Human Genome's Lupus News Nice, Underwhelming

Expectations were for something more than a heads-up on new drug trials.
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When

Human Genome Sciences

(HGSI)

put out word late Wednesday that it was going to hold a special news conference the following morning, the ears of biotech observers and investors perked up.

Would the well-known genomics firm unveil a blockbuster acquisition? Had its scientists unraveled some groundbreaking medical riddle? Or because we're all fearful of the bioterrorism threat, was CEO Bill Haseltine coming to the rescue with a cure for anthrax?

Well, Thursday morning has come and gone, and the answers to these questions are, disappointingly, no, no and no. The actual news: Human Genome Sciences is starting human clinical trials on one of its young drugs, a possible treatment for lupus and other autoimmune diseases.

Investors reacted with apathy for most of the day. Shares of Human Genome Sciences traded flat for most of the session, eventually rising $1.57, to $44.20, on the back of a broader, late-afternoon biotech rally.

Investor excitement over the whole genes-to-drugs story -- championed best by the likes of Human Genome Sciences and

Millennium Pharmaceuticals

(MLNM)

-- has been wearing thin for most of the year. Shares in these companies are off 60% and 72% from their 52-week highs as frustration sets in over a perceived lack of progress and the creeping suspicion that these companies might be a tad overvalued.

To be fair, Thursday's news from Human Genome Sciences is noteworthy, it's simply not of the hold-the-presses variety. The Food and Drug Administration has given the OK for the company to start clinical trials of LymphoStat-B, an experimental drug that hopefully will help patients suffering from lupus, a disease in which the body's own immune system goes haywire and attacks healthy joints and tissues.

LymphoStat-B is a monoclonal antibody that seems to work by turning off a natural immune system stimulator, the B lymphocyte stimulator, or BLyS for short. Of course, years of testing will have to be conducted before anyone knows whether LymphoStat-B is a success.

And that's the big rub with today's announcement, which was made by CEO Haseltine at a news conference at the National Press Club in Washington. (No wonder some people thought the company was going to have something to say about anthrax.)

"Holding a press conference to announce this? Give me a break," says Bill Tanner, biotech analyst at SG Cowen. "The company is making progress

on genomic-based drug development relative to others, but this is no reason to get crazy." Tanner rates Human Genome Sciences a buy, and his firm hasn't done underwriting for the company.

Company spokesman Jerry Parrott says the decision to preannounce and hold a news conference for LymphoStat-B was made because the drug, if successful, will address a huge unmet medical need. Lupus is a serious, life-threatening disease that hits 200,000 to 500,000 people each year in the United States.

The start of human trials for the drug also proves the value of the company's gene-based drug development technology, he adds, and makes good on the promise to develop an antibody to BLyS, which the company also discovered to much fanfare.

Human Genome Sciences now has six drugs in clinical development, all of which have been identified using the company's technology that analyzes genes for potential drug targets. By comparison, Millennium has yet to push a genomics-derived drug candidate into human clinical trials. The company does have about a half-dozen other drugs in development -- and one approved drug -- but they came from an acquisition.

SG Cowen's Tanner says the other reason to be enthused by today's announcement is that LymphoStat-B might just be the company's most exciting drug prospect. But in other words, some of its more advanced drug candidates face some tough challenges.

Repifermin has shown early promise as a wound-healing drug, but it is in a category second only to sepsis drugs in difficulty to crack, says Tanner. Human Genome Sciences also has a drug called Myeloid Progenitor Inhibitory Factor, which is being developed to fight infections in chemotherapy patients. But this drug will face stiff competition from an improved version of Neupogen, a big seller for Amgen.