Replies to post #138052 on Biotech Values

[dav1234]

Galapagos CEO Onno van de Stolpe calls the development deal with Abbott Laboratories (ABT) announced earlier today the "largest Phase 2 deal in the history of the industry." The agreement will line up Abbott in competition with Pfizer (PFE) in a race to develop a widely used rheumatoid arthritis drug. Shares of Galapagos are up 22% in Brussels trading

[DewDiligence]

Abbott Takes Option on Galapagos Drug in $1.35B-Biobucks Deal

[This is the same deal as the one announced in #msg-72658934; the “LLY’ in instead of “ABT” in the header of that post is a typo.]

http://www.bloomberg.com/news/2012-02-29/abbott-to-pay-galapagos-150-million-up-front-for-arthritis-drug-rights.html

›By Phil Serafino - Feb 29, 2012 3:34 AM ET

Abbott Laboratories (ABT) agreed to pay Galapagos NV (GLPG) as much as $1.35 billion for the rights to an experimental drug for rheumatoid arthritis. Galapagos shares rose the most in three years.

Galapagos will receive an upfront payment of $150 million for the oral drug, GLPG0634, the companies said in a statement today. If mid-stage clinical trials are successful, Abbott will pay another fee, of $200 million, to license the treatment, they said. Mechelen, Belgium-based Galapagos is eligible for additional payments totaling $1 billion if development, regulatory and sales goals are met.

With the agreement, Abbott will be chasing New York-based Pfizer Inc. (PFE), which has submitted a drug in the same class to the U.S. Food and Drug Administration for approval. Galapagos plans to use the proceeds to fund development of other experimental medicines, the company said.

“The deal terms are impressive, the largest Phase 2 deal in the history of the industry,” Galapagos Chief Executive Officer Onno van de Stolpe said on a conference call with reporters. [This is a clear misstatement; however, as I joked in #msg- 72659511, it may be the largest phase-2 deal in the history of the *Belgian* biotech industry.] The agreement “will enable us to start building an infrastructure that we need for further pipeline molecules that we’re driving towards the market.”

Shares Soar

The drug is a so-called JAK1 inhibitor that blocks an enzyme known as a Janus kinase, the companies said. Kinases play a role in the signaling mechanism used by a number of proteins known as cytokines that are involved in autoimmune diseases such as rheumatoid arthritis, they said.

Galapagos soared 22 percent to 13.25 euros at 9:17 a.m. in Brussels trading. Before today, the stock had risen 4.3 percent this year, giving the company a market value of 286.4 million euros ($385 million).

Galapagos has completed a mid-stage clinical trial on GLPG0634 that showed an efficacy “among the best reported” in rheumatoid arthritis, according to the statement. Galapagos said it plans to begin a second Phase 2 trial shortly, and will deliver a package of mid-stage trials to Abbott in 2014.

If Abbott licenses the drug at that juncture, the Abbott Park, Illinois-based company will be responsible for the third and final stage of clinical trials typically needed for regulatory approval, according to the statement. Abbott will pay Galapagos double-digit royalties on sales if the drug comes to market.

Financial Impact

Galapagos will give an earnings forecast when it reports results on March 2, Van de Stolpe said. The Abbott payment “clearly will have an impact,” he said.

Galapagos held discussions with 12 potential partners for the drug, said Van de Stolpe. The company chose Abbott because “they are innovative, they’re a dominant player, and they were willing to pay premium terms.” [Unlike the CEO’s assertion earlier in this post, this one is entirely believable.]

It’s too early to tell what peak sales of the drug may be, said Van de Stolpe. Analysts predict Pfizer’s product, tofacitinib, will reach $2 billion to $5 billion peak sales, “and clearly we are targeting the same market,” he said.

Existing treatments for rheumatoid arthritis are injectable antibodies, said Andre Hoekema, Galapagos’s head of corporate development. The Pfizer and Galapagos drugs will be available in tablet form, he said.

“Pfizer is considered to be the company that is considered to be in the lead and will launch a JAK inhibitor first,” he said. “Galapagos is not No. 1, but we feel we have a very good chance to be the best in class.”‹

[DewDiligence]

Quiz: GLPG0634 will never be sold by an Abbott salesforce—how do we know this?

[jq1234]

It is a real large deal, especially compared to LLY's JAK1/2 RA deal with INCY two years ago. I guess biotech deal price is going up.

Under the terms of the agreement, Lilly will receive worldwide rights to develop and commercialize INCB28050 as an oral treatment for all inflammatory conditions. In exchange for these rights, Incyte will receive an initial payment of $90 million and is eligible for up to $665 million in additional potential development, regulatory, and commercialization milestones, as well as tiered, double-digit royalty payments on future global sales with rates ranging up to twenty percent if a product is successfully commercialized.