During 2007 company revenues increased 87 per cent to €65.9m; however, the Dutch firm posted an operating loss of €21.8m, a stretch from the €11.8m lost in 2006, after the firm doubled its R&D expenditure to €30.6m as it made progress toward entering the clinic with its bone and joint programs.
Its BioFocus DPI service division reported year-on-year revenue growth of 39 per cent to €48.4m although the unit reported an operating loss of €3.9m, before restructuring and one-off costs, mainly due to lower than expected sales in biology services and compound libraries as well as to the effect of site consolidations, the firm said.
The segment has been undergoing a year of restructuring and consolidation following acquisitions that were made in 2006, of the Discovery Partners International (DPI) operations in July, and of Inpharmatica and ProSkelia in December.
"To establish a cost structure for future profitability", Galapagos consolidated operations in the division in 2007 by integrating sites in Cambridge, UK, moving the Heidelberg, Germany operations into its Basel, Switzerland site and moving into new facilities in Leiden, Germany.
"Despite BioFocus DPI's segment loss, we believe the restructuring in 2007 will strengthen its leading position and bring the division back to profitability," said Leo Steenbergen, chief financial officer of Galapagos.
He added that the demand for medicinal chemistry services in the unit "exceeded expectations" and that the order book for biology services has "since shown improvement", with the recent €7.6m collaboration with Janssen Pharmaceutica given as an illustration.
Meanwhile, the firms' Drug Discovery division showed positive results across all therapeutic areas.
During the year the division brought in R&D milestones of €22.9m and also attracted large new deals with big pharma partners such as AstraZeneca and GlaxoSmithKline (GSK) for alliances in the rheumatoid arthritis and osteoporosis programs as well as for anti-infectives - the first alliance outside the company's core field of bone and joint diseases.
"Through its alliance strategy, Galapagos has established a model for financing expansion of R&D activities without incurring a corresponding impact to cash burn", said Steenbergen.
Looking forward, the firm predicted a significant growth in sales from BioFocus DPI, resulting in a full-year guidance of between €75-80m.
Although R&D expenditure is expected to increase again to approximately €50m, as a result of progressing its drug candidates towards the clinic, delivering a preclinical candidate in osteoarthritis and advancing its other R&D programs, this spending hike is expected to be "substantially" offset by anticipated milestones from its alliance partnerships formed through its Drug Discovery division.
