Galapagos diabetes, obesity deal with Merck could top $233 million
by Chris Anderson  |  Email the author

MECHELEN, BelgiumóLast Friday, Galapagos NV announced it entered into a multi-year, global strategic alliance with Merck to identify and develop potential new therapies for diabetes and obesity. The deal marks an important milestone for Galapagos, company executives note, as it looks to forge more partnerships outside of discovery work for bone and joint diseases.

"Clearly, this alliance with Merck fits very nicely in our strategy," says Onno van de Stolpe, CEO of Galapagos. "This is the sixth alliance that we have signed, and it is only the second alliance outside the bone and joint areaówe also have an anti-infective alliance with GlaxoSmithKline. We believe that we should use our target discovery platform to sign on other partners in other therapeutic fields, whereby we are using their expertise in that specific disease area. This obesity and diabetes program is a good example of that, where we use the disease expertise that Merck brings into this alliance."

In terms of the work each company will do, the dividing line is at the entry to Phase I trials for any compound the partners advance. That means Galapagos will do the target discovery and preclinical work on a number of different protein targets and then turn it over to Merck to conduct the clinical trials, perform registrations and conduct the sales and marketing acitivities.

For its services, Galapagos will receive just more than $2 million from Merck as an upfront payment, with milestones payments that could total more than $233 million over the life of the agreement. In addition, Galapagos will be eligible to receive up to double-digit royalties on sales of any approved products.

The relatively low upfront payment from Merck is not indicative of the value of Galpagos' discovery platform, rather the stage at which the partnership is commencing. Commenting in a Reuters wire story on the deal, KBC analyst Jan de Kerpel says starting a partnership at such an early stage will limit upfront payments, though de Kerpel was generally favorable on the deal.

"There is only a limited chance of success starting at such an early discovery that a drug will make it the market, but the company is aware of that and is working in different areas to spread the risk," De Kerpel said in the Reuters story.

Officials from Merck were not available prior to press time, but the program does fit well within the framework of Merck's work and expertise in the areas of obesity and diabetes.

"By combining Galapagos' novel target identification strategy with Merck's drug development expertise this collaboration provides a unique opportunity to discover and develop potential new therapies for diabetes and obesity," said Catherine Strader, vice president of external basic research at Merck Research Laboratories, in a press release announcing the deal.

For Galapagos, it adds yet another Big Pharma partnership feather to its cap. It already has alliances in antiviral, antibacterial and osteoarthritis with GlaxoSmithKline; a rheumatoid arthritis (RA) partnership with Johnson & Johnson company Janssen Pharmaceuticals; an osteoporosis deal with Eli Lilly; and a second osteoporosis deal with Wyeth.

Of these, the Janssen deal in RA is the most advanced, with a compound expected to enter the clinic this year. The partnership with GSK for osteoarthritis is also moving along, with candidate compounds now entering preclinical development.

"We have a nice differentiation of programs from very early to mature," van de Stolpe says. "The strength of Galapagos is we have a strong product pipeline, we are in the clinic with two and probably have the most impressive list of pharma partners of any biotech in the world. We now have four of the top 10 pharma partners in these alliances."