Janney Initiates Galapagos At Buy, Sees Fair Value Of Shares At $64

Janney has initiated coverage of Galapagos NV (ADR) GLPG with a Buy rating and fair value estimate of $64, citing potential success of Filgotinib.

Galapagos has deals with Gilead Sciences, Inc. GILD and AbbVie Inc ABBV for the development of Filgotinib in inflammatory diseases and cystic fibrosis (CF), respectively.

The brokerage said the emergence of oral-JAK inhibitors offers an "interesting paradigm" in the management of Rheumatoid Arthritis (RA). Thus, in Filgotinib (partnered with Gilead), Galapagos has a "potential blockbuster."

The Filgotinib Advantage

"We are modeling peak sales of $1.9 billion for filgotinib in RA, and $658 million in Crohn's with Ulcerative Colitis offers additional optionality (not in our FV)," analyst Debjit Chattopadhyay wrote in a note.

Chattopadhyay acknowledges that Filgotinib is at least two years behind Baricitinib, an RA drug from Incyte Corporation INCY and Eli Lilly and Co LLY.

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However, since the company's drug is third in to launch, it may be a commercial positive, because experience from Pfizer Inc. PFE's Xeljanz suggests physicians are likely to become increasingly more comfortable with the safety profile of JAK inhibitors over the next two years.

"Filgotinib JAK1 specificity resulting in a superior hematologic safety profile over competitors could be an advantage (more so in IBD); oral dosing increases convenience over biologics; and although experience with GILD suggests otherwise, filgotinib could be priced attractively vs. other JAK's and biosimilars (we are modeling a $21,000 launch price in U.S.)," Chattopadhyay noted.

Cystic Fibrosis

Meanwhile, the analyst highlighted that Cystic Fibrosis corrector/potentiator commercial opportunity could exceed $7 billion globally, and he assumes a 30 percent market share for Galapagos/AbbVie.

Currently, Vertex is the leader in Cystic Fibrosis market with its Kalydeco and Orkambi. The analyst noted that with about 70,000 patient commercial opportunities, it may not be feasible for Galapagos to develop a potentiator and corrector sequentially, especially if Vertex's triple-combo succeeds in meaningfully improving upon Orkambi.

"Whether GLPG/ABBV will choose a phase 3 program prior to a triple-combo phase 2 is not yet clear, but will likely be data dependent. Either way, progress on the CF program will be a key driver of sentiment on GLPG stock over the next 12 to 18 months, in our view," Chattopadhyay added.

At time of writing, ADRs of Galapagos were up 0.77 percent to $54.62.

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