Lupus, GSK, HGSI and drugs

A story was crossing the CNBC World channel this morning about Lupus and a new drug to treat it. OK, a friend has Lupus, so my ears perked up. “First New Drug” in a very long time… lots of potential for effective treatment… but the stock was being downgraded. What?

Seems it’s a cost issue. The projected cost is expected to limit market size to smaller than previously expected…

OK, it’s a joint venture of Human Genome Sciences Inc HGSI and Glaxo Smithkline GSK.

Is there any monetary “juice” here?

First up, GSK looks to be a basic “market match” with the SPY S&P 500. It does have a nice 5+% dividend and is a pretty “safe” drug company. Just the kind of thing for a “sleep well” long term investment. For trading, you could just as easily trade the SPY and avoid any company and segment specific risks… but without that dividend. If you are in 2% bonds, getting more than double the yield with some growth is not a bad choice. Here’s a “5 Year Weekly Interval” chart comparing it to the S&P 500. You can clearly see the ‘market match’ then the ‘crash’ and that it has lagged in the recovery phase.

Glaxo GSK vs SPY 5 year weekly interval chart

Glaxo GSK vs SPY 5 year weekly interval chart

You can reasonably expect that it will eventually get closer to that S&P match space again as markets settle. For now, we see the ‘SMA Stack’ is weaving and it’s more of a ‘flat roller’. Trades could be made on a range basis or on a Slow Stochastic basis (at this time scale) with MACD confirming. Right now MACD looks like it’s setting up for a crossover to the downside (but that same ‘birdy beak’ look is also what happens in a long slow steady rise…), and that ADX line below 25 says the trade indicator to use is Slow Stochastic. Since this is a weekly chart, we could just move to the daily chart and trade it based on the slower indicator. (A Fast indicator, like the “Slow” Stochastic, on a slow chart does about the same as a slow indicator (like MACD) on a faster chart…)

Here is the 1 year Daily Interval chart. Notice that MACD is below zero, and DMI is “red on top”. Not a moment to be buying. Also note that price has crossed the SMA stack and is coming back at it from the bottom side. Looks like a top rolling over to me. So wait a bit for any desired ‘buy’. You can likely pick this up with a 6% or maybe even a 7% dividend if the price drops some more. But don’t expect it to go too far. That dividend will defend the stock to the downside… Also notice that even at the Daily Interval scale, it has ADX below 25. This is not moving either way very fast.

Glaxo GSK One Year Daily Interval vs SPY S&P 500

Glaxo GSK One Year Daily Interval vs SPY S&P 500

OK, so much for Glaxo… how about HGSI?

The 5 year chart is interesting. We see a great honking spike on some news or other a year and a half ago (probably the pre-release rumor on the new drugs) and then a rolling flat as folks waited for The News. (“Buy the rumor, sell the news”) So I’d expect this to be a ‘not right now’ stock too. We’ll see.

Human Genom HGSI 5 year weekly interval

Human Genom HGSI 5 year weekly interval

DMI “red on top” and MACD “red on top” and near / at zero. Not much to see here… The “action” was all a year+ ago. Now it’s just a ‘toppy roller’ and might be worth a faster trade, but not much else. Biotech is very hard to trade. It’s always news driven and you find out AFTER the spike, that something interesting was about to happen. You buy it when it’s beaten down and nobody cares, not when ‘good news’ is in the air. Then you wait. Sometimes for years. IFF the Giant Pop happens, then you sell and wait for the next re-entry. Only do this on companies with the cash to live through the down cycle…

On a one year daily interval chart, it’s looking like a potential trade (as the present news flow has been negative with downgrades for ‘loss of market size’ on the price of the drug).

HGSI Human Genome 1 year Daily interval

HGSI Human Genome 1 year Daily interval

RSI ‘near 20’ with MACD looking like a ‘crossover soon’ (maybe) and ADX has a downward ‘kink’ in it as it inflects. Promising. IFF MACD has a ‘crossover to the upside’ with ‘blue on top’ (and preferably crosses the zero line during the trade) AND we get DMI with “blue on top” as we have a red/blue cross over; then it would be a nice entry in a rebound from bad news as the reality of a new drug drives some earnings expectations (regardless of price).

So what was this news? If you click on the ‘news’ tab on the Bigcharts chart for HGSI you find this story on the top:

Original Story. You can read the whole thing here.

By Matt Andrejczak, MarketWatch

SAN FRANCISCO (MarketWatch) — Two analysts downgraded Human Genome Sciences Wednesday after a U.S. Food and Drug Administration panel showed support for a lupus drug Human Genome is co-developing with GlaxoSmithKline PLC.

