Human Genome Sciences’ Fourth Quarter Solid; Preps ABthrax To Ship, Plots Revenue Spike

$165 million anthrax deal with feds will fund pipeline’s Albuferon for hepatitis C and more.

With deliveries of ABthrax stockpiles to the government now slated for the autumn, Human Genome Sciences expects its revenue will soar by more than 350 percent this year.

Manufacturing of the anthrax treatment is on track, with 20,000 doses due to ship this fall, as part of a $165 million contract, according to the Rockville, Md.-based company.

Revenue is expected to shoot up to $160 million in 2008 from about $42 million in 2007 and about $26 million in 2006, the company reported in a Feb. 26 earnings release. Annual net loss for 2007 edged up to $262.4 million from $251.2 million in 2006, the firm said.

Several key clinical developments are on the horizon for this year, including the release of Phase III data for the chronic hepatitis C virus treatment Albuferon (albinterferon alfa-2b) in the second half.

Pharmaceutical giant partner GlaxoSmithKline plans to release results from two Phase II trials of the atherosclerosis candidate darapladib this year. Results from one trial will be presented the American College of Cardiology meeting in March, while findings from the other will be submitted to a peer-reviewed journal. These results will form the basis of a decision on whether to progress to Phase III.

Enrollment in two Phase 3 trials for the lupus medication LymphoStat-B will wrap up this fall, with data expected next year.

"The potential for a safe, effective drug to treat systemic lupus erythematosus is great," wrote Susquehanna Financial Group analyst Jason Kolbert in a note issued the day after the earnings call. "With no new drugs approved for this indication in more than 40 years, and the current standard of care carrying significant risks, we believe this market could match the hepatitis C market."

Revenues from the anthrax program will boost a range of new drugs in research and development, Kolbert told the "The Pink Sheet" DAILY. Given that the government is the sole buyer in the deal, costs for commercializing ABthrax are low and gross margins estimated at from 20 percent to 30 percent, he said. Other clients could surface in 2009.

"Foreign governments want to see the U.S. stockpile delivered before they buy," Kolbert said. "The delivery could open the door for another order."

In a report, Charles Duncan at JMP Securities wrote that 2008 could "transformational" for HGS, with developments for darapladib and Albuferon providing upward stock momentum.

The company has been testing various dosing regimens of Albuferon in randomized ACHIEVE 1 and ACHIEVE 2/3 trials. Research revealed a link between a 1,200-mcg dose and serious pulmonary adverse events.

HGS' stock price took a nosedive last month after the Independent Data Monitoring Committee reviewed unblinded data from the trials and advised switching patients from the 1,200 mcg dose to a 900 mcg dose ¹ (Also see "HGS Cuts High Dose Albuferon In Phase III After Increased Pulmonary Events" - Pink Sheet, 24 Jan, 2008.) .

Kolbert and other analysts believe the market overreacted to the DMC's action. The risk profile for the drug is higher than what had originally been anticipated but still very low, Kolbert said.

HGS executive Jerry Parrott said the 900 mcg dose is the most accurate dose and most likely to reach the market.

- Emily Hayes ([email protected])