Randomly Noted

A decade ago, Human Genome Sciences Inc., founded in 1992 by genomic genius William Haseltine to commercialize gene research, was flying high. So were the shares of a great many biotech and high-tech firms. Then came the bursting of the internet bubble. HGS’s shares went from three digits to single digits. Haseltine eventually exited HGS. And today, the company still doesn’t have much on the market; its 2008 revenue totaled $48.3 million. But it does have one promising medication, for lupus, and today, as the firm announced promising clinical trial results, HGS’s shares shot up by more than 200%. I recount all this by way of demonstrating how painstaking, fraught and expensive drug-development is – and how desperate disease sufferers are. Lupus patients are likely to snap up this drug (called Benlysta) – when and if it hits the market – even though it’s effective in only some patients. It’s the extreme difficulty of developing new medications for life’s most severe health afflictions that makes the pharmaceutical and biotech industries so defensive when they’re challenged about rising drug prices, so-called lifestyle drugs, fat marketing budgets and big sales forces. Big-selling medications that command fat profit margins – however derivative and look-alike they are – help fund research and development budgets. Yes, they enrich pharma executives but they also can enrich shareholders. All this said, the following line in a recent WSJ story about Biogen Idec took my breath away: “Biogen’s top seller, the multiple-sclerosis drug Avonex, rose 12% to $591 million in quarterly sales. The company said Avonex’ sales had grown about 2% on a unit basis, but it has also continued to raise Avonex’ price, by between 20% and 30% in the last year, according to data from Medicare. It now costs about $26,400 a year. Other MS drugs have also raised their prices.” I’m not naive about the pharma industry, but an annual price increase of between 20% and 30% – for a drug whose patients are beyond desperation, due to the intractability of MS – in the midst of a global economic crisis doesn’t sit right. It’s quite possible that the bosses of Biogen Idec and other MS drug makers simply had to mandate a price hike to deliver promised profit margins. And one can’t argue with a big fat price increase when there are customers willing to pay up. Indeed, DJN colleague Tom Gryta reports that the new lupus drug, Benlysta, will probably cost about the same as an MS drug. It’s the free market, delivering life-enhancing drugs at exorbitant prices.By the way, Tom’s story has a nugget of potential M&A news: GlaxoSmithKline PLC has partnered with HGS to eventually market the drug in the U.S. Tom writes: “Citigroup analyst Yaron Werber believes the strength of the data may entice GlaxoSmithKline to simply buy Human Genome Sciences, which also has potential to get royalties on two late-stage drugs Glaxo is developing. The companies don’t have any agreement in place that prevents Glaxo from purchasing shares of Human Genome, the company noted on the call.”