Deal Overview
On January 8, 2025, Galapagos NV. (US Nasdaq ADR: GLPG; $23.76, Market Capitalization: $1.56 billion), announced its plans to split into two listed entities by mid-2025 by spinning off its activities focused on innovative medicines. The SpinCo will be focused on building a pipeline of innovative medicines with robust clinical proof-of-concept in oncology, immunology, and/or virology through strategic business development transactions. SpinCo will have a seasoned leadership team and Board of Directors with a proven track record of biotechnology company-building and strategic transaction experience to manage and oversee SpinCo independently.
The remaining Galapagos entity will specialize in cell therapy, focusing on its lead CAR-T candidate, GLPG5101, currently being tested for relapsed or refractory non-Hodgkin lymphoma.
Additionally, the new Galapagos will undergo a comprehensive strategic realignment, which involves discontinuing its small molecule programs. These programs will be offered to potential partners.
The plan is for both companies to be listed on Euronext.
The group’s American partner and shareholder Gilead Sciences will hold about 25% of the shares in both Galapagos and the newly created firm following the split. The reorganization is expected to lead to the reduction of around 300 positions in Europe, or around 40% of the group’s workforce.
The completion of the spin-off of SpinCo is subject to the satisfaction of customary conditions, including concluding consultations with works councils in the Netherlands, Belgium, and France, and receipt of approval from Galapagos shareholders. All Galapagos shareholders will receive SpinCo shares on a pro rata basis, determined by their Galapagos shares as of a specified record date, in accordance with Belgian law.
The management emphasized that the separation is a “crucial move” for the company to unlock substantial value for its shareholders. This step will position Galapagos for sustainable growth, value creation, and future success with its renewed focus on cell therapies.
The new innovative medicines division, still unnamed, will receive around $2.5 billion from Galapagos. It will concentrate its drug development on oncology, immunology, and virology. This entity will prioritize ”strategic business development transactions” to expand its pipeline, a strategy mirrored in its leadership team, which will feature professionals with proven success in securing deals.
Goldman Sachs International served as the financial advisor to Galapagos in reviewing its strategic alternatives for this transaction. Lazard acted as the independent financial advisor to Galapagos, specifically for its independent Directors. Baker McKenzie provided legal advice to Galapagos, while Allen Overy Shearman Sterling advised the independent Directors. TD Cowen and J.P. Morgan Securities LLC were the financial advisors to Gilead.
Deal Rationale
Galapagos NV, a Belgian biotechnology company, has announced its intention to spin-off one of its business units into a new, independent entity. Galapagos has been a leader in developing innovative cell therapies to address high unmet medical needs. The company will retain its robust pipeline and global development and commercialization rights, which were recently expanded through an amended agreement with Gilead Science. Post separation the focus areas for SpinCo will include oncology, immunology, and virology.
The reorganization initiative came on the back of more than 90% correction in the company’s value since 2020 as the company faced multiple set backs. Firstly, the company faced significant setbacks in its clinical trials, particularly with its rheumatoid arthritis drug, filgotinib, which failed to gain FDA approval. Additionally, the termination of several other pipeline programs and disappointing clinical trial results contributed to the decline. The COVID-19 pandemic also impacted the company’s operations and investor confidence.
By creating two publicly traded entities, Galapagos aims to unlock shareholder value, with each entity having a distinct strategic focus, allowing investors to better assess and invest in specific areas of interest. The separation enables each entity to pursue its growth strategy independently: Galapagos will advance its cell therapy platform, while SpinCo will build a diverse pipeline of innovative medicines through strategic acquisitions and partnerships. With distinct operational focuses, both entities can streamline operations and allocate resources more effectively, leading to improved decision-making and faster execution of strategic initiatives.
