Human Genome Sciences CEO Cautions On Lupus Drug Launch
January 12 2011 - 3:04PM
Dow Jones News
Human Genome Sciences Inc. (HGSI) is expecting regulatory
approval of its lupus drug in March, but Chief Executive Thomas
Watkins is trying to make sure investors don't get too excited
about the drug's launch.
Benlysta, a drug being develop by Human Genome and
GlaxoSmithKline PLC (GSK), would be the first drug for the
autoimmune disease in more than 50 years. After an earlier delay,
the Food and Drug Administration is set to make a decision in
March, and Wall Street generally expects sales to exceed $1 billion
a year.
Watkins isn't worried about the drug selling--earlier this week,
the company projected "multibillion-dollar annual revenues" by
2015--but he has become concerned about investor perceptions of the
launch's speed in recent months.
"We've been trying to manage down expectations a bit," he said
in an interview Wednesday at the J.P. Morgan healthcare conference
in San Francisco.
"Often with drug launches, the expectations are so high that for
the first couple of quarters it is almost impossible to meet the
expectations," he said.
Companies such as Amgen Inc. (AMGN) and Dendreon Corp. (DNDN)
faced Wall Street scrutiny in 2010 from slower-than-expected
launches of new products that are expected to be blockbusters
eventually.
The success of Benlysta has made Human Genome's stock a darling
of the sector. It traded at 45 cents in early 2009 amid pessimism
ahead of the two trial results for Benlysta. The shares recently
traded at $27.02.
Cowen & Co. analyst Eric Schmidt said last month that the
stock price of about $25 implies that peak sales of the drug need
to reach $2.5 billion to $3 billion a year. He said that level was
unlikely and predicts a peak of $1.7 billion in lupus-related
sales, valuing the stock at $11 to $12.
Watkins declined to offer estimates, but he believes that the
initial uptake may be gradual. It will take some time for
managed-care companies to get the drug in their systems, he said.
Watkins said managed-care companies will pay for the new drug, but
that they typically drag their feet in setting up reimbursement for
new, pricy biologic drugs.
He declined to comment on price but expects it to be somewhere
between $20,000 and $45,000 a year.
Physicians will have to use the "buy-and-bill" method--meaning
they acquire the drug and then bill an insurer--something that
frequently delays physicians in immediately using the drug in a lot
of patients. Physicians that would prescribe a drug like Benlysta
are familiar with the process, but it can lead to a slow launch,
Watkins said.
The drug's success in two large studies has produced consistent
speculation that Glaxo or another large drug maker would acquire
Human Genome. Watkins declined to comment on any interest from
buyers but said he is focused on building the company to grow as an
independent organization.
Part of that plan is to build the company's later-stage
pipeline, which it plans to do through licensing and acquisitions
in immunology and cancer.
Watkins declined to name a target, but he expects any deal will
be below $1 billion and won't depend on the success of Benlysta.
The company ended 2010 with about $950 million in cash, and Watkins
is confident in tapping the credit markets.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com