Human Genome Shares Hit A 7-Year High Amid Takeover Chatter 08/25 07:46 AM
NEW YORK (Dow Jones)--Shares of Human Genome Sciences Inc. (HGSI:$19.04,00$1.86,0010.83%) continued to rise for the sixth straight day as market chatter picked up this week about a possible takeover by U.K. drug giant GlaxoSmithKline PLC (GSK:$39.30,00$-0.14,00-0.35%) , though analysts said there was nothing concrete to the speculation and added the shares deserve to be up anyway.
On Tuesday, the stock jumped 9.8% to $18.85, re-setting the 52-week high figure for the second straight day after gaining 4.4% in Monday trading on similar speculation. It is the highest the company has traded since 2002, but still well off the $112.63 it was at in March 2000.
Analysts pointed to a rumor GlaxoSmithKline (GSK:$39.30,00$-0.14,00-0.35%) was going to buy the drug maker in order to reap all the benefits of the lupus treatment Benlysta, which the two are partners on. Benlysta showed late last month it had met the late-stage study goals in treating lupus, a notoriously hard-to-treat autoimmune disease that hasn't seen a new therapy in decades. It is believed a successful drug would be a multi-billion dollar opportunity.
Almost immediately after that study, Human Genome turned into an instant market-speculation machine with a cheap valuation and soaring potential. Shares more than tripled on the day the results were released and, with Tuesday's rise, have now climbed more than eight-fold this year after tumbling to an all-time low of 45 cents in March. Options have also been active in the stock.
A GlaxoSmithKline (GSK:$39.30,00$-0.14,00-0.35%) spokesman said the company doesn't comment on market rumors or speculation. Human Genome spokespeople weren't immediately available.
Analysts questioned the validity of the rumors, but were in agreement that even with the recent spike, the shares could have even further to go.
"I have no reason to believe [GlaxoSmithKline (GSK:$39.30,00$-0.14,00-0.35%) ] are more serious now than they have ever been," JMP Securities analyst Liisa Bayko said.
But she added a coming study on the drug would be the next real catalyst. She said her current $18 price target doesn't have that data figured in yet. "I feel pretty good about that being positive and the stock could go up a lot after that."
The speculation this week included a possible $30-a-share price tag, valuing the company at about $4.07 billion, which some analysts questioned as pretty high. But Leerink Swann analysts have a $30 price target on the shares, and Think Equity analyst Jason Kolbert said it makes sense GlaxoSmithKline (GSK:$39.30,00$-0.14,00-0.35%) would step in sooner rather than later to buy it somewhere around $30.
"Financially it makes sense for [GlaxoSmithKline (GSK:$39.30,00$-0.14,00-0.35%) ] to take them out now," Kolbert said, noting once the next study comes out some time after Labor Day, the stock is likely to make the move more expensive.
But Kolbert said there was nothing he had heard this week to make him believe a deal was imminent. "There is always going to be speculation," he said.
-By David Benoit, Dow Jones Newswires; 212-416-2458 ; david.benoit@ dowjones.com;
