Human Genome Sciences Inc’s (HGSI) first quarter 2010 net loss of 26 cents per share was wider than the Zacks Consensus Estimate of 20 cents. The company earned 56 cents per share (excluding special items) in the year-ago quarter. The loss suffered in the reported quarter was attributable to lower revenues primarily because of a drop in sales of ABthrax (for the treatment of inhalation anthrax) to the U.S. Strategic National Stockpile.
 
Revenue in the reported quarter plummeted to $46.5 million as against $177.3 million in the year-ago quarter. Revenue for the quarter included $27.6 million related to the global agreement with Novartis (NVS) for the development of Zalbin to treat Hepatitis C. Revenue recognized from the sale of ABthrax dropped to $13.5 million in the reported quarter as against $153.5 million a year prior.
 
Total costs and expenses in the first quarter of 2010 climbed approximately 6% year over year to $84.3 million. Research and development expenses in the reported quarter came in at $57.5 million as against $53.7 million in the year-ago quarter, up approximately 7.1%. General and administrative expenses in the reported quarter increased approximately 28% to $18.3 million. The company exited the quarter with $1.1 billion in cash and investments of which $1.05 billion was unrestricted and available for operations.
 
Our Take
 
We believe that the earnings report at Human Genome is a non-event. This is because the company possesses an interesting and diversified pipeline. Consequently, we strongly believe that investor focus will remain on the fate of its late-stage candidates, especially the lupus drug candidate Benlysta (belimumab) co-developed with GlaxoSmithKline plc (GSK).
 
The company intends to seek marketing approval for Benlysta during the second quarter of 2010 in the United States and Europe. If approved, we expect Benlysta to become a blockbuster for the company. Furthermore, Benlysta would be the first new lupus drug to hit the market in 50 years. Lupus affects about 1.5 million people in the United States and 5 million people worldwide.
 
Apart from Benlysta and ABthrax, other pipeline candidates at Human Genome include Zalbin (albinterferon alfa-2b) indicated for treating chronic hepatitis C patients. The drug is under review in the United States. Human Genome expects the U.S. Food and Drug Administration (FDA) to approve the drug in the fourth quarter of 2010 (target date: October 4, 2010). We believe that Zalbin could be a significant revenue earner for the company on approval.
 
However, the Marketing Authorization Application (MAA) for the candidate was recently withdrawn by partner Novartis. The withdrawal of the MAA was based on indications that the European regulatory authorities would ask for additional data, which the companies may be not be able to furnish in the time frame permissible under the European Centralized Procedure.
 
Currently we have a Neutral outlook on Human Genome in the long term implying that it will perform in line with the overall U.S. equity market over the next six to twelve months. We advise investors to retain the stock over the time period.
Read the full analyst report on “HGSI”
Read the full analyst report on “NVS”
Read the full analyst report on “GSK”
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