Thank you for standing by, and welcome to the joint business update call for Gilead Sciences and Galapagos. My name is Daniel and I'll be your conference operator today. At this time, all participants are in a listen only mode. And as a reminder, this conference call is being recorded. I would now like to turn the call over to Sung Lee, Senior Vice President of Investor Relations.
Please go ahead.
Thank you, Daniel. We appreciate everyone joining us on a Sunday for this call. Earlier today, Gilead and GLapagos issued a press release announcing that both companies have entered into a comprehensive 10 year global clinical and research collaboration. On our call today, We would like to review the terms of the collaboration and benefits to both companies and then address any questions you may have We have posted a set of slides on each company's website for your reference. The speakers on today's call will be Daniel O'Day, Chairman and Chief Executive Officer of Gilead Sciences Anno Van Derstopa, Chief Executive Officer of Galapagos and Elizabeth Goodwin, Vice President, Investor Relations Galapagos.
Before we begin, let me remind you that both companies will be making forward looking statements that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those referred to in any forward looking statements. Those risks and uncertainties are contained in our joint press release, presentation and latest SEC filings of each company. I will now turn the call over to Dan.
Well, good afternoon, good evening, everybody. On behalf of Ono and myself, I really want to thank you all for joining us here today. We'd like to articulate, why we think this is such a unique and transformational agreement in the industry between 2 very strong companies that have very strong futures. So, let me articulate it by going to the next slide is, sorry, this slide is really the 3 key aspects of this collaboration from our side. First of all, Gilead gains access to a pioneering research platform and an exclusive right to, Galapagos' current and future medicines, outside of Europe.
We really think there's a complementarity to our 2 organization skill set. It combines Galapagos' ability to identify novel targets, 1st in class targets with Gilead's expertise, on chemistry, on speed to markets and on infrastructure. And so this is an organized deal that's really out of, based about the unique capabilities of both organizations coming together to create something stronger. And of course, the investment in this deal enables Galapagos to expand and accelerate that highly productive, R and D that we've seen over the past 2 decades now. So if we go to the next slide in summary, what are the elements of this from a financial standpoint.
Gilead will provide a US3.95 billion dollars upfront payment in addition to $1,100,000,000 in equity investments. Gilead will have a stake with that additional $1,100,000,000 of equity investment of 22 percent at the beginning of our collaboration with an option and an ability to take that up to just below 30% We've pre negotiated predefined, opt in fees and milestone payments in a way that allows us to really concentrate on the science, move the most, promising medicines into development and onto the market. We'll have a fifty-fifty development cost split after the opt in, which will generally occur after the phase 2 time point And the royalties have also been, standardized across the programs, in the range of 20% to 24%. If we turn our attention to the next slide, it gives an overview of the current and future programs that that are a part of this agreement. This has, I think, both short, medium and long term advantages for both companies and for patients and for shareholders, the discovery platform is world leading.
I'll let Ono talk about that, but our scientists and myself greatly appreciate the unique nature of this platform, the proven nature of this platform over the past 2 decades. We will have a revised filgotin collaboration component of this that will essentially do 2 major changes. 1 is allows filgotinib to create an infrastructure or franchise in Europe, to allow them to increase their commercial presence So, we co commercializing Filgotinib in the major 5 European countries and we kind of split the lead between rheumatoid arthritis and IVD. And the cost sharing for the global development agreements on filgotinib, converts to really the cost sharing that we have now for all the other programs in the agreement, which is a fifty-fifty from what was previously and eighty-twenty, eighty, Gilead-twenty Galapagos. Of course, there's, there's 6 programs beyond Filgotinib that Galapagos has in the clinic, 20 more pre clinically The 2 that are just highlighted here are the IPF program, GLPG 1690, And you can see the milestone for that, which essentially now we have opted into as a result of this agreement.
So we'll begin the fifty-fifty global development costs We have an option for $250,000,000 up then and a variety of, milestone payments due to the potential size and opportunity here that would add up to $750,000,000. And then we standardized all other clinical programs that could come out of this arrangement in the form of 150,000,000 opt in after the phase 2 for ex Europe rights and fifty-fifty global development cost shares. Split the post opt in. On the next slide, I'll just come at it from what I think are the some of the most significant benefits for Gilead and I'll let Ono comment on Galapagos. As you recall, since I've come on board four and a half months ago, I had promised you that I'd be focused on the portfolio at Gilead, both internally and externally Secondly, the commercial delivery and thirdly, the people and talent piece, I'm obviously continuing to work on all three of those, But this represents a really significant major step forward for the portfolio at the end of the day, this essentially doubles our research base overnight with a highly competent, highly capable research organization, it significantly increases our portfolio, you can see the strategic advantages there, access to the IP, the technology, the expertise, the capabilities and inflammation and fibrosis, which is, Galapagos' most significant strength right now.
