HGS adopts ‘poison pill’ in response to Glaxo’s tender offer

The Human Genome Sciences Laboratories and Offices building in Rockville. (Jose Luis Magana - Reuters) Rockville-based Human Genome Sciences enacted a stockholder rights plan Thursday in an effort to prevent drugmaker GlaxoSmithKline from purchasing the biotech company against the will of its board of directors.

The tactic, known as a “poison pill,” aims to make the shares less attractive to an outside acquirer by giving the company’s existing shareholders special privileges. The HGS rights plan will activate when a third party purchases at least 15 percent of the company’s stock and will remain in place for one year.

Glaxo pledged Thursday to move forward with its tender offer and restated its belief that the proposed acquisition priceof $13-a-share, or $2.6 billion, reflects the value of HGS. The tender offer will close June 7.

“GSK will continue to proceed with its tender offer and has clearly stated its preference to complete a transaction on a friendly basis in a timely fashion,” the company said in a statement.

HGS began to review its strategic alternatives, including a possible sale of the company, after Glaxo put forth an unsolicited buyout bid last month worth $2.6 billion. HGS rejected that proposal saying it undervalued the company’s long-term financial prospects.

Glaxo countered earlier this month with a tender offer worth the same amount, a buyout tactic that would allow the British pharmaceutical company to subvert the board of directors by purchasing stock directly from shareholders.

The announcement of a stockholder rights plan came the same day that the company rebuffed the tender offer as too low and urged its shareholders not to sell at Glaxo’s $13-a-share asking price.

“The rights plan, which has a term of one year, is intended to allow the company to fully engage in its strategic review process and as a means to protect the long-term interests of the company’s stockholders,” HGS said in a statement. “The rights plan will not prevent any offers or transactions that the board determines to be in the best interest of HGS and its stockholders.”

HGS and Glaxo are co-developers of the Rockville firm’s only commercially viable drug to date, a treatment for systemic lupus called Benlysta. Sales of the drug have been slower than many analysts expected, driving down the price of the company’s shares compared to a year ago.