Human Genome Sciences has adopted a shareholder rights plan in the face of GlaxoSmithKline's hostile offer and has again dismissed the latter's $2.60 billion bid as inadequate.
A week ago, GSK decided to appeal directly to shareholders with its $13-a-share offer for its long-time partner and co-developer of the lupus drug Benlysta (belimumab). HGS has now decided to adopt a poison pill, which can thwart hostile bids by giving other shareholders the right to buy more stock at a discount if one shareholder buys 15% or more of the company's stock.
The rights plan is valid for one year and will have a term of one year, which HGS says is intended to allow the company "to fully engage in its strategic review process and as a means to protect the long-term interests of the company’s stockholders". Following GSK's original approach, the US biotech hired Goldman Sachs and Credit Suisse to explore alternatives, including a potential sale of the company.
GSK was invited to get involved in the process but insists its participation is unnecessary as its offer is not conditioned on due diligence. However, in its latest rejection of GSK's bid, HGS added that it is talking to "a number of other parties, including major pharmaceutical and biotechnology companies, regarding a potential transaction".
Confidentiality agreements with other pharma companies
It has also entered into confidentiality agreements with some of them, giving them an opportunity to engage in due diligence. The company also noted that the rights plan "will not prevent any offers or transactions that the board determines to be in the best interest of HGS and its stockholders".
HGS also accused GSK of timing its offer while its shares were trading near a 52-week low and "to opportunistically capture for itself the significant upside opportunity for upcoming value-driving products", notably the late-stage cardiovascular drug darapladib and albiglutide, currently in Phase III for the treatment of type 2 diabetes.
Also despite disappointing sales, HGS still believes Benlysta has "substantial growth opportunities". It sees the initial US market for the drug to be 200,000 patients, "which translates to a market opportunity of approximately $7 billion".
In response, the UK firm said it "continues to believe that now is the appropriate time in the evolution of the GSK/HGS relationship for the companies to combine" and that it is "uniquely positioned to deliver on the opportunity of the combination". GSK added that will proceed with its tender offer "and has clearly stated its preference to complete a transaction on a friendly basis in a timely fashion". The bid will close on June 7.