The buyout of HGS continues a run on big biotechs by pharma over the last several years. Source: Human Genome Sciences

London-based GlaxoSmithKline (GSK) acquired for $3.6 billion long-time collaborator Human Genome Sciences (HGS), the developer of Benlysta (belimumab), a human antibody that targets BLyS (B lymphocyte stimulator) approved in 2011 as the first new drug for lupus in almost 50 years (Nat. Biotechnol. 29, 292, 2011). The partnership, which began in 1993, has generated two other compounds now in late-stage trials at GSK: darapladib, an inhibitor of lipoprotein-associated phospholipase A2 discovered by GSK using HGS technology, for treating cardiovascular diseases including atherosclerosis, and albiglutide, a glucagon-like peptide-1 (GLP-1) receptor antagonist for type 2 diabetes, created by HGS using albumin-fusion technology and licensed to GSK in 2004. GSK initially launched a $13 per share tender offer for HGS in April 2012. HGS' management advised shareholders to reject that bid, claiming among other things that it did not adequately reflect the value to HGS of the three products, though it also cited synergies GSK would obtain in the buyout and the benefit of HGS' $2.6 billion in net operating loss carryforwards and R&D tax credits. HGS opened the door to competing offers from other companies, but GSK then upped its bid to $14.25 per share, or the final $3.6-billion price. “It was a foregone conclusion that HGS was going to be acquired by GSK,” given the terms of their partnership, says David Brindley of The European Centre for Accelerating Medical Innovations at the University of Oxford. “From an investors' point of view, I'd go as far as to say it was formulaic.” Had HGS been as valuable to anyone else, “there's no way that there would not have been a bidding war,” he says. With its global marketing infrastructure, GSK may be in better position to maximize the value of Benlysta. With net sales of $52.3 million in 2011 and $31.2 million in first-quarter 2012, HGS' launch of the drug had fallen below analyst estimates.

If not for GSK's support, Benlysta might never have seen the light of day. The companies began working together in 1993 when GSK (then SmithKline Beecham) committed up to a whopping $125 million for rights to HGS' mRNA-based discovery process, among the first industry models for a broad-based genomics approach linking protein discovery with disease. But over the next decade, despite the funding from GSK and a series of large public stock offerings, HGS' own product development efforts foundered. Then, in 2005, GSK became HGS' partner for Benlysta's development, remaining stalwart even after a failed Phase 2 trial a few months later threatened the compound's future and initiating the first of two dramatically successful Phase 3 studies in 2007 (Nat. Biotechnol. 27, 779, 2009).