HGS rejected the initial offer. Glaxo then made a hostile, public offering to shareholders, while HGS said it was soliciting other bids.
The health-care business is changing rapidly, at least by its standards, creating financial conflicts. Patients and insurers — government and private — want to pay less for drugs and services. Providers, such as doctors, pharmaceutical companies and hospitals, hope to stay in business or increase their profits.
That concern, in turn, has prompted a new surge of big pharmaceutical companies acquiring smaller ones or forging partnerships.
For example, several companies bid for Amylin before Bristol-Myers Squibb acquired it for $5.3 billion earlier this month. AstraZeneca then paid $3.4 billion to partner with BMS in selling Amylin's drugs.
In this case, Glaxo wanted to take over HGS, with which it had had a 19-year partnership, save a projected $200 million in costs by 2015, and increase profits or potential profits from the drugs involved. Though Celgene Corp. reportedly inquired about HGS, the existing partnership deterred other suitors because they would only get a piece of HGS' drugs.
Two of the compounds, both still in clinical trials, are darapladib (for heart disease and stroke) and albiglutide (for diabetes). Many competitors also offer drugs for those diseases.
The third drug of note is Benlysta, which the FDA last year approved for use as the first new treatment for lupus in 50 years. HGS reported first-quarter sales of $35.6 million. Glaxo might be inclined to market Benlysta more heavily now that it won't have to share profits through the partnership.
"By gaining full rights to several partnered products, Glaxo's pipeline is better positioned to help the company accelerate its growth," Morningstar analyst Lauren Migliore wrote in a note. "Also, we believe the deal signals Glaxo's strong conviction in darapladib, which could develop into a major blockbuster."
Glaxo said it expected the acquisition would add to earnings in 2013 and that it would continue with its ongoing share buyback program.
"We are pleased to have reached a mutually beneficial agreement with HGS on friendly terms and believe the combination of GSK and HGS represents clear financial and strategic logic for both companies and our respective shareholders," Glaxo chief executive officer Andrew Witty said in a statement. "The transaction meets GSK's strict financial criteria for acquisitions, and we expect will deliver significant returns over the long term."
Contact David Sell at 215-854-4506 or firstname.lastname@example.org or Twitter @PhillyPharma. Read his PhillyPharma blog on philly.com.