Galapagos Q4 2025 / FY 2025 Earnings Call - EUR3bn Cash Pile Fuels Pivot to Late-Stage Dealmaking with Gilead Support

Operator: Good day. Thank you for standing by. Welcome to the Galapagos Year-End 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Glenn Shulman, Head of Investor Relations. Please go ahead.

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Good day, everyone. This is Sofie Van Gijsel, Head of Investor Relations, and I’d like to thank you all for joining us today as we report Galapagos’s full year 2025 financial results and fourth quarter business update. Last evening, we issued a press release outlining these results. This release, along with today’s presentation, can be found on the Galapagos investor website at www.glpg.com. Before we begin, I would like to remind everyone that we will be making forward-looking statements. These forward-looking statements include remarks concerning future developments of our company and our pipeline, and possible changes in the industry and competitive environment. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies, and prospects, which are based on the information currently available to us and on assumptions we have made.

Actual results may differ materially from those indicated by these statements and are accurate only as of the date of this recording, February 24, 2026. Galapagos is not under any obligation to update statements regarding the future or to conform to these statements in relation to actual results unless required by law. You are cautioned not to place any undue reliance on these statements. Joining us on today’s call from the executive team are Henry Gosebruch, Chief Executive Officer, Aaron Cox, Chief Financial Officer, Sooin Kwon, Chief Business Officer, and Dan Grossman, Chief Strategy Officer of the company, all of whom will be available during the Q&A session. With all that, let me now turn the call over to Henry Gosebruch, CEO of Galapagos. Henry?

Henry Gosebruch, Chief Executive Officer, Galapagos: Thank you, Glenn, and thank you all for joining us today. Galapagos had a transformative 2025, focused on turning the page from cell therapy, implementing a new strategic direction, and laying a strong foundation for long-term value creation. We are entering this new chapter with approximately EUR 3 billion in cash at year-end 2025, in a strong position to pursue transformative business development opportunities with significant strategic flexibility. The new team is in place to execute on the strategic vision. We have been very deliberate in assembling the right leadership team to execute the strategy, and I could not be more pleased with the level of talent we’ve been able to attract to Galapagos. We’ve assembled a management team with world-class business development expertise and a shared mission of leveraging our unique position to create significant shareholder value.

Collectively, our team has executed hundreds of transactions in the life sciences sector and is working well together with the goal of creating value for our shareholders. We have also evolved our board composition, welcoming five new directors who bring the deep transaction, capital allocation, and operating experiences needed for this next phase of growth. Our objective is not incremental rebuilding, but a fundamental reshaping of the company around programs we believe are capable of delivering meaningful patient impact and sustainable shareholder returns. We are aggressively evaluating opportunities across our focus areas in maintaining a broad dialogue with companies and innovators globally. We are encouraged by the level of potential transactions we have in our deal pipeline and our opportunity to become a unique player in the biotech deal ecosystem and carve out niches where we can be competitively differentiated. At the same time, we are disciplined and selective.

We will allocate our capital carefully and thoughtfully, with clear financial metrics in mind. Our focus remains on clinically de-risked opportunities in areas where we are able to bring unique insights that represent competitive advantage. Lastly, our collaboration with Gilead remains a key strategic advantage and potential competitive differentiation. We are working very closely with Gilead and continue to have active and constructive dialogue as we evaluate opportunities. Their global development and commercialization expertise, combined with our capital base, agility, and deal-making skills, creates a powerful platform as we shape this next phase of growth for Galapagos. Let me briefly provide an update on our legacy R&D asset, TYK2 or GLPG3667. In December, we announced top-line phase two results for GLPG3667 in patients with dermatomyositis and systemic lupus erythematosus or SLE.

GLPG3667 met the primary endpoint in the dermatomyositis study, demonstrating a statistically significant clinical benefit and meaningful improvements on secondary measures of disease activity compared to placebo. We are currently evaluating all strategic options for this program, including pursuing potential partnerships with other I and I players, to accelerate the development of GLPG3667. In conclusion, Galapagos is well positioned for the future. Our year-end cash position of approximately EUR 3 billion, our strong business development and capital allocation experience, provides the strategic flexibility to pursue business development opportunities while maintaining a disciplined focus on value creation. With that overview, I would like to now turn the call over to Aaron Cox, our CFO, to review our full year 2025 financial results and 2026 guidance. Aaron?

Aaron Cox, Chief Financial Officer, Galapagos: Thanks, Henry, and hello, everyone. In the press release issued last night, we detailed our full year 2025 results, provided an update on fourth quarter performance, and shared our 2026 guidance. Total operating profit from continuing operations amounted to EUR 295.1 million in 2025, compared to an operating loss of EUR 188.3 million in 2024. This operating profit was primarily due to the release in revenue of the remaining deferred income balance of EUR 1,069 million, associated with the exclusive access rights granted to Gilead under the OLCA. As a reminder, in conjunction with this transaction in 2019, Galapagos recognized a contract liability of approximately EUR 2.3 billion, which was to be recognized as revenue on a straight line basis over the 10-year term of the agreement.

