For years one of the most durable buyout rumors on the market was that GlaxoSmithKline ($GSK) was going to buy Human Genome Sciences. It made a lot of sense. The two companies were closely allied on a promising drug for lupus. There was a heart drug in the pipeline that they were paired on as well. And when HGS was flying high on the heels of the eventual Benlysta approval, the rumors went viral.
But despite all the hot insider stock tips, which helped drive HGS shares to some heady heights, nothing happened. At one point it seemed that when analysts had nothing better to do, they would serve up reheated scuttlebutt about a deal. And then, after HGS went on to disappoint investors with initial lackluster sales for Benlysta and its share price tanked, GSK finally moved. It made a bargain-basement offer and then just sat tight. HGS said no. Then hell no. The biotech brought in the investment bankers to see if they could stir up a counteroffer, with some encouraging hands offering help with rumors of a possible counteroffer coming from Celgene ($CELG).
Now, Celgene does throw its money around from time to time. But analysts quietly had a field day with that one, laughing over such a clumsy effort to shake down GSK and get it to bid against shadows. GSK ended up sweetening its offer for HGS just a bit and closed the deal at $3 billion. The kicker came some days later, when Reuters reported that Amgen ($AMGN) had actually offered $7 billion for the company back in the salad days of 2010, only to walk away after they were rejected. And there was no way that Amgen wanted back in when the company was clearly in play.
In many respects, the story around HGS's acquisition says a lot about buyout rumors. A lot of smoke can indicate that there really is a fire burning under the haze. It can also get in investors' eyes and completely obscure the reality of the situation. Timing is essential. And just because you may eventually be proved right doesn't mean you won't lose your shirt along the way.
This game is played by some very smart people. And by no means do all of them feel required to stick to the truth when stock profits are involved. Hidden agendas abound on Wall Street. And biotechs make good fodder when it comes to rumors, especially this year.
After the HGS buyout, Bristol-Myers Squibb's ($BMY) $2.5 billion Inhibitex deal, a $5.3 billion Bristol-Myers deal for Amylin and then AstraZeneca's $1.26 billion Ardea acquisition, the M&A rumor game turned red-hot. Add in the switch at the helm for AstraZeneca ($AZN), a pharma company that is inviting itself to every bargaining table it can find, and you have the right mix of hungry buyers and a crowd of biotechs which knows that for the right price, there's a deal to be made.
That deal slate offers a very clear idea of what fits into Big Pharma's sweet spot in 2012: targets that include either late-stage blockbuster candidates or some clearly defined new products on the market that can be had for $1 billion to $6 billion.
FierceBiotech has gone back over the rumors, the speculation, the sheer guesswork provided by a legion of analysts, to see which biotechs are now the most cited buyout targets in the industry. What follows is a short list of the most-rumored takeover targets.
Do not think for a second that all of these companies are going to fetch a premium in some heated auction. There may be a number of big buyers prowling the biotech industry right now. But there's just so much prey they can afford to bite into. -- John Carroll, Editor-in-Chief. Follow me on Twitter and LinkedIn.