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GLAXO TO BEGIN HOSTILE TENDER FOR HUMAN GENOME SCIENCES -- GlaxoSmithKline Plc (London GBR) began a hostile $2.6 billion tender offer last week for Human Genome Sciences Inc. (Rockville MD) after the U.S. company, its partner on the Benlysta drug for lupus, rebuffed an earlier takeover approach. Glaxo will offer $13 a share in cash, or 81% more than Human Genome’s closing price on April 18, the British drugmaker said in a statement. Human Genome announced April 19 that Glaxo had offered to buy the company for that price. Human Genome reiterated last week that the offer was too low and that it’s reviewing alternatives. Glaxo, which is developing two other medicines with Human Genome, said it won’t participate in the review, in part because it wants Human Genome shareholders to know that it’s committed to proceeding with the offer. It’s unlikely that another potential acquirer will bid for the company, said Rajesh Varma, who helps manage 5 billion euros ($6.6 billion) for Human Genome shareholder DNCA Finance SA in Paris. “It will probably be a long, drawn-out story,” Varma said.
Glaxo’s bid is part of a wave of takeover activity in the pharmaceutical industry as drugmakers seek new products. Roche Holding AG (Basel CHE) made a hostile offer for Illumina Inc. (San Diego CA) in January, and abandoned it last month. AstraZeneca Plc (London GBR) agreed last month to buy Ardea Biosciences Inc. for $1.3 billion. The Glaxo offer became public last month after Human Genome shares slid 76% from their 2011 peak. Sales growth for Benlysta, Human Genome’s first drug on the market, has disappointed investors, and the company may not become profitable for years. “To take part in a strategic review of the target company is only going to result in the price going up,” said Savvas Neophytou, an analyst at Panmure Gordon in London. Glaxo “must have decided whatever they are offering is adequate and covered by the assets that are visible to them.”
Human Genome rejected the bid last month partly out of concern for stockholders who bought shares at an average price that’s higher than the offer, two people with knowledge of the matter said at the time. All but three of the 25 largest shareholders acquired stock at a higher average price, said the people, who asked not to be named because the talks are private. Human Genome closed the week up 33 cents, or 2%, at $14.70 in New York. Glaxo fell 2.50 pence to 1,424.50 pence in London trading.
HEALTHCARE ACCESS TO ERODE IF OBAMA LAW STRUCK DOWN: STUDY -- Most Americans have seen a decade-long erosion in access to medical services that is likely to continue if President Barack Obama’s healthcare law is struck down by the Supreme Court or repealed in Congress, a study released last week shows. The study, one of a series on the fractured state of the $2.6 trillion U.S. healthcare system published in the May issue of the journal Health Affairs, says access to health care deteriorated for U.S. adults aged 19 to 64 between 2000 and 2010, even among those with private health insurance. The age group represents about 195 million people, according to U.S. Census data, and has been targeted for expanded health coverage under the 2010 Patient Protection and Affordable Care Act, Obama’s signature domestic policy achievement. The Supreme Court is considering whether to strike down all or part of the law, with a ruling due next month. The law would extend affordable health coverage to more than 32 million uninsured Americans beginning in 2014, by creating subsidized, state-regulated health insurance markets and by expanding the joint federal-state Medicaid program for the poor. The U.S. Department of Health and Human Services says access to care and use of healthcare services has declined in recent years, partly as a result of a recession that swelled the ranks of the unemployed and uninsured.
Researchers at the nonpartisan Urban Institute found the deterioration in access to care was evident even earlier, from 2000 to 2010, as spiraling healthcare costs led to reductions in employer-sponsored insurance benefits and strained the existing Medicaid system for the poor. An exception was seen for children, who were protected from the decade-long erosion by concerted efforts to enhance their coverage. On that basis, the researchers predicted that adults would benefit from reforms that counter higher costs for the privately insured, raise Medicaid payments to providers and shore up the social safety net. “If the key coverage provisions in the (law) are ruled unconstitutional or repealed, projections indicate that the numbers of uninsured people will grow,” the researchers wrote. “Given what we have observed over the past decade, we would be likely to see further deterioration in access to care for all adults--insured and uninsured alike,” they said. The researchers found that adults in 2010 were 66% more likely to report unmet medical needs than in 2000, 79% more likely to have unmet dental needs and were also more likely to have delayed treatment.
