Genome Sciences puts 1st Q loss at 10 cents

More R&D spending called `a great sign'

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

Human Genome Sciences Inc. said yesterday that its first-quarter loss narrowed despite increased operating expenses and flat revenue, thanks to one-time expenses that inflated its loss a year ago.

The Rockville-based developer of gene-based drugs reported a quarterly loss of $13 million, or 10 cents a share, compared with a loss of $72.5 million, or 70 cents a share, in the first quarter last year. Revenue was $5.3 million, even with the 2000 quarter. Revenue from a year ago was restated to comply with a change in accounting rules.

The results were slightly better than the loss of 11 cents a share that analysts surveyed by IBES International Inc. had expected. Shares of Human Genome Sciences rose $3.70 yesterday, or 6.6 percent, to close at $59.55 on the Nasdaq stock market.

Like other drug developers that have yet to put products on the market, Human Genome Sciences' shares are valued more on the progress of its products in development than on its financial results. The company, for example, recently said that a GlaxoSmithKline heart-disease drug discovered with the help of HGS' gene databases had shown promise in early tests in people.

HGS stands to gain royalties from the drug's sale should it ultimately be approved.

"We are very pleased with the activities of this past quarter," Chairman and Chief Executive Officer William A. Haseltine said, noting the progress of HGS' own drugs and the GlaxoSmithKline drug as well as other developments.

Banc of America Securities analyst James F. Reddoch said the company is moving its drugs into human testing faster than he had anticipated, causing him to increase his estimate of how much HGS will spend on research and development. The company said yesterday that it expects to spend 50 percent to 70 percent more on research and development in 2001 than it did last year, when it spent $91.5 million.

"That's a great sign," Reddoch said. "That's exactly where you want to see companies spending," because it means their products are moving toward the market. He noted that the company is well-positioned to pay for drug development because it has about $1.8 billion in cash.

Human Genome now has moved five drugs into human testing. By year's end, Reddoch said, it may have as many as nine.

The company said yesterday that it expects a net loss of $70 million to $90 million this year.

In the first quarter, operating expenses increased to $40.4 million from $25.5 million as HGS expanded, in part through the September 2000 acquisition of Pennsylvania-based Principia Pharmaceutical Corp. The one-time expenses in the year-ago quarter were related to converting debt to equity.

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