GSK: A Rebuffed Suitor for the Moment

Last week Human Genome Sciences (HGS) rejected GlaxoSmithKline’s (GSK) unsolicited $2.59 billion bid for HGS or $13 per share.  Although rejecting GSK’s initial bid, HGS kept the door open for other suitors, including again GSK.

HGS has authorized its board of directors to explore strategic alternatives for the company, including a potential sale. HGS has invited GSK to participate in this process and has requested additional information regarding investigational products in GSK’s clinical pipeline to which HGS has substantial financial rights, including darapladib, in Phase III development for treating cardiovascular disease, and albiglutide, in Phase III development for treating Type 2 diabetes.

HGS posted a net loss of $381.1 million in 2011 on revenues of $131 million and also posted a loss in 2010 of $233 million. Last year, HGS received FDA approval for Benlysta (belimumab), a drug to treat lupus. The drug was approved by FDA in March 2011 and posted 2011 revenues of $52.3 million. In 2006, HGS and GSK entered into a codevelopment and commercialization agreement under which HGS conducted the Benlysta Phase II trials, with assistance from GSK. The companies share equally in Phase III/IV development costs, sales, and marketing expenses, and profits of any product commercialized under the agreement.

Although HGS rejected GSK’s $13.00-per-share bid, the companies’ mutual interest in Benlysta and in the late-stage candidates darapladib and albiglutide make them possible suitors. Some analysts say it is unlikely that another company would be interested in HGS given its stake in the GSK-shared drugs.

Analysts say the deal would be favorable to GSK for it would secure full ownership of Benlysta and the late-stage candidates darapladib and albiglutide. When approved last year, Benlysta became the first new drug to treat lupus in 50 years, and although it has gotten off to a slow start in terms of sales, some analysts are bullish on its prospects as well as the other HGS/GSK late-stage candidates.

So time will tell if a marriage of GSK and HGS will be realized.