Human Genome Goes Full Monty
Well played, Human Genome Sciences (NAS: HGSI) . I just hope the move doesn't come back to haunt you.
The biotech is in a battle -- it hasn't reached war status yet -- with its partner GlaxoSmithKline (NYS: GSK) , which wants to buy the company for $13 per share. Human Genome politely declined and said it was going to look for other suitors. The openness stands in stark contrast to Amylin Pharmaceuticals (NAS: AMLN) , which has been publicly coy about its plans.
In keeping with the full-disclosure policy it seems to have adopted, Human Genome announced today that its bidding process will close on July 16.
The biotech invited Glaxo to join the bidding process, but the pharma giant has already said that it doesn't want to play that game. That seems like a prudent move for Glaxo, given that it could just be bidding against itself.
Announcing a date is good for investors. Knowledge is power, and an assurance that this won't drag on for too much longer should help keep investors interested. Shares continue to trade above the $13 offer that Glaxo made.
But disclosing the end of the bidding period puts Human Genome in a precarious position if no bidders arrive. It's hard to manage expectations and let investors down easy over time when they all know the deadline.
Obviously, the strategy Human Genome has adopted isn't all that risky if it knows it has at least one bidder willing to top Glaxo's $13 offer. Unfortunately, investors won't know whether the biotech is bluffing until it's too late unless Human Genome takes a page from Amylin's playbook and use undisclosed sources to disclose big names like Pfizer (NYS: PFE) and Merck (NYS: MRK) that are reportedly interested in the company. That might be the only way to get Glaxo to the bidding table.
Betting on M&A poker hands without the ability to see the cards is a dangerous game. Not much like clinical trials and FDA approval decisions, Human Genome's purchase, or not, has become a binary event with the potential to fall back toward $8 per share if Galxo, the only current bidder, walks away.
The biggest binary event, the presidential election, is around the corner. Check out the Fool's new free report, "These Stocks Could Skyrocket After the 2012 Presidential Election," where you'll get ideas for companies that can benefit from each candidate's platform Get your free copy.
At the time this article was published Fool contributorBrian Orelliholds no position in any company mentioned. Check out hisholdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Pfizer. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.