Bad News Delivers a Decisive Blow to Galapagos N.V.

Galapagos N.V. (NASDAQ: GLPG) is developing new triplet combination therapies with AbbVie (NYSE: ABBV) for cystic fibrosis that the two companies hope can challenge Vertex Pharmaceuticals (NASDAQ: VRTX) someday. Unfortunately, the results reported yesterday from a mid-stage study did not inspire confidence. Is Galapagos’ plan to tackle cystic fibrosis a failure?

What’s cystic fibrosis?

A serious, life-shortening disease with few treatment options, cystic fibrosis is caused by problems associated with reabsorbing and transporting chloride and, correspondingly, sodium, the two components of salt. In healthy patients, chloride is transported through the CFTR channel, but in cystic fibrosis patients, faulty genes prevent that from happening.


This inability to properly absorb and transport chlorine can cause many problems for cystic fibrosis patients, especially in the lung, where chlorine depletion can lead to the dehydration of airway surface liquid (ASL), a salt-containing liquid and a mucus gel layer that plays an important role in preventing lung infections.

There are approximately 75,000 people in the world with cystic fibrosis, including about 30,000 in the U.S., and sadly, most patients succumb to their disease before their 30s because of damage to their lungs that eventually results in respiratory failure.

Vertex Pharmaceuticals’ dominance

There’s no cure for cystic fibrosis, but Vertex Pharmaceuticals markets three drugs that may help improve outcomes for cystic fibrosis patients.

They launched their first cystic fibrosis drug, Kalydeco, in 2012. Kalydeco helps clear mucus from the airways to help prevent infection and improve respiration. Initially, it was only approved for use in a very limited number of people. However, it’s now approved for use in patients with 10 specific CFTR mutations.

The second drug that won approval is Orkambi, a combination drug comprising of Kaydeco and lumacaftor that’s approved for use in patients with two copies of the F508del mutation in their CFTR gene. Earlier this year, Vertex Pharmaceuticals won approval for its third drug, Symdeko, a combination of Kalydeco and tezacaftor, after it was shown in trials to improve patients’ lung function.

About 34,000 cystic fibrosis patients have amenable mutations that can be addressed by these three drugs, and because cystic fibrosis medications cost hundreds of thousands of dollars per year and they must be taken for life, Vertex Pharmaceuticals has carved out a dominant multibillion-dollar position in the indication.

Galapagos stumbles

Under a 2013 that was expanded in 2016, AbbVie is helping Galapagos develop multidrug combination therapies to improve the transport of chloride for up to 90% of cystic fibrosis patients.

Galapagos has been conducting proof-of-concept studies for various cystic fibrosis drugs that it hopes to use together in triplet combinations, and on Thursday, it reported results for one of those drugs, GLPG2737. Although GLPG2737 statistically reduced the amount of chloride lost in sweat, a hallmark of the disease, it failed to statistically improve lung function when used alongside Orkambi. Specifically, the improvement in lung function was 3.4% with a p-value of 0.08, which failed to meet the 0.05 level associated with statistical significance.

The disappointment on the lung function measure is potentially a big problem because GLPG2737 is one of three Galapagos drugs being evaluated in its ongoing triplet study, Falcon. That triplet study is expected to have its first interim data readout in the third quarter of 2018. Until we see data that restores confidence in GLPG2737’s efficacy, there’s likely to be significant concern over the likelihood for this trial to deliver a win.

What happens next

Galapagos is continuing the triplet study, but AbbVie has decided to opt out of a previously planned second triplet study that would have also included GLPG2737. AbbVie’s decision suggests it’s not just investors who are nervous about GLPG2737’s efficacy.

The stumble of GLPG2737 could mean that Vertex Pharmaceuticals won’t face any stiff challenge anytime soon. That would be great news for Vertex Pharmaceuticals because it’s already knee-deep working on its own triplet therapies that incorporate Symdeko. If its efforts on triplets pan out, Vertex Pharmaceuticals thinks it will be able to double its addressable patient population. Given Vertex Pharmaceuticals first-quarter sales were $638 million, a triplet success would be a boon for patients, the company, and its investors.

Galapagos cystic fibrosis program could still get back on track if the triplet data hits statistical significance, so they can’t be counted out yet. However, if the triplet isn’t a winner, investors will have to ratchet back their revenue models. Based on AbbVie’s licensing pact, Galapagos can receive up to $600 million in milestones and it can split profit with AbbVie on sales in certain countries if its cystic fibrosis drugs win approval.

The cystic fibrosis program isn’t the only iron in the fire at Galapagos, though. It’s also working with Gilead Sciences on filgotinib, a drug for autoimmune diseases.

Results from filgotinib trials in rheumatoid arthritis are also on deck for later this year, so investors will want to weigh the odds of success of failure for that program before buying Galapagos if they’re interested in picking it up on this sell-off.

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Todd Campbell owns shares of Gilead Sciences. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.

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