Human Genome Seeks To Surprise Doubters With Lupus-Drug Data

Human Genome Sciences Inc. (HGSI) is hoping to surprise an army of doubters on Monday when it discloses late-stage clinical data on the experimental drug Benlysta in treating lupus, a notoriously hard-to-treat autoimmune disease that hasn't seen a new therapy in decades.

The Rockville, Md., drug maker, which has joined with GlaxoSmithKline PLC ( GSK), believes it has a better chance at success than previous failed therapies because it used lessons from a failed Phase II trial to help design the Phase III one. Although the company worked with the Food and Drug Administration on the trial's design, skeptics note that the trial's main goal, or endpoint, has never been used before and they have doubts about the trial's ability to succeed.

"Lupus has been a difficult disease to study, and a lot of recent drug failures have made people skeptical that anything will work," said Barry Labinger, the company's executive vice president and chief commercial officer.

Lupus occurs when the body attacks itself, causing inflammation and tissue damage virtually anywhere in the body and making it difficult to treat. Lazard Capital Markets projects that a new treatment represents a $2.9 billion annual market opportunity.

The coming data are the first of two similar trials, with the second expected in November. If this first trial fails, analysts see the stock dropping to near $1 but possibly exceeding $10 on successful data.

With the stock currently at $2.53, investors could be willing to trade a minimal investment for the chance to get huge short-term returns.

But, like many on Wall Street, Barclays analyst Jim Birchenough is advising clients to exercise caution as he calculates an imposing 85% chance of failure.

Furthermore, Human Genome could face debt issues after a failure, notes UBS analyst Maged Shenouda. The company has $397 million in debt coming due by 2012, he said, and $340 million in projected year-end cash.

Regardless of the outcome, Executive Vice President Labinger expressed confidence in the company's future, noting other products in development.

Attempts to treat Lupus have created a long list of failures, including disappointment from Rituxan, sold by Biogen Idec Inc. (BIIB) and Roche Holding AG (RHHBY), and Riquent from La Jolla Pharmaceutical Co. (LJPC), which is now winding down its operations.

More pessimism comes from Benlysta's Phase II failure that led to a complex Phase III design that attempts to isolate the patient group that responded in the previous trial.

The latest study includes only patients who have certain immune-system antibodies, which may indicate more disease activity. These patient made up about 75% of the Phase II study. Furthermore, the trial's endpoint uses a combination of several disease-activity measures that have never been used in a study before.

A retrospective analysis of the failed Phase II study shows it would have succeeded using the new endpoint, which gives Benlysta an edge that previous therapies didn't have, Labinger said.

After working with the FDA, Human Genome obtained a special protocol assessment, which is an agreement with the agency on a study's design that meets regulatory requirements for a new drug application and could lead to a drug's approval.

Although Birchenough acknowledges that the endpoint may be legitimate, he argues that there have been "few, if any" cases where a retrospective subset analysis of a failed Phase II trial led to subsequent success in a late-stage trial.

Researchers have long struggled with the design of lupus clinical trials because almost every patient has different symptoms and, accordingly, gets different treatments including anti-inflammatory drugs, steroids, anti-malarials and immunosuppressants.

This can make it difficult to isolate a population that is more likely to respond to any particular drug, and to measure a response in any group.

"No matter how far you whittle down a subpopulation, you are inevitably going to see another population develop," Birchenough said.

Source : news.morningstar.com