But of course, they can follow the science into other disease areas as well, and we would be grateful for that. It also establishes a strong research based for us in Europe, a company that's been, Gilead, predominantly focused on U. S.-based talent. We now have the ability to tap into the best scientific talents in Europe and be able to allow that to help us grow and develop, our medicine base in the future. Strengthens our pipeline, like I said, with 6 clinical development programs in addition to Filgotinib.
And I would just say that, I couldn't be more pleased that this is the first collaboration that I announced under my leadership because I think it speaks to the type of value we'll create for the portfolio. But I want you to know that, at Gilead, we will continue. This is one of a variety of things that we'll continue to look at to enhance our innovation network, and to create opportunities for growth for Gilead into the future. So with that, thank you for your attention. I'll turn it over to you all in order to pick it up from here.
Thank you, Dan. It's very exciting to announce this deal and to talk about it and to also hear the nice words that Dennis is saying about the capabilities of Galapagos. We have worked very hard over the last 20 years to build a biotech company and then in this anniversary year to get a deal like this is quite something I want to start with saying a big thank you to the team of Gilead and the team of Galapagos who got it together. It's a very complicated large overarching deal that, of course, took a lot to get together. And the teams worked throughout the last couple of day and nights, continuously to get it all in time for today's dining and announcements.
So I thought, I need to thank them very much for that. It's great. It's all about innovation innovation innovation. And I think that's the big plus of this deal, the fact that we're partnering this with Gilead, who has mentioned also very high in its strategy. This funding that we're now getting from Gilead will enable us to dramatically increase the efforts in discovery and development.
The planning is to double the research engine at Lager's, we have about 500 people remotes that would also write it out as long as we can do it operationally, but that's really the planning to get more new, more of the actions as fast as possible. Out of this engine. We are focusing on Europe, clearly, as we built additional infrastructure, the planning is in a couple of years cover all countries in Europe and be ready for the programs that went through. But that's not all it is. We get access to the great with these at Gilead, especially in chemistry and development, of course, the commercial infrastructure and the operations.
So I think it's a deal that gives us a lot not only financial but also from a technological point of view. A couple of questions, just a follow-up on this call about our target discovery technology. They're a very nice movie that displaying how this all works on our website. Illustrating this. It's a technology that we actually set up about, 20 years ago when we started the first couple of years building a platform to come up with a rapid way to identify novel targets.
This technology today has all years is still the superior way to the licensure role in technology platform with the cell assays. We use an adenovirus to use small pieces of DNA into a human cell. And the fact that we use this antivirus enables us to work with primary human cell self directly out of the human body, which of course mimics the in vivo situation as much as possible. And therefore, makes it such a valuable tool and all the targets that we have been working on were identified using this technology. So it's really exciting an exciting platform that we're interested in to investigate.
And we also have a wide variety of target validation tools, which you have to do before you actually can fight the drug discovery process. Over the years, we have built
a very
large pipeline of molecules moving forward in the various phases of clinical trial or discovery, filgotinib, of course, being the most advanced going for, filing for in Europe and U. S. This year. So that's very exciting for rheumatoid arthritis, but as you can see on this slide, We have over 10 indications where filgotinib is being investigated, great potential for this JAK1 inhibitor. The second program in idiopathic pulmonary fibrosis is in Phase III, a very exciting program.
We also have another IVF program in Phase II. Have an osteoarthritis program in Phase 2b, great potential, higher risk than IPF, but if we get there, and then we got lots of discovery programs, including a very exciting program Toledo that we have highlighted to the investors already. And we believe could be the next wave in, to treat inflammatory disorders. So it's an exciting platform every month. We're coming up with novel targets that we're investigating moving forward into the pipeline.
So we hope to expand this pipeline with many other programs to come. So the last part of what Galapagos was lacking is the commercial infrastructure. We developed from being a reality franchise to now fully integrated by a pharmaceutical company. And we're starting this commercial infrastructure with selling Filgotinib in the Benelux and with this new deal around Filgotinib we will be expanding our reach in Europe, including the big 5 first in RA and later in IBD. And then we will follow with if it all works out with 1690 and IPF and the other products starting from 2022.
