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Human Genome shares fall 43%

The Baltimore Sun

Shares in Human Genome Sciences Inc., a 15-year-old Rockville biotech company that has yet to get a drug on the market, plummeted to their lowest level since 1995 yesterday after disclosing that serious side effects emerged during a clinical trial of a potentially lucrative hepatitis treatment when patients received high doses.

The share price dropped nearly $4.40 to $5.62, or almost 44 percent.

Human Genome Sciences officials said they were still optimistic that Albuferon would win approval - and have market success - at a lower dose.

"We continue to have every confidence that Albuferon will become the market-leading interferon for the treatment of chronic hepatitis C," H. Thomas Watkins, president and chief executive officer, told analysts in a conference call. The company says that's a $2.3 billion market.

But some analysts say the problem with side effects raises questions as to whether the drug can be approved by the Food and Drug Administration and foreign regulators.

Joseph P. Schwartz, an analyst for Leerink Swann & Co., lowered his estimate for the probability of Albuferon winning market approval to 65 percent from 90 percent.

And Dr. Jim Birchenough, an analyst for Lehman Brothers, wrote in a research note that Albuferon had also shown increased coughing and shortness of breath in earlier trials, and said he would "expect significant FDA scrutiny of this issue," according to Forbes.com.

But Schwartz, while seeing reduced chances for Albuferon's success, also termed the magnitude of the price drop "an overreaction."

In a research note, Schwartz wrote that the lower dose had done well in earlier trials, and he did not view success for the higher dose "as likely or necessary."

"This is not positive news, but should the stock be cut in half for this?" asked Jason Kolbert, an analyst for Susquehanna Financial Group, who also said the magnitude of the share price drop represented overreaction. He said the higher dose "was never the one HGS planned to take forward," and the key is whether the lower dose can win approval.

Albuferon is a longer-acting form of interferon, which is an approved hepatitis treatment. Some patients in the HGS trial were receiving 1,200-microgram doses every two weeks; other patients were receiving 900-mcg doses. They were being compared against a control group receiving the current standard treatment, called Pegasys.

In midstage trials, Human Genome Sciences reported that the 900-mcg dose matched Pegasys in safety and effectiveness, but because it is given less often, patients missed work less often.

But an independent data monitoring committee reported "serious pulmonary adverse events" in the 1,200-mcg group. It recommended cutting the doses for those patients to 900 mcg, and Human Genome Sciences and its partner, Novartis Pharmaceuticals, agreed.

HGS said it couldn't provide details about the "serious adverse events" because it did not have all the data available to the committee and because it didn't want to bias a current study.

Watkins said the company was still on track to apply for approvals for the drug in the fall of 2009.

Human Genome Sciences has no drugs currently on the market and lost $169.6 million through the first three quarters of 2007. It has three drugs in final-stage testing, including Albuferon.

Another is an anthrax treatment being developed under a $165.2 million contract with the Department of Health and Human Services. Human Genome Sciences hopes to begin sales to the government by the end of this year.

It is also in final-stage testing of LymphoStat-B, a drug for lupus. While it hasn't specified a market size, it has characterized both LymphoStat-B and Albuferon as "potential blockbusters."

With Albuferon, Human Genome Sciences can collect up to $507 million in milestone payments from Novartis if development is successful. It has already received $130 million of that. If the drug gets to market, Novartis and Human Genome Sciences will split the U.S. profits 50-50, and HGS will collect royalty payments on sales elsewhere.


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