Human Genome Sciences Inc. Q3 2008 Earnings Call Transcript

Nov. 6.08 | About: GlaxoSmithKline (GSK)

Human Genome Sciences Inc. (HGSI) Q3 2008 Earnings Call November 6, 2008 5:00 PM ET

Executives

H. Thomas Watkins - President and Chief Executive Officer

Jim Davis - Executive Vice President, General Counsel and Secretary

Tim Barabe - Senior Vice President and Chief Financial Officer

Barry Labinger - Executive Vice President and CCO

David Stump - Executive Vice President of Research Development

Analysts

Geoffrey Porges - Sanford Bernstein

Ted Tenthoff - Piper Jaffray

Liisa Bayko - JMP Securities

Yaron Werber - Citi

Han Li - Stanford Group

Brian Skorney - SIG

Thad Strobach - Quattro Global Capital

Operator

Good day and welcome to the Human Genome Sciences’ Third Quarter 2008 Financial Results Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to H. Thomas Watkins, President and Chief Executive Officer of Human Genome Sciences.

H. Thomas Watkins - President and Chief Executive Officer

Thank you, operator. Good afternoon, everyone. Thank you all for joining us today. Most of you who have not seen the press release that we issued a short time ago this afternoon will find it posted on our website at www.hgsi.com.

Before we begin, I would like to point out that we will be making forward-looking statements which are based on our current intent, belief, and expectations. They are subject to certain risks and uncertainties, and I encourage everyone to look at our SEC filings for additional detail.

In today’s call, I will provide an overview of recent HGS accomplishments and also some key upcoming milestones. Then Dr. Jim Davis, Executive Vice President and General Counsel -- Jim also leads our program with the US government -- will discuss our recent progress with ABthrax, including the change in our timing expectations. Tim Barabe, Senior Vice President and Chief Financial Officer will then follow with some highlights of our third quarter 2008 financial results and our new guidance for the full year 2008. With a Q&A session that will follow we will be joined by other members of HGS Senior Management Team.

The third quarter of 2008 was another quarter of substantial progress for HGS particularly for Albuferon, LymphoStat-B and our oncology program. In addition we remain confident that we will receive authorization in the very near term to ship ABthrax to the Strategic National Stockpile. We have met every milestone under our contract with the US government and we are currently waiting for authorization to begin delivery.

However, it now appears that the training of authorization is likely to cause our anthrax sales which we had previously expected to recognize in 2008 to instead be recognized in 2009. Let me emphasize that this reflects a change only in the timing of the revenue, but we are updating our financial guidance accordingly. I’ll talk more about this in a moment.

In September 2008, we delivered on our strategy to leverage our operations capability here at HGS with a new and exclusive agreement with Hospira for manufacturing, process developments and commercial supply of selected Hospira biopharmaceutical products. We see potential for between $30 million and $60 million in revenue over the next three to four years for manufacturing alliances including the alliance with Hospira.

Also in 2008, GlaxoSmithKline announced the presentation and simultaneous publication of Phase II data that are strongly supportive of darapladib. Darapladib is an investigational small molecule drug for the treatment of atherosclerosis to which HGS has substantial financial rights. In their third quarter press release GSK confirmed its plan to begin Phase III development of darapladib in the near future and we look forward to GSK’s continuing progress in advancing this potentially very important new therapy.

At this point let me to our late stage lead products, beginning with Albuferon. We have completed treatment in both Phase III trials of Albuferon and we are on track for our first Albuferon Phase III data. Next month we will report top-line results from ACHIEVE 2/3, our Phase III trial of Albuferon in treatment-naive patients with genotypes 2 or 3 chronic hepatitis C. This will represent a particularly important milestone for HGS, since it is both the first Phase III clinical data for Albuferon and also the first Phase III data for our company.

If Albuferon proved successful in ACHIEVE 2/3, it will take us one important step closer to commercialization. We are also on track with ACHIEVE 1, which is the second of our two Phase III trials of Albuferon. ACHIEVE 1 is being conducted in patients with genotype 1 chronic hepatitis C and we expect to have the results from this study by spring 2009.

