Extract SVB Leerink 22 juli 2019
Raising PT from $150 to $200
NASDAQ: GLPG / OUTPERFORM
On the way to TOLEDO, GLPG remains a big buy
We are adjusting our PT to reflect added cash, partnership agreements and our adjusted calibrated views on the pipeline. Our current PT and valuation do not include the Toledo programs, as we wait for details.
We remain convinced and inspired by GLPG’s technical prowess coupled with efficient decision making and nimble operations. We see filgotinib as a likely winner, despite a crowded market, due largely to its safety profile; any change in safety, particularly cardiovascular signals, would change our position.
The IPF program is exciting with a real shot at transforming the treatment space. The BI deal has further strengthened our belief in the value of the pathway, program and asset.
We have adjusted our views on the osteoarthritis (OA) program for GLPG1972. While we previously had a very low probability of success for a presumably large prize, after MEDACorp KOL conversations we have increased our probability of success but added a needed Phase 2b program, delaying time to launch, and have reduced the size of the targeted population. We believe this adjusted approach reflects the state of the field, including expected learnings from large cohort studies on OA structure/function likely to be published in the next 18 months that will aid in improving patient selection and targeting, translating into an increased probability of success for GLPG1972.
We don’t know the identity of TOLEDO. We only know that GLPG has initiated a large, parallel set of studies with diverse chemical entities in pursuit of this pathway across indications. As many know, some pathways are amenable to benefits across multiple indications, while others, despite their preclinical promise remain restricted to a few. We will revisit Toledo as we learn more about it.
Raising PT to $200.
We are raising our 12-month price target to $200 per share, up from $150, following the infusion of $5.1B in total cash. The impact of this additional cash is partially offset by the addition of ~6.9M shares, the conversion of projected revenues into royalties for GLPG1690 and GLPG1205 in idiopathic pulmonary fibrosis and GLPG1972 in osteoarthritis, and by changes in operating expenses to reflect expected expansion of R&D activity. The inclusion of probability adjusted milestones into our model adds additional incremental upside to our valuation. Small modifications to the filgotinib agreement add modestly to our valuation of the drug. We have pushed back our projected launch date for GLPG1972 into 2028 to allow for completion of a Phase 2b trial as a follow-up to the ongoing Phase 2 ROCELLA trial.
Modeling for growth.
Our model focuses on current clinical stage programs for which we have high conviction, including filgotinib in RA and IBD and GLPG1690 in IPF. We include a modest valuation for GLPG1972? in osteoarthritis, underpinning our view of the option-like risk-reward trade off for this asset, but with a long-dated time horizon to the market. Not included in our valuation are potential indication expansions for filgotinib into psoriatic arthritis and ankylosing spondylitis, both of which are expected to enter Phase 3 trials in the upcoming months, as well as GLPG’s highly prized Toledo program, an immunity and inflammation (I&I) program developing multiple novel molecules that GLPG believes will disrupt the treatment paradigm in as many as eight inflammatory diseases. These and other pipeline programs will be added into our valuation as new information is made public.
Several catalysts in the next twelve months create upside potential for GLPG. The identification and detailing of Toledo, the futility read for GLPG1690, filgotinib’s submission, and upadacitinib’s approval/label are all on our watch list. Major downside risks to our PT include a better than expected labelling for upadacitinib, unexpected safety findings for filgotinib and a futility surprise for GLPG1690. The Toledo program holds significant potential upside to our thesis.