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Human Genome Sciences Shares Rise on Talk of Takeover

By Meg Tirrell and Jeff Kearns
Bloomberg News
Wednesday, August 26, 2009

Shares of Human Genome Sciences, the maker of an experimental lupus drug, gained for a sixth consecutive day and options trading jumped on speculation that GlaxoSmithKline may make a $30-per-share offer to buy it.

The Rockville company's stock surged $2.02, or 11.8 percent, to $19.20 Tuesday. It was HGS's biggest percentage gain in a month, pushing the shares to their highest value since April 4, 2002.

The Daily Telegraph in Britain reported Monday that London-based Glaxo may be preparing an offer for the smaller company, which also makes an experimental drug for hepatitis C.

"Pre-market rumors that GlaxoSmithKline may be planning a $30-per-share takeover of Human Genome launched shares of the biopharmaceutical company to a new 52-week high," Andrew Wilkinson, the senior market analyst at Greenwich, Conn.-based Interactive Brokers Group, wrote in a note Tuesday.

The stock more than tripled on July 20 after Human Genome reported positive results of a year-long study on its lupus drug, Benlysta, being developed with Glaxo. No cure exists for the disease, which triggers the immune system to attack healthy cells and affects about 5 million people worldwide.

Glaxo chief executive Andrew Witty has said his strategy is to focus on collaborations with small firms and targeted acquisitions in emerging economies, while expanding in consumer products. The London-based company made at least four emerging market purchases in the past year.

In April, Witty made the biggest acquisition of his 15-month tenure as CEO, paying $2.9 billion for Stiefel Laboratories, a closely held Coral Gables, Fla.-based dermatology firm. Claire Brough, a spokeswoman for Glaxo, declined to comment on speculation about Human Genome Sciences.

"It makes a lot of sense," said Liisa Bayko, a JMP Securities analyst. "If the lupus drug ends up being positive, it's a shoo-in for GSK to buy them out considering they have access to a lot of Human Genome's portfolio."

Human Genome spokesman Jerry Parrott declined to comment.

Bloomberg staff writers Trista Kelley in London, Lisa Rapaport in New York and David Olmos in San Francisco contributed to this report.

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