Galapagos stock surged Monday after the Food and Drug Administration cleared the biotech company to begin testing its cancer drug in people.
RBC Capital Markets analyst Brian Abrahams says this is an important step for furthering Galapagos' point-of-care model for CAR-T drugs. CAR-T drugs involve removing a patient's immune cells and then genetically modifying them to find and destroy cancer cells. Later, doctors infuse the bespoke drug back into the patient. Galapagos is trying to automate the cumbersome manufacturing process.
But it still might not be smooth sailing for the company, Abrahams said.
"We believe clarity around important potential challenges like production and differentiation will need to be sorted through before there is sufficient visibility around a market opportunity to meaningfully move the stock," he said.
On today's stock market, Galapagos stock jumped 9.7% to 28.39. Still, shares have decelerated since February 2020, and are down 30% this year, as of Monday's close.
Galapagos Stock: Gearing Up To Face Giants
Galapagos is entering the CAR-T market against bigger companies Gilead Sciences and Novartis. Both make CAR-T drugs for forms of non-Hodgkin lymphoma.
In June, Galapagos presented promising results from the European portion of its study in patients with a variety of non-Hodgkin lymphomas, including the most common: diffuse large B-cell lymphoma. The results showed consistent effectiveness and safety, RBC's Abrahams said.
Abrahams kept his sector perform rating on Galapagos stock. The company will need to differentiate itself in this highly competitive space.
"While the green light from the agency suggests regulators may be getting initially comfortable with Galapagos' decentralized, hub-and-spoke model, we believe important risks lay ahead, including ensuring consistent and high quality cell product across manufacturing sites, reducing/maintaining a short median vein-to-vein time and meeting dose needs, especially for more severe patients," he said.
Galapagos stock retook its 50-day moving average on Friday, MarketSurge shows. But shares remain well below their 200-day line.
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