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Human Genome Sciences, Inc. (HGSI)

Q4 2007 Earnings Call

February 25, 2008 4:30 pm ET

Executives

H. Thomas Watkins - President and Chief Executive Officer

Timothy C. Barabe - Senior Vice President and Chief Financial Officer

David C. Stump, M.D. - Executive Vice President, Research and Development

James H. Davis, Ph.D., J.D. - Executive Vice President and General Counsel

Analysts

Analyst for Yaron Werber - Citi

Geoffrey Porges – Bernstein

Jim Birchenough - Lehman Brothers

Richard Smith – JPMorgan

Analyst for Mark Schoenebaum - Bear Stearns

Annabel Samimy – UBS

Analyst for Sapna Srivastava - Morgan Stanley

Meg Malloy - Goldman Sachs

Han Li - Stanford Group

Jason Kolbert – Susquehanna

Terence Flynn - Lazard

Joseph Schwartz - Leerink Swann

Chris Raymond - Robert Baird

George Farmer - Wachovia

Operator

Good morning and welcome to the Human Genome Sciences fourth quarter and full year 2007 financial results conference call. (Operator Instructions) 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

Good afternoon everyone, thank you for joining us. Those of you who have not seen the press releases that we issued just 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 based on our current intents, beliefs, and expectations. They are subject to certain risks and uncertainties and I encourage everyone to look at our SEC filings for additional detail.

On today’s call, I plan to provide an overview of HGS accomplishments and comment on our outlook for 2008. Tim Barabe, Senior Vice President and Chief Financial Officer will then briefly touch on a few aspects of our 2007 financial results and 2008 financial outlook. I will have a few concluding comments, and we will open the call to your questions.

Dr. David Stump, Executive Vice President, Research and Development; Barry Labinger, Executive Vice President and Chief Commercial Officer; and Dr. Jim Davis, Executive Vice President and General Counsel will join us for the Q&A session.

Looking back at 2007, it is clear that it was a year of execution for HGS, a year in which we delivered substantial progress towards the commercialization of our late-stage products. It was also a year in which we demonstrated our commitments to building a company that achieves commercial success and sustainable growth well into the future. 2008 promises to be another eventful year, during which we will achieve major milestones on a number of our programs.

Let’s talk about our late-stage programs first. One year ago, I reported that HGS was for the first time a Phase 3 company. Today, I am pleased to say that we expect to have our first Phase 3 data available by the end of this year for Albuferon in the treatment of chronic hepatitis C. We continue to expect to have all Phase 3 data for Albuferon available by spring 2009 and we and Novartis plan to file global marketing applications by the fall of 2009.

Phase 2 results for the 900-microgram dose of Albuferon every two weeks demonstrated efficacy and safety comparable to PEGASYS, with half the injections, improvements in quality of life and significantly fewer missed days of work on treatment. If these results are confirmed in Phase 3, we and Novartis believe that Albuferon could become the market-leading interferon for the treatment of hepatitis C.

Turning to LymphoStat-B, we expect to complete enrollment in bulk Phase 3 trials in SLE by fall 2008. And we expect to have all Phase 3 data available for LymphoStat-B in 2009.

As you know lupus is a chronic disease and patients need new treatments that provide durable efficacy with a favorable safety profile. Phase 2 results suggest that the clinical benefit of LymphoStat-B was sustained through 2.5 years on treatment in patients with active disease, with continued improvement observed in these patients and with safety remaining comparable to placebo.

The Phase 2 results are confirmed in Phase 3, we believe that LymphoStat-B could represent a breakthrough that will change the landscape of lupus treatment completely. We and our collaborator GlaxoSmithKline believe that LymphoStat-B represents a major commercial opportunity.

Our third compound in late-stage development is ABthrax, which we believe will make an important contribution to our nation’s biodefense program. We announced steady results in December 2007 that provided the scientific evidence required to establish the efficacy of ABthrax in the treatment of inhalation anthrax.

