Executive Summary / Key Takeaways

• Galapagos NV is undergoing a profound strategic transformation, pivoting to become a pure-play cell therapy leader focused on oncology, underpinned by its innovative decentralized manufacturing platform.
• The company's flagship GLPG5101 (CD19 CAR-T) program, with Mantle Cell Lymphoma (MCL) as its lead indication, is advancing towards pivotal trials in 2026, targeting a potential first approval in 2028.
• Galapagos' proprietary decentralized manufacturing units (DMUs) offer a critical competitive advantage through a rapid 7-day "vein-to-vein" time, delivering "fresh, fit" cells that demonstrate promising efficacy and safety profiles, particularly in high-unmet-need hematological malignancies.
• A strategic separation will establish SpinCo with €2.45 billion in cash to pursue transformative transactions, while Galapagos will retain €500 million, providing a cash runway until 2028 to fund its focused cell therapy pipeline.
• Investors should monitor clinical milestones for GLPG5101, the expansion of the DMU network, and the progress of next-generation cell therapies as key value drivers in this re-focused biotech entity.

A Strategic Metamorphosis: Forging a Cell Therapy Future

Galapagos NV, a biotechnology firm established in 1999 and headquartered in Mechelen, Belgium, is executing a bold strategic pivot, transforming itself into a focused cell therapy powerhouse. This strategic reorientation, culminating in the planned separation into two distinct entities, marks a significant departure from its historical, broader biopharmaceutical focus. The company's core mission is now centered on addressing high unmet medical needs in oncology through its innovative cell therapy pipeline and a proprietary decentralized manufacturing platform. This shift is a direct response to evolving industry dynamics and a clear commitment to accelerating value creation for stakeholders.

The biopharmaceutical landscape is characterized by intense competition, high R&D costs, and stringent regulatory hurdles. In this environment, Galapagos is carving out a specialized niche, leveraging its agility and technological differentiation. While larger pharmaceutical entities like AbbVie (ABBV), Gilead Sciences , Novartis (NVS), and Johnson & Johnson (JNJ) command vast market shares with diversified portfolios, Galapagos aims to compete effectively through targeted innovation and operational efficiency, particularly in the rapidly advancing field of cell therapies.

The Decentralized Edge: Galapagos' Technological Moat

Central to Galapagos' investment thesis is its highly differentiated decentralized manufacturing platform. This proprietary technology, utilizing the Lonza (LZAGY) Cocoon platform, represents a significant leap forward in cell therapy production. It comprises an end-to-end workflow management and monitoring software system, a functionally closed and automated manufacturing process, and a specialized quality control and release strategy. This approach directly addresses the inherent limitations of traditional, centralized CAR-T manufacturing, which often entails high costs, lengthy production and delivery times, and the necessity of cryopreserving cells.

The tangible benefits of this decentralized model are compelling and quantifiable. The platform consistently achieves a median 7-day "vein-to-vein" time, a critical metric that significantly reduces patient drop-out rates between leukapheresis and infusion—a known challenge with longer centralized processes. This rapid turnaround is particularly vital for critically ill patients with very short life expectancies, potentially offering a therapeutic solution where traditional methods might fail. The process yields "fresh, fit, stem-like cells" that are believed to enhance the therapeutic profile by being less exhausted, less toxic, and persisting longer in the patient's body.

Clinical data for GLPG5101, the company's flagship CD19 CAR-T candidate, underscore these advantages. In the ATALANTA study, high overall response and complete response rates were observed across various Non-Hodgkin Lymphoma (NHL) indications. Notably, 100% of patients with relapsed/refractory Mantle Cell Lymphoma (MCL) achieved a complete response, 95% in follicular and marginal zone lymphoma, and 54% in diffuse large B-cell lymphoma (DLBCL), with 71% at dose level 2. Furthermore, 80% of evaluable patients achieving complete response were minimal residual disease (MRD) negative and maintained their response at data cutoff. The safety profile is also encouraging, with low levels of ICANS (Immune effector Cell-Associated Neurotoxicity Syndrome), translating to less time in intensive care and hospital, and more time at home for patients. These outcomes demonstrate the potential for superior patient benefits in terms of both efficacy and safety.

