Perhaps the biotech understatement of the year: Analysts are hating Human Genome Sciences ( HGSI) ahead of the company's release of results from a key lupus drug study next week. The sell-side community tends to be an optimistic lot, which is why the near-universal negativity directed at Human Genome's drug Benlysta (formerly lymphostat-B) by almost every analyst covering the company cuts against the grain. Human Genome will be releasing results from the Benlysta phase III study in lupus patients before the opening bell on Monday, July 20. A chorus of analysts says the study is going to fail. "We continue to believe the probability that Lymphostat-B succeeds is extremely low, wrote an analyst at Lazard Capital Markets on Tuesday, tacking a sell rating and a $1 price target to the stock. On Monday, UBS downgraded Human Genome to neutral from buy. "We believe significant downside risk exists with the read-out of the BLISS-52 data later this month," wrote UBS. BLISS-52 is the name of the Benlysta study. Barclays Capital, from a July 6 report: "Benlysta likely to fail BLISS studies." Piper Jaffray's analyst chimed in on Monday, calling the Benlysta study "hard to call but find risk reward unfavorable." Also expressing skepticism and caution on Human Genome in recent weeks were analysts from Citibank, Sanford Bernstein and JMP Securities. The only positive view of Benlysta appears to be emanating from the analyst at Leerink Swann, who gives the drug a 60% chance for success. That's enough to rate the stock outperform. SummerStreet Research Partners, which rates Human Genome neutral, calls the odds of success for Benlysta "50/50 at best" in a report issued Wednesday.
One big reason for all the skepticism is that lupus is a tough-to-treat disease and a graveyard for drug development. There hasn't been a new drug approved for the disease in 30 years, but there have been many failed attempts. Most recently, a drug from La Jolla Pharmaceuticals ( LJPC) and BioMarin Pharmaceuticals ( BMRN) failed in a phase III study of lupus patients. Rituxan, an otherwise wildly successful cancer and autoimmune drug for Roche and Biogen Idec ( BIIB), also came up short in a phase III lupus study last year. 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. Benlysta 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. The company believes that in lupus, rheumatoid arthritis and certain other autoimmune diseases, elevated levels of BLyS contribute to the production of autoantibodies -- antibodies that attack and destroy the body's own healthy tissues. A phase II study of Benlysta 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, 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.
The Benlysta study results will be announced on July 20. A win for Human Genome could push the stock price to $10. A failure could cut the value of shares today -- $2.50 -- in half.