We also demonstrated that ABthrax was generally safe and well tolerated in two clinical trials in healthy adults. We have reached agreement with the FDA on the regulatory pathway and we plan to submit the final data package to BARDA and the FDA by mid 2008 to support authorization of delivery to the Strategic National Stockpile.

We have successfully completed our conformance lots and we are currently manufacturing ABthrax on schedule to begin delivery by fall 2008. From a business perspective ABthrax is strategically important because it will produce our first product sales. We are on track to receive $165 million in revenue from this contract with most of that to come in late 2008 when we expect to begin delivery.

Now as I said earlier, we’re also committed to achieving sustainable growth beyond our first product launches. We have an emerging mid-stage pipeline that is very exciting, led by our TRAIL receptor antibodies for the treatment of cancer and including important products under development by GlaxoSmithKline to which we have substantial financial rights.

First, our oncology program, HGS has pioneered the development of highly targeted antibody therapies based on the TRAIL receptor apoptotic pathway. HGS-ETR1, our antibody to TRAIL Receptor 1 is the most advanced of any product in development that targets TRAIL pathway.

I am pleased to report that we have completed enrollment in our randomized Phase 2 trial of HGS-ETR1 in combination with Velcade in multiple myeloma and we expect to have data available from this study during the third quarter of 2008.

In December 2007, we initiated a second randomized Phase 2 trial, this one to evaluate HGS-ETR1 in combination with chemotherapy agents, paclitaxel and carboplatin as first-line therapy in patients with non-small cell lung cancer. The TRAIL receptor antibodies hold powerful promise against an array of cancers and in December 2007 we announced the strategic transaction with Aegera Therapeutics that boost that promise even higher.

We now have the opportunity to develop and commercialize a novel class of small molecules, IAP inhibitors that also enhance apoptosis. We expect to initiate Phase 1 trials of HGS1029, our lead IAP inhibitor within the next few months.

This will give us two different approaches targeting different points in the same pathway and each able selectively to cause cancer cells to die by apoptosis. We plan to pursue these opportunities aggressively by studying our TRAIL receptor antibodies and IAP inhibitors both in combination with one another and in combination with other therapeutic agents.

In the GSK clinical pipeline both darapladib and Syncria, they also reach important inflection points in 2008. HGS has substantial financial rights to both of these products. Darapladib was discovered by GSK based on HGS technology. It is a small molecule inhibitor of an enzyme associated with the development of atherosclerotic plaques.

Earlier this month GSK announced that the data from its Phase 2 dose-ranging trial of darapladib in patients with coronary artery disease will be presented at the American College of Cardiology meeting to be held in late March 2008, and that the results of its randomized Phase 2/3 imaging trial have been submitted to a major medical journal.

GSK is developing darapladib as a treatment for atherosclerosis, and it has the potential to be an important treatment for the prevention of cardiovascular risk. So we look forward with great interest to publication of these results.

Syncria is also progressing well. Syncria was created by HGS using our proprietary albumin-fusion technology. It is a long-acting form of GLP-1, a peptide hormone that acts to help maintain normal blood sugar levels and to control appetite.

In May 2007, GSK initiated a randomized Phase 2b dose-ranging trial of Syncria in patients with type 2 diabetes. We believe that it is possible that GSK will reach decisions in 2008 regarding advancing both darapladib and Syncria to Phase 3 trials. A GSK decision to move forward with either of these products would be very important for HGS.

Now, let’s turn to Tim Barabe for our financial results.

Timothy C. Barabe

Good afternoon, you have the numbers for the fourth quarter and full year 2007 in the press release. But I would like to point out a few highlights.

First, revenues continued to increase and rose to $42 million in 2007 from $26 million in 2006.

Second, net cash burn for 2007, excluding the upfront paid to Aegera Therapeutics related to their licensing and collaboration agreement completed at the end of the year, was in line with prior guidance. Adding in $20 million paid to Aegera, net cash burn totaled $180 million. This number also reflected increased clinical development costs related to our Phase 3 programs.

