##### 



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
    Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2006
  Commission File Number 0-22962
  HUMAN GENOME SCIENCES,
    INC.
 (Exact name of
    registrant)
  Delaware

22-3178468(State of
    organization)

(I.R.S. employer
    identification number)   14200 Shady Grove Road, Rockville, Maryland
    20850-7464 (address of principal
    executive offices and zip code)
  (301) 309-8504
    (Registrants telephone number)
  Securities registered pursuant to Section 12(b) of the
    Act:
 Common stock, par value $0.01 per share
 Preferred Stock Purchase Rights
  Securities registered pursuant to Section 12(g) of the
    Act:
    NONE
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
    *
    Excludes 38,669,467 shares of common stock deemed to be
    held by officers and directors and stockholders whose ownership
    exceeds five percent of the shares outstanding at June 30,
    2006. Exclusion of shares held by any person should not be
    construed to indicate that such person possesses the power,
    direct or indirect, to direct or cause the direction of the
    management or policies of the registrant, or that such person is
    controlled by or under common control with the registrant.




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##### 



PART I
  ITEM 1.
    BUSINESS  This annual report on
    Form 10-K
    contains forward-looking statements, within the meaning of the
    Securities Exchange Act of 1934 and the Securities Act of 1933,
    that involve risks and uncertainties. In some cases,
    forward-looking statements are identified by words such as
    believe, anticipate, expect,
    intend, plan, will,
    may and similar expressions. You should not place
    undue reliance on these forward-looking statements, which speak
    only as of the date of this report. All of these forward-looking
    statements are based on information available to us at this
    time, and we assume no obligation to update any of these
    statements. Actual results could differ from those projected in
    these forward-looking statements as a result of many factors,
    including those identified in the section titled Factors
    That May Affect Our Business, Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations and elsewhere. We urge you to review and
    consider the various disclosures made by us in this report, and
    those detailed from time to time in our filings with the
    Securities and Exchange Commission, that attempt to advise you
    of the risks and factors that may affect our future results.
  Overview
  ® ® tm
      
    A drug development organization with the expertise necessary to
    design and implement well-focused, high-quality clinical trials
    of multiple compounds;
    Manufacturing capability for the production of protein and
    antibody drugs for preclinical studies, clinical trials and the
    commercialization of our products;
    A scientific and discovery base, including expertise in novel
    protein and antibody drugs;
    Protein formulation technology, including the albumin fusion
    technology we use to create long-acting protein drugs;
    A significant patent estate;
    A skilled and experienced management team and board of directors;
    Employees who are creative, well-trained, hard-working and
    capable; and
    A strong cash position.     1




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##### 



20850-7464. (301) 309-8504. Form 10-K.
  Strategy
    
    Concentrate on novel human antibody drugs and long-acting
    versions of existing protein drugs.  We currently
    concentrate our internal product development efforts on new
    antibody drugs discovered through genomics-based research, and
    on new long-acting versions of existing protein drugs created
    using our albumin fusion technology. Human monoclonal antibody
    drugs derived from our gene discoveries account for the majority
    of our current product pipeline. We rely on collaborations for
    the development of other products discovered using our
    genomics-based technology, including additional protein and
    antibody drugs, gene therapy products, small molecule drugs and
    diagnostic products.
    Develop, manufacture and commercialize our products both on
    our own and in collaboration with strategic
    partners.  We select a limited number of products
    to develop, manufacture and market either by ourselves or with
    partners. We also license certain products to strategic partners
    in exchange for up-front payments, product milestone payments,
    royalties on sales, and other rights.
    Pursue strategic acquisitions.  We may pursue
    strategic acquisitions to augment our capabilities, to provide
    access to complementary technologies and to expand our portfolio
    of new drug candidates.
    Expand our technology platform to accelerate our product
    development activities.  We may continue to invest
    resources to expand and enhance our technology platform. We also
    may establish additional collaborations with leading
    biotechnology or pharmaceutical companies to gain access to
    complementary technologies for our product development efforts.
    Capitalize on our intellectual property
    portfolio.  We pursue patents to protect our
    intellectual property and have developed a significant
    intellectual property portfolio. We intend to capitalize on our
    portfolio. As of February 1, 2007, we had 560 issued
    U.S. patents covering genes, proteins and antibodies, and
    had filed U.S. patent applications covering many more human
    genes, the proteins they encode, antibodies and proprietary
    technologies.  Products
    ® ® tm
  ® peptide-1 (GLP-1),
 2




