GSK goes hostile with $2.60 billion HGS bid
pharmatimes World News | May 10, 201|
GlaxoSmithKline is taking the hostile route in its $2.60 billion bid to buy Human Genome Sciences, going straight to shareholders with its previously-rejected offer instead of participating in the latter's "strategic alternatives review".
Last month, the board at HGS, which developed the lupus drug Benlysta (belimumab) with GSK, turned down the $13.00 per share offer, which represented an 81% premium to its stock price on April 18, the day before the bid was disclosed. The rejection followed consultation with financial and legal advisors and the board set it believed the bid "does not reflect the value inherent in HGS".
HGS hired Goldman Sachs and Credit Suisse to explore "strategic alternatives...including, but not limited to, a potential sale of the company" and GSK was invited to participate in this process. However, the UK major is not interested in that option.
Participation in review 'unnecessary'
GSK says it is taking its offer directly to HGS shareholders in part because "participation in the process is unnecessary as its offer is not conditioned on due diligence or financing and can be completed expeditiously". The drugs giant added that "it is important for HGS shareholders to understand that GSK is committed to proceeding with its offer", claiming "there is clear strategic and financial logic to this combination".
Furthermore, GSK went to say it believes that the four weeks that have passed since its offer made on April 11, together with the additional 20 days its offer must remain open following its commencement, "provides a reasonable amount of time for HGS to complete its review of alternatives".
The company went on to argue that its offer provides "immediate liquidity at a substantial premium while eliminating further exposure to the significant execution risk inherent in HGS achieving its future growth objectives" and takes into account the value of Benlysta, plus that of two other partnered therapies - the late-stage cardiovascular drug darapladib and albiglutide, currently in Phase III for the treatment of type 2 diabetes.
"In respect of HGS's desire to assure itself that GSK is not in possession of other material information regarding albiglutide or darapladib", the company said it has provided the US biotech with "the limited additional clinical information available to GSK that can be shared consistent with regulatory and legal constraints". The latter concluded by saying it values the long relationship the firms have had and "has clearly stated its preference to complete a transaction on a friendly basis in a timely fashion". GSK also "remains willing to meet and review its offer with HGS at any time".
HGS answer within 10 days
Pointedly noting that the bid is identical to the price of the proposal it has already rejected, HGS, whose shares have been around the $14.60 mark this week, said it will "carefully review and consider the offer" and make a recommendation within 10 business days of the GSK tender offer being launched. Regarding its strategic review, the firm said the process is ongoing.
Commenting on the move, Ana Nicholls, healthcare analyst at the Economist Intelligence Unit, said that if HGS had been hoping to get GSK to raise its offer, "then it will be disappointed". She believes the bid "is already fairly generous, given that HGS has been loss-making for the past two years".
Although HGS may argue that GSK is merely taking advantage of a share price which has tumbled thanks to disappointing sales of Benlysta, Ms Nicholls says "a sustained rebound is far from a sure thing". She believes that while darapladib and albiglutide have potential, "they have still to get through final trials, and the markets they would be entering are crowded ones".
GSK keeps tone friendly despite hostile HGS approach
World News | April 20, 2012
In confirming its unsolicited $2.60 billion bid for Human Genome Sciences, which has been rejected, GlaxoSmithKline says it still hopes to push through the deal "on a friendly basis".
The UK drugs major noted that its $13.00 per share offer represented an 81% premium to HGS' stock price on April 18, and chief executive Sir Andrew Witty (pictured) said it "reflects full and fair value". The board at HGS, which developed the lupus drug Benlysta (belimumab) with GSK, disagrees and has hired Goldman Sachs and Credit Suisse to explore "strategic alternatives...including, but not limited to, a potential sale of the company". GSK has been invited to participate in this process.
In a letter to his counterpart at HGS, Thomas Watkins, Sir Andrew noted that the firms have collaborated for nearly 20 years "and we greatly respect your history of innovation and what you have achieved". However, "we believe now is the appropriate time in the evolution of our relationship for our two companies to combine".
He went on to say that "GSK is uniquely positioned to deliver on the promises" of Benlysta, as well as the late-stage cardiovascular drug darapladib and albiglutide, currently in Phase III for the treatment of type 2 diabetes, drugs that HGS has a stake in. Sir Andrew noted that he was disappointed the $13 offer was "rejected without discussion" but added that "we hope to work with you on a friendly basis to complete this transaction successfully and expeditiously".
