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Human Genome Sciences rejects $2.6bn bid from GlaxoSmithKline Human Genome Sciences rejects $2.6bn bid from GlaxoSmithKline
(about 3 hours later)
GlaxoSmithKline has swooped on its long-term partner Human Genome Sciences with a $2.6bn (£1.6bn) hostile offer, which was immediately rejected.GlaxoSmithKline has swooped on its long-term partner Human Genome Sciences with a $2.6bn (£1.6bn) hostile offer, which was immediately rejected.
Human Genome said the bid, worth $13 a share, did not reflect the inherent value of the company, and has hired Goldman Sachs and Credit Suisse to spearhead its defence. They have been tasked with exploring strategic alternatives including a sale of the company. GSK has been invited to participate in the process. Maryland-based Human Genome, which develops antibody drugs, said the bid, worth $13 a share in cash, did not reflect the inherent value of the company, and has hired Goldman Sachs and Credit Suisse to spearhead its defence. They have been tasked with exploring strategic alternatives including a sale of the company. GSK has been invited to participate in the process.
Shares in Human Genome closed at $7.17 on Wednesday, which means GSK's offer represents an 81% premium. In a sign that investors believe the company will be sold for more, the shares more than doubled to $15.01 in pre-market trading on Nasdaq. Shares in Human Genome closed at $7.17 on Wednesday, which means GSK's offer represents an 81% premium. In a sign that investors believe the company will be sold for more, the shares more than doubled to $14.37. A year ago, they were worth about $30.
GSK expects to achieve at least $200m in cost savings by 2015 and to boost earnings from next year. The two companies collaborate on a number of medicines including Benlysta, the first new treatment for lupus in half a century. The drug industry has seen a number of bid battles recently; on Wednesday, Roche gave up after US gene-sequencing company Illumina fought back to block the Swiss drugmaker's $6.8bn hostile bid.
Human Genome, which posted a $381m net loss last year, was founded in the 1990s by William Haseltine, a Harvard Aids researcher. An early experimental treatment failed: a spray to treat hard-to-heal sores based on a protein that the firm's researchers found by screening 10,000 different genes.
GSK and Human Genome have worked together for almost two decades on a number of medicines including Benlysta, the first new treatment for lupus in half a century and Human Genome's first product to market. Its sales growth has disappointed, however.
Human Genome has asked for more information from GSK about progress with the experimental drugs the two companies have worked on together, including a heart drug called darapladib – which analysts believe could achieve annual sales of up to $10bn although there is a high risk it may fail trials – and the diabetes treatment albiglutide. Both are in late-stage development.
Analysts were divided over whether there would be a bidding war, with Mark Clark at Deutsche Bank describing GSK as the "only logical bidder". For the British drugmaker, the main advantage of the acquisition would be removing its profit share and royalty obligations on Benlysta, darapladib and albiglutide, he said.
GSK said it expects to achieve at least $200m in cost savings by 2015 and to boost earnings from next year.
GSK's chief executive, Sir Andrew Witty, said he was disappointed that Human Genome had rejected his offer without discussion. "Having worked together with Human Genome Sciences for nearly 20 years, we believe there is clear strategic and financial logic to this combination for both companies and our respective shareholders – and that now is the appropriate time in the evolution of our relationship for our two companies to combine."GSK's chief executive, Sir Andrew Witty, said he was disappointed that Human Genome had rejected his offer without discussion. "Having worked together with Human Genome Sciences for nearly 20 years, we believe there is clear strategic and financial logic to this combination for both companies and our respective shareholders – and that now is the appropriate time in the evolution of our relationship for our two companies to combine."
He stressed that the deal met GSK's strict financial criteria for acquisitions, and sought to reassure his investors by saying that the company would buy back up to £2bn of shares this year, as part of its long-term share buyback programme. He stressed that the deal met GSK's strict financial criteria for acquisitions, and sought to reassure his investors by saying that the company would still buy back up to £2bn of shares this year as planned, as part of its long-term share buyback programme.
Human Genome has asked for more information from GSK about progress with the experimental drugs the two companies have worked on together, including a heart drug called darapladib – which is in late-stage development and could become a blockbuster medicine – and the diabetes treatment albiglutide. Mark Purcell at Barclays Capital said: "GSK management has spoken previously of the potential for bolt-on acquisitions, rather than major deals. A £1.6bn deal would fit into the bolt-on category in our view." He reckons the deal would not be financially material for GSK.