Galapagos will continue to build on its leadership in cell therapy, particularly in oncology. Post separation, Galapagos expects to have about €500 million in cash and the firm aims to address high unmet medical needs by advancing its pipeline of cell therapies and expanding its global, decentralized manufacturing network. In addition, the amended agreement with Gilead Sciences grants Galapagos full global development and commercialization rights to its pipeline, subject to royalties on certain products. This enhances Galapagos’ ability to independently realize the full potential of its cell therapy platform.
In addition to the separation, Galapagos’ strategic reorganization involves a 40% reduction in its workforce. The company intends to discontinue its small molecule discovery programs and seek potential partners to take over its small molecule assets, including the TYK2 inhibitor, GLPG3667, which is currently in Phase 2 trials for systemic lupus erythematosus, dermatomyositis, and other potential autoimmune indications.
Following the planned reorganization, Galapagos expects its normalized annual cash burn to be between EUR 175 million and EUR 225 million, excluding restructuring costs.
SpinCo: SpinCo will leverage its substantial cash reserves to pursue strategic business development opportunities. The focus will be on acquiring and developing innovative therapies in oncology, immunology, and virology. With a dedicated focus on building a pipeline through transformational transactions, SpinCo aims to bring innovative therapies to patients facing unmet medical needs. This approach allows SpinCo to rapidly expand its portfolio and address critical health challenges.
Galapagos NV is a biotechnology company focused on developing transformative therapies in two key areas: cell therapies and innovative medicines. In cell therapies, it specializes in CAR-T treatments for cancers like non-Hodgkin’s lymphoma, using a decentralized manufacturing model to deliver therapies faster and more efficiently. In innovative medicines, Galapagos develops small-molecule drugs for inflammatory and immunological diseases. The company leverages advanced R&D platforms and strategic acquisitions to address unmet medical needs globally.
Cell Therapies: Galapagos NV is advancing cell therapies through its innovative decentralized manufacturing platform, which allows for the rapid production and delivery of CAR-T cells within a median vein-to-vein time of seven days. This approach enhances patient access to life-saving treatments, particularly for those with rapidly progressing cancers. The company is focused on developing next-generation CAR-T therapies for both haematological and solid tumours, aiming to transform patient outcomes by providing more effective and timely treatment options.
Innovative Medicine: In addition to cell therapies, Galapagos NV is committed to discovering and developing small molecules and biologics in oncology and immunology. The company leverages its extensive research capabilities and strategic collaborations to build a diverse pipeline of precision medicines. By focusing on high unmet medical needs, Galapagos aims to deliver solutions that improve the quality of life for patients worldwide.
Portfolio Overview
Galapagos NV’s portfolio is centered around its expertise in immunology and oncology, with a robust pipeline of drug candidates across various stages of development.
Immunology: Galapagos has developed treatments for autoimmune diseases, with its flagship product being filgotinib, marketed under the brand name Jyseleca®. Filgotinib is approved for the treatment of rheumatoid arthritis and ulcerative colitis in Europe and Japan (it divested its Jyseleca business to Alfasigma). The company is also advancing its TYK2 inhibitor, GLPG3667, which is in Phase 2 trials for dermatomyositis and systemic lupus erythematosus (SLE). These programs reflect Galapagos’ focus on addressing significant unmet medical needs in inflammatory and autoimmune conditions. Galapagos plans to discontinue its small molecule discovery programs and seek potential partners to take over current assets, including the TYK2 inhibitor, GLPG3667, dermatomyositis, and other potential autoimmune indications.
Oncology: In oncology, Galapagos is developing a pipeline of CAR-T cell therapies. Key candidates include GLPG5101 for non-Hodgkin lymphoma (NHL). GLPG5201 for chronic lymphocytic leukaemia (CLL) and Richter transformation (RT). GLPG5301 is a BCMA CAR-T candidate for multiple myeloma (MM) in Phase 1/2 trials. These CAR-T programs leverage Galapagos’ innovative point-of-care manufacturing platform, enabling decentralized and scalable cell therapy production close to patients, reducing logistical challenges and improving treatment timelines.
