US drugmaker Gilead Sciences has agreed a $5.1bn deal to increase its stake in Belgian biotech group Galapagos and gain access to a pipeline of drugs that are under development.
The deal marks an expansion of the alliance between the two companies, which were already co-operating on a potential arthritis treatment. It comes as Gilead is under pressure from sliding sales of its blockbuster hepatitis C drug, and is the first major move by chief executive Daniel O’Day who joined from Roche Pharmaceuticals in March.
Gilead will acquire the rights outside Europe to two additional drugs that are in development, which target osteoarthritis and lung scarring. It will also have the option to take up similar rights over any other new treatments that Galapagos invents over the next ten years.
The American company is paying an upfront fee of $3.95bn, and will also invest $1.1bn to nearly double its stake in Galapagos to 22 per cent. It will make additional payments if the two experimental drugs named in the deal are approved in the US. Gilead has also agreed to share some of Galapagos’ development costs.
Mr O’Day said he joined the company to expand its portfolio of world class research, and that this partnership was a “creative” and “unique” way to do it. Gilead did consider acquiring Galapagos but chose a partnership instead.
“I’m a believer that acquisitions, in this case, can often destroy value. Many times you lose some of the very best scientists and people in the organisation. You create complexity. In early stage research, independence creates more value,” he said.
Onno van de Stolpe, Galapagos chief executive, said he wanted to create a “European powerhouse”, not sell out to a large pharmaceutical company. With over a billion euros in the bank, he said Galapagos came to the negotiations in a position of strength.
“If you look at European companies successful in biotech, all have been acquired by big pharma and that’s something we — and especially me as a founder — didn’t want to see happening. We want to determine our own destiny regarding research,” he said.
Big pharmaceuticals companies are increasingly turning to mergers and acquisitions instead of relying entirely on in-house research scientists, preferring to let niche biotechnology companies take the risks inherent in early-stage research.
But the trend means that new drugs are more often being invented by companies that lack the expensive sales capabilities and global reach needed to commercialise them.
That, combined with pharmaceuticals companies’ need to replace old products that lose patent protections or are under pressure from competitors, has triggered a wave of deals.
In the first three months of the year alone, pharmaceuticals companies notched up $92bn worth of mergers and acquisitions, the highest quarterly total since 2014, according to EvaluatePharma.
Gilead is best known for HIV treatments and a hepatitis C medicine that transformed patients’ prospects by curing the disease within months, but also placed strains on insurance plans left footing a price of roughly $1,000 per pill.
But the company has since reported slowing sales of the drug, which fell to $790m in the first quarter of this year, from $1bn a year earlier. Unveiling the results in May, Gilead blamed a decline in the number of patients beginning treatment, and a fall in the price paid for the drug by the US Medicare scheme.
