After unsuccessfully struggling for three months to spur a bidding war, Human Genome Sciences threw in the towel today and accept a slightly sweetened offer from longtime partner GlaxoSmithKline. HGS signed on the dotted line for $14.25 a share, just $1.25 more than GSK ($GSK) offered back in April as it laid out its case for a buyout.
GSK immediately laid out plans to gain $200 million in cost "synergies" in the buyout, which nets not only Benlysta for lupus but also two late-stage drugs. The deal values HGS at about $3 billion, net of cash and debt, and is almost exactly twice what HGS stock had been worth when Glaxo stepped in with a hostile offer.
HGS, which developed the lupus drug Benlysta with GSK, had marked today as the deadline for competing bids. The deadline, though, was just the latest gambit from HGS, following a move to adopt a poison pill defense and its insistence that big companies were circling, ready to swoop. A few days ago Reuters even obliged with an article from an insider suggesting the Celgene ($CELG) could step up with a figure. But a number of analysts pooh-poohed the suggestion as a bit of auctioneering deception.
GSK and HGS, though, have been intertwined for years. In addition to Benlysta, GSK has been collaborating on the diabetes drug albiglutide as well as the promising late-stage heart drug darapladib. Those development ties evidently tangled up any chance HGS had for bringing a white knight to the bargaining table.
Back in April, when GlaxoSmithKline first offered $2.6 billion to buy out the company, the bid represented an 81% premium. But HGS's shares had been brutalized for months as the biotech company reported low sales for Benlysta, marking a tough commercialization transition for the Rockville, MD-based company. The buyout also marks one of several big biotech M&A deals this year, with Amylin in the mix. Companies with marketed products and late-stage programs like HGS offer a tantalizing target for Big Pharma companies looking to beef up sales ahead of generic competition. More companies may soon follow.
"This is a natural next step in our nearly 20-year relationship with HGS, and we look forward to working with HGS to integrate our businesses and to realizing the full value of Benlysta, albiglutide, and darapladib for the benefit of patients and our shareholders," noted GSK CEO Andrew Witty in a statement.