Human Genome Sciences ( HGSI) provided biotech's biggest summer shocker Monday with positive results from a phase III study of the lupus drug Benlysta.

The news drove Human Genome shares up 226.2% to $10.83 in recent trading. Shares of Benlysta partner GlaxoSmithKline ( GSK) were up 3.5% to $37.63.

Thoughts and observations stemming from the announcement:

Second Study

The big question for Human Genome is whether the success in the first phase III study of Benlysta predicts a win in the second phase III study, results of which will be announced in November. The positive BLISS-52 study enrolled patients primarily in Asia, South America and Eastern Europe. The study still under way, known as BLISS-76, is treating patients mainly from North America and Europe. Other than that, the studies are largely identical.

The placebo effect in the BLISS-52 was high (44% of placebo patients responded), so with treatments of lupus patients generally better in Western countries, will this hurt Benlysta's chances in BLISS-76?

Human Genome officials spent a good amount of time addressing this question on the company's conference call this morning. Simply put, the company is confident that BLISS-52's success bodes well for BLISS-76 results in November.

The evidence to back up that confidence is substantial. The results from BLISS-52 were very strong, so the drug has a lot of wiggle room just in case, for instance, placebo patients perform even better. Human Genome deserves a lot of credit for a well-designed study, including conceiving a novel primary endpoint that seems to have finally cracked lupus where previous studies failed.

Still, expect there to be some uncertainty and worry about the BLISS-76, mainly due to the perception that different (read: better) treatment of lupus patients in the U.S. could (maybe, perhaps, possibly) be enough to trip up Benlysta the second time around.

This worry, coupled with anticipation that Human Genome may try to leverage Monday's announcement to raise more money by selling stock, could keep a near-term lid on the stock price. (That's after Monday's meteoric rise of more than 200%, of course.)

Revenue Potential

Benlysta has the potential to be a blockbuster drug, which in drug industry parlance means peak sales exceeding $1 billion annually.

To get a sense of how the Benlysta sales projections work out, there are approximately 400,000 lupus patients in the U.S. treated today by rheumatologists. Of these patients, approximately 70% have moderate-to-severe disease, and of these patients, about 70% have active, "sero-positive" disease, which means they were eligible for the Benlysta phase III studies.

Crunch those numbers, and you get a Benlysta patient population of roughly 200,000.

Assume a 25% to 40% peak penetration and a $25,000 annual price, and you get Benlysta sales in the range of $1.25 billion to $2 billion. The European market is probably as big as the U.S. although perhaps not as easily reached commercially.

Still, we're talking big numbers for Benlysta, which is why analysts are generally re-setting price targets for Human Genome into the middle to high teens.

Surprised? You're Not Alone

A deep bench of sell-side analysts was on the wrong side of the Benlysta announcement, causing most of them to play catch-up Monday morning with bullish upgrades to rating and price targets so they don't miss the next leg up in Human Genome's stock price.

I also need to take my lumps -- and the scorn that goes with it -- for being a Benlysta doubter.

After Human Genome's shares were slammed down to 45 cents in late March, I wrote that the stock was oversold given the U.S. government's big purchase of the company's anthrax vaccine known as Abthrax.

But I wasn't exactly super-bullish either when in a March 27 Biotech Stock Mailbag, I stated that Human Genome was "not an attractive stock to me from a fundamental basis, even with at a sub-$1 price."

In a subsequent May 29 Mailbag, I again addressed Human Genome, writing, "Human Genome cannot prosper on Abthrax alone. It needs to develop a successful drug. Unfortunately, I don't think the hepatitis C drug Albuferon will be that drug, and neither does the market, which is why the stock got hammered in March when the latest data on Albuferon was presented.

"In the near term, this leaves Lymphostat-B Benlysta , the company's drug for lupus. Two phase III studies are under way, with data expected later this year. Lupus is an extremely tough disease, and the phase II data on Lymphostat-B produced mixed results. It's hard to call this anything more than a toss up."

Taking the Monday Morning Quarterback look back, I don't know if I would have changed my call. Lupus is a super-tough disease, and the prior Benlysta data coupled with all the changes and risks associated with the phase III study design made having confidence in Benlysta's success a challenge.

But clearly that was the wrong call. I was too chicken to roll the dice. Kudos to all the investors out there who bucked consensus and made a lot of money today.

(Listen to Adam Feuerstein and markets reporter Elizabeth Trotta break down the Human Genome announcement here.)

Not all the analysts were predicting doom and gloom for Benlysta, so a right and proper shout-out of respect needs to go to Leerink Swann's Joe Schwartz, who gave Benlysta a 60% chance for success going into Monday's data release.

Sixty-percent odds may not seem like much more than a toss up, but in this case, where all the other analysts were screaming, "FAIL, FAIL, FAIL," Schwartz was pretty much pounding the table in the other direction.

Great call. Congratulations to Joe.


A question to ponder: If Roche and Biogen Idec ( BIIB) ran another phase III study of Rituxan using the same novel, composite endpoint developed by Human Genome, would the study succeed?

Before Benlysta scored its victory, many doctors considered Rituxan -- already a blockbuster cancer and autoimmune disease drug -- to be the most promising and active drug for treating lupus. The big problem has been that Rituxan studies in lupus patients haven't worked.

But those studies used different endpoints, which has always been the hurdle tripping up developers of lupus drugs in the past. So, what if Human Genome's clinical trial endpoint is the one that best measures a drug's ability to treat lupus? And what would happen if Roche decided to use that endpoint to assess Rituxan in lupus again?

I think Rituxan might just work. Just a hunch. Only a clinical trial will tell us the answer for sure. Hello Roche? What are you going to do?

Takeover Talk

Human Genome and GlaxoSmithKline do not have a standstill agreement as part of their Benlysta partnership agreement. Let the takeover rumors (Glaxo buying Human Genome, of course) begin.

Big Day for BTK

Buyers of the Amex Biotechtechnology Index , or the BTK, can thank Human Genome for a very big day. The index is up 12% midday because Human Genome is the largest weighted component at 10.5%.
Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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