A “poison pill” defense is not deterring GlaxoSmithKline (NYSE: GSK) in its battle to acquire Maryland-based Human Genome Sciences (NYSE: HGS).
In a statement issued after the market closed Thursday, GSK said it believes its $13 per share offer represents full value for HGS, its partner in developing new drug treatments.
HGS on Thursday announced its defensive move – a so-called “ppison pill” – which will dilute holdings if anyone attempts to acquire 15 percent or more of its stock without board approval. GSK’s offer closes on June 7.
GSK and Human Genome Sciences split sales of the injectable biotech drug Benlysta, which last year became the first new drug approved for lupus in 50 years. Sales so far have fallen short of expectations, with monthly revenue averaging $11 million, but some analysts believe the drug could grow into a billion-dollar blockbuster.
HGS said Thursday that Glaxo’s offer failed to capture the “significant upside potential” represented by Benlysta and the company’s pipeline of drugs including darapladib, for treatment of cardiovascular disease, and albiglutide, for type 2 diabetes.
GSK said it believes the earliest the first Phase III trial for darapladib can finish is in 2013 and the earliest the second trial can finish is sometime in 2014.
GlaxoSmithKline said it owns “the vast majority of the economics” associated with albiglutide and darapladib.
“Full and Fair Value”
“GSK believes its offer represents full and fair value and is in the best interests of both companies’ shareholders. It is well aligned to GSK’s long-term strategy of delivering sustainable growth, simplifying GSK’s business model, enhancing R&D returns and deploying capital with discipline. For HGS shareholders, it provides immediate liquidity at a substantial premium while eliminating further exposure to the significant execution risk inherent in HGS achieving its future growth objectives.
“GSK’s offer incorporates the value of Benlysta, darapladib, albiglutide and HGS’s pipeline and financial assets. It also reflects expected cost synergies of at least $200 million. Sales of Benlysta are in line with GSK’s expectations and in the US were $25.7m in the fourth quarter of 2011 and $31.2m in the first quarter of 2012. Both albiglutide and darapladib are in development and are being evaluated in blinded clinical studies. Of the two pivotal phase III trials underway for darapladib, GSK currently believes the earliest the first trial can finish is in 2013 and the earliest the second trial can finish is sometime in 2014.
“GSK owns the vast majority of the economics associated with each of albiglutide and darapladib.
“HGS is entitled to certain conditional milestones and a mid single digit royalty if albiglutide is successfully commercialized. For darapladib, if successfully developed, HGS is entitled to a 10 percent royalty and an option to co-promote and receive up to 20 percent profit share but will also need to make a proportionate contribution to investment for costs of launch and promotion.
GSK continues to believe that now is the appropriate time in the evolution of the GSK/HGS relationship for the companies to combine and that GSK is uniquely positioned to deliver on the opportunity of the combination.
“GSK will continue to proceed with its tender offer and has clearly stated its preference to complete a transaction on a friendly basis in a timely fashion. The tender offer will close on June 7th.”
HGS in Talks with Other Firm
Human Genome also said Thursday that it is in talks with “major” pharmaceutical and biotechnology companies about a potential transaction.
Human Genome entered into confidentiality agreements with certain parties and is providing those parties an opportunity to engage in due diligence reviews, the company said today in a statement. Its board of directors unanimously said shareholders should reject Glaxo’s “inadequate” $2.6 billion offer.
“The board believes that GSK acted to take advantage of the company’s depressed stock price levels,” the statement reads.
GSK began a hostile bid on May 9 for Human Genome.
“Our Board of Directors has concluded unanimously that the GSK offer is inadequate and does not reflect the value inherent in Human Genome Sciences,” said H. Thomas Watkins, the chief executive officer. “We remain very confident in the commercial and therapeutic potential of BENLYSTA. We believe it will ultimately transform the standard of care for SLE as the first drug designed to treat the underlying disease of SLE rather than individual symptoms. We also believe HGS holds great potential beyond BENLYSTA for SLE, including potential new indications for BENLYSTA and a number of emerging mid- and early-stage products in our internal pipeline. In the GSK clinical pipeline, we have substantial financial rights to darapladib, which if successful could address a potential population of more than 40 million patients in the U.S., and to albiglutide, a potential treatment for Type II diabetes, which affects 25 million patients in the U.S.
“We announced on April 19 that our Board has authorized the exploration of strategic alternatives in the best interests of stockholders, including a potential sale of the Company,” he added. “We invited GSK to participate in this process, which is well underway. Instead, GSK chose to commence an unsolicited tender offer at a price that undervalues our Company. The HGS Board of Directors has determined that the GSK offer is not in the best interests of our stockholders and recommends that they not tender shares to GSK.”
Human Genome also adopted a so-called “poison pill” shareholder rights plan that permits Human Genome stockholders, except an acquirer, to purchase common stock having a market value of twice the exercise price of the rights.
The plan will dilute holdings if anyone attempts to acquire 15 percent or more of Human Genome’s stock without board approval.
“The rights plan will not prevent any offers or transactions that the Board determines to be in the best interest of HGS and its stockholders,” the company said today in a separate statement.
GSK operates its U.S. headquarters in RTP.
(Bloomberg and The Associated Press contributed to this report.)