Human Genome Sciences, Inc. (HGSI) recently announced July 16, 2012 as the date for the submission of definitive acquisition proposals. Human Genome sent a letter to GlaxoSmithKline (GSK) asking the company to participate, clearly mentioning that the board of directors of Human Genome has earlier rejected Glaxo's $13.00 per share offer as inadequate.
Human Genome also mentioned that the final bid terms of Glaxo along with the draft agreement will be provided to all the interested bidders. The company further added that the timing of the process may change and the process may not result in any successful transaction.
Earlier, in April 2012, Glaxo had made an offer to acquire Human Genome for $13 per share in cash. Glaxo then commenced a tender offer on May 10, 2012, which was initially set to expire on June 7, 2012. Glaxo had subsequently extended the tender period to June 29, 2012.
Meanwhile, Human Genome’s board of directors continued to advise its stockholders against Glaxo’s tender offer.
If Glaxo succeeds in acquiring Human Genome, it would gain full control over Benlysta (approved for treating systemic lupus erythematosus). Glaxo will also gain control over late-stage candidates such as darapladib (cardiovascular disease) and albiglutide (type II diabetes).
Our Take
Benlysta has significant potential, being the first lupus drug to hit the market in more than 50 years. It was approved in the US in March 2011, while EU approval came in July 2011. However, the product has performed below expectations since launch. Human Genome recorded sales of $31.2 million in the first quarter of 2012.
We believe the Glaxo takeover of Human Genome would be beneficial. Glaxo has been a long-time partner of the company. Apart from Benlysta, the companies are co-developing several pipeline products like darapladib (phase III), albiglutide (phase III) and rilapladib (phase II).
We currently have a Neutral recommendation on Human Genome, which carries a Zacks #3 Rank (Hold rating) in the short run.
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