Disappointing drug trial weighs on biotech's stock

Human Genome's shares fall 29% after it reports lupus therapy results


Shares of Human Genome Sciences Inc. fell nearly 30 percent yesterday, the second-biggest percentage decliner on the Nasdaq stock market, after the Rockville biotech company reported disappointing clinical trial results for an experimental lupus treatment.

The company's stock closed at $9.87, down from $13.97 a day earlier. With nearly 50 million shares sold yesterday, it traded at 20 times its average volume. That made Human Genome the fourth-most-active stock on the Nasdaq, between computer giants Microsoft Corp. and Cisco Systems Inc.

The Wall Street reaction bewildered the company, which has been behaving lately like a business on the way up. It granted large raises to some top executives in August, and last month, with Gov. Robert L. Ehrlich Jr. and other top state officials in attendance, unveiled a $230 million manufacturing plant.

"We actually are quite pleased with this outcome," Human Genome Sciences spokesman Jerry Parrott said yesterday of the trial results.

He declined to comment on investor mind-set, saying only "there's a level to which people are not interested in the details."

While Human Genome Sciences has no marketed products, it has several in various clinical trials.

At the top of the heap, and closest to commercialization, has been LymphoStat-B, which is being tested as a treatment for both rheumatoid arthritis and a life-threatening form of lupus called "systemic lupus erythematosus," or SLE, that affects between 200,000 and 500,000 Americans. Immune systems don't work properly in people with SLE, causing the body to attack itself and tissue to become swollen and painful.

In April, the company announced LymphoStat-B had done well in a midstage clinical trial of patients with rheumatoid arthritis, which gave the stock price a 22-cent bump. But yesterday's lupus news - that the developing drug was safe, well-tolerated, but slower to take effect than thought and effective on just a subset of the lupus population - caused a landslide in the price nearly back to its level last spring.

"Wow," was about all Brad Miles could say. His company, Cambridge Antibody Technology, based in England, isolated the particular protein that makes up LymphoStat-B and licensed it to Human Genome for development.

He wondered about an overreaction: "People are viewing it as a negative even though the subgroup has some benefit."

Lupus is not a well-studied disease. It's been nearly 40 years since the Food and Drug Administration last approved a treatment for it. Few companies have been interested in taking on the challenge of creating a new treatment.

"We're basically plowing new ground," Parrott said. "It's not like there are other studies."

Human Genome Sciences had expected to see patient improvement at a 24-week point, but instead saw improvement at 52 weeks, which the FDA considers an acceptable amount of time. The company was also hoping for less frequent disease flare-ups, which can include inflamed muscles and joints and attacks to the kidneys, heart and lungs.

"We have indeed learned a lot here," David C. Stump, the company's executive vice president for drug development, said yesterday during a conference call. "I'm encouraged."

In August, Stump received a $100,000 annual raise, according to Securities and Exchange Commission documents, bringing his salary to $430,000 before a bonus. Two other executive vice presidents received $40,000 raises that month: general counsel James H. Davis and Chief Financial Officer Steven C. Mayer.

Because of the study, Human Genome Chief Executive Officer H. Thomas Watkins said the company has a better idea of how to tailor the next trial and a "clear path forward."

Executives plan to proceed after discussions with the FDA and partner GlaxoSmithKline, which in July exercised an option to help develop and commercialize LymphoStat-B.

"All I can say is we're going through the data with our partner to determine the next steps for the compound," GlaxoSmithKline spokesman Rick Koenig said.

At least one analyst who follows Human Genome thinks they should plow ahead. David Witzke of Banc of America Securities Equity Research wrote: "We believe there is good probability of success in [the next trial] and would be aggressive buyers at current levels."


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