GlaxoSmithKline is to acquire its long-time partner Human Genome Sciences for $3-billion, ending a three-month hostile pursuit of the U.S. biotech company on friendly terms after sweetening its offer.
The purchase price excludes Human Genome's cash and debt.
The deal comes after weekend talks in which Britain's biggest drug maker agreed to raise its bid to $14.25 a share from $13 previously, which Human Genome had rejected as inadequate.
Reuters earlier reported that the two sides were near a deal. The acquisition will secure GSK full rights to a recently launched drug for lupus and other new medicines.
Biotechnology companies are in increasing demand as Big Pharma companies seek new products to replace older medicines that are going off patent in the biggest wave of drug patent expiries in history.
In addition to gaining 100 per cent of Benlysta for lupus, a disease of the immune system, GSK also gets full ownership of experimental medicines for diabetes and heart disease.
GSK said it expected to achieve cost savings of at least $200-million by 2015 and the deal would boost its core earnings in 2013. It continues to expect to repurchase up to £2.5-billion in shares in 2012.
The deal is a nice to have rather than a need to have for GSK, whose $112-billion market value dwarfs that of Human Genome.
There have been a spate of acquisitions of biotech companies this year as large pharmaceutical companies seek to rebuild their pipelines.
Most recently, Bristol-Myers Squibb agreed to buy diabetes specialist Amylin Pharmaceuticals by sharing the $7-billion cost of the deal with AstraZeneca.
Human Genome, which rejected GSK's $2.6-billion offer in April as too low and launched an auction process, had come under pressure from investors to try and strike a deal with the British drug maker in the absence of any alternative bids.
The U.S. company set itself a July 16 deadline for finding higher bids but interest has been limited because GSK, its long-time partner, already has marketing rights to its drugs.
Last year, Human Genome and GSK won approval for Benlysta, the first new treatment for lupus in 50 years. But the drug's launch disappointed investors and Human Genome's shares fell from a high above $25 to a low of $6.51 in December.
GSK made its offer a few months later, prompting Human Genome to launch an auction with the help of Credit Suisse and Goldman Sachs.