100 molecular drug sites found

Japanese find is held to raise the number of research `targets'

March 28, 2001|By Julie Bell | Julie Bell,SUN STAFF

Human Genome Sciences Inc. said yesterday that Japan's largest pharmaceutical company used the Rockville company's gene database to help find 100 drug "targets" for continued research.

The drug research of Takeda Chemical Industries Ltd. has been focusing on several therapeutic areas. These include diabetes, cardiovascular diseases, bone and joint diseases, central nervous system disorders, urogenital diseases and allergies.

Analysts said the announcement about Takeda served to highlight the value of the database. Takeda is one of Human Genome Sciences' five strategic partners in its human gene consortium.

Currently, all pharmaceuticals on the market are thought to treat illnesses by interacting with about 500 molecular "targets," often sites on proteins. One analyst said yesterday's announcement showed Takeda had discovered additional targets.

"What this does is significantly increase - by about 20 percent - the actual number of targets being evaluated," said Charles C. Duncan, an analyst with Prudential Vector Healthcare Group.

Robertson Stephens analyst Edward A. Tenthoff said that, with the announcement, Human Genome is "waving a flag and saying, `This is what Takeda has been able to do: 100 targets.' "

The flag-waving comes as Human Genome's database agreements with Takeda and the four other pharmaceutical companies are set to expire in June, throwing open the possibility that the Rockville company could sign more lucrative contracts with those companies or others in the near future.

Human Genome focuses primarily on using the database to discover its own drugs. But it raised about $275 million to help finance those efforts by selling database access in the early to mid-1990s to Takeda, Glaxo- SmithKline, Merck KgaA of Germany, Sanofi-Sythelabo SA of France, and Schering-Plough Corp.

If any of the database-developed drugs make it to market, Human Genome stands to get royalties in an amount equivalent to a high single-digit percentage of a drug's overall sales.

Human Genome has grown substantially since 1993, when the first of the deals was signed with GlaxoSmithKline's predecessor, SmithKline Beecham.

Human Genome now has five of its own drugs in human trials and - after last fall's successful secondary stock offering - began the year with $1.8 billion in cash.

That's enough for the company to pay its bills until it becomes profitable in 2005 or early 2006, estimates Craig West, an analyst with A. G. Edwards & Sons.

By then, he reasons, Human Genome should have some of its own drugs on the market, bringing in revenues.

"The deals we do in the future will be biased and weighted toward HGS participating in commercialization of products," said Gardiner Smith, Human Genome's executive director for business development.

Gardiner declined to say exactly how such deals might be structured but noted that the fast-expanding company, which plans to break ground this year on a 250,000-square-foot manufacturing facility, soon will have the capacity to "contribute as a full-fledged partner."

Analysts speculate that the company will seek a greater share of profits and may even seek to manufacture or co-market drugs discovered in collaboration with other companies using its database.

"What's lost for Human is the forced urgency to do something to generate cash ... in the near term," West said. "It allows them to participate more in late-stage development."

Duncan, the Prudential analyst, put it this way: "I think collaborations, if structured well, can expand the growth opportunities of genomics companies not just linearly but logarithmically."

Shares of Human Genome Services rose $3.63, or 8.3 percent, to close at $47.31 yesterday on the Nasdaq stock market.

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