Human Genome: Anyone but GlaxoSmithKline?

In an attempt to avoid a hostile takeover by GSK, the company enters talks with several other major companies.

By Benzinga May 18, 2012 9:41AM

By Brett Callwood, Benzinga Staff Writer


Human Genome Sciences (HGSI) is doing whatever it can to avoid a hostile takeover by GlaxoSmithKline (GSK).


The company says it's talking to what it calls "major" pharmaceutical and biotechnology companies to keep GlaxoSmithKline away.


It's a fascinating period of time for HGSI, which claims to have entered into confidentiality agreements with a number of unnamed parties, and is currently providing opportunities to enter into due diligence reviews.


Last week, GSK made an initial $2.6 million tender offer after HGSI turned down a takeover approach.


GSK's offer for HGSI became public knowledge in April, after HGSI shares fell 76% from the company's peak in 2011. It is certainly a generous offer, no matter the noises coming out of HGSI, valuing the company at 11 times estimated 2012 sales.


"Shareholders should have the opportunity to decide for themselves on the merits of the offer," Glaxo said.


Also, the situation is mildly awkward due to the fact that the two companies are currently working together to develop two medicines. So the fact that HGSI is seemingly prepared to do anything to avoid entering into a deal with GSK only serves to exacerbate that awkwardness.


Despite HGSI's board voting unanimously in favor of turning down the GSK's $2.6 billion offer, Glaxo doesn't seem too keen to take no for an answer, stating on May 9 that it would be proceeding with the bid by offering $13 per share in cash directly to shareholders.


Human Genome does seem to want to proceed with a deal, but it will not be bullied, and analysts are predicting that a deal will get done in the region of $15 per share. While the company's attempts to find another buyer may be little more than a healthy game of hardball, GSK will do well to realize that it won't be getting Human Genome on the cheap.


"The rights plan will not prevent any offers or transactions that the board determines to be in the best interest of HGS and its stockholders," the company said Thursday in a separate statement related to the adoption of its short-term rights plan.


In response to GSK's offer, HGSI said in a statement, "The board believes that GSK acted to take advantage of the company's depressed stock price levels."


Both stocks traded lower Thursday.


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1Comment
May 19, 2012 10:14AM
avatar
To call this offer generous is ridiculous.  Most recent biotech deals have been in the neighborhood of 20 times sales.  No one owns biotech for the here and now.  Its always about the future.  HGSI's future is bright with or without Glaxo.  Do you really think GSK is doing this deal for the $200mm in synergistic savings with Benlysta, to escape the milestone payment in the order of another $200mm due HGSI in the near future?  This is an attempt to steal incredible future value in HGSI's pipeline in the billions of dollars, most notably Benlysta and darapladib and HGSI's 30% interest in this potential mega-blockbuster.  GSK just began a second 12000 person phase III trial of darapladib in the second year of its initial phase III trial of this heart-health drug.  Do you really think GSK would do this if it didn't have some knowledge of darapladib's efficacy?  Anyone familiar with GSK's stringent management of clinical phase drugs knows better.  $15 a share? Yeah, right. It better have a 2 in front of the offer if GSK wants to be taken seriously.
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