gilead and the pharmasset deal: a case study

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KECK GRADUATE INSTITUTE Of Applied Life Sciences

KARTHIK CHANDRAN MARCUS DEMASTER PRATYUSHA GHOSHAL CANDICE LO

Gilead and the Pharmasset Deal The authors prepared this case under the supervision of Professor Joel West solely for the purposes of class discussion. All events and data contained in this case are true. However, some dramatic elements have been added that may not be factual. This case is not intended to illustrate effective or ineffective management, but to be an educational lesson in financial valuation and corporate strategy.

Dr. John F. Milligan took a sip of his coffee and looked out over the San Francisco Bay from his office. The morning hadn’t started off how he expected. It was October 12th, 2011, and he had just gotten off the phone with P. Schaefer Price.1 Price was the CEO of Pharmasset, a small New Jersey biotech company with just 82 employees but the potential to make a big splash in the market for Hepatitis C medications. 2

As the President and Chief Operating Officer of Gilead Sciences, Dr. Milligan and Gilead CEO John Martin had been heavily focused on negotiating an acquisition agreement with Pharmasset since June. The week prior, Milligan submitted Gilead’s most recent offer, the “October 7 Proposal,” which placed an acquisition bid of $125 per share. Gilead’s top management thought this offer was a “fair and full price” and expected to be able to close the deal soon.1

Price’s response was less than encouraging. The American Association for the Study of Liver Disease (AASLD) was holding its yearly conference November 4th-‐8th. Price reiterated to Milligan that Pharmasset would still want to wait to finalize a deal until after the conference where the company believed their latest clinical trial data would be positively received by investors. Price told Milligan their board would meet October 11th to discuss and Price would get back the following day.1

In his call to Milligan that morning, Price confirmed that Pharmasset’s Board was declining Gilead’s offer. But Price also delivered a new piece of news. Pharmasset would be inviting other parties to evaluate confidential data regarding its recent clinical trial results and submit their own acquisition proposals.1

Milligan was beginning to get a clear picture of Price’s skill at negotiation. Before joining Pharmasset as CEO in 2004, Price had worked as an Executive in Residence for Bay City Capital where he specialized in advising portfolio companies in investment opportunities. Prior to that, Price was President at PowderJect Vaccines. With Price at the helm,

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PowderJect grew to be the sixth largest vaccines company3 before an $888 million merger with Chiron Corporation in 2003.4

Throughout the negotiations, Price and Pharmasset kept their cards close. After months of meetings between the two parties, Gilead submitted an initial offer to Pharmasset of $100 per share on September 2nd. Pharmasset’s board rejected the offer, and Price gave his initial indication that Pharmasset intended to reveal promising clinical trial data to investors at the AASLD conference. However, Pharmasset invited Gilead to exclusively view this information under a confidentiality agreement prior to the conference. Following the review, they could submit another bid. After careful assessment of this data, Gilead’s board agreed to submit the new offer of $125 per share.1

The value of this bid was unprecedented. At a 56% premium over Pharmasset’s rapidly rising valuation,5 this new acquisition offer amounted to a price tag of $9.4 billion.6 While the data Gilead received from Pharmasset showed their leading compound, PSI-‐7977, could be the strongest non-‐interferon HCV drug candidate in the industry, Gilead had a number of promising HCV compounds in its own pipeline (Exhibit 2). Gilead’s shareholders may ask why the company didn’t simply invest in developing these drug candidates.

Milligan sat down to his desk. $9.4 billion was a lot of money, and Pharmasset was fishing for a larger offer? Milligan believed Gilead should make this deal, even if the final price tag exceeded $10 billion, but he wasn’t sure if he could convince the board. He began to think back over the past months of negotiations. They hadn’t gone as swiftly as hoped, but Milligan knew Pharmasset and the Hepatitis C market were a natural fit for Gilead. In his opinion, this acquisition could be the key to Gilead’s future growth strategy.7

Gilead and its Early Years

Gilead Sciences had long put its focus in antivirals. The company was founded in 1987 by two colleagues at Menlo Ventures, H. DuBose Montgomery and Michael Riordan. 8 Originally incorporated under the name, Oligogen9, the company started out around the idea of using antisense technology to develop antiviral oligonucleotides that shut down proteins responsible for viral replication.10

The technology never panned out for Gilead. However, the company did find success in developing nucleoside phosphates, small molecules that can also interfere with viral replication. Under the direction of John Martin, who Gilead first hired in 1990 as Vice President of Research & Development, the company quickly shifted its focus to these compounds.10

This proved to be the right choice for the company. The new class of compounds was the basis for Gilead’s first commercial drug, Vistide. Used for the treatment of cytomegalovirus (CMV), Vistide was approved in 1996, the same year Martin was appointed CEO.10 From there, Martin continued to guide Gilead through a series of fruitful acquisitions and product development campaigns. By 2011, Gilead had grown to 4500 employees11 and nearly $8

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billion in annual sales (Exhibit 3). Tina Dameron, senior director of Human Resources, described the culture of the company.

“There’s no standstill at Gilead. We’re always moving full speed ahead to the next product or deliverable, meeting the next milestone, and asking ourselves how we’re going to do it with speed and flexibility, while making sure that we’re doing everything in the right way, in full compliance with regulations.”

Dameron joined Gilead in July of 1999,12 when the company acquired her former employer, NeXstar Pharmaceuticals, Inc. of Boulder, Colorado. Through the acquisition, Gilead gained revenues from NeXstar’s commercial products, Ambisome and Daunoxome.13

Ambisome is an injectable liposomal formulation of amphotericin B approved in Europe in 1990 for the treatment of serious fungal infections and by the US Food and Drug Administration (FDA) in 2000 for the treatment of cryptococcal meningitis in HIV patients.14 Daunoxome is an injectable liposomal formulation of daunorubicin citrate approved by the FDA in 1996 as a first-‐line therapy for Kaposi’s sarcoma.15

Along with a boosted product portfolio, the acquisition gave Gilead a proven distribution, sales, and marketing presence in Europe and Australia. NeXstar’s experience in the cancer and HIV markets would also benefit Gilead for the future.13

Later in 1999, the FDA awarded marketing approval of Tamiflu to Roche, which co-‐developed the drug with Gilead. A treatment for all common strains of influenza A and B, Tamiflu garnered over 30% of the market for influenza antivirals in its first year16 and rose to 75% in 2009.17 In 2005, Gilead won a court settlement with Roche that raised the mixed royalty rate of Tamiflu from 7%-‐20% to 14%-‐22%.18 This settlement was especially beneficial to Gilead in the winter of 2009-‐2010 as fear of a swine flu pandemic caused governments around the world to stockpile the drug. Tamiflu royalties amounted to $246.3 million in the first quarter of 2010, a large gain over the $33.2 million of Q1 2009.19

