Setback for HGSI Pipeline – Analyst Blog

Recently, Human Genome Sciences Inc. (HGSI) was dealt a blow by the US Food and Drug Administration (FDA) when the US regulatory body issued a complete response letter to the company for its hepatitis C candidate Zalbin (albinterferon alfa-2b). Human Genome and partner Novartis (NVS) have decided against continuing with the development of the candidate.

 

The Biologics License Application (BLA) for Zalbin was submitted to the FDA late last year. The companies were seeking approval for a 900-microgram twice monthly dosage of Zalbin for the treatment of patients suffering from chronic hepatitis C.

 

We remind investors that the two companies entered into an exclusive global agreement in 2006 to develop and commercialize Zalbin. Human Genome and Novartis selected Zalbin as the brand name for albinterferon alfa-2b in the United States, while Joulferon is the brand name for the rest of the world.

 

The decision of the FDA to issue a CRL does not surprise us since Human Genome had already announced in June this year that Zalbin is unlikely to be approved by the FDA at its current dosage based on the preliminary feedback from the US regulatory authorities. While providing the feedback, the FDA expressed concerns regarding the safety of 900-microgram Zalbin, dosed twice monthly. The feedback was provided by the regulatory authorities via a “discipline review” letter. The agency communicates a preliminary analysis on possible shortcomings of an application via such a letter.

 

The European approval of the candidate is also in jeopardy. Earlier this year, Novartis withdrew its Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for Zalbin. The withdrawal of the MAA that was filed in December 2009 was based on indications that the European regulatory authorities would ask for additional data, which the companies would not be able to furnish in the time frame permissible under the European Centralized Procedure.

The feedback from the European regulatory authorities expressed concerns whether the therapeutic benefit offered by Joulferon, dosed once every other week, outweighed the risks associated with the candidate.

 

Even though the company has received a huge setback regarding Zalbin, we believe investor focus is more on the company’s lupus candidate Benlysta, co-developed with GlaxoSmithKline plc (GSK), which has blockbuster potential. The candidate has been granted priority review status by the FDA with a target date of December 9, 2010. The candidate is also under review in Europe.

 

 

Human Genome currently has a Zacks #4 Rank, which translates into a short-term Sell rating. The near-term pressure on the stock is primarily attributable to the setbacks suffered by the company regarding Zalbin.

 

However, we are Neutral on the stock in the long term. The long-term stability offered by the potential approval of Benlysta is the main reason behind our Neutral stance on the stock. The stance indicates that the stock is expected to perform in line with the US equity market over the next 6+ months. We advise investors to retain the stock over the time period.