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GlaxoSmithKline to Buy Human Genome Sciences for $3.6 Billion


The deal that made the most sense for both companies was announced Monday. The $14.25 per share is a 99% premium to Human Genome's stock before word of takeover interest was made public.

MINYANVILLE ORIGINAL After a three-month hunt, GlaxoSmithKline (GSK) appears to have bagged its prey as the drug maker says it will pay $3.6 billion, or $14.25 per share, for Human Genome Sciences (HGSI).

The cash deal tops Glaxo's original bid of $13 per share in April for its drug-development partner. Glaxo would gain full rights to the lupus drug Benlysta and drugs in development for diabetes and heart disease. All along, it was the deal that made the most sense for both companies but Human Genome held out for a bigger price. After spurning Glaxo, the Rockville, Maryland-based biotech company put itself up for sale, a move that it said garnered some interest. However, it's unclear whether any other company bid. A report that Celgene (CELG) may have been interested did little to rally Human Genome's stock. (See Human Genome Sciences Awaits Bids Next Week.)

Glaxo is paying almost twice the share price of Human Genome's stock before word of the British drug maker's takeover interest was made public in April. The stock traded as high as $14.71 in late April. At least one analyst, Christopher Raymond of Robert W. Baird, predicted Human Genome would fetch a price closer to $20 per share.

"While this number is lower than the high-teens valuation we had hoped for, it is materially higher than the original bid," Raymond says in a note Monday.

Glaxo's American shares rose less than 1% to $45.23 in morning trading Monday. The stock is down 1% this year. Human Genome rose 5% to $14.20 in morning trading and is still down 39% over the past 12 months. The stock traded just below $30 per share in April 2011.

Glaxo and Human Genome's Benlysta became the first new drug to be approved for lupus in the US in a half century. But sales of the treatment were slower than expected, contributing to a drop in Human Genome's share price.

In addition to Benlysta, Glaxo would gain rights to an experimental diabetes drug albiglutide and the therapy darapladib for chronic coronary heart disease. The companies also are in early stages of testing an Alzheimer's treatment.

As part of the deal, Glaxo says it plans to cut $200 million in annual costs by 2015. Having full rights of the drugs it has been developing with longtime partner Human Genome will "simplify and optimize" sales, manufacturing, R&D and other operations, the company says.

"This is a natural step in our nearly 20-year relationship with [Human Genome]," Glaxo CEO Andrew Witty says in a statement.

In his own statement, Human Genome CEO H. Thomas Watkins says: "After a thorough analysis of strategic alternatives, [Human Genome] has determined that a combination with [Glaxo] is the best course of action for our company and the best way to maximize value for our stockholders."

Twitter: @brettchase

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