GlaxoSmithKline (GSK) has thrashed out an agreement to purchase Human Genome Sciences (HGS) after raising its offer for the company to $14.25 per share from $13.
The improved deal raises the overall value of the acquisition from $2.6bn to $3.6bn, or around $3bn net of HGS' cash and debt, according to GSK. The agreement is due to expire on July 27, 2012.
The acquisition gives GSK full control of lupus product Benlysta (belimumab), currently co-marketed by the two companies and the fruit of almost 20 years of collaboration, as well as a stable of pipeline drugs. Albiglutide for diabetes and darapladib for atherosclerosis are both in late-stage clinical testing, while a potential Alzheimer's drug called rilapladib is in phase II.
It is also planning to gain $200m in cost-savings from the takeover and expects the deal to be accretive to earnings in 2013. Sir Andrew Witty, GSK's chief executive, said the transaction "will deliver significant returns over the long-term".
HGS launched a tender process for other potential partners in April, 2012, after GSK first launched its hostile takeover bid, saying its initial bid was inadequate, but no alternatives emerged by the expiration of its deadline on July 16, 2012.
"After a thorough analysis of strategic alternatives, HGS has determined that a combination with GSK is the best course of action for our company and the best way to maximise value for our stockholders," said the US firm's CEO Thomas Watkins.
HGS' stock has been as high as $30-per-share just over a year ago, although that was just after Benlysta hit the market as the first new lupus drug in 50 years and amid sales forecasts of more than $3-4bn a year at peak.
As it turned out, initial take-up of Benlysta has proved somewhat disappointing, with GSK booking £15m ($23m) from the drug last year from its share of gross profit in the US and total sales in all other markets. HGS recorded US Benlysta sales of around $52m.
The pharma giant still believes it has blockbuster potential, however, with industry analysts concurring and predicting peak sales in excess of $2bn.
Meanwhile, law firm Levi & Korsinsky is trying to mobilise shareholders into a class action lawsuit to try to block the deal and said it is investigating "possible breaches of fiduciary duty and other violations of state law in connection with the sale".
At present no official notice of a legal challenge to the deal by shareholders has been published.