Gilead to Invest $725 Million in Galapagos After AbbVie Snub

  • Galapagos eligible for $1.35 billion in additional payments
  • Shares of Galapagos surged in Amsterdam to record high

Gilead Sciences Inc. plans to pay $725 million to acquire a stake in Belgian drugmaker Galapagos NV and buy into an experimental drug that had been spurned by AbbVie Inc. less than three months ago.

Gilead will acquire about 15 percent of Galapagos for $425 million and pay a license fee of $300 million as part of an agreement to develop and sell filgotinib, a treatment for rheumatoid arthritis and other inflammatory diseases, according to a statement on Thursday. Galapagos is also eligible to get an additional $1.35 billion in payments for meeting certain milestones in developing the drug.

Shares of Galapagos jumped to a record in Amsterdam trading.

The transaction marks a comeback for the drug and its maker, which took a beating in September when AbbVie decided to drop its partnership with Galapagos to develop the treatment and instead move ahead with its own experimental rheumatoid arthritis pill. Galapagos had lost more than a third of its value in the days following that surprise announcement.

The move would also accelerate Gilead’s entry into rheumatoid arthritis, where it has two compounds in the first phase of clinical development, according to the company’s website. Galapagos’s drug is about to enter the third and final stage, and works differently than Gilead’s molecules.

Gilead’s Next Move?

Investors are waiting to see Gilead’s next move after the pharmaceutical company’s two hepatitis C treatments became the fastest-selling drugs of all time, with a combined $18.1 billion in sales in the last 12 months. The Foster City, California-based company has $15.7 billion in cash, equivalents and short-term investments on its books, and investors are waiting to see whether it makes a large acquisition. Its last big deal was the about $11 billion purchase of Pharmassett Inc. in 2012.

Galapagos surged 11 percent to 58.47 euros as of 10:31 a.m., after earlier touching an all-time high of 60.55 euros. Gilead will acquire the shares at 58 euros apiece, or 10 percent above the stock’s closing price on Wednesday.

Gilead’s payments to Galapagos will include tiered royalties starting at 20 percent and a profit split in co-promotion territories.

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