---------------------------+----------------------+--------------|
| Cash and cash equivalents | 23,617 | 10,274 |
+-----------------------------------------------------------------+


Details of the financial results
Note: Consolidation of BioFocus plc results is effective from October
17, 2005.

Revenue

Galapagos' revenues for the full year 2005 increased by 44% to € 11.2
million (2004: € 7.8 million), attributable to the acquisition and
consolidation of BioFocus plc in the fourth quarter of 2005. Of
these revenues, € 9.1 million were generated by BioFocus (BioFocus
plc plus Galadeno, the former service division of Galapagos).

Revenues generated by the former (without the BioFocus plc
acquisition) Galapagos in fourth quarter 2005 amounted to € 1.4
million compared to € 4.2 million in the same period last year. This
decrease is attributed to the large and unique nature of revenues in
fourth quarter 2004, including the asthma target outlicensing to GSK
and license payments Celgene and Wyeth. Excluding these agreements,
sales in the two periods were comparable.

The newly formed BioFocus service division (BioFocus plc plus
Galadeno) generated Q4 2005 consolidated revenues of € 7.4 million.
Total Group revenues for Q4 2005 were € 7.9 million, exceeding
previous guidance of € 7.7 million.

For comparison purposes, had the BioFocus plc acquisition occurred
from January 1st, pro forma consolidated revenues of Galapagos and
BioFocus plc would have been € 17.5 million in 2005, excluding
inter-company sales of € 0.8 million.

Results

The net loss for the full year 2005 was € 6.5 million, or € 0.73 per
share, compared to € 3.6 million, or € 0.60 per share for 2004. The
main contributing factor to the planned increase of the net loss is
an increase in research and development costs of € 1.3 million.

In Q4, BioFocus has contributed a profit of € 1,0 million to the
result of the Group on a fully loaded basis. Total Group loss for Q4
2005 was € 0.9 million.
Total research and development expenses in 2005 were € 6.7 million,
compared to € 5.4 million in 2004. The additional investment in R&D
allowed us to progress into drug discovery a number of bone and joint
targets, with the published result of our lead compound in rheumatoid
arthritis that successfully showed reduced paw swelling in a mouse
model.

Cash flow and cash position
Galapagos raised € 22.4 million in a public offering priced at € 7
per share, amounting to a net cash contribution of € 20.8 million.
Full year operational cash burn, excluding the IPO and BioFocus plc
acquisition, amounted to € 4.7 million, a reflection of continued
cash management.
Galapagos' cash and cash equivalents amounted to € 23.6 million on
December 31, 2005.


Financial outlook 2006

Galapagos expects the full-year revenues for 2006 to fall within the
range of € 25 to € 30 million, a 40 to 70% increase over pro forma
revenues of € 17.5 million in 2005. The Company expects a maximum
investment in research and development of € 9.0 million, a 34%
increase over 2005, for progression of Galapagos' internal drug
discovery programs in 2006.


Corporate highlights

Galapagos' fourth quarter highlights for 2005 include:

* Proof of Concept (in vivo) in rheumatoid arthritis
* Completion of the acquisition of BioFocus plc and listing on the
AiM in London
* Integration of Galapagos' service unit, Galadeno, and BioFocus
plc completed
* Executive Committee strengthened with the addition of David Smith
as CFO, Chris Newton as Senior VP BioFocus, and David Phillips as
Senior VP Sales & Marketing
* Secured US patent further protecting our adenoviral based target
discovery platform
* BioFocus' North American sales office opened in Boston

Operational highlights
Partnering activities

More than 20 agreements were signed with top biotech and
pharmaceutical companies in 2005, many of them extensions or
expansions of existing collaborations. New collaboration agreements
were signed with Idenix, Novartis, GSK, Lilly, Senexis, Prolysis,
Celera Genomics, the Cystic Fibrosis Foundation and the High Q
Foundation.

