Human Genome Sciences ($HGSI) wants to flirt with some new potential suitors. After turning down GlaxoSmithKline's ($GSK) $2.6 billion offer last week, the company says it's exploring its strategic alternatives. But analysts are skeptical that other buyers will show up for the party.
GSK CEO Andrew Witty says his company is "the compelling owner for this business," and market-watchers appear to agree: They say GSK's superior claim--it's HGS' partner on the new lupus treatment Benlysta and two experimental drugs--will discourage other interest. Another buyer "would be at a bit of a disadvantage knowing that GSK has insights into the (Human Genome) pipeline," Cowen and Co.'s Eric Schmidt told Reuters. "It just doesn't seem like a comfortable situation for a third party to get involved with."
That's essentially what Witty was saying during today's first-quarter earnings call. "We have the rights and the operational control for the three main assets," Witty said, "and we believe this is the right time to maximize value for both sets of shareholders."
The Human Genome people don't necessarily disagree in principle. They do disagree with GSK's definition of its value. CEO Thomas Watkins maintains that, despite its slow start, Benlysta still has "blockbuster potential." And then there's the experimental heart drug darapladib, which Watkins calls "a blockbuster in the making."
Witty counters that, despite encouraging signs from darapladib research, it's still a risky bet that won't pay off for years. Still, Schmidt thinks GSK could well end up raising its bid a bit, perhaps to $15 per share from $13. "I'm sure GSK didn't make its best offer first," he told Reuters. "I think they will go modestly higher."