Galapagos (GLPG) Risk Factors

To meet business objectives, we rely on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store confidential and sensitive data, including confidential research, business plans, financial information, intellectual property, patient data, customer data and personal data that may be subject to legal protection. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these IT systems and networks, and the confidentiality, integrity, and availability of confidential and sensitive data. These threats may include, but are not limited to, social-engineering attacks (including through phishing attacks), business email compromise, online and offline fraud, malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, access attacks (such as credential stuffing), ransomware attacks, and supply-chain attacks. These types of incidents continue to be prevalent and pervasive across industries, including in our industry, and such attacks on our systems have occurred in the past and are expected to occur in the future. In addition, we expect the amount and sophistication of the perpetrators of these attacks to continue to expand. Our systems and networks, and those of our third parties and vendors, may also be subject to software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, or telecommunications failures, earthquakes, fires, floods, and other similar threats. We continuously assess these threats and make investments to increase internal protection, detection, and response capabilities, as well as to increase our third party providers' capabilities and controls to address this risk. However, because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential risk for us to be adversely impacted. Although Galapagos has invested time and resources in the protection of its information technology and other internal infrastructure systems, we and our vendors, like other companies in the industry, have experience attacks from time to time, and we and our vendors may experience other such attacks in the future. The impact of security breaches and significant disruption in the availability of our information technology and networks could result in reputational, competitive, operational or other business harm, financial costs, litigation (including class action claims), regulatory action (for example, investigations, fines, penalties, audits and inspections), as well as interruptions in our collaborations with our partners, and delays in our research, development work, regulatory approval efforts and other work.

If the third-party data and results we rely upon prove to be inaccurate, unreliable or not applicable to our product candidates, we could make inaccurate assumptions and conclusions about our product candidates and our research and development efforts could be materially adversely affected.

