On Wednesday, Citi adjusted its financial outlook on Galapagos NV (NASDAQ:GLPG:NA) (NASDAQ: GLPG) shares, lowering the price target to €30.00 from the previous €35.00, while maintaining a Neutral rating on the stock. The revision follows a comprehensive review of the company's recent financial performance, its projections for the year 2024, and current foreign exchange trends.
The updated assessment by Citi takes into account the finalized sale of Galapagos' Jyseleca business to Alfasigma, a transaction that was completed in February 2024. This divestment, along with the restructuring of the company's European commercial operations, has led to a substantial reduction in both revenue and operating expenses, as approximately 400 employees were transferred as part of the Jyseleca deal.
In light of these changes, Citi has increased its research and development expenditure estimates for Galapagos to between €250 million and €400 million annually.
This adjustment reflects the necessary investment for the successful development of Galapagos' pipeline, which includes cell therapy among other assets. The investment is also seen as indicative of potential business development activities related to the pipeline.
Citi anticipates that the first significant data from Galapagos' pipeline will become available in 2025. Looking further ahead, the firm forecasts that Galapagos is expected to reach a financial breakeven point by the year 2028, aligning with the expectations set by the company itself.
InvestingPro Insights
As Citi revises its financial outlook on Galapagos NV, current metrics from InvestingPro provide additional context. With a market cap of $1.93 billion, Galapagos holds a P/E ratio of 8.59, which contrasts sharply with an adjusted P/E ratio for the last twelve months as of Q4 2023 at -500.03, reflecting the market's sentiment about its future earnings potential. The company's price to book value as of the same period stands at 0.65, possibly indicating that the stock is undervalued compared to its assets.
InvestingPro Tips suggest that Galapagos is currently trading near its 52-week low and is in oversold territory according to the RSI, which may interest contrarian investors or those looking for potential turnaround situations. However, analysts are concerned as they anticipate a sales decline in the current year and do not expect the company to be profitable this year. With the company quickly burning through cash and suffering from weak gross profit margins, these factors should be considered when assessing the stock's potential.
For investors seeking a deeper dive into Galapagos' financials and future prospects, InvestingPro offers an additional 12 tips on their platform. To explore these insights and more, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.