With its first drug on the market -- nearly 20 years after the company was founded -- Human Genome Sciences (Nasdaq: HGSI) should start to show meaningful revenue this year.
Profit? That'll have to wait until 2013.
Part of the problem is that Human Genome has to share the profits from its new lupus drug, Benlysta, with marketing partner GlaxoSmithKline (NYSE: GSK). But it's really the expenses that are keeping the company from showing a profit earlier.
This year, Human Genome is expecting to spend between $150 million and $170 million on SG&A expenses as it builds up its sales force and an additional $180 million to $220 million on R&D expenses.
While Benlysta is already approved, the pipeline is still heavily focused on the drug. The company is looking for a European approval in second half of the year, and it's developing a subcutaneous formulation, which should go into a phase 3 clinical trial in second half of the year. Human Genome is also testing Benlysta in other autoimmune diseases.
Beyond Benlysta, there are a couple of phase 3 drugs that Glaxo has full control of, but Human Genome could get royalties from them if they're approved. And some earlier-stage cancer compounds.
Spending now to make more later is a necessary evil for biotech companies, and it's made tougher by companies licensing out their drugs to get enough money to gain approval -- another necessary evil. Bayer and Onyx Pharmaceuticals' (Nasdaq: ONXX) Nexavar was approved at the end of 2005, but Onyx didn't show a full-year profit until 2008. Elan (NYSE: ELN) failed to show a profit last year despite Tysabri achieving blockbuster status; it shares revenue of the multiple sclerosis drug with Biogen Idec (Nasdaq: BIIB).
All told, Human Genome will burn through between $280 million and $380 million this year. That will still leave the company with at least $550 million at the end of the year, plenty of money to get to its goal of profitability in 2013.
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