Third, with more than $600 million at the end of December 2007, our cash position remains strong.

Looking ahead to 2008 we have updated the guidance we provided in January. We expect revenue to increase to $160 million or higher, this includes $100 to $120 million from ABthrax product sales late in the year.

We expect net cash burn for 2008 to be in the range of $135 to $155 million and we now expect cash and investments at year-end 2008 to total $450 to $470 million compared with $600 million at the end of 2007. The net cash burn and cash and investments guidance for 2008 reflects the favorable effect of $47 million received last week from Teva Pharmaceuticals in partial payment for the 13% of CoGenesys that HGS formerly owned.

Tight spending control, increased revenues and clinical development cost-sharing all played important roles in keeping net cash burn to a minimum in 2007. We will continue this emphasis in 2008.

With that, I’d like to turn it back over to our President and CEO, Tom Watkins for the Q&A session.

H. Thomas Watkins

So in summary, 2007 was a year of great progress for HGS as we executed well across all areas of our business. In 2008, we expect to accomplish additional key milestones in our transformation into a commercial company.

Operator, we are now ready for our question and answer session.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Yaron Werber - Citi.

Analyst for Yaron Werber - Citi

My question is related to darapladib program. Do you have any insight as to why GSK decided to publish the IBIS-2 result instead of presenting it in a medical conference? And if so, why is it taking them rather long to make a decision to move this program into Phase 3 given they had the data for a while?

H. Thomas Watkins

We don’t have any insight into timeframes. You would have to ask GSK for any additional elucidation on that fact. We’re reporting information that is publicly available and it is our understanding that the timeframes we’ve talked about and the actions we’ve talked about are forthcoming. So the focus for us is really on the possibility of a Phase 3 decision which is obviously of significance to us and we look forward to continuing announcements from GSK that will be further to that end.

Operator

Our next question comes from Geoffrey Porges - Bernstein.

Geoffrey Porges - Bernstein

On the Albuferon, the ACHIEVE trials, could you give us any sense as to whether there is a schedule or for the DMC reviews and how that might play out over the remaining period of the trial.

Could you give us a sense if you completed enrollment of the BLyS LymphoStat trials by the fall, presumably I mean sort of September timeframe, then what does that tell you about when in ‘09 you could be reaching the end of the treatment period and then analyzing the data?

David C. Stump, M.D.

The completion of enrollment in each BLyS study would lead to a primary assessment at 52 weeks after a period of randomization allow us a period of weeks to collect data, clean data, analyze data. So I think you could look at a year plus a period of time, a few weeks, for data being made available to the public.

With respect to the DMC activities in the ACHIEVE trial, they do meet on a regular basis by charter, but they also are allowed to monitor ongoing events as they wish. We report data to an independent data analysis group. They work with the DMC on data analysis.

So actually the nature of their ongoing deliberations is not exactly known to us. So we would hear from them obviously if they had something important they wanted to hear from us or to say to us.

Operator

And our next question comes from Jim Birchenough - Lehman Brothers.

Jim Birchenough - Lehman Brothers

Just on Albuferon, just wondering if you have any further detail on the DMC assessment, in particular with regards to pulmonary symptoms, whether there is any mild-to-moderate symptoms in the lower dose group and whether any patient attributes contributed to the excess rates we saw at the interim assessment.

David C. Stump, M.D.

I really don’t have any more information. We got a recommendation, it’s been just over a month ago and that is the communication we’ve had from them. I am as eager as you all are to see that final data and dig into it and start asking some of those questions such as you just asked about what’s going on.

Operator

Our next question comes from Richard Smith – JPMorgan.

Richard Smith – JPMorgan

Can you just provide us with a sense of whether you’re planning to start any combination trials with Albuferon and direct antivirals before the launch or whether you’ll have any data here with the combinations at the time of launch?

David C. Stump, M.D.

We have always thought that it would be desirable to have some combination experience with Albuferon and a novel antiviral before the launch. And I think the key is before the launch of the second product launch, and I think we still believe that.

