When the Food and Drug Administration signed off on the first new treatment for systemic lupus in a half century last March, the approval was celebrated as a win for both long-suffering patients and the drug’s maker.
But adoption of the medicine and the subsequent financial payout has come slower for Human Genome Sciences than some on Wall Street and in the company’s Rockville headquarters predicted.
Chief executive H. Thomas Watkins told investors at a conference last week that net sales for 2011 tallied $52.3 million and that the company has cut 150 jobs, primarily in manufacturing, from its payrolls.
“Probably the most difficult metric to predict when you’re getting ready to launch a product is what you’re going to sell in the first few quarters,” Watkins said in an interview. “I would say we were pleased with the steady build of sales in the first three quarters. Would we have liked to see more? Sure.”
Sales of the drug, known as Benlysta, have gradually increased with each quarter as physicians become more familiar with the product and prescribe it for patients, Watkins said. The company has also ramped up its marketing efforts during that time.
But Wall Street has been less-than-ethusiastic about uptake of the drug and the company’s stock has been trading below $10 a share since early November. Last week’s announcement brought little change.
“I don’t think this is something Wall Street adequately understands,” Watkins said. “[They think], ‘This is like an iPad or an iPhone. If this is a revolutionary technology, patients and physicians will be lined up outside the store.’ It doesn’t quite work out that way.”
William Tanner, an analyst with Lazard Capital Markets, said Benlysta will take longer than some had expected to gain traction in the marketplace, but investor confidence will improve as it does.
“Obviously it’s a very big market but by the same token no one has a very good idea” of the exact size, Tanner said. “There’s a big number of patients but no one knows what the actual utilization is going to be.”
“If you look at the stock, the sales have been wildly disappointing compared to expectations,” Tanner continued. But “everybody has appreciated that the sales are going to be slow and ramping.”
Just how long that ramp will be remains to be seen. Watkins told investors that the company remains committed to reaching profitability by 2014, even as it sheds 100 employees, 25 contractors and 25 unfilled positions.
Watkins said many of those positions will come from the company’s manufacturing department, which saw its ranks swell significantly as Benlysta prepared to hit the market. The company also discontinued a few early-stage research projects, he said.
The full-time staff today stands at approximately 1,200, down from 1,300 at the end of 2011, Watkins said. He remains bullish on Benlysta’s ability to treat other diseases, which HGS and co-developer GlaxoSmithKline are currently exploring in clinical trials.
“In some areas of the company we were a little overstaffed for some of the work we needed to do right now,” Watkins said. “The company is still growing. It’s still adding employees.”