GlaxoSmithKline is nearing a deal to acquire Human Genome Sciences for about $2.8 billion in cash after pursuing the U.S. biotech company for three months, two sources familiar with the situation said on Sunday.
The British pharmaceutical giant is expected to raise its offer to around $14 per share from $13 previously, the sources said, declining to be identified because the information was confidential. A deal is expected to be announced before the U.S. stock market opens on Monday, they said.
The deal has yet to be finalized and the companies are still working out last-minute details, the sources said.
Human Genome, which rejected GlaxoSmithKline's $2.6 billion offer in April as too low and launched an auction process, had come under pressure from investors to try and strike a deal with the British drugmaker in the absence of any alternative bids.
The U.S. company -- an early pioneer of gene-based drug discovery -- had set itself a July 16 deadline for finding higher bids. Interest has been limited because GSK, its long-time partner, already has marketing rights to its drugs.
U.S. biotech company Celgene Corp was at one stage considering whether to bid and was conducting due diligence, according to a separate source familiar with the matter, but negative analyst and investor reaction when news of those discussions broke deterred the U.S. group.
Without alternative bids, Human Genome shareholders had been pressing the company's management to engage with GSK before July 16 to avoid a share price collapse -- and that argument acted as a trigger for the weekend discussions.
Human Genome, which has been trying to find another buyer in a separate auction process after GSK took its offer directly to shareholders, reached out first to its hostile suitor to negotiate a deal, according to one of the sources.
While the deal had been clinched at a small bump to the existing $2.6 billion offer, a so-called contingent value right (CVR) -- an additional benefit tied to a specific drug's success -- is not expected to be part of a deal, the sources added.
A spokesman for GSK declined to comment, while officials at Human Genome were not immediately available.
Last year, Human Genome and GSK won approval for Benlysta, the first new treatment for lupus in 50 years. But the drug's launch disappointed investors and Human Genome's shares fell from a high above $25 to a low of $6.51 in December. Glaxo made its offer a few months later, prompting Human Genome to launch an auction with the help of Credit Suisse and Goldman Sachs.
Human Genome and GSK share rights to Benlysta. They are also collaborating on two other experimental drugs in late-stage trials for heart disease and diabetes, where GSK owns a large majority of the economic interest.
Buying Human Genome will give GSK full rights to these partnered drugs, underscoring the appetite among big drugmakers for biotech products to drive future sales.
GSK will be also be able to strip out costs and the company's chief executive, Andrew Witty, told investors in May he expected to deliver "an extraordinary return" through the acquisition.
Human Genome investors had been hoping that GSK would sweeten its offer and the shares closed on Friday at $13.58 - above GSK's offer but well down on the level of more than $15 hit in April, soon after the unsolicited offer was made public.
There have been a spate of acquisitions of biotech companies this year as large pharmaceutical companies seek to rebuild their pipelines after a wave of patent expiries.
Most recently, Bristol-Myers Squibb agreed to buy diabetes specialist Amylin Pharmaceuticals by sharing the $7 billion cost of the deal with AstraZeneca.
(Reporting by Ben Hirschler in London and Soyoung Kim in New York; Additional reporting by Greg Roumeliotis in New York; Editing by Susan Fenton, Gunna Dickson and Ryan Woo)