Under the deal, which concerns experimental drug filgotinib, Galapagos will receive an upfront payment of $725m and may receive up to $1.35bn if certain targets are met, as well as royalties once the drug enters the market.
The $725m upfront payment will feature a $300m licence payment and a $425m equity investment.
Filgotinib is a JAK1-selective inhibitor discovered and developed by Galapagos to treat rheumatoid arthritis (RA) and Crohn’s disease.
Galapagos CEO Onno van de Stolpe said: “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.
“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.”
The deal will see the companies start Phase III studies in RA and Crohn’s disease next year pending the successful outcome of discussions with regulatory authorities.
Data from a Phase II trial show that filgotinib has the potential to be an effective and well-tolerated oral therapy for patients with RA (DARWIN studies) and Crohn’s disease (FITZROY study).
As part of the agreement, Galapagos will co-fund 20% of the worldwide development activitiesm, while Gilead will undertake manufacturing and global marketing and sales activities.
In addition, Galapagos has the option to co-promote filgotinib in the UK, Germany, France, Italy, Spain, Belgium, the Netherlands and Luxembourg.
If Galapagos decides to co-promote in Belgium, the Netherlands or Luxembourg, it will also book sales in those countries.
Gilead research and development executive vice-president and chief scientific officer Norbert Bischofberger said: “This partnership represents an opportunity to add complementary clinical programmes to our growing inflammation research and development efforts.
“We look forward to working with Galapagos to advance this programme forward as quickly as possible.”
The transaction, which has been approved by the boards of both companies, is subject to customary closing conditions and clearances under the Hart-Scott Rodino Antitrust Improvements Act.