GlaxoSmithKline‘s (NYSE:GSK) forced Human Genome Sciences’ (NASDAQ:HGSI) hand and now the biotechnology company must make a decision about its future on a much faster timetable than it would have liked.
GSK today formally commenced its offer to buy HGS at $13 per share, about $2.6 billion, and the British pharmaceuticals giant said shareholders should be the ones to decide whether it’s fair. GSK gave the Maryland company 20 business days to wrap up its process for weighing the offer or finding an alternative bidder. In a statement, HGS acknowledged that GSK had commenced the hostile offer and noted that the offer was unchanged from the initial price. HGS said that its board of directors would give the company’s shareholders a recommendation on the offer within 10 business days.
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True to his word, GSK CEO Andrew Witty has not budged on price. Since the offer became public on April 19, Witty has said that GSK’s bid was “full and fair,” dismissing any suggestion that the company increase the $13 per share price. The offer represents a more than 80 percent premium over HGS’s $7.17 stock price on the last trading day before GSK’s offer was publicly disclosed.
HGS had responded to GSK’s offer by saying that the bid did not reflect the company’s value and HGS would start a “strategic alternatives process” in search of a better offer. But GSK, which maintains its U.S. headquarters in Research Triangle Park, North Carolina, doesn’t believe that a better offer is out there for the company and did not want to wait for HGS to finish out its search for one. GSK instead took its offer directly to HGS shareholders.
GSK said that it doesn’t need to participate in HGS’ strategic alternatives process because its offer is not conditioned on conducting due diligence or securing financing; GSK believes it is important to show HGS shareholders that GSK is committed to proceeding with the offer; and GSK believes there is “strategic and financial logic” to the deal and HGS shareholders should have the opportunity to decide that for themselves. In mid-morning trading, HGS stock was trading at about $14.31 per share, down slightly from Tuesday night’s $14.62 closing price.
GSK’s R&D relationship with HGS dates to the mid-1990s. The partners have commercialized one product, lupus drug Benlysta, which received U.S. Food and Drug Administration approval last year. The companies are also in late-stage clinical development of diabetes drug albiglutide and cardiovascular drug darapladib, among other compounds.
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