Shares of Human Genome Sciences (HGSI) quickly returned to the ten dollar level earlier this year after having slipped to below seven bucks during the closing weeks of 2011. The rebound was short-lived, however, as the latest earnings report did not demonstrate enough established growth in Benlysta sales to satisfy those investors that have a closer eye on the short term, rather than the long.
Benlysta sales did rake in $26 million for the latest quarter, up from $18 million during the third quarter of 2011, and the slower-than-expected commercial roll out can be attributed, in part, to the fact that Doctors view this as a "trial period" for Benlysta, according to comments made by company officials in a conference call held last week.
Although becoming only the first lupus drug to be approved by the FDA in over fifty years, Benlysta still faces the challenge of proving itself to skeptical Doctors who understand that there is a reason why there have not been any new lupus drugs approved in such a long period of time. Lupus is one of the more mysterious ailments out there, and it should be expected - especially now, after seeing Benlysta's lagging sales numbers - that the medical community will eyeball new lupus treatments with a higher level of scrutiny than they would in regards to other indications.
Benlysta is partnered with the UK's GlaxoSmithKline (GSK), with whom Human Genome is often mentioned in buyout speculation.
The past few months have proven to be more of trading period for HGSI, with the peaks and valleys being significant enough to satisfy the short term traders, but the dips may also be setting up the longs with the opportunity to buy and hold at prices that could be near the bottom of any future trading range.
Profitability is still a couple of years away, at least, but the continued buyout speculation and potential for a sudden spike in Benlysta sales at some point seems to keep this one afloat with interest.
Company officials predict another "trial year," according to the comments made during the latest call, so the true longs may be best suited by sticking with a strategy of slow accumulation on the dips, and then waiting for the story to play out quarter after quarter.
The traders, however, may continue to enjoy the short term swings.
As usual, investors of the sector can never stray too far from HGSI, not with the short and long term potential that this company holds.
Disclosure: Long HGSI.