Keywords:Genomics, drug development, value, investment, biotechnology, accounting
Human Genome Science (HGS) aspired to dominate the emergent field of genomics by discovering expressed gene sequences and developing therapeutic and diagnostic products based on proprietary genes. While HGSâ€™ accomplishments fell short of their own lofty expectations, by the time HGS was acquired by GlaxoSmithKline, the company had extensive intellectual property and had launched a product with >$1 billion market potential. Nevertheless, HGSâ€™ acquisition price was less than the total capital investments in the company. This work examines HGSâ€™ history and accomplishments in the context of the business plan described by the company at their IPO. We focus specifically on the companyâ€™s valuation over time, which was highly correlated with general market indices, but negatively correlated with metrics of technical or clinical progress. The history of HGS points to the challenge of accounting for the value created by a science-based business plan. Earnings-based metrics, present value calculations, and â€œfair valueâ€ assessments did not account for HGSâ€™ progress in executing their stated business plan. This work highlights the critical need for accounting practices that credit value to the progress of translational science and enable investors to profit from such investments.
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