((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Updated shares, added analyst comments to paragraphs 5-7, 9, plans for the remaining part of Galapagos in paragraph 8) by Alban Kacher
The Galapagos Pharmaceutical Company
Amsterdam-listed GLPG.AS said on Wednesday it plans to split into two publicly traded entities by mid-2025, spinning off its business focused on innovative medicines.
Galapagos, headquartered in the city of Mechelen in Belgium, will provide approximately 2.45 billion euros ($2.53 billion) in cash for the new company, which will be named at a later date, a- she indicated in a press release.
“The proposed separation is intended to help investors more easily evaluate the merits and future prospects of the two separate businesses,” said Galapagos Chief Financial Officer Thad Huston.
The group’s American partner and shareholder, Gilead
GILD.O , will own approximately 25% of both Galapagos and the newly created company, both of which will be listed on Euronext, Galapagos said.
Galapagos shares were up 1.2% at 1024 GMT, having climbed as much as 12.2% earlier in the session. Emily Field, an analyst at Barclays, said the initial rise was likely due to short interest.
While the planned split appears to make strategic sense, uncertainty remains over whether investors will extend credit to the new publicly traded company, Ms. Field said.
“(The spin off) is just cash, will people rate it as something more than cash?
The new company will aim to build a pipeline of innovative medicines, while the remaining part of Galapagos will focus on developing its oncology cell therapy platform.
“While we believe this is a positive step for the company, Galapagos 2.0 ends up with an early-stage cell therapy program,” said Jacob Mekhael, an analyst at KBC.
The reorganization should lead to the elimination of around 300 positions in Europe, or around 40% of the group’s workforce, Galapagos said.
After the reorganization, the group expects a normalized annual cash outflow of between 175 and 225 million euros, excluding restructuring costs.
Galapagos shares have suffered a sharp devaluation since the end of 2020, after the group decided not to pursue approval by the US Food and Drug Administration of its experimental treatment for rheumatoid arthritis. (1 dollar = 0.9678 euros)
