Human Genome Pumps Up Its Pipeline

Includes: GSK
by: VFC's Stock House

Barely a week following news that it had received the first FDA approval for a new lupus drug in over half a century, Human Genome Sciences (HGSI) made a move to boost the long term viability of its pipeline.

In a deal announced earlier this week, Human Genome has agreed with FivePrime Thereapeutics to develop and commercialize FivePrime's clinical stage cancer drug, FP-1039, for an up-front payment of $50 million and additional monetary stipulations that could add another $450 million in development, regulatory and milestone payments to FivePrime's war chest.

FivePrime will also receive a double-digit royalty percentage on all future sales in the United States, Canada, and the European Union, according to a press release issued earlier in the week, while FivePrime will retain all commercial rights in the areas of the world not mentioned.

Human Genome already had a fairly full pipeline of potential before this deal was announced, including rights to two late-stage products being developed by GlaxoSmithKline (NYSE:GSK), and this move is indicative that HGS is looking to quickly become a major player in the pharmaceutical and biotech sector.

It has already been stated that HGS is prepared to have Benlysta on the market later this year, and the immediate influx of war chest cash should enable the company to expand the pipeline and self-fund the majority of its research & development well into the future.

FP-1039 is a relatively early-stage product, only just now preparing to enter Phase II trials, so there is still a good deal of inherent risk involved for HGS and long term investors, but the acquisition of rights to a product that can potentially treat multiple cancer indications is definitely noteworthy, given its potential on the market, should it make it that far.

The recent Benlysta approval was certainly not the end of any story for Human Genome, rather this could be a company on the cusp of becoming a big player in the sector.

Not bad for a company whose stock was trading for under a buck just two years ago.

That's why you just gotta love this sector.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.