HGS Agrees to $3.6B GSK Buyout; Truvada Approved for Prophylactic Use

After weighing its options for three months, Human Genome Sciences Inc. agreed to a slightly sweetened offer from GlaxoSmithKline plc, agreeing to an acquisition for $14.25 per share in a cash deal that values the Rockville, Md.-based company at approximately $3.6 billion, or approximately $3 billion net of cash and debt.

In April, when HGSI publicly spurned GSK’s offer of $13 per share in cash, the biotech stock’s price nearly doubled in value overnight, closing at $14.17 on April 19, as analysts weighed in on prospects for a higher bid and, possibly, additional suitors. HGSI’s stock remained in the $14 range over the next month as the bid turned hostile and GSK, of London, repeatedly extended its tender offer.

But HGSI’s stock began to drift lower in recent weeks, and no white knight appeared on the scene. In the end, the company settled for an additional $1.25 per share, or a 9.6 percent premium over the initial offering. The deal represents a premium of 99 percent to HGSI’s closing price of $7.17 per share on April 18, the day before HGSI publicly disclosed GSK’s initial offer.

The boards of both companies have approved the transaction, which is expected to close without further delay. GSK amended its pending tender offer to reflect the higher price and to extend the expiration to midnight, Eastern time, on July 27. At the close of business on July 13, GSK said approximately 427,042 shares of HGSI had been tendered and not withdrawn.

The deal gives GSK full ownership of lupus drug Benlysta (belimumab), a recombinant, fully human, IgG1λ monoclonal antibody. GSK also picks up full ownership to albiglutide (Syncria), a once-weekly glucagon-like peptide-1 agonist in Phase III studies in Type II diabetes, and darapladib, an investigational Lp-PLA2 inhibitor in chronic coronary heart disease. The companies were development partners on all three drugs.

At midday, shares of HGSI (NASDAQ:HGSI) were up 4.5 percent, trading just south of the deal price of $14.25.

Also, the FDA approved Gilead Sciences Inc.’s Truvada as the first drug to help reduce the risk of contracting HIV-1, the most common form of HIV infections.

Approval of the new indication includes a risk evaluation and mitigation strategy (REMS) with voluntary checklists and educational materials for both prescribers and patients, Debra Birnkrant, director of the FDA’s Division of Antiviral Products, said during a media call Monday.

Since Truvada (emtricitabine/tenofovir disoproxil fumarate) is already approved for use in combination with other antiretroviral agents to treat HIV, Bernkrant said the new REMS couldn’t restrict access to the drug. However, because of concerns about side effects, the new labeling is strongly worded, she added.

As part of pre-exposure prophylaxis, individuals who are at high risk will take Truvada daily to lower their chances of becoming infected with HIV should they be exposed to the virus. It is intended to be used in combination with safe sex practices, risk reduction counseling and regular HIV testing.