The ideas that we're now building up a full commercial organization in Europe as fast as we can. So to To summarize, it's clearly a transformative 10 year collaboration. It's a collaboration of 2 partners focused on on science and innovation, it's all aimed at delivering meaningful new drugs to patients that targets part of the disease that are not well treated at this point in time. It's based on our discovery engine being it the target discovery as well as drug discovery, both of which are very well developed in the company. We believe that with Gilead expertise, we can bring products faster to the market is, of course, very important.
And we can build the infrastructure, thanks to the money paid by Gilead. So we all hope that this is going to be a very productive, successful, innovative based collaboration that both companies will actually benefit from We believe that both Gilead and Galapagos have done an excellent deal here. It's unprecedented in the history It's clearly the largest life science deal so far. And I think we have are in a very good position to show that this is the way pharma and biotech should work together. With that, I would like to hand it back for discussion.
Great.
Thank you, Onno. Let's now open the call for questions.
Today's question and you. A question and answer session. If you have further questions, you're welcome to rejoin the queue. And our first question comes from Brian Abrahams with RBC Capital Markets.
Your line is now open.
Hi there. Thanks for taking my question and congrats to both companies, both teams on the announcement today.
I was wondering if you could talk
a little bit more about how you anticipate Galapagos' drug discovery capabilities and Gilead's chemistry expertise, so working together collaboratively, effectively. And I'm curious if there's any particular earlier pipeline programs or target efforts where the teams see the most immediate potential impact to drive a clinical candidate? Thanks.
Maybe I can start. We believe we're completely transparent to Gilead on what targets we're actually working on, we're going to disclose that as we speak, actually, so that there will be no various. There will be no secrecy. And that means that anything that Gilead can bring to a table that can help to progress these programs will be beneficial for both parties And that can be that we actually going to exchange scientists, scientists from Gilead at Galapagos and vice versa, could also be, by example, formulation or specific chemistry questions that Gilead can help us where we would be or could be struggling. I don't think we have identified a specific program yet where we immediately need the help of Gilead, but that's now with a deal signed and all the confidentiality basically broken open, we can very rapidly get the teams together and talk about where the synergies on in the programs are actually going to be.
Yeah, I would just add, Brian. Thanks. Completely agree with Ono. I think Ono and I would say that one of the reasons we're so enthusiastic about this is that our scientists are highly supportive of this deal. So, At the end of the day, when you look into our sciences eyes, they see the complementarity of it.
They see the, mutual expertise that can come together. For me, that comes together in a couple of different ways. 1 is, being able to leverage this very unique discovery platform that Galapagos has developed over the past 2 decades. It's really a highly productive high throughput platform that allows target discovery of new molecules, 1st in class molecules, in a unique way that Gilead does not do today. At the same time, I think there is a real benefit from a skill set standpoint to combine some of Gilead's world leading chemical expertise ability to target known targets in a way that has proven to be very powerful either from a binding perspective from and therefore, the resulting efficacy and selectivity of that chemistry.
So I think there's a complementarity in skill set. I also think there's a complementarity in the therapeutic area knowledge and expertise. I mean, Gilead amongst other therapeutic expertise, I'm sorry Galapagos has really developed a very strong expertise in inflammation and fibrosis discovery amongst others. Dilead's heritage, as you know, is antivirals now emerging into oncology with cell therapy and other liver diseases. But at the same token, I think this allows us to really expand our expertise in inflammation and fibrosis.
With the cooperation with Galapagos. So there's a lot of complementarity here. There's a lot of mutual back for science and keeping the bihar for transformational medicines. And I am really, a believer that this is going to be a 1+1 equals 3, because of the nature of how these skill sets and therapy areas will come together.
Thanks so much. I'll hop back in the queue.
Thanks, Brian.
Thank you. And our next question comes from Umer Raffat with Evercore ISI.
Your line is now open.
Thanks so much for taking my question. I do have one question, but one for Dan and one for Ono, if I may. Dan, can you break down for us this $4,000,000,000? And because presumably the economics on Filgotinib didn't really changed. So I know the change on the cost side a little bit, but can you break that down the $4,000,000,000 across $16.90 in IPF versus the OA program?
Versus the platform. I think those are really the 3 components of it. If you could just break it down for us so we get a sense for how much you're paying for what. And then, oh no, my question for you is this. There was one case of cholangiocarcinoma on 16 90, in the IPF trial.