We are looking closely at the kinetic profile of our product and how it might interact with novel antivirals. We’re obviously all going to be really eager to see the full ACHIEVE study data when they are available to us late this year and early next year. I think knowing what we’ve seen about the timeframes of development now for the novel antivirals, I think we do have plenty of time to get some of that experience before their launch, that would be my assessment.

Richard Smith – JPMorgan

Once-monthly dosing, any decisions made there or is that something likely to be a Phase 4 trial?

David C. Stump, M.D.

No decisions yet. We and Novartis are still quite eagerly committed to exploring this. We have some obvious stakeholders that we’re in conversation with besides us, scientific leaders in the field, regulatory authorities. But we are still committed to seeing if we can’t find a path forward for the Q4 week program in a time-friendly manner.

Operator

Our next question comes from Mark Schoenebaum - Bear Stearns.

Analyst for Mark Schoenebaum - Bear Stearns

It’s Andrea O’Shea here for Mark. I have two quick financial questions; the first one is regarding the revenue for ABthrax. My notes say that you were expecting to get $165 million, about 90% of that would be in ‘08. Did the timeline get pushed a little bit to ‘09 or are you still expecting to get the full $165 million?

And the second question is about the R&D ramp. I was under the impression that you will be sharing the cost for the Phase 3 studies for LymphoStat-B. And I was wondering if you could comment on how that will impact R&D starting in ‘08?

Timothy Barabe

With respect to the first question, we have for a number of months now said that we will receive the full $165 million related to ABthrax. However, roughly 70% of that will be realized in 2008, sorry, with the balance in 2009. So that has been an update that we’ve been talking about for a good three or four months now.

And I am not sure I understand the question on R&D spend as it relates to Albuferon vis-à-vis LymphoStat. We are committed to both of these programs and our partners are committed as well.

H. Thomas Watkins

We’ve been recording R&D expenses on both Albuferon and LymphoStat since we began the Phase 3 trials and then the partners reimburse us for their portion of the expenses. So what you see in the quarterly results or yearly results is the net effect of our spending less the partnership portion which is 50%.

Back on ABthrax for a second, let me just add a comment to what Tim said, there’s been no change in the schedule here. We’ve been saying for some months now that we expect the revenue from delivery to begin in the latter third roughly of 2008. So the 70% of $165, which is about $100 million, should be expected to be recorded consistent with the shipping, which would be in the last third or so of the year. There’s been no change in that timing.

Operator

Our next question comes from Annabel Samimy - UBS.

Annabel Samimy - UBS

I had a quick question on Syncria and a follow-up also. Can you give us a sense of how the trial was designed and what exactly Glaxo is looking for that would help them to make the decision to move forward into Phase 3 for Syncria.

And the follow-up is in the revenue, we understand the $110 to $120 is for the ABthrax, the 70% ABthrax. But does that include any further milestones from any of your partners, the remainder of the revenue guidance. Or is it simply the amortization of what you’ve already received?

David C. Stump, M.D.

We’ve had no detailed discussion with them about their protocol design that we can disclose. I think you can assume it’s a fairly standard Phase 2 trial design for a glucose lowering agent. They’ll be looking at the dynamics of glucose lowering hemoglobin A1c. I’m sure they’ve got all the appropriate controls and a number of doses in the study. But given that I’ve had no detailed discussion, I think speculating beyond that is probably not helpful.

Timothy Barabe

Annabel on the revenue part, there are very modest milestones assumed in the 2008 revenue number. The vast majority of the revenue comes from the ABthrax contract as well as the amortization of milestones already received from Novartis and GSK.

Operator

Our next question comes from Sapna Srivastava - Morgan Stanley.

Analyst for Sapna Srivastava - Morgan Stanley

It’s actually Dave calling in for Sapna, just wanting to just get one last clarification on this ABthrax. So when the revenue comes later in the year, is that going to be recognized as just a big lump of a hundred plus million or is it going to come over time or is it going to come as a lump but you’ll amortize it over time. And just in terms of sort of the modeling of this. Is it going to be again just one lump or is there some schedule that you’re going to apply to it?

