Play-by-play: How Sanofi jacked up its offer twice to seal the $1.9B deal for Kadmon

With an existing transplant portfolio, Sanofi is naturally fit to be the new owner of Kadmon, developer of graft-versus-host disease (GVHD) drug Rezurock. And the French pharma spent less than three months to successfully convince the biotech of that and to find the right price.

From June 26 to Sept. 7, in what was a whirlwind of transaction discussions, Sanofi turned an original collaboration outreach into an outright acquisition, just as Kadmon attracted interest from two other potential buyers and managed to sell itself at a better price, a Kadmon securities filing (PDF) shows.

Sanofi made the first move. Matthieu Merlin, Sanofi’s head of business development and licensing at its general medicines business unit contacted Kadmon on June 26 for an introductory call to explore collaboration opportunities.

Merlin’s communication came on the heels of a similar request for an introduction by another company, coded Party A, to Kadmon’s financial service provider Moelis. Kadmon CEO Harlan Waksal and chief financial officer Steven Meehan held a conference call with representatives from Party A on July 8, where the two sides covered topics including potential benefits of a collaboration or other strategic transaction.

RELATED: On a dealmaking roll, Sanofi lays out $1.9B for Kadmon and its newly launched transplant drug

On July 12, Merlin talked to Kadmon’s general counsel Gregory Moss and expressed Sanofi’s interest in Rezurock. Little did they know at the time that the ROCK inhibitor would go on and snag a quick FDA go-ahead for third-line treatment of chronic GVHD just four days afterward and six weeks ahead of schedule.

On July 20, Merlin contacted Moss again. This time, he brought news that Sanofi may be interested in a larger transaction covering the entire company, including its immuno-oncology platform.

Sanofi dispatched its higher-level execs to their next—and in-person—meeting on July 27. Besides Merlin and Moss, Sanofi’s chief financial officer Jean-Baptiste de Chatillon, head of general medicines Olivier Charmeil and global head of mergers and acquisitions Loic Gonnet joined Kadmon’s Waksal and its senior vice president of research and nonclinical development Jeegar Patel. In a post-meeting dinner, the Sanofi execs confirmed its interest in acquiring Kadmon.

Meanwhile, Kadmon had entered a confidentiality agreement with standstill provisions with Party A, which during a meeting at its European headquarters on July 28, indicated that it was also interested in acquiring the New York biotech.

RELATED: Kadmon eyes $15.5K price tag and August debut for new transplant rejection med Rezurock

At this point, Kadmon remembered another potential bidder, Party B, which had previously also suggested that it was looking for deals once Rezurock cleared the FDA. Kadmon noted to Party B that it was now open to deal talks on July 29.

Following a Kadmon board meeting, Sanofi and Party A would learn on Aug. 4 that the biotech now had formal authorization to conduct full-on sale discussions. It was on that day that Sanofi made its first offer to buy Kadmon at $7 per share, or a 55% premium to its prior closing price.

Kadmon immediately rejected that term. Five days later, Sanofi sent over its second bid of $9 per Kadmon share alongside a request for exclusive negotiations. And Kadmon turned away that offer again but granted Sanofi further access to the company’s confidential information to conduct its due diligence.

In the meantime, discussions with Party A and Party B hit dead ends. On Aug. 18, Party A told Kadmon that it was no longer in the game thanks to Rezurock’s anticipated regulatory timeline in Europe. As for Party B, Kadmon’s board noted during a meeting on Aug. 23 that that third firm was significantly behind in conducting due diligence and that it wasn’t in a position to make an offer. In addition, none of the six other companies that Kadmon’s financial advisers reached out to expressed meaningful interest in a merger, according to the securities filing.

In between those time points, on Aug. 21, Sanofi came back with its third and “final proffer,” proposing to take over Kadmon at $9.5 apiece, which marked an 88% premium to the company’s previous closing price. Based on the progress with Party A and Party B, Kadmon entered the exclusivity agreement with Sanofi.

After several back-and-forth discussions around termination fees, Rezurock’s upstream licenses plus other deal terms, Kadmon and Sanofi finally shook hands on Sept. 7 before making the deal public the next day. The final deal had Sanofi paying $1.9 billion for Kadmon and newly approved Rezurock, which complements the French pharma's existing transplant meds, Mozobil and Thymoglobulin. Jefferies has projected Rezurock could reach global peak sales of $1 billion.