We and our collaborator, Novartis on this program are on track with our plan to file global marketing applications for Albuferon by fall 2009. Assuming positive outcomes from the ACHIEVE studies we believe the Albuferon could become the market leading interferon for the treatment of hepatitis C.

Turning now to LymphoStat-B we also continued to make substantial progress here in quarter three. We have completed the enrollment and initial dosing in both of our Phase III trials, we are on track for our first LymphoStat-B Phase III clinical results by mid 2009 and to have all Phase III results ready for regulatory filings in the fall of 2009. The BLISS trials are the largest randomized trials ever conducted in lupus and we and our collaborator on this program GSK, hope that the study results will demonstrate the potential of LymphoStat-B to be a breakthrough in the treatment of this disease, which as you know has not seen a new drug approved by the FDA in nearly 50 years. If the BLISS trails yield positive results we anticipate filing a BLA for LymphoStat-B in the United States in the first half of 2010.

Now let’s turn to our oncology products with a particular focus on HGS-ETR1, our antibody to TRAIL Receptor 1. In August 2008, we completed enrollment and initial dosing in our randomized trial of HGS-ETR1 in combination with the chemotherapy agents paclitaxel and carboplatin as first-line therapy in advanced non-small cell lung cancer. Initial results from this study are anticipated in 2009, and we expect that the non-small cell lung cancer results along with results of two other randomized combination trials those being in hepatocellular cancer and multiple myeloma, will support a decision on whether to advance HGS-ETR1 into Phase III development.

Now let’s turn to Dr. Jim Davis for reports on ABthrax. Jim?

Jim Davis - Executive Vice President, General Counsel and Secretary

Thank you, Tom and good afternoon. Let me begin by stating that I am very pleased with the excellent progress we have made on ABthrax and the strong partnership we have with the Department of Health & Human Services. I think you know that ABthrax is not a traditional product. Its one of the few products procured by the United States Department of Health & Human Services under the Project Bioshield Act of 2004, and one of the first to undergo FDA review for authorization to ship to the Strategic National Stockpile.

IN 2006, HHS exercised its option to purchase ABthrax through the SNS. Since that time, HGS has met every milestone under its contract with US government. We have completed the animal studies necessary to demonstrate the efficacy of ABthrax. We have completed the human safety studies necessary for approval of ABthrax. We have completed the manufacture of all bulk drug necessary to supply 20,000 doses to the SNS.

In May 2008, we submitted a final ABthrax data package to FDA and recently we had a successful pre-BLA meeting with FDA. Now, we are waiting that authorization to initiate delivery. As you know, ABthrax is being reviewed by FDA under what is often called the animal rule, which is designed to apply in situations for traditional efficacy studies in humans are not possible.

Under this rule, successful studies in relevant animal models are considered sufficient to establish efficacy, while human testing is still required to establish safety, just as it is with any other therapeutic products. The animal rule as I think you know is still relatively new both to HGS and FDA. The wealth of data we submitted in support of our request for authorization of delivery has received a far more extensive review than we expected. And, accordingly, final authorization is taking longer than we expected. We remain confident, however that authorization to ship to the Strategic National Stockpile will be forthcoming in the near term.

However, because of the length of time the FDA review is taking, it now appears likely that our sales of ABthrax will be recognized in 2009 instead of 2008 as previously expected. Let me emphasize as Tom mentioned that this changes merely reflects the change in the timing of the revenue and that we are confident that we will receive a $150 million for delivery of 20,000 doses of ABthrax to the Stockpile in 2009. And, we expect to receive an additional $15 million upon FDA licensure.

At this point I would like to turn the call over to Tim Barabe for a discussion of financial results and the new guidance. Tim?

Tim Barabe - Senior Vice President and Chief Financial Officer

Thanks Jim, and good afternoon everyone. By now you all seen the numbers for the third quarter and the updated guidance for 2008. I’d like to draw your attention to a few highlights. First, revenues rose slightly to a $11.7 million for the third quarter of 2008 from $11.1 million in the third quarter of 2007. Second, R&D expenses decreased to $54 million for the third quarter of 2008 from $62 million for the same period in 2007, due primarily to decreased expenses associated with Albuferon and Phase III trails.