Following the 2025 OLCA amendments, the intention to wind down and related events in 2025, as of December 31st, it was assessed that there were no remaining obligations that would justify this specific contract liability to be maintained in our IFRS financial statements. We do not expect any cash tax impact in 2025 related to this recognition of revenue. Importantly, while the OLCA still remains in force, we expect that any future business development transaction will be completed under terms that would be different than the existing terms of the OLCA. Turning to expenses.

Operating expenses were negatively impacted for a total of EUR 399.8 million by the decision to wind down the cell therapy activities with an impact of EUR 275 million, consisting of an impairment of the cell therapy activities of EUR 228.1 million, severance costs of EUR 33.3 million, costs for early termination of collaborations of EUR 16.3 million, deal cost of EUR 10.1 million, EUR 1.5 million for additional accelerated non-cash costs recognition for subscription right plans, and EUR 7.5 million of other costs, partly offset by a positive fair value adjustment of the contingent consideration payable of EUR 21.8 million. Additionally, the executed strategic reorganization related to the small molecule business announced in 2025 for EUR 124.8 million.

Financial investments in cash and cash equivalents totaled EUR 2,998 million on December 31st, 2025, as compared to EUR 3,317.8 million on December 31st, 2024. Our cash and cash equivalents and current financial investments included $2,159 million held in US dollars versus $726.9 million on December 31st, 2024. These US dollars were translated to euros at an exchange rate of 1.175. Since year-end, we have converted more euros to US dollars and now hold approximately 72% of our cash in US dollars and 28% in euros. We expect to continue increasing the portion of cash in US dollars as the year progresses. Turning now to our guidance for 2026.

As part of the transformation to the new Galapagos, we announced our intention to wind down our cell therapy activities last fall, and we are now executing on this process following the works council processes that were completed last month. Given the progress we’ve made on this execution, I can now share that we expect the cell therapy wind down to be substantially completed by the end of the third quarter of 2026. In connection with the wind down of the cell therapy activities, we expect an operating cash outflow of up to EUR 50 million in Q1 2026, as well as one-time restructuring cash impact of EUR 125 million-EUR 175 million in 2026. This reflects a EUR 25 million reduction compared to the prior guidance range of EUR 150 million-EUR 200 million.

In addition, we anticipate cash costs of approximately EUR 35 million-EUR 40 million for the final implementation of the restructuring announced in January 2025. Costs related to the ongoing SIC two program, including completion of the phase two clinical trials in DM and SLE, as well as ongoing support to advance the program toward phase three development, are expected to be up to EUR 40 million in 2026. Away from the spend items, we continue to expect meaningful cash flow to come from interest, income, royalties, and tax credits. As a result, we expect to be cash flow neutral to positive by the end of 2026.

We also anticipate we will have approximately EUR 2.775 billion-EUR 2.85 billion in cash equivalents, and financial investments at December 31st, 2026, excluding any business development activities or currency fluctuations. Now let me turn it back to Henry to wrap up.

Henry Gosebruch, Chief Executive Officer, Galapagos: Thanks, Aaron. In closing, 2026 will be a pivotal year for Galapagos as we focus on building long-term value through transformative business development, leveraging our strong balance sheet, our deal-making expertise, and our unique collaboration with Gilead. Our shares remain at a significant discount to the cash figures Aaron just reviewed. We will be focused on closing the gap through execution on our business development plan, thoughtful capital allocation, and engagement with shareholders to rebuild trust and confidence. We are encouraged by the momentum we’ve built so far as we reshape Galapagos with a clear strategy in place. With a disciplined approach to capital allocation, we remain focused on pursuing the right opportunities to build a pipeline of novel therapeutics designed to deliver meaningful benefits for patients and a sustainable value for shareholders.

We are still early in this new chapter of our company, but we are off to a strong start, and we are excited about the future ahead. With that, thank you all for your attention, and we will now open it up for your questions. Operator?

Operator: Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Today’s conference call is limited to one question per participant. Please stand by while we compile the Q&A queue. Our first question comes from the line of Brian Abrahams from RBC Capital Markets. Please go ahead. Your line is open.

Brian Abrahams, Analyst, RBC Capital Markets: Hey, good morning. Thanks for taking my question. As you continue to progress on business development, kind of curious if anything has evolved in terms of what you might be looking for. You know, is there any deadline or any sort of change that we might expect based on the Gilead agreement, if you’re not able to identify assets to bring in by a certain time point? Thanks.

