While Human Genome Sciences Inc. (HGSI) is open to a permanent relationship, the biotech is making it pretty clear that it wants a suitor that truly values what it has to offer.

So HGSI's message to long-term partner GlaxoSmithKline plc (GSK) is that if it hopes to successfully woo the Rockland, Md.-based biotech into an acquisition, it's going to have to flash a bigger engagement ring than the $2.6 billion, or $13 per share, it offered last week. (See BioWorld Today, April 20, 2012.)

"It is clear that GSK shares our view that the market has been overly focused on the short-term sales results of our company. We also can conclude that GSK shares our view that there is significant value in Benlysta as it achieves its potential over time," HGSI President and CEO Thomas Watkins said during the company's first-quarter earnings call late Tuesday.

But HGSI insisted that its value is deeper than Benlysta (belimumab), a lupus drug partnered with GSK. "This is a view we conclude that GSK must also share," Watkins said.

To help GSK and other possible suitors reach that conclusion, HGSI used the earnings call to strut its assets, including its internal pipeline and the drugs partnered with GSK.

It started with Benlysta, the first new lupus drug approved in more than 50 years, and HGSI's only approved drug. Physicians' uptake of Benlysta has been slow in its first year on the market. But sales are growing, and HGSI expects it to eventually hit $7 billion in U.S. sales. "Benlysta is a blockbuster in progress," Watkins said. (See BioWorld Today, March 11, 2011.)

It has a ways to go to hit the $1 billion blockbuster threshold. Benlysta posted $31.2 million in first-quarter sales, up nearly 18 percent from the previous quarter. Watkins stressed that sales increased for each four-week period in the first quarter. That growth should accelerate as more physicians move from trying the drug in a few patients to actually adopting it, he said.

While Benlysta generated the biggest portion of HGSI's first-quarter revenue of $47.1 million, the company realized $6.1 million in sales of its anthrax drug raxibacumab to the national stockpile and $9.1 million from manufacturing and development services. The company reported a GAAP net loss of $93.5 million, or 47 cents per share, for the quarter. As of March 31, it had $798.7 million in cash and investments, of which $719.2 million was unrestricted.

But it's not the balance sheet that HGSI was flaunting Wednesday. It was the pipeline, much of which is intertwined with its partnerships with London-based GSK. "Darapladib is a blockbuster in the making," Watson said, referring to an investigational Lp-PLA2 inhibitor that's in Phase III trials for chronic coronary heart disease.

Darapladib was discovered by GSK based on HGSI's technology. If the drug is commercialized, HGSI is entitled to 10 percent royalties on worldwide sales, plus a 20 percent co-promotion option in North America and Europe.

Another GSK-HGSI offspring in the works is albiglutide, which is in Phase III development as a Type II diabetes treatment. Created by HGSI, the once-weekly glucagon-like peptide-1 agonist was licensed to GSK in 2004. Under that agreement, HGSI is entitled to up to $183 million in fees and milestone payments, including $33 million already received, plus single-digit net royalties on worldwide sales.

Watkins, hinting at the possibility of seeking other suitors, said all of HGSI's rights in the partnered programs are fully transferable, and the company has plenty more to offer.

In addition to the GSK-partnered projects, HGSI is developing mapatumumab, which just began a Phase II hepatocellular cancer trial. It also is developing cancer drug HGS1036, through a regional collaboration with Five Prime Therapeutics Inc., and it's engaged in a number of partnerships with other biopharma companies over the years. (See BioWorld Today, April 18, 2012.)

In the Eye of the Beholder

However, value, like beauty, is in the eye of the beholder. In this case, GSK and HGSI are not seeing eye to eye. Responding to questions in GSK's earnings call Wednesday, GSK's CEO Andrew Witty said the pharma's offer, based on criteria used in other deals over the past four years, fully appreciates the value of the biotech.

Although HGSI has rebuffed GSK's advance, Witty had nothing but good to say about the long-term partner. "We've had a great relationship with [HGSI]," he said, adding that GSK's proposal was "a somewhat natural consequence of where things are at."

"It was time for us to make this a more efficient relationship," Witty said, noting that shareholders would benefit from the synergy that would result from the union.

"We are the compelling owner for this business. . . . We know the company probably better than anyone else – other than the people who run {HGSI] today," Witty said. Because of that, he saw no need to do due diligence.

Several analysts agreed with Witty. While other pharma companies might be interested in HGSI, GSK would prove the best fit, J.P. Morgan analyst Cory Kasimov said. He predicted the marriage would go through, with GSK paying a modest premium over its initial offer.

Cowen and Co.'s Eric Schmidt doubted there would be other suitors, adding that GSK's $13 per share "represents a substantial premium to fair value."

The offer represented an 81 percent premium to HGSI's April 18 closing price of $7.17 but only a 58 percent premium to the 90-day average of $8.23. Since news of the proposal got out, HGSI's shares (NASDAQ:HGSI) have climbed, closing at $14.48 Wednesday.