Long Term Investment, Biotech & High Yield Dividend Stocks

[califax]

HGSI reports first profit in 10 years

http://www.bizjournals.com/washington/stories/2009/04/27/daily68.html?surround=lfn

Wednesday, April 29, 2009, 5:34pm EDT | Modified: Thursday, April 30, 2009, 12:58pm

Human Genome Sciences Inc. beat Wall Street’s earnings estimates for the first quarter, ringing up tens of millions of dollars in its first-ever product-related sales and profits.

The Rockville biotech posted $177.3 million in first-quarter revenue, of which $153.8 million, or nearly 87 percent, stemmed from its AbThrax anthrax treatment sales to the federal government. That is leagues ahead of the $12.3 million that the company reported in revenue for the first quarter last year, all composed of payments for hitting certain milestone events in research and development partnerships.

In addition, HGS scored $129.8 million in profits for the first quarter, the first profitable quarter the company logged in at least a decade. In the first quarter of last year, the company posted a $52.7 million loss.

But the positive numbers are temporary, company officials acknowledged, at least until HGS can get its first product approved and successfully marketed -- a move expected for a hepatitis C drug by the second half of 2010.

“We won’t have every quarter like this until we get some of our other big products on the market,” said Tom Watkins, president and CEO of Human Genome Sciences (NASDAQ: HGSI). “AbThrax was an order we received and filled for most of this quarter, and it was certainly at this point a one-time event.”

The company plans to post a little more AbThrax revenue in the second quarter, when its 20,000-dose shipment to the federal government for its national stockpile is expected to complete. But Watkins said HGS is working on additional contracts with the federal government.

“Prospects for follow-on orders for the U.S. government are certainly positive,” he said. “We don’t have anything specific to talk about at this point.”

This first quarter was also helped by the company’s repurchase in February of $106.2 million of its outstanding convertible debt at the discount price of $50 million, all in an effort to cut down the $510 million in previously reported convertible debt set to come due in 2011 and 2012.

That leaves HGS with cash and investments of $396.9 million by the end of the first quarter, compared with $372.9 million at the end of last year. The company said that is enough funding to take its two lead products through the regulatory channels to potential approval and launch. HGSI plans to file this fall for approval to sell its hepatitis C drug, called Albuferon, while its second trademark drug, LymphoStat-B for the treatment of lupus, will release data from its final clinical trials this July and November.

Albuferon had largely disappointed the investor community when its late-stage study data was first revealed in March. It had met its prescribed endpoints of performing as well as current drugs, but with half the number of injections. But Wall Street had hoped Albuferon would prove superior to current standard of care, which they said would be necessary to make it a more marketable drug, and that sent HGSI’s stock tumbling to all-time lows, shedding two-thirds of its value to close at 55 cents.

Analysts have also expressed doubts about LymphoStat-B, pointing to another recent lupus drug candidate that failed its trials. The combination has caused two analysts to downgrade the company’s stock in the last two months, but HGSI officials said the two drugs will play an important role in their commercial portfolio if approved.

“I would tell you that progress on [Albuferon] is continuing, and we feel very good about the prospects of Albuferon to move forward,” Watkins said. “Should it be approved, we believe it will be an important factor, an important option for physicians to consider.”

As for LymphoStat-B, company officials said the drug’s clinical trial setup differentiates it from other failed drugs, adding that the trial had been designed under the purview of the Food and Drug Administration and other experts.

“The failure of other drugs should not give us really any reason to be less confident about LymphoStat-B,” Watkins said. “We feel very good about the phase III trials we have ongoing. That’s why we have the confidence that we do. But you never know until you see the results.”