|Gilead's Norbert Bischofberger|
Less than three months after AbbVie ($ABBV) turned its back on Galapagos and a $1.4 billion deal for the late-stage autoimmune drug filgotinib, Gilead Sciences ($GILD) has stepped in with $725 million in cash and up to $1.35 billion in milestones to take its place in the partnership.
AbbVie ultimately decided to go its own way with an in-house JAK1 inhibitor--ABT-494--to tamp down inflammation from rheumatoid arthritis and other diseases. But a week ago Galapagos bounced back with positive data from their Phase II study of filgotinib, which pointed the biotech straight into a Phase III pivotal program--and into Gilead's welcoming arms.
Gilead, which has been expected to pull off one or more biotech deals to fatten its pipeline, is paying Galapagos $300 million for the licensing fee and buying $425 million of the biotech's shares--15% of the stock--at a 20% premium. In addition to the milestones, Gilead is committed to giving Galapagos a 20%-plus royalty stream on sales and will split profits in co-promotion countries, if Galapagos picks up the option. Those countries are the U.K., Germany, France, Italy, Spain, Belgium, the Netherlands and Luxembourg.
Gilead's deal with Galapagos marks the latest in a series of big licensing pacts and M&A deals in biotech, where valuations have finally cooled after three years of red-hot growth. And Gilead has the cash for this and more. The big biotech has been reaping a megablockbuster harvest from its hep C drugs, which left many analysts looking for a new set of deals and buyouts to beef up its R&D efforts. The company has also profited handsomely from HIV.
Gilead doesn't do a lot of deals, but when the deal team makes a move they tend to make a big splash.
In this case, Gilead was convinced to move after the Belgian biotech reported that filgotinib had hit the primary endpoint in a Phase II study, significantly reducing symptoms of Crohn's disease. Investigators tracked the drug's impact on the Crohn's Disease Activity Index, or CDAI, seeing evidence of clinical remission with reductions of 150 or more on the score. The drug also scored well on a quality of life assessment.
But Gilead will likely face intense competition if it makes it to the market with this drug.
"While there remain questions on filgotinib (dosing schedule / pre-clinical signal on male reproductive toxicity), the (deal) signals both the commercial potential of the oral JAK segment, as well as increased competitive intensity with Lilly (baricitinib), AbbVie (ABT-494), and Gilead (filgotinib) now expected to compete with Pfizer's Xeljanz," noted Barclays' Geoff Meacham.
"This partnership represents an opportunity to add complementary clinical programs to our growing inflammation research and development efforts," said Norbert Bischofberger, Gilead's executive vice president of R&D and chief scientific officer. "We look forward to working with Galapagos to advance this program forward as quickly as possible."
- here's the release