A Reuters analysis of 10 likely biotech takeover targets shows the extent to which a few large investors, including Fidelity Investments, Capital Research Global Investors, Wellington Management and T. Rowe Price Associates hold the keys to the kingdom when it comes to negotiating a deal.

From Amylin Pharmaceuticals (>> Amylin Pharmaceuticals, Inc.) to Onyx Pharmaceuticals (>> Onyx Pharmaceuticals, Inc.) and Human Genome Sciences (>> Human Genome Sciences), these U.S.-based companies are, on average, 60-percent held by their top 10 shareholders, according to ownership filings.

That can help explain their ability to fend off an unwanted advance by the biggest players in the drug industry.

"There is a lot of concentration of power in the hands of certain shareholders, which basically demands more negotiations and more convincing arguments before deals get done," said long-time biotech investor Francesco De Rubertis, a partner at Index Ventures.

It could also leave major drugmakers with little option but to contemplate higher deal premiums, as they hunt for promising new drugs and technologies to refill pipelines depleted by the biggest wave of patent expiries in pharmaceutical history.

In some cases the fight-back is already gaining traction.

Last month GlaxoSmithKline (>> GlaxoSmithKline plc) had a $2.6 billion offer for its long-time partner Human Genome spurned with no discussion, while a resounding snub from investors prompted Roche (>> Roche Holding Ltd.) to walk away from Illumina (>> Illumina, Inc.).

"The key learning point is that Big Pharma needs to avoid bids being painted as opportunistic," said Charles Hoare, global head of healthcare M&A at Commerzbank. "If it involves big shareholders having to accept a big loss on their investment, it is much harder to persuade them."

DIGGING IN THEIR HEELS

Big share price swings linked to the highs and lows of developing risky products means investors have bought in at widely differing points on the biotech rollercoaster.

Certainly, investors who have kept the faith through bad times now appear to be digging in their heels.

Take Mark Evans, a fund manager at Taube Hodson Stonex (THS), the sixth-largest Human Genome investor with 5.6 percent. He finds GSK's $13 a share unacceptable and is galled that the market failed to recognize the company's value before the bid.

"Glaxo has been very clever to bid at the point of least confidence," he said. "It just shows how differently the stock market values these businesses compared to industrial buyers."

THS has been invested in Human Genome since 2004. Others bought more recently, notably when the shares surged from some $3 in July 2009 after the U.S. firm and GSK announced impressive clinical trials results with lupus drug Benlysta.

"I imagine that a lot of holders bought in after the first successful Benlysta trial. They would have bought between $15 and $18, so they need $20 really," Evans said.

After two decades of partnership, GSK Chief Executive Andrew Witty had hoped for a better reception when he wrote to his opposite number Tom Watkins on April 11.

Instead, he got a brief telephone call at 10.00 a.m. London time on April 19, just 12 minutes before Human Genome issued a press release rejecting GSK's offer, according to a person familiar with the situation.

Watkins, however, was cheered on by his investors. What sticks in their craw is the fact that while GSK offered an 81 percent premium, the price per share was still less than half last year's peak.

Significantly, another biotech deal on April 23 involved AstraZeneca (>> AstraZeneca plc) clinching agreement to buy Ardea Biosciences (>> Ardea Biosciences, Inc.) for $1.26 billion - a smaller 54 percent premium but a price 10 percent above the stock's 52-week high.

Amylin, meanwhile, is negotiating a tricky path. After reportedly rejecting a $3.5 billion unsolicited bid from Bristol-Myers Squibb (>> Bristol Myers Squibb Co.), it is now under pressure from activist investor Carl Icahn to sell itself. Sources familiar with the matter have said it is exploring a sale with the help of Credit Suisse and Goldman Sachs.

PRESSURE TO BUY

During the downturn, Big Pharma's fat dividends and share buybacks kept many investors happy. Now, though, investors are looking for growth - increasing the pressure to access promising new drugs locked away in biotech labs.

"We and the competition are thinking the same thing: we need to do deals to augment the internal portfolio," AstraZeneca research head Martin Mackay said in an interview. "This isn't just a gap-filler. This is going to be the strategy for years to come."

The world's top drugmakers all have the financial muscle to do bolt-on biotech deals running into billions of dollars, and are likely to find themselves competing more closely for attractive assets.

Pfizer (>> Pfizer Inc.) CEO Ian Read said in an interview this week he was on the hunt for mid-size deals of around $4 billion that could add promising new treatments for diabetes, cancer and neurological conditions. And sources have told Reuters that Bayer (>> Bayer AG) is close to a multi-billion euro deal to bolster its healthcare decision.

In the long run, seeing off opportunistic approaches may pay off for some biotech firms, but it can be a gamble. Investors in the biotech "hold-out" camp will be hoping others can emulate Switzerland's Actelion (>> Actelion Ltd), which this week produced knock-out clinical trial results with a new lung drug.

The success of macitentan means investors who backed Actelion's management last year, in the face of a push by activists to consider selling up, can now breathe a lot easier.

(Additional reporting by Paritosh Bansal in New York; Editing by Michele Gershberg and David Holmes)

By Ben Hirschler and Sophie Sassard