Gilead Sciences is beefing up its investment in Belgian-Dutch biotech firm Galapagos NV as it seeks to add drugs for treating inflammatory and autoimmune conditions to its portfolio.
Under a $5.1 billion deal announced on Sunday, Gilead will provide Galapagos with $3.95 billion in research funding and pay $1.1 billion to raise its stake in Galapagos from 12.3% to 22.0%.
The companies had initially become partners in 2015, with Gilead investing $2 billion to codevelop an experimental rheumatoid-arthritis drug called filgotinib that it intends to submit to the U.S. Food and Drug Administration this year.
The new agreement gives Gilead option rights in the U.S. to GLPG1972, a drug Galapagos has been developing for osteoarthritis, and rights to GLPG1690, a candidate for treating idiopathic pulmonary fibrosis.
Galapagos offers a “pioneering target and drug discovery platform, proven scientific capabilities, and outstanding team,” Gilead CEO Daniel O’Day said in a news release, noting that Gilead will gain “exclusive access to all current and future compounds in Galapagos’ rich pipeline while Galapagos is able to expand its research activities and build commercial infrastructure.”
Other big pharma companies have taken the acquisition route to growth, with AbbVie recently buying Allergan for $63 billion.
But O’Day told reporters he firmly believed in the concept of enabling Galapagos to further invest in its research while “at the same time keeping their independence as a premier European biotech company that allows them to recruit the very best talent, make their own decisions, and progress programs according to their judgment.”
According to Market Realist, Gilead’s need to add to its portfolio has been intensified by its “struggling HCV (hepatitis C) franchise, cannibalization of older HIV drugs, and failure of its late-stage investigational nonalcoholic steatohepatitis asset, selonsertib.”
The sharing of costs with Galapagos should “insulate Gilead from significant downside risk in case of R&D failure but it “may not be able to significantly influence the progress of Galapagos’s research programs,” Market Realist said.
Gilead is paying a 10% premium to Friday’s closing price for the increased stake in Galapagos. The stock was up 17.5% in trading Monday.