Slow and Steady Has Investors Fleeing

Slow and steady might win the race, but it isn't a way to keep biotech investors' interest. As we approach a year after GlaxoSmithKline (NYSE: GSK) and Human Genome Sciences' (Nasdaq: HGSI) Benlysta was approved, the biotech sits 72% off its post-approval highs.

The lupus drug seemed to have so much potential given the lack of treatment options. A new drug hadn't been approved specifically for lupus for half a century.

But what HGS' investors didn't take into account is that lupus isn't immediately life threatening. In fact, symptoms wax and wane, so at some points, patients many not even feel like they need medications. The nature of the disease doesn't give doctors an immediate impetus to prescribe the drug. They can wait and see how the first couple of patients do before prescribing it to additional patients.

And it shows in the sales to date.

Source: Company releases.

Sure sales are increasing; most companies would kill for 37% quarter-over-quarter growth. But when you're working off that small of a base, it's hard to get excited. The run rate for the fourth quarter puts annual sales at just over $100 million, a far cry from the billion-dollar blockbuster every drugmaker dreams of.

Dendreon (Nasdaq: DNDN) is experiencing slower quarter-over-quarter growth, but can see breakeven in sight because it's working off a larger base; HGS has a ways to go before it'll be turning a profit. The company lost $81 million last quarter and isn't guiding for profitability until 2014.

As a kid, I always rooted for the tortoise, and I'll root for Human Genome Sciences, too. But there's no denying that the hare is the more exciting of the two; it's hard to root against drugmakers like Vertex Pharmaceuticals (Nasdaq: VRTX) and Regeneron Pharmaceuticals (Nasdaq: REGN) with strong launches.

And unlike the children's fable, sometimes drugmakers fast out of the gate might actually win the race. In Vertex's case, the company might actually take a nap like the hare, but its cystic fibrosis drugs should wake it up. Regeneron's race is still in the early stages, but it seems to be flying along against an entrenched leader in Roche.

If HGS wants to be something other than an also-ran, it's going to have to pick up the pace. Unfortunately, at this point, there isn't much HGS and Glaxo can do but hope that doctors see positive results in their first patients and prescribe it more.

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