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Human Genome Drops on Lupus Drug


Investors are worried that the launch of Benlysta is not gathering enough steam. The company vows to step up its sales efforts.

Human Genome Sciences (HGSI) investors needed some comfort that sales of a breakthrough drug for lupus aren't fizzling. Unfortunately, the company couldn't put those worries to rest.

Instead, the company reports the drug Benlysta generated $18.8 million third-quarter sales, short of the $20 million Wall Street analysts expected. Despite having been just launched as the first new treatment for the chronic disease in half a century, sales of Benlysta are falling short of conservative expectations. In another troubling sign, the money-losing company slashed its forecast for cash at the end of this year to as much as $470 million from a upper-end estimate of $650 million. Analysts are cutting their sales and profit estimates.

In morning trading Wednesday, the company's shares are down 20% to $10.23. The stock is down 65% in the past six months. The implosion of another biotech this summer -- Dendreon (DNDN) -- also helped drag Human Genome's stock down. (See Why Dendreon Isn't Like Other Biotechs.)

"We remain as confident as ever in the long-term therapeutic and commercial potential of Benlysta," Human Genome CEO H. Thomas Watkins told investors and analysts on a conference call late Tuesday.

When a CEO has to state what should be obvious, that's not a good sign.

Watkins vowed to ramp up sales efforts. The company is reaching out to consumers -- mostly women -- through advertising. Watkins also promises "higher levels of scientific engagement," which means he's going to trot out more lupus experts to plug the product.

Watkins says the challenge is building what he calls a new market -- since there's been no new treatment for lupus in decades. Benlysta won US approval in March and was cleared for sale in Europe in July. Developed with GlaxoSmithKline (GSK), the drug is being marketed by both companies.

The problem appears to be the sales effort rather than the drug. According to Human Genome, 90% of rheumatologists surveyed by the company say they have or intend to prescribe the drug to their patients. Rheumatologists are the speciality doctors who treat patients with lupus, a disease that turns the body's own immune system against itself, attacking healthy tissue and organs. Lupus causes severe inflammation, joint pain, rash, and fatigue.

Benlysta is a secondary drug. In the US, its market is about 200,000 patients with moderate to severe lupus. The treatment costs $35,000 a patient per year in the US.

Robert W. Baird analyst Christopher Raymond says he thinks stepped up marketing efforts may help. He's still bullish on the company but troubled by the lagging early sales. The company also pushed back its goal of being profitable by one year to 2014.

"Investors will ultimately be rewarded here -- just not as soon as hoped," Raymond says.

The analyst has a buy rating and a $19 price target. He predicts Benlysta revenue of $61 million this year and $785 million by 2014.

Some consumer groups have criticized drug companies over the years for the amount of money and resources they throw toward marketing their products. That said it appears Human Genome needs to step up its game.

Twitter: @brettchase

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