Galapagos Acquires Cangenix, Realigns Services Business
By Cormac Sheridan
Although Galapagos NV is best known for its whopper of an alliance with AbbVie Inc. for its JAK inhibitor, GLPG0634, the company's rapidly growing drug discovery services business is set to expand further in 2013, following the acquisition of Cangenix Ltd., a UK-based specialist in structure-based discovery, and the establishment of its Fidelta unit in Croatia as an externally focused services arm.
Mechelen, Belgium-based Galapagos is paying £1 million (US$1.6 million) up front for Canterbury-based Cangenix, which emerged from the downsizing of Pfizer Inc.'s research operation in Sandwich in 2011. An additional £440,000 is available in earnouts contingent on a set of undisclosed conditions.
Galapagos originally gained a presence in Zagreb, Croatia, in 2010 by acquiring for free GlaxoSmithKline plc's research center, which employed 130 people at the time. GSK had paid $35 million to acquire it four years earlier from Zagreb-based Pliva d.d., after the latter firm decided to focus on generic drugs.
The Croatian unit brought a dowry to Galapagos – a €14 million (US$18.7 million) three-year R&D contract with London-based GSK.
Galapagos also deployed the unit on its alliance with Merck & Co. Inc., of Whitehouse Station, N.J. Now that the latter agreement has run its course, Galapagos is repositioning the unit, which has 100 employees, as a third external service division, alongside its existing services units, BioFocus and Argenta, which it acquired in 2005 and 2010, respectively.
Fidelta's capabilities include chemistry, pharmacology, biomarker research, toxicology and ADME/PK analysis. Its staff has experience in infectious disease, inflammation, metabolic disease and oncology.
"For the moment, it is unclear how Fidelta will be positioned in the market, as there is some overlap of services with the BioFocus and Argenta service offering," Jan De Kerpel, analyst at KBC Securities in Brussels, Belgium, wrote in a research note.
"However, since discovery services is a people-business and pricing is heavily dependant on the price per full-time equivalent, we would not be surprised if BioFocus and Argenta, both [of which are] predominantly UK-based, would continue to be positioned as premium brands while Fidelta could perform certain programs at lower cost."
The services business has built up a substantial head of steam of late.
By midyear 2012, it had racked up €32.9 million in revenues, a 37 percent improvement on the first half of 2011 , and had turned in positive EBITDA of €5.7 million, a 54 percent improvement on the same period in 2011.
The Cangenix unit, which has just four employees, will remain at its present base in Canterbury, but it will become part of the Harlow, UK-based Argenta organization, which focuses on small-molecule drug discovery.
"We consider the Cangenix activities as a small add-on acquisition complementing Argenta's service offering. It can assist in a smart way (via computer modeling) the discovery and optimization of new small-molecule drugs," De Kerpel noted.
Galapagos will not report its annual results for 2012 until March 8, but it previously guided full-year revenues of €150 million and a profitable year, thanks in part to its potential $1.35 billion alliance in rheumatoid arthritis with AbbVie, which included $150 million up front. (See BioWorld Today, March 1, 2012.)
It would receive another $200 million should North Chicago-based AbbVie take the project in-house, after the completion of a Phase IIb trial that is getting under way this year.
Data are not due until the fourth quarter of 2014.
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