Positive Benlysta data leaves Human Genome with new bulls

Any remaining bears on Human Genome Sciences and GlaxoSmithKline’s chances of getting approval for their treatment for lupus, Benlysta, could be facing a lonely time after the drug sailed through a phase III trial in patients with serologically active systemic lupus erythematosus, showing a significant reduction in symptoms and the need for patients to use steroids. But while investors may be jumping on the bandwagon, sending HGS shares up three-fold in morning trading to $9.66, it should be remembered that the drug still has to pass its final test in the form of the 76-week, Bliss-76, data expected in November, and that HGS has disappointed in the past.

What people seem to be taking a punt on at the moment, however, is the sheer size of opportunity for Benlysta. As frequently trotted out, there has been no new approved treatment for Lupus in the last 50 years (Therapeutic Focus - Lupus needs shots on goal to hit the mark, June 12, 2009). With one potentially on the horizon, analysts and investors are gleefully rubbing their hands together in anticipation of sales. Citigroup are conservatively estimating that if the drug is priced at a similar level to other antibody therapies, approximately $15,000 a year, and mops up 50% of the market, peak US sales could hit $1.4bn, with worldwide sales increasing to $2.5bn, potentially adding 3% to Glaxo’s 2014 earnings per share.

Low expectations

Not bad for a drug that many had written off, dragging down 2012 consensus sales forecast from a now low-looking $119m in June 2008 to an even meaner $69m this June. This came despite HGS last month offering investors some glimmer of hope with results from a four-year phase II continuation study showing that Benlysta in combination with standard of care significantly reduced the number of lupus flairs (Event - Human Genome Science shares seesaw as crucial lupus data approaches, June 12, 2009).

One group that remained unconvinced was Lazard Capital Markets, which in June helped HGS shares to fall by 11% after changing its recommendation from a hold to a sell, claiming that the prospects of the phase III trials being positive were low. What Lazard did do, however, was predict that if the results were positive HGS shares could rise to $10.

Like Lazard, the majority of the market’s expectations for Benlysta had until today been extremely low due to the prior failure in reducing the signs and symptoms of Lupus in a phase II trial in 2005. The lack of success by others in the field, following the failure of La Jolla’s Riquent and Biogen Idec’s Rituxan, also meant that few predicted Benlysta to succeed where these products had fallen before.

Stacking the odds

What HGS appears to have done to maximise its chances of success this time round was select a sub group of responders from the 2005 trial, seropositive patients who made up 75% of the trial population, and take a high risk decision to change the primary endpoint for the phase III trials, a gamble which appears to have paid off.

The new found bulls are now trusting that HGS will file the drug in the first half of 2010 if the Bliss-76 data do turn out to be positive, with an early 2011 launch forecast.

Any remaining bears will be mindful of the fact that, while the company has well and truly surprised the market today, Benlysta does still have one more trial to get through, which if it fails could send the shares down equally fast as they have risen today.

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