Please ensure Javascript is enabled for purposes of website accessibility

Galapagos Cozies Up Closer to Gilead Sciences

By Todd Campbell - Dec 15, 2017 at 7:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The clinical-stage drug developer is executing an option that ties it more closely to this large-cap biopharma.

Gilead Sciences (GILD 0.89%) inked a collaboration deal with Galapagos NV (GLPG 1.59%) in 2015 to gain rights to the latter's JAK1 inhibitor filgotinib. Today, Galapagos decided to execute its co-commercialization rights to filgotinib in several European countries. The move comes only weeks ahead of a standstill agreement between the two companies expires and positions Galapagos to split profit in regions covered by the co-marketing agreement. Since Galapagos' decision could have a big impact on its financials, let's learn more about filgotinib and the company's relationship with Gilead Sciences.

What's the story?

Gilead Sciences swooped in with enough money to license it and acquire a nearly 13.3% equity ownership stake in Galapagos after AbbVie Inc. (ABBV 0.42%) walked away from its license to focus on its own autoimmune disease drugs.

A man in a suit's hand is outstretched to shake another person's hand.

IMAGE SOURCE: GETTY IMAGES.

Gilead Sciences gave Galapagos $300 million in up-front cash for its license and handed over $425 million in cash for its ownership stake. As part of the agreement, Gilead Sciences agreed to give Galapagos up to an additional $1.35 billion in development and commercial milestones, and if filgotinib is approved, tiered royalties beginning at 20%.

Gilead Sciences also agreed to allow Galapagos to opt in to co-promote filgotinib in various European markets, an option that Galapagos took advantage of this week. After exercising its option, Galapagos will split profit on filgotinib sales in Germany, France, Italy, Spain, the U.K., the Netherlands, Belgium, and Luxembourg.

Since agreeing to license filgotinib, Gilead Sciences has advanced it into phase 3 trials in rheumatoid arthritis, ulcerative colitis, and Crohn's disease. Filgotinib is also in phase 2 trials for eight more autoimmune disease indications. 

A massive market

The market for autoimmune disease drugs is massive, especially for rheumatoid arthritis drugs. Globally, up to 1% of the population suffers from rheumatoid arthritis, including about 1.5 million people in the United States and Europe.

In 2016 alone, the rheumatoid arthritis market was worth $19 billion and the market for inflammatory bowel diseases, including ulcerative colitis and Crohn's disease, was worth $8 billion. In those indications, anti-TNF therapies such as Humira dominate first-line treatment and they represent over 40% and 70% of the second-line market, respectively.

We won't know how much of these markets filgotinib can win away until its ongoing phase 3 trials wrap up, but phase 2 results in rheumatoid arthritis and Crohn's disease were encouraging. In those trials, Filgotinib was efficacious and well tolerated, with an arguably lower risk of drug interactions than other autoimmune disease treatment options.

If filgotinib performs similarly in its pivotal trials, then Gilead Sciences and Galapagos could stand a very good chance of shaking up treatment. That's because biologics used in autoimmune diseases, such as AbbVie's $18 billion per year Humira, can interact with other medications, making their use less than ideal. Filgotinib also has a dosing advantage over biologics because it's taken orally rather than injected or infused.

Overall, Galapagos decision to execute its option suggests that it's beginning to take the steps needed to prepare to shift from a clinical-stage to a commercial-stage company. Frankly, it couldn't ask for a better partner to help it along. Gilead Sciences is among the biggest biopharma's in the world and it's got plenty of experience tapping multibillion-dollar markets, so if any company can help make filgotinib a success, it's Gilead Sciences.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Galapagos Stock Quote
Galapagos
GLPG
$56.69 (1.59%) $0.89
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$62.36 (0.89%) $0.55
AbbVie Inc. Stock Quote
AbbVie Inc.
ABBV
$153.80 (0.42%) $0.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.