MEDICAL STOCK SPOTLIGHT
-- Repros Therapeutics Inc. (Nasdaq) led advancing issues, soaring $3.59, or 85% on the week, to $7.80. The upward blast came after the company announced it held a meeting with the Division of Reproductive and Urologic Products (a part of the Food and Drug Administration which regulates New Drug Applications) to agree upon the registration requirements for the company’s Androxal oral therapy for the treatment of secondary hypogonadism. The Woodlands, TX-based Repros believes secondary hypogonadism is responsible for over 90% of the incidence of low testosterone in the United States. Repros is a development-stage biopharmaceutical company focused on new drugs to treat hormonal and reproductive system disorders.Elsewhere, Vertex Pharmaceuticals Inc. (Nasdaq) rocketed $24.61, or 66%, to $62.02. The Cambridge, MA-based company said its new cystic fibrosis drug Kalydeco, when combined with its experimental treatment for the disease, led to significantly improved breathing ability in a mid-stage study. The data suggested Vertex could have a multibillion-dollar franchise in cystic fibrosis, a life threatening genetic disorder that affects about 70,000 people worldwide. Kalydeco, which in January became the first approved drug to treat the underlying cause rather than symptoms of the life-shortening lung disease, helps only about 4% of cystic fibrosis patients with a specific gene mutation. Vertex is testing combinations it hopes will eventually be able to address the larger CF population.
Keryx Biopharmaceuticals Inc. (Nasdaq) leaped 30% to $1.89. The company was upgraded by equities research analysts at Ladenburg Thalmann from a “neutral” to a “buy” rating in a research note. The brokerage currently has a $3.00 price target on the stock. A number of other analysts have also recently weighed in on KERX. Analysts at Roth Capital also upgraded Keryx from a “neutral” to a “buy” rating. New York-based Keryx is a biopharmaceutical company focused on the acquisition, development and commercialization of pharmaceutical products for the treatment of cancer and renal disease.
And Greenway Medical Technologies Inc. (NYSE) jumped $2.71, or 21%, to $15.54. The company reported fiscal 3Q earnings per share of $0.08, $0.04 better than the analysts’ estimates. Revenue for the quarter came in at $32.9 million versus the consensus estimate of $28.54 million. Carrollton, GA-based Greenway Medical develops, markets and sells a suite of healthcare technology products, including practice management and electronic medical record software applications for physician practices, clinics and other providers in ambulatory settings. Its suite of products and services is called PrimeSUITE, which integrates clinical, financial and administrative data in a single database to enable views of patient records and workflow throughout each patient encounter.
But MAKO Surgical Corp. (Nasdaq) plunged $16.47, or 42%, to $23.20 after cutting its annual sales projections for a key product. The medical device maker said it sold fewer-than-expected numbers of its RIO robotic surgery systems in the first quarter. MAKO now expects to sell 52 to 58 RIO systems--a robotic-arm interactive system used for minimally invasive knee procedures--during the year. It had previously forecast sales of 56 to 62 RIO systems. The company sold six RIO systems in the quarter, down from the 18 it sold in the fourth quarter. Net loss for the first-quarter widened to $11.7 million, or 28 cents share, from $11 million, or 27 cents per share, a year earlier. Quarterly revenue rose 51% to $19.6 million. Analysts had expected a loss of 20 cents a share, on revenue of $23.7 million. For 2012, the Fort Lauderdale, FL-based orthopedic device maker backed its forecast of 11,000 to 13,000 MAKOplasty procedures--a procedure for total hip arthroplasty and partial knee resurfacing.
Merge Healthcare Inc. (Nasdaq) stumbled $1.12, or 29%, to $2.74 after reporting 1Q earnings per share of $0.03, $0.01 worse than the analysts’ estimates. Revenue for the quarter came in at $61.6 million versus the consensus estimate of $64.83 million. The company withdrew its previous outlook. Merge Healthcare develops software that facilitates the sharing of images to create an electronic healthcare experience for patients and physicians. Its products are designed to help solve some of the challenges in health information exchange, such as the incorporation of medical images and diagnostic information into broader health information technology (IT) applications and the interoperability of software.
And Amedisys Inc. (Nasdaq) skidded $3.98, or 27%, to $10.54 as the home healthcare provider indicated that it would continue to struggle with offsetting the impact of changes in Medicare reimbursement rates. “Home health experienced substantial Medicare reimbursement cuts in 2011 and 2012, and will continue to face reimbursement pressure in 2013 and beyond,” CEO Bill Borne said on a conference call with analysts. The cuts to Medicare reimbursement for 2012 have weighed on the profits of most home healthcare providers, including Gentiva Health Inc. and Almost Family Inc. First-quarter revenue from Amedisys’ home health division--its biggest--fell 6% to $301.4 million. Gross margins at the division fell 500 basis points to $42.9%. TheStreet Ratings rates Amedisys a “sell.”
