Galapagos builds beachhead

STORY UPDATE

MECHELEN, Belgium—July 6, 2006—Galapagos NV announced closure of its all-cash acquisition of all drug discovery operations of DPI for €4.25 million, integrating them with its current service arm to become BioFocus DPI. Based on the acquisition, Galapagos has increased its 2006 revenue guidance from €25-30 million to €33-38 million.

MECHELEN, Belgium—Looking to firm up its initial foothold in the United States, pharma­ceutical company Galapagos NV announced the signing of a definitive purchase agreement with San Diego-based Discovery Partners International (DPI) to acquire assets that DPI is offloading as part of its recent merger with Infinity Pharmaceuticals.

The $5.4 million all-cash transaction will see the European company pick up drug discovery service sites in San Diego, South San Francisco, Allschwill (Switzerland), and Heidelberg (Germany), as well as DPI's sales office in Tokyo.

Under the terms of the agreement, which is expected to close this month, Galapagos will receive all outstanding stock of DPI sub­sidiaries Discovery Partners International AG, ChemRx Advanced Technologies, Xenometrix Inc., and Discovery Partners International LLC, as well as certain con­tracts originally signed by DPI. The assets will remain operational but will run under the banner of Galapagos's current service arm, BioFocus.

For Galapagos, the ability to rapidly expand its market share in the United States played a significant part in its interest in DPI's properties. "It is our expectation that having substantial operations and staff in the U.S. will enable us to increase our busi­ness with U.S. pharma and biotech compa­nies. Proximity lends itself to faster service," says Onno van de Stolpe, Galapagos CEO.

"Furthermore, DPI's U.S. customer base now gets access to one of the broadest rang­es of drug discovery services on offer, with target discovery through to delivery of pre­clinical candidates, and we expect this to increase the revenue base from U.S. cus­tomers," he adds. "With the acquisition, we have strengthened our target-to-preclinical candidate offering and propelled BioFocus DPI into the global top five in drug discovery services."

In the webcast announcing the agreement, DPI CEO Michael Venuti explained that the deal allows DPI to move into the Infinity Pharmaceuticals merger without worrying about the shut-down costs it would have incurred if it had liquidated the opera­tions—costs he esti­mated at $15 million.

"There were a wide variety of companies that expressed interest in purchasing pieces of DPI," he said. "DPI has historically been assembled from divergent compa­nies over the years and so there was a remnant of that organization, where certain skills were localized by site, and certain com­panies wanted to build-in just the capability that was localized in one or two of the sites.

"We saw doing a comprehensive deal for the assets with a single company to be the most efficient way to accomplish our ends, so that we wouldn't have to liquidate any of the sites that might be left behind. It was our goal to get as much as we could in a single trans­action."

According to van de Stolpe, Galapagos will look to integrate DPI's four companies—which pre­viously operated somewhat inde­pendently—within the BioFocus service offering. He anticipates the integration will lead to higher efficiencies and, he says, all cur­rent DPI customers can expect service levels at all sites to be fully maintained during the ownership change.

The integration will also mean a name change for BioFocus, which will become BioFocus DPI. "DPI has built an excellent reputation in drug discovery, so we believe that combining the DPI brand with that of BioFocus will yield synergies in market awareness and esteem," van de Stolpe says. "Also, the DPI name in the new service operation is a reflection on the importance of the DPI people within Galapagos and will motivate the staff to con­tribute to the future of the com­pany."

At press time, Galapagos announced that it had further expanded the capabilities of its BioFocus DPI discovery products division through collaborations with two Indian service companies: Indus Biosciences in Hyderabad and ProCitius in Chennai.