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20 June, 2006 - 17:49 By Staff Reporter

International deals catapult BioFocus into world elite

The Essex-based biotech, BioFocus, has landed two major international deals that have thrust it into the top five of worldwide drug discovery services companies according to owner, Galapagos NV.

Onno Van de Stolpe, Galapagos’ chief executive, believes the £92m drug discovery alliance with GlaxoSmith-Kline and BioFocus’ incorporation of the newly acquired Discovery Partners Intern-ational (DPI) has done enough for revenues to place it alongside companies such as Albany Molecular, Lexicon Genetics and Evotec.

Galapagos has agreed to make a £2.9m all-cash payment for DPI, which includes the assets of its four drug discovery services sites: San Diego and South San Francisco, USA, Allschwill, Switzerland and Heidelberg, Germany as well as DPI’s Japanese sales office in Tokyo.

The four sites, which will remain fully operational once merged into what is now known as BioFocus DPI, are expected to add over £5.5m in revenues to BioFocus in the second half of 2006 and be cash flow accretive in 2007.

Van de Stolpe said: “BioFocus is now a truly global company with responsibility for all DPI’s sites. Based on the added revenues from DPI, it will also be in the top five of firms providing drug discovery services worldwide.”

BioFocus will assume the scientific management of these sites from its Chesterford Research Park headquarters, including execution of all current service contracts, while other operational functions will be managed directly by Galapagos.

Galapagos believes each of DPI’s four operating companies will strengthen and broaden the BioFocus product offering in several complementary ways.

The Swiss operation has world class hit finding activities with access to over 600,000 synthetic chemical compounds, greatly expanding the capabilities and collections of BioFocus.

The German operation complements the current BioFocus expertise in synthetic chemistry through an extensive collection of natural compounds originating from Actin-omycetes and fungi with over 140,000 isolated sub-fractions, over 75,000 purified extracts and more than 1,000 isolated compounds, this platform.

San Diego, which will also operate as Galapagos’ North American headquarters, has a lead optimisation platform and chemical library development capabilities, which provide additional capacity for Bio-Focus contracts.

San Francisco’s operation is a compound management facility established through a multi-year contract with the National Institutes of Health, one of the world’s foremost medical research organisations.

The San Diego and San Francisco operations also give Galapagos a firm US presence in addition to the existing BioFocus sales office in Boston which opened last November.

Some downsizing of general and administrative functions in the San Diego facility is anticipated in relation to the integration of the various service organisations.

Galapagos will use these operations to increase its visibility and market share in the US drug discovery market.

Van de Stolpe said: “We believe that DPI’s capabilities will substantially strengthen our technology, product offering and customer base. This acquisition provides Galapagos with a strong presence in the US and we will now have a global reach with operations in seven countries.”

“We believe this positions the company well for additional turnkey deals like the alliance between Galapagos and GlaxoSmithKline. With this acquisition, we also obtain additional capacity to accelerate the programme within this alliance.”

This multi-year, multi-programme drug discovery and development collaboration with GSK will aim to expand Galapagos’ existing internal target and drug discovery programmes in osteoarthritis: degenerative joint disease.

Galapagos’ full suite of target-to-drug discovery products and services to pharmaceutical and biotech companies are all delivered through BioFocus, its service division since the £20.2m acquisition in October 2005.

Through the new alliance, Galapagos will collaborate to deliver disease modifying drugs with clinical Proof of Concept to GSK’s global R &D organisation and will contract a substantial part of these activities to BioFocus.

Van de Stolpe, said: “With this first broad alliance, we have started to realise the strategic synergies of combining BioFocus’ drug discovery capabilities with Galapagos’ target discovery engine.

“The alliance with GSK in osteoarthritis also serves as a strong validation of Galapagos’ internal drug discovery programmes in bone and joint diseases.”

Osteoarthritis is the most common form of arthritis, typically affecting people aged 45 and older.

It is a degenerative disease characterised by joint destruction and loss of articular cartilage, the slippery tissue that covers the ends of bones in a joint.

No currently available treatments prevent osteoarthritis or even reverse or block the disease process.

It is expected that with the ageing of the population, more individuals will be prone to develop osteoarthritis.

BioFocus will conduct compound screening, identify tractable hits, pursue a number of hit-to-lead programmes, and develop the resulting leads into candidate selection compounds through to a successful Proof of Concept in clinical research Phase IIA.

GSK will have exclusive options to further develop and commercialise these compounds on a worldwide basis. Galapagos will take the rights for those compounds which GSK does not exercise its option.

Under the terms of the agreement, Galapagos will receive an upfront technology access fee of £2.7m from GSK.

Upon successful completion of all agreed alliance programme criteria, Galapagos stands to receive up to £44.6m in success-based milestones for a successful drug development programme.

This would double if two marketable products were developed.

In addition, Galapagos will receive up to double-digit royalties on commercial sales of alliance products.

Further to the agreement, on the realisation of a defined future milestone, GSK will make an equity investment of up to £2.1m in Galapagos.


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