Recently, Human Genome Sciences, Inc. (HGSI) inked a deal with privately-held FivePrime Therapeutics Inc. to develop and subsequently commercialize a cancer therapy.
The agreement pertains to FivePrime’s oncology candidate FP-1039 for treating various cancer forms. The candidate is currently in early-stage development.
The deal, which gives Human Genome exclusive development and commercialization rights in the US, Canada and the European Union, will see Human Genome paying an upfront license fee of $50 million to the private entity.
Moreover, the pact makes FivePrime eligible to receive up to $445 million in milestone payments. Human Genome will also make royalty payments on net sales of FP-1039, once it is launched.
The South San Francisco-based FivePrime has co-promotion rights in the US apart from full rights pertaining to the development and commercialization of the candidate in the rest of the world (excluding the areas for which Human Genome is responsible).
The successful development and commercialization of FP-1039 would bring in additional revenues at Human Genome, which already boasts of cancer candidates such as HGS-1029 and mapatumumab in its pipeline.
We note that Human Genome has signed the deal close on the heels of its potentially blockbuster lupus drug, Benlysta, receiving US approval. The drug, which has been co-developed with GlaxoSmithKline (GSK), is under review in many other countries with European approval expected in the second half of 2011.
Our View
We believe that the approval of Benlysta by the US Food and Drug Administration (FDA) for treating patients suffering from systemic lupus erythematosus is a huge positive for the company which should drive it to profitability.
Moreover, the approval of the drug in additional territories would spur further top-line growth at Human Genome. Moreover, the company is also making efforts to develop its other pipeline candidates and expand Benlysta’s label.
We prefer to remain on the sidelines and maintain a ‘Neutral’ stance on the stock till visibility is obtained regarding Benlysta’s performance in the market. The long-term ‘Neutral’ view is supported by the Zacks #3 Rank (‘Hold’ rating) carried by Human Genome in the short run.
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