Gilead Increased Bid 37% as Rivals Demurred on Acquisition of Pharmasset

Gilead Sciences Inc. (GILD) increased an offer to buy experimental hepatitis C drugmaker Pharmasset Inc (VRUS) several times before agreeing to pay $10.8 billion, as other potential buyers bowed out before making a bid, filings show.

Gilead, the world’s largest maker of HIV medicines, first offered to purchase Princeton, New Jersey-based Pharmasset for $100 a share on Sept. 2, a 56 percent premium, Pharmasset disclosed today in a filing with the Securities and Exchange Commission. That offer was deemed insufficient by Pharmasset, a company with 82 employees, no marketed products and a net loss of $91.2 million for the fiscal year ended Sept. 30.

“The board determined that Gilead could be in a position to improve its proposal if it were to have access to certain confidential company data and development plans,” Pharmasset said in the filing.

The data, released at the American Association for the Study of Liver Diseases in November, showed Pharmasset’s drug PSI-7977 cured all patients in a study. Based on that information, Foster City, California-based Gilead raised its offer on Oct. 7 to $125 a share. It is one of at least three hepatitis C drugs in development by Pharmasset, according to Bloomberg data.

At that point, Pharmasset decided to seek other bidders, contacting four companies including one that had made a rejected acquisition offer in September 2010, according to filing. The other unnamed potential bidders had dropped out of the process by Nov. 17, when Gilead increased its offer to $135 a share.

Days later, Gilead raised its bid to $137 a share, and Pharmasset agreed. The deal was officially announced on Nov. 21.

The purchase price was an 89 percent premium from Pharmasset’s closing price on Nov. 18. Gilead said the acquisition, its largest, will reduce the company’s earnings through 2014 and then add to profit.

Gilead fell less than 1 percent to $39.80 at the close in New York. The shares have gained 9.8 percent this year.

To contact the reporter on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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