Glaxo finally succeeds in battle to acquire partner

GlaxoSmithKline is to acquire its long-time partner Human Genome Sciences for $3bn (£1.92bn), ending a three-month hostile pursuit of the US biotech company on friendly terms after sweetening its offer.

The purchase price excludes Human Genome’s cash and debt.

Human Genome was an early pioneer of gene-based drug discovery

Hide Ad
Hide Ad

The deal comes after weekend talks in which Britain’s biggest drugmaker agreed to raise its bid to $14.25 (£9.13) a share from $13 (£8.33) previously after Human Genome rejected the initial bid as inadequate.

The acquisition will secure GSK full rights to a recently launched drug for lupus and other new medicines.

Biotechnology companies are in increasing demand as big pharmaceutical companies seek new products to replace older medicines that are going off patent in the biggest wave of drug patent expiries in history.

The acquisition will secure GSK full rights to Benlysta, a recently-launched drug for lupus, a disease of the immune system.

Hide Ad
Hide Ad

GSK will also get full ownership of experimental medicines for diabetes and heart disease.

GSK said it expects to achieve cost savings of at least $200m (£128m) by 2015 and the deal will boost its core earnings in 2013.

It continues to expect to repurchase up to £2.5bn in shares in 2012.

“It looks like a great conclusion for Glaxo,” said Navid Malik, an industry analyst at Cenkos Securities.

Hide Ad
Hide Ad

“At $14.25 a share, it is marginally higher than they first pitched but lower than I expected them to have to pay.”

He sees the deal as a “nice to have” acquisition rather than a “need to have” for GSK.

GSK will now enjoy 100 per cent of the upside if the biotech firm’s drugs live up to their prom- ise.

GSK’s $112bn (£72bn) market value dwarves that of Human Genome. Human Genome, which rejected GSK’s $2.6bn (£1.7bn) offer in April as too low and launched an auction process, had come under pressure from investors to try and strike a deal with the British drugmaker in the absence of any alternative bids.

Hide Ad
Hide Ad

The US company set itself a July 16 deadline for finding higher bids, but interest has been limited because GSK, its long-time partner, already has marketing rights to its drugs.

US biotech company Celgene was at one stage considering whether to bid and was conducting due diligence, according to a separate source familiar with the matter.

But negative analyst and investor reaction when news of those discussions broke deterred the US group.

Last year, Human Genome and GSK won approval for Benlysta, the first new treatment for lupus in 50 years.

Hide Ad
Hide Ad

But the drug’s launch disappointed investors and Human Genome’s shares fell from a high above $25 (£16) to a low of $6.51 (£4.17) in December.

GSK made its offer a few months later, prompting Human Genome to launch an auction with the help of Credit Suisse and Goldman Sachs.

GSK was advised by Lazard and Morgan Stanley.

There have been a spate of acquisitions of biotech companies this year as large pharmaceutical companies seek to rebuild their pipelines.

Most recently, Bristol-Myers Squibb agreed to buy diabetes specialist Amylin Pharmaceuticals by sharing the $7bn (£4.5bn) cost of the deal with UK-based AstraZeneca.

Bristol-Myers and AstraZeneca are to collaborate on developing Amylin’s products once the buyout is completed.

Related topics: