Subsequent Event (Notes)

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events [Text Block]

SUBSEQUENT EVENT

In July 2019, we entered into an Option, License and Collaboration Agreement (the Collaboration Agreement) with Galapagos NV (Galapagos), pursuant to which the parties entered into a global collaboration that covers Galapagos’ current and future product portfolio (other than filgotinib, an investigational, selective JAK1 inhibitor for inflammatory disease indications, which is already subject to the parties’ existing collaborative arrangement). Upon the closing of the Collaboration Agreement, we will make an up-front license and option fee payment of $3.95 billion and an equity investment in Galapagos of approximately $1.1 billion.

Collaboration Agreement

Under the Collaboration Agreement, we will acquire rights to participate in the development and commercialization of GLPG-1690, Galapagos’ Phase 3 candidate for idiopathic pulmonary fibrosis, and receive option rights to participate in the development and commercialization of GLPG-1972, a Phase 2b candidate for osteoarthritis, and Galapagos’ other current and future clinical programs that have entered clinical development during the first ten years of the collaboration. We may exercise our option to acquire a license to a program after the receipt of a data package from a completed, qualifying Phase 2 study for such program (or, in certain circumstances, the first Phase 3 study).

If GLPG-1690 receives marketing approval in the United States, we will pay Galapagos $325 million as well as tiered royalties. If we exercise our option to acquire a license to the GLPG-1972 program after the completion of Galapagos’ ongoing Phase 2 trial, we will pay a $250 million option exercise fee. In addition, following opt-in, Galapagos would be eligible to receive up to $750 million in development, regulatory and commercial milestones on GLPG-1972 as well as tiered royalties. With respect to all other products in Galapagos’ current and future pipeline, if we exercise our option to acquire a license to a program, we will pay a $150 million option exercise fee per program. In addition, Galapagos will receive tiered royalties ranging from 20% to 24% on net sales of all Galapagos products optioned by us as part of the Collaboration Agreement (including GLPG-1690 and GLPG-1972), subject to customary royalty terms and adjustments.

If we exercise our option rights for a program, we will share development costs and mutually agreed commercialization costs equally with Galapagos, subject to the ability of either party to conduct certain independent research or development activities and independent commercial activities in their respective territories. Galapagos will retain exclusive rights to commercialize products included in the optioned program in the European Union, Iceland, Norway, Lichtenstein and Switzerland, and we will have exclusive commercialization rights for such products for all other countries globally, except for GLPG-1972 where we will only acquire the U.S. rights as they are the only rights not subject to a license agreement between Galapagos and a third party.

For each program we opt-in to, we are required to use commercially reasonable efforts to obtain marketing approval in the United States and Japan and to market, promote, sell or distribute one product for one indication in the United States and Japan. We may terminate the collaboration in its entirety or on a program-by-program and country-by-country basis with advance notice as well as following other customary termination events.

Subscription Agreement

In July 2019, we entered into a Subscription Agreement (the Subscription Agreement) with Galapagos pursuant to which we agreed to purchase, subject to certain conditions, the number of ordinary shares of Galapagos, no par value (the Subscription Shares), sufficient to bring our aggregate ownership percentage in Galapagos at the closing of the Subscription Agreement to 20.1% on a fully diluted basis. The price per subscription share is equal to €140.59. In addition, subject to and upon Galapagos’ shareholders’ approval, we will be issued and will subscribe to warrants that confer the right to subscribe for a number of new shares to be issued by Galapagos sufficient to bring the number of shares owned by us to 29.9% of the issued and outstanding shares. We are subject to a 10-year standstill restricting our ability to acquire voting securities of Galapagos exceeding more than 29.9% of the then issued and outstanding voting securities of Galapagos.

We agreed not to, without the prior consent of Galapagos, dispose of any equity securities of Galapagos prior to the earlier of the second anniversary of the closing of the Subscription Agreement and the termination of the Subscription Agreement (if the closing does not occur). During the period running from the date that is two years following the closing of the Subscription Agreement until the date that is five years following the closing of the Subscription Agreement, we shall not, without the prior

consent of Galapagos, dispose of any equity securities of Galapagos if after such disposal we would own less than 20.1% of the then issued and outstanding voting securities of Galapagos.

We will have the right to have two designees appointed to Galapagos’ board of directors (the Galapagos Board) following the closing of the Subscription Agreement and the approval of Galapagos’ shareholders. In the event that our designees are not approved by Galapagos’ shareholders, our designees will be invited to the Galapagos Board as observers.

The closing of the Collaboration Agreement and Subscription Agreement are subject to a number of closing conditions, including antitrust clearances required by the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder and receipt of merger control approval from the Austrian Federal Competition Authority.