The key concern: Sales for the lupus drug called Benlysta may not be as big as previously thought, according to analysts at Citigroup and Bank of America who both downgraded Human Genome and cut their stock-price targets before the stock market opened.

OK, this is typical ‘double speak’. We’ve got a new drug announcement and an approval from the FDA being likely and ‘supported’ but the stocks get downgraded. What? Why?

Lupus is an inflammatory connective tissue disease. It occurs mostly in women and is characterized by fever, skin rash, and arthritis.

An FDA panel late Tuesday voted 13-2 to recommend the FDA approve Benlysta. A separate vote on the effectiveness of drug was 10-5.

It all looks great up to this point. FDA panel saying it is recommended. Effectiveness looks good too. What’s not to like?

In a research note, B. of. A. analyst Rachel McMinn said FDA panel feedback at Tuesday afternoon’s meeting “underscored concerns that Benlysta will have a smaller than expected role in lupus treatment.”

McMinn had previously assumed treatment using the lupus drug would run $40,000 per patient. She lowered that calculation to $35,000.

OK, they don’t expect quite so much lucre per patient. Good news for the patient, not so good for the company. But still, 35 vs 40? Not that big a hit…

Citigroup analyst Yaron Werber downgraded Human Genome to “hold” from “buy” and cut his price target to $30 a share, from $35.

He now expects Benlysta to reach global sales of $1.6 billion by 2015, down from a previous assumption of $2.6 billion.

OK, we’ve got a $5 a share gain expectation from where the price is today. Not great, but not bad either. But you can make that much in a 2 month swing trade as it wobbles back and forth… Don’t think I’d invest in it, but I’d be willing to trade it.

On the TV show there was talk about the cost being prohibitive for wide spread use. The company rep did not ratify the $35,000 cost projection, but did say that pricing was not settled and that they intended to find a way for folks who needed treatment to get it, despite what the cost might be. I took that to mean “get the government to subsidize it via other people picking up the tab”. And folks wonder why I think government ought not to be in the middle of economic transactions. Too easy to bypass market signals that the price is too high and they ought to cut it. Instead, just dip in some other persons pocket… but I digress…

OK, the good news is that for the first time in a very long time there is a reasonably effective new treatment for Lupus. The bad news is that it’s going to be terribly expensive, but not expensive and widely used enough to make the company a boat load of money (just a small yacht worth…) and that money will need to be laundered through a government agency.

Sorry, not seeing a lot of investment here. Good for ‘news driven trades’ though as various government agencies do / don’t approve and do / don’t agree to pay with other peoples money.

If I had Lupus would it be worth $35,000 to me? That would likely depend on just how bad I felt… but the pattern of these things is such that when one company finds a Very Expensive Drug that works, other companies find slight variations on the molecular shape that work too, and price cuts arrive in a few years. So there is some hope that in 4 or 8 years, we’ll see cheaper versions, and then this drug price will drop. (And I have no idea how this will work with GSK in the UK and the National Health Service…)

To me it looks like HGSI is a nice trade vehicle with a potential for an entry ‘soon’, and GSK is a ‘sleep well’ dividend payer for the spouses retirement account, maybe with a ‘nibble’ now and then a ‘fill out the position’ if / as it drops just a bit more.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money and tagged , . Bookmark the permalink.

7 Responses to Lupus, GSK, HGSI and drugs

  1. twawki says:

    As someone with lupus I mostly follow a fresh raw food diet and that seems to work for most of the time. Have had friends go down the drug route and the drugs ended up killing them.

  2. E.M.Smith says:

    Hmmm… Interesting that food is an issue.

    I have an “autoimmune problem” from food as well. If I eat a lot of beef, I get arthritis.

    I can have about 1 ‘steak worth’ a week, at most, with minimal issues. (Though once things have ‘flared up’ I need to back off to ‘near zero’ for a couple of weeks…)

    While driving back from Oregon one night (at about 2 am…) there was a Late Night Talk Radio show on the SF station with Doctors from an immunology practice. They were discussing allergies and how they are additive. That you may have 3 or 4 things pushing you toward a response, but not over the trigger point. Then the next little thing can set you off, so you blame it, not the base reactions setting the trigger. They then went on to describe roughly the reactions I’d been having… from the sneezing and watery eyes to the phlegm and all.

    I’d read a book “The Arthritics Cookbook” and knew of the food connection, but he basically just said “leave out large swaths of food and eat rice and vegetables”. These folks were talking “elimination diets” were you find exactly what foods might be ‘setting the trigger’. I put the two together…

    The immune system takes about a week, sometimes two, to respond. Either with more or less. So they said to pick one food, and eat only that for a week. Then add another food. When you started feeling crappy or having reactions, that food is one of your triggers.

