Human Genome Sciences (HGS) has told its shareholders not to accept GSK’s hostile $13 per share tender offer.

Its Board of Directors insist the $2.6bn offer is inadequate, undervalues the company and is not in the best interests of HGS or its shareholders.

H. Thomas Watkins, HGS President and CEO, said its Board “has concluded unanimously” that the offer “does not reflect the value inherent in Human Genome Sciences”.

HSG rejected GSK’s initial takeover approach towards the end of April, forcing the pharma company to go back and target the company’s shareholders.

In the meantime, HGS instructed Wall Street advisors to search for potential suitors as part of a strategic review process – something GSK refused to participate in.

On reaching its recommendations to shareholders, HGS’s Board considered numerous factors.

Its Directors decided that its main product Benlysta – which it is in partnership with GSK – has “substantial growth opportunities” and pointed towards HGS’s “substantial financial assets”.

GSK were also accused of “opportunistically” capitalising on recent share price dislocation and capturing for itself the “significant upside opportunity for upcoming value-driving products”.

“The HGS Board of Directors has determined that the GSK offer is not in the best interests of our stockholders and recommends that they not tender shares to GSK,” said Mr Watkins.

GSK will table a hostile $2.6bn takeover bid for Human Genome Sciences after refusing to participate in its strategic review process.

Instead, Glaxo intends to press ahead with its $13 per share offer to HGS’ shareholders, despite the company’s board having previously rejected the same offer.

The bid offers a premium of 81% of HGS’s share price in mid-April, GSK says, and the pharma giant now hopes to evolve its relationship with the Maryland-based firm.

The two are in partnership for the diabetes drug Benlysta. GSK says it “values the long relationship” it has with HSG and would prefer to conduct takeover “on a friendly basis in a timely fashion”.

HSG rejected Glaxo’s initial $13 per share offer on the grounds it undervalued its potential and instructed Wall Street advisors to search for potential suitors, sources claim.

But GSK say their decision not to participate in the review process and to target HGS’s shareholders is unnecessary as there is “clear and strategic logic” to the combination of the companies.

It added that a month has passed since its original offer and that “provides a reasonable amount of time” for HGS to complete its review process.

GSK says it continues to believe that it has made a “full and fair offer” which provides “immediate liquidity” to shareholders in HSG.

GSK Chief Executive Sir Andrew Witty has ruled out a takeover bid for AstraZeneca.

Sir Andrew told shareholders at the company’s annual general meeting yesterday not to expect any major takeovers in the future as GSK focuses on the potential of its pipeline.

In response to a question over a possible merger, Sir Andrew said a deal for AZ would be “very distracting” at a time when experimental drugs in its pipeline are entering an exciting period.

The future of AstraZeneca remains uncertain as the company battles against generic competition, setbacks in drug development and the loss of its CEO David Brennan after he retires on June 1.

Revenue was down by 8% in the first three months of this year at AZ with sales in the US, Western Europe, Established Rest of the World and Emerging Rest of the World all falling.

David Brennan announced his retirement to coincide with the publication of the Q1 results after admitting that the pharmaceutical sector is “experiencing pressures none of which I’ve witnessed in my 36 years in the industry”.

AZ shareholders had criticised his leadership in recent years after the company had failed to compensate for the loss of revenue with mergers and acquisitions.

As a result, industry analysts have speculated that AZ may become a takeover target for one of pharma’s biggest companies.

A merger of GSK and AZ, the two largest pharma companies in the UK, would provide big cost savings. It led one GSK shareholder to raise the issue with the Chief Executive claiming it would be more effective than the recent $2.6bn offer for Human Genome Sciences.

Sir Andrew said GSK believes it can “deliver an extraordinary return to shareholders through this acquisition. I think we waited until exactly the right moment to make this offer, but nonetheless this is a compelling offer for shareholders at HGS to consider,” he said.

The $13 per share offer was rejected by HGS – who have now instructed Goldman Sachs and Credit Suisse to help explore strategic alternatives to GSK’s bid. Sir Andrew declined to comment on whether he had made contact with HGS’ management since GSK’s offer was rejected.

Human Genome Sciences’ (HGS) decision to reject GSK’s $2.59 billion acquisition offer highlights the future potential biotech companies believe they possess, analysts have said.

HGS rebuked GSK’s $13 per share offer and have now instructed Wall Street advisors to try and find other potential bidders, sources claim.

Paul Chapman, Partner at Marks & Clerk LLP, said the “stark dismissal” of GSK’s offer shows how biotech companies “value their portfolios and pipelines, and how much potential they see for the future”.

GSK’s offer was an 81% premium on the closing price of HGS’ stock on 18 April, the Financial Times reported. Its stock was as high as $30 per share around a year ago. But prices fell after the disappointing launch of its lupus drug – in partnership with GSK – Benlysta.

A statement from HSG said that the billion dollar offer from GSK does not reflect the company’s value – despite its high premium. Ana Nicholls, a healthcare analyst at the Economist Intelligence Unit, agrees.

She commented: “HGS’ decision to turn down the offer, which it says doesn't reflect its true value, suggests that it thinks it can get a better offer, either from GSK or elsewhere. It may be right. HGS’ two late-stage pipeline drugs, for diabetes and cardiovascular disease, have plenty of potential in large markets.”

The rejection of GSK’s offer comes a matter of days after Roche indicated it was considering abandoning its £6.8bn hostile bid for Illumina. Paul Chapman expects to see more takeover bids by pharmaceutical companies of biotech and biopharma firms in the future. “Major players in the pharmaceutical industries are in a bind,” he said. “The patent cliff is approaching fast and existing pipelines in more traditional areas of R&D seem insufficient to replace lost revenue. They need to rejuvenate pipelines and absorbing smaller, promising biotech firms is an attractive way of doing so.

“It could be that the likes of HGS and Illumina are quite aware of the advantageous position they are in, and are playing their hand accordingly. Glaxo can afford to return with a revised offer, the question is will they?”

The first drug for 50 years to treat systemic lupus has been approved in the US – and may be on its way to Europe.

Benlysta (belimumab) has been approved for adults with active, autoantibody-positive systemic lupus erythematosus (SLE) who are receiving standard therapy.

H. Thomas Watkins, President and CEO, Human Genome Sciences (HGS), who co-markets the inhibitor with GSK, says the two companies are “honoured” to bring the product to the US.

GSK submitted a Marketing Authorisation Application for Benlysta to the European Medicines Agency in June 2010. Applications have also been submitted, and are currently under consideration, in Canada, Australia, Switzerland, Russia, Brazil and The Philippines.

Moncef Slaoui, Chairman, GSK Research and Development (pictured), said, “The approval of Benlysta is an important step for appropriate lupus patients. Patients have been waiting for new treatment options to help manage this chronic disease.”