Timothy Barabe

It’s a little of both in the sense once we are authorized to ship product to the Strategic National Stockpile we will be able to recognize revenue. So that will be an event that will not be amortized. Whatever we ship we will recognize as revenue because the defining event is being able to ship to the Strategic National Stockpile.

Analyst for Sapna Srivastava - Morgan Stanley

And so you expect to ship $110 to $120 million worth of the product in ‘08?

Timothy Barabe

Yes, we expect to ship roughly 70% of our commitment this year, in ‘08, yes.

Operator

Our next question comes from Meg Malloy - Goldman Sachs.

Meg Malloy - Goldman Sachs

Is there anything else that has to happen from a regulatory perspective for you to get that authorization? You mentioned, Tom, some additional data this summer. Just want to make sure that we understand what the process is and are there any other legislative steps that have to occur for the authorization to happen.

James H. Davis, Ph.D., J.D.

No, there are no other steps. What we have to do is get our final data reports together, get them submitted to FDA and to BARDA. The money has already been both appropriated, authorized and sequestered at HHS, so there are no other legislative steps there. It’s merely a matter of getting the data into FDA, getting a sign off that it’s appropriate for the stockpile and then we will be delivering material.

Operator

Next we’ll go to Han Li - Stanford Group.

Han Li - Stanford Group

On the $47.3 million cash you received from Teva for CoGenesys, are you going to book in the first quarter ‘08 some one-time gain?

Timothy Barabe

Yes, we’ll be booking a one-time gain in the first quarter of 2008 and if you’ve seen the press release the remaining $5 plus million will be received in the first quarter of 2009.

Operator

Next we’ll go to Jason Kolbert - Susquehanna.

Jason Kolbert - Susquehanna

Can you just talk a little bit about what the manufacturing margins and COGS are associated with ABthrax and can you expand a little bit on what the acceptance criteria is between FDA and BARDA?

James H. Davis, Ph.D., J.D.

I would say that when we did the ABthrax contract with the U.S. government we were very conscious that we are interested in getting pharmaceutical type returns on any product we are doing and that’s what we expect to get for ABthrax.

The U.S. government is cognizant of the fact that to get people to participate in BioShield who are pharmaceutical companies, it’s very important that you get the sort of margins that one would expect for a typical pharmaceutical product recognizing of course you don’t have all the sales and marketing expenses that you might have for a typical product. So while I can’t talk exclusively about the cost of goods, I think that gives you at least some judgment about the type of revenue we expect to be receiving.

In terms of the criteria, it is that the product would be safe and effective for use in an emergency situation. We will not have an approved BLA at the time, part of our contract is to get a BLA and we do expect to be applying for that in ‘09. But to get in the National Stockpile the product has to be determined to have been both manufactured appropriately and to have sufficient safety and efficacy to be used in an emergency situation.

And there are specific criteria that we have worked out with FDA on those standards and we are in agreement as to what data needs to be submitted. We believe we have that data and simply it’s a matter of compiling that data and getting it to the agencies for their review.

Timothy Barabe

I would just like to add that all of the expenses to-date we have had for ABthrax have gone through the P&L. So basically what we’re doing now is finishing up some work some liner work in ABthrax plus of course we’re manufacturing product but we did begin manufacturing product in 2007. So a lot of that expense has already gone through the income statement in previous years.

Operator

We have a question from Terence Flynn - Lazard.

Terence Flynn - Lazard

Can you give us any more details on the percentage of those COGS that you have already recognized?

Timothy Barabe

I guess what I’d say is all of the testing that we’ve done, so the clinical testing that we’ve done has been expensed. In terms of COGS if you’re trying to get an idea, I guess I could only point you in the direction of healthy specialty pharma type margins. I don’t think we can be any more precise than that because there is a little bit of a mix of some manufacturing that has already taken place, but of course the bulk of it will take place this year.

