Human Genome Lupus Drug Benlysta

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Human Genome Sciences (Nasdaq: HGSI), a biopharmaceutical company, along with GlaxoSmithKline, reported positive results for treatment of systemic lupus erythematosus (SLE), an autoimmune disease, in its first phase III trials on Monday, July 20, before the opening bell. Within a few hours its stock rocketed to $11, a rise of over 200 percent backed by heavy volumes.

Lupus affects an estimated 1.5 million people in the United States and 5 million worldwide, according to the Lupus Foundation of America. Benlysta, the new experimental drug for lupus treatment, is not the only potential blockbuster in HGSI's clinical development pipeline. It includes drugs to treat hepatitis C, inhalation anthrax and cancer. The market for Benlysta alone has been estimated by Lazard Capital Markets at $ 2.9 billion. The drug has to pass another phase III trial in November this year before it gets FDA approval.

An article in Barron's says: "Even taking Benlysta's approval for granted, the drug will likely not make it to market until 2011. That leaves Human Genome the rest of 2009 and all of 2010 without the benefit of its sales. Analysts do not expect the company to turn a profit either year, with losses projected to jump from 13 cents this year to well over $1 in 2010."

Human Genome has close to $400 million in debt, which is just about covered by its current market cap of over $ 400 million. HGS reported revenues of $204 million in the first six months to June 30, 2009, compared to $23.8 million in the comparable half of 2008. Revenues included $162.7 million from the company's raxibacumab (ABthrax) contract with the U.S. government, $17.7 million from the Zalbin (previously Albuferon) agreement with Novartis, $10.3 million from manufacturing and development services, and $2.7 million from the BENLYSTA agreement.

It reported a net income of $64.4 million in the first half of the current year, compared with a net loss of $132.8 million in the comparable period of 2008. The company also announced that the U.S. government "has exercised its option to purchase an additional 45,000 doses of raxibacumab for the Strategic National Stockpile, to be delivered over a three-year period, beginning near the end of 2009. HGS expects to receive approximately $151 million from this award as deliveries are completed."

"The second of the two late-stage trials for Benlysta is due to be reported in November and the company aims to file for approval of the drug by early 2010, according to David Stump, the company's head of research and development," says a Reuters reports.

Revenues from supply of ABthrax to the U.S. government is, at best, a non-recurring income. Human Genome can recognize revenues from sales of blockbuster Benlysta, subject to approvals only in 2011 in the best-case scenario. Lupus disease has defied any drug treatment in the last four decades. It is a tough call whether Human Genome will deliver on its promise on Benlysta or repeat the history of other biotech majors like Biogen Idec (Nasdaq: BIIB) and Teva (Nasdaq: TEVA) whose drugs failed to take off.

More about this author: Dheer Kothari

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