Galapagos (ENXTAM:GLPG): Evaluating Valuation Following Strategic Exit From Cell Therapy Business

Galapagos (ENXTAM:GLPG) set in motion a significant shift this week by announcing plans to wind down its cell therapy business, following a broad strategic review and Board support. The move signals a new organizational focus.

See our latest analysis for Galapagos.

Galapagos has seen some renewed investor attention following recent leadership changes and its bold strategic pivot to exit cell therapy. Despite a one-year total shareholder return of 2.7%, long-term holders still face deep losses, with the five-year total return at -75%. The stock’s momentum has clearly faded as the share price is hovering at $27.04 after pulling back over the past month and quarter, indicating that the company’s transformation story is still a work in progress.

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So with Galapagos shares trading well below their analyst price target and a transformative restructuring underway, are investors looking at an undervalued turnaround opportunity, or has the market fully priced in any hopes for future growth?

Price-to-Sales Ratio of 6.5x: Is it justified?

Galapagos is trading at a price-to-sales (P/S) ratio of 6.5x, placing its valuation below many direct peers but well above its own estimated fair value ratio. With the latest close at $27.04, the stock may look cheap beside industry averages, yet seems pricey when measured against what the company is delivering today.

The price-to-sales multiple is a key lens for loss-making biotech firms and provides a quick way to gauge investor expectations versus the company’s underlying revenue. For a business like Galapagos, which is unprofitable and has slower forecast sales growth than the market, a high P/S ratio signals that the market might still be pricing in hopes of future breakthroughs or pipeline wins.

At 6.5x, Galapagos screens as good value relative to peer (21.3x) and sector (8.6x) averages, but looks expensive when compared to its own fair P/S ratio of just 2.5x. This means there is room for the stock’s valuation to shift closer to fundamental norms if the company fails to rapidly improve its sales or secure new growth drivers.

Explore the SWS fair ratio for Galapagos

Result: Preferred multiple of 6.5x (ABOUT RIGHT)

However, with slow revenue growth and persistent net losses, any delays in restructuring or missed milestones could quickly undermine the bullish recovery story.

Find out about the key risks to this Galapagos narrative.

Build Your Own Galapagos Narrative

If you want to take a closer look or believe there’s more to the Galapagos story, you can build your own data-driven view quickly and independently. Do it your way

A great starting point for your Galapagos research is our analysis highlighting 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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