This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

March 25, 2010 - Human Genome Sciences, Inc. (HGSI-NASDAQ) operates as a biopharmaceutical company in the United States. The company's clinical development pipeline includes novel drugs to treat hepatitis C, lupus, inhalation anthrax, and cancer. It focuses on the commercialization of BENLYSTA for systemic lupus erythematosus; ZALBIN for chronic hepatitis C; and raxibacumab for inhalation anthrax.

In addition, the company focuses on the development of the TRAIL receptor antibody HGS-ETR1 and a small-molecule antagonist of IAP (inhibitor of apoptosis) proteins.

Further, Human Genome Sciences Inc., through a strategic collaboration agreement with GlaxoSmithKline, holds substantial financial rights to certain products in the GlaxoSmithKline clinical pipeline, including darapladib that is in Phase III development as a treatment for coronary heart disease and ischemic stroke; and Syncria (albiglutide), which is in Phase III development as a treatment for type 2 diabetes.

Additionally, it has an agreement with Novartis International Pharmaceutical, Ltd. for the co-development and commercialization of ZALBIN; and a strategic licensing and collaboration agreement with Aegera Therapeutics, Inc. to develop and commercialize HGS1029 and other small-molecule inhibitors of IAP (inhibitor of apoptosis) proteins in oncology. Human Genome Sciences Inc. was founded in 1992 and is headquartered in Rockville, Maryland.

Before you read another word, take a look at this: the stock traded at 50 cents a share in early 2009, then took off like a rocket, hitting a 52-week high of $33.13 on March 12. But then this stock was changing hands at $116 in 2000. If you want to get on this ride, you have to buckle up.

The reason for the volatility: the promise, always, of a break through drug that never quite happens. But revenues have increased every year since 2007 when they were $41.9 million, then $48.4 million, followed by a jump to $275 million in 2009. This year analysts see a downturn. Consensus from 11 of them is for $178.83 million. But wait until next year! They see a quantum leap to $508 million or up 184% in one year.

Earnings aren't as solid. This year, the consensus is for a loss of 92 cents a share. Next year, the range is wide: from 86 cents in the black to a negative $1.91. If the stock is given the benefit of the doubt, it may see positive earnings for the first time in its history in 2011. It was only 20 years in the making.

The real story here, as with all biopharmaceutical companies, is the pipeline. HGSI has several strong drug candidates in Phase III trials. If both get FDA approval, those revenue numbers for 2011 will look realistic. Management announced it will file a marketing approval request for Benlysta, its lupus therapy, in the second quarter of this year. It's waiting for a response on Zalbin which it estimates will come in October of this year. Since there have been many, many drugs that were denied approval, even after Phase III data suggested they were efficacious, most investors will wait to see what the FDA has to say before buying HGSI. Aggressive investors may feel comfortable enough now to start a position with the hopes that the two drugs will be approved, but the realistic perspective that one or both may not. If they are both turned down, expect the stock to plummet dramatically.

Both drugs have delivered promising results in their Phase III trials. Analysts feel both will be approved (the revenue jump in 2011 is dependent on it). However, even with approval, and initial marketing, because the development costs for drugs is so high, don't expect huge profits for a while, quite a while. But when and if they come, profits will be big, very big.

Whether one or both drugs will reach the market is nowhere near a certainty, and FDA disapproval will knock the stock down for some time. Even with its large cash position ($719 million), to deveop new drugs or finish the drugs in its pipeline, HGSI will most likely require new financing if approval is not granted for one of the drugs.

More numbers (most numbers are meaningless because there are no profits): Price to sales ratio is 21.81. Price to book ratio is 18.26. Total debt is $592.48 million. Current ratio is 7. Book value is $1.71. Beta is an astonishing 5.71. The stock is up 3565.88% in the last 52 weeks. There are 165.01 million shares outstanding with a Float of 161.39 million. Insiders own .31% while Institutions have 93.70%. There is no dividend.

Aggressive investors will like the danger here. But keep some powder dry if you dare to venture into this stock. Without FDA approval, this one is going down. Even if only one drug is approved, this stock may head lower as it's already pricing in very favorable outcomes for both. Be sure to dig deeper before dipping into this one.

- Company Web site: www.hgsi.com

 Ted Allrich