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HGS attempts to thwart GSK takeover plans

Genome specialists also in talks with alternative buyers

GSK - logo on building

Human Genome Sciences (HGS) has taken steps to avoid a hostile takeover targeting shareholders by its long-term partner GlaxoSmithKline (GSK) with the adoption of a shareholder rights plan.

This plan would be implemented if GSK managed to obtain 15 per cent of HGS' shares through offering individual HGS shareholders $13.00 per share, after a full takeover deal worth $2.6bn was turned down by HGS' board of directors.

If the proportion of GSK shares in HGS reached 15 per cent, other HGS shareholders would be offered the chance to buy more shares at a discount in an aim to prevent any further inroads from GSK.

HGS said: “The rights plan, which has a term of one year, is intended to allow the company to fully engage in its strategic review process and as a means to protect the long-term interests of the company's stockholders.”

It appears alternative buyers are included in this strategy review, with HGS issuing a separate statement stating its management has “engaged in discussions with a number of other parties, including major pharmaceutical and biotechnology companies, regarding a potential transaction”.

Following consultation with financial and legal advisors, HGS has again encouraged shareholders not to take GSK up on its offer of $13.00 per share and affirmed its decision that the offer is “inadequate, undervalues the company and is not in the best interests of HGS and its stockholders”.

HGS' president and CEO, H Thomas Watkins, described how the potential of lupus treatment Benlysta (belimumab), which is co-marketed by the two companies, influences HGS's belief in the company's worth.

“We believe [Benlysta] will ultimately transform the standard of care for systemic lupus erythematosus (SLE) as the first drug designed to treat the underlying disease of SLE rather than individual symptoms,” he said.

“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.

Profits from Benlysta sales, which made $31.2m for HGS during the first quarter of 2012, are currently split between the two companies.

If GSK does acquire HGS it would retain all income made by Benlysta, as well as any future sales of investigational drugs darapladib and albiglutide.

18th May 2012

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