Biotech Values

[DewDiligence]

Human Genome Sciences sequences to leaner, meaner entity:

[HGSI has long been one of the most hyped companies in biotech, IMHO. With Haseltine gone, perhaps things will change. It will be interesting to see the market reaction today.]

http://www.washingtonpost.com/ac2/wp-dyn/A22227-2004Mar24?language=printer

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Biotech Company Laying Off 200 More

HGS to Lose CEO Haseltine, Cut Back Search for New Drugs

By Justin Gillis and Yuki Noguchi
Washington Post Staff Writers
Thursday, March 25, 2004; Page E01

Human Genome Sciences Inc., a bellwether company for Maryland's biotechnology industry, will announce as early as today that it will lay off 20 percent of its 1,000 employees. Its chairman and chief executive, William A. Haseltine, will retire this year, and the company will cast aside some experimental drugs to focus on a handful that could get to market relatively soon.

Company executives portrayed these developments -- which come atop the layoff of 7 percent of the staff just before Christmas -- as part of a wrenching but necessary transformation for Human Genome Sciences, which has been burning investors' cash for more than a decade in a so-far-fruitless search for new cures. The company has a handful of products that need to move into expensive, late-stage human tests, and despite holding $1.3 billion in cash, it won't be able to fund that development without paring costs, they said.

Haseltine's departure will deprive biotechnology of one of its most visible and effective cheerleaders, a man whose ego, charisma and quirks came to personify the nascent industry, one of whose main outposts is the Interstate 270 corridor in Montgomery County. Welcomed on Capitol Hill and in foreign capitals, Haseltine succeeded as well as anyone in the country over the past decade in spreading the idea that genetic knowledge will determine the human future.

But as Haseltine adorned the walls of his Rockville company buildings with Renaissance art and spun visions of a new "regenerative medicine" that would let people live active lives until age 120, his company sometimes stumbled. Its earliest drug candidates failed in human tests over the past two years.

Haseltine, who will turn 60 this year, said he initiated discussions about his retirement with the company's board, feeling that his skills as a research scientist won't be the main thing the company needs as it prepares to compete in the marketplace. One board member backed up that account, saying Haseltine first raised the issue a year ago and was not pushed to retire.

"You have a CEO who's got the maturity and judgment to say, 'I have been the right person, but I am not the right person for the next stage' " of the company's development, said Richard Danzig, head of the board's governance committee and a former secretary of the Navy.

Had the company's first drug tests succeeded, Human Genome Sciences might already have joined the elite ranks of biotech companies with big sales and rising stock prices, and might be hiring employees rather than firing them.

Instead, about 200 employees will be shown the door over the next several days, following the departure of scores who were laid off just before Christmas. Many of them joined the company as young researchers because they hoped they were getting in on the ground floor of something big, and several current and former employees said an air of bitterness and resignation now prevails as people see that dream snatched away.

"I thought this was going to be the next Microsoft," said Alex DeSeabra, who joined the company as a lab worker in 1997. Last year, as the company wobbled and drug projects were canceled, he said he started making plans on company time to start his own business, and was eventually fired for doing so. Though he once saw Haseltine as a "brilliant" and "articulate" chief executive, he said, he now felt Haseltine had oversold the company's promise to Wall Street -- and its employees were paying the price. [FWIW, I strongly agree.] "I think Dr. Haseltine promised a lot of things," he said, yet more than a decade of work has produced no commercial product.

Haseltine acknowledged yesterday that some of the company's early human tests -- of a drug supposedly able to heal persistent wounds, for instance -- were disappointing. But he said such setbacks were inevitable in a field as complicated as drug development, and the company remains on track to get its first product to market in roughly the time he had always expected, he said -- about 15 years after its founding in 1992.

"I realized we need to increase our focus," Haseltine said. "If all these drugs are going to benefit patients, they've got to get to the market. I realized the skills we needed were more in late-stage development, and commercialization, and marketing. I'm a scientist. I am not a commercial person."

Haseltine's departure probably brings to a close one of the great modern rivalries in American science, between him and J. Craig Venter, the maverick genetic researcher. Human Genome Sciences was actually founded on the basis of technology that Venter perfected while at the National Institutes of Health. But Venter didn't want to run the company, preferring to start a not-for-profit research institute. Haseltine left Harvard University, where he had made crucial discoveries about the AIDS virus, to take the job. The two men developed a loathing for one another so legendary that some Washington dinner hosts were careful never to put them in the same room.

Venter eventually started a company of his own, Celera Genomics Corp., which became known for its race with NIH to decode the human genome. Celera and NIH ultimately declared a tie, but Venter was forced out of his company two years ago by the same kind of commercial pressures that have now undone Haseltine.

Venter declined yesterday to talk about Haseltine, as has been his practice for years. In an interview, Haseltine credited another scientist with the genetic research approach that became the basis of the company and offered faint praise for Venter. "What Craig did in work at the NIH was show you could apply it to humans and make it work on a systematic basis," Haseltine said. "But that's about as far as it went."

Carl Feldbaum, president of the Biotechnology Industry Organization, a national trade group based in Washington, said the rivalry, however uncomfortable for people around them, may have spurred both men to greater achievements.

"I think a bit much was made of this particular rivalry, but in fact they abound throughout our industry," Feldbaum said. "For the most part, they've been creative. Individuals have driven each other to accomplish more than they might have without the competitive fire. It's like, what would Ali have been without Frazier?"

At the three Rockville campuses of Human Genome Sciences, rumors about impending layoffs and management changes have circulated since last week, employees said. People in several of the firm's research and development departments have started clearing their desks and making copies of personal information, according to one scientist. For fear of being added to the layoff list, this person would speak only on condition of not being identified.

"There is a sense that the hammer is coming down, and no one can concentrate," the scientist said. "We are anticipating the worst."

The bright spot for employees is that Maryland's biotech industry, despite periodic layoffs and shutdowns, is growing overall. In contrast to the recent pain in the information-technology world, few biotech employees with useful skills remain jobless for long, and only a handful have to leave Maryland to find work, said C. Robert Eaton, president of industry group MdBio. "One of the reasons it pays to be in a region like this with a lot of other companies is that you have options," he said. "When we look at the total employment, it always seems to be going up steadily, at about 5 percent a year."

Paradoxical as it may seem, cutbacks are commonplace in the biotech industry as companies get near to commercializing products. They often pare research operations, staffed with expensive employees schooled in biology, to focus on manufacturing and sales, which require different skills. Some biotech companies have laid off as much as half their staff as they enter the late stages of testing.

Human Genome Sciences is expected to announce that it will drop some drug projects to focus on the most promising. These include two cancer-fighting drugs and another that may fight viral hepatitis. Some Wall Street analysts see the latter as a potential blockbuster. But funding the final development stages of these drugs will require hundreds of millions of dollars, taxing the company's funds.
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