Human Genome Sciences Inc. chief executive William A. Haseltine shrugged off a $219.7 million fiscal-year loss yesterday brought on by two one-time charges and heavy spending on drug development. He said the company is in a "strong financial position."
The Rockville biotechnology company, which has no drugs on the market, is pinning its hopes for profitability on commercializing human proteins designed to treat and prevent disease. But during a period when most companies in the sector cut back on drug development and delayed testing on promising compounds, Human Genome Sciences spent $191 million on research and development in 2002. It continues to conduct human tests on eight drug candidates, giving it one of the sector's largest drug pipelines, analysts say.
Haseltine predicted yesterday that operating expenses will continue to rise in 2003 by as much as 10 percent. But analysts warned that the costs are unlikely to be offset by revenue. Human Genome Sciences had revenue of $3.5 million in 2002, most of it from partnership fees, down from $12.8 million a year ago.
But with $1.5 billion on hand as of Dec. 31, Human Genome Sciences remains one of the wealthiest biotechnology companies in the world.
"We have the ability to manage the costs associated with our clinical development program," Haseltine told analysts and investors in a conference call yesterday. Nevertheless, Haseltine said, the company could try to license out or co-develop any of its drug candidates to minimize testing costs in 2003. It may also act to free up some of its $205 million in restricted cash, he said.
For the year ended Dec. 31, the company reported a loss of $219.7 million ($1.71 per share), compared with $117.2 million (92 cents) during the same period a year ago. The losses included two one-time charges: The first, a non-cash charge of $32.2 million, relates to a write-down of equity purchased in 2000 from Cambridge Antibody Technology as part of a collaboration agreement; the second, a cash charge for $14.2 million, is tied to the construction of a manufacturing plant. The company said the expiration of a genetic data consortium, which brought Human Genome Sciences annual fees in 2001, accounted for dwindling revenue for the year.
For the fiscal fourth quarter ended Dec. 31, the company reported a net loss of $59.8 million (46 cents), compared with a loss of $55.2 million (43 cents) during the same period a year ago. Revenue for the quarter, meanwhile, was flat at $642,000.
Much of the company's earning power is tied up in the eight drugs it is shepherding through human tests. Pharmaceutical giant GlaxoSmithKline is co-developing one of them, a protein called repifermin that accelerates skin cell production. But the remaining seven could eventually become cash cows for the company and future partners, analysts say, though it could take years.
"Never in biotech have you had a pipeline that is so early and so large," said Christopher Raymond, an analyst with Robert W. Baird & Co. "Long term, this is a stock you need to have if you are playing in biotechnology, but the problem there is such short-term volatility" because the drugs have not cleared major regulatory hurdles.
Company executives said the $14.2 million charge in the quarter, taken for design modifications to the company's new manufacturing plant, will save shareholders between $75 million and $100 million for the cost of the facility. Haseltine said the company plans to move into its new corporate campus in Montgomery County in the third quarter this year.