Analysts feel HGSI's odds are stacked against them

BANGALORE, July 16 (Reuters) - Human Genome Sciences' (NASDAQ:HGSI) lupus drug Benlysta faces long-odds to reaching the market, given disappointing early trial results as well as a history of multiple prior drug failures in an indication that does not readily lend itself to treatment.

It has been more than three decades since a new therapy has been approved for systemic lupus erythematosus (SLE), which occurs when the body's immune system attacks healthy cells and tissues.

"We note that historically, drug development in SLE has been extremely difficult... and view the Benlystaprogram similarly; with cautious skepticism, following recent SLE failures," UBS analyst Maged Shenouda said in a note.

It is tough to assess a treatment's effectiveness as SLE tends to flare up and wane.

Analysts also cited disappointing data from the drug's mid-stage trial in 2006 as a cause for concern.

Results from Benlysta's first late-stage study will be released on July 20.

The study, codenamed BLISS-52, was designed to measure patient response rate to the drug at the 52nd week.

"Fundamentally, odds are against a robustdata set," Jason Kolbert at ThinkEquity LLC said in a note.

"We cannot predict with accuracy the outcome of the (late-stage) clinical trial," he wrote.

The graveyard of compounds that failed clinical studies in the SLE indication includes Biogen Idec Inc (NASDAQ:BIIB) and Genentech Inc's Rituxan, and La Jolla Pharmaceutical Co's (NASDAQ:LJPC) Riquent -- both of which failed in late-stage trials.

PROSPECTS BLEAK

Jim Birchenough, an analyst at Barclays Capital, sees an 85 percent chance of Benlysta failing in its late-stage trial. His main concern was the disappointing results from the original mid-stage trial reported in 2006.

He also dismissed the latest set of promising results from another phase II study, saying it was four-year follow-up data for only a subset of patients from the initial mid-stage trial that had failed to meet its main goal.

Last month, Human Genome had said its lupus drug continued to show positive results in a mid-stage trial conducted over four years in patients with serologically active SLE, and that continued treatment with the drug showed sustained improvement or stabilization of SLE and decreased frequency of flares.

"We believe uncertainty remains linking seroactivity to positive clinical results," UBS' Shenouda said.

STILL IN WITH A CHANCE

But Leerink Swann's Joseph Schwartz believes Benlysta may still succeed. "The consensus is that nothing works in lupus, but if something is going to work then Benlysta has the shot."

He gives the trial a 60 percent chance of success.

"The trial has been well designed and (the choice of) patients have been selective... An anecdotal thing that bodes well is that patients have remained on the drug for a long time."

Schwartz believes that a strong unmet medical need combined with compelling safety and efficacy data from the mid-stage trial and one late-stage trial success could be enough to persuade U.S. health regulators to take a chance on the drug.

However, he also warned that while the drug showed a good long-term experience, the main question would be whether it is powerful enough to show efficacy in a 52-week timeline.

About 1.5 million people in the United States and about 5 million worldwide suffer from various forms of lupus, including SLE, according to the Lupus Foundation of America.

ThinkEquity's Kolbert expects that the market potential for Benlysta could reach between $1 billion and $2 billion, split 50 percent with partner GlaxoSmithKline (NYSE:GSK).

DEBT CONCERNS LOOM

Analysts say a trial failure would ignite concerns about balance-sheet risks at Human Genome.

"The company has about $397 million in debt due by 2012 that would be at risk following disappointing BLISS-52 data," UBS' Shenouda noted.

The company had cash, cash equivalents and investments of $396.9 million as of March 31.

"If Lymphostat-B (Benlysta) fails to be commercialized, it will place a burden on thecompany to cover its debt obligations with (the chronic hepatitis C drug) Albuferon in the near term," Kolbert said in a note.

However, the company had said in April that its cash position continued to be sufficient to take it "through the availability of Phase 3 data, the filing of marketing applications and the launch of our late-stage products".

Human Genome is developing Albuferon to treat chronic hepatitis C in partnership with Swiss drugmaker Novartis (NYSE:NVS) and expects to file for marketing approvals globally in fall of 2009. (Editing by Vinu Pilakkott)

BiomedReports is not paid or compensated to report news and developments about publicly traded companies. Full disclosure can be read in the About Us Section

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