Discovery Programs: Beyond its clinical-stage assets, Galapagos has over 15 discovery programs in both immunology and oncology. These include small molecules and biologics aimed at addressing high unmet medical needs. The company’s CellPoint B.V. and AboundBio acquisitions have further strengthened its capabilities in CAR-T therapies and antibody-based therapeutics, expanding its reach into precision oncology.
Revenue Generation
Galapagos generates revenue through multiple streams, primarily driven by its R&D collaborations, licensing agreements, and product sales.
Collaborations and Licensing: Revenue for Galapagos’ in FY23 came from its collaboration agreements, particularly with Gilead Sciences. The partnership with Gilead includes developing and commercializing filgotinib, with Galapagos receiving milestone payments, royalties, and revenue-sharing from sales. Collaboration revenue in FY23 is €230.2 million and revenue from Royalties is €9.5 million.
Product Sales: Galapagos earns revenue from the sales of Jyseleca® (filgotinib) in Europe and Japan. However, the company recently divested its Jyseleca business to Alfasigma, transferring the associated commercial, medical, and development activities. This move allows Galapagos to focus on its R&D pipeline.
9M24
Total revenue grew 11.3% YoY to €200.2 million, primarily due to €19.1 million of revenue from the supply of Jyseleca to Alfasigma. Collaboration revenues grew by 0.7% YoY to €181 million. The revenue recognition related to the exclusive access rights granted to Gilead for the company’s drug discovery platform amounted to €172.7 million, remaining flat YoY. R&D expenses grew by 42.5% YoY to €238.2 million due to higher costs for cell therapy and small molecule programs in oncology. G&A and S&M expenses grew by 6.6% YoY to €238.2 million, primarily due to increased legal and professional fees, mainly related to business development activities and investments in strategic marketing for oncology. Operating loss of €125.6 million against Loss of €41.9 million in 9M23. Net loss from continuing operations is €20.4 million, compared to a net profit of €36.2 million in 9M23. Basic and diluted loss per share is €0.31 against Earnings of €0.55 in 9M23.
FY23
Total revenue declined 0.6% YoY to €239.7 million. Collaboration revenues amounted to €239.7 million, compared to €241.2 million last year. The revenue recognition related to the exclusive access rights granted to Gilead for companies’ drug discovery platforms amounted to €230.2 million (compared to €230.4 million in FY22). The company also recognized royalty income from Gilead of €9.5 million (compared to €10.7 million in FY22). R&D expenses declined by 10.6% YoY to €241.3 million due to a decline in personnel costs, depreciation and impairment. G&A and S&M expenses declined by 3.3% YoY to €238.2 million, due to a decrease in personnel expenses and other operating expenses, partly offset by an impairment of €7.6 million on a construction project in Mechelen, Belgium. Operating loss of €88.3 million against Loss of €131.1 million in FY23. Net loss from continuing operations is €4.0 million, compared to a loss of €71.4 million in FY23. Basic and diluted loss per share is €0.06 against €1.09 in FY23.
Company Description
Galapagos NV (Parent)
Incorporated in 1999, Galapagos NV is a biotechnology company headquartered in Mechelen, Belgium. The company focuses on developing medicines primarily in the fields of oncology and immunology, targeting both the United States and European markets. In cell therapies, it specializes in CAR-T treatments for cancers like non-Hodgkin’s lymphoma, using a decentralized manufacturing model to deliver therapies faster and more efficiently. The total number of employees at the end of June 2024 is 683.
Innovative Medicines Business (Spin-Off)
Innovative medicines business develops small-molecule drugs for inflammatory and immunological diseases. The company leverages its extensive research capabilities and strategic collaborations to build a diverse pipeline of precision medicines. The focus of SpinCo will be on acquiring and developing innovative therapies in oncology, immunology, and virology. With a dedicated focus on building a pipeline through transformational transactions, SpinCo aims to bring innovative therapies to patients facing unmet medical needs.