Galapagos is also investing in next-generation cell therapies, including multi-targeting armed CAR-T candidates for hematological and solid tumors. These programs aim to overcome limitations such as CD19 escape, combine validated and novel targets, and enhance cell persistence and tumor microenvironment engagement. The company plans to initiate clinical development of a novel CAR-T candidate and select at least one program for IND-enabling studies in 2025. Additionally, through a collaboration with Adaptimmune (ADAP), Galapagos is advancing uza-cel, a TCR T-cell therapy for solid tumors like head and neck cancer. Initial in-vitro results suggest that uza-cel produced on Galapagos' DMU platform could potentially improve efficacy and durability compared to centrally manufactured versions, with proof-of-concept studies slated for 2026.

For investors, this technological differentiation forms a robust competitive moat. The ability to deliver superior patient outcomes, coupled with logistical advantages and cost-effectiveness, positions Galapagos for strong market penetration and potential premium pricing in high-value oncology segments. The continuous R&D in next-generation therapies aims to extend this leadership, ensuring long-term growth and relevance in a dynamic market.

Strategic Realignment and Financial Foundations

Galapagos' strategic transformation gained significant momentum with the divestiture of its Jyseleca business to Alfasigma in January 2024, generating approximately €200 million in savings and allowing a sharper focus on its core cell therapy ambitions. This was followed by the announcement in Q4 2024 of a planned separation into two publicly-traded entities: Galapagos and SpinCo. This separation, anticipated around mid-2025, is designed to unlock distinct value creation pathways.

Post-separation, Galapagos will be capitalized with approximately €500 million in cash, strategically aligned to fund its operations until 2028, coinciding with the anticipated pivotal readout for GLPG5101 in MCL. The normalized annual cash burn for Galapagos is projected to be between €175 million and €225 million, excluding restructuring costs. This reduced burn rate reflects a significant restructuring, including a roughly 40% reduction in headcount, streamlining the organization to its cell therapy focus. While initial investments are being made to expand the DMU network, these costs are expected to moderate as clinical investments increase.

SpinCo, the newly formed independent entity, will assume the 10-year global Option License and Collaboration Agreement (OLCA) with Gilead Sciences, Inc. (GILD). It will be capitalized with a substantial €2.45 billion, enabling it to pursue high-quality assets and build a pipeline of innovative medicines through transformational transactions, with a focus on oncology, immunology, and virology. Henry Gosebruch, with deep experience in M&A and capital allocation, has been appointed as SpinCo's Founding CEO.

Galapagos' financial performance in Q1 2025 saw total net revenues of €75 million, comprising €14 million from Jyseleca supply revenues and €61 million from collaboration revenues. Operating expenses increased due to clinical expansion in oncology CAR-T and the build-out of the DMU network, including €111 million in restructuring costs related to the separation. The company ended Q1 2025 with a cash balance of €3.3 billion. The full year 2024 saw total revenues of €276 million and a net profit of €74 million, influenced by fair value adjustments, currency exchange, interest income, and a €53 million gain from the sale of the Jyseleca business. Research and development expenses for 2024 increased by 39% year-over-year to €335 million, driven by the expansion of oncology CAR-T programs.

Pipeline Progress and Strategic Outlook

Galapagos' pipeline is rapidly advancing, with GLPG5101 leading the charge. The company dosed its first U.S. patient in the ATALANTA-1 study in Q1 2025, and MCL has been selected as the lead indication for pivotal trials, with an anticipated approval in 2028. New data from the indolent NHL cohort are expected in mid-2025, and further MCL data in the second half of 2025, followed by an end-of-Phase 2 meeting to finalize pivotal trial design.

