NPS Pharmaceuticals Inc (NPSP) — We first recommended NPSP as a trade and long-term buy back in November 2012 while NPSP stock was trading under $10.
This midcap biotech company develops therapeutics for gastrointestinal and endocrine disorders as well as neurological disease. Since my original article, NPS Pharmaceuticals has developed a positive global demand for its rare disease-focused portfolio, according to Standard & Poor’s. Meanwhile, while NPSP lost 14 cents per share in 2013, the company is expected to earn 40 cents per share this year. Additionally, S&P sees the potential of “near $1 billion” sales vs $251 million in 2014. S&P’s 12-month target is $42.
NPSP stock recently jumped to $37.45 on the rumor that Shire Plc (SHPG) was preparing a bid for the company. The deal reportedly was turned down, but Shire has retained an investment banking firm to fund a deal, and Shire itself has been the subject of recent takeover rumors.
The stock has been a fabulous performer for us, rising to almost $40 in February. It fell to under $24 in April, formed a base with a support line now at $27, and jumped to the high $30s on the above rumor of a buyout. A pullback on lighter volume places NPSP about 15% lower than its high, with support at its 200-day moving average at $29.60.
Buy NPSP stock at the market for a trade to $40 or a long-term hold based on the possible consummation of an eventual acquisition.