GLPG Galapagos

RNS Number:5351O
ProStrakan Group plc
22 December 2006

ProStrakan Group plc



ProStrakan increases focus on Specialty Pharma model with sale of its Drug
Discovery Unit (ProSkelia) to Galapagos


Galashiels, Scotland, 22 December 2006 - ProStrakan Group plc ("ProStrakan" LSE:
PSK), the European specialty pharmaceutical company, announces today the sale of
ProSkelia SASU ("ProSkelia"), its Paris-based Drug Discovery unit, to Galapagos
NV ("Galapagos" Euronext & London AIM: GLPG) in a transaction valued in total at
a maximum of c. Euro45 million.  The transaction will have the following benefits
for ProStrakan:


  * Focus resources entirely on expansion, development and commercialisation
    of its specialty pharmaceutical product portfolio
  * Monetise considerable value in ProSkelia, while retaining involvement in
    selected commercialisation rights
  * Substantially reduce the Company's annual cash burn
  * Increase the certainty of breakeven within the current timeframe



ProStrakan is now wholly focused on accelerating revenue growth through
break-even and beyond.  With 5 potential product launches in Europe over the
next 24 months and 3 potential product launches in the US in the next 30 months,
the Board is increasingly confident of building the business by continuing to
invest in its sales and marketing capabilities and in the launch and further
acquisition of late stage new products.   The divestment of the Discovery unit
brings substantially increased certainty to breakeven and allows optimum
flexibility for investment in the future growth of the Company.  Going forward,
ProStrakan will concentrate resources on in-licensing, development and
commercialisation of specialty products through its own sales forces, initially
in EU and, over time, in the USA.



Galapagos, as an integrated drug discovery company, provides a strong
therapeutic and strategic fit with ProSkelia.  As successful progression of the
project portfolio develops, ProStrakan retains the option to commercialise
selected compounds, by prior agreement.



Under the terms of the agreement, ProStrakan will receive Euro12.5 million of
Galapagos shares.  ProStrakan will also receive cash payments totalling Euro14.5
million over time on the achievement of certain milestones and collaboration
agreements by Galapagos.  In addition, ProStrakan retains 75% of the future
milestones and royalties from the Amgen and Novartis collaborations signed
earlier this year.  ProStrakan has further retained a right of first refusal
over the Selective Androgen Receptor Modulator (SARM) programme for cachexia.
Finally, ProStrakan has granted an option to Galapagos to license its Oestradiol
Glucoside (E2G) programme under which Galapagos will pay for and conduct a Phase
II trial which, if successful, will trigger the grant of the licence to
Galapagos in return for agreed milestones and royalties. ProSkelia currently
employs approximately 65 people and is expected to have an operating cost base
in 2006 (excluding depreciation and amortisation) of c. #9 million.  The
transaction is expected to close shortly.



Commenting on the agreement, Dr Wilson Totten, CEO of ProStrakan, said: "I am
delighted to be able to announce this deal, which brings major strategic benefit
both to ProStrakan and to Galapagos.  We have been extremely successful in
developing and acquiring new late-stage products, to the point where we have a
unique range of new product launches in EU and USA in the near term.  Divesting
our Discovery unit in the structure announced today preserves our interest in
future up-side from a number of the programmes, and enables us to focus even
more of our resources on successfully delivering commercial growth.  Avoiding
the substantial running costs involved in Discovery also provides greater
certainty in breakeven and significantly reduces the near term cash needed to
run the business.



"By signing Research agreements with Amgen and Novartis earlier this year, we
have validated the scientific excellence of the ProSkelia unit.  I am certain
that this will be continued under Galapagos' leadership, and we look forward to
future successes."



