BioWorld International Correspondent

LONDON - Galapagos NV continued its progress as a consolidating force in European drug discovery, acquiring ProSkelia, the French discovery arm of the UK biotech ProStrakan Group plc in a deal valued at €45 million (US$59.1 million).

The deal gives Galapagos its first clinical program and a number of preclinical products in the area of bone and joint diseases. Although no immediate cash payment is required, the company simultaneously raised €31 million through a private placement to fund the further development of the ProSkelia portfolio.

Onno Van Stolpe, Galapagos CEO, said the move positioned Galapagos as a leader in the discovery and development of small molecules for treating bone and joint diseases. He added that the company now has the necessary funding to bring [the] programs into the clinic in 2008 and 2009.

The move came three weeks after AIM and Euronext-listed Galapagos acquired London-based Inpharmatica Ltd for €12.5 million in shares. Earlier in the year the Mechelen, Belgium-based company paid €4.3 million cash for the drug discovery arm of Discovery Partners International, and in October 2005 took over the AIM-quoted UK drug discovery business Biofocus plc.

The sale signals a change in strategy for ProStrakan plc, of Galashiels, which since its formation in 2004 from the merger of Strakan Ltd and Proskelia SA has pursued a mixed business model of in-licensing specialty pharma products to generate revenues for investing in the home-grown portfolio. With the divestment of ProSkelia (the former bone diseases unit of the French pharma company Aventis SA) and its 65 employees, ProStrakan reduces its cash burn substantially, while retaining an interest in certain products.

ProStrakan has been steadily building a European sales and marketing infrastructure, and in the next two to three years the company expects to launch five products in Europe and three in the U.S. "Divesting our discovery unit [in that way] preserves our interest in future upsides from a number of programs, and enables us to focus even more of our resources on successfully delivering commercial growth," said Wilson Totten, CEO.

He added, "Avoiding the substantial running costs involved in discovery also provides greater certainty in breaking even and significantly reduces the near-term cash needed to run the business."

ProStrakan may be saving money, but Galapagos will not be handing over any cash immediately. The deal comprises the issue of 1.4 million shares valued at €12.5 million, €14.5 million from revenues received by Galapagos on future licenses around the transferred assets, and 75 percent of all milestones and royalties paid under collaborations based on the ProSkelia assets that ProStrakan signed in 2006 with Amgen and Novartis AG. The shares are subject to a 12-month lock-up agreement

In addition, ProStrakan has right of first refusal to a world-wide license on a cachexia product currently under development by ProSkelia, once it completes a Phase IIa proof-of-concept trial.

ProStrakan has excluded two programs, an anti-androgen product for acne and alopecia and a hormone replacement therapy, from the deal.