Beyond GLPG5101, the BCMA CAR-T candidate GLPG5301 for multiple myeloma is progressing, with top-line data expected in 2026. The study temporarily paused due to a case of Parkinsonism, a known risk with BCMA therapies, but has resumed after implementing enhanced monitoring strategies. The company is also expanding its DMU network through collaborations with partners like Blood Centers of America (with Excellos in San Diego as the first U.S. site), Catalent (CTLT), Moffitt Cancer Center, and NecstGen, collectively targeting nearly 250 million patients. Operations have also been established in China to accelerate next-generation cell therapy development.

In immunology, Galapagos is actively seeking partners for its TYK2 inhibitor, GLPG3667, which is in Phase II/III enabling studies for Systemic Lupus Erythematosus (SLE) and Dermatomyositis (DM), with top-line results anticipated in the first half of 2026. This program is mechanistically differentiated by preserving the IL-10 pathway, unlike some competitors, a feature believed to be clinically relevant in these interferon-driven diseases. The company will discontinue future small molecule research to focus entirely on cell therapy leadership.

Competitive Landscape and Differentiators

In the competitive cell therapy space, GLPG5101 aims to differentiate itself by combining the best of both worlds in terms of efficacy and safety, a profile that management believes will be competitive against existing CAR-T options. The 7-day vein-to-vein time is a crucial advantage, enabling treatment for patients who might otherwise be too ill to wait for longer manufacturing processes. This speed also significantly reduces the percentage of patients who drop out between leukapheresis and infusion, a common challenge for other CAR-T therapies.

Galapagos' decentralized manufacturing model inherently offers a competitive edge over centralized systems by reducing cost burdens, shortening delivery times, and eliminating the need for cryopreserved cells. This localized production model enhances access and scalability, particularly in underserved regions like Asia, where the company has established operations.

While the BCMA CAR-T space for multiple myeloma is highly competitive, Galapagos is carefully evaluating GLPG5301's benefit-risk ratio against incumbents. In small molecules, GLPG3667's unique IL-10 pathway preservation offers a potential differentiation against other TYK2 inhibitors from larger players like BMS (BMY) and Takeda (TAK). The collaboration with BridGene Biosciences for a SMARCA2 PROTAC also highlights a strategy to develop best-in-class targeted therapies in precision oncology, leveraging combined expertise to address high unmet needs in SMARCA4 deficient non-small cell lung cancer.

Risks and Considerations

Despite the clear strategic direction, investors must consider several risks. Deutsche Bank (DB) downgraded Galapagos to Sell, citing the removal of FY25 cash guidance, uncertainty around the company's structure, and risks related to future business development and current cell therapy programs. While the post-separation cash runway is projected to 2028, the successful execution of pivotal trials and subsequent commercialization remains critical. Regulatory requirements for manufacturing, particularly for pivotal studies and commercial supply across multiple DMUs, are stringent and require continuous validation and comparability demonstrations. The competitive landscape in both cell therapy and immunology is intense, requiring Galapagos' assets to demonstrate clear differentiation and superior profiles.

Conclusion

Galapagos is undergoing a profound and decisive transformation, shedding its broader pharmaceutical identity to emerge as a focused leader in cell therapy. The strategic separation into Galapagos and SpinCo, coupled with a disciplined capital allocation, positions the company to aggressively pursue its ambition in oncology. The core investment thesis hinges on the unique advantages of its decentralized manufacturing platform, which delivers "fresh, fit" CAR-T cells with a rapid 7-day vein-to-vein time, offering compelling efficacy and safety data in high-unmet-need hematological malignancies like MCL.

With GLPG5101 advancing towards pivotal trials and a robust pipeline of next-generation cell therapies in development, Galapagos is poised for significant clinical milestones. The company's technological leadership, operational efficiency through its DMU network, and strategic partnerships are critical drivers for future growth and market penetration. While competitive pressures and regulatory complexities persist, Galapagos' clear strategic focus and differentiated approach in cell therapy present a compelling, albeit transformative, investment narrative.