KBC 6 augustus 2021
No surprises in Galapagos’ 1H21 financial update, apart from TYK2 compound GLPG3667 now also being envisioned for development in UC in the course of 2022. Given long timelines for clinical catalysts, we maintain our € 66 price target & Hold rating.
News:
Yesterday evening, Galapagos reported on its 1H21 results.
Financials: Galapagos reported € 277.2m revenues (CSS € 257.0m),
as per usual mainly driven by recognition of deferred revenue from
the Gilead deal (€ 253.2m). R&D expenses came in at €268.8m,
nearly flat y/y (€ 262.9m 1H20). S&M costs were € 29.1m, with G&A
landing at € 76.9m. Total OPEX of € 374.8m was slightly above CSS
of € 362.6m. Net financial result was € 17.1m (positive FX effect &
interest expenses), with profit from discontinued operations relating
to the sale of Galapagos’ Fidelta service business adding € 22.2m to
the results. Net result lands at - € 55.0m, with a June 30th cash
position of € 5.0bn. Operational cash burn for the quarter was €
223.2m, below our and CSS estimates of € 287.0m.
Operations & outlook: To date, Filgotinib has launched in 11 countries
across Europe. Reimbursement discussions remain ongoing, and
Galapagos expects complete transition from Gilead on European
commercial operations by YE21. For 2H21, Galapagos will report on
European Filgotinib sales. Next to launch efforts in RA, a CHMP
opinion on Filgotinib’s use in UC and subsequent approval by the EMA
is expected in 2H21. Enrollment in the phase III DIVERSITY study in
CD should complete by YE21.
For the Toledo franchise, Galapagos is advancing a SIK3 specific
compound, GLPG4399, into phase I clinical development this year.
Additionally, a follow-up SIK2/3 compound for GLPG3970 will enter
the clinic in 2022. On TYK2 and the GLPG3667 program, the company
is running an extended dose escalation study in healthy volunteers. A
phase IIb in PsO and a phase II in UC are anticipated for 2022.
Galapagos’ polycystic kidney disease program, GLPG2737, is expected
to complete enrollment in its ongoing phase IIa study by YE21.
Cash guidance remains at € 580 – 620m in operational cash burn.
Our View:
Higher than expected revenue recognition and a € 22.2m windfall
from the Fidelta sale provide Galapagos with a set of financial results
slightly better than CSS estimates. Given operational cash burn of €
223.2m and unchanged guidance of € 580 – 620m for FY21, it seems
further ramp-up of S&M costs should be expected as commercial
rollout of Filgotinib across Europe continues. Initial sales is bound to
be a key element to watch out for in 2H21 results.
While most pipeline elements were disclosed earlier in July at the time
of GLPG3667 and GLPG3970 phase I / II results, the intention to
develop TYK2 compound GLPG3667 in a phase II UC trial in the
course of 2022 is a novel element, pointing to the company’s
willingness to invest in the compound.
Commercial progress in RA & regulatory updates in UC for Filgotinib
will be the main items for Galapagos in 2H21, with no anticipated
clinical catalysts in the short term. € 66 price target and Hold rating
reiterated.
Lenny Van Steenhuyse
Financial Analyst - Biotech & Pharma