Nomura Instinet samenvatting
Galpagos NV Buy
Dearth of Upside Opportunities as Risky IPF Franchise Is Already Priced In, by Our Estimates
February 25, 2020
Galapagos reported 4Q/YE19 earnings, ending the year with €5,780.8mn in cash and equivalents. 2020 operational cash burn is guided to €420-450mn, which includes €200mn in milestone payments related to filgotinib approval in RA in various regions. R&D costs are expected to be up 35%-40%, due to increases in filgotinib cost share (from 20%-50%) and investments in early-stage/discovery pipeline assets. We are revising our target price to $290/share up from $209/sh, which is stretching the limit of valuation, in our view.
Near-term risks remain around the IPF franchise ($18 of our TP) and TOLEDO program ($12 of our TP; target yet to be announced). Sources of upside appear to be increasingly limited, as risky IPF and TOLEDO come into focus. Up Next: filgotinib data in UC 2Q20 (derisked somewhat by upadacitinib data in Crohn's; ‘1972 data in OA in 2H20; PINTA (‘1205 in IPF) and NOVESA (‘1690 in SSc) in 2H20.
UC Data Next: IBD is less competitive space for filgo vs. RA, and we estimate that longer duration of use vs. current IBD biologic may see upside to consensus estimates.
IPF Franchise: Programs Mostly Priced In, by Our Estimates. GLPG has two IPF assets in clinical trials: ‘1690, an autotaxin inhibitor, in the Ph3 ISABELA trials (futility analysis in 1Q21), and ‘1205, a GPR84 inhibitor, in a Ph2 trial (PINTA). We view IPF as an inherently risky indication, due to an incomplete understanding of disease pathogenesis. Further, safety concerns around autotaxin inhibition remain, due to the short duration of the Ph2 trial (autotaxin and LPA are highly expressed in the CNS; dysfunctional autotaxin expression and LPA signaling have been implicated in AD, which may suggest CNS safety issues would only be apparent with long-term usage of an autotaxin inhibitor; see publication here; historically, other clinical assets targeting this pathway also resulted in CNS AEs). One-third of the pts in ISABELA will have reached the 52-week primary endpoint by the futility analysis in 1Q21. DSMC has regular access to unblinded safety data and has not flagged issues; 1Q21 decision will be a “go/no go decision” with few other details.
PINTA and GPR84 Inhibition: Oppty. for Combo Use with ‘1690; Competitor Drug with Less Affinity Showed Good Safety. Competitor Prometric reported Ph2 data from its trial of PBI-4050 (GRP84 targeted agent) in IPF.