GSK and HGS posture over price and value in M&A standoff

There's a certain kind of dance that goes on during any arms-length buyout negotiation in biotech. The target company highlights its incredible, fantastic potential while the would-be buyer paints itself as the only logical acquirer, who's already put a wonderful deal on the table.

Those are the roles being played out by GlaxoSmithKline ($GSK) and Human Genome Sciences ($HGSI), two companies which need no introduction.

Human Genome Sciences is wasting no opportunity when it comes to touting its underlying value. With GlaxoSmithKline waiting in the wings with a $13 per share offer, HGS CEO Tom Watkins wants to make it clear that the initial slow start in selling Benlysta does not mean that the drug will fail to live up to its blockbuster potential.

"The market has been overly focused on the short-term sales results of our company," Watkins told analysts, according to a report in Bloomberg. "This unsolicited offer does not reflect the value inherent in HGS." And even though Benlysta's Q1 sales numbers barely broke $31 million, he added, that is no cause for great concern. "We remain very confident in the blockbuster potential of Benlysta." 

HGS has been beating the bushes for a competing bid in the hopes of spurring an auction that can get the share price back up to where it was a year ago – more than twice what GSK has bid. But Glaxo is betting its unique partnership arrangement with HGS will keep other interested parties at bay.

"We have the rights and the operational control for the three main assets and we believe this is the right time to maximize value for both sets of shareholders," CEO Andrew Witty (photo) told analysts during his Q1 review, according to Reuters. And he added that he doesn't believe the company needs to add a sweetener to close the buyout.

HGS's assets include darapladib, a heart drug with blockbuster potential, as well as an experimental diabetes treatment. 

- here's the Bloomberg report
- get the Reuters story