* 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 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
"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
"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
"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
"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,"
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
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
(Additional reporting by Doris Frankel in Chicago; Reporting
by Bill Berkrot; editing by Andre Grenon, Bernard Orr)