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Galapagos (NASDAQ:GLPG) American depository shares fell 2.1% in premarket trade after BofA downgraded the firm to Underperform as few catalysts emerge in the near term.
“A pre-commercial stage biotech developing therapies for oncology and immunologic disorders, GLPG’s enterprise value has remained stuck at negative $1.5-2bn EV for over 2 years and we don’t see a near/medium-term fix,” the analysts said.
The analysts said the rating cut is also over concerns that the stock remains a value trap.
The firm’s key cancer pipeline has ~three to four years to market and has a high cash burn rate, along with unclear differentiation in highly competitive end-markets, BofA said.
“Further, the company’s M&A focus on early-stage assets limits the risk that investors will unwind the heavy cash discount priced in stock. Thus, we do not expect an upside until we see a clearer path to value creation,” the note stated.
The note also observed that GLPG is a “late mover” in most key markets. thus, the analysts see a smaller commercial opportunity for GLPG’s CAR-T candidates.
“So far, GLPG’s lymphoma CAR-T looks no better than competitors in a crowded market,” the analysts said, adding they see 2024 as a relatively catalyst-light year for GLPG.
SA analysts and Quants rate the company at Buy.
