Monday, December 21, 2009

Human Genome Sciences (HGSI) Appears Ready to Breakout of 2 Month Base

You may be noticing I've been focusing on a certain type of chart of late, as I see a lot of similar set ups... stocks which have build nice bases and appear ready to break out of them.  If indeed this market is ready to burst over S&P 1120, and "melt up" as portfolio managers "mark up" their books for year end, these stocks with huge bases built should become real stars. 

A reader just sent me Human Genome Sciences (HSGI), a $5B market cap biotech company working on a lupus drug, which has a 2 month base built. 

[click to enlarge]

Today, Morgan Stanely upgraded the stock with a price target of $40 which is pushing the price just over the top end of this Nov/Dec base... from a chart perspective my mouth is watering.  I might be a buyer in the last hour here or if the company starts to take off tomorrow.  Any close over $30 would make things very interesting; volume is suspect however.

Let me offer a word of warning; I stay away from biotech stocks as a rule since they are mostly lottery tickets unless you are talking some of the huge names like Amgen (AMGN) or Gilead (GILD) for example.  I will generally make a foray into biotech every 12-18 months when I get very overconfidant, the market is "way too easy" (as it is now - just buy almost anything and you'll make money sooner or later), or I'm just plain bored and want some spice in the portfolio.  Within a short period of my biotech purchase, invariably either the stock crashes or the market does. ;) So as I am pondering this name, take that into consideration.

Morgan Stanely upgrade:
  • Shares of Human Genome Sciences Inc. rose $1.41, or 5 percent, to $29.58 Monday after Morgan Stanley initiated new coverage of the Rockville drug maker with a rating of "overweight."
  • Morgan Stanley set a share-price estimate of $40 on Human Genome Sciences stock, and told clients in a report that "Benlysta is likely to be the first drug approved in lupus in 50 years, and we believe investors underestimate the drug's pricing power, penetration across various lupus patients, peak sales" and margins, according to Bloomberg News.
  • In November, Human Genome Sciences reported its second round of positive results from a late-stage clinical trial of Benlysta, its experimental lupus drug.
  • Human Genome Sciences and its development partner GlaxoSmithKline PLC plan to apply to federal regulators in the first half of 2010 to start selling Benlysta on the market, setting up an opportunity to share as much as $6 billion in forecasted peak annual sales from the drug. The companies foresee being able to sell an approved Benlysta in Europe in the first half of 2011.
Human Genome Sciences has spent the past 2 months absorbing these positive results on Benlysta released November 2nd (the stock jumped over 30%)
  • The anticipated study data, from a clinical program called Bliss-76, showed a 10-milligram dose of Benlysta, plus therapy with steroids, prompted an improvement in 43 percent of patients, compared with an improvement in only 33 percent of patients on the placebo end of the study.
  • Bliss-76 involved 865 patients and took place over 52 weeks. It is the second late-stage study on the potential lupus treatment to meet key goals. Last month, the company reported similar positive results from Bliss-52, which involved more than 860 patients in Asia, South America and Eastern Europe. 
Lottery ticket? Stock of the year?  HGSI was under 50 cents in March... 2009.  Which is why the gambling anonymous type of investor, loves his/her biotech stocks - even if 95 out of 100 flame out in spectacular fashion.

No position.... yet

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