HIV and Combination Therapies

In late 2001, the FDA awarded market approval for Gilead’s first HIV antiviral, Viread. Viread gained European approval for HIV treatment in 2002 and European and FDA approval for chronic hepatitis B in adults in 2008.14 At the end of the year, Gilead sold off its pipeline of three oncology compounds and Boulder, Colorado operations to OSI Pharmaceuticals for $200 million in cash and stock. This sale increased Gilead’s focus and commercial capabilities around its antiviral medicines.20

Gilead’s Hepsera franchise launched in mid-‐2002 after its FDA approval for the treatment of chronic Hepatitis B. The European Medicines Agency (EMA) approved Hepsera for the same indications the following year.14

In January, 2003, Gilead acquired Triangle Pharmaceuticals of Durham, North Carolina for $464 million. 21 Triangle’s pipeline included emtricitabine, which Gilead launched as

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Emtriva in mid-‐2003 for the treatment of HIV.14 The acquisition of the emtricitabine compound facilitated the start of Gilead’s successful strategy of developing antiviral combination therapies.

Truvada was the first of these therapies. FDA approved in mid-‐2004 and EMA approved in early 2005, Truvada combined Viread and Emtriva into a once-‐daily pill.14 This pill is often taken in combination with other anti-‐HIV medications like Reyataz and Norvir or Isentress.22

Gilead followed Truvada with the launch of Atripla in July, 2006, through a joint venture with Bristol-‐Myers Squibb. Atripla combined the active ingredients, efavirenz, emtricitabine, and tenofovir disoproxil fumarate from the respective commercial drugs, Sustiva, Emtriva, and Viread. Through this combination, Atripla became the first complete, once-‐daily oral treatment regimen for HIV/AIDS patients.23

Truvada and Atripla have been Gilead’s most successful products. By year end, 2011, Truvada had generated total sales of $13.5 billion since its launch in 2004. Launched two years later, Atripla surpassed Truvada in yearly sales by 2010, amassing revenues to date of $11.2 billion. By comparison, Gilead’s next top seller, Ambisome, has amassed just under $3 billion since it was acquired with NeXstar in 1996 (Exhibit 3).

Finally, in August, 2011, Gilead launched Complera, its latest combination HIV antiviral product. Complera combined the active ingredients of Truvada with rilpivirine. Rilpivirine was developed by Tibotec Pharmaceuticals and approved in May, 2011 as Edurant.24 Complera avoids many of the central nervous system side effects caused by the use of efavirenz in Atripla.25

However, Complera’s sales are expected to continue to be modest, pulling in just shy of $39 million in 2011. This is because Atripla is still the preferred one-‐pill-‐a-‐day treatment regimen, especially for patients with more than 100,000 copies/ml of HIV-‐1 RNA in their blood. In clinical trials, these patients were much more likely to experience virologic failure and resistance to Complera’s ripilvirine than Atripla’s efavirenz. Complera is also not recommended for patients under age 18.26

Gilead Pipeline

Quad Integrase STR is Gilead’s leading pipeline compound. “The Quad,” as it is commonly called, is a single-‐tablet per day HIV-‐1 regimen that combines Truvada’s active ingredients (emtricitabine and tenofovir disoproxil fumarate) with elvitegravir and cobicistat. By August, 2011, studies had established the Quad as “non-‐inferior” to Atripla. Patients on the Quad also exhibiting increased CD4 cell counts and lower viral load compared to patients on Atripla.27 Gilead filed a New Drug Application (NDA) to the FDA for marketing approval of the Quad in late October, predicting a commercial launch in the summer of 2012. Analysts on Wall Street forecast the drug to achieve sales of $1.53 billion by 2015.28

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Other phase 3 compounds in Gilead’s HIV/AIDS pipeline include the Quad’s elvitegravir and cobicistat as standalone medications.29 Elvitegravir is an HIV integrase inhibitor, meaning it blocks the virus’s ability to integrate into the DNA of human cells, thus interfering with HIV replication. Cobicistat is an inhibitor of cytochrome P450, which is an enzyme responsible for metabolizing pharmaceutical compounds in the body. By inhibiting this enzyme, cobicistat is able to increase the potency of a drug like elvitegravir. Cobicistat could potentially be combined in a treatment regimen with other commercially available HIV protease inhibitors.30

One of Gilead’s phase 2 HIV compounds could have significant implications for Gilead’s ability to remain a leader in HIV therapies. GS-‐7340 is a prodrug of the active ingredient in Viread, tenofovir. This allows the compound to be administered in smaller amounts, down to one-‐tenth of tenofovir’s dosage level. As a result, GS-‐7340 could further optimize safety and efficacy in patients, especially in older patients.31 Bill Lee, senior vice president of Research at Gilead Sciences explained.

“In patients and non-‐patients, renal function declines over time. As the renal function declines with age, you want to put less and less stress on the kidneys. With superior efficacy at one tenth the amount of tenofovir circulating in the system, we predict that GS-‐7340 will have a better safety profile in these patients.”32

According to CEO John Martin, one of Gilead’s top objectives is “to make our current products obsolete by coming up with new products.”32 The hope is that GS-‐7340 could enable Gilead to launch a new generation of patent-‐protected HIV therapies, such as Viread, Truvada, and Atripla, which previously contained tenofovir. Furthermore, an approval of the Quad in 2012 may allow Gilead to address the company’s forecasted revenue losses due to patent expirations (Exhibit 5).

Gilead also holds an already strong pipeline in the hepatitis B and C area (Exhibit 2). Four compounds with indications for hepatitis C and one compound for liver fibrosis are in phase 2. Three compounds are in phase 1 with indications for hepatitis B and hepatitis C.29

Furthermore, Gilead has two indications for ranolazine in phase 3 in the cardiovascular/metabolic area. Gilead has two compounds indicated for treatment of respiratory ailments. Aztreonam for inhalation solution is in phase 3 clinical trials for the treatment of bronchiectasis, while GS-‐6624 is in phase 1 trials for idiopathic pulmonary fibrosis. Finally, Gilead has three oncology compounds with six indications in varying phases of clinical trials.29

Hepatitis C

Disease Description

Hepatitis C is a disease leading to inflammation of the liver and is caused by the Hepatitis C virus (HCV)33. It is the most common blood borne infection in the United States.34 A member of the Flaviviridae family of viruses, there exist at least six genotypes of HCV (with fifteen recorded subtypes), of which genotype 1 is the most commonly found in the United

