According to BioCentury's BCIQ deals database, the upfront payment is the largest for a partnership in the past 10 years. The upfront is more than triple the second largest deal in that time frame, the $1.6 billion Merck & Co. Inc. paid AstraZeneca plc for rights to PARP inhibitor Lynparza olaparib.
Galapagos CEO Onno van de Stolpe told BioCentury that with regulatory filings for filgotinib to treat RA slated for this year, there was growing concern by Galapagos’ management that a takeout by Gilead was imminent.
“We as management have felt the increasing concern that an acquisition would happen at some point in time,” van de Stolpe said. However, maintaining Galapagos as an independent entity has long been a priority for the CEO.
In January, when the parties met at the J.P. Morgan Healthcare conference to discuss how they could “greatly accelerate or increase their collaboration,” van de Stolpe said Galapagos insisted on the 10-year standstill agreement that prevents Gilead from seeking to acquire the Belgian company or gain a 30% or more stake. "Otherwise we would not have been at the table," he told BioCentury. “We needed to do a deal to anchor our independence, and this was the moment to do it,” van de Stolpe added.
Galapagos believes that the deal structure is also value-creating for both companies. “I don’t buy the fact that acquisitions are so great for investors. If you are a company that is successful and has a pipeline and a platform, let it go its own course and create the value that way,” van de Stolpe said.
He believes that the record-breaking cash infusion will have multiple benefits. First, it will allow Galapagos to double its R&D staff to over 1,000 and increase the number of clinical candidates generated by the company's small molecule discovery engine from the current three per year to up to five a year.
The deal also means that Galapagos could expand its therapeutic area focus beyond inflammation and immunology. "Don't expect us to go into cancer," van de Stolpe said. "But anything else where we think we can make a difference with our discovery platform, we'll definitely review an expansion."
Galapagos is also open to using some of the cash for BD, including bringing in new modalities such as RNA. "Clearly we have enough money now to do acquisitions that we'd want," van de Stolpe said. "We will be looking, but everything that we acquire will become part of the alliance with Gilead."
In addition to the R&D collaboration and access to future Galapagos pipeline programs, Gilead also gains ex-EU rights to GLPG1690, a first-in-class autotaxin inhibitor that is in Phase III testing to treat idiopathic pulmonary fibrosis; and an option to U.S. rights to GLPG1972, a first-in-class ADAMTS5 inhibitor that is in Phase IIb testing to treat osteoarthritis. If GLPG1690 is approved in the U.S., Galapagos would receive a $325 million milestone; the opt-in fee for GLPG1972 is $250 million, with an additional $550 million in regulatory and commercial milestones if the option is exercised. Servier (Suresnes, France) has rights to GLPG1972 outside the U.S.
The deal also amended the filgotinib partnership, under which Galapagos will have greater input into the global development strategy and more responsibility in European commercialization, allowing the biotech to build out a European commercial presence. Galapagos adds exclusive commercialization rights in the Netherlands, Belgium and Luxembourg, in additional to the original co-commercialization rights in France, Germany, Italy, Spain and the U.K. In return, the partners will equally share future global development costs for filgotinib.
The Galapagos R&D collaboration is expected to close this quarter.