Galapagos Exits Cell Therapy, Seeks New Direction Under Gilead's Watchful Eye

Belgian biotech Galapagos is undergoing a significant strategic shift, abandoning its cell therapy ambitions and seeking new opportunities in the pharmaceutical landscape. The company's recent turbulence, marked by leadership changes and scrapped plans, highlights the challenges faced by mid-sized biotechs in a rapidly evolving industry.

Leadership Shake-up and Strategic Pivot

Galapagos has seen significant changes at the top, with CEO Paul Stoffels departing after a brief tenure. His replacement, Henry Gosebruch, formerly of neuroscience biotech Neumora, now faces the task of charting a new course for the company. Gosebruch's appointment came amid a failed attempt to spin out a portion of Galapagos' business, a move that was ultimately thwarted by regulatory hurdles.

The company's decision to exit cell therapy marks a stark departure from its previous strategy. Despite what Gosebruch described as "pretty supportive" clinical data, Galapagos concluded that the complexities of cell therapy development, including supply chain challenges and patient journey intricacies, outweighed the potential benefits. This decision aligns with a broader industry trend, as other major players like Takeda and Novo Nordisk have also recently stepped back from cell therapy investments.

Financial Position and Future Direction

Galapagos finds itself in an unusual position, sitting on approximately 3 billion euros in capital but lacking a clear strategic direction. The company's substantial cash reserves are largely a result of its 2019 deal with Gilead Sciences, which included a $5 billion investment in Galapagos.

Gilead's 25% stake in Galapagos has effectively prevented the Belgian biotech from winding down operations and returning capital to shareholders, a move that would require a 75% vote under Belgian corporate law. Instead, Gilead is pushing for Galapagos to "rebuild" and pursue new opportunities in the pharmaceutical space.

Gosebruch indicated that Galapagos is now focusing on potential deals for clinical-stage assets in immunology and oncology, with a preference for "slightly smaller indications" or niche segments within larger therapeutic areas. The company is also working to renegotiate its agreement with Gilead, which currently gives the larger pharma company options on Galapagos' assets at potentially below-market rates.

Restructuring and Workforce Reductions

As part of its strategic shift, Galapagos has significantly downsized its operations. The company's clinical team has been reduced to about 15 people, primarily working on a legacy TYK2 inhibitor program for lupus and dermatomyositis. Looking ahead, Galapagos expects to maintain a lean workforce of 35 to 40 employees, focusing on corporate functions, business development, and strategy.

These changes reflect the company's transition from an R&D-focused organization to one prioritizing strategic acquisitions and partnerships. As Galapagos navigates this pivotal moment in its history, the pharmaceutical industry will be watching closely to see how this once-promising biotech reinvents itself in the face of setbacks and shifting market dynamics.