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Strength in numbers
March 2010
by David Hutton  |  Email the author


  MECHELEN, Belgium—Galapagos NV has acquired Argenta Discovery 2009 Ltd., a privately held contract research drug discovery company, for about $23 million in cash, the Belgium-based drug discovery and development firm announced in February.

According to Galapagos, the combination of Argenta and Galapagos' service division, BioFocus, creates one of the world's largest drug discovery service organizations, with 390 employees and significant profitability.


The acquisition also brings additional capacity and drug discovery capabilities to the Galapagos group, says Onno Van de Stolpe, the company's CEO.


"It also provides Galapagos R&D with additional capacity, capabilities and access to respiratory models for our internal R&D efforts," says Van de Stolpe. "This new combined service division builds on our successful cash-generating business model, and it provides more resources to progress our drug pipeline. With a post-transaction cash position of more than $40 million, and Galapagos now financially self-reliant, we are well capitalized and in a strong position to further build Galapagos into a biotech leader in Europe."


Van de Stolpe says Galapagos and BioFocus were particularly attracted to Argenta's position as a premier drug discovery services company. 


"Argenta was a big competitor, so bringing the two together creates significant critical mass," he notes. "In addition, Galapagos is in need of substantial chemistry outsourcing capacity for its Big Pharma alliances, and with Argenta, we acquire additional capacity. Thirdly, Argenta brings specific expertise in respiratory models and pharmacokinetics to our service division."


There are also other advantages that, while a little less obvious on the surface, are no less important, Van de Stolpe adds. He says those include "upscaling expertise that can be used for Galapagos, and for the Roche COPD alliance, we can make use of the respiratory models—which is something for the future, as this alliance has just started up with target discovery."


Moreover, Galapagos, with its seven strategic alliances with the top five pharma companies, will be able to tap into the rich array of services of both Argenta and BioFocus to deliver its objectives and obtain the milestones that are the basis of the Galapagos' success, Van de Stolpe adds.


"We now have reached a situation that Galapagos is operational cash flow-positive, which is exceptional for a drug discovery company with four programs in the clinic and more than 40 programs in discovery and preclinical development," Van de Stolpe says. "With our anticipated revenues of over €135 million for 2010, we have taken the fourth spot in European biotech, without yet having a product on the market."


Argenta's contract research operation, which includes expertise in medicinal chemistry, computer-aided drug discovery, in vitro biology, analytics, in vivo pharmacokinetics, pharmacology and world-leading respiratory models, has a strong reputation for scientific excellence. 


With current and past clients such as Antisoma, AstraZeneca, BioTie, Genentech, Novartis and Zafgen, Argenta adds strong industry names to the contract research customer base. While revenue growth rates have been lower than those of BioFocus, Argenta's order book is strong and its margins are among the highest in the industry.


The acquired Argenta operations will be run by Dr. John Montana, who will report to Dr. Christopher Newton, senior vice president of Galapagos. Newton was chief scientific officer and board director at Argenta from 2000 to 2005, prior to joining BioFocus.


"Having been a part of Argenta Discovery at its beginning, I have every confidence in Argenta's strong track record and innovative approach to drug discovery," Newton says. "With this move, the Galapagos Group has two organizations with unparalleled depth and breadth in research serices."


The acquisition has caught the attention of analysts.


"The acquisition not only provides additional capacity to BioFocus, but also expertise in respiratory diseases and access to new clients such as AstraZeneca, Novartis and Genentech," KBC analyst Jan De Kerpel tells Reuters.


Argenta's respiratory development programs will continue as a new privately held company, Pulmagen Therapeutics. Galapagos will have no ownership in Pulmagen.

According to Dr. Chris Ashton, CEO of Pulmagen, the acquisition is a winning situation for all parties. 


"Pulmagen is now able to focus its entire resources on moving its therapeutic pipeline through the clinic," he says. "Furthermore, the stellar team that has made Argenta Discovery's services renowned in the drug discovery industry will remain together as an integral part of Galapagos' service division, and I am sure they will continue to thrive within the Galapagos environment."


MorphoSys and Galapagos expand antibody alliance


MECHELEN, Belgium—Galapagos also announced in February that it has expanded an antibody alliance in bone and joint diseases with MorphoSys AG. The partners have agreed to add another antibody target to the alliance, thereby increasing the total number of programs to four.


The focus of the alliance is to discover and develop antibody therapeutics based on novel modes of action in bone and joint diseases, including rheumatoid arthritis, osteoporosis and osteoarthritis.


As part of the initial agreement, three targets were selected for the collaboration. Antibodies with high specificity towards the first target have been generated and are now being tested in disease-specific in vitro and in vivo experiments. In parallel, Galapagos has applied its target discovery platform to identify additional targets for antibody development. Based on this, Galapagos and MorphoSys have now added a fourth antibody target to the alliance. The partners have prioritized the targets in order to maximize the value and intellectual property position of the respective therapeutic antibody programs.


"This collaboration provides Galapagos with a platform to develop antibody drugs for our proprietary targets," said Onno Van de Stolpe, CEO of Galapagos. "This, together with more than 40 R&D small molecule programs, solidifies our leading position in discovering innovative approaches to address diseases with unmet medical need."


MorphoSys is an independent biotechnology company that develops novel antibodies for therapeutic, diagnostic and research applications. The company says its HuCAL technology is one of the most powerful methods available for generating fully human antibodies.


According to Dr. Marlies Sproll, chief scientific officer of MorphoSys, the expansion of the company's proprietary pipeline is a key value driver for the company.


"In 2010, we plan to add up to four new proprietary programs including both fully owned and co-development opportunities such as with Galapagos," he says. "Our alliance with Galapagos gives us access to novel disease-related target molecules which could build the basis for first-in-class antibody therapies in the future."

Code: E031006



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