And we've seen, obviously, the Bristol study with the LPA1 antagonist get discontinued because of, ulcerative colitis. So my question is, what do we know about that? Are we concerned about that going into phase 3? And, do we know if any blinded events in this general organ area that have happened in phase 3?
So Omar, thank you. I'll make it relatively brief because I think it's I really wouldn't want to break it down to each one of those assets. I think you have to take a big step back and look at the value creation of this deal. So, At the end of the day, the way we look at it at Gilead for the $3,950,000,000 and the consideration of the equity is to say, look, Galapagos can bring significant value to Gilead over this period of time and it can come in a variety of different forms, right? It can come in a successful IPF, a successful OA, a successful Toledo that could come in any number of programs, but the concept of being able to look at this from the standpoint of the current pipeline, which is, you know, in addition to Filgotinib 6 programs in the clinic, and 20 preclinical programs combined with the increased investment of that $3,950,000,000 that owner has already mentioned, you know, he is the target to try to double his research resources could lead us to and Ono should speak to this better than I can, but the way we look at it is could be 1 to 2, new clinical candidates a year going into the clinic.
So, I think when you step back and take a look at the totality of Gilead's investment here, it takes all those things into account. Over to you on a would you agree on the
Okay. It's difficult to put, well, of course, in the negotiations, you go from all directions and, you end up with a certain number And we in the negotiation, ultimately also didn't discuss those separate components anymore. It is about the number that we believe was the right one to do the deal for and that, Gilead was willing to pay as an upfront. So that is what it is and it's up to you, the analysts to work that in your models. Good luck with that.
Regarding your question on the OA trial, I don't know, 1690 it's clear that the BMS molecule as BMS has reported themselves had a compound specific toxicity and another target specific one. We haven't seen any of that with 1690. The trial is well underway as part of the due diligence that Gilead did on the programs. They looked at the blinded blinded data so far. And of course, we have a number of patients that have been on the drug for quite a while and there was nothing that was concerning to us or to them regarding the blinded data that we have seen.
So we're very optimistic still that we got a clean compound here.
Thank you very much. Thank you. And our next question comes from Michael Yee with Jefferies. Your line is now open.
Hey guys, thanks and congrats on the deal as well. I had a question for Dan related to perhaps, maybe just talking about the timing of the deal and sort of why this came together obviously, we had a big announcement on Filgotinib in the FDA meeting recently. So maybe talk to how much we learn from that and why now and what's playing into that? And then as a follow-up, because it is sort of near term, can you just remind us, if there is a futility process on the IPF program and what we should know about that as well. Thanks so much.
Good. I'll start. I'll let you comment on the futility in a second, but Thanks a lot, Michael, and appreciate your compliments in the deal. So, yeah, I think it's important to note that, the deal is not directly related in any way to Filgotinib or the new news in Filgotinib relative to the U. S.
Filing decision. That's good news. But nonetheless, I'll just take a step back. The teams have been discussing OA to expand the collaboration prior to me coming into the organization. And then when I came in, very shortly after arriving, I was briefed by the teams At that point in time, I didn't yet have all the FINCH trial readouts, but we had 1 FINCH trial readout.
I was really intrigued by that. And so within the 1st couple of weeks of my tenure in the role, I, I flew over to sit down and and get to know Ohno more. I thought this was going to be an important relationship, and something that had held great promise and potential. And the teams have been working very, very hard ever since I came in, compliments to the team, but Olino and I have also been working on our relationship, which is very important. At the end of the day, in my experience and these types of arrangements and of course the ones I have experienced with are the Genentech arrangements in the past, the Chugai arrangements.
It really comes down to the teams working well together, but also, the CEO is working well together. And I have to say, you know, I couldn't be more enthusiastic to work with Alamo to see what he and his team have created over the past 20 years. We're very like minded in terms of how we see innovation and how to drive that. And so once we got that relationship established, We only encouraged our teams to accelerate the type of progress and to come up with a structure and an architecture that would make sense for both of us. And I'm really pleased that works so hard to do that.
So, that was the timing of the deal. We came to, you know, conclusion that this was the right thing to do on I and then we and then we let our teams get into the detail and we and they brought it across the finish line. But Filgotinib of course then happened in the process of all of right. And so we had the FDA meeting during this. That's very encouraging news as we put the release out that, we do have a path forward now to file in the United States, still this year and we're very excited about that.
