Gilead Sciences Inc (NASDAQ: GILD) reported on Friday the launch of a ten year global drug research and development collaboration with Galapagos NV (Euronext & NASDAQ:GLPG).

This agreement will provide Gilead with access to GLPG1690, Galapagos' Phase 3 candidate for idiopathic pulmonary fibrosis as well as option rights for GLPG1972, a Phase 2b candidate for osteoarthritis, in the United States. Both GLPG1690 and GLPG1972 are first-in-class compounds and could offer important mid- and late-stage pipeline opportunities for Gilead. In addition, Gilead receives option rights on all of Galapagos' other current and future clinical programmes outside of Europe.

Under the terms of the agreement, Galapagos will receive a USD3.95bn upfront payment as well as a USD1.1bn equity investment of a subscription for new Galapagos shares at a price of EUR140.59 per share, representing a 20% premium to Galapagos' 30-day, volume-weighted average price.

As part of the scientific partnership , Gilead will have access to Galapagos' established research base, 500 scientists as well as to its unique platform, which utilizes disease-related, human primary cell-based assays to discover and verify novel drug targets. Gilead will nominate two individuals to Galapagos' board of directors.

For all other programmes resulting from the collaboration, Gilead will make a USD150m opt-in payment per program and will owe no subsequent milestones. Galapagos will receive tiered royalties ranging from 20-24% on net sales of all Galapagos products licensed by Gilead as part of the agreement.

The transaction, which is expected to close late in the third quarter of 2019, is subject to certain closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and receipt of merger control approval from the Austrian Federal Competition Authority.