The Gilead and Galapagos Agreement Is a Big Win for Both Firms and Their Shareholders

Gilead and Galapagos Global Research Collaboration

Gilead Sciences (GILD) and Galapagos NV (GLPG) entered into a 10-year global research and development collaboration. Gilead will gain access to innovative compounds, including six molecules currently in clinical trials, more than 20 preclinical programs and a proven drug discovery platform.

Galapagos will receive a $3.95 billion upfront payment and a $1.1 billion equity investment from Gilead. Galapagos will use the proceeds to expand and accelerate its research and development programs.

Gilead will get exclusive product license and the rights to develop and commercialize all current and future programs in all countries outside Europe. In addition, Gilead and Galapagos have agreed to amend certain terms in the agreement governing the rheumatoid arthritis product filgotinib and other inflammatory diseases; to provide a broader commercialization role for Galapagos in Europe.

The collaboration will allow for a closer scientific partnership between the companies.

Gilead will have the right to access Galapagos’ research base which includes more than 500 scientists as well as access to Galapagos’ unique platform which utilizes disease-related, human primary cell-based assays to discover and verify novel drug targets. Gilead will also nominate two individuals to Galapagos’ Board of Directors following the closing of the transaction.

From Gilead’s Chairman & CEO

Daniel O’Day, Chairman and Chief Executive Officer of Gilead Called the agreement unique and explained the firm’s excitement towards the agreement by the fact that it will generate long-term strategic value and immediate benefits for both firms.  He explained that Gilead choice to partner with Galapagos is based on the value of Galapagos drug discovery platform, its proven scientific capabilities, and its outstanding team. He added that Gilead will also gain exclusive access to all current and future compounds in Galapagos’ rich pipeline.. The collaboration, he said, reflects Gilead’s intent to grow its innovation network through diverse and creative partnerships.

Gilead Gains Rights to Galapagos’ GLPG1690 & GLPG1972

As per the collaboration, Gilead gains rights to GLPG1690, Galapagos’ Phase 3 candidate for idiopathic pulmonary fibrosis. Gilead also receives option rights for GLPG1972, a Phase 2b candidate for osteoarthritis, in the United States. Both GLPG1690 and GLPG1972 are first-in-class compounds and could offer important mid- and late-stage pipeline opportunities for Gilead. In addition, Gilead receives option rights on all of Galapagos’ other current and future clinical programs outside of Europe.

From Galapagos’ CEO

Onno van de Stolpe, Chief Executive Officer of Galapagos, said, “What a fantastic moment in our 20th anniversary year to sign this landmark deal with our great partner Gilead. Galapagos has been highly effective at target identification and drug discovery, progressing novel molecules from research into the clinic. 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 a new mode of action medicines. With the capital provided by Gilead, we aim to progress innovation to patients.”

Terms of the Collaboration 

Galapagos will fund and lead all discovery and development autonomously until the end of Phase 2. After completing qualifying Phase 2 study, Gilead will have the option to acquire an expanded license to the compound. If the option is exercised, both firms will co-develop the compound and share costs equally.

In case GLPG1690 is approved in the United States Gilead will pay Galapagos an additional $325 million milestone fee.

For GLPG1972, Gilead has the option to pay a $250 million fee to license the compound in the United States after the completion of the ongoing Phase 2b study in osteoarthritis. If certain secondary efficacy endpoints are met, Gilead would pay up to an additional $200 million. Following opt-in, Galapagos would be eligible to receive up to $550 million in regulatory and commercial milestones.

For all other programs resulting from the collaboration, Gilead will make a $150 million opt-in payment per program and will owe no subsequent milestones. Galapagos will receive tiered royalties ranging from 20-24% on net sales of all Galapagos products licensed by Gilead as part of the agreement.

Filgotinib Collaboration

Gilead and Galapagos agreed to amend certain terms around the development and commercialization of the investigational rheumatoid arthritis and other inflammatory diseases drug filgotinib. 

The companies have recently completed the comprehensive Phase 3 FINCH program in rheumatoid arthritis and plan to seek regulatory approval for the product in the United States and Europe before the end of the year. Under the amended agreement, Galapagos will have greater involvement in filgotinib’s global strategy and participate more broadly in the commercialization of the product in Europe, providing the opportunity to build a commercial presence on an accelerated timeline.

Gilead and Galapagos will co-commercialize filgotinib in France, Germany, Italy, Spain and the United Kingdom, and retain the 50/50 profit share in these countries that was part of the original filgotinib license agreement, and under the revised agreement.

Galapagos will have an expanded commercial role and will retain exclusive rights in Belgium, the Netherlands and Luxembourg.

Both firms will share future global development costs for filgotinib equally, in lieu of the 80/20 cost split provided by the original agreement. Other terms of the original license agreement remain in effect, including the remaining $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 United Kingdom.

Terms of the Equity Investment

Gilead’s equity investment will consist of a subscription for new Galapagos shares at a price of €140.59 per share, representing a 20% premium to Galapagos’ 30-day, the volume-weighted average price. This will increase Gilead’s stake in Galapagos from approximately 12.3% to 22% of the issued and outstanding shares in GalapagosIn addition, Galapagos intends to seek shareholder approval to issue two warrants allowing Gilead to further increase its ownership of Galapagos to up to 29.9% of the company’s issued and outstanding shares.

The agreement also includes a 10-year standstill restricting Gilead’s ability to seek to acquire Galapagos or increase its stake in Galapagos beyond 29.9% of the company’s issued and outstanding shares, subject to limited exceptions.

The transaction, which is expected to close late in the third quarter of 2019, is subject to certain closing conditions, including 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.

Conference Call

At 3:00 p.m. EST today the Gilead and Galapagos management teams will host a joint conference call and a simultaneous webcast to discuss the collaboration. To access the live call via the internet please connect to the company’s website at or 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast.

To access the call by telephone from the U.S. & Canada please call 1-877-359-9508 or 1-224-357-2393 and use the conference ID 186 9522.

For international telephone access please call Belgium: 080073264; France: 0805081488; Netherlands: 08000232838 and the United Kingdom: 08000288438 and use the conference ID 186 9522.

A replay of the webcast will be archived on the companies’ websites for one year and a phone replay will be available approximately two hours following the call, through July 28, 2019. To access the phone replay, please call 1-855-859-2056 or 1-404-537-3406 and dial the conference ID 186 9522.

Prohost Observations 

We believe this agreement is a win-win for both firms. It enriches Gilead’s technology and its pipeline products. And yes, we can say that Gilead has made an excellent deal regarding its needs. Through this agreement Gilead is adding a proven drug discovery technology to its technological capability and several breakthrough products to its pipeline. As a matter of fact, Gilead could have the rheumatoid arthritis and inflammatory disease product filgotinib approved and marketed by next year. Regarding Galapagos, the agreement will definitely move its investigational products much faster in clinical trials and it will decrease this firm’s financial burdens, in addition to increasing its research and drug creation capability. Along with financial support, Galapagos will gain billions of dollars in upfront payments, milestone payments, royalty payments and equal partnering with Gilead on many products as well as having Gilead itself as a minority partner in everything, i.e., in Galapagos  

This agreement is indeed, terrific news for both firms.     

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