Is Human Genome Science ( NASDAQ: HGSI ) really worth more than $2.6 billion? It is a question to be asked when time comes, but it may help to gain a stock more than 100% than yesterday's close as company has rejected $2.6 billion takeover bid from Glaxo Smithkline Plc.
Read below the news transcript:
Human Genome Sciences Inc. (HGSI) rejected an unsolicited offer from GlaxoSmithKline Plc (GSK), its partner on the lupus treatment Benlysta, to buy the U.S. company for about $2.59 billion.
The $13-a-share cash offer, which represents an 81 percent premium to yesterday’s closing stock price of $7.17, doesn’t reflect the company’s value, Rockville, Maryland-based Human Genome said today in a statement. The board is exploring alternatives including a potential sale of the company, and Glaxo has been invited to participate in that process, Human Genome said.
Glaxo is seeking to take advantage of a 76 percent slide in Human Genome shares from their 2011 peak. Sales growth for Benlysta, Human Genome’s first drug on the market, has disappointed investors, and the company may not become profitable for years. Human Genome is also collaborating with Glaxo on two other experimental drugs, darapladib to treat hardening of the arteries, and Syncria for diabetes and heart failure.
“It’s the potential of all three drugs” that’s appealing to Glaxo, said Tim Franklin, an analyst at MainFirst Bank AG in London. “I guess they’ve been watching and waiting. It’s going to be very difficult for Human Genome to argue for a higher price because obviously this is what the market thinks they’re worth.”
Human Genome more than doubled to $15 a share in trading before the Nasdaq Stock Market opened. Glaxo shares gained 1.3 percent to 1,460.50 pence at 11:43 a.m. in London. A spokeswoman for London-based Glaxo didn’t immediately return a call seeking comment.
First Drug
Benlysta, approved by by regulators in the U.S. and Europe last year, is Human Genome’s first drug to reach the market. The company lost $381 million last year on sales of $130.9 million. Analysts predict revenue will jump 79 percent this year to $234.4 million, based on the average of 19 estimates compiled by Bloomberg. The company will report its first annual profit in 2015, according to analysts surveyed by Bloomberg.
Glaxo’s offer values Human Genome at 11 times this year’s estimated sales.
SmithKline Beecham Plc, a predecessor company to Glaxo, entered into a collaboration agreement with Human Genome in May 1993, before the U.S. company’s initial public offering in December of that year.
Human Genome said it’s asked Glaxo for additional information on experimental treatments including darapladib, which is in the last of three stages of human studies usually needed for regulatory approval, and Syncria, also in late-stage testing. Syncria, also known as albiglutide, belongs to the same class of medicines as Novo Nordisk A/S (NOVOB)’s Victoza.
‘Very Promising’
The experimental diabetes therapy is a “very, very promising” new treatment, Glaxo Chief Executive Officer Andrew Witty said in February. “And we’ll see when the full data comes in before we can really articulate the full picture to you.”
“When you have so many projects together in late-stage development, it makes sense to want to integrate 100 percent of their value,” Eric Le Berrigaud, an analyst at Bryan, Garnier & Co. in Paris, said in a telephone interview. “It means Glaxo thinks these projects have a potential. Hard to say which project they are betting on the most.”
The U.S. biotechnology company has hired Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC as financial advisers and Skadden Arps Slate Meagher & Flom LLP and DLA Piper LLP as legal counsel.
No Assurance
“There can be no assurance that any transaction will occur,” Human Genome said. "HGS does not intend to discuss the status of its evaluation unless and until a specific transaction has been approved.’’
It’s unlikely any company other than Glaxo would want to bid, MainFirst’s Franklin said.
“There will be control provisions around Benlysta, darapladib and albiglutide that will protect GSK’s interests so it would not be worth anyone else bidding that price for the rest of the business,” he said.
French rival Sanofi and Switzerland’s Roche Holding AG also have made unsolicited offers for companies whose shares have fallen. Sanofi bought Genzyme Corp. for $20.1 billion last year after Genzyme’s stock declined following manufacturing woes. Roche yesterday abandoned its $6.7 billion offer for Illumina Inc. after the target company rejected the approach and refused to negotiate.
