Galapagos : With Abbott on board, it is only the beginning!Fair Value EUR20 vs. EUR15.2 (price EUR12.92) BUY
Following the deal announcement with Abbott, as well as 2011 full year results, we upgrade our fair value to EUR20 from EUR15.2 and confirm our BUY rating. In our view, the market is still not taking into account the massive economics of the partnership, nor its transformative role for the company. Being the largest by value in the industry for a phase 2 product, this deal is the latest confirmation of Galapagos’ innovative discovery platform. In parallel to GLPG0634 phase 2 and thanks to the upfront payment, Galapagos will able to pursue the development of other clinical candidates, for which we expect substantial news in the coming months.
The largest deal by value for a phase 2 product. The economics of the deal, particularly the USD150m upfront and the USD1.35bn total deal value, are impressive for a biotech company with a market cap of less than EUR350m. Indeed, this deal is the largest licensing deal ever achieved by a biotech company for a single product in phase 2.
Abbott is the perfect partner to fully exploit GLPG0634’s potential. With Humira the fifth top selling drug worldwide (USD7.9bn), there is no doubt that Abbott has the know-how to turn a drug into a multi-blockbuster in the field of auto-immunes diseases. With Pfizer paving the way for JAK inhibitors, GLPG0634 has the potential to become best-in class in the oral space, in our view. Newsflow expected for several early stage candidates. Many sceptics could ask “what’s next?” Contrary to many biotech companies, Galapagos is not focused on any one single product and has several other clinical candidates in development, such as GLPG0187 in oncology, GLPG0492 in cachexia and GLPG0974 in inflammation, for which we should have results in the coming months. In conclusion, we expect several milestones payments from the 5 alliances already in place with big Pharma companies.