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GlaxoSmithKline Said to Consider Buying Human Genome for $2.6 Billion

Sunday, 15 July 2012 10:19 AM

GlaxoSmithKline is holding talks this weekend with Human Genome Sciences to agree a deal to acquire it for some $2.6 billion, after pursuing the U.S. biotech firm for three months, sources familiar with the situation said on Sunday.

Human Genome, which rejected a $13-a-share offer in April from GlaxoSmithKline, its long-time partner, has come under pressure from investors to try and strike a deal with the British drugmaker in the absence of any alternative bids.

The U.S. company - an early pioneer of gene-based drug discovery - has set itself a July 16 deadline for finding higher bids, but interest has been limited because GSK already has marketing rights to its drugs.

U.S. biotech company Celgene was at one stage considering whether to bid, according to a source, but negative analyst and investor reaction when news of those discussions broke deterred the U.S. group.

Without alternative bids, Human Genome shareholders have been pressing the company's management to engage with GSK before July 16 to avoid a share price collapse - and that argument has been a trigger for the weekend discussions.

A spokesman for GSK declined to comment, while officials at Human Genome were not immediately available.

Last year Human Genome and GSK won approval for Benlysta, the first new treatment for lupus in 50 years. But the drug's launch disappointed investors and Human Genome's shares fell from a high above $25 to a low of $6.51 in December. Glaxo made its offer a few months later, prompting Human Genome to launch an auction with the help of Credit Suisse and Goldman Sachs.

Human Genome and GSK share rights to Benlysta. They are also collaborating on two other experimental drugs in late-stage trials for heart disease and diabetes, where GSK owns a large majority of the economic interest.

Buying Human Genome would give GSK full rights to these partnered drugs, underscoring the appetite among big drugmakers for biotech products to drive future sales.

GSK would be also be able to strip out costs and the company's chief executive, Andrew Witty, told investors in May he expected to deliver "an extraordinary return" through the acquisition.

Human Genome investors have been hoping that GSK will sweeten its offer and the shares closed on Friday at $13.58 - above GSK's offer but well down on the level of more than $15 hit in April, soon after the unsolicited offer was made public.

There have been a spate of acquisitions of biotech companies this year as large pharmaceutical companies seek to rebuild their pipelines after a wave of patent expiries.

Most recently, Bristol-Myers Squibb agreed to buy diabetes specialist Amylin Pharmaceuticals by sharing the $7 billion cost of the deal with AstraZeneca.

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Sunday, 15 July 2012 10:19 AM
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