Shares of Human Genome Sciences (HGSI) are trading back to earth this week after having hit the fifteen dollar mark on talk of a buyout by Benlysta GlaxoSmithKline (GSK) last week. When the buyout talk, which originated in the UK with a newspaper article, failed to materialize into anything but rumor, shares sputtered and investors looked towards Tuesday's earnings report for a better idea of whether HGSI would retain its recent gains.
Given the evidence in the company's report which included an earnings and revenue miss for the quarter, there's likely not enough going on to justify the stock holidng onto its recent gains, unless, of course, another round of buyout talk emerges that keeps investors interested.
The Benlysta ramp-up is progressing slower than expected, a common theme in the sector these days as reimbursement concerns resulting from government financial strife and complacency have professionals hesitant to try new treatments, which weighs heavily on the short term prospects of the company.
In turn, the CEO also announced during the conference call that the point of profitability is now expected to be 2014, vice the previously-predicted timeframe of 2013.
Benlysta is still generally expected to become the blockbuster that many predicted of the first lupus-treating drug approved by the FDA in over 50 years, which makes any pullbacks in price potentially worth the buy for those with a longer term outlook.
It's also likely that we haven't seen the end of the buyout rumors, which could add to the short term interest and volatility of the stock.
Be prepared for another drop, and continued volatility to follow.
Disclosure: Long HGSI.