Biotech targets fight back as Big Pharma circles

Wed May 2, 2012 10:28am EDT
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By Ben Hirschler and Sophie Sassard

LONDON (Reuters) - Biotech companies are fighting back in an unequal battle with Big Pharma, helped by a small but powerful cohort of investors who dominate the companies' share registers.

A Reuters analysis of 10 likely biotech takeover targets shows the extent to which a few large investors, including Fidelity Investments, Capital Research Global Investors, Wellington Management and T. Rowe Price Associates hold the keys to the kingdom when it comes to negotiating a deal.

From Amylin Pharmaceuticals AMLN.O to Onyx Pharmaceuticals ONXX.O and Human Genome Sciences HGSI.O, these U.S.-based companies are, on average, 60-percent held by their top 10 shareholders, according to ownership filings.

That can help explain their ability to fend off an unwanted advance by the biggest players in the drug industry.

"There is a lot of concentration of power in the hands of certain shareholders, which basically demands more negotiations and more convincing arguments before deals get done," said long-time biotech investor Francesco De Rubertis, a partner at Index Ventures.

It could also leave major drugmakers with little option but to contemplate higher deal premiums, as they hunt for promising new drugs and technologies to refill pipelines depleted by the biggest wave of patent expiries in pharmaceutical history.

In some cases the fight-back is already gaining traction.

Last month GlaxoSmithKline (GSK.L: Quote) had a $2.6 billion offer for its long-time partner Human Genome spurned with no discussion, while a resounding snub from investors prompted Roche ROG.VX to walk away from Illumina (ILMN.O: Quote).   Continued...

Signage is pictured on the company headquarters of GlaxoSmithKline in west London July 21, 2008. REUTERS/Toby Melville