Human Genome rejects Glaxo bid, for now

GlaxoSmithKline P.L.C. said Thursday it regrets that Human Genome Sciences Inc. rejected its $2.59 billion takeover offer, which was made public earlier in the day.

HGS is based in Rockville, Md., and has been a partner with Glaxo for about 20 years in development of the lupus drug Benlysta and other pharmaceuticals. Its share price doubled after the Glaxo offer.

"We are disappointed that Human Genome Sciences has rejected our offer without discussion and are confident that our offer is in the best interest of shareholders of both companies," Glaxo chief executive officer Sir Andrew Witty said in a statement.

GSK is based in London but has facilities in Center City and the Philadelphia suburbs.

Early Thursday, HGS posted a statement on its website, explaining that the offer undervalued the company but that its board would listen to other offers and encouraged Glaxo to join that discussion.

The $13-per-share offer was an 81 percent premium to Wednesday's closing price of $7.17. Shares closed Thursday at $14.17, up 98 percent.

HGS sought more information from Glaxo about other products that the companies are developing in their partnership.

Besides Benlysta, HGS and Glaxo work together on darapladib, a treatment for cardiovascular disease, and albiglutide, a treatment for Type 2 diabetes. Both are in Phase 3 trials, which are the last step before approval is sought from regulatory agencies, such as the U.S. Food and Drug Administration.

Bernstein Research analyst Tim Anderson said in a note to clients that the price for this deal could rise or other companies could get involved, but that the appeal to others is limited.

"Both are conceivable, but it is likely only to be the former as any other non-GSK acquirer would only get half of the various assets, and in most cases acquiring companies want full control — not partial control — over what they are buying," Anderson wrote.

Witty has said previously that he did not plan on big buys, but that smaller acquisitions might make sense. In this case, Glaxo said it hopes to save $200 million by 2015 from the combined operations over what it incurs now through a partnership. The company still plans to spend $1 billion to $2 billion in buying back shares.

"The transaction is well-aligned with our long-term strategy of delivering sustainable growth, simplifying GSK's business model, enhancing R&D returns and deploying our capital with discipline," Witty said in the statement. "Through complete ownership, we can simplify and optimize R&D, commercial and manufacturing operations to advance these products most effectively and efficiently while securing the full potential long-term value of the assets."

Lazard and Morgan Stanley are acting as financial advisers to Glaxo, and Cleary, Gottlieb, Steen & Hamilton and Wachtell, Lipton, Rosen & Katz are providing legal advice. HGS is represented in negotiations by Goldman Sachs and Credit Suisse on the financing and Skadden, Arps, Slate, Meagher & Flom and DLA Piper on the legal issues.

Contact David Sell at 215-854-4506 or dsell@phillynews.com or Twitter @PhillyPharma. Read his PhillyPharma blog on philly.com.