Galapagos NV (MECHELEN, Belgium), an integrated drug discovery company with preclinical programs in bone and joint diseases, announced that it has entered into a global collaboration agreement with Eli Lilly and Co to develop a novel class of medicines with potential to stimulate bone formation for the treatment of osteoarthritis (OA). The deal represents the third major alliance that Galapagos has entered to develop drugs to treat bone and joint diseases. Lilly's portfolio of drugs for OA includes Evista®, Forteo®, and arzoxifene.

Using its proprietary SilenceSelectâ„¢ and FLeXSelectâ„¢ platforms, Galapagos focuses its OA research programs on chondrocytes and has discovered and validated novel OA targets in cellular disease models that may play a key role in bone formation, advancing these into drug discovery. The agreement provides Lilly access to 12 of these proprietary OA targets and drug discovery programs for candidate drugs. According to Galapagos, modulation of these targets in human chondrocytes should lead to a net production of stable cartilage and should therefore be able to prevent and repair damage to this cartilage in patients. Galapagos will be responsible for the development of drug candidates potentially through to phase IIa clinical proof-of-concept. Under the terms of the agreement, Lilly will have the exclusive option to further develop and commercialize these candidates on a worldwide basis. Galapagos will have the right to further develop and commercialize compounds for which Lilly does not exercise its option.

Galapagos will receive a €3 million (~USD 4.3 million) upfront payment from Lilly. Contingent on achieving certain milestones, Galapagos is eligible to receive up to €88 million (~USD 126.5 million) in discovery, development, and regulatory milestones for each target program. Should a product be commercialized, Galapagos could receive up to €130 million (~USD 187 million) of one-time sales milestones and up to double-digit royalties on worldwide sales of alliance products.

In a separate announcement, Galapagos reported that it has reached significant milestones in its multiyear OA drug discovery alliance with GlaxoSmithKline, triggering a fourth milestone payment of €7.5 million (~USD 10.8 million) from GSK. Included in this payment is €5.9 (~USD 8.5 million) for initiating two drug discovery programs from GSK as a consequence of the expansion of their alliance in July. In June 2006, GSK's Center of Excellence for External Drug Discovery (CEEDD) and Galapagos initiated a program to deliver disease-modifying drugs with clinical proof-of-concept to GSK's global research and development organization. The aim of the agreement is for Galapagos to expand its portfolio of novel targets in the field of OA, to conduct compound screening, to identify tractable hits, to pursue a number of hit-to-lead programs, and to develop the resulting leads into candidate selection compounds through to a successful proof-of-concept in phase IIa clinical trials.

GSK has exclusive options to further develop and commercialize these compounds on a worldwide basis. Galapagos has the right to further develop and commercialize compounds for which GSK does not exercise its option. In July 2007, GSK made a €4.4 million (~USD 6.3 million) equity investment in Galapagos and the alliance was expanded to include up to two selected GSK targets worth up to €186 million (~USD 267.4 million) and up to double-digit royalties on global product sales. To date, Galapagos has received a total of €15.1 (~USD 21.7 million) in access fees and payments from GSK under the agreement.