After $5.8B deal, Bristol Myers' yearslong courtship of Mirati revealed in securities filing

Mirati Therapeutics was long rumored to be the target of a Big Pharma buyout before Bristol Myers Squibb put up $5.8 billion for the California-based cancer drug developer in early October. Now, Mirati has revealed the tortuous bargaining process that led up to the deal.

All the way back in October 2020, Mirati inked confidentiality agreements with BMS and two other “global pharmaceutical companies” dubbed Party A and Party B, Mirati said in a recent securities filing. While Mirati occasionally shared information on its business with the three companies, only BMS made buyout proposals.

BMS’ courtship of Mirati kicked off in earnest on March 23, 2022, when Giovanni Caforio, Bristol’s chief executive officer, made a pitch to Mirati’s former CEO David Meek to acquire all outstanding shares of the company for $125 a piece in cash. The closing price for Mirati shares on March 22, 2022, was $85.49 per share.

After meeting with its outside M&A counsel, Mirati determined BMS’ deal wasn’t sufficient to warrant a sale.

By April 5, 2022, BMS had raised its offer to $140 per Mirati share in cash—an offer that Mirati’s counsel still found too low.

At the same time, however, Mirati’s board determined that the company should provide BMS with more information on its business to obtain an improved proposal. This information came in the form of the available clinical data for adagrasib and Mirati’s other pipeline candidates. 

Around that time, Party A reached out to let Mirati know it was still interested in pursuing a potential tie-up with the company. Shortly thereafter, BMS said that it couldn’t revise its April 5 offer because it needed more clarity on the approval prospects of adagrasib.

Branded as Krazati, adagrasib eventually won FDA approval in December 2022 for previously treated KRAS G12C-mutated non-small cell lung cancer (NSCLC).

Ahead of that approval, though, Party A on May 27, 2022, communicated that it did not expect to launch a bid for Mirati at that time, also citing a need for more mature data on adagrasib.

Between October and December of 2022, both BMS and Party A remained in contact with Mirati, reviewing the latest data on adagrasib and continuing to weigh potential purchases of the company.

BMS altered its tack slightly in the wake of Krazati’s approval. On Dec. 21, the Big Pharma offered to co-commercialize Mirati’s KRAS inhibitor globally, excluding China. The deal would have seen Mirati potentially receive a $500 million upfront payment plus up to $485 million in regulatory milestones and $450 million in sales-based benchmarks. BMS’ proposal also contemplated that Mirati would issue 19.9% of its outstanding shares to Bristol at a 30% premium to market.

That said, Mirati’s board of directors did not view a global partnership for Krazati as an “attractive strategic option for maximizing” shareholder value, Mirati explained in its securities filing.

By March of this year, BMS and another company—Party B—continued to express interest in potentially buying out Mirati. Both Party B and Mirati wanted to see more mature data on the use of Krazati in first-line NSCLC.

Around this time, it appears Party A largely dropped out of the running, thanks to “recent internal strategic priorities,” Mirati said in its filing.

On May 5, BMS said it was pausing its purchase consideration, citing its internal view of Mirati’s valuation. The closing price of Mirati shares on May 5, 2023, was $45.96 per share.

Things took another downward turn for the cancer specialist on May 24, when Mirati revealed that its Sapphire study on sitravatinib, an investigational spectrumselective kinase inhibitor, missed the mark on its overall survival endpoint at the time of final analysis.

Shortly thereafter, the European Medicine Agency gave Krazati a thumbs down for marketing authorization in Europe, further tanking Mirati’s shares.

At this point, it was back to the drawing board for Mirati, with the company’s directors telling management to reach out to other companies for a potential global partnership on Krazati—a proposal the company had previously turned down.

The bidding process kicked back off on Aug. 27, 2023, when BMS’ Caforio contacted Mirati leadership with an offer to buy all outstanding shares of Mirati for $64 a pop versus the prior day’s share price of $37.02 per share.

Mirati’s board ultimately suggested it was willing to hear BMS out if the Big Pharma lifted its offer to $82 per share.

BMS responded by increasing its proposal to $66 per share, plus two $5-per-share Contingent Value Rights (CVRs).

Mirati again proposed a counteroffer, which BMS revised down to a bid of $68 per share upfront with no CVRs. At this point, BMS suggested it would be difficult for the company to improve its offer further.

The parties ultimately settled on a deal for BMS to acquire Mirati for $58 per share plus one $12 CVR tied to the FDA’s acceptance of Mirati’s MRTX1719 application.

BMS revealed it was buying Mirati for up to $5.8 billion on Sunday, Oct. 8. That price marked a 52% premium to a 30-day average of Mirati’s stock before a Bloomberg report of a potential takeover boosted the company’s market performance.

On top of the current equity value of $4.8 billion, the deal also includes a non-tradeable contingent value right. It promises to pay Mirati shareholders a total of $1 billion if the FDA accepts an application for the company’s pipeline drug MRTX1719 for NSCLC in patients who’ve received no more than two prior lines of therapy within seven years of deal closure.

BMS expects to close the transaction by the first half of next year.