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Galapagos Service Arm Continues to Fund Own Efforts; Novartis, Celera Latest Deals


A recently created services arm at drug-discovery firm Galapagos will help Novartis Pharmaceuticals UK develop and conduct functional assays in primary human cells in an undisclosed disease area, the company said this week.

Under the terms of the agreement, the services division, called Galádeno, will use its SilenceSelect gene knockdown platform to design a research program for Novartis. SilenceSelect is based on Galádeno's collection of adenoviruses with human gene sequences that knock down more than 4,000 human proteins by producing siRNA in human cells.

In addition, the agreement, together with deals signed in the past year with Boehringer Ingelheim, GlaxoSmithKline, Bayer, and Celgene, may help justify Galapagos' decision last year to create the services arm in order to nurture its own drug-discovery program in osteoarthritis and osteoporosis.

The Novartis deal marks the second major agreement for functional analysis services signed by Galapagos in the last month. In June, Galapagos said that Galádeno had entered into a service agreement with Celera Genomics in which Galádeno will construct recombinant adenoviruses harboring specific genes selected by Celera in an undisclosed therapeutic area.

Calls to Novartis and Celera were not returned in time for this publication.

Apparently investors have confidence in Galapagos' internal discovery/service strategy, too. In May, Galapagos raised €20 million ($25.1 million at that time) in an initial public offering and announced its listing on the Euronext Brussels and Euronext Amsterdam stock exchanges. A month later, the company announced it had raised an additional €2 million through the exercise of an over-allotment option by KBC Securities and Kempen, the joint lead managers in the IPO.

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Though Galapagos hasn't yet advanced any of its own drugs into clinical trials, its annual revenues have increased 37 percent since 2002, and it narrowed its operating loss in 2004 by 23 percent from the prior year after it increased slightly between 2002 and 2003 (see chart). The company does not break out net loss or profit.

Galapagos attributes most of the revenue increase to service agreements for target identification and target validation research based on its adenoviral delivery technology, full-length cDNA libraries, and siRNA libraries for "knocking in" or "knocking down" specific genes in living cells.

"There are deals where we actually do the complete assay design and screen the complete collections in an assay," Galapagos CEO Onno van de Stolpe told CBA News last week. "Or, companies want to use our adenovirus technology to validate these targets. So in that case, they come to us with a set of genes that they are interested in, we make the adenoviruses with a knock-in or knock-out construct, and then ship it back to the customer."

To conduct the actual screening, Galádeno uses automation technology it acquired from Tibotec, a Belgian company that with Dutch firm Crucell was one of Galapagos' majority shareholders.

"Crucell brought in the adenoviral technology, but the screening technology came from Tibotec," van de Stolpe said. "We further developed it into an industrial platform, and we have an issued patent in the US regarding the use of these adenoviral collections to use these collections for target discovery."

Van de Stolpe said that Galádeno uses a mix of methods to read out its cDNA or siRNA screens, including images, fluorescence, and enzymes. He added that the company incorporates a variety of automation technology such as that produced by Tecan.

"We cannot explore the technology in all the disease areas. … So we had better use it in other therapeutic areas, where somebody else takes those targets and uses them for their own discovery programs."

"We just look at what the best readout is for the disease model we are building, and we apply it as such," he said. "So not everything is high-content or image-based; but, any morphological changes require image-based techniques."

Galapagos will continue to stay the course with its bone and joint disease therapeutic development, van de Stolpe said. It also has a nascent program in Alzheimer's discovery, for which it is looking to find a partner; as well as a discovery program involving mast cells for asthma and allergy, for which it has a three-year research alliance with GlaxoSmithKline.

However, according to van de Stolpe, Galapagos' technology should have applicability across many therapeutic discovery areas, and the company will continue to look to exploit this to fund its own discovery.

"We cannot explore the technology in all the disease areas, and of course we have invested heavily in building these collections, and have the IP position," van de Stolpe said. "So we had better use it in other therapeutic areas, where somebody else takes those targets and uses them for their own discovery programs.

"So we're clearly going to use the technology outside the areas that we're exploring, and clearly to fund our discovery operations," he added. "We have a substantial amount of cash in the bank. But still, you want to reduce your burn rate, and having Galádeno as a service operation exploring this technology really helps."

— Ben Butkus ([email protected])

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