We'll be working on that the wholeheartedly to get that in. So we'll be filing both in the U. S. And Europe this year. That obviously is good news for filgotinib, but we already had an agreement in filgotinib.
So it didn't necessarily affect this broader deal in any way. Was good news for Filgotinib, but the broader deal was done with the concept of appreciating exactly what we've talked about here, the benefit of of this to innovation and to expanding both of our abilities to accelerate our innovation. On the, on the IP, sorry.
Yes. So on the relationship, I think it's very important that CEOs got along very well. And I've also asked Dan to actually join the Galapagos Board. Of course, that ultimately will be up to shareholders to approve, but we nominate Devon as one of the two boards, he said Gilead acquires with this transaction. And I think it's important that we meet each other very frequently to make sure that this collaboration runs as smoothly as as it can and the signs are very good to start with.
Regarding sixteen ninety, the interim analysis that will be done after 25% of the patients have concluded 1 year treatment. So that is still more than a year away. We are doing well in the recruitment. We're ahead of the planning, but it's always difficult to get the centers online very rapidly. It's a hockey stick.
Kind of acceleration that you see. And we're very pleased with the reception with the at the centers. Regarding 6090, there's a lot of excitement from the investigators to participate and bring patients. So it looks very good But of course, we cannot wait to get this drug to, to the market as fast as possible because the unmet medical need is so large and all the patients that don't have access for whatever reason to this drug, it's very difficult because they're life expectancy is so short.
Thank you. And our next question comes from Phil Nadeau with Cowen and Company. Your line is now open.
Good afternoon. Thanks for taking my question. Same thing using both my Gilead analyst and Galapagos analyst hat. I'm hoping to get one question in for both of you. So Dan, for you, first, the upfront and equity investment you're making Galapagos is a meaningful the current market cap.
So why not just buy all of Galapagos? What structure this is a collaboration rather than an outright acquisition? And Anna, one for you, you are getting a substantial amount of financing with this deal. Congrats. Can you give us some sense which programs you're likely to accelerate with the funding?
Thanks.
Yes. Thanks, Phil. I think it's an excellent question. The bottom line is that in my experience, I think there's different mechanisms, structural mechanisms of a deal that make the most sense. For this particular deal, the fact that it's based upon people.
It's based upon talent. It's based upon, sciences following, the best scientific hypothesis. I firmly believe that the concept that we've come up with, the concept of enabling Galapagos with a significant capital infusion for the to further invest in that research and at the same time, keeping their independence as, a premiere European biotech company that allows them to recruit the very best talent, make their own decisions, and progress programs according to their judgment. At the same time, of course, we want to make sure that, that Gilead shareholders are protected with our investment, which is the reason, of course, we're increasing our equity investment in the company. So I think those three elements structurally in place I believe that you're going to create more value, than in acquisition.
And so I think the independence is critically important in the early stages of our discovery. And this will assure that we have a motivated Galapagos independent driving the portfolio And then with exclusive rights to everything that comes out of it, I think we more than make up for the benefits that will come out of that. Versus an acquisition. So in this particular case, I'm convinced this will create more value in the structure. Oh no, do you agree?
Yes. We're very happy with the outcome. I don't think I would have accepted an acquisition proposal, but to be fair, it never was an acquisition proposal by Gilead. From the beginning on, we have been talking about this kind of structure and I think that's the right thing. And hopefully a model that other biotech companies will follow because that how we should all grow up as companies and not be acquired by Big Pharma.
That's a little bit on the side. You asked where we will use our money. On the short term to accelerate and clearly a program that we are spending a lot of money on already, but that clearly will be accelerated even more is on Toledo. We have Toledo at the moment, one program in phase 1 and the other one starting and we anytime. And we hope next year to actually do something what we believe has never been done before is with a new mode of action immediately go into 8 parallel phase 2 programs of which a couple will be dose finding to prepare for phase 3.
Also maximize the time advantage that we have over the competition where we will disclose the target. We are now in a unique position with this target and with the molecules and we want to keep that. So we're going to maximize the investment in that program. It is really a unique program that could be step up in the way inflammatory diseases are being treated compared to the current treatments, including filgotinib, the JAK inhibitors So if that really come through, to full development, it's going to be a very expensive program for us, the data also for Gilead, of course, but also a great opportunity to capture market share in this large market
Perfect. That's very helpful. Thanks for taking my questions.
Thank you. And our next question comes from Geoffrey Porges with SVB Leerink. Your line is now open.
