4Q loss increases at Human Genome


Human Genome Sciences Inc.'s fourth-quarter loss widened to $59.8 million, but the Rockville-based company said yesterday that it has enough cash to fund its drug-development efforts for at least several more years.

The company has $1.5 billion in cash and short-term investments available to finance clinical trials on eight drugs and secure a manufacturing facility to help produce the ones that make it to market. The ambitious construction plans are forcing the company to set aside a growing amount of cash as collateral for the off-balance-sheet deals that back them.

Company officials told industry analysts yesterday that it continues to seek ways to conserve cash and reduce the amount it has to set aside as collateral. Options include restructuring leases on its facilities and restructuring certain debt.

"We continue to have a strong financial position," said William A. Haseltine, HGS' chief executive officer, in a conference call with analysts. "Nonetheless, we are always looking for ways to strengthen that position, and we are committed to that end."

The company's fourth-quarter loss amounted to 46 cents per share, an increase from a loss of $55 million, or 43 cents per share, posted for the fourth quarter of 2001.

Revenue in the quarter was flat at $642,000.

Excluding a $14 million charge related to design changes in the manufacturing plant, the company's loss in the quarter was $45.6 million, or 35 cents per share. Fourth-quarter 2001 losses were $32.9 million, or 26 cents per share, excluding one-time charges.

For the year, HGS lost $219.7 million, or $1.71 per share, compared with $117 million, or 92 cents per share in 2001.

The company spent $191 million on research and development last year, but has no products on the market. Company officials expect the size of its work force and operating costs to increase about 10 percent this year.

That hasn't stopped HGS from initiating acquisition and construction projects that were previously expected to force the company to set aside $526 million in cash in 2004. Company officials have since redesigned plans for a new manufacturing facility, a move expected to cut $75 million to $100 million from the final cost.

Company officials said yesterday that they will need to set aside only about $400 million as collateral on capital projects. Analysts have scrutinized the size of the set-aside in recent months out of concern that it could limit the company's ability to fund drug research.

"It's not really something that's going to impact them," said William Tanner, an analyst with Leerink Swann & Co. in Boston.

Tanner, who rates the company's shares "underperform," said the plant under construction won't sit idle because there is a dearth of facilities capable of manufacturing proteins. If HGS doesn't bring a product to market, other biotechnology companies may step forward to lease the space. Tanner expects HGS to burn through about $220 million this year. At that pace, the company should have enough cash to keep operating for several years, he said.

Shares of HGS closed down 5 cents at $6.48 yesterday.

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