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States. Genotypes 2 and 3 have also been identified in the country, and have been found to respond better to treatment.33, 35 Healthcare professionals and others who come in contact with blood are at risk of contracting this disease. Others at risk are patients on long-‐term kidney dialysis, people that received blood transfusion before July 1992, or those born to a mother infected with Hepatitis C. Unprotected sexual contact or sharing of needles with an infected person may also lead to this disease33. HCV infected patients usually do not develop symptoms initially, other than mild clinical illness or fatigue.33, 35 In most cases, symptoms begin to appear after extensive damage and scarring of the liver, known as cirrhosis, leading to long-‐term infection. As the disease progresses, the symptoms include weakness and fatigue, loss of appetite, nausea, vomiting, abdominal pain, etc.33

History/Discovery of HCV

The race to isolate HCV dates back to the mid 1970s when Harvey J. Alter and his research team at the National Institutes of Health proved that hepatitis A or B viruses did not cause most of the post transfusion hepatitis cases. Michael Houghton, Qui-‐Lim Choo, and George Kuo at Chiron Corporation collaborated with Dr. D.W. Bradley from CDC to identify the unknown organism (then named NANBH or non-‐A-‐non-‐B hepatitis) with the help of a novel molecular cloning approach.36

In 1988, Alter confirmed the discovery of this virus by verifying its presence in various NANBH specimens. The virus was then renamed as the hepatitis C virus. Alter and Houghton were awarded with the Lasker Award for Clinical Medical Research in 2000 for their “pioneering work leading to the discovery of the virus that causes hepatitis C and the development of screening methods that reduced the risk of blood transfusion-‐associated hepatitis in the U.S. from 30% in 1970 to virtually zero in 2000.”36

Prevalence in the U.S. and Internationally

HCV infection is prevalent throughout the globe, and accounts for seventy five percent of all liver disease cases in the world.37 Epidemiological studies show that hepatitis C is the least prevalent in northern European countries like Great Britain, France and Germany and most prevalent in Southeast Asian countries like Malaysia, the Philippines, and India. Also, some African nations like Egypt showed extremely high prevalence of the disease. United States and Western Europe report approximately 150,000 new cases of Hepatitis C infections each year, and as much as 350,000 new cases occur in Japan annually.38 Overall, about 170 to 200 million people worldwide are known to be affected with HCV.39 Of those, three to five million infected individuals are in the United States.39 The country reports eight to ten thousand HCV infection related deaths every year. Hepatitis C is most commonly detected in individuals between the ages of 40 and 60.35

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Current treatments available

Although there is no vaccine for HCV as yet, medications are available for the treatment of the disease. These treatments are aimed at removing the virus from the patients’ blood in order to reduce the risks of liver cirrhosis. The most common treatment for HCV infections is a combination of twice daily doses of ribavirin capsules, and weekly injections of pegylated interferon alfa33. The duration of this treatment is approximately twenty four to forty eight weeks, and the entire treatment regime costs about $35,000.37 The year of 2011 witnessed the approval of two other HCV drugs, Incivek (Telaprevir) and Victrelis (Boceprevir), manufactured by Vertex Pharmaceuticals and Merck respectively.40

Merck’s drug for chronic hepatitis C infection, Victrelis, otherwise known in the trade as boceprevir, was approved by the FDA on May 13, 2011. Boceprevir is an HCV protease inhibitor, and prevents the virus from multiplying by binding to it. This drug, used in combination with peginterferon alfa and ribavirin, is intended to treat genotype 1 hepatitis C in adult patients. Although more effective than current standard therapy, a limitation of Victrelis is that it cannot be used as a monotherapy, and must be used in conjunction with regular doses of peginterferon alfa and ribavirin.40

Soon after the approval of Victrelis, on May 23, 2011, the FDA also approved another HCV drug, Vertex Pharmaceuticals’ Incivek (Telaprevir). The FDA’s website states that

“Incivek (Telaprevir) in combination with peginterferon alfa and ribavirin, is indicated for the treatment of genotype 1 chronic hepatitis C in adult patients with compensated liver disease, including cirrhosis, who are treatment-‐naïve (patients who have not received interferon-‐based drug therapy for their infection) or who have previously been treated with interferon-‐based treatment and not responded adequately, including prior null responders, partial responders, and relapsers.”

This drug has also not been able to replace the pegylated interferon alfa and ribavirin treatment, but must be use along with them.40

Value of the market

The HCV market was valued at $2 billion in 2007. The only available drugs in the market until May 2011 were Pegasys (highest revenue generation), Copegus, and Pegintron. However, with the introduction of novel therapies, cure rates are expected to increase, whereas the duration of therapy will decrease. The new drugs will also have better side effect profiles, dosing schedules, and routes of administration. In addition, the number of patients seeking Hepatitis C treatment is also likely to increase; thereby leading the market to grow to an estimated $10 -‐ $15 billion by 2017.

Vertex’s new drug Inciveck has grown in sales rapidly, quickly generating $400 million by the end of the third quarter of 2011. On the other hand, Merck’s Victrelis has generated just $31 million in sales in the same timeframe. Inciveck is expected to reach a sales volume of more than $4 billion by 2015. Many other drugs like Setrobuvir (ANA 598), RG-‐7128, TMC -‐

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435 and Danoprevir are in phase II and III trials. The fates of these drugs will be crucial factors in determining the dynamics of the future HCV market.41

Pharmasset, Inc.

Founding

Pharmasset, Inc., a clinical-‐stage pharmaceutical company, was founded in early 1998 with the mission of creating novel drugs to tackle viral infections. Dr. Raymond Schinazi and Dr. Dennis Liotta, scientists and professors at Emory University in Georgia, founded Pharmasset with the intention of researching three main disease indications that were the subject of their ongoing academic research: Hepatitis B Virus (HBV), Human Immunodeficiency Virus (HIV), and Hepatitis C Virus (HCV).42

Dr. Liotta, as director of the Emory Institute for Drug Discovery, became recognized as a pioneer in medicinal chemistry and discovered several viable drug candidates for HIV and HCV. Dr. Schinazi, on the other hand, focused his efforts on HIV and pediatric medicine. He started the first-‐ever HIV lab at Emory University, and is now recognized as a pre-‐eminent scholar in the field of HIV and hepatitis by the National Institutes of Health. 43

Together, the two professors had more than 60 years of viral disease drug research between them, and were already highly familiar with the process of commercializing drugs from academic settings. In 1996, Dr. Schinazi and Dr. Liotta were the primary founders of Triangle Pharmaceuticals, which went public within a year of its inception and was acquired by Gilead in 2001 for $482 million.43

This experience brought a familiarity to the process when Liotta and Schinazi set out to create Pharmasset. Despite this, the founding of Pharmasset posed a unique challenge. With the founding of the company in 1998, they intended to pool their expertise and create a company that could successfully broach the HBV, HCV, and HIV markets. Historically, for a startup to create viable drug candidates and make it through clinical trials in even one of these indications would be highly improbable. Yet fourteen years later, they had brought forward three strong drug candidates in the HCV space.43

