GSK: finally gets its Human The outcome was never much in doubt: GlaxoSmithKline and Human Genome Sciences have agreed a price. GSK will pay $14.25 a share, or roughly $3bn, for HGS. This is about 10 per cent higher than GSK's original offer, made in April, which was rejected. Given that HSG's share price hopped above $14 immediately following the first offer, it is easy to interpret the back-and-forth as a tiresome ritual. GSK makes a "full and fair" offer slightly below the level it knows it will have to pay; HGS spurns the offer and publicly seeks a better bid, knowing full well that, because GSK already has rights to half the profits from its primary asset (the lupus drug Benlysta), other bidders are very unlikely to appear; GSK displays a symbolically higher offer; and HGS, having symbolically done its duty for its shareholders, accepts. Formulaic perhaps, but it doesn't mean that HGS was pushed around. When a small drug developer makes a deal with a bigger company, it is getting rid of risk by taking payments upfront and sharing expenses. But it is also giving up some upside, not just through shared profits but also by in effect reducing the number of bidders for the entire company to just one. More importantly, the balance of power between cash-rich, growth-poor global pharmas (such as GSK) and small companies with promising products (such as HGS) favours the latter. GSK is paying $3bn for two things. First, Benlysta, which is generating sales at a $130m annual rate and could, if all goes well, make about $1bn in annual sales down the road. Second, the possibility it will be able to avoid paying royalties on two drugs it has already licensed from HGS, neither of which may ever get out of the clinic. Expensive and risky but when the buyer has money and an obvious need, the seller always stands to do well.