Gilead Sciences is paying $5.1 billion (€4.5 billion) to enter into a 10-year collaboration with Galapagos. The deal gives Gilead access to all of Galapagos’ current and future programs outside of Europe.
Through the deal, Gilead will gain access to six clinical-phase assets, 20 preclinical programs and whatever else Galapagos moves into the clinic over the next decade. Gilead is paying $3.95 billion upfront and making a $1.1 billion equity investment at a 20% premium in Galapagos to secure such wholesale access to its partner’s pipeline.
With Gilead already having a stake in late-phase JAK1 inhibitor filgotinib, the pipeline of programs covered by the deal is led by phase 3 autotaxin inhibitor GLPG1690 and phase 2b ADAMTS-5 inhibitor GLPG1972. Galapagos is developing GLPG1690 and GLPG1972 in idiopathic pulmonary fibrosis and osteoarthritis, respectively.
Gilead will hand over still more money if GLPG1690 and GLPG1972 progress as hoped. If GLPG1690 is approved in the U.S., Gilead will pay a $325 million milestone fee. Gilead will have to pay $250 million if it wants the U.S. rights to GLPG1972 following the completion of the ongoing phase 2b. That figure will swell by $200 million if the osteoarthritis trial meets certain secondary efficacy endpoints. Gilead is also on the hook for up to $550 million in regulatory and commercial milestones.
The opt-in fee for all other programs is $150 million, with no subsequent milestones, meaning Gilead could pay billions more on top of its huge upfront. That makes the deal a big commitment by Gilead. But, having spoken to management at Gilead, some analysts compared the deal favorably to buying Galapagos outright.
“[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,” analysts at Jefferies wrote in a note to investors. “We like the deal as [Gilead] continues to build pipeline and [potential] future growth and positively changing the [potential] trajectory of [Gilead] over the next few years.”
Everything that Galapagos has said in recent years suggests Gilead may have struggled to buy the biotech outright if that was its preferred option. Galapagos has consistently expressed a desire to grow into a standalone, midsized European biopharma company despite a steady stream of chatter about it being a buyout candidate.
The deal with Gilead should put that chatter to rest for now. Gilead’s $1.1 billion investment will increase its stake in Galapagos from 13% to 22%. Warrants issued by Galapagos will give Gilead the chance to further increase its stake to 29.9%. That is likely as high as Gilead’s stake will get for at least 10 years, though, because the deal features a standstill agreement.
As such, the deal effectively safeguards the independence of Galapagos for the next 10 years, giving it the time and money to mature into the multiproduct, commercial-stage company it aspires to be.
That aspiration is reflected in revisions to the filgotinib deal. Galapagos now has an expanded role in the commercialization of the JAK1 inhibitor in key markets in Western Europe, plus the exclusive rights in Belgium, the Netherlands and Luxembourg provided by the original deal. With the broader Gilead deal securing Galapagos’ European rights to future programs, the biotech has the motivation and the means to build up a commercial presence in the region.
The Gilead deal could also support the acceleration and expansion of Galapagos’ pipeline. Galapagos will work autonomously and fund all work up to the end of phase 2, beyond which it will co-develop assets optioned by Gilead and split the costs with its partner.