Human Genome Sciences spurns GSK's $3B offer

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Human Genome Sciences rebuffed GlaxoSmithKline's advances Thursday with a press release that said, in essence, “Thanks for the $2.6 billion takeover offer, but we're worth more than that.” The company said it is looking into other options and suitors. GSK sent its unsolicited bid to HGSI weeks ago, with an April 19 deadline.

The move is a bold one for cash-strapped Human Genome Sciences (HGSI), which has struggled with a slow launch of its Benlysta lupus drug. The Rockville, MD-based firm had 1,100 full-time employees as of February 1, having just announced plans to cut 150 manufacturing and R&D jobs. Its 2006 development and commercialization deal with GSK leaves the company's sales force of 150 to shoulder the drug's US sales and marketing strategy. It also lets HGSI pocket US sales revenue, with GSK taking the rest. The drug's principal patents start to expire in 2016.

ISI analyst Mark Schoenebaum expects Benlysta US sales to peak at $1.4 billion, and HGSI says the drug's lupus population hovers around 200,000 patients in the US. But lupus is potentially just one application for the drug, which HGSI is testing in heart and kidney disease (both head into Phase III testing this year).

Meanwhile income from research partnerships has plummeted to $1.3 million last year, from a three-year high of $88 million in 2010, since HGSI and Novo Nordisk walked away from HGSI's HCV candidate Zalbin. The FDA and the European regulatory agency deemed the drug risky for patients.

Saying no to GSK, however, doesn't mean the relationship between the two companies is over. They are bound by development agreements for heart drug darapladib and type 2 diabetes drug albiglutide, both of which were in Phase III testing as of December, as well as the marketing and supply agreements for Benlysta and Phase II Alzheimer's drug rilapladib.

Bernstein analyst Tim Anderson noted that experts are divided over prospects for darapladib, first of a new class of drugs that targets an enzyme that helps clog arteries.

“It is also telling that no other pharmaceutical companies that we cover, especially those that have a cardiovascular presence, seem to be pursuing this mechanism in late-stage clinical trials,” Anderson wrote.

Independence would garner $150 million in outstanding payments for HGSI for the diabetes drug, albiglutide, which is a GLP-1 agonist. An HGSI presentation says albiglutide also offers “single-digit net royalties on worldwide sales.”

Beyond Benlysta, Human Genome Science's most mature drug is raxibacumab, for inhalation anthrax, which it has sold to the US government since 2009. The company is still in the process of filling government orders and has booked a total of $117.4 million of its projected $142 million in sales to the US government so far.

On GSK's side, the offer provides several advantages, including what the company says would amount to saving $200 million in efficiencies. The acquisition would also bolster its oncology pipeline—HGSI's hepatocellular cancer drug mapatumumab is in Phase II testing—as well as its inflammation and chronic disease franchises.

The offer comes during a relatively smooth time for GSK, which has come out on the other side of a patent cliff that cut 31% of its sales over a three-year period. A GSK spokesperson told MM&M it wouldn't comment on whether the drug giant would up its offer or how high it was willing to bid. An HGSI spokesperson was equally tight-lipped and said she could not ballpark how much money was enough for HGSI to say yes to an acquisition.
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