Four things to watch following the Human Genome Sciences acquisition


Human Genome Sciences' headquarters in Rockville. (Jeffrey MacMillan/Capital Business)

News that Human Genome Sciences agreed to a $3.6 billion buyout by British drugmaker GlaxoSmithKline last week brought an end to a months-long struggle for control of the Rockville firm.

But the agreement also raises questions about what the deal will mean for both HGS and the region’s biotechnology community, and points to trends shaping the industry that seem poised to continue. Both firms have declined to comment.

Take a look at four things to watch as the ink dries on the deal.

1. The future of the HGS headquarters and production facilities in Maryland, and the hundreds of employees who work there, is perhaps the biggest question on the mind of the region’s economic developers.

The loss of some or all of those jobs would deliver a noticeable blow to efforts by state and county officials to grow the Interstate 270 corridor into a thriving life sciences hub. Glaxo already has offices in Philadelphia and Research Triangle Park, N.C.

“We are obviously reaching out to Glaxo to indicate we are supportive of their efforts and would like to have a conversation about efforts to maintain or expand their presence,” said Judy Britz, executive director of the Maryland Biotechnology Center.

Recent history could work to the state’s advantage. Both AstraZeneca and Qiagen expanded the payrolls and square footage at MedImmune and Digene, respectively, after those companies were snapped up in 2007.

The HGS acquisition“could result in potentially some loses of jobs but it also could mean Glaxo is going to shift some workers over here,” said Stephen Fuller, director of George Mason University’s Center for Regional Analysis. “There’s a good outcome and a not-so-good outcome that will be determined in the next month or two.”

2. The outcome for HGS executives will likely be a different story. A company’s top brass doesn’t normally linger long after the deal is signed, though Glaxo could seek to dictate that timeline with contract stipulations.

The Glaxo and HGS deal may be unique in that the firms have been partners for two decades, meaning Glaxo is already familiar with the leadership and may not feel as inclined to replace them.

Still, executive departures could prove beneficial to the region’s biotechnology industry. Those leaders are likely to start their own venture or take their expertise to fledgling firms and begin building again from the ground up.

“You’re going to find people who have experience and now have seen how it’s done,” said Doug Doerfler, chief executive at MaxCyte and vice chairman of the Tech Council of Maryland's MdBio division. “The great thing about being with a company like HGS or MedImmune is you’ve gotten to see how you get across the finish line to a product.”

Steve Dubin and David Abramson, formerly the heads of Martek Biosciences in Columbia, formed advisory firm SDA Ventures after the company’s sale to Royal DSM. MedImmune’s purchase resulted in several spin-off ventures, including Amplimmune and Zyngenia, both in Gaithersburg.

3. Some industry observers held hope that HGS would remain a stand-alone company as its flagship lupus drug Benlysta landed on the market, bucking the trend of biotechnology firms being folded into already established pharmaceutical companies.

The trend prevails. Many big pharmaceutical companies are approaching a “patent cliff,” meaning the medications that made them so much money will soon have generic alternatives. Thus, they’re buying drug candidates from smaller players.

“The big pharmaceutical companies just see them as an easy way to buy research that you didn’t have to invest in early on and didn’t have to absorb all of the costs,” said Fuller, whose wife works for HGS.

HGS is a slightly different story. Glaxo funneled $125 million into the firm more than a decade ago and already had rights to certain profits from Benlysta. The deal could bring Glaxo’s sales prowess to bear in the United States, where sales of the lupus drug have been slower than analysts predicted.

4. HGS’s long-standing partnership with Glaxo may have made it more difficult for the Rockville company to garner competitive bids. Any other firm would be buying HGS’s stake in products already owned in part by Glaxo, said Liisa Bayko, managing director at JMP Securities.

For other biotech firms drafting drug development deals with pharmaceutical behemoths, Bayko said the HGS deal raises questions about whether those agreements could ultimately limit exit opportunities.

“People might think about ... what does that mean, does that handicap you in some way?” Bayko said. “You’re obviously more tied to that partner.”

Britz said, “Many large pharma or diagnostic companies will make strategic investments that also give them some first right of refusal [and] that position them well should they want to acquire the company.”

Locally, Rockville-based Micromet had a partnership with Amgen before being bought by the Thousand Oaks, Calif.-based firm for $1.16 billion in January.

Steven Overly is a national reporter covering federal technology and energy policy with a focus on Capitol Hill. He previously covered the business of technology, biotechnology and venture capital.
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