In a business update discussing its first quarter results of 2008, Galapagos said it is on track to pull its services division back out of the red during the year.
Company management said it "remains confident that the restructuring and consolidation efforts in its BioFocus DPI service division will start to pay off in 2008 and will contribute to bringing the division back into profitability".
During 2007 BioFocus DPI reported year-on-year revenue growth of 39 per cent to €48.4m although the unit reported an operating loss of €3.9m, before restructuring and one-off costs, mainly due to lower than expected sales in biology services and compound libraries as well as to the effect of site consolidations, the firm said.
The segment has been undergoing a year of restructuring and consolidation following acquisitions that were made in 2006, of the Discovery Partners International (DPI) operations in July, and of Inpharmatica and ProSkelia in December.
"To establish a cost structure for future profitability", Galapagos consolidated operations in the division in 2007 by integrating sites in Cambridge, UK, moving the Heidelberg, Germany operations into its Basel, Switzerland site and moving into new facilities in Leiden, Germany.
In addition to the achievement of a lower cost base for BioFocus DPI, company chief financial officer Leo Steenbergen said in March that the demand for medicinal chemistry services in the unit "exceeded expectations" and that the order book for biology services has "shown improvement", with the formation of a recent €7.6m collaboration with Janssen Pharmaceutica given as an illustration.
Now, Galapagos has also just announced the signing of another deal for the division, worth over €1.8m, in the form of a drug discovery research agreement with University College London (UCL).
Over a two year period BioFocus DPI will perform medicinal chemistry services for a UCL research project - an ongoing drug discovery program for the treatment of vascular collapse during sepsis (collapsing of blood vessels due to systemic infection by a pathogen) - in order to progress UCL's lead series through to pre-clinical testing.
The Dutch firm will also offer UCL absorption, distribution, metabolism and excretion (ADME) screening facilities during the appropriate stages of the work and will allow the university access to a selection of compounds in its SoftFocus collection to facilitate the identification of new chemical starting points for this drug discovery program.
"We are pleased to add UCL to BioFocus DPI's considerable list of academic partners," said Onno van de Stolpe, CEO of Galapagos.
"BioFocus DPI's leading medicinal chemistry and ADME expertise, such as the newly launched ADME/PK Laboratory, give us a strong edge in winning highly competitive deals."
During the first quarter, the BioFocus DPI division also announced agreements with Eli Lilly, the National Institutes of Health, and Allergan.