Glaxo (GSK) Comments on Human Genome (HGSI) Bid Rejection; Will Continue with $13/Share Tender
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Price: $52.22 +0.21%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 4.8%
Revenue Growth %: +61,577.8%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 4.8%
Revenue Growth %: +61,577.8%
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GlaxoSmithKline plc (NYSE: GSK) commented on Human Genome Sciences (Nasdaq: HGSI) Board of Directors' decision to recommend against GSK’s tender offer to acquire all of the outstanding shares of HGS for $13.00 per share in cash. The offer represents a premium of 81 percent to HGS's closing share price of $7.17 on 18th April, the last trading day before HGS publicly disclosed GSK’s private offer. The offer is not conditioned on due diligence or financing.
GSK believes its offer represents full and fair value and is in the best interests of both companies’ shareholders. It is well aligned to GSK’s long-term strategy of delivering sustainable growth, simplifying GSK’s business model, enhancing R&D returns and deploying capital with discipline. For HGS shareholders, it provides immediate liquidity at a substantial premium while eliminating further exposure to the significant execution risk inherent in HGS achieving its future growth objectives.
GSK’s offer incorporates the value of Benlysta, darapladib, albiglutide and HGS’s pipeline and financial assets. It also reflects expected cost synergies of at least $200 million. Sales of Benlysta are in line with GSK’s expectations and in the US were $25.7m in the fourth quarter of 2011 and $31.2m in the first quarter of 2012. Both albiglutide and darapladib are in development and are being evaluated in blinded clinical studies. Of the two pivotal phase III trials underway for darapladib, GSK currently believes the earliest the first trial can finish is in 2013 and the earliest the second trial can finish is sometime in 2014.
GSK owns the vast majority of the economics associated with each of albiglutide and darapladib.
HGS is entitled to certain conditional milestones and a mid single digit royalty if albiglutide is successfully commercialized. For darapladib, if successfully developed, HGS is entitled to a 10 percent royalty and an option to co-promote and receive up to 20 percent profit share but will also need to make a proportionate contribution to investment for costs of launch and promotion.
GSK continues to believe that now is the appropriate time in the evolution of the GSK/HGS relationship for the companies to combine and that GSK is uniquely positioned to deliver on the opportunity of the combination.
GSK will continue to proceed with its tender offer and has clearly stated its preference to complete a transaction on a friendly basis in a timely fashion. The tender offer will close on June 7th.
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GSK believes its offer represents full and fair value and is in the best interests of both companies’ shareholders. It is well aligned to GSK’s long-term strategy of delivering sustainable growth, simplifying GSK’s business model, enhancing R&D returns and deploying capital with discipline. For HGS shareholders, it provides immediate liquidity at a substantial premium while eliminating further exposure to the significant execution risk inherent in HGS achieving its future growth objectives.
GSK’s offer incorporates the value of Benlysta, darapladib, albiglutide and HGS’s pipeline and financial assets. It also reflects expected cost synergies of at least $200 million. Sales of Benlysta are in line with GSK’s expectations and in the US were $25.7m in the fourth quarter of 2011 and $31.2m in the first quarter of 2012. Both albiglutide and darapladib are in development and are being evaluated in blinded clinical studies. Of the two pivotal phase III trials underway for darapladib, GSK currently believes the earliest the first trial can finish is in 2013 and the earliest the second trial can finish is sometime in 2014.
GSK owns the vast majority of the economics associated with each of albiglutide and darapladib.
HGS is entitled to certain conditional milestones and a mid single digit royalty if albiglutide is successfully commercialized. For darapladib, if successfully developed, HGS is entitled to a 10 percent royalty and an option to co-promote and receive up to 20 percent profit share but will also need to make a proportionate contribution to investment for costs of launch and promotion.
GSK continues to believe that now is the appropriate time in the evolution of the GSK/HGS relationship for the companies to combine and that GSK is uniquely positioned to deliver on the opportunity of the combination.
GSK will continue to proceed with its tender offer and has clearly stated its preference to complete a transaction on a friendly basis in a timely fashion. The tender offer will close on June 7th.
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