Company Size and Structure

While Pharmasset had a promising nucleoside reverse transcriptase inhibitor (NRTI) for the treatment of HIV in phase II trials, the company’s focus primarily shifted to the research and development of oral therapeutics for HCV. The company stayed small throughout its lifespan, retaining just 82 employees by the time Gilead made its latest offer. Despite having fewer than 100 employees, Pharmasset had become a highly valued stock, with a market capitalization of nearly $6 billion. It maintained an academic feel, perhaps aided by the fact that it had no commercial products and placed a significant emphasis on extremely thorough research and development.42,47

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Drug Portfolio

In recent years, Pharmasset pared down its robust pipeline featuring seven drugs at various clinical stages into three promising HCV therapeutics: RG7128, PSI-‐7977, and PSI-‐938. Pharmasset’s least developed compound, RG7128, is in Phase 2 clinical trials. As of 2010, there were approximately 400 HCV positive participating in this phase. While data from this trial was scant, safety and efficacy studies as of early 2011 were seen by investors to be going well, especially in conjunction with the standard of care for patients with HCV over long durations. Interestingly, the drug was shown to be more efficacious alone rather than paired with standard interferon care, ridding patients of HCV within two weeks in some patients.44

In early 2011, Pharmasset received fast-‐track designation from the FDA for PSI-‐938, which was categorized as an oral guanosine nucleotide analog polymerase inhibitor of HCV. Pharmasset’s safety and potency study, titled “NUCLEAR”, demonstrated over 90% efficacy in patients with genotype 1 HCV. The FDA’s fast-‐track designation demonstrates improved tolerability, efficacy, and safety over the existing standard of care. Pharmasset’s NUCLEAR trial sufficiently demonstrated both a need for a highly efficacious HCV drug and the success of PSI-‐938 in this area.45

Pharmasset’s most advanced drug candidate, PSI-‐7977 had just entered Phase III trials46. The compound created a lot of press for the company, demonstrating incomparable levels of clinical success for the HCV field. Dr. Duane Nash, a leading biotech financial analyst for Wedbush Securities, stated that PSI-‐7977 was a drug that keeps showing “fairly astonishing data.” Indeed, Nash stated that among analysts, “it is assumed that Pharmasset will play a very large role in therapy for HCV for the future.”47

PSI-‐7977 was a drug in the same class of chemical compound as PSI-‐938, but it was designed to be used in combination with an already marketed antiviral known as ribavirin. In Phase II, the study named “ELECTRON” demonstrated a full cure rate for 10 out of 10 participants in the trial with genotypes 2 and 3 of the virus, while the parallel “PROTON” study demonstrated a 96% cure rate for patients with genotype 1.48

As 2011 progressed and Pharmasset began preparing to enter Phase III trials, buzz in the industry continued to grow around PSI-‐7977, especially due to its efficacy in trials without interferon. Interferon has a number of downsides in its use as an HCV treatment. The drug must be injected subcutaneously rather than administered orally. Furthermore, interferon causes a wide array of side effects including flu-‐like symptoms, neuropsychiatric effects, and cardiovascular effects.49 Upon announcing Pharmasset’s Phase II trials, Michelle Berrey, the company’s Chief Medical Officer, made the following claims.

“Interferon remains the greatest impediment to care for a majority of the millions of individuals living with HCV. PSI-‐7977 has demonstrated high cure rates, without viral resistance, and across HCV genotypes.” 50

This degree of confidence, bolstered by the hard data from Pharmasset’s Phase II trials, played directly to the hearts of financial analysts and investors.

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Gilead’s Pursuit of Pharmasset

Initial Proposal

The promise of Pharmasset’s pipeline was not lost on Gilead’s upper management. In late June of 2011, John Milligan and Pharmasset CEO P. Schaefer Price had an informal meeting near Pharmasset’s headquarters in New Jersey to chat about their companies. John Martin, who also attended the meeting, was particularly enthusiastic about recent advancements in HCV treatment and was very interested in Pharmasset’s product portfolio. During the ensuing two weeks, Gilead spent time to review Pharmasset’s pipeline based on any available public information.1

After Gilead contacted Barclays Capital and Merrill Lynch to act as financial advisors with respect to a possible acquisition of Pharmasset, Gilead’s board of directors spent the month of July reviewing their options. Of particular interest were the financial options available to Gilead if an acquisition was to take place. By July 21st, the board authorized Gilead to pursue a deal with Pharmasset.1

Three weeks later, after much hand-‐wringing and several discussions between Milligan, Price, and John Martin, the Gilead board was brought together for a special meeting. Extensive discussions ensued. The board was concerned about how Pharmasset’s pipeline would affect Gilead’s existing HCV pipeline, and could not come to a consensus on what the acquisition proposal might entail. To resolve these issues, a Transaction Committee on the board was created that would review strategic transactions under consideration by Gilead. The final offer price and any financial arrangements were subject to this committee’s approval.1

At the end of August 2011, the Transaction Committee met to discuss Pharmasset’s clinical candidates and a report compiled by Barclays that evaluated Pharmasset’s stock performance. The Committee ultimately decided on an acquisition proposal of $100 a share.1

On September 2nd, John Milligan, John Martin, and P. Schaefer Price met in New Jersey. Similar to their meeting in June, the conversation began informally. They discussed the antivirals market and their respective companies’ strategic approaches. But at the end of the meeting, Milligan expressed Gilead’s interest in an acquisition and provided Price with the formal proposal agreed upon by Gilead’s Transaction Committee one week earlier. The proposal dictated that Gilead would acquire all outstanding Pharmasset shares for $100 a share. This offer was approximately a 56% premium on Pharmasset’s closing stock price the day of the meeting.1

Soon after, Price informed Milligan that it would take two weeks to discuss and consult with the Pharmasset board. On September 16th, Price informed Milligan that while the board had not been seeking a sale of the company, they did take the proposal seriously and were strongly considering their options. At that time, however, they held that Gilead’s initial proposal did not offer enough value to Pharmasset’s shareholders. Price explained

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that Pharmasset was to deliver important information at the American Association for the Study of Liver Diseases (AASLD) conference in San Francisco that November. He offered early access to this information if Gilead would enter into a confidentiality agreement. Milligan did not give him a firm answer at the time, but suggested they discuss again prior to Gilead’s next board meeting in early October.1

Milligan then summoned a meeting of the Transaction Committee. He explained Price’s concerns with the offer, requesting for permission to negotiate the acquisition proposal and to enter into the confidentiality agreement with Pharmasset. Gilead management debated this at length, but finally agreed.1

Negotiations Hit a Roadblock

Milligan and the Committee spent the early days of October reviewing the information that was provided to them under the confidentiality agreement with Pharmasset. An evaluation of the given material and of the HCV market at large encouraged the Committee. On October 7th, the board of directors revised the acquisition proposal to indicate a purchase price of $125 a share, which indicated a 56% premium on Pharmasset’s closing share price the previous evening.1

Later on that same day, Milligan and Price talked at length on the phone. While the two did agree on the need to keep negotiations fruitful, amicable, and ongoing, Price and the Pharmasset board were confident that the information presented at AASLD in November would be positively received by investors. He told Milligan that Pharmasset would prefer to postpone negotiations until after the conference in November. Promising to talk to his board, Price told Milligan that he would bring new information on October 12th.1

Gilead’s Options

It was the 12th, and that information had come. For Milligan, the news that Pharmasset was seeking other bidders changed the dynamics of the negotiation completely. Who could these other bidders be? Bristol-‐Myers Squibb? Roche? Merck? Milligan knew these companies were eyeing the HCV market as well.51 He sat at his desk reflecting on the situation.

