Does Immunomedics' Success Mean Human Genome Sciences' Failure?

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Includes: GSK, IMMU
by: M. E. Garza

Immunomedics, Inc. (NASDAQ:IMMU) received good news yesterday.

Really big news.

If you're not familiar with Immunomedics, they're a New Jersey-based biopharmaceutical company primarily focused on the development of monoclonal, antibody-based products for the targeted treatment of cancer, autoimmune and other serious diseases.

Along with their partner and co-developer, Belgium drugmaker UCB, the company announced a mid-stage trial comparing their treatment to placebo for treating lupus over 12 weeks showed "meaningful treatment effect." Shares soared on the news, as lupus is considered a notoriously hard-to-treat autoimmune disease and could be a huge market.

However, Immunomedics' good news had an almost immediate negative impact on shares of Human Genome Sciences (HGSI) which has also been developing a treatment for lupus called Benlysta. Shares of Human Genome were down to 18.96-1.54 (-7.51%).

HGSI's shares had been rising the last two sessions because of rumors about a possible takeover by GlaxoSmithKline PLC (NYSE:GSK), the same company that has been working with HGSI on the development and clinical trials of Benlysta.

IMMU's lupus drug performed well in its second stage of human studies, giving a nearly 25 percent treatment advantage over placebo by the end of 12 weeks. That trial, conducted on 227 lupus patients, sets the stage for the two companies to plan their third phase of human tests on the drug, called epratuzumab and still years away from potential approval.

Those results appeared to best HGSI's, but a closer look shows that HGSI used a different measurement than Immunomedics. Investors pushed the panic button after rumors of Benlysta’s effectiveness came into question. In HGSI's unexpectedly positive third phase of trials, 57.6 percent of patients responded well to Benlysta versus 43.6 percent for placebo.

Both drugs appear to target and weaken cell activity that helps produce the proteins that encourage a person’s immune system to start attacking itself, thereby causing lupus.

HGSI's Benlysta was projected by analysts to draw anywhere from $1.5 billion to $3 billion in peak annual sales revenue for Human Genome Sciences if it got approved by federal regulators, but this development has definitely affected those estimates.

HGSI is still a very attractive company and definitely not a one trick pony, and both these drugs are still several steps away from an FDA approval, but one has to wonder if GlaxoSmithKline would still be as willing to pay the big rumored price per share for HGSI.

For what it's worth, HGSI's shares started to rise again in after hours trading - the final tick put the price right at the same price level where shares were right before those takeover rumors hit days ago.

Disclosure: No Positions