In contrast, for the nine-month period R&D expenses were up to $194 million in 2008, from $158 million in 2007. This increase was due primarily to the ongoing LymphoStat-B Phase III trials along with increased manufacturing activities which were partially offset by a decrease in Phase III clinical trial costs for Albuferon as the treatment phase of the trials for Albuferon were completed.

Third, net cash burn for the nine-month period of 2008, amounted to $187 million.

Fourth, we are updating our financial guidance for 2008 to reflect the change and expected timing of ABthrax sales. As a result, we now expect our full-year 2008, net cash burn to be in a range of $245 to 265 million. And, I should point out that, while we are not going to provide 2009 guidance at this point we would certainly expect our net cash burn to be lower than this year’s net cash burn.

We expect revenue for 2008 in the range of $45 million to $50 million and we expect cash investment at year end 2008 to total somewhere between $350 million and $370 million. The timing change for recognition of ABthrax sales accounts for the change in our expectations for 2008.

However, as Jim pointed out it also means that we should have a stronger 2009 than previously expected. I’ll end my comments by saying as I did in the release that our cash position remains strong and is sufficient to take us at least through the availability of Phase III data and the filing of marketing applications for our new products while also fueling development of our product pipeline.

With that I would like to turn the call back over to Tom Watkins for our Q&A session. Tom.

H. Thomas Watkins - President and Chief Executive Officer

Thank you, Tim. So, in summary Albuferon and LymphoStat-B are on track for Phase III data, we remain confident HGS will receive a $150 million in 2009 for delivery of 20,000 doses of ABthrax to the Strategic National Stockpile and as you heard an additional $15 million upon licensure of the product. Our oncology program continues to make significant progress and we are pleased that GSK has confirmed its plan to advance darapladib into Phase III development.

So, with that I will open the call to your questions. Operator, if you would please review the procedures for us.

Question-and-Answer Session

Operator

Thank you very much. [Operator Instructions]. Our first question is from Geoffrey Porges from Sanford Bernstein. Please proceed with your question sir.

Geoffrey Porges

Thanks very much. Tom, first of all, obviously, we need to, I think understand a little bit more about what’s going on with ABthrax and are you absolutely certain that you will get paid for this in 2009, as it merely a sort of procedure, administrative procedural issue here? Or are there substantive issues being reviewed by both the DoD and by the FDA? And then I’d just like to come back with a follow up question if I may? Thanks.

H. Thomas Watkins

Jim, why don’t you start with that question.

Jim Davis

Yeah, sure. Let me just clarify one thing, DoD is not involved in this contract. The approval authority through HHS, the BARDA division. And we have no substitute issue with BARDA. What has happened with FDA is that we have submitted substantial number of reports and our reports are back the same reports that we eventually submit for our BLA. FDA is doing a very thorough review of each of those reports, quite similar if not identical to what they would do for our BLA. As a result that review is taking a fair amount of time. As is usual FDA comes back, ask questions, we give them data, we give them reformulated data, we give them new charts and tables. But, I think the process is one of a typical response back and forth with FDA as they review the data. And we do remain confident that we will get this approval in the near term and that we will receive our revenue in 2009.

Geoffrey Porges

Could I ask a follow up question to that then? When was it apparent to you Tom that you were not going to get the revenue because quite recently you were still saying that you were going to be reporting the revenue beginning in October or beginning in the fourth quarter with the substantial chunk of revenue, so when was this known?

H. Thomas Watkins

Just very recently, Geoffrey the answer to that, at FDA, this is not an approval. As we have stated, it’s a clearance to ship. And it has always been our belief and remains our belief that as soon as we get that clearance we will be shipping very promptly. BARDA and Jim stated this, working very closely with us here. They are anxious to stock a product. We’ve got it manufactured; we’ve got it ready to ship. So, the answer to your question is, the timing change, which is really this year to next year sort of thing, has just become apparent to us in the very recent past, and that’s why we are taking the steps that we are. Jim, anything to add to that?

Jim Davis

No. I would just say that it’s not really any change, other than as it has taken longer to get the approval and we get later in the year, it gets more and more difficult to ship as much as we’d like to ship this year. So, if we don’t get approval for a couple of weeks it’s very difficult to get the product into the Stockpile. And we don’t get paid until it in the Stockpile. So it’s a fairly recent event as we realize we’re getting closer and closer to the end of the year.

