With shares of Human Genome Sciences ( HGSI) at an all-time low, the company's next shot at a turnaround lies with a risky phase III study of a lupus drug due in July.

The Bethesda, Md.-based biopharmaceutical firm released disappointing results from a phase III study of its hepatitis C drug Albuferon on Monday, which caused the stock price to fall 67% to 55 cents a share and remain near that level Wednesday.

Analysts who follow Human Genome Sciences say the setback with Albuferon raises the stakes for the company's other late-stage drug candidate, LymphoStat-B. Two phase III studies of LymphoStat-B in patients with systemic lupus erythematosus, or SLE, are under way, with data from the first study expected in July.

Human Genome Sciences is developing LymphoStat-B in partnership with GlaxoSmithKline ( GSK).

There are no approved drugs to treat SLE, or lupus, although steroids are commonly used to treat symptoms. Recently, a drug from La Jolla Pharmaceuticals ( LJPC) and BioMarin Pharmaceuticals ( BMRN) was a failure in a phase III study of lupus patients. Rituxan, an otherwise wildly successful cancer and autoimmune drug for Genentech ( DNA), also failed a phase III lupus study last year. A second Rituxan study in lupus is under way.

Lupus is a chronic disease in which the body's immune system attacks connective tissue, resulting in inflammation and tissue damage, often to the heart, joints, lungs and kidneys. Women are more often diagnosed with lupus than men, and the disease goes through periods where it flares up then goes into remission.

LymphoStat-B is a human monoclonal antibody designed to recognize and tamp down the biological activity of B-lymphocyte stimulator, or BLyS, a substance that was discovered by Human Genome Sciences.

The company believes that in lupus, rheumatoid arthritis and certain other autoimmune diseases, elevated levels of BLyS are believed to contribute to the production of autoantibodies -- antibodies that attack and destroy the body's own healthy tissues.

A phase II study of LymphoStat-B in lupus patients produced mixed results. The primary endpoint of the phase II study was not met; however, a certain subset of lupus patients did benefit significantly from treatment with the drug.

Human Genome Sciences, in consultation with the FDA, designed the phase III studies based on the positive subset data gleaned from the phase II study in hopes of increasing the odds of success.

"We maintain our cautiously positive view on the potential of LymphoStat-B in lupus and anecdotal clinical feedback still supports this view, although after recent disappointments it would be foolish to count on any trial in this disease," said Sanford Bernstein analyst Geoffrey Porges in a recent research note.

Lazard Capital Markets analyst Terence Flynn was more skeptical in a recent note. "We do not expect the ongoing Phase III trials of LymphoStat-B will be successful for a variety of reasons."

Data from the first LymphoStat-B study in lupus will be released in July; the second study will be completed in November.

Human Genome Sciences is also working on earlier-stage cancer drugs and, with GlaxoSmithKline, is testing drugs for heart disease and diabetes.
At the time of publication, Feuerstein's Biotech Select model portfolio was long Genentech.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.