In a refreshing change of course, the FDA has approved a significant new drug. GlaxoSmithKline (NYSE:GSK) and Human Genome Sciences (Nasdaq:HGSI) announced after market close on Wednesday that the FDA had informed the companies of the approval of their application to market Benlysta for the treatment of lupus. It no doubt helped greatly that the safety/side-effect profile on Benlysta was quite clean, to say nothing of the clear clinical need for new lupus treatments. (For background reading on the FDA approval process, see A Primer On The Biotech Sector.)
With approval in hand, the two companies will begin marketing the drug relatively soon, with a 50/50 split of costs. While there was a general expectation that HGSI and Glaxo would price Benlysta in line with drugs for multiple sclerosis or arthritis, the two companies went a bit more toward the high end of the range and Benlysta will cost about $35,000 a year (more in the first year of treatment). (For related reading, check out Pharmaceutical Phenoms: America's Best Selling Medicines.)
The FDA also gave the company a rather favorable label. While the drug is contraindicated in some of the most severe and lethal forms of lupus (those that involve the kidneys and central nervous system), the companies estimate that there are at least 200,000 eligible patients. In actual practice, though, it would be a bit surprising if more doctors did not give it a go in some less-severe cases.
The FDA's approval is partly conditional; the two companies will have to conduct a study of the drug in African-Americans. So far to date, Benlysta's results in this patient group have not been favorable, but they have not been statistically convincing either. Given that the rate of lupus is almost three times higher in people of Afro-Caribbean descent (compared to the overall incidence rate in the U.S.), that is clearly a subject that merits study.
The Market for Benlysta
All in all, it does not seem hard to imagine that Benlysta could be a $2 billion+ drug for Human Genome Sciences and Glaxo. True, the efficacy of Benlysta was not absolutely blockbuster, but it is good enough to offer significant improvements in quality of life for a sizable segment of the patient population.
Beyond lupus, though, there are other potential applications for Benlysta. The companies are already looking at follow-up studies in vasculitis and transplants, and there are possibilities in less-common diseases like Sjögren's, Waldenström's and idiopathic thrombocytopenic purpura (ITP). All told, if some of these additional indications work out, Benlysta could easily be a multibillion dollar drug. (For related reading, check out Can Savient Soar On One Specialty Drug?)
Better still, the two companies have little to worry about in terms of competition. Current therapies for lupus include steroids and antimalarials but no branded drugs with specific labeling for lupus. Immunomedics (Nasdaq:IMMU) would like to change that, and its drug has shown encouraging results in early studies, but is at least a few years from market.
The Bottom Line
Human Genome Sciences has made a remarkable transition from a basically failed genomics/sequencing concept to full-fledged biotech. It is worth wondering, though, whether HGSI is destined to stay independent. The company has two interesting late-stage compounds in testing for atherosclerosis and diabetes, and those are also partnered to Glaxo. It would seem straightforward, then, that Glaxo may be interested in buying out HGSI and gaining a 100% stake in all of these drugs.
If a deal were to come, a price well into the $30s (or higher based on Phase 3 data in those two drug candidates) would be a minimum. Of course, it does not have to be Glaxo that makes the purchase - I suspect many major pharmaceutical companies ranging from Pfizer (NYSE:PFE) to AstraZeneca (NYSE:AZN) to Forest Labs (NYSE:FRX) would at least consider the idea, as there are precious few drug companies out there today that couldn't use a virtually competition-free blockbuster product with solid economics. (For more, see Measuring The Medicine Makers.)
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