Geoffrey Porges

And then, last question, Tom. This is obviously, at least to some degree, a setback, certainly against expectations, and you’ve had setbacks with most of your other programs now. We look back, the ETR1, antibody Phase II was a bit of the disappointment. And Albuferon, obviously, you had an issue there on the Phase III. We had an issue with the LymphoStat Phase II. And looking at where you are with the stock price, you’ve got this sort of $500 million plus convertible debt that is looming a couple of years out, and you have only a finite amount of cash. When do you start to more aggressively explore strategical alternatives for the company, Tom?

H. Thomas Watkins

Let me answer it this way. I would not characterize this ABthrax change of timing here as a setback. I think we have we’ve said pretty consistently that whether we ship this year or next year, obviously you always want to ship as soon as you can. We remain confident of the product and its opportunity and it’s potential. All three of our Phase III products Albuferon, ABthrax and LymphoStat-B have great potential. The opportunity for those products remains very high, we all going to see the data from two of those three products here beginning of the month, and we will all know the opportunity here, we are quite confident that the opportunity is likely to be very high. The cash we have is sufficient to last us until we get to the other side of both Phase III data and marketing application filing. That’s a good long time of cash, and the debt that you are speaking of does not become due until 2011 and 2012, which is well past the dates that we expect to be filing. So, while we are certainly cognizant of the facts that you are reflecting, we remain very confident here that our product opportunities are going to provide us a lot of options in the future here.

Geoffrey Porges

Thanks very much.

Operator

Thank you very much. Our next question is from Ted Tenthoff with Piper Jaffray. Please proceed with your question sir.

Ted Tenthoff

Great, thank you very much. Just to make sure we round things out on ABthrax first, the delay had nothing to do with the election or anything along those lines and was really more of a departmental delay, just to be sure?

Jim Davis

That is correct.

Ted Tenthoff

Okay, great. And Tim question for you the current cash position, does that include the $14 million milestone, the partnering milestone for Albuferon?

Tim Barabe

I’m not so sure I understand the question. At the end of the third quarter, we had $433 million in cash on the balance sheet, and any milestones that we would have received and we didn’t receive any large milestone from Novartis this year. It does include CoGenesys proceeds.

Ted Tenthoff

Okay, CoGenesys proceeds. Maybe I was -- okay, so I may have missed that.

Tim Barabe

The milestones for Novartis were last year and in 2006.

Ted Tenthoff

Okay. All right, excellent. Looking forward to the ACHIEVE data next month.

Operator

Thank you very much. The next question is from Liisa Bayko with JMP Securities. Please proceed with your question ma’am.

Liisa Bayko

Hi, just a question on the view front, is there anything you came away with at the ACR meeting that sort of gives you either increased or decreased confidence regarding the LymphoStat-B program?

David Stump

This is David, I’ll take that. I don’t think there was anything specific to our view of Albuferon’s likelihood of success, we did hear much data that is relevant, I think, to the long-term future of Albuferon and there obviously is great progress in the direct antiviral field. There are new compounds coming along behind the current couple of leaders in that area. We are certainly committed to getting to know all the folks working with those products and planning as best we can to be kicking off combination studies, including Albuferon as soon as possible after we’ve seen our ACHIEVE data.

Liisa Bayko

And ACR and LymphoStat -- did you learn anything at ACR that maybe you could give us some…?

David Stump

Yeah I think sector is the presentation, as you know, of the EXPLORE data, probably the most directly relevant data for LymphoStat. It was definitely a negative study. I was -- I’m still struck by the issues of end points chosen, as I’ve mentioned to you all in the past, those particular end points would not have worked in our Phase II study. We we’ve done that retrospective analysis. The other thing that struck me was as we look at the presentation of the population disease activity response using a bio-like composite over time was the dramatic early response, probably due to the high-dose prednisone that all patients received in that study. It was pointed out by Joan Merrill. I think that really was a limiting factor in the ability to show any positive effects when you undercut your baseline risk by that much. That was the direct data we heard. We also, clearly, are aware that one of the TACI-Ig studies, the lupus nephritis IDI study, was soft due to infection concerns in that study. We don’t think that’s a big issue for LymphoStat. We reported three year of safety experience from our extension trials in our Phase II patient population, the ongoing safety profile adjusted per patient years observed, compared to what we have seen in placebo is very comparable. We are not seeing dramatic, precipitous decline in quantitative immunoglobulin. And we’ve got an independent data monitoring committee that keeps following our blinded Phase III. They meet regularly, and we’ve certainly heard nothing in contrast to a good safety profile from them. So yes; it was an eventful week. Ten nice days on the west Coast but lots of interesting days besides.

