Glaxosmithkline and Galapagos Enter Into Drug Discovery

June 7, 2006

• Gene to clinical Proof of Concept for multiple targets in osteoarthritis
• €4 million technology access fee payment
• Up to €130 million in milestones for two marketable products
• Up to double digit royalties on commercial sales of alliance products
• Agreement on equity investment of up to €3 million upon
achievement of a certain milestone

GlaxoSmithKline (GSK) and Galapagos NV (Euronext & LSE: GLPG) announced today the creation of a worldwide, multi-year, multi-programme drug discovery and development alliance in the field of osteoarthritis. GSK, through its recently established Center of Excellence for External Drug Discovery (CEEDD), and Galapagos will collaborate to deliver disease modifying drugs with clinical Proof of Concept to GSK’s global research and development organisation. This alliance builds upon Galapagos’ internal target and drug discovery programmes in osteoarthritis.

The aim of this turn-key agreement is for Galapagos to expand its portfolio of novel validated targets in the field of osteoarthritis, to conduct compound screening, identify tractable hits, pursue a number of hit-to-lead programmes, and develop the resulting leads into candidate selection compounds through to a successful Proof of Concept in clinical research Phase IIA. GSK will have exclusive options to further develop and commercialise these compounds on a worldwide basis. Galapagos will have the right to further develop and commercialise compounds for which GSK does not exercise its option. Galapagos will contract a substantial part of the activities to its service division, BioFocus.

The focus of the alliance’s efforts will be on delivering disease-modifying drugs with clinical Proof of Concept for osteoarthritis to GSK’s global research and development organisation. The overall strategy will be to identify genes that stimulate anabolic repair processes (chondrogenesis) and inhibit catabolic (breakdown) activity in affected joints.

Under the terms of the agreement, Galapagos will receive an upfront technology access fee of €4 million from GSK. Upon successful completion of all agreed alliance programme criteria, Galapagos stands to receive up to €65 million in success-based milestones for a successful drug development programme. In addition, Galapagos will receive up to double-digit royalties on commercial sales of alliance products. Further to the agreement, on the realisation of a defined future milestone, GSK will make an equity investment of up to €3 million in Galapagos.

Maxine Gowen, Ph.D., Senior Vice President and head of GSK’s CEEDD stated, “We are very pleased to be able to announce the alliance with Galapagos. As there are no therapies available that prevent or block the progression of osteoarthritis, the potential unmet need is substantial. Through this combination of GSK’s understanding of medical needs and Galapagos’ innovation in drug discovery, we aim to bring new medicines to patients.”

“The alliance announced today fits very well into our strategy to provide turn-key drug discovery services to the biopharmaceutical industry,” said Onno van de Stolpe, Chief Executive Officer of Galapagos. “With this first broad alliance, we have started to realise the strategic synergies of combining BioFocus’ drug discovery capabilities with Galapagos’s target discovery engine. The alliance with GSK in osteoarthritis also serves as a strong validation of Galapagos’s internal drug discovery programmes in bone and joint diseases.”

Galapagos’s osteoarthritis programmes

Galapagos has ongoing osteoarthritis research programmes and focuses on chondrocytes, which are the main cell types in cartilage. These programmes will be the basis of the alliance with GSK. Galapagos has identified eleven novel targets to date that have been validated in cellular disease models. It has progressed three of these into drug discovery and has initiated a hit-to-lead programme on its most advanced target. Modulation of these targets in human chondrocytes should lead to a net production of stable cartilage and should therefore be able to prevent and repair damage to this cartilage in patients.

About osteoarthritis

Osteoarthritis (OA) is the most common form of arthritis, typically affecting people aged 45 and older. It is a degenerative disease characterised by joint destruction and loss of articular cartilage. Cartilage is the slippery tissue that covers the ends of bones in a joint. Healthy cartilage allows bones to glide over one another. It also absorbs energy from the shock of physical movement. In OA, the surface layer of cartilage breaks down and wears away. This allows bones under the cartilage to rub together, causing pain, swelling, and loss of motion of the joint. Over time, the joint may lose its normal shape. Also, bone spurs - small growths called osteophytes - may grow on the edges of the joint. Bits of bone or cartilage can break off and float inside the joint space. This causes more pain and damage.

