Galapagos Turns Profit, But Costs Loom in 2026 Wind-Down

Date of Call: Feb 24, 2026

Financials Results

• Revenue: Not explicitly provided; operating profit of EUR 295.1M in 2025 vs operating loss of EUR 188.3M in 2024 primarily due to revenue recognition of deferred income.
• Operating Margin: Operating profit of EUR 295.1M in 2025 compared to operating loss of EUR 188.3M in 2024; margin not explicitly quantified.

Guidance:

• Cell therapy wind down expected to be substantially completed by end of Q3 2026.
• Operating cash outflow of up to EUR 50M in Q1 2026 for wind down.
• One-time restructuring cash impact of EUR 125M to EUR 175M in 2026 (reduced from prior guidance).
• Cash costs of EUR 35M to EUR 40M for final implementation of 2025 restructuring.
• TYK2 program costs (Phase II completion, Phase III advancement) expected up to EUR 40M in 2026.
• Expect cash flow neutral to positive by end of 2026.
• Anticipate cash, cash equivalents, and financial investments of EUR 2.775B to EUR 2.850B at Dec 31, 2026, excluding BD activities or currency fluctuations.

Business Commentary:

Financial Performance and Strategic Shift:

• Galapagos reported a total operating profit from continuing operations of EUR 295.1 million in 2025, a significant improvement from an operating loss of EUR 188.3 million in 2024.
• This turnaround was primarily due to the release of deferred income revenue of EUR 1,069 million from the wind-down of cell therapy activities and amendments to the OLCA agreement.

Cash Position and Capital Allocation:

• The company ended 2025 with EUR 2,998 million in cash and financial investments, including EUR 2,159 million held in U.S. dollars, reflecting a strategic shift towards holding more USD assets.
• This move is attributed to the anticipation of business development activities and operational costs primarily in U.S. dollars, as well as higher interest rates on USD investments.

Strategic Focus and Business Development:

• Galapagos is focused on clinically derisked opportunities in immuno-inflammation and oncology, leveraging its collaboration with Gilead to accelerate development and commercialization.
• The strategic focus is supported by the company's strong cash position and experienced management team, aiming to create sustainable shareholder returns.

Cost Management and Restructuring:

• The company incurred significant costs related to the strategic reorganization and wind-down of cell therapy activities, totaling EUR 399.8 million in operating expenses.
• These costs included impairments, severance, and collaboration termination fees, reflecting the deliberate decision to pivot away from non-core activities.

Outlook and Guidance for 2026:

• Galapagos anticipates being cash flow neutral to positive by the end of 2026, with cash, cash equivalents, and financial investments estimated between EUR 2.775 billion to EUR 2.850 billion.
• The company expects to complete the cell therapy wind-down by Q3 2026, with associated cash outflows and restructuring costs factored into the guidance.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'Galapagos had a transformative 2025' and 'we are entering this new chapter with approximately EUR 3 billion in cash at year-end 2025 in a strong position'. Management expressed being 'encouraged by the momentum we've built so far' and 'we are off to a strong start, and we are excited about the future ahead.'

Q&A:

• Question from Brian Abrahams (RBC Capital Markets): Just as you continue to progress on business development, just kind of curious if anything has evolved in terms of what you might be looking for? And then 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?
  Response: Strategy remains consistent: focusing on derisked late-stage clinical assets in i&i and oncology where Galapagos can bring unique competitive advantage. No specific deadline for a deal, but OLCA expiration (~3.5 years away) is an ultimate deadline; aim to complete a transformative transaction before then.

• Question from Philip Nadeau (TD Cowen): Our question is 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?
  Response: High bar remains for any asset, internal or external. Still early with data; full data package not yet in. Given lack of internal Phase III infrastructure, partnering makes sense to do it faster, more capital-efficiently, and create more value; evaluating all options including partnerships.

• Question from Sean McCutcheon (Raymond James): 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? And how much you need to reserve for operating expenses going forward and how the Gilead partnership informs deal sizing and optionality on that front?
  Response: EUR 3B capital must cover deal consideration and development expenses. Gilead partnership is constructive; Gilead is open to contributing upfront payment and development spend, effectively allowing Galapagos to 'go beyond' its standalone capital pool.

• Question from Mathijs Geerts Danau (KBC Securities): Mathijs coming for Jacob. I had a question on the lower cell therapy wind-down costs. Do you maybe expect that to lower further in the future? Or do you see any possibility in that?
  Response: Not providing future guidance, but will update on future calls. One-time restructuring cost range lowered by EUR 25M in this release; updates will be provided as wind down progresses.

