Report: How savvy Pharmasset persuaded Gilead to boost its offer by 37%

Bloomberg has gathered at least a few pieces of the puzzle surrounding Gilead Science's ($GILD) winning $10.8 billion bid for the red-hot hep C drug developer Pharmasset ($VRUS). And anyone interested in learning how to get the most for a biotech company should pay close attention.

Pouring over SEC documents filed by the companies, reporter Ryan Flinn found that Pharmasset rejected Gilead's first offer, then went out to see if it could get a bidding war going by contacting four other potential buyers--including one that had already made an overture. By the time the dickering was done, Gilead had raised its offer by 37% and Pharmasset was satisfied that it had the best deal possible.

Gilead's first offer for the company was an even $100 a share, a 56% premium on a stock that had soared as Pharmasset unveiled positive data on its highly promising PSI-7977, writes Flynn. But Pharmasset's board felt that Gilead could do better. They then offered a Gilead an inside look at some of the latest information on their hep C program and Gilead went to $125. Then Pharmasset went looking for other bidders, Gilead went to $135 and closed the deal days later at $137--even though no other offer was put on the table.

Once the two companies closed the deal, of course, there was no end to the second-guessing as analysts pondered why Gilead would pay so much for a company with 82 employees and a track record of solid red ink as it explored a possible interferon-free approach to treating hepatitis C. But if the rest of the biotech industry could learn how to generate the same kind of passion, the potential rewards for investors would be enormous.

- here's the story from Bloomberg