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|Submitted on||May 17, 2010|
|Stock Price at Recommendation||$21.45|
|Market Cap||$615 million|
Human Genome Sciences
Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.
This Week's Pitch
Just to demonstrate the hopelessness of trying to predict when companies will dilute, I'll point out that Targacept had 230M in cash at the end of Q1 and the following statement in their last PR just 12 days ago:
"Targacept continues to expect its cash, cash equivalents and investments balance at December 31, 2011 to be at least $150 million and that its current cash resources will be sufficient to meet its operating requirements at least through the end of 2013."
Let me try my pitch again:
First outperform pitch on Targacept. The share price of 21.5 looks high for a baby bio with no marketed drugs, but it hides a very reasonable market cap of [600 million]. Lots of good things and just a few bad things have been happening to the company of late, and the scope of their pipeline and collaborations is very impressive.
The stock's journey from the low single digits began in July 2009 with impressively positive results for TC-5214 in major depression. In 2010 the company partnered TC-5214 with [AstraZeneca
Aside from TC-5214, the company has TC-5619 which has shown encouraging results in cognitive dysfunction of schizophrenia but recently failed in a trial for ADHD. AstraZeneca has decided not to license TC-5619 but the company is planning to proceed with a new phase II trial in schizophrenia. AZD3480, another compound partnered with AstraZeneca, will begin a phase II study in Alzheimer's in H2. Decisions by AstraZeneca on further development of AZD3480 in ADHD and AZD1446 in Alzheimer's are expected in H2 2011. And finally, the company has begun enrolling phase II trials of TC-6987 in asthma and in diabetes with the goal of completing them by the end of the year in order to decide which direction to proceed in for further development.
A lot can go wrong with a wide pipeline like this so nasty surprises are always possible. But I'm not seeing any good justification for the 20% share price decline since March and this seems a good time to test the waters with a green thumb.