British Glaxo Makes Offer for Palo Alto Firm : Pharmaceuticals: $533-million bid for Affymax comes as attempt to take over rival Wellcome is rebuffed.

Three days after launching one of the largest corporate takeovers ever, Britain’s Glaxo on Thursday announced a much smaller--and this time friendly--deal by offering $533 million in cash for a low-profile Palo Alto drug research company called Affymax.

Meanwhile, Glaxo’s other target, Wellcome, rebuffed its British rival’s $14.24-billion bid, saying the price was too low. Although Glaxo’s unsolicited bid represents a 49% premium over Wellcome’s share price prior to the proposal, Wellcome officials told shareholders that the company hopes to attract a higher offer.

But analysts said Wellcome’s rejection could be merely a formality, since there is little likelihood that another company would get into a bidding war with Glaxo.

“Glaxo may be prepared to go higher if another bid appears. . . . But it’s difficult to see anyone better for the merger than Glaxo,� said Peter Liang, an analyst with Salomon Bros. in London.

Wellcome’s largest shareholder, the Wellcome charitable trust, has agreed to sell to Glaxo but has until the end of today (London time) to change its mind.

In trading Thursday, Glaxo stock rose 25 cents a share to close at $19.25. Wellcome gained 37.5 cents to $15.625.

Glaxo, the world’s second-largest pharmaceutical company, is the maker of the popular ulcer medication Zantac. Wellcome’s flagship product is AZT, the principal drug for treating AIDS.

Analysts said Glaxo’s announcements this week show that the company, which hadn’t made a major acquisition in nearly two decades, sees the need to adopt a new strategy to cope with rapid changes in the health care business.

In Affymax, Glaxo is paying handsomely for a small company that has no drugs yet on the market, and which lost $14.2 million on revenue of $16.3 million for the nine-month period ended Sept. 30. Yet Glaxo is betting that Affymax’s expertise in a relatively new field of drug development will one day yield promising new medications.

Affymax shares surged $11.50 a share to finish at $29.50 on Nasdaq.

Affymax has patented a technology that it calls VLSIPS, which combines synthetic chemistry with the miniaturization methods used in the semiconductor industry. The technique allows researchers to synthesize thousands of different biochemical compounds onto a tiny silica chip, then study the potential of the compounds as medications.

The approach, also being pursued by several other drug companies, is seen as a way to dramatically reduce the time and cost of developing new drugs. Also drug maker Marion Merrell Dow on Friday announced the completion of its acquisition of Selectide Corp., a Tucson, Ariz.-based drug research firm that, like Affymax, specializes in combinational chemistry.

Robert Esposito, national director of the life sciences practice for KPMG Peat Marwick, said the Affymax acquisition is a way for Glaxo to strengthen what is already considered one of the strongest research programs in the pharmaceutical industry. Glaxo faces the unpleasant prospect of a significant decline in sales when Zantac loses its U.S. patent protection in 1997, opening the door to competition from lower-cost generic versions of the world’s best-selling drug.

“They are looking for ways to fill the product pipeline,� Esposito said. “The companies that are successful in the future will be the ones that come out with breakthrough drugs.�

Gordon Ringold, Affymax’s president and chief operating officer, described the deal as “very friendly� and said the firm had initiated talks with several U.S. and foreign drug makers about a possible alliance.

“We felt some time ago that we needed a strategic relationship in order to maintain our leadership in drug discovery technology,� Ringold said. “We didn’t have the infrastructure or capital to do it alone.�

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Associated Press contributed to this report.