Analysts Call



ProStrakan Management will be hosting a conference call at 9.30am UK time on
22nd December.  For joining details please call Mo Noonan at Financial Dynamics
on +44 (0)20 7831 3113



For more information, please contact:


ProStrakan                                           +44 (0)1896 664000
Wilson Totten, CEO
Adrian Gardner, CFO

Financial Dynamics                                   +44 (0)20 7831 3113
David Yates / Anna Keeble



Notes to Editors



Details of the transaction

Under the transaction, ProStrakan is selling 100% of the share capital of
ProSkelia SASU to Galapagos.  The consideration being received is as follows:



*    1,396,648 shares in Galapagos which have a value of Euro12.5 million, assuming
a value per Galapagos share of Euro8.95. ProStrakan has entered into a lock-up
agreement in relation to these shares whereby it will not, other than in certain
defined circumstances, sell any of the shares for a period of 12 months from
Completion;

*    Euro14.5 million in cash receivable by ProStrakan over time as a proportion of
the revenues received by Galapagos in the future from entering into
collaborations around any of the pre-clinical assets being transferred; and

*    A right of first refusal to a worldwide licence to progress development of
the SARM programme once that programme has successfully demonstrated clinical
proof of concept in a Phase IIa clinical trial in cachexia.



ProStrakan has further agreed with Galapagos that Galapagos may retain all of
the FTE funding receivable and 25% of all milestones and royalties receivable
under the collaborations signed by ProStrakan with Amgen and Novartis in 2006.
75% of all milestones and royalties under these collaborations shall be paid
over to ProStrakan as and when they arise.



ProStrakan has also entered into an option agreement whereby Galapagos has
received an option to develop and enter into an exclusive worldwide licence to
its Oestradiol Glucoside programme (being a novel approach to Hormone
Replacement Therapy).  Under this agreement, and should Galapagos choose to
exercise its option, ProStrakan would receive: (i) an upfront payment in cash or
Galapagos shares (ii) a share of any licensing or distribution revenues
receivable by Galapagos in the future up to a determined limit and (iii) a
royalty on sales.



The anti-androgen programme (for acne and alopecia) and the Trimegestone patch
(for HRT and contraception) - currently owned by ProSkelia - do not form part of
this transaction and so are being transferred from ProSkelia to ProStrakan.
Given the status of these programmes, the consolidated holding values in
ProStrakan's books of Euro2.7 million will be written down to zero as a non-cash
item in ProStrakan's 2006 accounts.



ProStrakan is also in discussion with Sanofi-Aventis and the French taxation
authorities regarding the taxation implications of this transaction and certain
commitments given at the time of the acquisition of ProSkelia in August 2004.


ProStrakan

ProStrakan Group plc is a rapidly growing international specialty pharmaceutical
company engaged in the development and commercialisation of prescription
medicines for the treatment of unmet therapeutic needs in major markets.
Headquartered in Scotland, and following this transaction, the Company's
Development facilities are situated in Galashiels in Scotland.  EU-wide sales
and marketing of ProStrakan's portfolio of products are handled by commercial
subsidiaries based in the UK, France, Germany and Spain.



ProStrakan was listed on the London Stock Exchange in June 2005.



On 13th Sept 2006, the Company announced its Preliminary Results for the first
half of 2006: revenues on continuing products increased by 28% over the prior
period to #16.1 million; total gross profit increased by 14% to #9.9 million and
retained loss increased by 6% to #14.9 million.



www.prostrakan.com





Galapagos NV

Galapagos is a publicly traded, genomics-based drug discovery company (Euronext
Brussels, GLPG; Euronext Amsterdam, GLPGA, London AiM: GLPG) that has drug
discovery programs based on proprietary, novel targets in bone and joint
diseases - osteoarthritis, osteoporosis and rheumatoid arthritis. Galapagos
offers a full suite of target-to-drug discovery products and services to
pharmaceutical and biotech companies through its division BioFocus DPI,
encompassing target discovery and validation, and drug discovery services
through to clinical Proof of Concept. In addition, BioFocus DPI provides
adenoviral reagents for rapid identification and validation of novel drug
targets and compound libraries for screening. Prior to this transaction,
Galapagos employed more than 380 staff, and occupies facilities in the US, the
UK, Belgium, Switzerland, Germany and the Netherlands.



www.glpg.com




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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