Thank you very much for taking the question. Congratulations on the collaboration. There haven't been any CFOs on the call, but I hope they're in the room. I'm wondering if you could just tell us when the upfront payment will be recognized? And when you put a forward out to Gilead, Is there any sense that that's going to be gated over a period of time or the all in closing of the transaction?
And then how long is the warrant outstanding for and presumably, Dan, that's at the cart for the equity list. Prices requiring the equity, but just wondering how long that will be, underpinning to pull up against the stock?
Well, I feel it's in the room. So, we'll introduce him here. I achieve operating and Chief Financial Officer.
Hi, Geoff. Thanks for the question and happy to answer that. So in terms of recognition, this will not be recognized all outflow to actually be largely spread out over the 10 year periods. Because clearly there's a commitment from the company to invest in the programs that we're running. From an accounting point of view, we'll see that as a as a recognition over time, there might be a bonus at the 1st year for the license that is applicable to 16 90, but otherwise it's going to be spread out.
Over the 10 year periods. And on the warrants, if I take that question immediately as well, there's actually 2 warrants, one to get to a level of 25% share holding a 1 to a level of 29.9 percent shareholding. The first one is at the same strike price as the current equity issuance, so around 1,000,000 and valid for 1 year. The second one is valid for the entire terminal collaboration and has a strike price, which is going to be based on the future EVAP. Plus 20% premium.
Right.
Jeff, this is Sanford. The upfront payment, would be expensed So it would go through GAAP accounting. And then for non GAAP purposes, it would be included.
Okay. Thanks so much.
Thank you. And our next question comes from Alethia Young with Cantor Fitzgerald. Your line is now open.
Hey guys, thanks for taking my question and congrats on the deal this afternoon. I just wanted to ask maybe if you've got a big picture R and D question, when you think about the kind of deal and the history of Golapagos, the novel targets, do you think Your INI goal is to be kind of 1st in class with molecules or in different kind of things like that? Are you looking also to kind of diversify and go after some later stage more well known targets as well? Thanks.
Thanks, Alethia. Yes, I think it's absolutely a combination of both. I mean, I think we've seen in And Gilead's pass also a combination of both. So, but the important thing is that we want to be either 1st in class or best in class. So, I think, The great thing about the Galapo Growth Agreement is they're really generally going after 1st in class.
Whereas, we want to do that, but we also think there are plenty of opportunities still to be best in class with our world leading chemistry expertise, our ability to target things differently than we target best, and to make, still a transform, transformational difference on standard of care. But do that also by pursuing no targets. So, we'll continue to have a combination of both. And Alethia, as I go throughout second half of this year, I'll be speaking more about my insights into the overall Gilead strategy and giving you even more color to that where we feel we would best be placed in terms of our strategy for the future. So more on that later in the year.
Thank you. And our next question comes from Patrick Trucchio with Berenberg Capital.
Collaboration. My question is regarding the filgotinib collaboration, specifically the sharing of future global development costs evenly versus the prior arrangement where the split was eightytwenty. Is there anything to interpret here beyond Galapagos contribute a bit more to the program For example, as a program costing or expected to cost more than originally expected or are advanced studies into more indications, than those you're already aware of planned?
I think in general, yeah, the budget has grown. Because of the success of filgotinib in the various various diseases that's been tested. Phase III are being started for ankylosing spondylitis and psoriatica try this, which clearly carry a price tag is actually good news, right? The fact that the filgotinib is working beyond the IBD and RA. And the more readouts expected, Lupus this year.
And we got some other Phase 2 Phase 2 is running. So, yeah, the price deck has been going up, but I think the fact that we brought it to a fifty-fifty more to do because of the rest of the programs also are the fifty-fifty basis funding now. And what we also did as was explained in the press release and in the presentation is that we have a bigger commercial presence and more equal position in the countries that Galapagos is co marketing the molecule together with Gilead.
Yes, I just agree. It really was largely intended to harmonize the nature of the deal from both a commercial standpoint, providing Galapagos for the ability to accelerate their commercial presence in Europe at the same time then harmonizing the developments, cost split, with Filgotinib with what will be all the other programs in the agreement. Part of what owner and I and the teams wanted to establish and I think it's is to try to make this it is a complex deal, but actually it's quite simple at the end of the day in terms of the terms for new programs that come into it. So, every new clinical program has the same opt in now after the ones that we've carved out already and spoken about $150,000,000 opt in. They all have the fifty-fifty global development costs.
