* Analysts see blockbuster potential for lupus drug
* Say Glaxo acquisition rumor driving up shares
* Human Genome shares up 11.9 pct (Adds options activity, analyst comment)
By Bill Berkrot
NEW YORK, Aug 25 (Reuters) - Human Genome Sciences Inc HGSI.O shares rose nearly 12 percent on Tuesday on renewed chatter that GlaxoSmithKline Plc (GSK.L) was set to pay a healthy premium for the company to gain full control of the promising lupus drug Benlysta.
Human Genome shares soared in mid-July after it released late-stage clinical data showing a significant improvement of lupus symptoms in patients taking the drug that many industry observers had written off.
It has been several decades since a new lupus treatment was approved in a field littered with clinical failures. The complex disease causes the immune system to attack the body's own tissues and organs, including the joints, kidneys, skin, heart and lungs.
Analysts said reports of Glaxo's interest in buying the biotechnology company, possibly before data from a second Phase III trial confirms the previous positive results and drives up the asking price, was the catalyst for the Human Genome share movement.
"There's a rumor that Glaxo is going to buy them that first surfaced in a trade publication. They reported that the fresh gossip was Glaxo would pay $30 a share for Human Genome Sciences," said ThinkEquity analyst Jason Kolbert.
That would be close to double Human Genome's closing price at the end of last week.
"Benlysta could be a very big drug, a multibillion-dollar drug," said Kolbert, who raised his Human Genome 12-month price target to $26 early this month, when the stock was trading just above $14.
"Lupus is an unmet need and it's a benign drug, so you don't have a risk/reward problem."
Thomas Weisel Partners analyst Ian Somaiya agreed that Glaxo is a solid contender to step in and buy the biotech company.
"Any acquisition should be in the mid- to high $20s if not close to $30," Somaiya said. "The market opportunity for Benlysta is multibillion dollars."
Leerink Swann analyst Eric Varma believes even those would be bargain prices for Glaxo or any acquirer.
"From our analysis this stock at $30 per share would still be cheap if you look at it from a long term perspective," Varma said.
"Our peak sales for Benlysta is $3.6 billion worldwide sales by 2015, and that's just for Human Genome's 50 percent share of the co-promote (with Glaxo)," Varma said.
"At a minimum in the lupus segment, the drug has the ability to generate at least $2 billion in (annual) sales with no competition. That's a very unique market segment, and the market valuation of the company still doesn't reflect it," Somaiya said.
Options activity in Human Genome was high for a second consecutive day. About 44,000 call options traded in the company, nearly four times its average daily volume and three times the number of puts in the afternoon session, according to option analytics firm Trade Alert.
Somaiya and other analysts believe Benlysta could eventually be used to treat a host of other diseases, significantly expanding its sales potential.
"A very simple analysis of the market opportunity for Benlysta starts off in lupus, with potential expansion into lupus nephritis, which is a larger patient population, and potentially into lymphoma, if not autoimmune diseases like multiple sclerosis and rheumatoid arthritis," Somaiya said.
Human Genome will present full details of the first successful Phase III trial at an upcoming medical meeting with data from the second pivotal trial expected sometime in November.
Human Genome shares were up $2.05, or 11.9 percent, at $19.23 in afternoon trading on Nasdaq after rising as high as $19.98 earlier in the session.
"At its current market cap of $2.7 billion it's still less than our 2015 sales (forecast) for Benlysta," Varma said. "We think there's a lot of room left. The stock deserves to be up." (Additional reporting by Doris Frankel in Chicago; Reporting by Bill Berkrot; editing by Andre Grenon, Bernard Orr)