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.

John Hood [file photo]

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On June 18, 2019, we initiated a confidential arbitration proceeding against Dr. Asa Abeliovich, our former consulting co-founder, related to alleged breaches of his consulting agreement and the improper use of our confidential information that he learned during the course of rendering services to us as our consulting Chief Scientific Officer/Chief Innovation Officer. We are in the early stage of this arbitration proceeding and are unable to assess or provide any assurances regarding its possible outcome.

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CEO Pascal Soriot via Getty Images

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