At the end of December, we usually review the biotech sector to see which stocks have the most upside for the year ahead. The basis of the “implied upside” is the consensus mean estimate from Thomson Reuters. Sometimes the pack of analysts is very right, and sometimes they all get blind-sided.
It was interesting to see that Human Genome Sciences, Inc. (NASDAQ: HGSI) was the top biotech and biohealth related stock as far as implied upside for the year ahead. Perhaps the upside is because analysts were caught off their feet over the doctor-patient adoption despite that no new lupus treatment had been given FDA approval in years. Perhaps it is now that more clarification is coming on the reimbursement and recommended drugs from physicians.
Either way, this was what biotech traders would refer to as a widow-maker in 2011. Shares are currently around $7.07 and the $17.06 price target objective from Thomson Reuters implies more than 100% upside ahead. Can that be true? Most likely it is because the stock has been sold off even more than most analysts expected: its 52-week range is $6.51 to $30.15.
Many investors still hope for a takeover, but it would realistically be puzzling as to how such a deal could get done now that the share price implosion would leave so many shareholders buried with assured losses.
JON C. OGG