True or False: Celgene ($CELG) is weighing a bid for Human Genome Sciences ($HGSI). For GlaxoSmithKline ($GSK), the question isn't insignificant. The U.K. drugmaker has its own hostile bid to consider--and if other buyers really are interested, then Glaxo might want to jump in with a new, higher offer.
It's an anonymous source-versus-anonymous source dilemma. Reuters reports that two companies, including Celgene, are poised to enter the bidding for HGS. The second company wasn't identified, though Reuters' source described that potential deal as a merger of equals.
The Street, on the other hand, says its source spat on the very idea that Celgene would buy HGS. And here's where the identity of the sources comes in. The Street's tipster is "in contact with Celgene management," the news site reports. This person asserts that Celgene isn't at all interested in joining forces with HGS--and suggests that Human Genome's bankers are planting rumors to prod Glaxo into raising its $13-per-share bid.
Meanwhile, analysts are unimpressed, to put it mildly, by the potential combo of Celgene and HGS. "Awful! Dumbest thing ever!" one told The Street. "Crazy. Nuts. Horrid. Putrid," another said.
It's true that Celgene needs a boost. Its plans for expanding the Revlimid franchise have hit some big snags recently. But whether Human Genome could provide a lift is another story. Benlysta, the first new treatment for lupus in decades, didn't hit the market with a bang, and some payer setbacks pose a challenge to sales growth.
One reason the deal makes sense for Glaxo is that it's already partnered up with HGS on Benlysta, as well as some in-development products. On the other hand, Benlysta and its prospective cousins wouldn't be out of place at Celgene. Though the company is known for its blood-cancer treatments, it is also studying two lupus therapies.
So, here's a role-playing game. If you were Glaxo CEO Andrew Witty, which source would you believe? And then what would you do?