$200 million in cost synergies
The GSK chief said that "we also expect to achieve at least $200 million in cost synergies to be fully realised by 2015 and expect the transaction to be earnings-accretive beginning in 2013". He added that the proposal meets GSK's "strict financial criteria for acquisitions".
Observers are not sure whether the offer seems a reasonable one or not given that HGS share price fluctuates considerably and was in the $30 region a year ago. However the launch of Benlysta, the first lupus drug to be approved in 50 years, has been disappointing.
Mark Clarke, an analyst at Deutsche Bank, issued a research note saying that for GSK, the attraction in acquiring HGS would be removing its profit share and royalty obligations on Benlysta, albiglutide and darapladib. He added that "whether such a deal ultimately would be EPS-accretive for GSK - and to what degree - would depend on the long term outlook for Benlysta (which has got off to a slow start) and the two partnered pipeline drugs, both of which have risks attached to them".
Paul Chapman, partner at intellectual property specialists Marks & Clerk, noted that "this rather stark dismissal of GSK's not inconsiderable offer goes to show just how highly biotech companies such as HGS value their portfolios and pipelines". He cites the Roche/Illumina saga where the Swiss major abandoned its bid for the gene sequencing firm despite raising its offer "to levels that it clearly thought generous. Illumina simply wasn't having any of it. Nor, it seems, are HGS".
He goes on to say that "major players in the pharmaceutical industries are in a bind, they need to rejuvenate pipelines and absorbing smaller, promising biotech firms is an attractive way of doing so". However, "the likes of HGS and Illumina are quite aware of the advantageous position they are in, and are playing their hand accordingly".
UK patients to be barred from first new lupus drug in 50 years
UK News | May 01, 2012
Analysts may be rethinking their sales forecasts for GlaxoSmithKline's lupus drug Benlysta after cost regulators for the National Health Service in the UK turned down funding for the drug.
GSK HGS Benlysta gets European OK for lupus
In final draft guidances issued by the National Institute for Health and Clinical Excellence and the Scottish Medicines Consortium, regulators concluded that Benlysta (belimumab) could not be considered a cost-effective use of NHS resources for patients with active autoantibody positive systemic lupus erythematosus with a high degree of disease activity despite standard therapy.
Lupus - a chronic autoimmune disease that, if uncontrolled, can lead to severe, debilitating symptoms, long-term organ damage and premature death - affects more than 25,000 people in the UK, and some patients with advanced disease fail to respond to current therapy.
Benlytsa, approved in Europe in 2011, is the first in a new class of drugs called BLyS-specific inhibitors, which work by targeting a naturally occurring protein believed to play a role in the production of antibodies which attack and destroy the body's own healthy tissues.
But while NICE's appraisal committee concluded that, compared with standard care, there was some evidence of the clinical effectiveness of the drug, its benefit was not enough to justify its price to the NHS, "as the cost of the drug in relation to how well it works is very high", said Sir Andrew Dillon, the Institute's chief executive.
In addition, some patients with severe disease currently receive rituximab off-label. Although it is not licensed for this use, the Committee would have liked to see data comparing the cost of Benlysta and rituximab, as it is used in clinical practice.
The Institute's sister group in Scotland also agreed. "The treatment's cost in relation to its health benefits was not sufficient and, in addition, the [GSK] did not present a sufficiently robust economic case to gain acceptance by the SMC", it said.
Anger over decision
But Simon Jose, General Manager at GSK, has slammed the decisions. "By denying access to belimumab, which is the first treatment specifically developed and licensed for lupus in over 50 years, UK patients are being left behind those in other countries including the US, Germany and Spain who already have access to this medicine" he said.
While recognising that there are finite resources within the health service, "evaluating an innovative medicine in a framework that compares it to a standard of care consisting of inexpensive generics fails to recognise the benefit of this clinically proven medicine", Jose argues, and stresses that the company believes it has not only priced the drug "responsibly" but has also offered a Patient Access Scheme to both NICE and the SMC, "which we firmly believe represents value for both a cost-constrained NHS and patients with uncontrolled lupus".
On a more general note, he berated the systematic failure to recognise and adopt innovative new medicines in the UK. "The appraisal system itself, and its failure to recognise innovation, remains a fundamental problem", he said, noting that the UK is "one of the slowest to enable patients to have access to innovative new treatments."
NICE has not yet issued final guidance to the NHS.