Human Genome Sciences, Inc. (HGSI) once again rejected GlaxoSmithKline’s (GSK) $13 per share tender offer of acquiring all outstanding shares of the company. Human Genome’s board of directors concluded that Glaxo’s offer was inadequate and does not reflect the proper valuation of the company.
Glaxo has extended its tender offer to July 20, 2012. Notably, the date is after the expiration of Human Genome’s process bid deadline of July 16, 2012. Human Genome has been asking Glaxo to participate in the process bid, which the latter refused twice.
Previously, Human Genome announced July 16, 2012 as the date for the submission of definitive acquisition proposals. The company sent a letter to Glaxo asking the company to participate in the process. The letter clearly mentioned that the board of directors of Human Genome has earlier rejected the $13 per share offer as being inadequate.
Glaxo’s offer was first announced in April 2012. With Human Genome’s board rejecting the offer, Glaxo went ahead and commenced a tender offer on May 10, 2012, which was initially set to expire on June 7, 2012. Glaxo subsequently extended the tender period to June 29, 2012.
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. The company recorded sales of $31.2 million in the first quarter of 2012.
We believe Glaxo’s 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).
However, with less than 1% of Human Genome’s share being tendered so far, Glaxo will have to raise its offer price to be successful in its acquisition bid.
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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