Strength in numbers

Galapagos gains Argenta Discovery’s medicinal chemistry, computational chemistry, ADME and biology activities

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

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


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


"It also provides Galapagos R&D with additionalcapacity, capabilities and access to respiratory models for our internalR&D efforts," says Van de Stolpe. "This new combined service divisionbuilds on our successful cash-generating business model, and it provides moreresources to progress our drug pipeline. With a post-transaction cash positionof more than $40 million, and Galapagos now financially self-reliant, we arewell capitalized and in a strong position to further build Galapagos into abiotech leader in Europe."


Van de Stolpe says Galapagos and BioFocus were particularlyattracted to Argenta's position as a premier drug discovery servicescompany. 


"Argenta was a big competitor, so bringing the two togethercreates significant critical mass," he notes. "In addition, Galapagos is inneed of substantial chemistry outsourcing capacity for its Big Pharmaalliances, and with Argenta, we acquire additional capacity. Thirdly, Argentabrings specific expertise in respiratory models and pharmacokinetics to ourservice division."


There are also other advantages that, while a little lessobvious on the surface, are no less important, Van de Stolpe adds. He saysthose include "upscaling expertise that can be used for Galapagos, and for theRoche COPD alliance, we can make use of the respiratory models—which issomething for the future, as this alliance has just started up with targetdiscovery."


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


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


Argenta's contract research operation, which includesexpertise in medicinal chemistry, computer-aided drug discovery, in vitro biology, analytics, in vivo pharmacokinetics, pharmacology and world-leadingrespiratory 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 tothe contract research customer base. While revenue growth rates have been lowerthan those of BioFocus, Argenta's order book is strong and its margins areamong the highest in the industry.


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


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


The acquisition has caught the attention of analysts.


"The acquisition not only provides additional capacity toBioFocus, but also expertise in respiratory diseases and access to new clientssuch as AstraZeneca, Novartis and Genentech," KBC analyst Jan De Kerpel tellsReuters.


Argenta's respiratory development programs will continue asa new privately held company, Pulmagen Therapeutics. Galapagos will have noownership in Pulmagen.

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


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


MorphoSys and Galapagos expand antibody alliance


MECHELEN, Belgium—Galapagos also announced in February thatit has expanded an antibody alliance in bone and joint diseases with MorphoSysAG. 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 developantibody therapeutics based on novel modes of action in bone and jointdiseases, including rheumatoid arthritis, osteoporosis and osteoarthritis.


As part of the initial agreement, three targets wereselected for the collaboration. Antibodies with high specificity towards thefirst target have been generated and are now being tested in disease-specific invitro and in vivo experiments. In parallel, Galapagos has applied itstarget discovery platform to identify additional targets for antibodydevelopment. Based on this, Galapagos and MorphoSys have now added a fourthantibody target to the alliance. The partners have prioritized the targets inorder to maximize the value and intellectual property position of therespective therapeutic antibody programs.


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


MorphoSys is an independent biotechnology company thatdevelops novel antibodies for therapeutic, diagnostic and researchapplications. The company says its HuCAL technology is one of the most powerfulmethods available for generating fully human antibodies.


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


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


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