The Galapagos pipeline spans both oncology and immunology, but in recent years, the company has invested heavily in cancer cell therapy. The firm is now fully embracing the modality, announcing on Wednesday a business separation that leaves legacy Galapagos focused on cell therapy and a spin-off company able to independently develop a variety of new medicines. The transaction will result in two separate publicly traded companies.
The yet-to-be named new company, called SpinCo for now, will be capitalized with €2.45 billion (about $2.5 billion) from Belgium-based Galapagos, which will retain its name. The plan is for SpinCo to deploy that cash across business deals to build a pipeline of drug candidates with clinical proof-of-concept in oncology, immunology, and virology. But SpinCo will start out with a partner. It is inheriting a collaboration agreement with Gilead Sciences signed in 2019.
Galapagos started out in 1999 as a developer of small molecule drugs for inflammatory disorders. The company’s top-selling product was Jyseleca, a pill for rheumatoid arthritis and ulcerative colitis. This drug was initially developed in partnership with Gilead, and it won regulatory approvals in Japan and Europe. But after the FDA rejected the drug in 2020, Gilead walked away from it, leaving Galapagos to commercialize it alone. Last year, Galapagos transferred the Jyseleca business to Alfasigma, enabling the company to devote more resources to cell therapy.
In cell therapy, Galapagos is chasing bigger companies, including Gilead, that have commercialized these treatments made by engineering a patient’s immune cells into targeted cancer fighters. But the multi-step manufacturing process can take a month or more; beyond actual manufacturing time, it takes time to transport cells to and from the lab where the engineering is done. Meanwhile, a patient’s cancer can advance, making it harder to treat. Galapagos aims to get cell therapies to patients more quickly by bringing manufacturing time down to about a week.
In 2022, Galapagos acquired CellPoint, a company whose software enables remote monitoring of cell therapy manufacturing. CellPoint was partnered with contract drug manufacturing giant Lonza, whose Cocoon system enables manufacturing at the hospital where a patient is receiving care. During the 2023 annual meeting of the American Society of Hematology, Galapagos presented encouraging early results for its cell therapies made with Cocoon.
Galapagos has since posted additional data supportive of a one-week manufacturing time, but not everyone is fully convinced Cocoon gives the company an advantage. Bristol Myers Squibb and Novartis are both developing new platforms that could enable a seven-day turnaround time, Leerink Partners analyst Faisal Khurshid wrote in a note sent to investors during the ASH 2024 conference last month. He also pointed to AstraZeneca’s $1 billion acquisition of Gracell Biotechnologies, whose appropriately named FasTCAR technology is designed to offer next-day turnaround times.
To Khurshid, a key question is whether the new structure enables SpinCo to be better at business development than Galapagos was. At the legacy company, business development has been stymied by the emphasis on developing CAR T-cell therapies, he said in a Wednesday research note. Galapagos faced challenges finding good deals and its longstanding collaboration with Gilead came with limitations, such as requiring the company to give away half of a partnered asset after Phase 2 for a fixed $150 million.
“We eagerly await whether the new structure better allows for BD (business development),” Kurshid said. “The challenging issue of the [Gilead] collaboration structure remains, but a new team in place to oversee BD should definitely help the prospects here.”
The 2019 collaboration with Gilead partnered multiple programs and included a $1.1 billion equity investment. Galapagos and Gilead are now amending the agreement. Galapagos regains full global rights to its pipeline and will pay royalties to Gilead on sales of certain products. But those drug candidates will not be developed within Galapagos. The company’s renewed focus on cell therapy brings a corporate restructuring that will lead to the discontinuation of small molecule programs in both oncology and immunology. These programs still offer value through potential partnerships, Galapagos said in an investor presentation. The company also said it will look to partner GLPG3667, a small molecule TYK2 inhibitor in mid-stage development for dermatomyositis and systemic lupus erythematosus.
The corporate shakeup will result in the layoff of about 300 workers — about 40% of the company’s headcount, Galagapos said. Most of the job cuts will happen in Belgium and Galapagos will also shutter a site in France. After the reorganization and the business separation, the company expects to have about €500 million (about $515.6 million), which it expects will support the company into at least 2028.
“The planned reorganization is a difficult but necessary step, but one that will position Galapagos for sustainable growth and value creation and for future success in its renewed focus on cell therapies,” Galapagos CEO Paul Stoffels said in a prepared statement. “Gaining full global development and commercialization rights from Gilead to our robust discovery and development pipeline supports our commitment to executing our strategy for accelerated growth and value creation.”
As for SpinCo, that company will apply to list its shares on the Euronext exchange. Galapagos expects the business separation will be complete by mid-2025. When that happens, Gilead will have a 25% ownership stake in each company; two Gilead directors will step down from the Galapagos board and two Gilead directors will join SpinCo’s board. The 2019 agreement that gave Gilead the right to license and develop programs outside of Europe will now apply solely to SpinCo.
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