Galapagos and Gilead Sciences have agreed a ten-year “multi-billion dollar collaboration” to create what they say will be a global R&D leader based in Europe and engaged in developing and commercializing breakthrough therapies.

Market watchers said the R&D arrangement was an alternative to Gilead’s buying the Belgian company outright, as has been the California-based biotech’s hallmark approach- Following the transaction’s closing in the fourth quarter.

Gilead will increase its shareholding and also nominate two members to Galapagos' board of directors

The tie-up that the two companies bill as “one of the largest ever biotech deals in Europe“ foresees Gilead making a $3.95 billion upfront payment and an $1.1 billion equity Investment in Galapagos.

Gilead's investment will take the form of a subscription for new Galapagos shares at a price of €140.59 per share, representing a 20% premium to the company’s 30-day, volume-weighted average price. This will increase Gilead's stake from approximately 12.3% to 22% of the issued and outstanding shares.

Additionally, Galapagos said it intends to seek shareholder approval to issue two warrants allowing Gilead to further increase its ownership to up to 29.9%. Over the ten years of the pact, the US biotech will be restricted in its ability to acquire Galapagos or increase its stake beyond this cap.

Through the research pact, Gilead will gain access to the Belgian biotech’s differentiated drug discovery platform and current and future product pipeline outside Europe.

Galapagos currently has six molecules in clinical trials and more than 20 preclinical programs. The cash injection will provide it with the financial resources to expand and accelerate research and clinical programs.

The companies already have a research cooperate on filgotinib, a drug candidate being advanced for rheumatoid arthritis. Regulatory approval in the US and Europe is to be sought before the end of this year.

Galapagos' research base includes more than 500 scientists. Its platform also will retain European rights to current and future pipeline products.