Galapagos reaches agreement to acquire GlaxoSmithKline research centre in Zagreb, Croatia

Issued: London UK

• R&D operations in Zagreb fulfil Galapagos’ growing R&D capacity requirements
• Agreement provides for the preservation of jobs and expertise
• €14 M R&D contract with GSK for selected fee-for-service work at the Zagreb site

Galapagos and GlaxoSmithKline today announced they have reached an agreement for Galapagos to acquire GSK’s state-of-the art research centre in Zagreb, Croatia. The arrangement, which is subject to closing conditions and is expected to be effective as of 9 September 2010, provides for ongoing employment of the staff at the centre and will provide additional capacity for Galapagos’ growing R&D requirements.

Terms of the deal include the acquisition of the research centre along with the transfer of approximately 130 staff. In addition, Galapagos will provide R&D services to GSK under a three year fee-for-service contract to the value of €14 M. Further terms were not disclosed.

The Zagreb centre comes with a strong heritage in the area of antibacterial research having served as GSK’s Macrolide Center of Excellence for Drug Discovery and before that as an R&D site for Pliva, the independent pharmaceutical company and founder of the blockbuster antibiotic azithromycin. The integrated capabilities in the operations will allow Galapagos to resource research programmes from molecule through to the clinic in alignment with its milestone-driven alliance model. The site will form the basis of a newly created third Galapagos business unit, Internal Outsourcing, that will provide flexible, additional capacity for the Galapagos Group. GSK’s senior researcher from the Zagreb site, Dr. Radan Spaventi, will join the Galapagos Executive Team as Senior Vice President.

“With our eight strategic alliances, we have a need to expand our discovery and development organisation. The team in Zagreb brings a proven track record and expertise in disease and discovery development that matches that of our current pharmaceutical alliances,” said Onno van de Stolpe, CEO of Galapagos. “The acquisition answers our expansion needs and, by bringing a majority of our outsourced programs back in house, we can achieve significant cost savings in R&D.”

The arrangement to transfer operations of the large, pharma-standard, R&D operations along with the transfer of the GSK employees was reached following GSK’s announcement in February 2010 to cease R&D activity at Zagreb as part of a site rationalisation initiative.

Moncef Slaoui, Chairman of GSK Research and Development, said: “This is a great outcome for GSK and Galapagos as it meets the capacity requirements of both companies and at the same time assures continuity of employment and a preservation of expertise at this excellent scientific facility.”

“Today’s acquisition fits very well into our financial strategy to control costs and protect downside risks while managing the tremendous growth of our alliances business,” stated Guillaume Jetten, Chief Financial Officer of Galapagos. “Furthermore, the R&D contract with GSK and additional overflow work from within the Group will substantially cover our internal targets for site capacity utilisation. We remain confident of our full year guidance for revenues of at least €135 M with positive operating income and cash flow, and a positive net result in 2010.”

GlaxoSmithKline – one of the world’s leading research-based pharmaceutical and healthcare companies – is committed to improving the quality of human life by enabling people to do more, feel better and live longer. For further information please visit www.gsk.com

Galapagos (Euronext: GLPG; OTC: GLPYY) - is a mid-size biotechnology company specialized in the discovery and development of small molecule and antibody therapies with novel modes-of-action. The Company is progressing one of the largest pipelines in biotech, with six clinical and over 50 small molecule discovery/pre-clinical programs. Through risk/reward-sharing alliances with GlaxoSmithKline, Lilly, Janssen Pharmaceutica, Merck & Co., Roche and Servier, Galapagos is eligible to receive up to €3.3 billion in downstream milestones, plus royalties. Following the acquisition of the Zagreb research center, the Galapagos Group has over 800 employees and operates facilities in seven countries, with global headquarters in Mechelen, Belgium. More info at: www.glpg.com

GlaxoSmithKline Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, GSK cautions investors that any forward-looking statements or projections made by GSK, including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Factors that may affect GSK' s operations are described under 'Risk Factors' in the 'Business Review' in the company' s Annual Report on Form 20-F for 2009.

Galapagos safe harbour statement

This release may contain forward-looking statements, including, without limitation, statements containing the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “seeks,” “estimates,” “may,” “will,” “could,” “stands to,” 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 historic or 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 statements in this document to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless required by law or regulation.