    OK, I ate nothing but potatoes for a week. One of the longest weeks of my life…

    But all my issues ended.

    Then I added chicken. What a relief! (In retrospect, I would start with chicken… but I’ve a better way now…) Then a week later, another food, then eventually I added “milk” back in and things went off the rails.

    OK, a few more foods later I was Really Really tired of chicken and potatoes (even if I could have a couple of vegetables and fish with them…) and I was pondering “What is A food” (thinking about how to add ‘Lasagna’ ;-) and realized that we (the phantom Drs. and I ) were doing a “Linear Search”. ‘Wait a minute!’ I think, I know much better search methods…. so I swapped to a ‘binary search’ (but with modified bounds, not a strict binary search as I can’t get 1/2 of all foods into a meal ;-)

    Basically, I started adding foods in “groups”. If the group did nothing, then all PARTS of the group were deemed OK. If I reacted to a ‘group’, then I’d try 1/2 the ingredients (more or less) in another group. Pretty rapidly you find, for example, it’s the milk in ice cream that was the issue; not the chocolate, sugar, vanilla, nuts, etc.

    So I added a “salad group”. Lettuce, cabbage, carrots, radishes, etc. with an oil / vinegar dressing. No Problems after a week. Then I added a ‘lasagna’ group. Cheese, tomato sauce, noodles, olives, mushrooms, etc. Again no problem. ( A couple of decades later I now react to too much cheese and may have a slight tomato reaction developing – The Arthritics Cookbook warns folks off of tomatoes – but not enough to be a problem yet. Then it was simply not a problem at all.) Now I had a much larger pallet of flavors to work from. Then I added a ‘chili group’ and the world was a much happier place ;-)

    The bottom line is that THE thing that was causing almost all my “problem” was the quart of milk a day I was consuming. Secondary was the lb of beef a day. It was ‘cow stuff’ that was my ‘issue’. Keep that under about 1 lb a week total, no problems.

    You may well find that if you do such an ‘elimination diet’ that there is some particular thing in the ‘other diet’ that is the issue and a lot that is again “ok”. I know, having had creaky joints for a week after giving in to too much ice cream at a birthday party; the desire to do such experiments can be driven off by the consequences… but it was a great relief for me to find, for example, that my corn reaction (never need Exlax again…) is restricted to the protein component. I can have corn sugar, corn starch, corn oil, just not the corn protein. Made finding something I could eat in a package much easier… corn starch being in nearly everything that doesn’t have corn syrup in it…

    It may well be that the “fresh raw” part is needed (as some things in fresh and raw foods are broken down and changed in cooking) or it might be just that most folks don’t eat raw meat and it’s a meat protein that’s the problem… The Arthritics Cookbook has folks dump all meats but fish in the first step IIRC. And any acidic vegetables like tomato. Just rice, fish, neutral vegetables like the “Choy” group (cabbages / turnips) and bean sprouts kind of stuff.

    So the question that comes to mind for me is just: Is it the “fresh raw” character or is it the reduced selection of foods folks will eat raw? Just a thought…. You could easily find out by steaming your veggies for a week and seeing if “nothing bad happens”. (Though I know the dread that comes with stepping outside the “safe box” once you’ve found it. The first time I did a ‘challenge’ with corn starch was nerve wracking even though nothing happened. Then the time I discovered corn meal on the bottom of pizza, it was an ‘issue’ for a couple of days … and I still have to plan on either NOT having ice cream at parties or accepting the consequences… and I love ice cream…)

    The point? Finding a ‘safe box’ is a very good thing, there are fairly efficient ways to find it (by groups), and it may well be worth the added effort to narrow down the size of the ‘unsafe boxes’ by trying little parts of them to see what exactly is “the issue”.

    FWIW, I’ve slowly gained sensitivity to “cow stuff” over the years. Initially it was just large quantities of milk that was the issue. A couple of years later, daily beef had to drop to 1 time a week beef. Something in the cooking process denatures the proteins in milk enough that I can have small amounts of things cooked with milk in them (like clam chowder) but I usually make my own now with goat milk. And I don’t react to butter, even though some milk proteins ought to be in it. Not enough, I guess. So I can still cook with butter and some cows milk. Or have a single beef dish about once a month (too fast a ‘come and gone’ to trigger the immune response?).

