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GlaxoSmithKline (NYSE:GSK) has offered $13 per share for Human Genome Sciences, Inc. (HGSI). Human Genome Sciences finds the offer inadequate and has solicited bids, due by July 16, 2012. Human Genome Science, Inc. has revenue. But sales of Benlysta, the first new drug for Lupus in more than 50 years, were disappointing and Human Genome Science's stock price had declined to below $8 per share before the GlaxoSmithKline bid. Raxibacumab, although awaiting approval for the treatment of inhalation anthrax, has resulted in sales for stockpiling. Hopefully this market will be limited to only stockpiling for terrorism or biological warfare events. Another proprietary drug in the pipeline, Mapatumumab is an antibody that induces cancer-cell death by activating the protein known as TRAIL receptor 1. It is in Phase 2 development. Benlysta, the approved drug, is being developed for other indications. Based on these drugs, it is not clear that shares of Human Genome Sciences should be valued higher than the trading range that existed before the GlaxoSmithKline bid. But, there are two other drugs being developed with GlaxoSmithKline, Darapladib and Albiglutide. Is this hostile takeover bid about the remaining royalties for these two drugs held by Human Genome Sciences?

From the CDC website, "Every year about 785,000 Americans have a first coronary attack. Another 470,000 who have already had one or more coronary attacks have another attack." Vast improvements have been made in drug therapy for patients with heart disease. But even with optimal medical treatment (OMT), it is known that there is still residual risk of progression and events. Obviously this is a large market for a new drug, both in the United States and worldwide. OMT can include statins (reduce LDL cholesterol), beta blockers (reduce blood pressure and workload on the heart), angiotensin converting enzyme inhibitors (reduce blood pressure), and low dose aspirin (reduces platelet activation). Beta-blockers and angiotensin converting enzyme inhibitors, in combination, also reduce ventricular remodeling which in turn reduces the risk for chronic heart failure. But even with dramatically improved therapy, there remains residual risk of progression and cardiovascular events in patients with heart disease. There are a couple of targets for drug development in reducing this residual risk in patients with heart disease. Keep in mind, there is an inherent difficulty in trials designed to test drugs that may reduce this residual risk. The trials are done in patients that are already receiving therapy for heart disease, especially statins. Patients taking drugs, with established benefit, can not and should not be excluded from trials aimed at reducing residual risk.

Human Genome Sciences and GlaxoSmithKline are developing Darapladib (and another drug in this class, Rilapladib). Darapladib is an inhibitor of lipoprotein associated phospholipase-A2 (Lp-PLA2). Lp-PLA2 is associated primarily with LDL cholesterol particles and to a lesser extent, HDL cholesterol particles. Lp-PLA2 is a risk marker for cardiovascular disease and a target for therapeutic drug development (i.e., Darapladib).

Two pivotal phase 3 trials addressing whether darapladib can reduce the risk of adverse cardiovascular events are underway. From clinical trials.gov, the SOLID-TIMI 52 study is in patients with acute coronary syndrome and the STABILITY study is in patients with heart disease. The primary endpoint in both studies is the time to the first occurrence of any component of the composite of Major Adverse Cardiovascular Events (OTCPK:MACE).

Development of drugs targeting this "residual risk" in heart disease has been fraught with financial risk. It is well established that HDL cholesterol, "the good cholesterol", levels are correlated with reduced cardiovascular event risk. So, logically, raising HDL cholesterol levels should reduce cardiovascular events. But does it? High dose niacin has long been used to raise HDL cholesterol levels. Niacin causes flushing, but more importantly in a study published in the New England Journal of Medicine, niacin therapy may not reduce events in patents already taking statins. Another target for raising HDL cholesterol levels is cholesterylester transfer protein (CETP). The first drug in this class, torcetrapib by Pfizer (NYSE:PFE), had toxicity issues (increased mortality) discovered in an expensive phase 3 trial. The adverse effects were not related to the primary mechanism of action of CETP inhibitors, but rather torcetrapib raised aldosterone levels and, consequently, blood pressure levels.

Three more drugs in this class under development do not have this adverse effect. The second drug in this class, dalcetrapib, has had development terminated by Roche Holding (OTCQX:RHHBY), also in an expensive phase 3 trial. From a Roche press release, "A data and safety monitoring board recommended that the dal-OUTCOMES phase 3 trial be stopped due to a lack of clinically meaningful efficacy. The DSMB found no evidence of safety problems." There are two more drugs in this class, Anacetrapib by Merck (NYSE:MRK) and Evacetrapib by Eli Lilly (NYSE:LLY). Both of these drugs notably raise HDL levels more than dalcetrapib, so the verdict is still out as to whether they will show benefit.

The other drug from Human Genome Sciences shared with GlaxoSmithKline is being developed for diabetes. Albiglutide is a glucagon-like peptide 1 agonist. Drugs in this class, exanatide from Amylin (AMLN) and liraglutide from Novo Nordisk (NYSE:NVO), are already approved. This bodes well for approval of albiglutide. And this class of drugs does not cause weight gain, so it may well be the second drug class of choice added to therapy after metformin for type 2 diabetes patients. From the CDC website, "Nearly 26 million Americans have diabetes and an estimated 79 million adults have prediabetes." From the Human Genome Sciences 2011 annual report, "HGS will receive 10% royalties on worldwide sales if darapladib is commercialized, and has a 20% co-promotion option in North America and Europe" and "We are also entitled to single-digit royalties on worldwide sales if albiglutide is commercialized."

Could the Human Genome Sciences' share of potential revenue from darapladib and albiglutide lead to a bidding war for Human Genome Sciences, Inc.?

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

Source: Hostile Takeovers And The Race To Reduce Residual Risk In Heart Disease Patients