Does persistence pay off?

GSK extends offer to acquire Human Genome Sciences, details remain the same

Kelsey Kaustinen
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LONDON—It is often said that history repeats itself, and asGlaxoSmithKline PLC's (GSK) attempt to acquire Human Genome Sciences (HGS)follows in the footsteps of the Roche/Illumina saga, that adage is provingcorrect so far.
GSK announced on June 29 that it extended its tender offerfor all outstanding shares of Human Genome Sciences (HGS) to 5 p.m. New YorkCity time on July 20. GSK commenced its tender offer on May 10 for $13 pershare in cash, for an approximate total of $2.6 billion. The offer representedan 81-percent premium over HGS' closing share price on April 18, the last daybefore HGS publicly announced GSK's private offer, and originally expired atmidnight in New York on June 7.
GSK stated in a press release that as of midnight on June 7,approximately 474,029 shares (including 24,856 shares subject to guarantee ofdelivery) had been tendered to the offer, a figure that HGS notes representsroughly a quarter of 1 percent of its outstanding shares. GSK continues to holdto its belief that the offer "represents full and fair value and is in the bestinterests of both companies' shareholders."
"[The offer] is well aligned to GSK's long-term strategy ofdelivering sustainable growth, simplifying GSK's business model, enhancingR&D returns and deploying capital with discipline. For HGS shareholders, itprovides immediate liquidity at a substantial premium while eliminating furtherexposure to the significant execution risk inherent in HGS achieving its futuregrowth objectives," the company noted in a press release.
GSK and HGS have worked together for almost 20 years onseveral compounds. The pair's two major projects, both of which are inlate-stage development, are darapladib, indicated for the treatment ofatherosclerosis, and albiglutide, indicated for the treatment of type 2diabetes. GSK and HGS are also jointly marketing Benlysta, indicated for lupus,in a 50/50 profit-share scenario.
GSK's offer incorporates the value of Benlysta, darapladiband albiglutide, as well as HGS' pipeline and financial assets, and reflectsexpected cost synergies of at least $200 million.
HGS, like Illumina before it, seems wholly uninterested inbeing acquired. The company announced GSK's private offer to purchase alloutstanding shares at $13 on April 19, along with its stated belief—backed bythe HGS board of directors—that the offer was inadequate. The company alsoannounced that it would be initiating a strategic alternatives review process,in which GSK was invited to participate. The tender offer commenced on May 10,and on May 17, HGS issued a pair of announcements: first, that its board ofdirectors unanimously denounced the tender offer as inadequate, and second,that it was enacting a short-term stockholder rights plan, colloquially knownas a "poison-pill" defense.
HGS noted that its strategic alternatives review process"continues to be active and fully underway," a process GSK has declined toparticipate in, and HGS added, "seeks to circumvent, disrupt and prematurelyend … to the disadvantage of HGS stockholders." HGS reaffirmed that it iscommitted to completing the process "as expeditiously as possible," andrepeated its recommendation to company shareholders not to tender their sharesto the offer.
"Our board of directors has concluded unanimously that theGSK offer is inadequate and does not reflect the value inherent in Human GenomeSciences," H. Thomas Watkins, president and CEO of HGS, noted in a pressrelease regarding the board's decision. "We remain very confident in thecommercial and therapeutic potential of Benlysta … We also believe HGS holdsgreat potential beyond Benlysta for SLE, including potential new indicationsfor Benlysta and a number of emerging mid- and early-stage products in ourinternal pipeline."
The offer expired on June 29, and was extended again at thesame price to July 20. GSK noted in a press release that "as of the close ofbusiness on 28 June, approximately 375,526 [shares] had been tendered and notwithdrawn, pursuant to the offer." The extension, GSK noted, "will provide HGSshareholders the opportunity to evaluate the outcome of the HGS Board's processrelative to GSK's offer." The company also added that based on circumstances atthe time of the extension's expiration, GSK will consider all available optionsregarding its offer but can make no assurance that the tender offer will befurther extended."

GSK teams up withAstraZeneca to tackle antibiotic research
LONDON—In late May, GlaxoSmithKline PLC (GSK) andAstraZeneca PLC announced they will lead a new approach to antibiotic researchin Europe that will see pharmaceutical and biotechnology companies workingalongside public partners to tackle the rising threat from antibioticresistance and address some of the key barriers to the development of effectiveantibiotics.
The objective of the proposed research program is to improvethe underlying scientific understanding of antibiotic resistance, design andimplement efficient clinical trials and take novel drug candidates through clinicaldevelopment. The program is part of the European Commission's Action Planagainst the rising threats from antimicrobial resistance, launched in Novemberlast year.
Set against a backdrop of emerging resistant bacteria andwith the pipeline of future antibiotics described by the World HealthOrganization as "virtually dry," this innovative research program,NewDrugs4BadBugs, intends to boost the currently faltering discovery anddevelopment of new antibiotics.
Supported by the Innovative Medicines Initiative (IMI),Europe's largest public-private initiative, the research program's firstprojects will be funded by a joint budget of up to $279 million provided by IMIand $143 million in-kind contributions from the pharmaceutical andbiotechnology companies involved. GSK, AstraZeneca, Janssen, Sanofi and BasileaPharmaceutica will work alongside public research organizations and scientificexperts to address several aspects of resistance and stimulate new antibioticresearch. Further projects within the program, with additional funding, areexpected to launch later in the year.
Antibiotic resistance is increasingly becoming a worldwidehealth threat. Many of the medical advances in recent years, such aschemotherapy for cancer treatment and organ transplantation, depend oneffective antibiotics. Despite this need and the continued emergence ofbacteria resistant to existing drugs, research has diminished over the past 15years and few companies remain active in this area. This is due to thescientific difficulties in finding new agents that successfully targetbacteria, regulatory complexities and a lack of the commercial incentivesneeded to encourage investment in this area and to fund future R&D.
The proposed research program will develop GSK's investigationalantibiotic, GSK1322322, targeting multidrug resistant respiratory and skininfections including methicillin-resistant Staphylococcusaureus (MRSA), which is currently in Phase II development. Pending theresults of ongoing work, this will be joined slightly later by AstraZeneca'sMEDI4893, a novel investigational monoclonal antibody in early-stagedevelopment that targets a toxin released by MRSA and AZD9773, aninvestigational treatment for severe sepsis and septic shock, conditionstriggered by uncontrolled bacterial infecti

Kelsey Kaustinen

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