July 26, 2012 / 8:40 PM / in 5 years

Exclusive: Human Genome rejected Amgen's $7 billion bid in 2010: sources

NEW YORK/LONDON (Reuters) - Amgen Inc, the world’s largest biotech company, had offered to acquire Human Genome Sciences Inc for $35 per share two years ago, but the preliminary $7 billion bid was rejected by its smaller U.S. rival, two people familiar with the situation said on Thursday.

Amgen, at the time, was hunting aggressively for potential acquisitions to reinvigorate its product portfolio.

Human Genome, which last week agreed to be bought by British drugmaker GlaxoSmithKline Plc for $14.25 per share -- or $3 billion -- said in a filing with regulators last week that the company had received, and rebuffed, a preliminary takeover bid at $35 per share in August 2010. It did not identify the prospective buyer.

News of the $35 per share offer suggests GSK played its hand well by biding its time before pouncing on its long-time partner when the stock was down in the dumps earlier this year.

Human Genome’s board, consulted by its advisers at the time, decided not to pursue a sale at the proposed price, given that regulatory approval for Benlysta -- the first new treatment for lupus in 50 years -- was expected later in 2010, the company said in the filing last week.

According to the people familiar with the situation, Amgen was the company that made that approach in 2010. The people asked not to be identified because the matter was not public.

Representatives for Amgen declined to comment. Human Genome did not return calls for a comment.

Amgen itself proved uninterested when invited back by Human Genome as a potential “white knight” to fend off GSK’s initial unsolicited approach in April this year.

According to the filing by Human Genome, the company received a letter from an unnamed third party on August 3, 2010, indicating its “preliminary interest in pursuing a possible acquisition of all of the outstanding common stock of the company at a price of $35.00 per share in cash.”

The offer was declined around a week later, the filing shows.

Times, of course, were different then. Human Genome was still riding high on hopes for Benlysta -- rights to which are shared equally with GSK -- and the stock closed at $26.33 on August 2, 2010.

Benlysta went on to win approval by the Food and Drug Administration in March 2011, though early sales since its launch have disappointed investors and Human Genome’s shares have plummeted since.

“The company then believed that its best long-term strategic alternative was to remain an independent company and pursue the commercialization of Benlysta and the development of the other products then in its pipeline,” Human Genome said in the filing.

“Following the receipt of the $13.00 Offer from GSK, that third party declined the company’s invitation to participate in the company’s strategic alternative review process,” Human Genome added.

The U.S. pioneer of gene-based drug discovery was formed 20 years ago with the mission to isolate genes and identify their function in order to develop new drugs. Over the years it has had a rollercoaster ride as hopes for its drugs have waxed and waned.

Human Genome, whose shares touched as high as $30 last year, were trading at around $7 just before GSK’s initial $13 per share offer was made public on April 19. The British drugmaker eventually sweetened its offer to $14.25 per share to clinch the deal.

GSK’s successful offer may have represented a 99 percent premium to the price before it stepped into the fray, but it is still a bargain compared with what Amgen was ready to pay.

Amgen’s then-CEO, Kevin Sharer, told a Goldman Sachs conference in June 2010 that he was “aggressively” looking at acquisitions.

“We will take a risk in acquisitions, but it will be a measured risk. It sure won’t be a bet-the-company risk,” he said at the time.

For Amgen, with a market value of some $60 billion, Human Genome would certainly have fitted the bill as a significant, if not transformational, bolt-on deal.

In fact, some industry analysts, including Michael Yee of RBC Capital Markets, said at the time that Human Genome was the most sensible takeover target for Sharer’s acquisition-hungry team.

Other companies touted as possible targets for Amgen in 2010 and into 2011 included Actelion, a Swiss biotech company with a dominant position in treating pulmonary arterial hypertension, a rare heart and lung condition.

Reporting by Soyoung Kim in New York and Ben Hirschler in London; additional reporting by Deena Beasley in Los Angeles; editing by Matthew Lewis

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