Human Genome shares rise after upgraded to 'Buy'

NEW YORK - Shares of biotechnology company Human Genome Sciences Inc. jumped Tuesday after the company said it closed a public stock offering for newly issued shares worth about $357 million.

The stock gained $1.08, or 7.4 percent, to $15.31 in afternoon trading. Shares reached a six-year high point of $15.72 earlier in the trading session.

The Rockville, Md.-based company had previously expanded the offer to 23.2 million shares from 18 million shares, for $14 apiece. Including just under 3.5 million shares for underwriter overallotments, the company said net proceeds were just under $357 million.

The company, which is developing a range of drugs to treat hepatitis C, lupus, inhalation anthrax and cancer, intends to use proceeds for research and development and other general corporate purposes.

ThinkEquity analyst Jason Kolbert upgraded shares to "Buy" from "Accumulate," citing the prospects for the company's developing lupus treatment, coupled with the stock offering. He called the offering "prudent" and said it would "strengthen the company's balance sheet, where convertible debt has been an overhang."

Meanwhile, he said the developing Lupus treatment Benlysta has the potential for peak annual sales of more than $2.7 billion, based on its effectiveness and the size of the market. The opinion comes less than a month after the release of positive late-stage study data on the drug. Analysts have given mixed assessments of the drug's potential for success.

Lupus is a chronic disease where the immune system attacks the body's own tissue. Symptoms include skin rashes, joint pain and swelling, inflammation of the kidneys and the fibrous tissue surrounding the heart, as well as other problems.

A Lazard Capital Markets analyst, last month, switched to a "Hold" rating from a "Sell" rating, following the study results, remaining cautious. A Leerink Swann Research analyst had reaffirmed a "Outperform" rating on the stock, citing positive study data, but still only gave the drug a 60 percent chance of success.

ThinkEquity's Kolbert, though, boosted his price target to $26 from $18, along with the "Buy" rating, as he remains optimistic about upcoming study data and the market for the drug.

"We revised our model after speaking with several people in the industry and the company, which has done extensive primary research," he said.

He said the drug could modestly be priced at $25,000 annually, and based on worldwide market size, could have sales of more than $2.7 billion annually. It would be the first new drug for lupus in more than 50 years.

"At first blush, we are surprised by the numbers, but what we must recognize is that Lupus is an unmet medical need and Benlysta is essentially a benign drug that has shown itself to be active, and therefore helps patients," he said.

The company's marketing partner, GlaxoSmithKline, also gives the drug a powerful sales team behind it when it is approved.

In July, Human Genome reported positive results form a late-stage study of the drug. The company expects a second late-stage study to confirm those results in November, with an eventual submission to the Food and Drug Administration in 2010.

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