Liisa Bayko

Okay, thanks a lot.

David Stump

You’re welcome.

Operator

Great, thank you very much. The next question is from Sapna Srivastava with Morgan Stanley. Please proceed with your question.

David

Hi, thanks its Dave calling in for Sapna. Just a question, in terms of your cash position and fund raising plans over the next few years, how do you factor in your decision about whether to potentially opt in to some of the co-promote options that you have, assuming trial success and drug approval? I mean do you think that you still have the potential to exercise some of those and raise money specifically for that? Or, just how are you factoring in developing the TRAILs versus building a sales force and how are you balancing those things?

H. Thomas Watkins

Hi, Dave this is Tom. I’m not exactly sure what opt-in/co-promote sorts of options you’re talking about. As we’ve stated before, for both LymphoStat and Albuferon, again, assuming good Phase III data, it’s our intention to be involved in the commercialization of those products along with our partners, GSK and Novartis, respectively. So, the most important thing for us right now, and we are remaining, certainly, on track for this is to get our Phase III data out there and to see what we believe will be excellent opportunities for these products to get ABthrax shipped and continue down the path toward commercialization. And, we are looking at opportunities, you mentioned the TRAILs. We look at the TRAILs, as we stated before, as a potential opportunity to partner, but we are also weighing that and we’ll continue to weigh it against the opportunity to continue to hang onto the upside from the development of those products. So, there’s a lot of moving parts here. I think the key thing is, the prospects for the company remain excellent, and we are going to be all able to look at four sets of Phase III data here beginning in a month’s time that will confirm what we believe will be excellent upside, excellent opportunities for both products.

David

Great, thank you.

Operator

Okay, thank you very much. Our next question is from Yaron Werber with Citi. Please proceed with your question.

Yaron Werber

Hi, thanks for taking my question. I’m not sure if you can answer them, but the first question is -- can you give us a little bit of a sense has to how -- the potential, I believe, was $30 million to $40 million or so from Hospira over the next three to four years how would be we have a sense as to -- is that $10 million, roughly, give or take, a year? Or, is that going to be lumpy? And then I have two other questions as well.

H. Thomas Watkins

I think the way to think about that one, Yaron, is we said $30 million to $60 million from all manufacturing alliances over about a three- to four-year period. It’s reasonably -- expected to be reasonably flat over that period of time. Curran Simpson is here in the room, and he can tell you that partnership with Hospira is off to an excellent start. We are collaborating well and moving forward on that. So, we would expect to recognize revenue even in 2009 from that. He and his team are working on additional collaboration opportunities, manufacturing alliance opportunities as we move forward. So, I think we feel good about that number, that range, and a reasonably flat sort of a sequence to that revenue over that period of time would be a reasonable assumption. Good, solid revenue that is important for us.

Yaron Werber

As we model ‘09, you said you’re expecting $150 million from HHS and an additional $15 million upon FDA licensure?

H. Thomas Watkins

Yes. We’ve always said that the revenue was $150 million -- I think what we said previously was 93% of the of the total, which is $150 million -- from the shipment and the reimbursement of the clinical work, which we’ve done -- that’s per the contract -- and the last 7%, which amounts to $15 million, on approval of the BLA. And we just separated those two out for you in the guidance that Tim just provided. The BLA -- as you know, the shipments are expected in 2009 as we stand. The BLA is expected to be submitted. Dave just mentioned, or Jim did, about the very successful pre-BLA meeting we had a few weeks ago. So, we expect to submit the BLA in the quarter two timeframe. So, we would expect that licensure would come before the end of the year. So that’s the sequence next year.

