Glaxo Seen Likely to Extend Hostile Tender Offer for Human Genome

By Sten Stovall

LONDON--GlaxoSmithKline PLC (GSK) looks likely to extend its unsolicited $2.6 billion tender offer for Human Genome Sciences Inc. (HGSI) beyond June 7, despite a "poison pill" shareholder rights plan the U.S. biotechnology company imposed to block the deal.

Human Genome adopted the stockholder rights plan last month to try to ward off the U.K.'s biggest drug maker in an increasingly hostile takeover battle between the companies that together sell new lupus drug Benlysta.

Glaxo has taken its $13-a-share offer directly to investors after Human Genome's board said it was too low. The U.S. pioneer of gene-based drug discovery has rejected the offer, made in April, pointing out that its shares traded at double that level a year earlier. The target company has since started a strategic review, which it hopes will encourage rival bids.

The British predator last month said it wouldn't proceed with its offer unless the target company dropped the "poison pill" shareholder rights plan. It allows shareholders to buy additional shares at a discount if one investor buys or launches a tender offer for more than 15% of Human Genome's stock without the board's approval, effectively blocking an unwanted bidder.

"There's a reasonable chance that the poison pill will eventually make them walk away if they don't have enough acceptances in place but the likelihood is that they'll extend it, but not for long," said Navid Malik of Cenkos Securities. "I still believe that in order to get this deal done, Glaxo is going to have to raise the offer by a couple of dollars."

Glaxo began working with Human Genome Sciences nearly 20 years ago. Human Genome Sciences was one of the first biotech companies to emerge from the early 1990s push to map all of the genes in the human body.

Along with Benlysta, the U.S. biotech also has financial interests in other experimental drugs under development at Glaxo, including darapladib for cardiovascular disease and once-weekly diabetes drug albiglutide.

Glaxo Thursday declined to say when its decision on whether or not it would extend its tender offer.

"The tender offer states we have until 9 am U.S., or 2 pm U.K. time on the following business day after it expires to make a public announcement of any planned extension," an official for the company said without elaborating.

At 1438 GMT, shares in Human Genome were trading at $13.30, down 0.3% on the day. Glaxo was at GBP14.30, up 0.3% from Wednesday's close.

Write to Sten Stovall at [e-mail]