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Gilead and Galapagos Enter 10-Year Research and Development Collaboration.

M2 PHARMA-July 16, 2019-Gilead and Galapagos Enter 10-Year Research and Development Collaboration

(C)2019 M2 COMMUNICATIONS

- US-based biopharmaceutical company Gilead Sciences, Inc. (NASDAQ: GILD) and Belgium-based Galapagos NV (NASDAQ: GLPG) have entered into a 10-year global research and development collaboration, the companies said.

Through this agreement, Gilead will gain access to an innovative portfolio of compounds, including six molecules currently in clinical trials, more than 20 preclinical programs and a proven drug discovery platform.

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

Gilead will receive an exclusive product license and option 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 filgotinib, the candidate being advanced for rheumatoid arthritis and other inflammatory diseases to provide a broader commercialization role for Galapagos in Europe.

The collaboration will allow for closer scientific partnership between the companies. Gilead will have access to Galapagos' established research base, which includes more than 500 scientists, and to Galapagos' unique platform, which utilises 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.

As part of 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.

Galapagos will fund and lead all discovery and development autonomously until the end of Phase 2. After the completion of a qualifying Phase 2 study, Gilead will have the option to acquire an expanded license to the compound.

If the option is exercised, Gilead and Galapagos will co-develop the compound and share costs equally. Gilead will maintain option rights to Galapagos' programs through the 10-year term of the collaboration and for up to an additional three years thereafter for those programs that have entered clinical development prior to the end of the collaboration term.

If GLPG1690 is approved in the United States, Gilead will pay Galapagos an additional USD 325m milestone fee.

For GLPG1972, Gilead has the option to pay a USD 250m 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 USD 200m. Following opt in, Galapagos would be eligible to receive up to USD 550m in regulatory and commercial milestones.

For all other programs resulting from the collaboration, Gilead will make a USD 150m 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.

Gilead and Galapagos have also agreed to amend certain terms around the development and commercialisation of filgotinib, the experimental compound being advanced for rheumatoid arthritis and other inflammatory diseases.

The companies have recently completed the comprehensive Phase 3 FINCH program in rheumatoid arthritis and plan to seek regulatory approval for the medicine 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. Galapagos retains exclusive rights in Belgium, the Netherlands and Luxembourg.

The companies 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 USD 1.27 bn 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.

Gilead's equity investment will consist of a subscription for new Galapagos shares at a price of EUR 140.59 per share, representing a 20% premium to Galapagos' 30-day, 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 Galapagos.

In 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.

Barclays, Centerview Partners and Lazard are acting as financial advisors to Gilead. Moelis and Co. and Morgan Stanley are acting as financial advisors to Galapagos. Skadden, Arps, Slate, Meagher and Flom, Covington and Burling LLP and Eubelius are serving as legal counsel to Gilead and Baker McKenzie and Linklaters are serving as legal counsel to Galapagos.

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Publication:M2 Pharma
Date:Jul 16, 2019
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