Yaron Werber

So that’s before the end of next year. And, the $150 million it sounds like you said, as you ship it’s not going to be a single big shipment, in which you -- something -- you’ll record it over a few quarters?

H. Thomas Watkins

That’s reasonable, yes. As we ship, we recognize revenue on each shipment. And then, there is a chunk of the revenue that comes from reimbursement of the clinical work that comes at one time. But it reasonable to assume it over the year.

Yaron Werber

And, just finally, as we look at we look at your -- just with the credit crunch going on, and you do have two big converts coming in 2011 and 2012, grossly out of the money. How much flexibility do you have on the R&D line? Let’s say this year you’re doing 240 or so. Can you give us a little bit of a sense as to how much of that is discretionary, or how fast would you roll down once the LymphoStat studies are finished and the Albuferon studies are finished?

H. Thomas Watkins

I think the best guidance we can give you there is that, as Tim stated earlier, we have seen a decrease in R&D in the last couple of quarters as the Phase III work for the lead programs has begun to wind down. What I think so important for us all to focus on here is we’ve got four data points coming beginning a month from now that will really define what we’re looking at, in terms of these two lead products. So, a combination of what we would expect to be sort of a natural slowing of R&D because of the Phase III completion, combined with the very important data points will define a lot in terms of our future. We’re optimistic here.

Operator

Thank you for your question. The next question is from Han Li with Stanford Group. Please proceed with your question?

Han Li

Yes, thanks for taking my questions. Two quick ones, one on LymphoStat, can you give us an update on where are we, or where Novartis is on the start of the trials in multiple sclerosis?

H. Thomas Watkins

I’m sorry; GSK, yes. David or I can speak to that.

David Stump

I think we have been looking very closely with GSK at MS. We are all aware of the Rituxan Phase II data that has raised MS as a prominent B-cell target. We’re looking hard at that, pulling together of what we think a protocol concept would be like. I think we’ll give some guidance on how we would execute when we have a little more visibility into actual timing.

H. Thomas Watkins

We’re about to go to the FDA together, Han, for a pre-IND meeting in the next few weeks, and we look forward to getting that study at some point in the future.

Han Li

And also talk about Novartis and on the monthly dose of Albuferon, has it started or where you are at there?

H. Thomas Watkins

I think we have we’ve said pretty consistently that study would be expected to start in the fourth quarter, and we stick to that time frame.

Han Li

Okay, all right thanks.

H. Thomas Watkins

Okay, thank you.

Operator

Okay, thank you very much. Our next question is from Brian Skorney with SIG, please proceed with your question, sir.

Brian Skorney

Hi guys, I was just wondering, just three quick questions; first, just on a financial basis. Can you give us what your total contractual cash obligations are at this point?

Tim Barabe

Brian, what you mean, what’s you exactly mean by that because that if you so, you’re talking about convertible debt first, for instance?

Brian Skorney

I mean like that, plus the long-term lease with Biomet, plus operating leases. I know, at the beginning of the year, you put that out in your 10 K, and it was about $1.5 billion. So, I just want to see, has that come down at all or up.

Tim Barabe

I mean every year that goes by that we rent the buildings reduces the eventual obligation on that. But, I think all of that information is in the Q and the K, and right now the main obligation remains the two convertibles, the convert that comes due in late 2011, and the other one that comes due in 2012, and again, I would like to just point out what Tom did earlier, and that those converts come due after we have the four data points on our Phase III trials.

Brian Skorney

Okay, just going back to the ABthrax for a couple questions. If clearance was rejected by the FDA, would any of the costs that you have already booked be reimbursed? And also, as far as what has been going on with your dialogue with the FDA, can you give us any details on what additional information they have requested? Is there any clinical data, preclinical, CMC issues? What’s outstanding there.

Jim Davis

First of all, no, we do not get paid until we ship product. So, until we are able to ship product we would not get any reimbursement for our expenses. At this time I have to say FDA is asking -- has over the period of last three or four months after variety of questions, better variety of things. Most of them are clarifications and as I said re-articulation of data in different formats and things. And, beyond that, really can’t go into any specifics.

Brian Skorney

Okay. Thank you.

