Analysts douse hot HGS shares with splash of caution

With speculation about a possible GlaxoSmithKline bid for Human Genome Sciences now running rampant--and HGS shares shooting to the moon on the back of those rumors--some of the analysts in the biotech field are starting to add a note of caution about the whole affair.

Avik Roy, an analyst with Monness, Crespi, Hardt & Co., tells Dow Jones that it would be hard to believe that Glaxo would move to acquire HGS ahead of the next round of late-stage data on the lupus drug Benlysta, now expected in November. Some analysts peg Benlysta as a potential megablockbuster, capable of earning upwards of $4 billion a year from lupus patients desperate for an effective treatment. But the licensing pact that already exists between Glaxo and HGS for Benlysta gives the pharma giant an ideal position to mount a bid--and the opportunity to wait.

Not that the analysts don't see the sense in a takeover. Glaxo has $9 billion in cash on hand and a well defined strategy for finding 'bolt-on' acquisitions. That's one reason why HGS shares at one point broke $22 yesterday, giving the developer a six-fold increase in share price in a little more than a month.  

- check out the Dow Jones piece

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