By Steven Overly
Monday, December 6, 2010; 14
In the spring of 2009, the staff of Human Genome Sciences gathered in an auditorium at the nearby Universities at Shady Grove for one of three companywide meetings held each year.
But chief executive H. Thomas Watkins didn’t prepare departmental reports or formal presentations as usual. Instead, he stood on stage and simply answered employees’ questions for nearly two hours.
The company’s stock had sagged below a dollar. Its then-flagship drug had provoked troubling, and ultimately insurmountable, side effects. And the next product in line was an experimental drug to fight lupus; no new medication had succeeded in helping people afflicted with that dread disease in 50 years.
The prospects looked bleak to many outside the company’s Rockville headquarters.
“Our message that day was, ‘Here is where we are,’ ” Watkins said. ” ‘Here are the things that are going on that are on plan, here’s the things that are a little disappointing . . . but let’s remember what our strategy is, what our direction is.’ “
That direction has brought HGS to where it stands today, poised to produce the region’s next blockbuster drug if Benlysta earns Food and Drug Administration approval.
Benlysta, developed in partnership with GlaxoSmithKline, would not only be among a select number of products born from the genomics era, but its success could catapult HGS into a class of billion-dollar biotechs that is rare in the Mid-Atlantic region.
ROOTS IN RESEARCH
Harvard Medical School researcher William Haseltine started the company in 1992 when much of the biotechnology community was following efforts to map the 20,000 genes in human DNA.
The company attracted large sums of investment capital to fund ambitious research projects.
“They were caught in that frenzy during the ’90s when people knew that biotech had this great potential . . . and [everybody] was throwing a lot of money after it,” said Ric Zakour, executive director of the Tech Council of Maryland‘s biotechnology division. Haseltine “was a big-picture type guy. I think he ran the company very well during that era.”
But smart minds and innovative research had not created commercial products. As investors began to realize the benefits of genomics were years away, the stock value of HGS and many other companies at the time took a hit.
“They were very research oriented and thought they were going to be able to continue on the potential strength of the products they had, but they really had nothing they were able to show for it,” Zakour said.
Curran Simpson, now senior vice president for operations, joined the company eight years ago.
“I try to remember back to when I joined the company and looked at the portfolio of drugs that they had, I couldn’t imagine going from that to where we are now,” he said. “It was a lot of early-stage drugs, who knew if they were going to work, and over the years we’ve watched many of them not work.”
‘THE RIGHT CALL’
In 2004, Haseltine stepped down and the board hired Watkins, then working for Illinois-based Abbott Laboratories, in what represented a shift for the company.
With a background in business management, Watkins brought a more commercial eye to HGS’s research-heavy heritage and during his first year sought to evaluate all of the programs and prioritize those with near-term viability.
“We had a lot of different projects going on,” Watkins said. “They were all interesting and I think had merit. The trade-off we had to make was we’re going to narrow and we’re going to stop some things in service of trying to get something to market.”
Leerink Swann analyst Joseph Schwartz has covered the company for more than a decade. From an investment standpoint, he said, Watkins’s approach resonated with Wall Street.
“It was viewed favorably because I believe at the time they were also facing some capital constraints or at least the recognition that there were finite resources . . . and they were still holding on to a bit of their heritage, which was a land-grab mentality,” Schwartz said.
Inside the company, change came with a bit of upheaval. Some products-in-development were spun off into the company CoGenesys. Employee turnover topped out at around 20 percent, Watkins said.
When the dust settled, the result was a company with three primary products: Raxibacumab, for inhalation anthrax; Zalbin, for hepatitis C; and Benlysta, for systemic lupus.
Raxibacumab proved effective at attacking anthrax toxins in blood and body tissue. But short of government stockpiles, there isn’t much of a market for anthrax treatment and the potential revenue yield wasn’t transformative.
Zalbin, designed to treat hepatitis C, was seen by many as the company’s biggest contender for success. There’s an established market for hepatitis C medications and early indications suggested Zalbin could perform better than those on the market.
But a positive outcome in the drug’s final trials were tempered by negative respiratory side effects. It was March 2009, and the company’s stock plunged to its lowest levels ever.
“When that failed, most people did not give Benlysta any credit before it proved itself successful and that’s why the stock ended up where it was,” Schwartz said.
In October, HGS and its partner, Novartis, abandoned Zalbin.
“We both looked at the same data and concluded the same thing, which is this is going to be a tough one,” Watkins said. “You have to make risk decisions in biotech or any risky business and I think we made the right call.”
FROM SCRATCH TO FINISH
But as the light around Zalbin began to dim, Benlysta posted the first of two successful Phase 3 clinical results. Lupus is a notoriously complex illness and the FDA had not endorsed any new treatments for it in a half-century.
“When the first Phase 3 data hit in June or July of last year . . . that was a wake-up call for a lot of people that the company was on to something,” Schwartz said. There were doubters who thought that the first outcome was a fluke, “and when the second one posted successful as well, that cleared up some of the residual uncertainty,” he said.
Last month, an FDA advisory panel voted 13 to 2 in favor of sending the drug to market, albeit with label stipulations that it has not been tested in patients with the most severe forms of lupus. Federal regulators often follow the committee’s recommendation. On Friday, the company said the FDA is now aiming to make a decision in March.
“You live for years with the very real possibility that you’ll never get there, so when you do, you look back on the odds that you’ve beaten and it’s very inspiring,” said Barry Labinger, who joined HGS as its first chief commercial officer in 2005.
The company’s manufacturing plant now hums every day and night as a bulked-up crew develops batches of Benlysta in anticipation of approval. A sales force of about 70 completed training just last month and may soon be dispatched across the country.
Analysts, including Schwartz, predict Benlysta could produce billion-dollar revenue annually when fully introduced to the market. Patient organizations estimate as many as 1.5 million Americans and 5 million people worldwide suffer from lupus.
A bottom line in the billions would make HGS a financial rarity in this region, where Gaithersburg-based MedImmune is largely trumpeted as the crown jewel.
“We all feel the same way, which is in this local, Mid-Atlantic area there is one really successful company around here. It’s MedImmune,” said Watkins, who chairs Maryland’s Life Sciences Advisory Board. He said a second biotech giant would help recruit skilled workers.
“The more vibrant this community can be, the more options people will have and the less risky they’ll consider it to be to move to this area,” he added.
Related Articles
- Human Genome Sciences Announces Third Quarter 2010 Financial Results and Key Developments (eon.businesswire.com)
- Small Biotech Partnering With Big Pharma For Major Projects – Minyanville.com (news.google.com)
- Novartis takes $590M hit as HGS ditches hep C drug Zalbin (fiercebiotech.com)
- “Advisers recommend Human Genome lupus drug” and related posts (health.am)
- UPDATE 6-U.S. advisers recommend Human Genome lupus drug (reuters.com)
