Gilead Sciences will shell out $5.1 billion to nearly double its minority stake in Galapagos from approximately 12.3% to at least 22%—and possibly about 30%—through a 10-year global R&D collaboration in which Gilead will expand its role in the companies’ arthritis candidate filgotinib and co-develop the rest of Galapagos’ pipeline.

“Gilead also gains exclusive access to all current and future compounds in Galapagos’ rich pipeline while Galapagos is able to expand its research activities and build commercial infrastructure,” Gilead Chairman and CEO Daniel O’Day said yesterday in a statement.

Galapagos’ pipeline includes six molecules currently in clinical trials, more than 20 preclinical programs, and a drug discovery platform designed to discover and verify novel targets by using disease-related, human primary cell-based assays.

In the first major R&D deal under O’Day, who took the company’s helm on March 1, Gilead agreed to pay Galapagos an eye-popping $3.95 billion upfront—more than 12 times the €318 million ($358 million) in revenue generated by Galapagos last year, and 18% of Gilead’s total $22.127 billion in 2018 revenue.

Gilead will also make a $1.12 billion equity investment in Galapagos, which will use the proceeds to expand and accelerate its R&D programs, the companies said. The equity investment will consist of a subscription for new Galapagos shares at a price of €140.59 ($158.42) per share, representing a 20% premium to Galapagos’ 30-day, volume-weighted average price.

In return, Gilead will receive an exclusive product license and option rights to develop and commercialize all current and future Galapagos programs in all countries outside Europe. Gilead will have access to Galapagos’ research resources, including more than 500 scientists, and to Galapagos’ platform.

Gilead will gain rights to Galapagos’ Phase III idiopathic pulmonary fibrosis candidate GLPG1690, and U.S. option rights to GLPG1972, a Phase IIb candidate for osteoarthritis. Both are first-in-class compounds that according to Gilead “could offer important mid- and late-stage pipeline opportunities.”

Gilead said it will also receive option rights on all of Galapagos’ other current and future clinical programs outside of Europe.

“What a fantastic moment in our 20th-anniversary year to sign this landmark deal,” Galapagos CEO Onno van de Stolpe stated. “We will benefit greatly from Gilead’s expertise and infrastructure and believe this collaboration will provide an accelerated path to advance our pipeline.

“This agreement is about maximizing innovation based on developing new mode of action medicines. With the capital provided by Gilead, we aim to progress innovation to patients,” van de Stolpe added.

Filgotinib Filings Planned

Galapagos’ pipeline is led by filgotinib, the inflammatory disease candidate for which the companies said July 2 they plan to submit an NDA to the FDA in rheumatoid arthritis (RA) by year’s end. Also by then, the companies plan to submit a marketing authorization application (MAA) to the European Medicines Agency. The companies recently completed the Phase III FINCH program in RA, showing positive results.

Galapagos and Gilead began a potentially $2.075 billion-plus partnership on filgotinib in December 2015, less than three months after Abbvie terminated its filgotinib collaboration with Galapagos.

Under the amended agreement, the companies said, Galapagos will have an expanded role in filgotinib’s global strategy and participate more broadly in the commercialization of the product in Europe, providing the opportunity to accelerate a commercial presence.

Gilead and Galapagos agreed to co-commercialize filgotinib in France, Germany, Italy, Spain, and the U.K., and retain the 50/50 profit share in these countries that was part of their original filgotinib license agreement. Galapagos will retain exclusive rights in Belgium, the Netherlands, and Luxembourg.

The companies also agreed to share future global development costs for filgotinib equally, rather than the 80/20 Gilead-Galapagos cost split as called for under the original agreement.

Gilead has envisioned filgotinib as a competitor to AbbVie’s multi-indication blockbuster Humira® (adalimumab), which generated $19.936 billion in 2018 sales, ranking first in GEN’s A-List of Top Best-Selling Drugs of 2018.

Other terms of the original license agreement remain in effect, including the remaining, yet-to-be-paid $1.27 billion in total potential milestones and tiered royalties ranging from 20–30% payable in territories outside of Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Spain, and the U.K.

Galapagos said it intends to seek shareholder approval to issue two warrants allowing Gilead to further increase its ownership of Galapagos to up-to 29.9% of issued and outstanding shares. The companies agreed to restrict for 10 years Gilead’s ability to seek to acquire Galapagos or increase its stake in that company beyond 29.9% of its issued and outstanding shares, subject to limited exceptions.

Gilead said the company will nominate two individuals to Galapagos’ board of directors following the closing of the transaction, which is expected late in the third quarter, subject to conditions that include the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and receipt of merger control approval from the Austrian Federal Competition Authority.

“We are excited to enter into this unique agreement, which will generate both long-term strategic value and mutual, immediate benefits,” O’Day added. “We chose to partner with Galapagos because of its pioneering target and drug discovery platform, proven scientific capabilities, and outstanding team.”

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