- The Washington Times - Monday, October 3, 2005

Shares of Human Genome Sciences Inc. rose more than 3 percent yesterday after the Rockville drug company announced a contract to supply the federal government with medicine to treat anthrax.

Human Genome will supply 10 grams of the drug, ABthrax, to the Department of Health and Human Services for testing for $1.8 million under terms of the company’s first contract.

The department has the option to buy up to 100,000 doses of the drug for an undisclosed amount. The medicine would be stored in the Strategic National Stockpile, a national warehouse of drugs to treat diseases in the event of a public health emergency.

Analysts estimate the value of the full order at $50 million to $200 million.

Human Genome Chief Executive Officer H. Thomas Watkins said the company has the 100,000 vaccine doses ready if the government orders them.

“We hope the country never faces the need to use this product, but would be grateful for the opportunity to make ABthrax available for the treatment of our citizens and first-responders in case the need should ever arise,” he said.

After the contract announcement, shares rose 47 cents to close at $14.06 on the New York Stock Exchange.

Human Genome, which last posted a profit in 1994, was founded in 1992 to develop therapeutic medicine. The company reported a net loss of $55.9 million (43 cents per share) in the second quarter compared with $58.5 million (45 cents) a year ago.

“This is a company that currently has no products on the market and has little by way of revenue. That’s one reason why a contract of some size would be important,” said David Webber, a managing director at First Albany market-analysis company in New York, where Human Genome is rated as a buy. “It’s some validation of the company in a general way.”

Mr. Webber has no business relationship with Human Genome, but First Albany owns Human Genome securities.

“The company has a promising pipeline of drugs in development and there is a reasonable chance that more of those products will reach the market. If they do, most of the drugs in development address what would be substantial commercial profits,” he said.

“The development of drugs is a highly risky endeavor,” Mr. Webber said, adding that the risk is typical of nearly all drug companies.

Banc of America Securities also rates Human Genome as a buy, but warns it is a volatile stock. The New York firm warns that Human Genome is not posting a profit and the road to black ink could be delayed if its products don’t win government approval.

“We believe [Human Genome’s] prospects are underappreciated and that with low expectations, the risk-reward trade-off is highly favorable,” analyst David Witzke said.

In the past year, Human Genome’s stock has fluctuated between $9 and $16.

Banc of America owns more than 1 percent of a class of Human Genome stock.

Human Genome also is working on drugs in three other categories: cancer, hepatitis C and auto-immune disease treatment, all of which are in testing phases of development.

“While [ABthrax] is an important component of the company — the upside is very real — the core of the company is still in the three other major programs,” company spokesman Jerry Parrott said.

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