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Multiple irons in the fire, Galapagos returns to the market in $338M offering

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By Nuala Moran
Staff Writer

LONDON - Two years after grossing $210 million in an upsized IPO on Nasdaq, Galapagos NV has gone back to the market and raised $338 million in a placing.

Assuming that Morgan Stanley, as underwriter, takes up its option to buy more shares, the company will add almost $400 million to its current cash pile of $1 billion.

"We have quite a large existing balance with $1 billion already. But we have got some very expensive programs going on, with a clinical pipeline that has seven compounds at different stages of development," said Paul van der Horst, director of investor relations and business development.

The proceeds mostly will be devoted for Galapagos' oral JAK inhibitor, filgotinib, which is being co-developed with Gilead Sciences Inc. In addition to phase III trials in Crohn's disease, ulcerative colitis and rheumatoid arthritis, Galapagos recently started a further five phase IIb studies and plans to launch further phase IIbs in other indications.

"All of these are in the current budget, but assuming some studies are successful and we move to phase III, we are now funded," van der Horst told BioWorld Today. "Phase III trials are not cheap, especially not in immunology, so we will have the money for that."

The new phase IIb trials are in psoriatic arthritis, ankylosing spondylitis, small bowel Crohn's, fistulizing Crohn's and the systemic inflammatory disease Sjogren's syndrome.

In the deal with Gilead, sealed in December 2015, Gilead is picking up 80 percent of the cost of development and Galapagos the remainder. The agreement, in which Gilead paid $725 million up front, with $1.35 billion more to come in milestones, gives Galapagos an option to co-promote filgotinib in Europe's biggest markets, including France, Germany, Italy, Spain and the U.K.

"What we clearly wanted to do in the Gilead deal was to get co-promotion rights in Europe. We want to build our own commercial sales force and this [fundraising] gives us what we need to get going," said van der Horst.

It was assumed that positive data from the phase IIb rheumatoid arthritis trials of filgotinib as a monotherapy and in combination with methotrexate, would prompt Galapagos' former partner, Abbvie Inc., to take up its option and pay a $200 million milestone. However, in September 2015 it declined to do so, discarding a product that had been viewed as the successor to Abbvie's world leading drug, Humira (adalimumab), which is now facing biosimilar competition. (See BioWorld Today, Sept. 28, 2015.)

Galapagos subsequently further bolstered the case for filgotinib by posting positive phase II interim data in Crohn's disease in December 2015, just before announcing Gilead as its new partner. (See BioWorld Today, Dec. 18, 2015.)

In the lead indication of rheumatoid arthritis, the partners are conducting three separate studies.

FINCH 1 is a 52-week, randomized, placebo- and Humira-controlled study in combination with methotrexate (MTX) in 1,650 patients who have not responded to steroids.

The primary endpoint is the American College of Rheumatology (ACR) score of at least 20 percent symptom improvement at week 12. There will be radiographic assessments at weeks 24 and 52.

FINCH 2 is a 24-week study in 423 patients who are on conventional disease-modifying antirheumatic drugs, and have not responded to anti-TNF alpha drugs. The primary endpoint is ACR20 at week 12.

The 52-week FINCH 3 study, involving 1,200 MTX-naïve patients, will test filgotinib in combination with MTX, and as a monotherapy. The primary endpoint is ACR20 at week 24.

In addition, there will be a dedicated male patient testicular cancer safety study, which is intended to allay concerns about toxicity signals seen in preclinical development.

Along with further studies of filgotinib as a monotherapy, van der Horst said Mechelen, Belgium-based Galapagos is planning combination studies. He declined to give further details; however, last month the company sealed a collaboration agreement with Pharnext SA of Paris, to generate a pipeline of novel synergistic drug combinations.

Galapagos placed 3.75 million American depository shares at $90 each and gave Morgan Stanley the option to purchase up to 562,000 more over the next 30 days.

Van der Horst noted the placing price was at a modest discount to the last closing price of $92.30. "I'm very happy about where the discount ended up," he said. "There have been higher discounts elsewhere."

The shares (NASDAQ:GLPG) traded down by $3.85 to $88.55 when the market opened on Tuesday and closed at 89.31.

Shares also fell on Euronext (AMS:GLPG), by 2.28 percent to end the day at €83.16 (US$88.99).

Whilst most of the new cash will devoted to filgotinib, van der Horst said Galapagos also wants the financial flexibility for acquisitions and in-licensing.

"There's nothing at the moment, but if we see something fitting the pipeline, we want to go there," he said.

And there was a further reason for the placing. "As a biotech you can never have enough cash, and you want to be in the market when you don't need the money, not when you are short," said van der Horst.