Henry Gosebruch, Chief Executive Officer, Galapagos: Yeah. Hey, Brian, it’s Henry. I’ll take those questions. No, our strategy is really consistent with what we’ve been talking about, since, you know, last fall in terms of focusing on de-risk late-stage clinical assets, not exclusively, but primarily in the I&I and oncology space. I’d say we continue to see a lot of good opportunity there. As we said in the prepared remarks, we’re focusing on opportunities where we think we can bring, you know, unique insight, unique competitive advantage. I think there’s, again, a lot of opportunity and we’re working through our deal funnel and remain confident that there’s a lot of attractive opportunity for us.

With respect to your second question, you know, as we said previously, we’re not gonna set a deadline for a specific deal. We’ll remain, you know, patient, disciplined. We do have some good activity going on, but, you know, it’s more important to do the right deal than to do, you know, a deal by a certain period of time. The OLCA does expire. Now, it doesn’t expire for about 3 years and change, you know, ultimately, that is, you know, that is a deadline, but certainly we’re focused on getting an important transaction, you know, a transformative transaction done ahead of that ultimate expiration of OLCA.

Brian Abrahams, Analyst, RBC Capital Markets: Got it. If something does not happen before then?

Henry Gosebruch, Chief Executive Officer, Galapagos: Well, if something does not happen by then, despite, you know, working really hard on trying to make it happen, then, you know, OLCA would, you know, would expire and, you know, we would, we would go on without the OLCA in place.

Brian Abrahams, Analyst, RBC Capital Markets: Thanks.

Operator: Thank you. We’ll now move on to our next question. Our next question comes from the line of Philip Nadeau from TD Cowen. Please go ahead. Your line is open.

Aaron Cox, Chief Financial Officer, Galapagos: Morning, thanks for taking our question. Our question’s on GLPG3667. In the past, you’ve suggested that the bar to moving that forward internally and investing in it further would be rather high. We’re curious to get an update on your thoughts there. I know you said you’re pursuing all possible avenues of moving that forward, but how does management weigh developing that internally and investing in it versus out licensing? Thanks.

Henry Gosebruch, Chief Executive Officer, Galapagos: Yeah, Phil, I would say, those comments also stand. You know, we have a high bar. Frankly, we have a high bar, not just for GLPG3667, but for any asset, be it, you know, internal or external. We really look at it with, you know, the same unbiased lens. Now with respect to, you know, where we are, you know, again, it’s still early. We, as you know, get the top-line data just before the holiday. You know, data is still coming in, so we don’t have the full package in place. We are in the process of talking to partners.

Again, given that we don’t have the full infrastructure required to really take this into phase three, it makes sense to see where some of the players are that have that and maybe in working with a partner, we can, you know, do more, do it faster, do it more capital efficient and ultimately create more value. We’re focused on looking at that. We’re focused on getting our arms around the data that’s still trickling in. Again, the bar is exactly the same bar that we’ve always set for ourselves.

Delphine Laoui, Analyst, Bernstein: That’s very helpful. Thank you.

Operator: Thank you. Once again, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Today’s conference call is limited to one question per participant. We’ll now move on to our next question. Our next question comes from the line of Sean McCutcheon from Raymond James. Please go ahead. Your line is open.

Sean McCutcheon, Analyst, Raymond James: Hi, guys. Thanks for the questions. Can you speak to your current view on capital allocation, specifically as it relates to the pool of capital you aim to put forth for acquisitions for BD? How much do you need to reserve for operating expenses going forward, and how the Gilead partnership informs deal sizing and optionality on that front? Thanks.

Henry Gosebruch, Chief Executive Officer, Galapagos: Yeah, it’s Henry. Thanks for the question. Look at a high level, I mean, some of what I’m gonna say is pretty obvious, but we have EUR 3 billion in capital. As you point out, that capital needs to account both for, you know, any any consideration to a partner or acquisition target and of course, our development expenses we would, you know, have in any transaction. When you say sort of how does the relationship with Gilead inform our capital allocation, you know, as we said on calls previously, the dialogue with Gilead is quite strong. It’s very, very constructive.

They continue to indicate openness to contribute in both deal terms, meaning, you know, paying some of the upfront consideration as well as taking on some of the development spend operations. Ultimately, in working with Gilead, we can go beyond the EUR 3 billion we have. I think that’s one of the features we think is very attractive in working with Gilead. As we think through it, we don’t just think about our pool of capital, we also think about what, in working with Gilead, can we add to the, you know, add to the pie and therefore kind of go beyond what we could do on our own.

I don’t know if that’s where you were going with your question or, if you want to clarify maybe what I didn’t answer.

Sean McCutcheon, Analyst, Raymond James: no, I think that covers it. Thanks.

Henry Gosebruch, Chief Executive Officer, Galapagos: Good. Well, thank you.

Operator: Thank you. There are no further questions at this time, so I’ll hand the call back to Glenn for closing remarks.

