Barron's Sees Human Genome (HGSI) Shares Doubling Over Next 18 Months
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In an article from over the weekend, Barron’s pointed out shares of Human Genome Sciences (Nasdaq: HGSI) have fallen roughly 75 percent since the high set during the month of April 2011. The publication suggests investors have increased their short positions.
Management’s current forecast indicates the company will not turn a profit until 2014 as initial demand for its relatively newly-approved drug Benlysta has been weaker than originally anticipated. Although this has lead to much skepticism among investors, Barron’s highlights the significance of the drug. Benlysta is the first drug to be approved for lupus in the past five decades.
Barron’s believes shares of Human Genome will trade largely based on Benlysta sales for a while as it’s the company’s only revenue source. Barron’s does believe with a little rise in demand next year followed by some more doctor support, shares of Human Genome have the potential to double within the next 18 months.
While bear analysts estimate peak sales of Benlysta in the $1.5 billion to $2 billion range, bull analysts report clinical trial results underestimate the effectiveness of Benlysta. Analysts sees about 200,000 people are potential candidates for Benlysta while 1.5 million Americans are diagnosed with lupus.
Doctors have been hesitant to prescribe the drug as it is initially expensive and the reimbursement process with insurance companies is timely. The process is expected to change on January 1st when Medicare will offer Benlysta a permanent reimbursement code, ensuring a timely payment to doctors.
The company recently raised $435 million in a debt offering and now has $535 million in cash. Although Human Genome has $524 billion in debt, management should have enough money to operate until 2014 when the company is expected to turn its first profit.
If demand for Benlysta begins to ramp up, the company could end up being in the green ahead of expectations, but if demand remains weak some investors will be all smile as they cash in on their short positions.
Management’s current forecast indicates the company will not turn a profit until 2014 as initial demand for its relatively newly-approved drug Benlysta has been weaker than originally anticipated. Although this has lead to much skepticism among investors, Barron’s highlights the significance of the drug. Benlysta is the first drug to be approved for lupus in the past five decades.
Barron’s believes shares of Human Genome will trade largely based on Benlysta sales for a while as it’s the company’s only revenue source. Barron’s does believe with a little rise in demand next year followed by some more doctor support, shares of Human Genome have the potential to double within the next 18 months.
While bear analysts estimate peak sales of Benlysta in the $1.5 billion to $2 billion range, bull analysts report clinical trial results underestimate the effectiveness of Benlysta. Analysts sees about 200,000 people are potential candidates for Benlysta while 1.5 million Americans are diagnosed with lupus.
Doctors have been hesitant to prescribe the drug as it is initially expensive and the reimbursement process with insurance companies is timely. The process is expected to change on January 1st when Medicare will offer Benlysta a permanent reimbursement code, ensuring a timely payment to doctors.
The company recently raised $435 million in a debt offering and now has $535 million in cash. Although Human Genome has $524 billion in debt, management should have enough money to operate until 2014 when the company is expected to turn its first profit.
If demand for Benlysta begins to ramp up, the company could end up being in the green ahead of expectations, but if demand remains weak some investors will be all smile as they cash in on their short positions.
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