Human Genome Raising Money

This week, biopharmaceutical company Human Genome Sciences Inc. (HGSI - Analyst Report) announced the commencement of an underwritten public offering of up to 18 million shares of its common stock. The Maryland-based company stated that the underwriters would be given a month’s period to buy up to an additional 2.7 million common shares. While the company should be able to raise funds sufficient to finance operations through this operation, the issuance of shares will lead to considerable dilution in the shareholder base.

The company intends to use the proceeds for general corporate and acquisition or investment purposes. Additionally, this funding arrangement is also expected to provide cash for further development of the pipeline.

As a reminder, Human Genome has a robust and diversified pipeline, which includes drugs to treat hepatitis C, lupus, anthrax disease, cancer, rheumatoid arthritis and HIV/AIDS. The company has recently filed a Biologics License Application (BLA) for ABthrax for the treatment of inhalation anthrax while Zalbin (formerly Albuferon) has completed phase III development, and the filing of global marketing applications is expected in fall 2009.

Additionally, the company has collaborations with pharmaceutical and biotech companies such as Amgen (AMGN - Analyst Report), Genentech (DNA) (now part of Roche [RHHBY]), GlaxoSmithKline PLC (GSK - Analyst Report), etc. who are conducting trials of additional drugs to treat cardiovascular, metabolic and central nervous system diseases.

The recently-announced encouraging results of its lupus drug Benlysta have caused Human Genome's price to soar. However, we would like to see results from another late-stage study for the same indication in November this year, before recommending the shares to investors as it is a high-risk program. Historically, lupus has been found to be difficult to treat. Therefore, we are neutral on Human Genome’s shares.

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