Biotech Values

[DewDiligence]

The GNLB buyout premium is 465% (!) I’ve always said
that the stock market is inefficient, but the market where
drugs (and entire drug companies) are bought and sold is
quite efficient. Here’s the GNLB PR for archival purposes:

http://biz.yahoo.com/bw/081029/20081029006599.html

›GlaxoSmithKline to Acquire Genelabs Technologies to Increase Focus on Novel Small Molecule Therapies for Hepatitis C

Wednesday October 29, 8:43 pm ET

PHILADELPHIA & LONDON--(BUSINESS WIRE)--GlaxoSmithKline (LSE: GSK, NYSE:GSK) and Genelabs Technologies, Inc. (NASDAQ: GNLB ) announced today that they have entered into a definitive agreement pursuant to which GSK will acquire Genelabs for approximately $57 million (£35 million) through a tender offer of $1.30 per share in cash. This strategic acquisition will strengthen GSK’s effort to develop and deliver novel therapies against the hepatitis C virus (HCV).

Under the terms of the agreement, a subsidiary of GSK will commence a tender offer to acquire all of the outstanding shares of Genelabs common stock. The board of directors of Genelabs has unanimously recommended that shareholders tender their shares in the offer.

“Genelabs has demonstrated a strong track record in HCV drug discovery and identified numerous novel classes of inhibitors that target unprecedented mechanisms in the virus’s life cycle,” stated Zhi Hong, SVP of the Infectious Diseases Centre for Excellence in Drug Discovery (ID CEDD) at GSK. “This arrangement, combined with our other collaborations, will give GSK a broad HCV drug discovery platform addressing novel targets and innovative therapeutic approaches.”

Genelabs will become part of GSK’s Drug Discovery organisation and its HCV programmes will be consolidated into the broad therapeutic approaches already underway internally and through external collaborations. This acquisition continues GSK’s strategy of pursuing the best science, internally or externally, to bring new medicines to patients and value to the GSK pipeline.

Fred Driscoll, President & CEO of Genelabs said, “This transaction provides our shareholders with certain value at a substantial premium to our stock price. Through the efforts of our experienced scientific staff and other employees, we have generated highly differentiated compounds with the potential to address unmet medical needs of people with the HCV infection. GSK’s world-class research and development organisation will allow us to accelerate our strategic vision of providing novel treatments that deliver tremendous value for patients.”

There is a high unmet need for new drugs to treat HCV infection. The current gold standard therapy comprises pegylated-alpha interferon (IFN) plus ribavirin (RBV). The efficacy rate of this combination is relatively low (approximately 50%) and both drugs are associated with significant side effects that often lead to treatment discontinuation. Several new antiviral drugs targeting multiple virus and host targets are currently in development. Rapidly emerging drug resistance suggest that combination therapies with multiple classes of drugs will be required to achieve sustained virological response.

The tender offer is subject to customary conditions and is expected to close in December 2008.

Cowen and Company was the exclusive financial advisor to Genelabs in this transaction.‹