The AASLD conference was just around the corner. Investors would soon know what Gilead knew about Pharmasset’s latest clinical trial results. Share prices would rise, making an acquisition even costlier. If other companies in the acquisition race viewed the clinical trial results as well, a bidding war might heat up between interested parties before the conference. Should Gilead move aggressively to prevent this? A decision had to be made quickly, and there were several factors that needed to be closely studied.

The world market was projected to reach $11 billion in the next few years. Gilead had the chance to become a leader in this realm as long as they could best the current standard of care. The two drugs, Victrelis and Incivek, were performing well in the HCV market already. Vertex’s Incivek was able to capture 70% market share and $400 million in its first full quarter in 2011,52 even with its limitations in being used with an interferon. Both of these compounds had their downsides, leaving a gap for new drug treatments to fill.

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Gilead has a competitive pipeline in this area, with four compounds in phase 2 indicated for hepatitis C (Exhibit 2). However, these compounds have a number of drawbacks compared with PSI-‐7977.

GS-‐9256 and GS-‐9451 are NS3 protease inhibitors, which block viral activity at the translation and polyprotein processing as well as the RNA replication step (Exhibit 1). Protease inhibitors tend to exhibit strong antiviral efficacy. However, their high degree of specificity limits their effectiveness to only HCV genotype 1.53

GS-‐5885 is an NS5A inhibitor. This type of compound, like protease inhibitors, performs with high anti-‐viral efficacy. However, it is also specific to only HCV genotype 1 and 4.53

Finally, GS-‐9190 is a non-‐nucleoside NS5B polymerase inhibitor, which means the compound can block viral activity at the RNA replication step (Exhibit 1). Like all non-‐nucleoside inhibitors, though, GS-‐9190 tends to be mildly effective and only specific to HCV genotype 1.53

PSI-‐7977 is a nucleoside analogue polymerase inhibitor, which also act to block viral activity at the RNA replication step. Nucleoside inhibitors, however, tend to exhibit efficacy on genotypes 1, 2, and 3. PSI-‐7977’s strong safety and efficacy profile on each of these genotypes gave the drug the potential to dramatically simplify the treatment process.53

Based on the preliminary data Gilead had seen, PSI-‐7977 would easily reach phase 3 for the indications of HCV genotype 2 and 3. For genotype 1, it was less clear if the compound would advance to Phase 3, although this indication showed promising data as well. If approved for all indications, analysts were projecting PSI-‐7977 could reach $3.6 billion in peak sales by 2018,54 signifying a potential for high returns up until its patent expiration in 2029.55

Pharmasset had two other pipeline candidates in HCV, RG-‐7128 and PSI-‐938, which could be of value to Gilead. RG7128 was already in Phase 2 clinical trials via a partnership with Roche. Results had been promising thus far, with strong efficacy data as a standalone treatment. PSI-‐938 had seen success so far and received fast-‐track designation from the FDA in the beginning of the year. Overall, Pharmasset had over a decade of experience in HCV research, boasted a competitive pipeline, and appeared to bring significant value to Gilead’s pursuit of the HCV market.

Nevertheless, Milligan wondered if Gilead would be better off investing in research efforts to build its current HCV pipeline. Gilead also had strong pipeline candidates in other disease areas (Exhibit 2). Investing in these areas could be enough to to defer the large revenue losses Gilead would see from patent expirations in 2021 (Exhibit 5).

Milligan needed to set up a briefing with the board in the next few days, but first he had to build a case for his recommendation. He pondered Gilead’s options. First, Gilead could play it safe and decide to back away from the deal. Months spent on the negotiations would be wasted, but Milligan sensed an aversion to risk amongst members of the board. Second, Gilead could take a hard line, stick to its current bid of $125 a share, and wait to see if other companies make a bid. The final option would be to move aggressively with the

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negotiations, potentially raising the bid and pre-‐empting any other parties from making a higher offer. Each option had its tradeoffs. Milligan knew he needed to weigh each one carefully.

Case Questions

1. Determine the valuation of Pharmasset at the time of this case using the discounted cash flow method.

2. Is Pharmasset a good strategic fit for Gilead? Why or why not?

3. Discuss the pros and cons of Milligan’s three options. Which of these would you recommend and why?

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Exhibit 1: Targets for HCV Therapies

Source: Asselah, Tarik, and Patrick Marcellin. "Direct Acting Antivirals for the Treatment of Chronic Hepatitis C: One Pill a Day for Tomorrow." Liver International 32.SI (2012): 88-102. Print.

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Exhibit 2: Gilead Pipeline

Category Drug Indication Phase 1 Phase 2 Phase 3 HIV/AIDS

Quad I-‐STR HIV/AIDS Elvitegravir HIV/AIDS Cobicistat HIV/AIDS GS-‐7340 HIV/AIDS

Liver Disease

Mechanism of Action

Monoclonal Antibody GS-‐6624 Liver Fibrosis Polymerase Inhibitor GS-‐9190 Hepatitis C Protease Inhibitor GS-‐9256 Hepatitis C Protease Inhibitor GS-‐9451 Hepatitis C NS5A Inhibitor GS-‐5885 Hepatitis C TLR-‐7 agonist GS-‐9620 Hepatitis B/C Non-‐nucleoside

Inhibitor GS-‐9669 Hepatitis C

Nucleoside reverse transcriptase inhibitor

GS-‐7340 Hepatitis B

Cardiovascular/ Metabolic

Ranolazine Incomplete Revascularization Post-‐PCI

Ranolazine Type 2 Diabetes Respiratory

Aztreonam Bronchiectasis

GS-‐6624 Idiopathic

Pulmonary Fibrosis

Oncology/ Inflammation

GS-‐1101 Chronic Lymphocytic Leukemia

GS-‐1101 Indolent non-‐

Hodgkin’s Lymphoma

GS-‐6624 Colorectal Cancer GS-‐6624 Myelofibrosis GS-‐6624 Pancreatic Cancer GS-‐9973 Rheumatoid Arthritis

