The Galapagos ($GLPG) stock price has fallen after the rheumatism drug has not received approval from the FDA earlier this month. There is still the possibility that the drug may soon be used in Europe. What can we expect the coming weeks in September?
Rejection calls for new opportunities
Galapagos had a great disappointment on August 19, 2020. The biotechnology company’s share price ended 25% lower that day at a rate last seen in July, 2019. Temporarily, the price even got 35% lower that same day. The price drop has to do with the news from the United States. The Food and Drug Administration (FDA) has rejected the application for authorization of the rheumatism drug filgotinib. Upon approval of the drug, the company would receive a $100 million milestone payment.
Against all odds, the medicine watchdog decided to disapprove the medicine of Galapagos. The regulator has doubts about the safety of the higher dose of 200 milligrams. This dose may be unsafe for men and could cause things like infertility.
The drug was previously approved in Europe. Galapagos CEO Van der Stolpe stated that he expects final approval from the agency in the current quarter, so that the drug will be sold on the European market. However, the US market is many times larger than the European market, so investors took the share in the sale. Due to the rejection, the potential sales market appears several billions smaller.
Galapagos is a Belgian pharmaceutical research company specializing in the discovery and development of new medicines. The R&D department develops medicines for diseases such as rheumatism and eczema. In addition, Galapagos has partnerships with other major pharmaceutical companies for pharmaceutical programs. In 2016, more than 90% of the turnover was generated from research by the R&D department.
The perfect scenario
The price reaction is justified, but can be seen as exaggerated. Galapagos worked on the drug for no less than thirteen years and it can still make enough adjustments. However, this requires investigations. Money is not a problem, the company still has enough money in hand. With a cash position of over $5.7 billion, the company has a very healthy status. In addition, Galapagos has five major drugs in development, plus approximately 25 more discovery programs.
If Galapagos is allowed to sell the rheumatism drug in the United States, sales will surely increase. The medicine’s potential sales are therefore in the billions. For filgotinib, analysts expect revenue of between $4 and $6 billion per year. Galapagos will have to share that income from filgotinib with partner Gilead. This American biotech company contributes to the research that is being done on the drug. In return, Gilead is allowed to market the drug in the US, the main drug market. The other products in the pipeline can also make a nice contribution to the turnover in the future. For example, the drug for idiopathic pulmonary fibrosis is already in stage 3.
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