• Question from Delphine Le Louet (Bernstein): I was wondering and coming back to the capital allocation and the decision you've been taking 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. And so I was questioning about what was the rationale on the back of that? What was the exact timing for us to be clear? And shall we consider the breakup of, let's say, 2/3 U.S., 1/3 euro as being a picture for your next investment portfolio or for the picture we should have from your investment income in the near future?
  Response: Transitioning euros to dollars started mid-last year due to where BD activity and cost base are moving. Higher interest rates on U.S. dollars (~4%) vs. euros (~2%). Expect to transition more to USD as year progresses but will keep a portion in euros due to ongoing euro-denominated operating expenses.

• Question from Delphine Le Louet (Bernstein): I was wondering if you have or if you can communicate any expectation regarding your -- the breakeven in terms of operating income.
  Response: Expect cash flow neutral to positive by year-end 2026. Wind down costs will be 'chunky' throughout the year, making exact quarterly timing difficult to predict.

Contradiction Point 1

Timeline for Gilead Partnership Contribution

Contradiction regarding Gilead's role and the timeline for its financial contribution to Galapagos.

What was Sean McCutcheon's question from Raymond James? - Sean McCutcheon (Raymond James)

2025Q4: Gilead has indicated openness to contributing upfront capital... effectively allowing Galapagos to \"go beyond the EUR 3 billion\" and expand its deal-making capacity. - [Henry Gosebruch](CEO)

What is the current approach to capital allocation for acquisitions and business development, factoring in operating expenses and how the Gilead partnership affects deal sizing and optionality? - Brian Abrahams (RBC Capital Markets)

2025Q3: Gilead is expected to contribute... capital (upfront and potentially for development). - [Henry Gosebruch](CEO)

Contradiction Point 2

Strategy for GLPG3667 (TYK2) Development

Contradiction on the strategic evaluation of partnering versus internal development for the TYK2 program.

What are your thoughts on the recent earnings results? - Philip Nadeau (TD Cowen)

2025Q4: The company is still in the early stages of evaluating the Phase II data... Partnering with another player makes strategic sense to potentially do more, faster, and more capital-efficiently... - [Henry Gosebruch](CEO)

How does management prioritize internal development versus out-licensing for GLPG3667 (TYK2)? - Chi Meng Fong (BofA Securities)

2025Q3: A partnering process for 3667 was started earlier in the year, but is currently on pause as data is expected in early 2026. - [Henry Gosebruch](CEO)

Contradiction Point 3

Expected Timeline for Cell Therapy Wind-Down

Contradiction on the projected completion timeline for the cell therapy wind-down process.

What are your thoughts on the current market conditions affecting the banking sector? - Mathijs Geerts Danau (KBC Securities)

2025Q4: The costs were reduced due to the execution and completion of the process. Future guidance will be provided on subsequent calls as the wind-down progresses. - [Aaron Cox](CFO)

Will cell therapy wind-down costs decrease further in the future? - Unknown Analyst (Raymond James)

2025Q3: The wind-down... is expected to conclude in Q1 2026. - [Henry Gosebruch](CEO)

Contradiction Point 4

Capital Allocation Strategy and Business Development Outlook

Contradiction on the company's deal-making capacity and financial constraints.

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2025Q4: The company has a EUR 3 billion capital base... Gilead has indicated openness to contributing upfront capital and sharing development costs, effectively allowing Galapagos to 'go beyond the EUR 3 billion' and expand its deal-making capacity. - [Henry Gosebruch](CFO)

How is capital currently allocated for acquisitions and business development, considering operating expenses and the impact of the Gilead partnership on deal sizing and optionality? - Brian Abrahams (RBC Capital Markets)

2025Q1: The cash runway is intentionally aligned to fund through to 2028, providing a sufficient cushion. - [Thad Huston](CFO)

Contradiction Point 5

Breakeven Financial Timeline

Contradiction on the forecast for achieving cash flow neutrality.

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2025Q4: The company expects to be cash flow neutral to positive by the end of 2026. - [Aaron Cox](CFO)

When do you expect to breakeven in operating income? - Brian Abrahams (RBC Capital Markets)

2025Q1: The cash runway is intentionally aligned to fund through to 2028, providing a sufficient cushion. - [Thad Huston](CFO)