Source: http://www.gilead.com/pipeline

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Exhibit 3: Gilead Revenues by Product

Source: Gilead SEC Filings

(In Millions)

Approval/ Acquisition Date ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11

Vistide Jun, 1996 9 12 6 6 4 7 3 8 8 7 AmBisome July, 1999

129 141 182 186 198 212 221 223 263 290 299 306 330

DaunoXome July, 1999

5 4 4 3 3 2 1 Viread Nov, 2001

16 226 567 783 779 689 613 621 668 732 738

Hepsera Sep, 2002

7 51 113 187 231 303 341 272 201 145 Emtriva July, 2003

10 58 48 36 32 31 28 28 29

Truvada Aug, 2004

68 568 1,194 1,589 2,107 2,490 2,650 2,875 Atripla Jul, 2006

206 903 1,573 2,382 2,927 3,225

Letairis Jun, 2007

21 113 184 240 293 Ranexa Apr, 2009

131 240 320

Cayston Feb, 2010

48 78 Complera Aug, 2011

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Royalties

0 1 2 10 25 23 20 25 63 81 417 415 218 492 546 269

Contracts

25 27 24 19 21 20 23 6 19 22 21 29 33 50 14 14

Total Revenue

33 40 33 169 196 234 467 868 1,325 2,028 3,026 4,230 5,336 7,011 7,949 8,385

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Exhibit 4: Gilead Timeline

Source: Adapted from information at www.gilead.com

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Exhibit 5: Gilead Patent Cliff


Exhibit 6: Gilead Financial Performance by Quarter


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Exhibit 7: Key Players in Negotations

John C. Martin, PhD

Chairman and Chief Executive Officer, Gilead

John C. Martin, the current Chairman of the Board of Directors, and Chief Executive Officer of Gilead joined the company in 1990. Before joining Gilead, he had served Bristol Myers Squibb and Syntex Corporation in various leadership positions.

Dr. Martin obtained his PhD in organic chemistry from University of Chicago, and MBA in marketing from Golden Gate University. He is recipient of a number of awards including the prestigious Isbell Award from the American Chemical Society and the Gertrude B. Elion Award for Scientific Excellence from the International Society for Antiviral Research. Dr. Martin is currently an active member of the Board of Directors of the California Healthcare Institute and Gen-‐Probe Incorporated. In addition, he is also a trustee member at the University of Southern California.

John F. Milligan, PhD

President and Chief Operating Officer, Gilead

John F. Milligan joined Gilead Sciences Inc. in 1990 as a Research Scientist, and became Director of Project Management and Project Team Leader in 1996, for the Gilead Hoffman La-‐Roche collaboration for Tamiflu. He was appointed Chief Financial Officer in 2002, and was promoted to Chief Operating Officer in 2007. He became President a year later, in 2008.

Dr. Milligan obtained his Bachelor’s degree from Ohio Wesleyan University, and his Ph.D. in biochemistry from the University of Illinois. He was American Cancer Society post-‐doctoral fellow at University of California, San Francisco. He is currently a trustee at Ohio Wesleyan University, and member of the board of Biotechnology Industry Organization.

Source: Gilead website, Forbes.com

P. Schaefer Price

President, Chief Executive Officer and Director, Pharmasset Inc.

P. Schaefer Price joined Pharmasset in 2004, and is currently a member of the company’s board of director. He also holds the office of President, and Chief Executive Officer. Prior to joining Pharmasset, Mr. Price served various companies in the life sciences industry such as Bay City Capital, PowderJect Vaccines, and Berlex Biosciences. He received his Bachelor’s degree in molecular biology from University of Wisconsin Madison, and MBA from University of Minnesota.

Source: Forbes.com

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Exhibit 8: Example of Sales Curve for Pharmasset’s Drugs

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

% of Peak Sales

6.7 30.1 53.3 76.7 100 100 76.7 54 29 6.7 3.3 1 1 0.5 0.04

Source: Valuation in Life Sciences: A Practical Guide (third Edition), B. Bogdan and R, Villiger, Springer, 2010, pages 75, 78, 111

Exhibit 9: Pharmasset’s Costs as a Percentage of Sales

Category Percentage of Sales COGS 10% R&D (per drug) 5% Administrative 3% Sales & Marketing 35% Income Tax 40%

Source: Valuation in Life Sciences: A Practical Guide (third Edition), B. Bogdan and R, Villiger, Springer, 2010, pages 75, 78, 111

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Exhibit 10: A Sample of Precedent Acquisitions in the Life Science Industry

Date Acquisition Premium Over Closing Stock Price

May 2011 Cephalon/Teva 39%

September 2010 Crucell NV/J&J 58%

June 2010 Abraxis/Celgene 17%

June 2010 Talecris/Grifols 64%

May 2010 OSI/Astellas 55%

September 2009 Sepracor/Dainippon Sumitomo 28%

July 2009 Medarex, Inc./Bristol-‐Myers Squibb 90%

October 2008 ImClone/Eli Lilly 51%

July 2008 APP/Fresenius 29%

April 2008 Millennium/Takeda 53%

December 2007 MGI/Eisai 23%

November 2007 Pharmion/Celgene 50%

February 2007 New River/Shire 9.7%

November 2006 Kos/Abbot 56%

October 2006 ICOS/Eli Lilly 18%

October 2006 Myogen/Gilead 50%

December 2005 Abgenix/Amgen 54%

High Low Mean

Overview of Premiums to Unaffected Price 90.5% 9.7% 45.4%

Source: Pharmasset Schedule 14D-‐9 SEC Filing

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Exhibit 11: Pharmasset’s Projected Working Capital, Capital Expenditures, and WACC

Pharmasset, Inc.: Change in Working Capital & Capital Expenditures

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Change in Working Capital

Current Assets $170 $263 $407 $631 $976 $631 $407 $263 $170 $150 $140 $140 $130 $120 $100 Current Liabilities $16 $18 $21 $23 $26 $29 $26 $23 $21 $18 $16 $15 $14 $10 $8

Working Capital $154 $245 $387 $607 $950 $601 $381 $240 $149 $132 $124 $125 $116 $110 $92 Change in Working Capital ($1) $91 $142 $221 $343 ($349) ($220) ($141) ($91) ($18) ($8) $1 ($9) ($6) ($18)

Capital Expenditures

Net Fixed Assets $2 $3 $5 $6 $10 $20 $45 $100 $175 $300 $490 $790 $1,090 $1,390 $1,690 Capital Expenditures $2 $1 $2 $2 $4 $10 $25 $55 $75 $125 $190 $300 $300 $300 $300

Pharmasset’s WACC: 7%

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References: 1 Pharmasset Board. "Offer to Purchase All Outstanding Shares of Common Stock of Pharmasset, Inc. at $137 Net Per Share in Cash by Royal Merger Sub Inc. and Royal Merger Sub II Inc., Each, a Wholly-‐owned Subsidiary of Gilead Sciences, Inc., and Gilead Sciences, Inc." Letter to Shareholders of Pharmasset, Inc. 6 Dec. 2011. MS. 2 "Gilead Sciences to Buy Pharmasset in $11 Billion Biotech Deal." News Organizer. Web. 04 May 2012. <http://www.newsorganizer.com/article/gilead-‐sciences-‐to-‐buy-‐pharmas-‐255e62f7f06d7f112da0991b151fed85/>.