    If I’d just said “ALL COW STUFF” in any degree for all time, it would be much harder for me to find meals I could eat and it would be much less interesting food. And if I’d stopped at “Fish, rice, and oriental vegetables” I’d be very unhappy by now…

    Yes, it took me close to a year to get ambitious enough to step outside the ‘safe box’ on the chart. And about 2 years after that to go back and do some ‘in detail’ challenges on the different kinds of ‘cow stuff’. But eventually it was ‘worth it’. (FWIW, I’d ‘lucked out’ in that about 1/2 way into the first week I’d said “hell with it” and decided I just HAD to have butter on my spuds…. that I react to ‘cow stuff’ but not butter was very lucky or I might have spent a month figuring out it was NOT the potato but the butter… at any rate, butter was in from the start as an ‘acceptable cow stuff’ so I had a clue that it was ‘by parts’ and not just ‘all cow’…)

    There are now several “Arthritics Cookbook”s out there. This one was the first. By Colin Dong MD (Yes, a doctor, but one who could step outside his indoctrination when HE got arthritis… and figured out a way to fix it. That he then used in his practice with good results.)

    http://www.amazon.ca/Arthritics-Cookbook-Collin-Dong/dp/0821748831

    http://www.paperbackswap.com/Arthritics-Cookbook/book/0821748831/

    Sidebar on mechanism: Part of the thesis is that the beef proteins do not get fully broken down in digestion, then fragments get incorporated into joint surfaces with some ‘cowness’ still intact. Then the immune system says “What is cow doing here?” and attacks it. All it requires is that digestion be less than perfect and that assembly be lazy and use larger bits if they are laying around. The “builder” enzymes be less than stellar about telling cow collagen from human, for example. When you eat further from your own species, the odds of the protein being accepted ‘as is’ in digestion or assembly drop. Basically, not much in a carrot that looks like human cartilage. A bit more in clams, but still not much. A whole lot in a chicken but maybe still not close enough. But a cow, it’s a mammal and much closer in chemical structure…

  3. Doug says:

    HGSI has been kind to me so far with nice fat premiums for covered calls. Despite losses from share depreciation from $27 to $24, I’m that on the 30, and then 26, covered call for November.

    Check out the April calls now – more nice premium.

    Cheers

  4. Doug says:

    Woops, my post made no sense. Meant to say that despite losses of approx $3 a share, I made about $6 a share by selling first the $30 November call, buying it back when the stock depreciated to $24, and then selling the $26 call.

  5. twawki says:

    On the run but will come back and digest your response. My main issues come from what they do with food – unpasteurised cheese is fine, pasteurised can put me in hospital, organic apples are fine, sprayed apples cause me to cough etc As long as I eat as close to nature as possible I feel like Im walking on air. Out of a can or packet and Im in bed with chronic fatigue and all manner of problems.

  6. E.M.Smith says:

    Hmmm…. Fascinating…. Canning is just heating to 240 F for a short time. So the question would be do COOKED foods (home cooked in stainless steel pans) cause a problem too? If not, then I’d suspect the strange things from the can liner (like the one that acts like estrogen…) Pasteurized is just a gentle warming, but most pasteurized cheese is not ‘straight’ and has had some stuff added in the “processed” part of “pasteurized processed”, so again it would be interesting to know if a home made grilled cheese sandwich is fine when made with ‘natural’ cheese.

    If it’s ‘any heating even at home’ that causes issues, then I’d suspect something is formed in the heating process, and finding out what that was could benefit lots of folks….

    It would surprise me to find that there was a sensitivity to “heated foods”, but only a little. A lot of chemical changes happen with heating. It would just surprise me less to find out heating was not guilty and was only associated with some other chicanery in the processing…

    best of luck…

  7. twawki says:

    No its not so much cooked its the additives, preservatives etc. For example cheese here is made from pasteurised milk. Once the milk is pasteurised the enzymes that create the cheese are destroyed. Therefore a synthetic enzyme is required – therein lays the problem for me and it’s a hospitalisation one.
    With apples it is the chemicals – fungicides and insecticides that get sprayed on it that I react to, not the apples themselves. There is the buildup of these chemical residues in the body that then cause the ticklish cough 24/7 for weeks on end etc
    With breads it’s the gm soy flour that seems to be in everything these days – and I end up in bed with chronic fatigue and a foggy head.
    Yep have been allergy tested and elimination diets – was partially useful. However it is what they do to the food which determines how I respond. Most food in its processed state makes me sick. Most food in its natural state I feel strengthened by.
    Currently I juice 2-3x a day, herbal teas 2-3x a day, no processed foods and most of the time I’m good. Like to eat a small amount of meat with meals n thats good.
    However if like last christmas I decide to eat what the rest of the family ate (the trimmings) biscuits, ice cream, lollies, etc well I end up in the emergency department 4 nights in a row – not fun. Now if those biscuits were home made with natural ingredients, the ice cream home made with real milk etc, the lollies n chocs not eaten then there wouldnt have been a problem.

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