M&A

Here’s the inside account of Gilead’s 11-week sprint to its $12B Kite buyout

What started as a casual dalliance between executives at Gilead and Kite in 2015 marked by some occasional flirtation over head-turning technology turned serious early this year, probably at JP Morgan, as two top dealmakers — Gilead’s Andrew Dickinson and Kite’s Helen Kim — decided to see if they should get serious about a union of the two biotechs.

By mid-June the two CEOs, John Milligan and Arie Belldegrun, got into the act. And over the next 11 weeks the overture turned passionate enough for Milligan and Gilead to up their initial offer by about $5 billion.

Arie Belldegrun and John Milligan


There was an initial bid, which was stiffly rebuffed. The comeback with a sweetened offer was also rejected, but as the numbers grew larger — so did the interest in a buyout as Gilead turned from a spectator in the final leg of one of the most closely-watched development races in biotech to a jockey in the final stretch.

It’s all spelled out in a new SEC filing that says a lot about how these big deals get done, and the valuations that game-changing technologies like CAR-T are fetching.

In a simplified blow-by-blow, here are the highlights:

  • Belldegrun and Milligan, chaperoned by Gilead COO Kevin Young, had their first sit down about a deal on June 12.
  • At the end of June there was a crucial gathering of Milligan with the team at Kite to discuss commercial and manufacturing plans. Kite had been fine tuning this presentation for more than a year, and based on Milligan’s warm comments later about the Santa Monica crew at Kite, he clearly hit it off with some of the key players.
  • The next key event was Novartis’ ODAC committee meeting at the FDA on July 12 for CTL019, which led to a near unanimous vote for an approval. Gilead execs watched every minute of it. It was a chance to size up an important potential rival. “Although Kite’s CAR-T therapy, axi-cel, was submitted for approval for a different indication, the outcome of the ODAC meeting was important to further inform Parent’s (Gilead’s) evaluation of Kite and CAR-T therapies.”
  • The very next day Kite R&D chief David Chang arrived at Gilead HQ to discuss his work.
  • It must have gone well. Three days later came the first offer: $127 per share in cash, a strong 51% premium over the 60-day weighted average.
  • July 19, the Kite board slammed the door on that. They not only said no to that price, they added the company was not for sale.
  • July 28. How about $160? Belldegrun said he was still disappointed, but he was also clearly not offended. How about another get-together in LA? Now, the company was clearly for sale.
  • On August 1 the top execs at both companies gathered to discuss not just the lead drug, marketing and manufacturing, but all the next-gen research work that Kite has underway.  Belldegrun to Milligan: That was a disappointing offer, if this is going to happen, you have to make it ‘compelling.’ Milligan to Belldegrun: That’s going to be a tough sale to the board.
  • On August 8, after meetings and followup discussions, Kite announced with some fanfare that they had filed their IND and that the FDA would not require a committee review. The news made a splash, and it didn’t escape the attention of Milligan or anyone at Gilead in the know.
  • August 18. Milligan and Gilead executive chairman John Martin met with Belldegrun in New York and informally offered $176 a share. Belldegrun countered quickly, asking for $180, an 82% premium.

Due diligence followed. Sullivan & Cromwell weighed in. Kite execs had a chance to talk about retaining Kite staff. And on August 28, the deal was done at $180 a share, or close to $12 billion in total.

Belldegrun’s share of that is about $600 million based only on his own stock.

There was never a mention of any other bidder or attempt to start a bidding war, as David Hung had done with great effect when he was directing the negotiations with Pfizer over the $14 billion Medivation deal.



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