Read below the news transcript:
Human Genome Sciences Inc. (HGSI) rejected an unsolicited offer from GlaxoSmithKline Plc (GSK), its partner on the lupus treatment Benlysta, to buy the U.S. company for about $2.59 billion.
The $13-a-share cash offer, which represents an 81 percent premium to yesterday’s closing stock price of $7.17, doesn’t reflect the company’s value, Rockville, Maryland-based Human Genome said today in a statement. The board is exploring alternatives including a potential sale of the company, and Glaxo has been invited to participate in that process, Human Genome said.
Glaxo is seeking to take advantage of a 76 percent slide in Human Genome shares from their 2011 peak. Sales growth for Benlysta, Human Genome’s first drug on the market, has disappointed investors, and the company may not become profitable for years. Human Genome is also collaborating with Glaxo on two other experimental drugs, darapladib to treat hardening of the arteries, and Syncria for diabetes and heart failure.
“It’s the potential of all three drugs” that’s appealing to Glaxo, said Tim Franklin, an analyst at MainFirst Bank AG in London. “I guess they’ve been watching and waiting. It’s going to be very difficult for Human Genome to argue for a higher price because obviously this is what the market thinks they’re worth.”
Human Genome more than doubled to $15 a share in trading before the Nasdaq Stock Market opened. Glaxo shares gained 1.3 percent to 1,460.50 pence at 11:43 a.m. in London. A spokeswoman for London-based Glaxo didn’t immediately return a call seeking comment.
First Drug
Benlysta, approved by by regulators in the U.S. and Europe last year, is Human Genome’s first drug to reach the market. The company lost $381 million last year on sales of $130.9 million. Analysts predict revenue will jump 79 percent this year to $234.4 million, based on the average of 19 estimates compiled by Bloomberg. The company will report its first annual profit in 2015, according to analysts surveyed by Bloomberg.
Glaxo’s offer values Human Genome at 11 times this year’s estimated sales.
SmithKline Beecham Plc, a predecessor company to Glaxo, entered into a collaboration agreement with Human Genome in May 1993, before the U.S. company’s initial public offering in December of that year.
Human Genome said it’s asked Glaxo for additional information on experimental treatments including darapladib, which is in the last of three stages of human studies usually needed for regulatory approval, and Syncria, also in late-stage testing. Syncria, also known as albiglutide, belongs to the same class of medicines as Novo Nordisk A/S (NOVOB)’s Victoza.
‘Very Promising’
The experimental diabetes therapy is a “very, very promising” new treatment, Glaxo Chief Executive Officer Andrew Witty said in February. “And we’ll see when the full data comes in before we can really articulate the full picture to you.”
“When you have so many projects together in late-stage development, it makes sense to want to integrate 100 percent of their value,” Eric Le Berrigaud, an analyst at Bryan, Garnier & Co. in Paris, said in a telephone interview. “It means Glaxo thinks these projects have a potential. Hard to say which project they are betting on the most.”
The U.S. biotechnology company has hired Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC as financial advisers and Skadden Arps Slate Meagher & Flom LLP and DLA Piper LLP as legal counsel.
No Assurance
“There can be no assurance that any transaction will occur,” Human Genome said. "HGS does not intend to discuss the status of its evaluation unless and until a specific transaction has been approved.’’
It’s unlikely any company other than Glaxo would want to bid, MainFirst’s Franklin said.
“There will be control provisions around Benlysta, darapladib and albiglutide that will protect GSK’s interests so it would not be worth anyone else bidding that price for the rest of the business,” he said.
French rival Sanofi and Switzerland’s Roche Holding AG also have made unsolicited offers for companies whose shares have fallen. Sanofi bought Genzyme Corp. for $20.1 billion last year after Genzyme’s stock declined following manufacturing woes. Roche yesterday abandoned its $6.7 billion offer for Illumina Inc. after the target company rejected the approach and refused to negotiate.
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