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Thanks, Mel. I think in the Q&A queue, we do have one more or a couple more coming in, if possible, it’d be great to take. I think there’s a question from KBC.

Operator: Okay, one moment, please.

Matthias Danne, Analyst, KBC Securities: Yeah. Hi.

Operator: Please go ahead, Matthias Danne from KBCS. Your line is open.

Matthias Danne, Analyst, KBC Securities: Hi, yeah, Matthias, coming in for Jacob. Yeah, I had a question on the lower cell therapy wind down costs. Do you maybe expect that to lower further in the future, or don’t you see any possibility in that?

Henry Gosebruch, Chief Executive Officer, Galapagos: Yeah, Matthias, thanks. It’s Henry. Thanks for getting the question. I’ll let Aaron answer that.

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Yeah, thanks. We’ll... We’re not providing future guidance here, but we’ll obviously update folks on how that cost envelope is progressing on future calls. Yes, we did lower the range from a previous range of EUR 150 million-EUR 200 million in terms of one-time restructuring costs. We lowered that range by EUR 25 million with this release. As we continue to progress through the wind down, we’ll provide updated costs on future calls.

Matthias Danne, Analyst, KBC Securities: Okay, cool. Thanks.

Operator: Once again, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Today’s conference call is limited to one question per participant. We’ll now move on to our next question. Our next question comes from the line of Delphine Laoui from Bernstein. Please go ahead. Your line is open.

Delphine Laoui, Analyst, Bernstein: Hello. Hi, good morning, everybody. I was wondering and coming back to the capital allocation and the decision you’ve been taking, and especially regarding the cash and the cash allocation, the move from euro to dollar, considering the fact that you didn’t gain as much as financial income as last year. I was questioning about what was the rationale on the back of that? What was the exact timing, for us to be clear? Shall we consider the breakup of, let’s say, two-third U.S., one-third euro as being a picture for your next investment portfolio or for the picture we should have?

Aaron Cox, Chief Financial Officer, Galapagos: ... from your investment to come in the near future?

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Yeah, thanks, Delphine. Mid last year, we started transitioning more euros to dollars, and that was primarily based on where we expected our BD activity to be driven and also where our cost base is starting to move towards, which is more U.S.-based. We provided a range on this call of $2.775 billion-$2.85 billion for the year. As I mentioned before, we’ll update that as we go through the year.

In terms of continued transition to US dollars, we did as you heard from my remarks, we do expect to transition more to US dollars as the year progresses, but still keeping a portion in euros as we still have meaningful operating expenses in euro denomination over the year as we move through this wind down. We do see higher earnings rates in terms of what we’re receiving on our US dollars. As you look at rates across the environment, you could estimate euros earning around 2% and US dollars earning around 4%. While the exchange rate does move, we are seeing significant uptake in terms of the interest earned on the US dollars versus euros.

Aaron Cox, Chief Financial Officer, Galapagos: Okay. Can I ask another one, or, do you have to go back in the queue?

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Go ahead, Delphine. Go ahead.

Aaron Cox, Chief Financial Officer, Galapagos: Yeah, thank you very much. I was wondering if you have or if you can communicate any expectation regarding your, the breakeven in terms of operating income?

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Yeah, you cut out a little bit. You’re asking about what regarding operating income?

Aaron Cox, Chief Financial Officer, Galapagos: Yeah. When do you expect to break even for your operating income?

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Yeah. We’ve indicated we expect to be cash flow neutral to positive by year-end. Obviously, as we work through the wind down and associated costs, those costs are going to be chunky kinda throughout the year. It’s hard to predict exactly which quarter some of those costs are going to fall in, but we do expect to be cash flow neutral or positive by year-end.

Aaron Cox, Chief Financial Officer, Galapagos: Okay. Got it. Thank you.

Operator: Thank you. Once again, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we wait for further questions. We’ll now go to our next question.

Aaron Cox, Chief Financial Officer, Galapagos: Once again.

Operator: Our next question comes from the line of Nora Lazar from Berenberg. There are no further questions at this time, so please go ahead, Glenn, for closing remarks.

Sofie Van Gijsel, Head of Investor Relations, Galapagos: Thanks, Madeline. Thanks, everyone, for taking the time to join us this morning on the call. Just a couple of upcoming activities on the investor relations front. The Galapagos team is gonna be at the TD Cowen conference next week up in Boston, attending the Jefferies by the Beach conference, in a couple of weeks, Kempen Conference coming up in April 15th, and the Bank of America conference in May. You know, those interested in meeting with the team, please feel free to reach out to your sales contact at those respective institutions to schedule a meeting. Lastly, just wanna mention that our annual report will be filed near the end of March 26th. There’ll be additional information coming out then.

If you need anything in the meantime, don’t hesitate to reach out to me. Thank you all for your attention today, and have a great week.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.