Just last month GlaxoSmithKline (NYSE:GSK) was in the news for a move to acquire Human Genome Sciences (HGSI), its partner of up to twenty years for $2.6 billion. If you follow the news, you will remember that Human Genome Sciences rejected the offer saying that the $13 dollar per share offer was too low and undervalued the firm.
However, we have not heard the last as to the news of GlaxoSmithKline reiterating its $13 per share offer, which, according to GlaxoSmithKline, stands for a "full and fair value". GlaxoSmithKline believes that its offer stands at a premium 81% for the closing share price of Human Genome at the time of making the offer. It also believes that the offer is necessary in order to consolidate the relationship between the two firms for the mutual benefit of shareholders on both sides.
Surprisingly, Human Genome has taken the bull by the horns in taking proactive steps that will protect it from the seemingly hostile takeover that GlaxoSmithKline had initiated. It was gathered that Human Genome had initiated what is technically known as a rights plan or a poison pill, which will be triggered at 15% as a defense against the looming takeover. News also has it that Human Genome has hired two banks, namely Goldman Sachs (NYSE:GS) and Credit Suisse (NYSE:CS), as financial consultants in a bid to formulate other alternatives that could save it from a hostile takeover. One of the alternatives that are being considered is the possibility of getting some other competitors to make bids, which so far has not happened.
From my own point of view, I think that the acquisition move is necessary and will surely see the stock rising to the benefit of the shareholders. Yet, the timing was very wrong and the acquisition offer that was supposed to be completed on friendly terms according to the GlaxoSmithKline has the potential to escalate into a hostile takeover. Given the present standing of GlaxoSmithKline as a giant in the industry, it will be hard to reconcile its public image with the image of a big shark diving in for the kill on the little fish, Human Genome. Thus, the move could see GlaxoSmithKline dropping in the next few days, yet, it will not be long before it kicks into bullish direction again.
Other news on acquisitions has it that GlaxoSmithKline is set to conclude a deal that will give it the complete ownership of Cellzome. The deal, which bears a price tag of $99 million in cash, will give GlaxoSmithKline control of the remaining 80.02% of the privately held company, which is based in Germany. GlaxoSmithKline previously held a 19.98% share of Cellzome.
The good thing about this acquisition is that it has not generated any bad publicity, unlike what is happening with Human Genome, and the acquisition will give GlaxoSmithKline the exclusive right to using the proteomics technology of Cellzome. The proteomics technology is used to analyze the efficiency of a drug and for safety profiling research. More so, the acquisition will see GlaxoSmithKline making its research and development unit stronger; there is no doubt that a strong research and development unit will ensure the development of innovative products that will make the stock rise in the future.
It seems it is a season of acquisitions for GlaxoSmithKline because it is linked to another news that will see it increasing its stake in Theravance (THRX). News has it that GlaxoSmithKline has recently purchased 10 million shares of Theravance to bring the totality of its share in Theravance to 25.81 million shares and to give it a 26.7% ownership in Theravance.
GlaxoSmithKline may also be geared for an unprecedented rise in the next couple of months with the announcement that a combination of two of its experimental melanoma drugs has been able to reduce the progress of cancer with minor side effects, which are not more than some skin complications in the early stages of a study. In the study, patients were given a combination of Trametinib and Dabrafenib (both from GlaxoSmithKline) and from the result of the study it was gathered that they had a lower outbreak of skin lesions or rashes. This new report actually has the potential to help GlaxoSmithKline take a larger control of the market for cancer drugs given that it has a low side effect.
In another interesting story, the Indian government plans to bring the prices of drugs under control to make it more affordable to its 1.2 billion citizens. This may certainly lead to reduced profits for GlaxoSmithKline and its competitors. However, both local and multinational pharmaceutical firms in the country are taking steps to ensure that the Indian government does not continue with its plan.
On another note, in the wake of the report of a probe that was conducted by Indian lawmakers that alleged that both multinational such as GlaxoSmithKline, Novartis (NYSE:NVS), Eli Lilly (NYSE:LLY) and Indian companies violated rules in getting the proper approval if drugs and also selling drugs that would not be sold in developed countries in India. The report holds that the Central Drugs Standard Control Organization in India has formed an alliance with pharmaceutical firms to approve drugs without proper procedure.
However, GlaxoSmithKline and competitor Eli Lilly have been quick to counter such claims. GlaxoSmithKline, in its own statement, said that it was given a waiver to carry out clinical trials in India especially on its drug Ambrisentan, which is used in treating pulmonary arterial hypertension. In its statement, it said that the local law has a provision for giving waivers to drugs that can be used in treating a "rare disease which is life threatening and debilitating."
In conclusion, it seems that GlaxoSmithKline is mainly in the news for acquisitions, which is a good thing because it signifies growth. However, growth needs to follow a plan so that the growing body will not grow beyond its ability to manage itself effectively, which may then prove to be its undoing. Stay tuned for news of how GlaxoSmithKline plans to use its new acquisitions and hope for some innovative ideas.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.