Clinical and regulatory setbacks have left the star biotech duo Gilead and Galapagos smarting and their stock value bruised in recent months. Yet the pair claim to be well capitalized to weather the storm and determined to do so together.
The two companies forged an unusual blockbuster agreement in 2019, valued at around €4.5B ($5.1B), which allowed Gilead to access the Belgian-Dutch company’s full pipeline. In a bitter twist of biotech fate, however, two of their most promising late-stage candidates, targeting chronic inflammation disorders, hit major snags over the past few months, sending Galapagos’ share price down by almost two-thirds in a year.
“From everything Galapagos touches turning into gold, it seemed, to everything turning into a deception,” said Mike Plevier, a biotech and real estate investor, who has owned Galapagos stock since 2015. “I think this is biotech — taking risks to develop new drugs and treatments will make some programs succeed and some fail.”
Last month, the partners discontinued phase III trials of the candidate ziritaxestat. This drug was being developed to treat idiopathic pulmonary fibrosis, a rare condition that causes irreversible scarring of the lungs, by blocking the enzyme autotaxin. However, the decision to pull the plug came after an independent panel decided that “ziritaxestat’s benefit-risk profile no longer supported continuing these studies.” The details of what prompted the move are pending.
Ziritaxestat was also in phase II trials against the autoimmune disorder systemic sclerosis and those will be scrapped as well. The company does have a different idiopathic pulmonary fibrosis drug in its pipeline, a blocker of the immune receptor GPR84, that is due to enter a phase IIb trial. However, the way is open for competing phase III-stage drugs such as pamrevlumab to establish themselves on the idiopathic pulmonary fibrosis market.
A more bitter blow is still being digested by observers—and perhaps even by Gilead and Galapagos themselves. Their lead candidate filgotinib was approved in the EU and Japan in September 2020 for the treatment of rheumatoid arthritis. However, the US FDA rejected the drug due to safety concerns, and requested more data regarding filgotinib’s effects on the sperm count of male patients. In December, Gilead deemed the treatment unlikely to gain FDA approval for rheumatoid arthritis without “substantial additional clinical studies” and dropped the US program. The company also left Galapagos in charge of commercializing the drug in Europe.
Filgotinib works by blocking inflammation-linked Janus kinase (JAK) proteins. The drug is designed to be more selective and therefore safer than approved drugs of the same class, such as Pfizer’s tofacitinib. This therefore brings some irony to last year’s FDA rejection based on safety concerns. Filgotinib was also the star candidate in Gilead’s portfolio — before remdesivir, a drug designed to treat Covid-19, took its place amid the raging Covid-19 pandemic last year.
However, this isn’t the end of the road for filgotinib. The companies are awaiting the potential EU approval of the drug in ulcerative colitis, and are developing it for other inflammatory disease indications. According to interim safety results from two phase II studies released today, men given filgotinib appeared to have no more sperm count problems than the placebo group. These results were hailed by company officials as good news. If the full results continue to back up filgotinib, they could be key to swaying the FDA in favor of the drug.
“Gilead’s commitment to inflammation continues through our 10-year collaboration with Galapagos and our broader pipeline, as we seek to identify and develop new therapies for people living with inflammatory conditions,” a Gilead representative told me.
“In collaboration with Gilead, we have achieved approval of our first medicine, Jyseleca (filgotinib), in Europe, which will be commercialized by Galapagos across the region,” said a Galapagos spokesperson. The company also seemed upbeat about its partnership with Gilead, which has been the subject of intense media speculation in recent weeks.
Galapagos, which posted a net loss of €305M in 2020, is nevertheless well-capitalized, with €5.4B of total current assets at the end of last year.
“What I believe is still unique about Galapagos is their cash position,” Plevier said. “They still have the steering wheel in their own hands and are well-capitalized for repositioning.”
The 2019 deal with Gilead, he adds, is something that helped Galapagos enormously to be in that position. He sees it as a lesson for entrepreneurs.
“If an investor or entrepreneur could capitalize big on something they have developed that is still in an early stage, there are some big advantages of doing so,” Plevier said. “Needless to say, the biggest advantage is capitalizing your company for failures in a later stage.”
Cover image from Elena Resko