Something to Show for 15 Years

HGS officials, shown touring the firm's $235 million Gaithersburg manufacturing facility in 2005, are managing a slimmed-down drug pipeline.
HGS officials, shown touring the firm's $235 million Gaithersburg manufacturing facility in 2005, are managing a slimmed-down drug pipeline. (By Ricky Carioti -- The Washington Post)

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By Michael S. Rosenwald
Washington Post Staff Writer
Monday, December 25, 2006

Earlier this month, a man suffering from hepatitis walked into an examination room at a doctor's office in Fairfax so he could be injected with an experimental new drug made by Human Genome Sciences. His doctor, Vinod Rustgi, was in the room. So was a clinical trial coordinator.

For the patient, a man in his late 40s, the moment represented an opportunity to try a drug that he would need just twice a month, rather than once a week -- a significant lifestyle improvement given that hepatitis treatments can cause severe flu-like symptoms for a few days. For the doctor, the director of liver transplantation at Georgetown University, the drug could be an important new approach to treating a potentially deadly disease.

And for Human Genome Sciences, the moment marked the clearing of its biggest hurdle to date: The Rockville company, now nearly 15 years old, has finally entered the last stage of testing for one of its drugs. In a few days, HGS is expected to do it again, starting final testing for a lupus treatment. The company has spent hundreds of millions of investor dollars to get to this moment, with both products offering entree into multibillion-dollar markets. Yet the cruelest cruelty of the drug development business, for patients and companies, is that the drugs still might fail.

"When you are in the very early stages of research, you're sitting around trying to find a new idea you can develop that might have a chance in the future to help patients," said James H. Davis, the biotechnology firm's general counsel and one of the few executives left at the company who were around during its early research days. "Now we are at the point of knowing whether we are helping a patient or not."

The weight of the moment in the examination room was not lost on Rustgi as he watched his patient receive the injection. It is too early to tell how effective the drug will be in large numbers of patients. "There's a lot of stake for the field and for the company in that this a very important project for them," Rustgi said.

HGS has always had high hopes but little to show investors or patients. The firm was founded in 1992 by Harvard scientist William Haseltine, a self-confident genius who hung Renaissance art prints on company walls and was driven to meetings by a chauffeur. By understanding and leveraging the power of the decoded genome, his scientists could make drugs that would go beyond alleviating symptoms. They'd fix the problems.

The idea caught on quickly. The pharmaceutical drug giant now known as Glaxo SmithKline pumped $125 million into the company for the right to access its gene database. HGS went public not long after, raising about $31 million to use discovering genes for use in developing products. With the excitement surrounding the mapping of the human genome in the late 1990s, the stock rocketed to more than $200 a share. Haseltine showed up on the cover of BusinessWeek. The headline: Mr. Green Genes.

And then nothing happened. Dozens of drugs did not come fast and furious, as was expected (rightly or wrongly) by many investors. Over the next few years, two drugs actually made it to advanced human testing. They failed. The company's stock fell. (It closed at $12.69 on Friday.)

Company executives and scientists remained resolute. HGS executives continued spending money, even committing $235 million to build a manufacturing plant when the company did not have any products in the final stage of testing. The plant is now up and running, producing drugs that HGS is testing in humans.

Haseltine constantly reminded investors that it would take 15 years to produce a product. But in early 2004, as pressure mounted on the company, Haseltine resigned. The company, he agreed, should pare down the 12 potential drugs in its pipeline to a handful that it could bring to market quickly. Drugs aimed at hepatitis and lupus were winners in that process. Some treatments for cancer were slowed down for a year or so but are now picking up speed. An HIV treatment is a likely candidate to be licensed for development by another company.

"There is some tiering of the priorities," said H. Thomas Watkins, a longtime drug company executive who replaced Haseltine as chief executive. "Any life sciences company has to do that. You have to be concerned about your near-term prospects and moving those forward rapidly, particularly in a case like ours, when we are pre-commercial. So getting those products to market takes on an even higher importance. But you have to make sure you have sustainability too, with a pipeline, or you aren't going to be here very long."

Watkins's experience in the drug business is in the boardroom, not the lab, and upon taking over HGS he immediately found the pressure from investors and analysts unforgiving. Even in recommending the firm's stock last year, a Bank of America analyst called the company a "perennial underperformer" and its shares' performance "apathetic at best." Watkins was forced to become a change agent, and fast.

One of his earliest and most important hires was Barry A. Labinger, a seasoned drug sales and marketing executive who was given the title of chief commercial officer. Watkins also leaned heavily on David C. Stump, the firm's executive vice president of drug development and a veteran of biotech giant Genentech.

But narrowing the focus on quickly bringing drugs to market seemed to lessen the importance placed on executives with skill sets more attuned to the early, research-driven stages of biotech. That included people like Craig A. Rosen, a well-known microbiologist who co-founded the company with Haseltine. Along with the company's chief financial officer, Rosen spun off a unit of HGS by essentially buying a sizable chunk of its research-and-development capabilities. HGS maintains a financial interest in the new company, called CoGenesys, which has three drugs in its clinical pipeline. "We've evolved from the days of great research led by Craig to great drug development led by David Stump and great commercial development led by Barry Labinger," said Davis, who joined HGS in 1997. "It's not a difficult transition, but it's a significant transition."

HGS is also doing clinical trials to wrap up development of an anthrax treatment for the federal government's stockpile. But the biggest market opportunities are for the lupus and hepatitis drugs. Now the company's executives will have to wait a couple of years to see if their biggest bets to date actually pan out. The company is going from zero drugs in the final stage of development to two -- at the same time.

"I don't think anybody envisioned it being this close together," Davis said. "It doubles the excitement and doubles the odds of our success."


© 2006 The Washington Post Company

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