With the news of Human Genome Science's Lupus drug, HGSI stock soared to about 275% the previous value. This is reminiscent of Dendreon's huge gain with their Prostate Cancer drug. With this said I am sceptical of the overall longevity of this trade and with so many cashing out I see a huge fallout, as this is simply a Phase III clinical trial and another phase must be acheived before FDA approval. I see this stock dropping like a rock and many late investors will lose a lot of money tomorrow. Usually after a huge spike the stock has to come down. It's a simple supply and demand chart when it comes to stocks and this one is not any different than the price of gas, or the value of the dollar. I wasn't the best at Econ101 in college as I'm more of a finance person but this stock is going down.
Although I feel the drug will eventually be approved, this could be years down the road. With Human Genome's shaky past I see this as a longshot for longevity. So buyer beware. I too have taken the plunge and followed eagerly on Clinical Trial news like this only to see the stock dropping heavily in the days to weeks to come. Still this is great news for the biotech community and we should be focused on the treatment of Lupus but if you are in it for a quick buck, you've missed out. I still like the long option of HGSI but for day trading its too late and you need to be careful on following the hype and look for the next Human Genome Science or Dendreon out there. Check the FDA calendars and follow closely with the news and PR newswires and another will come along. With that said, it can take years to manufacture a drug for a biotech and many problems can arise even after the drug's approval.
I've seen it all when it comes to biotech manufacturing. The molecule can drop out of solution producing low yeilds. The manufacturing facility can have sterility issues. This is very common although we won't admit it. Sure the final product is sterile, but what did they have to do to acheive this? So many things can go wrong. I'm not saying they will, I'm just saying they can. It takes a considerable amount of time before the molecule hits the market and the company makes a profit. HGSI is not out of the woods just yet. Wait for it to drop and buy it up for the next round.
Here is a nice article on Human Genome Sciences found on Barron's website.
http://online.barrons.com/article/SB124809851547865115.html?ru=yahoo
MONDAY, JULY 20, 2009
BARRON'S TAKE
What's Next for High-Flying Human Genome Sciences? By TERESA RIVAS | MORE ARTICLES BY AUTHOR
Positive results for the company's experimental lupus drug sent shares skyrocketing on Monday.
HUMAN GENOME SCIENCES (ticker: HGSI) investors don't have a case of the Monday blahs. With a 231% gain in mere hours, how could they?
Before the bell Monday, Human Genome and GlaxoSmithKline (GSK) announced that the experimental lupus drug Benlysta showed promise in treating the stubborn autoimmune disease in its first Phase III trials.
The results were huge news -- the FDA has not granted approval for a new lupus treatment in half a century -- and investors' reactions were even bigger. Human Genome shares more than tripled in early afternoon trading, up $7.68, or 231%, to $11.
There's no doubt that Benlysta could be enormously important for Human Genome and lupus sufferers worldwide, but given past volatility and uncertainty, investors might want to take profits in light of today's phenomenal pop and look to pick up shares later, and ostensibly at a lower price, before Benlysta makes it to market.
Benlysta, although promising, still has to pass the second Phase III trial in November to assess its long-term effectiveness. Given the nature of the disease, many lupus sufferers will likely relapse over time, meaning that the November trial may not be as resounding a success as the first, according to Thomas Weisel analyst Ian Somaiya.
Somaiya thinks that the strength of the first Phase III trial alone, combined with the current antiquated lupus treatment, should be enough for approval. However, one might expect that with a stock that has risen so dramatically, investors may not read into the nuances of a less than stellar November trial.
Even taking Benlysta's approval for granted, the drug will likely not make it to market until 2011. That leaves Human Genome the rest of 2009 and all of 2010 without the benefit of its sales. Analysts do not expect the company to turn a profit either year, with losses projected to jump from 13 cents this year to well over $1 in 2010. And before today's pop, Human Genome's more than $580 million in debt well outstripped its market cap.
Additionally, Human Genome has a history of hype without results. In 2004, the company was touted as the one of the main beneficiaries of Project Bioshield, a government program aimed at developing and stockpiling vaccines and antidotes to bioweapons, but enthusiasm quickly faded.
Likewise, in March shares lost more than half their value in one day, when Albuferon, Human Genome's Hepatitis C drug, was trumped by Roche's (RHHBY) competing treatment in a late-stage trial, despite meeting other trial goals.
Not to mention that it is difficult to justify chasing a stock that has risen from 45 cents in March to a high of just over $11 in midday trading today (a 2,349% rise in four months), especially months before an FDA decision and more than a year before any sales start rolling in.
That said, Lazard Capital Markets analyst Terence Flynn pegs the global lupus market as a $2.9 billion opportunity, given the paucity of treatments. Flynn notes that when Benlysta finally hits the market in 2011, it will likely see sales of $207 million, eventually hitting the $1 billion mark in 2014. Still, he doesn't see the stock running much further than today's price, putting its fair value at $10.
Therefore, Benlysta is undoubtedly a boon for the five million lupus sufferers worldwide, and may eventually reward investor as well. But given the stock's furious run-up, history of volatility, interim earnings losses, and the time lapse before the drug's first sales, it seems wise to take profits. Investors should have plenty of time to pick up the shares cheaper and still benefit from Benlysta's promise.
Another good article is on Bloomberg at the following link.
http://www.bloomberg.com/apps/news?pid=20601085&sid=am8d7NnxYQ9Y
Human Genome Science Triples on Success of Lupus Drug (Update3)
By David Olmos and Lisa Rapaport
July 20 (Bloomberg) -- Human Genome Sciences Inc. more than tripled in New York trading after the company and GlaxoSmithKline Plc said their experimental lupus drug reduced patients’ symptoms in a yearlong study.
Human Genome Sciences leaped $9.19 to $12.51 at 4 p.m. in Nasdaq Stock Market composite trading, its greatest single-day rise since shares began trading in December 1993. London-based Glaxo’s American depositary receipts rose 4 percent, or $1.45, to $37.81 in New York Stock Exchange trading, after the study raised hopes of the first new therapy in more than 50 years for the autoimmune disease.
The positive results for Benlysta were unexpected by analysts who cited disappointing data in earlier clinical trials and a history of failures for treatments of lupus, which triggers the immune system to attack healthy cells. Ten of 12 analysts rated Human Genome a “hold” or “sell” as of July 17, according to Bloomberg data. No cure exists for the disease, which affects about 5 million people worldwide.
“The lupus community has really been on tenterhooks waiting for a positive announcement,” Sandra Raymond, chief executive of the Lupus Foundation of America, a Washington, D.C.-based patient advocacy group, said in a July 17 telephone interview, before the results were announced. “Since lupus was first discovered over a century ago, there has never been a drug specifically developed for lupus.”
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I was obviously wrong about this one. I should have said this about HEB instead after today's HUGE drop after such a large gain yesterday. I like it when Im wrong sometimes. Can't be right about everything. But when it comes to stocks it all comes with the territory. HGSI has been up the past two days but has fizzled off a little today.
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