Benlysta Approval Cheat Sheet: What You Need to Know (HGSI, GSK)

March 9, 2011 · Filed Under analyst calls, Cancer, fda, genomics, Lupus 

It is official… The FDA has approved Benlysta as the first new drug regimen for systemic lupus in  over 50 years.  Human Genome Sciences, Inc. (NASDAQ: HGSI) and partner GlaxoSmithKline plc (NYSE: GSK) are sure to have a Blockbuster on their hands.  The treatment is for the treatment of adult patients with active, autoantibody-positive systemic lupus erythematosus who are receiving standard therapy.

We want to stress that analyst data is going to change greatly and we want a snapshot here of what this looks like before the change.  The side-effects have taken a lot of space, and those are just verbatim.  The rest after that is where the guts of the outlook is.  We have been keeping tabs on a few side-bar issues going into this approval and here is are some of the key issues we think you need to know:

First is that we have been expecting Human Genome Sciences to win approval.  Not everyone was, but this is not an issue we see being negative for Human Genome regardless of how this stock acts in the first few days.  By now you know FDA approval stocks can have mega-moves up down and back and forth. The cost is currently aimed at $35,000 per patient per year.  There will be discounts and exceptions but this is within the range we were expecting.

THERE ARE SOME LIMITATIONS… The efficacy has not been evaluated in patients with severe active lupus nephritis or severe active central nervous system lupus.  It has not been studied in combination with other biologics or intravenous cyclophosphamide. Use is therefore not recommended in these situations.  What you need to know: Like it or not, off-labeling will occur here.  Think about it, 50+ years since the last approval…

TIMING & REVENUE HOPES… The companies are aiming for deliveries to begin to doctors within a couple of weeks, which of course will be an average.  That means that revenues can actually start sneaking in during this first quarter.  Do not expect much… Thomson Reuters only had estimates of $21.77 million in Q1 and $30.64 million in Q2 for revenues.  The current estimates of $172.37 million for 2011 revenues are fair and the estimates of $495.96 million for 2012 may need to be adjusted.  For 2012 the range is $295 million to $736 million, so it is not like there aren’t some differing opinions.  Our guess is that estimates on the lower end will come up.

SIDE-EFFECTS & MORTALITY RISKS… “Out of 2133 patients in 3 clinical trials, a total of 14 deaths occurred during the placebo-controlled, double-blind treatment periods: 3/675 (0.4%), 5/673 (0.7%), 0/111 (0%), and 6/674 (0.9%) deaths in the placebo, belimumab 1 mg/kg, belimumab 4 mg/kg and belimumab 10 mg/kg groups, respectively. No single cause of death predominated. Etiologies included infection, cardiovascular disease, and suicide. Serious and sometimes fatal infections have been reported in patients receiving immunosuppressive agents, including belimumab. In controlled clinical trials, serious infections occurred in 6.0% of patients treated with belimumab and in 5.2% of patients who received placebo. The most frequent serious infections included pneumonia, urinary tract infection (UTI), cellulitis, and bronchitis. The most frequent infections (≥5%) were upper respiratory tract infection, UTI, nasopharyngitis, sinusitis, bronchitis, and influenza.” Hypersensitivity reactions were reported in 13% of patients receiving belimumab and 11% of patients receiving placebo, and included anaphylaxis (0.6% with belimumab and 0.4% with placebo). Infusion-associated adverse events were reported in 17% of patients receiving belimumab and 15% of patients receiving placebo. Psychiatric events (primarily depression, insomnia, and anxiety) were reported more frequently with belimumab (16%) than with placebo (12%). Serious psychiatric events, serious depression and two suicides were also reported (0.8% for belimumab and 0.4% for placebo).

Analyst estimates… Thomson Reuters has a consensus price target objective of about $34.00 today, with a low of $23 and a high of $45 per share from analysts.  Over the last year shares have traded in a range of $20.56 to $34.49.  Earnings estimates are -$0.43 EPS and $21.77 million in revenues for this quarter; -$0.41 EPS and $30.64 million in revenues next quarter; -$1.47 EPS and $172.37 million in 2011; and -$0.60 EPS and $495.96 million in revenues in 2012.

Buyout or independent… Some still consider HGSI a buyout candidate.  We ONLY consider it a buyout target if GSK wants to acquire it.  Buying the company only gives a half-share of Benlysta and come-along partners do not always work as well in biotech and drug deals.

Company stats… The market cap is $4.85 billion.  Assets in cash and other we are looking at as hard assets are $155.7 million in cash and equivalents, $282 million in other short-term investments, and $448.6 million in long-term investments.  It also has $253 million in plant and equipment. Long-term dent is $434.7 million.

Trading patterns… Average daily volume is down to only 2.3 million shares and March 1 was the most recent day with 5 million shares traded.  That volume will be explosive Thursday.  March options show an open interest of over 100,000 CALLS for MARCH and over 70,000 contracts for MARCH only.

More analyst calls… Gleacher was very positive at the end of December.  Cowen & Co. took a very negative stance.

We will get to see how this begins trade indications early-early tomorrow after the NASDAQ releases its halt time.  Again, trading may very well be all over the place for the next few days.

The links throughout will offer more insight to individual sales targets, but hopefully this offers a bit of a cheat sheet. By morning, much of the analyst data will have changed… that part never changes.

JON C. OGG

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