Novartis takes $590M hit as HGS ditches hep C drug Zalbin

Human Genome Sciences and its partner Novartis took one look at the FDA's complete response letter for the hepatitis C treatment Zalbin and just walked away, shelving any further plans for the disappointing program.

Zalbin--albinterferon alfa-2b--was once the subject of intense speculation. The long-acting therapy, intended to be dosed once every two weeks, was styled as a big advance for the hepatitis C field. But the agency signaled earlier this year that the dosing program was unlikely to be approved, and both companies were ready to pull the plug on the drug once the CRL letter arrived. Novartis is reserving $590 million to close out two development programs, including Zalbin. No one discussed any of the details in the letter.

Novartis says that new mid-stage data on Zalbin helped persuade the company to take a $230 million hit on Zalbin. Another $360 million charge will be taken to stop work on Mycograb, an antifungal agent.

Last fall HGS CEO Tom Watkins told me that the company still stood to reap hundreds of millions of dollars from the Novartis deal. None of today's events, though, took anyone by surprise--least of all HGS investors who are completely focused on Benlysta, HGS's surprising new lupus drug. HGS shares slid a little more than one percent this morning as all concerned shrugged off the news.

"Zalbin is dead," declared analyst Avik Roy in a statement put out this morning. "Long live Benlysta." He raised HGSI's target price to $41, as he and others remained bullish on the new drug for lupus. A decision on Benlysta is scheduled for December, and with analysts like Roy pegging its projected price at $30,000 a year, the potential upside is huge.

- check out the Human Genome Sciences release
- see the Bloomberg report
- and here's the Dow Jones report