Shawshank, VA 4/19/12 (StreetBeat) -- The biotechnology company Human Genome Sciences (Nasdaq: HGSI) rejected an unsolicited $2.59 billion takeover bid on Thursday from the British drug maker GlaxoSmithKline (NYSE: GSK).Human Genome Sciences, based in Rockville, Md., said the offer did not reflect the value of the company, but added that it had started to explore its strategic options, including the potential sale of the business.
Glaxo has been asked to participate in this process, according to a statement from Human Genome Sciences. There are no assurances that a deal will eventually take place, the company added.
Under the terms of its deal, GlaxoSmithKline, based in London, offered $13 a share in cash to shareholders of Human Genome Sciences, an 81 percent premium on the company’s closing share price on Wednesday.
The proposed deal would be the fifth largest foreign takeover of a U.S. biotech company, according to the data provider S&P Capital IQ. The announcement also comes after the Swiss pharmaceutical giant Roche on Wednesday walked away from its failed $6.2 billion hostile takeover of Illumina, the provider of genetic analysis services.
“We are disappointed that Human Genome Sciences has rejected our offer without discussion,” Glaxo’s chief executive, Andrew Witty, said in a statement. “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,”
Analysts say Glaxo’s bid is an attempt to take advantage of the 75 percent drop in Human Genome Sciences’ share price over the last 12 months. The company reported a $381 million loss last year, following a $233 million loss in 2010. The losses were related to marketing and other administrative costs of its lupus drug Benlysta, according to a company statement.
Despite the initial rejection from Human Genome Sciences, Glaxo is well placed to acquire the biotech company. Both companies already split the profits of Benlysta, and are co-developing two other drugs to treat heart disease and diabetes, respectively.
The acquisition of Human Genome Sciences would allow Glaxo to pocket all the profits from the drugs that it is currently developing with the U.S. biotech company, Mark Clark, a Deutsche Bank analyst, told investors in a research note.
Glaxo said it expected roughly $200 million of cost savings by 2015, adding the proposed deal would add to its earnings in 2013.
Human Genome Sciences said on Thursday that it had asked for additional information regarding these drugs, darapladib and albiglutide, as it has a financial rights connected to them.
In a research note to investors, BMO Capital Markets said other large pharmaceutical and biotech companies might be interested in Human Genome Sciences, which could force potential bidders to increase their offers for the company.
The analysts added that Glaxo’s current takeover bid appeared opportunistic ahead of the release to market of the two drugs that are being co-developed by the companies.
In mid-afternoon trading in London, Glaxo’s share price had risen 1.1 percent, while in early morning trading in New York, stock in Human Genome Sciences had jumped more than 100 percent.
Human Genome Sciences has retained Goldman Sachs, Credit Suisse, and the law firms Skadden, Arps, Slate, Meagher & Flom and DLA Piper to help with its potential sale.
Lazard, Morgan Stanley and the law firms Cleary Gottlieb Steen & Hamilton and Wachtell, Lipton, Rosen & Katz are advising Glaxo.
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