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

Zinger Key Points
  • Galapagos' enterprise value has been consistently low, and the analysts don't anticipate any immediate or medium-term solutions to this.
  • Galapagos' primary cancer pipeline requires 3 to 4 years to reach the market, accompanied by significant cash depletion.

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.

Image: Shutterstock

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