In June 2022, we acquired CellPoint and AboundBio with the aim to enter the space of oncology. Through the acquisitions of CellPoint and AboundBio, respectively, we gained access to an innovative, scalable, decentralized and automated point-of-care cell therapy supply model as well as fully human antibody- based therapeutics platform. CellPoint has developed, in a strategic collaboration with Lonza, a novel point -of-care supply model, which offers the potential for efficient, 7-day delivery of CAR-T therapies and avoids complex logistics, thereby addressing important limitations of current CAR-T treatments. The platform that we use consists of end-to-end xCellit workflow management and monitoring software and Lonza's Cocoon platform, a functionally closed, automated manufacturing platform for cell and gene therapies. The manufacturing processes that we use to produce our product candidates for human therapeutics are complex, novel, have not been validated for commercial use, and are subject to multiple risks. Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error, or disruptions in the operations of our suppliers. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic therapy often cannot be fully characterized. As a result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, it is necessary to employ multiple steps to control our manufacturing process to assure that the product candidate is made strictly and consistently in compliance with the process. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims, or insufficient inventory. In addition, the manufacture of our point-of-care cell therapy product candidates involves complex processes, such as harvesting and transporting cells from every patient to Lonza's Cocoon system, engineering the cells ex vivo to express a specific biologic receptor for a specific target, and finally transporting the point-of-care cell therapy product candidates from Lonza's Cocoon system back to the patient for infusion into the patient. As a result of the complexities, the manufacturing process for our point-of-care cell therapy product candidates is more variable and difficult to reproduce than traditional small molecule chemical compounds or biologics. Our manufacturing process may be susceptible to product loss or failure due to logistical issues associated with the collection of patients' cells and the infusion of the patient with our point-of-care cell therapy product candidates. Product loss or failure may also be caused by a number of factors, including manufacturing issues associated with the variability in patient material, interruptions in the manufacturing process, contamination, equipment failure, assay failures, improper installation or operation of Lonza's Cocoon system, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. If for any reason a patient's starting material is lost, or if any point- of -care cell therapy product candidate does not meet the preset specifications, the manufacturing process for that patient will need to be restarted, sometimes including the re-collection of cells from the patient, and the resulting delay may adversely affect that patient's outcome. It may even happen that failed product candidate manufacture may prevent a patient from receiving our point-of-care cell therapy product candidates. If microbial, environmental or other contaminations are discovered in our point-of-care cell therapy product candidates or in the third- party facilities in which our point- of- care cell therapy product candidates are manufactured through Lonza's Cocoon system, delays can occur and such facilities can be closed. If such contaminations or other product quality issues are not discovered and if as a result thereof patients are exposed to a health risk, we may be held liable. Our insurance may not cover those cases, or the financial coverage may not be sufficient. Because our point-of-care cell therapy product candidates are manufactured specifically for each individual patient, vendors and operators will be required to maintain a chain of identity with respect to the patient's cellular material as it moves from the patient through the Cocoon point-of-care manufacturing process, and back to the patient for infusion. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including clinical hold or other suspension or termination of our clinical trials or withdrawal of our point-of-care cell therapy products from the market, if approved. Moreover, the patient's starting material may lead to variable product quality or quantity which could result in an out of specification or insufficient product. Further, as product candidates are developed through preclinical to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as point-of-care manufacturing methods, are altered along the way to optimize processes and results. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our point-of-care cell therapy product candidates or our manufacturing process to perform differently and affect the results of planned clinical trials or other future clinical trials or otherwise necessitate the conduct of additional studies, which can be costly and time-consuming. We and our vendors may not successfully establish a robust point-of-care production process, including quality release and monitoring process, that fulfills the requirements of the FDA, the EMA and comparable regulatory authorities. There can be no assurance that Lonza's Cocoon system for our point- of-care cell therapy product candidates is viable and can be effectively scaled up or transferred to third party vendors and operators for commercialization. We are dependent on a third party for the end-to-end xCellit workflow management and monitoring software and if there are any issues with this software, we may be unable to obtain regulatory approval for our product candidates. Any failure to follow regulatory requirements or any delay, interruption or other issues that arise in the manufacture or storage of our product candidates as a result of a failure of our facilities or the facilities and operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize our point-of-care cell therapy product candidates. Point-of-care cell therapy product candidates that have been produced and stored for later use may degrade, become contaminated or suffer other quality defects, which may cause the affected point- of-care cell therapy product candidates to no longer be suitable for their intended use. Furthermore, if our vendors or operators fail to deliver the required commercial quantities or supply of our point-of -care cell therapy product candidates on a timely basis and at reasonable costs, we would likely be unable to meet demand for our point-of-care cell therapy product candidates, and we would lose potential revenues. In addition, the manufacturing process and facilities used to produce our point-of-care cell therapy product candidates through our Cocoon system are subject to FDA, the EMA and comparable regulatory authority approval processes and compliance with applicable cGMPs and Good Distribution Practices, and we and our vendors and operators will need to meet all applicable regulatory authority requirements on an ongoing basis, including requirements pertaining to quality control, quality assurance, and the maintenance of records and documentation. The FDA, the EMA and comparable regulatory authorities enforce these requirements through facility inspections. In the EU, the national competent authorities are responsible for manufacturing facility inspections, but the EMA plays a coordinating role in ensuring that standards are enforced consistently throughout the EU. Facilities using our point-of-care manufacturing process, including Lonza's Cocoon system, must be approved by the FDA, national competent authorities in the EU or comparable regulatory authorities. Vendors and operators are also subject to continuing FDA, EMA and comparable regulatory authority compliance. Our own or third parties' facilities where Lonza's Cocoon system is in use may be unable to comply with these regulatory requirements. Poor control of production processes can lead to the introduction of contaminants, or to inadvertent changes in the properties or stability of our point-of- care cell therapy product candidates that may not be detectable in final product testing. If we or our vendors and operators are unable to reliably produce product candidates to specifications acceptable to the FDA, the EMA or comparable regulatory authorities, or in accordance with the strict regulatory requirements, we may not obtain or maintain the approvals we need to commercialize our point-of-care cell therapy product candidates. Even if we obtain regulatory approval for any of our point -of -care cell therapy product candidates, there can be no assurance that either we or our third party vendors or operators will be able to manufacture the approved product to specifications acceptable to the FDA, the EMA or comparable regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Deviations from manufacturing requirements may further require remedial measures that may be costly and/or time-consuming for us or a third party to implement and may include the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business. Even to the extent we use vendors or operators for Lonza's Cocoon system, we are ultimately responsible for the manufacturing of our point-of-care cell therapy product candidates. A failure to comply with regulatory requirements may result in regulatory enforcement actions against our vendors or operators or us, including fines and civil and criminal penalties.

