AbbVie in another Deal with Galapagos - Analyst Blog

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Shortly after signing a worldwide licensing agreement with Belgian company Ablynx for an autoimmune disorder candidate, AbbVie ( ABBV ) has entered into another deal, this time with Galapagos.

The agreement with Galapagos covers the discovery, development and commercialization of novel potentiator and combination therapies for cystic fibrosis (CF). Technologies and resources of both companies will be used for the discovery and commercialization of oral drugs that will address the main mutations in CF patients, including F508del and G551D.

AbbVie and Galapagos will aim to identify compounds that correct defects in expression of (corrector) and/or increase the activity (potentiator) of the main mutations in the cystic fibrosis transmembrane regulator (CFTR) protein. The F508del mutation is most common with 90% prevalence among CF patients.

Financial & Other Details

AbbVie will make an upfront payment of $45 million to Galapagos initially.  On the completion of pre-determined success milestones, AbbVie and Galapagos will be equally responsible for phase III development and funding. However, Galapagos is entitled to receive up to an additional $360 million on the achievement of development, regulatory and sales milestones. Galapagos will also receive tiered double-digit royalties on net sales.

AbbVie and Galapagos are looking to initiate phase I studies at the end of 2014.  Once candidates under this agreement are approved, AbbVie will handle commercial activities. However, exclusive rights in China and South Korea and co-promotion rights in Belgium, the Netherlands, and Luxembourg will be held by Galapagos.

The CF Market

CF is an inherited chronic disease estimated to affect about 70,000 people across the world. Several companies are currently working on bringing CF treatments to market. Among approved treatments, most notable is Vertex Pharmaceuticals' ( VRTX ) Kalydeco, which is available in the U.S., Canada and Europe for the treatment of CF patients (≥ 6 years) who have the G551D mutation. Kalydeco is a CFTR potentiator. Vertex Pharma is currently working on expanding Kalydeco's label and is evaluating it as a monotherapy, in combination with VX-809 (a CFTR corrector) and VX-661 (a CFTR corrector).

Our Take

This is the second collaboration between AbbVie and Galapagos who already have an agreement for the development of autoimmune disease candidate, GLP0634, for Crohn's disease and rheumatoid arthritis. AbbVie, with its expertise and commercial strength, should make a strong development and commercialization partner for Galapagos.

Meanwhile, this deal gives AbbVie a chance to expand and strengthen its pipeline. However, it will be several years before a product developed under the AbbVie-Galapagos CF collaboration reaches the market. Vertex Pharma, with several phase III studies for CF ongoing, already has a significant head start.

AbbVie currently carries a Zacks Rank #3 (Hold). While we are positive on AbbVie's strong late-stage pipeline, dividend yield and growth strategy, we remain concerned about its dependence on Humira. We believe AbbVie will continue pursuing in-licensing deals and collaborations to boost its pipeline.

At present, Roche ( RHHBY ) and Eli Lilly ( LLY ) look well-positioned. While Roche is a Zacks Rank #1 (Strong Buy) stock, Eli Lilly is a Zacks Rank #2 (Buy) stock.



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CF , LLY , RHHBY , VRTX

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