Human Genome rejects GlaxoSmithKline's $2.59B bid

Rockville, Md. - Biotech drugmaker Human Genome Sciences Inc. has rejected an unsolicited $2.59 billion takeover bid by GlaxoSmithKline PLC, the British pharmaceutical giant that spent nearly two decades helping the smaller company bring its first drug to market.

Rockville, Md.-based Human Genome Sciences said Thursday the offer undervalues the company and that it would explore other options, which could include a potential sale of the company. It invited GlaxoSmithKline to participate in its exploratory process.

GlaxoSmithKline offered $13 per share, which is an 81 percent premium to Human Genome's closing price on Wednesday of $7.17 per share. Human Genome currently has about 199.1 million outstanding shares, according to FactSet.

Glaxo CEO Andrew Witty said he was disappointed with the offer's rejection.

"We believe there is clear strategic and financial logic to this combination for both companies and our respective shareholders - and that now is the appropriate time in the evolution of our relationship for our two companies to combine," Witty said in a statement. Glaxo said a combination of the two companies would help the company save $200 million in expenses by 2015.

Analysts have speculated for months that Glaxo might try to buy its partner.

Shares of Human Genome Sciences nearly doubled, rising $6.98 to $14.15 in afternoon trading, while GlaxoSmithKline's U.S. stock added 27 cents to $46.64.

Glaxo and Human Genome Sciences currently split sales of the injectable biotech drug Benlysta, which made headlines last year as the first new drug approved for lupus in 50 years. Sales have been underwhelming since the drug launched in March, with monthly revenue averaging $11 million. Still, some analysts believe the drug could eventually grow into a billion-dollar blockbuster in coming years due to its large market and price tag. More than 200,000 U.S. lupus patients could benefit from the drug, which costs $35,000 per year.

Lupus causes fibrous tissue and inflammation of internal organs, skin rashes and joint pain. Most of Benlysta's benefit came from relieving muscle inflammation rather than treating the underlying disease.