Galapagos Downgraded, Pharma Firm Faces Uphill Battle With Slow Pipeline Progress: Analyst

Bank of America Securities downgrades European drugmaker Galapagos NV GLPG to underperform, citing few catalysts in the near term.

Galapagos’ enterprise value has been consistently low, ranging between $1.5 billion and $2 billion, and the analysts don’t anticipate any immediate or medium-term solutions to this. 

Additionally, the company’s main programs are entering crowded markets where differentiation is unclear, and there is a lack of significant catalysts to drive growth.

Galapagos’ primary cancer pipeline requires 3 to 4 years to reach the market, accompanied by significant cash depletion and uncertain standing in fiercely competitive markets. 

Moreover, Galapagos’ emphasis on acquiring early-stage assets increases the risk for investors, potentially leading to a decline in the stock price. 

BofA Securities’ downgrade to “Underperform” from “Neutral” is due to concerns that the stock may continue to be a value trap and underperform compared to its peers. The analyst lowered the price target from $41 to $31.

Galapagos is currently conducting three early-stage trials to assess its autologous cell therapy (CAR-T) treatments for hematologic cancers. 

The unique selling points of Galapagos’ CAR-Ts lie in their potential differentiators:

• Speed: Galapagos aims for a swift 7-day manufacturing turnaround time, quicker than the typical 30-day timeframe seen in most competitor programs. However, competitors like Gilead Sciences Inc GILD are also working on reducing this time frame, with lymphoma programs reaching a 14-day turnaround and showing signs of improvement.
• Supply: Galapagos has developed an automated manufacturing model that could eliminate some current production bottlenecks. However, being a late entrant (fifth) in most key markets poses a risk, as competitors may address supply issues before Galapagos can enter the market.

Thus, BofA sees a smaller commercial opportunity for Galapagos’ CAR-T candidates and lower revenue forecasts by 15-25% in out-years (2028E+).

Price Action: GLPG shares are up 0.16% at $32.25 on the last check Monday.

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