No currently available treatments prevent OA or even reverse or block the disease process. Treatment of OA involves pain control, weight control, and exercise. Many OA patients have pain that persists despite these measures. Some of these patients use non-steroidal anti-inflammatory drugs (NSAIDs) that relieve the symptoms without changing the course of the underlying disease. Healthcare providers are concerned about long-term NSAID use due to serious possible side effects.

It is expected that with the ageing of the population, more individuals will be prone to develop OA. As mobility of seniors is of high importance to maintaining a high quality of life, preventing the severity of OA is seen as an immense clinical need over the next decade.

About the CEEDD

GlaxoSmithKline is enhancing the way it discovers and develops drugs by creating a small dedicated team who will feed the GSK pipeline solely through the efforts of its external partnerships. The CEEDD (Center of Excellence for External Drug Discovery) was formed as further validation of GSK’s strategy to create small, independent and accountable R&D teams (Centers of Excellence for Drug Discovery or CEDDs). In essence, the CEEDD will ‘virtualise’ a portion of the GSK pipeline; namely, from Target to Clinical PoC, by forming multiple risk-sharing/reward-sharing alliances. Capitalising on the speed and efficiency of its partners will allow GSK to deliver pharmaceuticals products faster to patients.

About GlaxoSmithKline

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.

Cautionary statement regarding forward-looking statements

Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautions investors that any forward-looking statements or projections made by the company, 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 the Group’s operations are described under ’Risk Factors’ in the Operating and Financial Review and Prospects in the company’s Annual Report on Form 20-F for 2006.

About Galapagos

Galapagos is a publicly traded, genomics-based drug discovery company (Euronext Brussels, GLPG; Euronext Amsterdam, GLPGA, London AiM: GLPG) that has drug discovery programmes based on proprietary, novel targets in bone and joint diseases - osteoarthritis, osteoporosis and rheumatoid arthritis. Galapagos offers a full suite of target-to-drug discovery products and services to pharmaceutical and biotech companies through its division BioFocus, encompassing target discovery and validation, and drug discovery services through to delivery of pre-clinical candidates. In addition, BioFocus provides adenoviral reagents for rapid identification and validation of novel drug targets and compound libraries for screening. Galapagos currently employs more than 220 people, including 80 PhDs, and occupies facilities in Mechelen, Belgium, Saffron Walden, UK and Leiden, The Netherlands. Partners of Galapagos include Amgen, AstraZeneca, BASF, Boehringer Ingelheim, Celgene, GlaxoSmithKline, Idenix, Novartis, Organon, Roche, Serono, Vertex, and Wyeth. More information about Galapagos and BioFocus can be found at www.glpg.com.

GSK Enquiries:

UK Media enquiries:
Philip Thomson +44 20 8047 5502
Alice Hunt +44 20 8047 5502
Gwenan Evans +44 20 8047 5502

US Media enquiries:
Nancy Pekarek +1 215 751 7709
Mary Anne Rhyne +1 919 483 2839
Patricia Seif +1 215 751 7709

European Analyst/Investor enquiries:
Duncan Learmouth +44 20 8047 5540
Anita Kidgell +44 20 8047 5542
Jen Hill +44 20 8047 5543
David Mawdsley +44 20 8047 5564

US Analyst/ Investor enquiries:
Frank Murdolo +1 215 751 7002
Tom Curry +1 215 751 5419

Galapagos NV Enquiries:

Media enquiries:
Onno van de Stolpe, CEO +31 6 2909 8028

Contact Information

Onno van de Stolpe

CEO

Galapagos NV

Contact via E-mail