Recession-proof companies
Part I: Galapagos

Aug 04, 2009
By Pharmaceutical Executive

Onno van de Stolpe has led biotechnology company Galapagos (Belgium) since it was founded as a joint venture between Crucell and Tibotec in 1999. Launching amidst the boom in genomics research, the company has pursued a successful expansion policy, acquiring drug discovery company BioFocus DPI in 2005. Here, Onno talks to Pharma Exec Europe about the secret of Galapagos's success, and why he is confident the company can ride out the economic downturn with no adverse effects.

PEE: How has Galapagos has grown in the last 10 years, and is this rate of growth likely to continue?
OvdS: We started up as a genomics company at the time genomics were just starting to become popular. But it became clear pretty fast — I think by 2001 — that being a pure biology company, finding novel targets, would not ultimately be sustainable as a business model. So we decided to start investing in chemistry.

In 2004, we put in place an outsourced chemistry programme with BioFocus in the UK. After we went public in 2005, we were able to acquire BioFocus, and that was a major step for the company; we were then able to integrated biology with chemistry and formulate molecules against targets that we had discovered.

I think growth always has to be part of your business plan; we plan to continue to grow, but maybe not as aggressively as 2005–2006 when we really extended the capability and critical mass of the company. At the moment we have about 200 people working on our internal and alliance programmes, and this continues to grow; we have 300 people in the service division.

We also later this year to select a therapeutic area where we're going to take products all the way to the patient; until now we have licensed our programmes at various stages of product development.

Would you say your company is recession-proof?
We haven't been hit by the financial crisis yet so I think we are pretty recession-proof. The only area where we've been affected is with the biotech customers of our service division; they clearly feel the lack of new capital and so have less money to spend. But on the pharma side there is no issue as yet with cashflows.

There was some talk of you selling BioFocus DPI late last year.
That's not completely out of the picture, but there is less need to raise more cash; we are expecting a burn rate this year of only €7 million. Clearly, in the current climate, we wouldn't anticipate getting the value from selling BioFocus DPI that we believe it has. And having BioFocus DPI within the Galapagos family clearly presents strategic advantages in our discussions with pharma partners, so it's highly unlikely that we're going to part from it in the next couple of years. Also, we have reorganised BioFocus DPI to make it relatively lean and mean, and it's in a very good position to generate a healthy cashflow this year and going forward.

How do countries across Europe differ in their support for companies like Galapagos?
Well, your country (UK) is one of the worst; you don't have a system in place like we have in Belgium or Holland, or the tax credits that we're getting in France. The UK is not a very biotech-friendly place. And we don't get a lot of government support from Switzerland either, but maybe Switzerland doesn't need to do that so much. In France they have a very good system where, one year on, they give you back a percentage of the money you've spent on research.

Government support is very important for us, especially for our internal programmes; if you bring a product into the clinic, the costs are so tremendously high it's extremely difficult for any company to finance it, especially a biotech company that has limited cash resources.

You've been leading Galapagos for 10 years now. How do you stay motivated?
It has been such an evolving and exciting story, it is very difficult not to stay motivated. We started off as a very small biotech start-up trying to come up with some different technologies, then we moved into chemistry, where I had no experience. I'm a biologist, so it was a new experience. It was also great to do the IPO followed by four acquisitions. And over the last year it has been very exciting to move into clinical development; we now have a clinical development team with about 15 people that we recruited over the last 12 months. Again, this was a completely new experience for me.

By continually moving into new territories, the job continues to be extremely exciting job. To still be able to lead the company after 10 years is fantastic. I'm looking forward to the next 10!