- The Washington Times - Tuesday, April 29, 2008

Human Genome Sciences shares are down about 28 percent in the past six months, but investors and industry analysts are far from abandoning the company as a loser.

The Rockville biotechnology company holds about 600 patents on medicines and vaccines that use information about human genes and proteins to combat disease.

The company is close to completing work on three new drugs: Albuferon for hepatitis C, LymphoStat-B for systemic lupus and ABthrax for inhalation anthrax.

If the treatments win Food and Drug Administration approval as expected, they could become blockbusters with substantial impact on Human Genome Sciences’ earnings. The drugs are being developed with pharmaceutical companies Novartis and GlaxoSmithKline.

“Two thousand seven was a year of execution for [the company], during which we delivered substantial progress toward the commercialization of our late-stage products,” said H. Thomas Watkins, Human Genome Sciences’ chief executive. “We are poised to achieve a number of major milestones in 2008 across our entire portfolio.”

The company operates with about 400,000 square feet of manufacturing space to purify multiple protein and antibody drugs. It was founded in 1992 and employs about 850 workers.

Human Genome Sciences plans to deliver 20,000 doses of ABthrax in the fall to the Department of Health and Human Services. The government is storing medicines in the Strategic National Stockpile, a national warehouse of drugs and vaccines, to respond to biological terrorism or other health emergencies.

If the government is pleased with Human Genome Sciences’ product, the contract could ultimately be worth $200 million for the company.

The company reported a net loss of $92.9 million, or 69 cents per share, in the fourth quarter, compared with a net loss of $66.9 million, or 50 cents per share, in the year-earlier period. Revenue in the fourth quarter was up to $12.5 million from $10 million one year earlier.

Human Genome Sciences has not yet announced its first-quarter 2008 results.

Its stock, HGSI on the Nasdaq Stock Market, closed yesterday at $6.79 a share, up 41 cents or 6.4 percent, largely from news of progress in developing LymphoStat-B.

The company also is expanding its offering of cancer drugs.

Shares of Human Genome Sciences fell early this year after the company repurchased its rights to its cancer medications from British drug giant GlaxoSmithKline. In return, Human Genome Sciences agreed to accept smaller royalties on its diabetes drug candidate Syncria.

The agreement drove financial analysts to downgrade the company’s stock, saying it made a possible acquisition by GlaxoSmithKline less likely.

They also questioned whether the company is pinning too much hope on its investments paying off in the future.

Citigroup Global Markets analyst Yaron Werber recently assigned the company’s stock a “speculative risk” rating, saying, “The company currently has no marketed products and depends solely on the successful development of pipeline drug candidates such as Albuferon.”

The drug holds promise for success, but only if new antiviral drugs do not render it obsolete, Mr. Werber said.

Human Genome Sciences “is funded with a significant amount of interest bearing debt that will need to be refinanced or converted into equity in the future, and if this is not possible, default may occur,” Mr. Werber said in a research note to clients. “The company has chosen to build a large manufacturing plant to produce pipeline products that could become a major strain on cash flow if it is underutilized.”

Richard Smith, analyst for J.P. Morgan Securities, expressed concern about whether Human Genome Sciences’ hopes for its LymphoStat-B for systemic lupus might be too speculative.

“We view the LymphoStat-B program as high risk and believe that the Albuferon program remains the key driver of HGSI shares,” Mr. Smith said in a research note.

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