After the bell yesterday, Human Genome Sciences (NASDAQ:HGSI) reported that repefermin failed in Phase II trials for treatment of chronic venous ulcers. In response, the stock got whacked, declining 10% to $12.56 in after hours trading.
Chronic venous ulcers are open, non-healing sores that occur on the skin of the ankle or lower leg. Caused by venous insufficiency, they affect an estimated 500,000 to 700,000 Americans every year. Unfortunately, there is a lack of effective treatments for the ulcers, particularly with regard to the problem of recurrence.
The company said that repifermen, or Keratinocyte Growth Factor-2 (KGF-2), was well tolerated in the Phase II trial, with side effects similar to placebo. In other words, the drug is safe, but ineffective.
The news comes as a major disappointment, as many had hopes for reperfermin as a potential blockbuster. Further, the company's partner on the drug, GlaxoSmithKline (NYSE:GSK), had exercised an option to market and jointly develop the product starting in Phase III. So Human Genome, which has been receiving nominal royalty payments from GlaxoSmithKline, misses the benefit of joint development of repefermin for at least this indication.
But there may still be room for optimism.
Another Phase II trial for reperfermin is ongoing for the treatment of cancer therapy-induced mucositis. In addition, the company has initiated a Phase II trials for LymphoStat-B for systematic lupus erythematosus. Promisingly, LymphoStat-B also carries an FDA fast track designation.
Regardless, this is a major setback for the company and its investors. Just three years ago Human Genome Sciences had a market value of over $10 billion based entirely on hope.
Today, the story isn't much different: The drug developer has $1.14 billion in cash but also $503 million in debt, no products on the market, and nothing past Phase II trials. Furthermore, as of the first quarter, the company had an annual revenue run rate of less than $7 million to go with $185 million in annualized R&D expenses.
With the latest failure, at $1.6 billion, investors are paying a little more for hope than they were yesterday.