Terence Flynn - Lazard

So the majority of the COGS expense will be recognized this year and then next year probably a little bit as well or is it mainly a 2008 event?

Timothy Barabe

I would say that margins will be higher in 2008 than they will be in 2009. Because again once we ship product then we will also be inventorying product. So you have to keep that into effect as well. So at this point in time the majority of the COGS in 2008 relate to 2008 production but there is some production that did take place in 2007.

Operator

We have a follow-up question from Jim Birchenough with Lehman Brothers.

Jim Birchenough - Lehman Brothers

Is there any further review event manufacturing that’s required on ABthrax and just for the TRAIL antibody program, just wondering if you could frame the expectations what you need to show in terms of synergy with Velcade to move that program forward?

James H. Davis, Ph.D., J.D.

No, we do not expect any further manufacturing inspections prior to delivery of the product to the stockpile.

David C. Stump, M.D.

On the myeloma study I will be looking for persuasive evidence that we’ve got a drug effect on response rate or time to progression. Those are the key things. It’s a Phase 2 proof of concept study. It’s not adequately powered for minimally interesting clinical benefit. But I’ll definitely be looking for signals that I believe are real enough and relevant enough to go to next steps which should be larger more definitive clinical trials.

Operator

And we have another follow-up from Han Li with the Stanford Group.

Han Li - Stanford Group

On the cash management, do you have any exposure to the auction-rated securities in your cash?

Timothy Barabe

We have no auction-rated securities on our portfolio. Our investment policy does not permit auction-rate securities, CDOs, CLOs, subprime mortgage backed securities. Our 10-K should be filed certainly within the next few hours or by tomorrow morning at the minimum and you’ll see there that we don’t have any exposure unrealized loss-wise to securities in our investment portfolio. We tend to hold our investments short term and in very safe investments as well. So, no, we don’t have any significant exposure.

Operator

Our next question comes from Joseph Schwartz - Leerink Swann.

Joseph Schwartz - Leerink Swann

I was wondering since R&D increased substantially in the quarter, is that a good level to assume going forward? I understand that you’re recognizing ABthrax stockpiling expenses as part of the R&D. Maybe you could give us a sense of how much the R&D expense this quarter is comprised of the ABthrax versus just ongoing research programs?

Timothy Barabe

One thing that you have to keep in mind when you look at the fourth quarter is the expensing of the $16.9 million related to Aegera. So you’re going to see a very heavy R&D expense in the fourth quarter related to that licensing deal that was signed just prior to the end of the year in December.

So keep that in mind when you look at our R&D expenses. If you take that out that’s almost half of the variance for the fourth quarter versus the previous year and then those expenses are related to the Phase 3s. We were not in heavy clinicals in 2006, certainly not to the extent that we are now with Albuferon and LymphoStat-B.

Joseph Schwartz - Leerink Swann

Could you give us a sense of how much through the manufacturing you are with the ABthrax just in a rough sense? How much has been booked in R&D, and how much remains and will that be relatively linearly expensed?

James H. Davis, Ph.D., J.D.

We haven’t actually disclosed where we are. So as I’m not sure I’m comfortable giving that number right now. So I think that’s all we can say right now.

H. Thomas Watkins

I think, Joe, there was a little bit of expense in the 2007, probably in the fourth quarter that relates to ABthrax manufacturing that will go on in ‘08 and as Tim said earlier there is probably a little bit of manufacturing that will be completed in ‘08, that will be revenue recognized in ‘09.

I think the thing in the fourth quarter of ‘07, if you’re looking at R&D Tim’s pointed out probably the biggest reason for variance which is the Aegera upfront, but bear in mind also we announced completion of both Phase 3 trials on Albuferon, both ACHIEVE trials, in the third quarter, one in August and one in early November.

So by the fourth quarter we were operating at a fully completed state for that program for at least half of the quarter, a full quarter for one study and half the quarter for the second study. So that needs to be borne in mind when you’re trying to do comparabilities across quarter within 2007.

