Human Genome Sciences

(HGSI)

is becoming one of the first of the genetic research companies to turn its database into drugs.

On Tuesday, the Rockville, Md., biotechnology company said Japanese drug powerhouse

Takeda Chemicals

has selected about 100 gene targets from its database. Takeda, Japan's largest pharmaceutical company, will use these targets to kick-start discovery for new drugs to tackle diabetes, heart disease and other ailments.

Human Genome Sciences stock rose 8.3% to $47.31 on today's news, which backs up the company's belief that it not only has one of the deepest source books of human genes ever created, but that it will be able to parlay that knowledge into profits.

Genomics firms like

Celera

(CRA)

,

Millennium Pharmaceuticals

(MLNM)

and Human Genome Sciences have generated a tremendous buzz during the past year for their work in deciphering the genetic codes, but the stocks have been knocked for a loop because investors are concerned that great research doesn't necessarily translate into great revenue.

But Human Genome Sciences is developing its own drug pipeline, with four drugs currently in clinical trials, more than any of its rivals. Its most advanced candidate is a wound-healing drug dubbed

Repifermin

, which is halfway through the testing process.

"Human Genome Sciences is at the top of the heap of genetics research firms turning into drug makers," says Craig West, biotech analyst with

A.G. Edwards

. (West rates Human Genome Sciences accumulate, and the firm doesn't do underwriting for the company.)

The company is still losing money, as much as $235 million last year, before accounting changes, but drug development work will be funded with a corporate war chest of $1.8 billion in cash.

But the company is also spreading its bets, inking alliances with major drug companies to share its genetics database in return for undisclosed fees and royalties from the sale of any drugs developed. Takeda is one of five such partners, and the first to step up to claim a large cache of potential drug targets.

"We are very pleased that our strategic partner, Takeda Chemicals, has identified so many targets of interest for their own drug discovery efforts," says a statement from Arthur Mandell, Human Genome Science's chief business officer.

Analysts expect the company's other drug company partners will soon ramp up their own shopping forays from within Human Genome Science's genetic database.

"If Takeda has found 100 targets of interest, it is not unreasonable to assume the others have found similar numbers of targets," says biotech analyst James Reddoch of

Banc of America Securities

. "If each partner claims 100 targets, Human Genome Sciences -- having produced 500 meaningful targets -- is easily the most productive genomics company in existence." (Reddoch rates the company a buy, and his firm has not done any underwriting.)

Only a small percentage of targets ever make it to market, but Reddoch estimates that Human Genome Sciences could be sitting on $300 million in potential revenue from its target-sharing alliances.

Drug maker

GlaxoSmithKline

(GSK) - Get Report

has already pushed one of its gene targets derived from Human Genome Sciences into early clinical trials. The drug candidate, known as SB-435496, is a potential treatment for hardening of the arteries.

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