How Gilead and Kite Pharma's Flirtation Became the Real Thing

How Gilead and Kite Pharma's Flirtation Became the Real Thing September 6, 2017
By Mark Terry, Breaking News Staff

The acquisition of Kite Pharma by Gilead Sciences is one of the most interesting deals of the year so far. There are several reasons for that. Investors have been urging Gilead to buy something—anything—for quite some time, so the company finally pulling the trigger is news. It also marks Gilead’s push from infectious diseases, notably its dominance in hepatitis C and HIV, into immuno-oncology (IO), notably CAR-T. CAR-T is the hot new area of IO, marked recently by the Aug. 30 approval of the first CAR-T therapy, Novartis ’ Kymriah.

With all that in mind, John Carroll of Endpoints News, examines the timeline and inside details of the Gilead-Kite acquisition.

He writes, “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.”

Between mid-June and late-August, the flirting had gotten serious and the company’s chief executives, Gilead’s John Milligan and Kite’s Arie Belldegrun, were involved, although Gilead made a lowball offer of $5 billion, which Kite rejected. Gilead raised its bid and Kite again rejected it.

Carroll, pulling from U.S. Securities and Exchange Commission (SEC) filings, pulls together a detailed timeline of the buildup to the deal. One of the key points was on July 12, the Novartis’ ODAC committee meeting with the U.S. Food and Drug Administration (FDA) for its CAR-T drug, CTL019, which had an almost unanimous vote for approval. Carroll writes, “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.’”

Kite’s R&D boss David Chang visited Gilead the next day and three days later, Gilead offered $127 in cash per share, which was a 51 percent premium over Kite’s 60-day weighted average. On July 19, Kite rejected the offer and reportedly took the company’s For-Sale sign down. On July 28, Gilead responded with a $160-per-share offer, which Kite still didn’t like, but agreed to discuss, still playing hard-to-get.

August 1 was clearly another turning point, because the companies’ top executives got together to not only talk about the deal, but to discuss Kite’s lead drug, marketing, manufacturing and the rest of Kite’s pipeline. Belldegrun apparently told Millegan that the offer was a disappointment and they needed to cough up something “compelling” to make it work. Millegan told him it would be hard to convince his board of that.

On August 8, Kite filed its Investigational New Drug (IND) application with FDA. And furthermore, the FDA didn’t require a committee review. This got the attention of everyone in the industry, because it was clear that there was a real race for CAR-T and that the FDA appeared set to make approvals. It definitely caught the attention of Millegan and Gilead’s executives and board. Ten days later, Millegan and John Martin, Gilead’s executive chairman, met Belldegrun in New York and offered $176 per share. Belldegrun asked for $180, which was an 82 percent premium.

Carroll writes, “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, a close to $12 billion in total.”

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