Market Rumors Human Genome Sciences as a takeover target

Rumors of Glaxo's takeover of Human Genome Sciences for $30/share have pushed the stock up considerably today. Human Genome Sciences stock (HGSI) was up $2.03 to $19.21 per share in afternoon trading with a gain of 11.79%. Aftermarket trading is up +0.46 to 19.66, another gain of 2.40%. I see this as only a rumor but it does make some since as Human Genome and Glaxo have been partner's since 1993. Human Genome Sciences worked together and received royalties from Glaxo in 2006 for the Diabetes medication Syncria. April 2008 saw HGSI reacquiring the rights for the HGS-ETR1 and HGS-ETR2 oncology programs from Glaxo.

So what is going on here? Has Glaxo seen results from their second set of pivotal Phase III trial and are ready to make a deal? Results are set to be released in November for their Lupus drug BENLYSTA. HGSI press releases from their website can be found here Benlysta Results. For more takeover target information check out the Washington Biz Journal's article HGSI:a takeover target?. MedicalNewsToday posted an article in June announcing the Lupus drug's positive results on Benlysta.

Regardless, I see this as positive financial news for Human Genome Sciences which once traded in March around 0.45. I'm not sure I believe the hype in the rumor but I do like the news coming in and anticipation for results in November. Many analysts see this stock as undervalued and have a target range around 26/share.

Human Genome Sciences has declined to comment on the rumor. Human Genome corporate leaders have stated in the past that they are seeking independence in approval of these 2 trials and have no reason to change that. This was quoted by CEO Tom Watkins in July: “We’re really focused on getting the drugs to patients. We think we have the capability and wherewithal to do it on our own, and we don’t see any reason why that would change.”

With that said I don't know. I've seen CEOs take the money and run but I don't think this is the case. Just a hunch. Rumors have surrounded Spectrum Pharma as a takeover target for Bayer AG recently and those did not fall through either. It is a good marketing tool to push the stocks price up and it works pretty well. Needless to say I like Human Genome's chances with their Phase III results in November. I do see the stock price going higher with positive results and after all is said and done with this rumor I see the price will value out and be a good buy. Just a reminder not to chase stocks. Buy at a valued price and good things will happen.

Disclosure: Long Human Genome Sciences

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.