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Galapagos dumps San Diego facility
December 2008
by Amy Swinderman  |  Email the author
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SAN DIEGO—Committing to a focus on its services business, Belgian biotech Galapagos NV in early November completed the sale, for an undisclosed sum, of its service division's BioFocus DPI chemistry facility here to ChemVentures Pty. Ltd., an Australian research group.

According to Galapagos, the decision to sell the San Diego site—which has been part of BioFocus DPI since Galapagos' acquisition of Discovery Partners International (DPI) in July 2006—is part of a worldwide consolidation of the company's service locations. To date, these cost-cutting measures have resulted in the closure of Galapagos' London site upon the out-licensing of predictive drug discovery databases to the EMBL; a roll-up of the Heidelberg, Germany, activities into the company's Basel, Switzerland, operation; and the consolidation of the Cambridge, England, activities into the BioFocus DPI headquarters in Saffron Walden.

Onno van de Stolpe, CEO of Galapagos, says that after an operational review of BioFocus DPI, Galapagos concluded it can better serve its medicinal chemistry and compound libraries customers out of its British facility. This will also improve the operational margin of BioFocus DPI, which contributed around $4.8 million annually to company revenues.

"The activities in San Diego overlapped our U.K. activities in Chesterford Park, and we decided to optimize our operations by divesting the San Diego site," van de Stolpe says. "No capabilities have been lost with this sale. BioFocus DPI has to grow and contribute cash to Galapagos. With this sale, we will improve our margins, and the profitability of BioFocus DPI will therefore improve going forward."

With remaining service sites in England, Holland, Switzerland and San Francisco, Galapagos is well-positioned to grow the business and generate an acceptable profit, van de Stolpe adds. Galapagos said it will retain its full-year revenue guidance of $94 to $100 million and a year-end cash position of around $34 million.

Van de Stolpe says the transaction is "further proof that we are committed to focusing on the strengths of our services business," but adds Galapagos will also continue to focus on internal programs and strategic alliances with Big Pharma.

The latter became especially evident on Nov. 18, when Galapagos announced two new collaboration agreements between BioFocus DPI and Merck Serono worth nearly $1.4 million over one year.

"We are always on the look-out for technologies and capabilities that can strengthen the service offering," van de Stolpe says.

The San Diego facility has had somewhat of a troubled past, as DPI (formerly Discovery Partners International) was forced to sell its operations there after its long-standing collaboration with Pfizer—which brought DPI $92 million in revenue between 2002 and 2005—expired in early 2006. Its future will now be determined by ChemVentures, a holding company that was established to facilitate the transaction and had no prior dealings with Galapagos.

ChemVentures CEO Dr. Daniel Harvey says the company intends to retain the facility's 40 employees and its initial plan is to "enhance our capabilities through the establishment of strategic relationships with both U.S.-based and international partners."

"The San Diego operation of BioFocus DPI acquired by ChemVentures has had a strong and positive relationship with the Galapagos organization since Galapagos acquired it from DPI in 2005," Harvey says. "Going forward, ChemVentures will continue to provide drug discovery services to Galapagos and collaborate with BioFocus DPI on various ongoing projects." DDN
 
Code: E120818

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