Gilead Sciences to pay $3.95 billion upfront, make $1.1-billion equity investment as part of deal with Galapagos

Gilead Sciences agreed to pay $3.95 billion upfront and make an equity investment of $1.1 billion as part of a 10-year R&D collaboration with Galapagos, the companies announced Sunday. Under the deal, Gilead will gain access to Galapagos' portfolio of compounds, including six molecules currently in clinical trials and more than 20 preclinical programmes.

The drugmakers said the agreement "will allow for [a] closer scientific partnership," and will give Gilead access to Galapagos' research base of more than 500 scientists and its platform, which utilises disease-related, human primary cell-based assays to discover and verify novel drug targets. In addition, Gilead will nominate two individuals to Galapagos' board following the closing of the transaction.

Daniel O'Day, chief executive of Gilead, said the agreement "will generate both long-term strategic value and mutual, immediate benefits," highlighting that it will almost double the company's research capacity, whilst providing it with a strong base in Europe. O'Day noted that the structure of the deal ensures Galapagos' independence and allows Gilead to protect the value of its investment. "Megamergers can often distract the organisation from pursuing the science and following the innovation," he said, adding "I prefer a transaction like this."

In 2015, Gilead entered into a partnership with Galapagos potentially worth more than $2 billion to develop and market the latter's JAK1-selective inhibitor filgotinib for inflammatory diseases. At the time, Gilead made an equity investment of $425 million in Galapagos, with the company noting Sunday that it will boost its stake in the Belgian drugmaker from approximately 12.3% to 22% at a price of €140.59 ($158.45) per share, representing a premium of nearly 10% to the latter's closing price on July 12. Further, Gilead may increase its ownership of Galapagos to up to 29.9%.

Galapagos indicated that it will use the proceeds from the collaboration "to expand and accelerate its research and development programmes." Galapagos CEO Onno van de Stolpe said "we will benefit greatly from Gilead's expertise and infrastructure," adding that some of the funds will be used to double its R&D staff to 1000 positions in Belgium, the Netherlands and France. "It's massive funding - we don't have a detailed plan yet on how to spend it," the executive remarked.

The companies added that under the new agreement, Gilead will receive an exclusive product license and option rights to develop and commercialise all of Galapagos' current and future programmes in all countries outside Europe. The deal includes rights to Galapagos' Phase III candidate for idiopathic pulmonary fibrosis GLPG1690, which if approved in the US, will trigger an additional $325 million milestone fee from Gilead.

Meanwhile, Gilead will gain an option to license US rights to the osteoarthritis drug GLPG1972 after the completion of the ongoing Phase IIb study for a fee of $250 million. In addition, if certain secondary efficacy endpoints are met, Gilead would pay up to a further $200 million, and following opt in, Galapagos would be eligible to receive up to $550 million in regulatory and commercial milestones. For all other programmes, Gilead will make a $150 million opt-in payment per programme, with Galapagos eligible to receive tiered royalties ranging from 20% to 24% on net sales of all products licensed as part of the agreement.

Commenting on the pact, Jefferies analysts including Michael Yee and Andrew Tsai said "Gilead will significantly expand its pipeline in a smart and financially savvy expanded partnership deal with Galapagos, essentially gaining options on everything in their pipeline without having to acquire the company full out." Meanwhile, O'Day, who has made expanding Gilead's pipeline one of his top priorities since joining from Roche earlier this year, remarked "in no way is this the only thing that we're looking at or the only thing that we're going to do. You can look at this like it's the beginning."

The companies added that they will also amend certain terms of the agreement for filgotinib, to provide a broader commercialisation role for Galapagos in Europe. Specifically, the companies will co-commercialize filgotinib in France, Germany, Italy, Spain and the UK, whilst retaining the 50/50 profit share in these countries that was part of the original deal. However, the drugmakers will now share future global development costs for filgotinib equally, in lieu of the 80/20 cost split provided by the original agreement.

Last year, Gilead and Galapagos announced that the Phase III FINCH 2 study of filgotinib in adults with moderately-to-severely active rheumatoid arthritis hit its main goal, while the companies reported earlier in 2019 that the late-stage FINCH 1 and 3 trials of the drug in the same indication achieved their primary endpoints. The drugmakers recently indicated that they plan to seek US approval of filgotinib in 2019, adding on Sunday that a filing in Europe is also targeted for this year.

For related analysis, see ViewPoints: Gilead, Galapagos get on the FDA's good side with filgotinib.

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