Galapagos Stock Surges On Strategic Spin-Off And Restructuring Plans: Retail Turns Extremely Bullish
By Stocktwits Inc | First Published Jan 8, 2025, 8:33 PM ISTThe Belgium-based biotech company said it would reduce its workforce by 40%, eliminating about 300 positions across Europe.
Belgium-based biotech company Galapagos NV's (GLPG) U.S.-listed shares rose over 4% in Wednesday's premarket after it announced a significant restructuring plan, including a spin-off into two publicly traded entities and a major workforce reduction.
Retail investors on Stocktwits turned ‘extremely bullish’ on the news, with message volume also spiking.
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The spin-off, tentatively referred to as SpinCo, will focus on building a pipeline of medicines through business development transactions, particularly related to oncology, immunology, and virology.
Meanwhile, Galapagos said it will continue its efforts to advance its cell therapy pipeline in oncology. Its lead CAR-T candidate, GLPG5101, has demonstrated promising efficacy and safety in patients with relapsed/refractory non-Hodgkin lymphoma.
Galapagos shareholders will receive shares in SpinCo on a pro-rata basis, based on their ownership of Galapagos shares as of a record date yet to be set.
SpinCo will seek a listing on Euronext, and approximately €2.45 billion (about $2.5 billion) of Galapagos' current cash will be allocated to it.
As part of the planned separation, Galapagos will assume full global development and commercialization rights to its pipeline, as it and Gilead Sciences (GILD) have agreed to amend their 10-year collaboration agreement.
Gilead will still hold a 25% stake in both Galapagos and SpinCo, with a lock-up period extending to 2027 for Galapagos and six months post-separation for SpinCo. Gilead will also be entitled to nominate two directors to SpinCo's board.
Galapagos said it would reduce its workforce by 40%, eliminating about 300 positions across Europe. The company will close its French site, though it will continue to operate in Princeton, Pittsburgh, and Leiden, among other locations.
As part of its restructuring, Galapagos plans to end its small molecule discovery programs and focus on advancing its decentralized cell therapy manufacturing platform.
Following the restructuring, Galapagos expects its annual cash burn to be between €175 million and €225 million, excluding restructuring costs. Upon the separation, the company said it would have approximately €500 million in cash.
The company said the planned spin-off will take place by mid-2025.
Galapagos stock has lost more than 30% of its value over the past year.
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