We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our drug supply for our approved products or preclinical and clinical drug supplies or lentiviral vector. This reliance on third parties increases the risk of shortages of our drugs or drug candidates and of the availability of such drugs or drug candidates at an acceptable cost or quality. This could potentially delay, prevent or impair our development and commercialization efforts. If, for any reason, we were to experience an unexpected loss in the supply of any of our approved products, our product candidates or placebo or comparator drug used in certain of our clinical trials, or our lentiviral vector, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials or commercial distribution of our approved products could be negatively affected. The facilities used by our contract manufacturers or other third-party manufacturers to manufacture our approved products and our product candidates are subject to the FDA's, EMA's, MHRA's, MHLW's and other comparable regulatory authorities' pre-approval inspections that can be conducted after we submit the required approval applications to any relevant regulatory authority, such as, for example, an NDA or BLA to the FDA. We monitor, but do not control, the implementation of the manufacturing process of, but are dependent on, our contract manufacturers or other third-party manufacturers for compliance with cGMP regulatory requirements for manufacture of any drug products. If our contract manufacturers or other third-party manufacturers do not successfully manufacture material that conforms to applicable specifications and the strict regulatory requirements of the FDA, EMA, MHRA, MHLW or others or if such authority finds deficiencies at a contract manufacturer's facility or is unable to conduct an inspection necessary to evaluate such facility, we will not be able to secure and/or maintain regulatory approvals for our products manufactured at these facilities. This could significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. We, or our manufacturers, purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical trials and our approved products. There are a limited number of suppliers for raw materials that we use to manufacture our drugs and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our clinical trials and our approved products. We do not have any control over the process or timing of the acquisition of raw materials by our manufacturers, and delays may result for reasons beyond our control, including the ongoing armed conflict between Russia and Ukraine. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial launch of our products would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our products. Additionally, if we receive regulatory approval for our product candidates, we may experience unforeseen difficulties or challenges in the manufacture of our products on a commercial scale compared to the manufacture for clinical purposes. We expect to continue to depend on contract manufacturers or other third -party manufacturers for the foreseeable future. Via the acquisition of CellPoint on June 21, 2022, we gained access to a decentralized and automated point-of-care cell therapy supply model, which CellPoint had developed in a strategic collaboration with a third party, Lonza. The platform that we license consists of the end -to-end xCellit workflow management and monitoring software and Lonza's Cocoon platform, a functionally closed, automated manufacturing platform for cell and gene therapies. If, for any reason, the collaboration terminates or is otherwise materially changed and we are no longer entitled to use such technology platform, then we may be unable to secure alternatives to such technology and our research, development or other efforts may be interrupted or delayed, and our financial condition and results of operation may be materially adversely affected.

We could face significant operational risks as a result of doing business internationally, which could have a material adverse effect on our business, financial condition and results of operations, such as (without any limitation): - fluctuations in foreign currency exchange rates;- potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from inconsistent enforcement;- potential changes to the accounting standards, which may influence our financial situation and results;- becoming subject to the different, complex and changing laws, regulations and court systems of multiple jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;- reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain countries;- difficulties in attracting and retaining qualified personnel;- restrictions imposed by local labor practices and laws on our business and operations, including unilateral cancellation or modification of contracts;- rapid changes in global government, economic and political policies and conditions, political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events, and potential failure in confidence of our suppliers or customers due to such changes or events; and - tariffs, trade protection measures, import or export licensing requirements, trade embargoes, economic sanctions, and other trade barriers.

The occurrence of unforeseen or catastrophic events, including extreme weather events and other acts of god or natural disasters, man-made disasters, electricity or telecommunication interruption, geopolitical and other economic or political conditions or events (such as the armed conflict between Russia and Ukraine or the conflict in Israel and Gaza) or the emergence of epidemics or diseases, depending on their scale, may cause different degrees of damage to the national and local economies and could cause a disruption in our operations and have a material adverse effect on our financial condition and results of operations. Such events may also cause the market price and demand for our ADSs or ordinary shares to fluctuate substantially. Man-made disasters, epidemics or disease, and other events connected with the regions in which we operate could have similar effects. If a natural or man-made disaster, electricity or telecommunication interruption or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as clinical trial sites or the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, could have a material adverse effect on our business.