Operator

And, thank you very much. The next question is from Geoffrey Porges with Sanford Bernstein. Please proceed with your question sir.

Geoffrey Porges

Thanks for taking my follow-up. I just wanted to ask a question about Albuferon. One of the things that emerged at EASL is a clear, I would say, bias in favor of one of the two pegylated interferons in terms of the efficacy response we’re seeing in clinical trials in a variety of settings, and certainly in the context of co-administration with some of the STA-C’s. It appears that the STAT-C developers are largely using Pegasys in their development programs. To what extent do you think that the labeling those agencies likely to be consigned to that combination. Do, you really have a chance for getting to a majority share of the market without having any data for use in combination with any of those drugs at the time of your approval. Thanks.

David Stump

Yeah Jeff. This is Dave, I will take the labeling piece of that. And, my guess is that because studies are being done with Pegasys in labels for new products, you will probably see in the clinical pharmacology section a description of how those studies were done. I think our operating assumption based on our interaction with thought leaders in the field and future prescribers, is that we are going to provide some experiential data of Albuferon in combination with those novel antivirals at the time those novel antivirals come to market. I don’t believe that means we have to do pivotal Phase III trials with them all over I think combination of Phase II and Phase IIB kind of experience will be enough to assure prescribers that Albuferon in Pegasys are interchangeable or interferon and that the choice should be made on other attributes of the product, many of which we hope to be demonstrating with Albuferon as our Phase III trials unblind. I think one reason we’re seeing Pegasys being used part of that is obviously they are the market leader. Another part of that is, I think there’s a view that it has a favorable kinetic profile.

We bring Albuferon forward as an improvement on that. I think, if you’ve been following the presentations of our kinetic data, you have been following the presentations around telaprevir specifically, emergence of resistance is not just related to exaggerated trough levels of telaprevir. It’s related to exaggerated trough levels of interferon as well. And we think Albuferon’s kinetics could offer an advantage there. Barry, I don’t know if you want to add, he says no.

Geoffrey Porges

Well. Thanks guys.

Operator

Thank you, very much. The next question is from Ted Tenthoff with Piper Jaffray. Please proceed with your question, sir. Hello sir, perhaps your mute is on. Mr. Tenthoff are you there. Sir, we still did not hear you. I’ll go to the next question. And our next question is from Thad Strobach with Quattro Global Capital. Please proceed with your question.

Thad Strobach

I guess I’m being a dead horse with ABthrax. I just want to understand the timing. Actually, I got dropped off for technical issues. I missed the question from Dave from Morgan Stanley. But what is the probability of ABthrax revenues not being recognized by the end of March 2009, or about the end of 2009? And then my second question is, given some past history of ABthrax programs and the FDA, have you got any, and this is more a question for Jim, have you gotten any changes to procedures, or has the FDA changed the bar on you in anyway, shape or form? Or, was it more of a, this sounds like a fairly standard request, and back forth dialogue with the FDA. I just wanted to clarify that.

Jim Davis

Sure. Let me answer the second question first, which is I don’t believe they have the bar. I don’t think anybody knows quite, where the bar is, in terms of getting them to a level of comfort that we have all the data we need, I think they are comfortable that we have the studies we need, what they’re doing right now is just making sure they fully understand the data. And it’s just a matter them working I hope through their beaurocratic process to get their final approval. So, we don’t see any problems there that we don’t believe on being addressed. But it is an FDA reviewed process, and that’s why we can’t give you any components on timing. But we remained very confident that we will get this approval in the near future. But I can’t give you any more specifics.

Thad Strobach

How long can I diluted, how long can I go back and forth, is there a drop whey they really have to give you a…?

Jim Davis

Unfortunately there is no producer date here. Obviously at some time we would be submitting the BLA but we expect to have approval long before that.

Thad Strobach

Okay, thank you.

Operator

Thank you very much. [Operator Instructions]. At this time it looks there are no questions.

H. Thomas Watkins

Okay, thank you operator. I want to thank everybody for your participation in the call and your interest in HGS. I look forward to seeing you all soon, and have a good evening. Thank you.

Operator

Thank you, everyone, for joining the Human Genome Sciences third quarter 2008 financial results conference call. Today's call has concluded. You may now disconnect.

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