LONDON GlaxoSmithKline (GSK.L) said it would not proceed with its $2.6 billion offer for Human Genome Sciences HGSI.O unless the U.S. biotechnology company dropped a "poison pill" shareholder rights plan imposed to block the deal.
Human Genome adopted the stockholder rights plan earlier this month in an attempt to ward off GSK in what is becoming an increasingly acrimonious battle between the companies that together sell new Lupus drug Benlysta.
The British company is taking its $13-a-share offer direct to investors after Human Genome's board said it was inadequate.
The plan allows shareholders to buy additional shares at a discount if one investor buys or launches a tender offer for more than 15 percent of the group's stock without the board's approval, effectively blocking an unwanted bidder.
"Because Human Genome has adopted a poison pill, GSK has added a condition to its offer requiring Human Genome to redeem the pill or, alternatively, GSK being satisfied in its reasonable judgment that the pill has been invalidated or is otherwise inapplicable to GSK's acquisition of Human Genome," GSK said in a statement on Wednesday.
Human Genome, an early pioneer of gene-based drug discovery, had said the rights plan would allow it to complete a strategic review.
Analyst Navid Malik at Cenkos Securities said Human Genome had taken an aggressive approach.
"It is certainly not going to endear GSK towards upping their offer in my view; it increases the risk of them just walking away, and I don't think there is a white knight that can offer a meaningfully higher offer for the shares," he said.
GSK said its tender offer was still scheduled to expire at 12:00 midnight New York time on June 7.
GSK's shares were down 1.4 percent at 1,396.5 pence at 10:29 a.m. EDT (1429 GMT), while Human Genome's shares were down 1.5 percent at $13.78.
(Reporting by Sarah Young and Paul Sandle; Editing by Will Waterman)