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Galapagos NV (GLPG.BR), GlaxoSmithKline (GSK) Abandon Joint Drug Project Due To Adverse Effects

8/8/2014 6:12:19 AM

Galapagos, GlaxoSmithKline Abandon Joint Drug Project Due To Adverse Effects Galapagos, GlaxoSmithKline Abandon Joint Drug Project Due To Adverse Effects

August 8, 2014
By Krystle Vermes, Breaking News Staff

Belgian biotech firm Galapagos has announced that its partner, GlaxoSmithKline (GSK), has stopped their joint drug development project, according to Reuters. The company reportedly did so out of concerns about the adverse effects that could come from the drug.

The two companies were working to develop a drug called GSK2586184, which would have been used to treat ulcerative colitis and psoriasis. GlaxoSmithKline decided to stop the joint project because they determined that it would not mix well with certain types of cholesterol drugs.

GlaxoSmithKline is considering next steps in the process now that development has ceased. Until then, Galapagos is not authorized to comment on the matter.

Investors of Galapagos now wonder if they should be concerned about other drugs in its portfolio, such as JAK1 inhibitors and GLPG0634, which is the company’s most developed product. GLPG0634 is the result of a partnership with the U.S. group, AbbVie (ABBV). This drug is designed to treat rheumatoid arthritis in patients.
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"I think investors are now worried about the company's main product which is a large part of its valuation," KBC Securities analyst Jan De Kerpel told Reuters.

Galapagos has carried out testing for GLPG0634 and has not seen any adverse side effects, which would mean that investors have little to worry about. However, the recent news on its joint project coming to a standstill has resulted in the drop of shares to a two-year low.

As 2014 winds down, Galapagos claims that it will have more cash than originally thought when the year comes to an end. This is primarily because of its sale of its services division. Galapagos is on pace to have 175 million (approximately $234 million U.S. dollars) Euros at the end of 2014, which is 5 million above its initial prediction.

Galapagos has fluctuated numerous times throughout the year. In March, it forecasted its revenue to be 180 million, but then lowered it to 100 million as the result of expected payouts from drug development programs.

However, the future looks bright for Galapagos as of now. Several test results are slated to become available to the company within the next 18 months. As a result, shares may increase in value.

Regardless of what happens with this shelved project with GlaxoSmithKline, Galapagos has established a presence in the industry that will carry it through the controversy.

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