GlaxoSmithKline Buys Human Genome Sciences in a USD 3 Billion Acquisition

On an equity basis this acquisition was worth approximately USD 3.6 billion; however, the final deal size was about USD 3 billion net of cash and debt.

According to GlobalData (London, UK;), an international market research company, the acquisition of HGS gives GSK full rights to three main drugs: Benlysta (belimumab), albiglutide, and darapladib. The incentive of the acquisition is Benlysta. As the first approved therapy for systemic lupus erythematosus in more than 50 years, there were high potenital for Benlysta sales. Unfortunately, as the US Food and Drug Administration (FDA) noted during the approval process, only 30% of lupus patients realized a benefit in clinical trials, and adverse events due to the depressed immune response were higher in Benlysta-treated patients. Consequently, sales for Benlysta have disappointed in its first year on the market. Benlysta experienced a 77% increase in sales during the second quarter of 2012; however, after only reaching revenues of USD 31.2 million in the same quarter, sales remain considerably below what was originally forecast.

Albiglutide is scheduled for FDA filing in early 2013 in the treatment of type 2 diabetes. GLP-1 analog Albiglutide has a longer half-life than exenatide or liraglutide, the other GLP-1 analogs on the market, which means that the drug requires only weekly or biweekly dosing. Despite this advantage, head-to-head trial results to date have been split; albiglutide was not as efficacious as liraglutide, but beat sitagliptin (Januvia). Results from several other head-to-head studies are pending. Current consensus is that albiglutide will struggle in the competitive diabetes market, with peak sales near the USD 500 million mark. Lastly, darapladib, a phospholipase A2 inhibitor, is in phase III for coronary heart disease. Initial trial results are not expected until the end of 2013.

HGS marks big pharma’s second major acquisition of an established biotech player in the last few weeks, as Bristol-Meyers Squibb (BMS) acquired Amylin Pharmaceuticals in a USD 7 billion joint deal with AstraZeneca in late June. With big pharma approaching and experiencing multibillion dollar patent cliffs, they have begun looking to tighten up their development pipelines, and established biotechs have become the key targets. Companies with marketed products grant immediate revenue to displace losses from generic erosion, whereas companies with late-stage development pipelines provide potential of low-risk, high-reward investments. The price tags for these acquisitions are considerably higher than those of earlier stage biotech companies; however, pharmaceutical companies save on development and clinical trials costs, and gain a greater chance of successful approval, in effect increasing the expected value of the drug and company acquisition.

This trend should continue throughout 2012 and into 2013 million, according to GlobalData analysts. The next established biotech that could be placed on the auction block is BioMarin Pharmaceutical (Novato, CA, USA), who specializes in rare disease therapeutics. In July 2012, it was reported that GSK might have interest in the biotech, with estimates of what would be a USD 7 billion agreement.

Related Links:
GlaxoSmithKline
Human Genome Sciences
GlobalData