They all have the Europe split versus rest of world split. And I think that's really helpful when you want 2 organizations to work well together that they can feel uninhibited. They understand they should do the best things for science and patients in bringing things forward and they don't have to get lost in the complexity of a deal, moving forward. So that was also contemplated to try to keep this simple and keep up pragmatic so that we can really focus on doing what's right between the two organizations.
Thank you. And our next question comes from Christopher Marotta Nomura. Your line is now open.
Hi, this is Jackson Harvey on for Christopher. Congrats on the deal. I just wanted to clarify. I'm sorry if this was mentioned earlier. I came on a little bit late, but in terms of the IPF drug.
Has all the data from the phase 3, is that still blind or have you been made aware of any additional data that may have influenced this collaboration?
No, everything is still winded and it's still early days. We believe it is understandable.
Got it. Okay. Thank you. Congratulations again.
Thanks.
Thank you. And our next question comes from Matthew Harrison with Morgan. Your line is now
Great. Good afternoon or good evening. Thanks for taking my question. I guess, Dan, what I wanted to ask was, can you just talk about how you think about this deal impacting near term Gilead versus long term Gilead and maybe some of the items that as you think about the business near term versus long term, were the key items for you. And then, Owen, maybe for that, can you just talk about what does additional sell in target discovery mean to you?
How does what does that actually translate to in terms of your productivity and your throughput there? Thanks.
Yes, sure, Matthew. So a couple of things on the nearer term, we've been in the nearer term. I mean, it allows us to be very aligned on the Gautner maximizing that opportunity in a way that allows us to jointly earn the costs and get ready for this model on how to commercial organizations. I think there's a benefit that helps accelerate getting to a pattern that will help us for future products. Also in the category of near term is clearly the IPF, the OA molecules, which are the most advanced you know, all of those these better than I do.
I see them as a very high potential medicines front risk levels as we've already articulated between ITF and OA. But it provides Gilead the option of enhancing its late stage portfolio, which is something that has been a key objective of ours and Gilead's and certainly mine coming in. And then longer term, you know, it just depends nearer and longer term, I guess, start to blend together at some point in time because I could see acceleration of a program like Toledo and others, fairly fast into the clinic and, depending on the results into different indications, but certainly from Toledo then back into the Galapagos portfolio and pipeline, here, of course, you know, knowing exactly which ones are going to be successful becomes more difficult identify as usual. Otherwise, you're not exploring really creative science, but one can imagine the productive R and D machine that is Galapagos now being enhanced by this capital infusion from Gilead. So whatever you've seen in the past terms of productivity, one could only expect for this capital infusion that is going to increase.
And therefore, the longer term for both Galapagos and for Gilead, I think we have more intelligent focused, 1st in class type shots on goals that start to help us in this decade long agreement. That's the way I I see it, Matthew. Over to you, Ronald. Yes.
It's a little early to give you a very concrete direction on where we're going to go with research. One area that we have started to invest in from a target discovery point of view is arthritis again because we're building up the expertise now anyway with 1972, it's an unmet metal meters hardly any competition out there we decided back to, setting up new cellular assays and starting to investigate those again. The human genome to identify notable targets. Those are, the first concrete steps that we'll spend more money on now. But there will be other disease indication that we can now go into because we got the funding.
And the nice thing with the technology platform is that it's so versatile that they're not limited to a specific disease. Of course, as a company, the moment we're seriously limited because of the expertise that we have in house. We're in a fibrosis information company. But with the capital and also the position of Galapagos now in the European market we're able to really attract best people. We also expand the disease focus and make that more broadly than we currently have.
And our next question comes from Mohit Bansal with Citigroup. Your line is now open.
Great. Thanks for taking my question and congrats on the Deepa both sides. If I could ask one question on osteoarthritis trial, which should see data within 1 year. Could you please help us understand what would be a good data a pre week trial, what would be good data for 12 months cartridge thickness changes? And where do you expect this to fit in the treatment paradigm given that this is an oral Thank you.
Well, the trial, the primary endpoint is indeed the protection of
Klutz So we'll measure with MRI, the card splits at day 1 and after 52 weeks. So that trial is well underway. We got a fully recruited. So, hopefully, we get the data in and is the molecule in good shape. There will be other endpoints like the Walmart score that we're looking for, where this ultimately will play is too early to We don't have any disease modifying data yet, but assuming that the data we have seen in patients where we saw a dramatic reduction in the breakdown of cartilage into a relevant Z score then this, of course, is a great opportunity to bring an oral work to this tremendous market where currently there's no disease modifying treatment available.
