By Debbie Strickland

Associate

One of the most well-capitalized companies in biotech is positioning itself to go back to the well in the future for as much as $1 billion. Human Genome Sciences Inc. filed a universal shelf registration with the SEC covering a range of financing vehicles, including convertible debt, preferred and common stock, and warrants to buy common stock.

"Once it becomes effective, this will give us great flexibility," said Steve Mayer, senior vice president and chief financial officer for the Rockville, Md., company. "We can take advantage of market opportunities as they emerge."

The shelf registration allows the company to complete financings in varying amounts quickly, without the lag time of putting together a filing and waiting for the SEC to declare it effective, a process that can take weeks.

As to how much the company might raise, and when, Mayer said that "it's all going to depend on market conditions. We raised quite a bit of money in the convertibles market, and we've converted a little less than half to equity already."

HGS seized the opportunity created by the recent biotech boom to conduct four convertible debt financings between June 1999 and March 2000 that raised $850 million at successively higher per-share conversion prices:

¿ A $125 million offering in June and July 1999, with a conversion rate of $52.20 per share (later adjusted to $26.10 to reflect a 2-for-1 stock split);

¿A $200 million offering in December 1999, at a conversion rate of $143.25 per share (also adjusted, to $71.625, to reflect the split);

¿A $225 million offering in February 2000, with a conversion rate of $112.50;

¿And a $300 million offering in March 2000, with a conversion rate of $219.

The company, which as of June 30 had $853 million in cash and short-term investments, paid investors in the first two offerings cash premiums to go ahead and convert earlier this year.

HGS' long-term goal has been to become a full-fledged pharmaceutical company, and that's an expensive quest. The company initiated its first clinical trial in late 1997, and has thus far taken four products into the clinic:

¿Repifermin (keratinocyte growth factor-2), for venous ulcers, cancer treatment-related mucositis and ulcerative colitis;

¿Mirostipen (myeloid progenitor inhibitory factor), for protection of hematopoietic stem cells from cancer chemotherapy;

¿B-lymphocyte stimulator, for common variable immunodeficiency;

¿And vascular endothelial growth factor-2 (VEGF-2), for refractory myocardial ischemia and critical limb ischemia (licensed to Vascular Genetics Inc.).

The firm's "very full preclinical pipeline" means more products will enter human testing, said Mayer, though just how many will cross that threshold in the near term is unclear.

"We've also entered relationships with Cambridge Antibody Technology, Dyax and Abgenix," Mayer noted, "and we hope to be putting some antibodies into the clinic soon."

Those three collaborations were launched in a span of eight months; the most recent, with Dyax, began in March. All center on generating drugs with activity against HGS targets. The CAT and Abgenix deals will provide fully human monoclonal antibodies, and Dyax's technology will generate peptides and antibody candidates. The CAT and Dyax deals also have a diagnostic development component.

Another round of aggressive partnering may begin next July with the expiration of SmithKline Beecham plc's exclusivity period for access to HGS' genomics database. The $125 million deal with the London-based big pharma company covers most areas of human and animal therapeutics and was a landmark when it was initiated in 1993. It was amended in 1996 to allow the companies to bring a few other large pharmaceutical companies into the fold.

"We can enter into a whole range of relationships," said Mayer, when the SmithKline Beecham agreement expires.

Mayer also suggested acquisitions, either of products or companies, are a possibility. "The shelf gives us greater flexibility should we want to facilitate any acquisitions, because having access to that additional financing will enable us to continue to invest in that new company or entity, or will provide resources we might need to integrate the acquisition into our current operations."

HGS shares (NASDAQ:HGSI) closed Thursday at $163.937, up $7.56, or 4.8 percent.

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