3 "P. Schaefer Price." Profile. Web. 03 Mar. 2012. <http://people.forbes.com/profile/p-‐schaefer-‐price/63477>.

4 "Breaking News on Pharmaceutical Technology." In-‐PharmaTechnologist.com. Web. 03 Mar. 2012. <http://www.in-‐pharmatechnologist.com/Industry-‐Drivers/Chiron-‐collars-‐PowderJect>.

5 "SCHEDULE 14D-‐9." U.S. Securities and Exchange Commission (Home Page). Web. 03 Mar. 2012. <http://sec.gov/Archives/edgar/data/1301081/000119312511331226/d265035dsc14d9.htm>.

6 "Pharmasset Announces Two-‐for-‐One Forward Stock Split." (NASDAQ:VRUS). 09 Aug. 2011. Web. 03 Mar. 2012. <http://investor.pharmasset.com/releasedetail.cfm?ReleaseID=597815>.

7 "Gilead Moves to Top Potential Rivals With $11 Billion Deal for Pharmasset."Bloomberg. Web. 04 May 2012. <http://www.bloomberg.com/news/2011-‐11-‐21/gilead-‐spends-‐11-‐billion-‐on-‐pharmasset-‐to-‐top-‐potential-‐bidders.html>.

8 Forbes. Forbes Magazine. Web. 03 Mar. 2012. <http://www.forbes.com/global/2003/1027/090_print.html>.

9 "GILEAD SCIENCES INC -‐ GILD Current Report Filing (8-‐K) EXHIBIT 3.1." Object Moved. Web. 03 Mar. 2012. <http://sec.edgar-‐online.com/gilead-‐sciences-‐inc/8-‐k-‐current-‐report-‐filing/2011/05/17/section10.aspx>.

10 "Stories." -‐ Life Sciences Foundation. Web. 03 Mar. 2012. <http://www.lifesciencesfoundation.org/stories-‐Balm_in_the_Pipeline:_Gilead_Sciences.html>.

11 "Advancing Therapeutics, Improving Lives." Corporate Overview: Gilead. Web. 27 Apr. 2012. <http://www.gilead.com/corporate_overview>.

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12 "Reflecting on Gilead's Twenty Years." Gilead Company News (4 Oct. 2007): 1-‐2. Print.

13 "Press Release Archive." Press Releases: Gilead. Web. 03 Mar. 2012. <http://www.gilead.com/pr_933211989>.

14 "January 2012." Corporate History Timeline: Gilead. Web. 03 Mar. 2012. <http://www.gilead.com/corporate_history>.

15 "Supplemental Content." National Center for Biotechnology Information. U.S. National Library of Medicine. Web. 03 Mar. 2012. <http://www.ncbi.nlm.nih.gov/pubmed/11363534>.


17 Maggon, Krishan; Guild (KPG), Knol Publishing. Influenza Antivirals Market 2009:Global Influenza ( 2009 H1N1 ) or Swine Flu Tamiflu and Relenza Market [Internet]. Version 89. Knol. 2011 Feb 11. Available from: http://knol.google.com/k/krishan-‐maggon/influenza-‐antivirals-‐market-‐2009/3fy5eowy8suq3/83. 18 Forbes. Forbes Magazine. Web. 03 Mar. 2012. <http://www.forbes.com/2005/11/16/gilead-‐settlement-‐pharmaceuticals-‐1116markets08.html>.

19 "Gilead Sciences Announces Record First Quarter 2010 Financial Results."Investors.gilead.com. Gilead Sciences, 20 Apr. 2010. Web. 5 Mar. 2012. <http://investors.gilead.com/phoenix.zhtml?c=69964&p=irol-‐newsarticle&id=1415271>.



22 "HIV and Its Treatment." Www.aidsinfo.nih.gov. National Institute of Health, Nov. 2011. Web. 5 Mar. 2012. <http://www.aidsinfo.nih.gov/ContentFiles/HIVandItsTreatment_cbrochure_en.pdf>.

23 "News & Events." FDA Approves the First Once-‐a Day Three-‐Drug Combination Tablet for Treatment of HIV-‐1. Web. 05 Mar. 2012. <http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/2006/ucm108689.htm>.

24 "U.S. Food and Drug Administration Approves Gilead Sciences' Complera(TM), a New Complete Once-‐Daily, Single-‐Tablet Regimen for HIV-‐1 Infection in Treatment-‐Naïve Adults." Investors.gilead.com. Gilead Sciences, 10 Aug. 2011. Web. 5 Mar. 2012. <http://investors.gilead.com/phoenix.zhtml?c=69964&p=irol-‐newsArticle&ID=1595280>.

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25 "AIDSmeds -‐ Top Stories : New Three-‐in-‐One HIV Med Complera Approved."AIDSmeds. Web. 05 Mar. 2012. <http://www.aidsmeds.com/articles/hiv_complera_gilead_1667_20970.shtml>.

26 "Recent News." Products: Gilead. Web. 05 Mar. 2012. <http://www.gilead.com/products>.


28 "Gilead Posts Higher Profit, Seeks Quad Approval." Www.reuters.com. 27 Oct. 2011. Web. 10 Mar. 2012. <http://www.reuters.com/article/2011/10/27/gilead-‐idUSN1E79Q1XV20111027>.

29 "Recent News." Pipeline: Gilead. Web. 10 Mar. 2012. <http://www.gilead.com/pipeline>.

30 "Data Show Gilead’s Quad Regimen for HIV Non-‐Inferior to Protease-‐Based Regimen at 48 Weeks in Second Pivotal Phase 3 Study." Investors.gilead.com. Gilead Sciences, Inc., 8 Mar. 2012. Web. 3 Apr. 2012. <http://investors.gilead.com/phoenix.zhtml?c=69964&p=irol-‐newsArticle&id=1671076>.

31 "Press Release Archive." Press Releases: Gilead. Web. 27 Apr. 2012. <http://www.gilead.com/pr_1652096>.

