How do you get acquired by Gilead? Forty Seven explains

(Gilead Sciences)

Just before Christmas and, critically, after announcing some positive data, Forty Seven sat down at Gilead Sciences' HQ with its C-suite to talk M&A.

Gilead liked what it saw, according to a recent Securities and Exchange Commission filing (PDF) that details the $4.9 billion March deal between the two, and a sneak peek at some limited data by Gilead saw it kick-start a buyout process that went on during the annual J.P. Morgan Healthcare Conference in San Francisco.

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It was also at this time that Gilead was asked the inevitable questions over whether it was doing a deal: Gilead’s CEO Daniel O’Day kept mum, but, unbeknownst to everyone at the conference, they were just weeks away from tying up the company's first biotech M&A deal since it bought Kite Pharma.

Forty Seven set up shop in 2015 to build on evidence of the role of CD47 in immune evasion that Irv Weissman (who got nearly $200 million out this deal) and his colleagues at Stanford University generated.

The evidence suggested drugging CD47 could neutralize a key mechanism that tumors use to avoid being attacked by the immune system, thereby unlocking opportunities for combination therapies in multiple indications.

In December last year, Forty Seven went some way toward validating its approach by revealing 50% or more of the myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML) patients who took its leading experimental drug magrolimab and Celgene’s Vidaza had a complete response.

The data triggered a surge in Forty Seven’s stock, which went from below $15 to above $40 in two weeks. This also saw Gilead come a-knocking.

Gilead’s accepted final bid valued Forty Seven at $95 a share. For most of its time on public markets, Forty Seven has traded below $20, dipping as low as $6 back in October.

The hefty premium bagged Gilead a drug that is being tested in a handful of indications. In addition to the phase 2 trials in MDS and AML, Forty Seven is testing magrolimab in patients with non-Hodgkin lymphoma, diffuse large B-cell lymphoma and three solid tumor types, namely colorectal, ovarian and bladder. 

The first offer seems to have come over lunch just ahead of Valentine’s Day: On Feb. 10, O’Day and Forty Seven’s CEO Mark McCamish “met at a restaurant in Palo Alto, California, to discuss Parent's interest in Forty Seven. Mr. O'Day and Dr. McCamish discussed their passion and vision for oncology and how the combination of Parent and Forty Seven could maximize the potential for magrolimab.

“During the meeting, Mr. O'Day expressed interest in a potential acquisition of Forty Seven and indicated that Parent would submit a written proposal later that day to all of the outstanding shares of Forty Seven.”

The first offer was nearly half what the Big Biotech would eventually spend: just $57.50 a share. Another meeting at another Californian restaurant saw no dice from Forty Seven: They wanted more. The biotech sent over a little more private clinical data they had access to in an attempt to persuade Gilead to open its wallet a little wider.

Calls were made, the offer went up $9 a share; this was rejected, so a few more bucks were added on. Then, a decisive moment: Someone spoke to Bloomberg, which reported on the deal. Cue its shares rocketing to near the buyout offer. Gilead had to respond, which, a few days later, they did, with an offer $77 a share.  

Close, but no cigar, Forty Seven said. At the eleventh hour, Gilead made its final, accepted offer and nabbed the biotech in early March. Playing hardball, having good cancer drug data, a good meal or two (and more than a little push from Bloomberg) seems to be the way forward with Gilead, which has already said it sees more bolt-on deals in its future.

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