Galapagos: a new force in drug discovery

Onno van de Stolpe – CEO

IEX Beleggen in Biotech DagMay 20, 2006

2

2005 – The year of ‘bold moves’

May: IPO on Euronext Brussels & Amsterdam

September: Successful bid on BioFocus – listing on AiM

3

Raises € 22M with IPO

Up 32% since IPO, market cap ~ € 115M

biotech IPO Europe 14%, US -10%

Bid on BioFocus

Offer on BioFocus closed

Offer on BioFocus unconditional

+ 32%

2005 – The year of ‘bold moves’

4

Share capital & history

• Founded 1999 by Crucell & Tibotec

• € 23 M financing: top tier VC’s 2002

• IPO: € 22 M raised

• BioFocus acquisition: 29% of Group shares

Shares: 13,050,743 April 2006

Crucell9%Tibotec

9%

VC's -Burrill

7%

VC's -Alpinvest

4%

VC's - Apax

10%

VC's - Abingworth

11%

Free float50%

5

Targetidentificatio

n

Target validation

Assaydevelopment

Preclinicaltesting

ClinicaltrialsI, II, III

Screening Leadoptimization

Find human protein responsible for disease

Identify chemical compound that binds to protein

Develop compound into drug candidate

Test drug candidate

Galapagos: from protein to drug

Too much/little of target protein

Correct level of target protein

6

Galapagos group – business model

Proprietary target & drug

discovery platform

fee for service offering

therapeutic programs

novel drug candidates

Partnering in:pre-clinicalphase Iphase II

bone &jointdiseases

€

NL & UK160 employees

Belgium60 employees

7

High value deals within reachBioFocus participates in € 3- 4 B drug discovery service market

Targetidentificatio

n

Target validation

Assaydevelopment

Preclinicaltesting

ClinicaltrialsI, II, III

Screening Leadoptimization

BioFocus: gene-to-candidate-drug capabilities

• Market set to grow at > 18 % growth per year• Pharma key drivers R&D outsourcing:

focus on core competencies access novel technologies improve speed to market

8

From idea to preclinical candidateTurnkey deal negotiation: multi year alliance

1.5 year

1.5 year

2 years

To targets

To Proof of Concept

To drug candidate

• target identification

• assay development

• screening

• medicinal chemistry

• preclinical development

Time per phase

9

Galapagos internal programs

Rheumatoid arthritis

Osteoporosis

Osteoarthritis

DiseasesAgeing population

Bone & joint diseases

market estimate:€ 21 billion

Underserved medical need

10

Leadoptimization

Pre-clinicalstudies

Phase I Phase II Phase III

2006-2007 2007-2008 2009 2010 2011 2013

Road to a new drugScenario for Galapagos RA program

out licensing to big pharma

Phase

Year

11

RA program: from target to drugSmall molecules inhibiting cartilage degradation

Inhibition of cytokine-induced MMP1

Inhibition of cytokine-induced collagen degradation

LPS/TNF profiling

IP/literature/drugability/safety profile

323

192

4,611

152

48

14

Targets to enter drug discovery, including target GT418

screened genes

Expression profiling/knock-in validation

12

RA mouse model treated with Galapagos molecule (40mg/kg, oral)

Significant reduction in disease-causing cytokines

Minimal impact on other cytokines

Untr

eate

d

Tre

ate

d

Untr

eate

d

Tre

ate

d

Untr

eate

d

Tre

ate

d

Untr

eate

d

Tre

ate

d

0

20

40

60

80

100

TNF- IL-6 GM-CSF IL-4

% c

yto

kin

e

Proof of Principle in RA

13

From target to Proof of Concept • Discovered protein responsible for RA in human primary cells

• Identified molecule that binds to protein

• Chemical molecule effective in mouse RA model

Reduction in cytokines

Reduction in paw swelling development

Improved chance that molecule will be effective in human RA

patients

14

Acceleration at a glance

0

2

4

6

8

10

12

in € millions

03 04 05

6.5

7.8

11.2

REVENUES

0

1

2

3

4

5

6

7

8

9

in € millions

03 04 05

5.4 5.4

6.7

R&D EXPENSE

0

5

10

15

20

25

in € millions

03 04 05

13.0

10.3

23.6

CASH POSITION

15

Group revenues guidancein € millions

03 04 05

6.57.8

17.5

06

25 - 3030

25

20

15

10

5

Galapagos 2006

Guidance on 40-70% growth on pro forma 2005

16

R&D expense drug discoveryin € millions

03 04 05

5.4 5.4

6.7 8

6

4

2

Increase in R&D

2005: 24%

2006: 34% (guidance)

06

9.0

17

• Bring own products into clinic

• Grow service business through organic growth and

acquisitions

• Establish strategic alliances through turn key deals with big

pharma

• Use BioFocus as cash generator for internal development

Become Europe’s leading biotech

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• Drive internal drug discovery programs

Lead optimization RA Proof of Concept in OA and/or OP

• Strengthen pipeline

In-license candidate drug, or Acquire product company

• Sign turn key alliance with big pharma

• Grow service business through organic growth and acquisitions

• Grow revenues with 40-70%

2006 outlook

Strong newsflow

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• Fortis Buy € 12 Geraldine O’Keeffe

• KBC Outperform € 10.5 Christophe

Van Vaeck

• Kempen Buy € 12 Mutlu Gundogan

• Rabobank Hold € 9.5 Mark van der

Geest

Analyst recommendations

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www.glpg.com