Ebb & Flow

Retail investors got carried away last week on a rumor that Human Genome Sciences Inc. (NASDAQ:HGSI) would be acquired by partner GlaxoSmithKline plc (LSE:GSK; NYSE:GSK) for $30 a share.

On Tuesday, the stock hit a 52-week high of $22.78 mid-day, up $6.33 (38%) from Friday's close. But in the absence of news, the shares fell back to close Friday at $19.80, still a $3.35 (20%) gain on the week.

Buysider Oliver Marti of Columbus Circle Investors doubted that the pharma would buy HGS ahead of data from a second Phase III trial (BLISS-76) of Benlysta belimumab to treat systemic lupus erythematosus (SLE). Results are due in November.

On July 20, when HGS reported positive Phase III data from the BLISS-52 trial, its shares jumped $9.19 (277%) to $12.51. HGS and GSK hope to submit regulatory applications for the human anti-BLyS (B lymphocyte stimulator protein) mAb in the U.S. and Europe in 1H10.

"It doesn't make any sense to buy a company for $30 before actually seeing the final Phase III data. Moreover, since they are partnered with GSK, what would be the rush?" Marti said.

Research analyst Avik Roy of Monness, Crespi, Hardt & Co. agreed. "Large pharma companies don't typically buy small biotech companies ahead of binary events," he said. "GSK already owns half the drug, they have plenty of exposure."

In 2005, GSK exercised an option to Benlysta (then LyphoStat-B) under a 1996 agreement. The partners share equally in Phase III and IV development costs, sales and marketing expenses, and profits on any commercialized products (see BioCentury, July 11, 2005).

Roy also dismissed rumors that GSK has information on the upcoming data. "They are going to find out the results of the trial within 24-48 hours before they have to disclose it," he said. "This speculation is nonsense."

Roy attributed last week's stock pop to retail investors who learned about the rumor through mainstream media outlets. According to Kurt von Emster of venBio, the rumor had been circulating on the

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