London: Human Genome Sciences Inc said it had rejected an unsolicited bid worth around $2.6 billion from long-time partner GlaxoSmithKline, marking a new takeover battle in a drugs sector that has been swept by M&A recently.
Human Genome said on Thursday the offer of $13 per share did not reflect the value inherent in the company. It has hired Goldman Sachs and Credit Suisse to assist with the exploration of strategic alternatives.
Its stock closed on Wednesday at $7.17, meaning GSK’s offer represented an 81 percent premium. But investors are betting that the company will fetch more and the shares more than doubled to $15.01 in pre-market Nasdaq trading.
With 198.5 million shares in issue, GSK’s bid would value Human Genome - which isolates genes and identifies their function in order to develop new drugs - at around $2.6 billion.
A spokeswoman for GSK, Britain’s biggest drugmaker, said the company had noted Human Genome’s announcement and would issue a statement shortly.
GSK has long been rumoured a potential acquirer of Human Genome, since the two companies already collaborate on a number of medicines, including Benlysta, the first new treatment for lupus in half a century.
Still, the decision to pull the trigger on a takeover attempt may surprise some investors, since GSK management has tended not to buy out partners it is working with in the past.
Navid Malik, an analyst at Cenkos Securities, said GSK knew Human Genome extremely well and must be seeing value beyond just Benlysta.
In addition to Benlysta, the two companies are also collaborating on an experimental heart drug called darapladib, in Phase III development, that analysts believe could be a multibillion-dollar-a-year seller - although it is also viewed as relatively high risk.
One healthcare banker said GSK’s offer looked generous and some Human Genome shareholders would probably accept it, if GSK launched a tender. But others will be holding out for more, encouraged by the clear appetite among Big Pharma for biotech assets.
Only on Wednesday, Illumina Inc saw off a $6.8 billion hostile bid from Roche Holding AG. That was the latest in a series of bid battles - some successful and some not - across the drugs industry recently.
Many drugmakers are seeking to do deals to bolster their pipelines of new medicines at a time when old products are going off patent. Buying Human Genome would give GSK full economic benefits of those medicines it currently partners with the US firm and is a sign of confidence on their commercial potential.