Human Genome Sciences rejects GSK's $2.59bn takeover bid

Human Genome Sciences (HGS) is seeking other offers after rejecting a $13 per share unsolicited bid yesterday from longstanding partner GlaxoSmithKline (GSK), which valued the firm at $2.59bn.

GSK's offer is an 81 per cent premium to HGS' closing price of $7.17 the day before the bid, but the stock doubled yesterday to $14.37, albeit still below its 52-week high of around $30.

In a statement issued swiftly after GSK's bid was announced, HGS said the offer does not reflect "the value inherent in the company", adding that it has retained Goldman Sachs and Credit Suisse to try to find "strategic alternatives", including a possible sale of the company.

US-based HGS has worked with GSK for years on a number of drugs, including lupus erythematosus treatment Benlysta (belimumab) which was approved in March 2011 and was HGS' first commercialised drug, with sales of around $50m by the end of the last year.

Analysts have suggested Benlysta could make as much as $4bn in annual sales, but in the meantime HGS is still in cash burn mode, posting a $381m loss last year.

The two companies are also working together on developmental-stage drugs, notably Lp-PLA2 inhibitor darapladib which is in phase III testing for acute coronary syndrome and albiglutide, currently in phase III development for the treatment of type 2 diabetes.

"HGS has requested additional information regarding investigational products in GSK's clinical pipeline to which HGS has substantial financial rights," said the US firm.

GSK appeared to be taken aback by the abruptness of HGS' rejection of its offer, with CEO Andrew Witty saying he was disappointed that the bid had been dismissed without negotiation.

"Having worked together with HGS for nearly 20 years, we believe there is clear strategic and financial logic to this combination for both companies and our respective shareholders," Witty said, adding that GSK expected to achieve at least $200m in cost synergies by 2015.

HGS may be hoping to start a bidding war for its business, and has invited GSK to participate in its "exploration of strategic alternatives". Industry observers have expressed doubt whether other bidders will some forward however, given the close ties between HGS and GSK.