Galapagos NV, a clinical-stage biotechnology company, and Gilead Sciences, Inc., a biopharmaceutical company, have entered into a global partnership for the development and commercialisation of the JAK1-selective inhibitor filgotinib for inflammatory disease indications. Galapagos will receive an upfront payment of $725 million consisting of a license fee of $300 million and a $425 million equity investment in Galapagos. In addition, Galapagos is eligible for payments up to $1.35 billion in milestones, with tiered royalties starting at 20 per cent and a profit split in co-promotion territories.

Phase 2 trial data show that filgotinib has the potential to be an effective and well-tolerated oral therapy for patients with rheumatoid arthritis (RA) (DARWIN studies) and Crohn's disease (FITZROY study). The companies will start phase 3 trials in RA and Crohn's in 2016 pending the successful outcome of discussions with regulatory authorities.

"We are excited about the potential of filgotinib in RA and other diseases with a strong partner like Gilead, which shares our goal of rapidly delivering these therapies for patients," said Onno van de Stolpe, chief executive officer of Galapagos. "Furthermore, we look forward to the perspective of working together worldwide across other possible indications. The co-development and co-promotion aspects of this collaboration bring us into the next phase of the company's evolution."

"This partnership represents an opportunity to add complementary clinical programs to our growing inflammation research and development efforts," said Norbert Bischofberger, PhD, Gilead's executive vice president, research and development and chief scientific officer. "We look forward to working with Galapagos to advance this programme forward as quickly as possible."

Under the terms of the agreement, the companies will collaborate jointly on the global development of filgotinib starting with the initiation of phase 3 trials in RA. Galapagos will co-fund 20 percent of global development activities and Gilead will be responsible for manufacturing and worldwide marketing and sales activities. Galapagos has the option to co-promote filgotinib in the UK, Germany, France, Italy, Spain, Belgium, the Netherlands and Luxembourg, in which case the companies will share profits equally. If Galapagos exercises its option to co-promote in Belgium, the Netherlands or Luxembourg, it will also book sales in these countries.

Galapagos will receive an upfront license fee of $300 million and Gilead will make a $425 million equity investment in Galapagos by subscribing for shares at a price of €58 per share, which represents a 20 per cent premium as compared to the average share price over the last 30 days. After the issuance of the shares, Gilead will own approximately 15 per cent of the outstanding share capital of Galapagos depending on the $/€ exchange rate at closing. Galapagos is eligible to receive further development, regulatory and commercial milestone payments up to $1.35 billion, plus tiered royalties on global sales starting at 20 per cent, with the exception of the co-promotion territories where profits will be shared equally.

This transaction has been approved by the boards of both companies, and is subject to customary closing conditions and clearances under the Hart-Scott Rodino Antitrust Improvements Act.