In the fourth quarter, several large agreements with both new and
existing customers for BioFocus were concluded:

* Idenix Pharmaceuticals entered a two-year drug discovery
collaboration with BioFocus worth up to $ 2.5 million with the
aim to discover compounds for Idenix's infectious disease
programs.
* Senexis expanded their collaboration with BioFocus to optimise
Senexis' novel inhibitors of amyloid-induced toxicity and
neuroinflammation for the treatment of Alzheimer's disease.
* Amgen expanded its drug discovery collaboration with BioFocus.
The multi-million dollar deal, which includes a $ 2.3 million
upfront fee for biology and computational/medicinal chemistry
services, will run throughout 2006.
* Prolysis and BioFocus extended their research collaboration
announced earlier this year. Prolysis will fund the medicinal
chemistry program aimed at identifying dual enzyme inhibitors
that can overcome the problem of antibiotic resistance throughout
2006.
* BioFocus entered into a collaboration with Cresset BMD to develop
a new range of compound libraries. This new product offering
will further strengthen BioFocus' competitive edge in targeted
compound libraries for high-value drug targets such as GPCRs and
ion channels thereby accelerating BioFocus customers' drug
discovery programs.


Galapagos drug discovery

* A number of targets validated through Galapagos target discovery
engine are being progressed through Galapagos' internal drug
discovery programs in bone and joint diseases.
* In our rheumatoid arthritis program, we aim to develop safe and
orally available therapeutics to reduce and even stop joint
destruction and inflammation. Galapagos' rheumatoid arthritis
targets were discovered and validated in disease-relevant assays
that use cells derived from rheumatoid arthritis patients. A
number of these targets are being progressed through Galapagos'
internal drug discovery program. A lead compound, from a series
that was designed against the most advanced kinase target,
successfully demonstrated an in vivo Proof of Concept in the
industry standard rheumatoid arthritis animal model. In this
mouse model, the lead compound modulated pro-inflammatory
cytokines (regulatory proteins that mediate the immune response)
such as TNF-alpha and those interleukins that are known to play a
pivotal role in the arthritis process. In addition, the lead
compound showed a reduction in paw swelling in this mouse model.
We will now focus our resources on accelerating this compound
series, and the rest of the target portfolio towards clinical
development.
* These results provide strong validation for our target discovery
platform to deliver novel targets that can be the basis for the
development of disease modifying drugs.


Annual report and annual shareholder meeting

The electronic version of Galapagos' Annual Report 2005 is now
available online at www.glpg.com/investor/financial_reports.htm.
Printed versions of the Galapagos Company Report 2005 will be
available shortly and can be requested by e-mailing ir@glpg.com.

Galapagos' 2005 annual shareholder meeting will take place at
Galapagos' headquarters in Mechelen, Belgium on April 4, 2006 at
18.00 Central European Time (CET).


Conference call and webcast presentation

Galapagos will conduct a conference call open to the public today at
09.30 Central European Time (CET), which will also be webcast. To
participate in the conference call, please call +32 2290 1608 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, and will be
available for replay a few minutes after the live version airs.
About Galapagos

Galapagos is a publicly traded, genomics-based drug discovery company
(Euronext Brussels, GLPG; Euronext Amsterdam, GLPGA, London AiM:
GLPG) that has drug discovery programs based on proprietary, novel
targets in bone and joint diseases - osteoarthritis, osteoporosis and
rheumatoid arthritis. Galapagos offers a full suite of
target-to-drug discovery products and services to pharmaceutical and
biotech companies through its division BioFocus, encompassing target
discovery and validation, and drug discovery services through to
delivery of pre-clinical candidates. In addition, BioFocus provides
adenoviral reagents for rapid identification and validation of novel
drug targets and compound libraries for screening. Galapagos
currently employs more than 200 people, including 80 PhDs, and
occupies facilities in Mechelen, Belgium, Saffron Walden, UK and
Leiden, The Netherlands. The partners of Galapagos include Amgen,
AstraZeneca, BASF, Bayer, Boehringer Ingelheim, Celgene,
GlaxoSmithKline, Idenix, Novartis, Organon, Serono, Vertex, and
Wyeth. More information about Galapagos and BioFocus can be found at
www.glpg.com.
CONTACT

Galapagos NV
Onno van de Stolpe, CEO
Tel: +31 6 2909 8028
ir@glpg.com
This press release may contain forward-looking statements, including,
without limitation, statements containing the words "believes",
"anticipates", "expects", "intends", "plans", "seeks", "estimates",
"may", "will" 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 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
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with regard thereto or any change in events, conditions or
circumstances on which any such statement is based, unless required
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