Got it.
Thank you.
Thank you.
And our next question comes
from Mall Kapadia with Bernstein.
Can I start on IPF, do you think it's possible with this cash infusion that we see, combination trials earlier? So I'm just thinking of 1690 in combination with 1205 a student like post futility analysis in that possibility? And then when would you expect 2, 3, 8,400,000,000 dollars, $3,400,000,000 dollars, $3,400,000,000 dollars, $3,000,000 $3,000,000 $4,000,000 $4,900,000,000 to also enter the clinic? And again with the cash infusion, any plans for combination trials earlier with these programs? Thank you.
It's a good question. First, we need to see if 1205 actually gives a
benefit to the patients.
If we get a readout of that trial, that's of course, it's a much smaller trial and shorter, so we'll get the data away before 16 90 reach out. If that data is compelling, then we might actually start a combination trial earlier. It's not currently in the planning, but we can always consider that. Depending on how it looks like. But the other molecules will move forward.
Do we exactly know when the trial when they go into phase 1? Disclosed? No, no, no,
it's not
disclosed yet. So I'll go there.
Great. Thanks very much.
Thank you. And our last question comes from Evan Sigerman with Credit Suisse. Your line is now open.
Hi, all. Thank you for fitting me in. One for Dan. So with this transaction, how much more capacity do you have to transact over the balance of 20.19 into 2020? Do expect to add more assets and inflammation or potentially in oncology with your recent appointment of a CEO to KITE.
And for Ono, with a healthy cash balance why now did you decide to sell potential future economics for your unpartnered assets?
Yes, thanks, Devin. So, I mean, suffice it to say we still have plenty of capacity. I mean, as you know, we'll be funding this deal on cash on hand, but as of the last quarter, we had roughly 30,000,000,000 reserves in cash and continue to generate cash. So I think we still have, plenty of strategic firepower put to work on things that we think will make the most sense. Look, we will be driven by the highest science in areas of expertise that that we have is the bottom line.
And I can't tell you whether the next one would be in inflammation or oncology or both. Or potentially another therapeutic area. But, we have our net out there. As I said before, I want to make everybody aware that, this is, this is one of a series of things, a very, very important one to enhance our portfolio, but we'll continue to look at others and continue to act on things that we think are really differentiated out there. And as I also said, towards the end of this year, I'll be articulating a little bit more about our overall strategy at Gilead and some of that will include our therapy area approach.
But inflammation, oncology, both areas were still very interested in addition to others. Thanks, Evan. Over to you.
Yes, a good question. Why now? We have a healthy pipeline and actually a healthy cash balance as well. We had over $1,000,000,000 in the bank. Before this year with Gillette.
For us, we have felt quite vulnerable over the years as an independent company and with the success of Filgotinib and, 1690 we believe that the vulnerability only increased to continue as an independent company. And we were looking for an anchor to make sure that the independence would be guaranteed long term, so we could make the right decisions independently for our research pipeline. And when the discussions with Gilead started, it was very compelling. As you have heard, they really respect and value our independence and the independence road of our research. So I believe it's the best of all world here for us to now get, substantially more capital than we could ever raise on the financial market we would have probably needed more money than the $1,000,000,000 anyway with the Toledo program moving forward.
So it's we now have to write cash. We can completely determine what we're going to do in research. Gilead has no no vote in any of the programs, disease areas. So we feel that we can execute on our plans to bring innovative products to the clinic. And then after phase 3, it's actually a very attractive attractive situation for shareholders as well because with new mode of actions, the risk is high, phase 3s are expensive.
If we share that with Gilead and clearly the risk of those late stage trials is also shared. So of course, we're giving up upside. We believe we negotiated a nice royalty clause here to get part of that opportunity back. So I think for shareholders, this is actually a good situation to see We now are an extremely well funded company with a lower risk profile than we had before, but still with fantastic opportunity with new mode of actions that move forward actually more than we had before because we're expecting to generate 1 to 2 additional proof of concept preclinical candidates per year. So we'll deliver more innovation to the market at a lower risk situation, which should be attractive.
Great. Thanks for taking the questions. Appreciate it.
Thank you. This does conclude the question and answer portion of today's call. Like to hand the program back to Emily.
Thank you, Daniel, and thank you all for joining us today. We appreciate your interest and look forward to updating you on our progress on future