Operator

Our next question comes from Chris Raymond - Robert Baird.

Chris Raymond - Robert Baird

And just a sort of a big picture question on ETR1, so you’ll have the data, you’ll be able to turn over the card, if you will, on the data in combination with Velcade. Certainly it’s hard to make a decision until you get the data, but where might you head after that in terms of other combinations. I’m sort of struck by the fact that you picked Velcade and not one of the IMiDs for example.

Dave, can you maybe say is there any data that sort of informed you not to combine with it with IMiDs or why did you pick Velcade and is it still an opportunity to combine it with either Revlimid or Thal?

David C. Stump, M.D.

We have no data to tell us that it won’t combine well with those agents. Actually we intend to do those experiments. We picked Velcade because of the striking pre-clinical data that we observed with Velcade in combination with ETR1. That plus the objective responses we saw on our non-Hodgkin’s lymphoma Phase 2 trial with ETR1 as a single agent.

But I think if you’re talking about, let’s say we get a good result in this trial later this year and we’re willing to think about okay how do we develop this for an important place in the market. Yes, well I think we’ll have to really have some starting pre-clinical data with other relevant combinations in myeloma and maybe some additional clinical data at some point. There is no data that says it won’t combine well with those agents, not pre-clinically.

Chris Raymond - Robert Baird

So you could assume then that would you have to run another trial before you’d come up with a registrational trial?

David C. Stump, M.D.

It’s kind of not necessarily. I think it depends on what we see in this study and how we look at how such a combination would fit in the marketplace. I think Velcade’s star is shining pretty brightly in the treatment of myeloma right now and time is certainly valuable to us. I’d be inclined to look for a pass to move into pivotal trials if I had the tickets.

But I think long term, clearly, it’s a market where the IMiDs are used and we would have to in parallel with such a program I think do some work, probably in the clinic. And in order to do that, I think we would need those pre-clinical experiments you’re talking about.

Operator

We have another question, George Farmer - Wachovia.

George Farmer - Wachovia

David, can you talk about the design of the carbo/paclitaxel lung cancer trials with ETR1? Is that a randomized study and what’s the endpoint?

David C. Stump, M.D.

Yes, it is a randomized trial. The endpoint is objective response. We also look at time to progression there. It’s active control chemo lung versus two other arms with two different doses of ETR1. As you can tell, we’re big fans of randomized proof of concept Phase 2 trials here. I really think with these targeted biological response modifiers you really need that to make informed decisions to go beyond Phase 2.We’re pursuing exactly the same approach.

George Farmer - Wachovia

So you’re evaluating two different doses, that’s a three-arm study?

David C. Stump, M.D.

That’s correct.

George Farmer - Wachovia

And how many patients is that?

David C. Stump, M.D.

We’re targeting 105, similar size.

George Farmer - Wachovia

And the Velcade trials are over 100 patients too?

David C. Stump, M.D.

Yeah, we’ve randomized 105.

Operator

We have a follow-up from Jason Kolbert - Susquehanna.

Jason Kolbert - Susquehanna

When we might see some interest from foreign governments in ABthrax or how that process might unfold once you make your first deliveries to the U.S. government.

James H. Davis, Ph.D., J.D.

We are very interested in working and talking to foreign governments. We are in the process of doing that. One of their key criteria is acceptance of the U.S. government of our material. It’s hard to give a specific timeframe. Obviously, anthrax is not as big an issue in Europe as other simply bombs and other terrorist issues. But it is a concern, we do have ongoing discussions, but it’s very hard to give you a timetable on when and if they might make a decision.

Operator

Ladies and gentlemen that does conclude today’s question-and-answer session. At this time, I’d like to turn the call back over to Mr. Watkins for any closing or additional remarks.

H. Thomas Watkins

I want to thank everybody for your participation and your interest today. Hope everybody has a good rest of their week. Thank you very much.

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Source: Human Genome Sciences, Inc. Q4 2007 Earnings Call Transcript
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