32 "GS-‐7340: The Next Generation of Tenofovir." Gilead Company News (26 Feb. 2012): 1-‐4. Print.

33 Board, A.D.A.M. Editorial. "Causes, Incidence, and Risk Factors." Hepatitis C. U.S. National Library of Medicine, 18 Nov. 0000. Web. 10 Apr. 2012. <http://www.ncbi.nlm.nih.gov/pubmedhealth/PMH0001329/>. 34 Centers for Disease Control and Prevention. Centers for Disease Control and Prevention, 14 Mar. 2011. Web. 10 Apr. 2012. <http://www.cdc.gov/hepatitis/HCV/index.htm>. 35 "MedicineNet.com." MedicineNet. Web. 10 Apr. 2012. <http://www.medicinenet.com/hepatitis_c/article.htm>.

36 "Hepatitis C History." THE MEDICAL NEWS. Web. 10 Apr. 2012. <http://www.news-‐medical.net/health/Hepatitis-‐C-‐History.aspx>.

37 Hepatitis C: Review of Current Treatments and Market Opportunities. Rep. DDO Limited, Nov. 2008. Web. 10 Apr. 2012. <http://drugdiscoveryopinion.com/downloads/HepatitisC.pdf>.

38 Krul, Kenneth G. "Global Hepatitis Strategies." Kalorama Information, Aug. 2007.

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39 "Worldwide Prevalence." Hepatitis C. Web. 10 Apr. 2012. <http://www.epidemic.org/theFacts/theEpidemic/worldPrevalence/>.

40 "For Consumers." Approval of Victrelis (boceprevir) a Direct Acting Antiviral Drug (DAA) to Treat Hepatitis C Virus (HCV). Web. 10 Apr. 2012. <http://www.fda.gov/ForConsumers/ByAudience/ForPatientAdvocates/ucm255413.htm>.

41 "Hepatitis C (HCV) Market Forecast & Drugs Pipeline Analysis to 2016."Marketresearch.com. 23 Jan. 2012. Web. <http://www.marketresearch.com/Renub-‐Research-‐v3619/Hepatitis-‐HCV-‐Forecast-‐Drugs-‐Pipeline-‐6773753/>. 42 "Pharmasset." Wikipedia. Wikimedia Foundation, 26 Feb. 2012. Web. 04 Mar. 2012. <http://en.wikipedia.org/wiki/Pharmasset>. 43 Kaufman, Rebecca. "Domino Effect: How One Big Success Spurs Many Others." TechJournal. Southeast BIO, 2 Mar. 2007. Web. 04 Mar. 2012. <http://www.techjournalsouth.com/2007/03/domino-‐effect-‐how-‐one-‐big-‐success-‐spurs-‐many-‐others/>.

44 "Pharmasset Announces Complete Enrollment of RG7128 Phase 2b Clinical Study." PR Newswire. 17 Feb. 2011. Web. 16 Mar. 2012. <http://www.prnewswire.com/news-‐releases/pharmasset-‐announces-‐complete-‐enrollment-‐of-‐rg7128-‐phase-‐2b-‐clinical-‐study-‐84625782.html>.

45 "PSI-‐938 Receives Fast Track Designation from the FDA for the Treatment of Chronic Hepatitis C Infection." PR Newswire. 24 Aug. 2011. Web. 16 Mar. 2012. <http://www.prnewswire.com/news-‐releases/psi-‐938-‐receives-‐fast-‐track-‐designation-‐from-‐the-‐fda-‐for-‐the-‐treatment-‐of-‐chronic-‐hepatitis-‐c-‐infection-‐128304453.html>.

46 "Pharmasset Initiates PSI-‐7977 Phase 3 Program for HCV." The Medical News. 1 Nov. 2011. Web. 29 Mar. 2012. <http://www.news-‐medical.net/news/20111101/Pharmasset-‐initiates-‐PSI-‐7977-‐Phase-‐3-‐program-‐for-‐HCV.aspx>.

47 "PSI-‐7977 The Most Advanced Hepatitis C Drug According To Dr. Duane Nash; Pharmasset (VRUS) Predicted To Play A Dominant Role In HCV Therapy." Yahoo! Finance. The Wall Street Transcript, 28 Nov. 2011. Web. 28 Mar. 2012. <http://finance.yahoo.com/news/PSI-‐7977-‐The-‐Most-‐Advanced-‐twst-‐2826811523.html>.

48 "Twelve Weeks Interferon-‐Free PSI-‐7977 Regimen Cures 100 Percent Hep C Genotype 2/3." AIDSmeds. American Association for the Study of Liver Diseases, 6 Nov. 2011. Web. 28 Mar. 2012. <http://www.aidsmeds.com/articles/psi7977_svr_hcv_1667_21405.shtml>.

49 "Hepatitis Central." Hepatitis C, Side Effects of Interferon Alpha in Viral Hepatitis. Web. 06 May 2012. <http://www.hepatitis-‐central.com/hcv/ifn/sideeffects.html>.

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50 "Pharmasset Announces the Initiation of an Interferon-‐Free Phase 3 Program with PSI-‐7977 for HCV." (NASDAQ:VRUS). 01 Nov. 2011. Web. 27 Apr. 2012. <http://investor.pharmasset.com/releasedetail.cfm?ReleaseID=619564>.

51 Krauskopf, Lewis, and Anand Basu. "Gilead Bets $11 Bln on Hepatitis in Pharmasset Deal." Www.reuters.com. 21 Nov. 2011. Web. 26 Apr. 2012. <http://www.reuters.com/article/2011/11/21/gilead-‐pharmasset-‐idUSNL4E7ML2020111121?type=companyNews>.

52 "Gilead's Pharmasset Acquisition Makes Vertex Look Cheap -‐ Seeking Alpha." Gilead's Pharmasset Acquisition Makes Vertex Look Cheap -‐ Seeking Alpha. Web. 06 May 2012. <http://seekingalpha.com/article/309720-‐gilead-‐s-‐pharmasset-‐acquisition-‐makes-‐vertex-‐look-‐cheap>.

53 Asselah, Tarik, and Patrick Marcellin. "Direct Acting Antivirals for the Treatment of Chronic Hepatitis C: One Pill a Day for Tomorrow." Liver International 32.SI (2012): 88-‐102. Print. 54 "Gilead Is Paying How Much For Pharmasset?" // Pharmalot. Web. 05 May 2012. <http://www.pharmalot.com/2011/11/gilead-‐is-‐paying-‐how-‐much-‐for-‐pharmasset/>.

55 "Pharmasset Announces Issuance of U.S. Patent for PSI-‐7977." (NASDAQ:VRUS). 22 June 2011. Web. 05 May 2012. <http://investor.pharmasset.com/releasedetail.cfm?ReleaseID=586664>.

gilead and the pharmasset deal: a case study

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