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##### 



Clinical
    Programs
    Lead
    Products
    Albuferon®
    (albinterferon alfa 2b)
    24-week
  difficult-to-treat
   3




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##### 



follow-up. follow-up.
    LymphoStat-B®
    (belimumab)
  ®
  52-week 52-week
  24-week 76-week 24-week
     4




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##### 



ABthrax tm (raxibacumab)
  Bacillus anthracis
        Earlier-Stage
    Pipeline Products
  TRAIL
    Receptor 1 Antibody
      TRAIL
    Receptor 2 Antibodies
   5




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##### 



CCR5
    Receptor Antibodies
    in vitro in vitro
  Products
    in GSK Pipeline
  ®
  Darapladib
    (GSK480848)
    Relacatib
    (GSK462795)
    GSK649868
    GSK626616
   6




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##### 



GSK716155
    (albumin-glucagon-like peptide 1)
  peptide-1 (GLP-1). GLP-1 GLP-1 GLP-1,
  Research
    and Development
    Gene,
    Protein and Human Antibody Technology
      Albumin
    Fusion Technology
  peptide-1 (GLP-1).
  Drug
    Development
   7




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##### 




    Clinical Research.  The clinical research group
    is responsible for the design, planning and analysis of clinical
    trials, and matches novel biological molecules emerging from our
    protein and antibody discovery programs to unmet medical needs.
    Clinical Operations.  The clinical operations
    group executes clinical trials and is responsible for managing
    clinical trial sites and ensuring that all proper procedures are
    followed during the collection of clinical data. The group
    includes our data management team.
    Project Management.  Our project management
    team oversees the process of development of a drug from the
    earliest stages of research through the conduct of clinical
    development and regulatory filings.
    Regulatory Affairs.  The regulatory affairs
    group manages communications with and submissions to regulatory
    authorities.
    Drug Safety.  As our products advance in
    clinical testing, our medical affairs group collects and
    analyzes information on drug experience and safety, and ensures
    that accurate medical information is distributed.
    Quality Assurance.  The quality assurance group
    ensures compliance with all regulatory requirements for the
    clinical development and manufacture of new products.
    Bioanalytical Sciences.  The bioanalytical
    sciences group develops and performs highly specialized assays
    that are used during monitoring of preclinical tests and
    clinical trials. Other assays help to ensure the quality and
    consistency of our products.
    Manufacturing.  We have manufacturing
    capability for the production of protein and antibody drugs for
    our clinical trials, as well as for preclinical studies. We have
    expanded our manufacturing facilities as our development
    pipeline has progressed to allow us to produce larger quantities
    of protein and antibody drugs for clinical development. We have
    completed the construction and validation of a large-scale
    manufacturing facility to support our increasing needs for
    protein and antibody drug production capacity related to the
    continuing progress of our product candidates and, eventually,
    the commercialization of our products.  Collaborative
    Arrangements
  Human
    Gene Therapeutic Consortium, Product Collaborations Technology Collaborations.
  Human
    Gene Therapeutic Consortium
    GlaxoSmithKline.
 8




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##### 



Takeda.
  Product
    Collaborations
    Novartis.
  GlaxoSmithKline.
 9




---



##### 



peptide-1 (GLP-1),
  Kirin.
  CoGenesys.
  diaDexus. tm
  Amgen.
  Genentech.
 10




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##### 



Technology
    Collaborations
  Antibodies
    and Peptides
  Abgenix.
  Cambridge Antibody Technology (CAT).
  Dyax. in vitro
  Medarex.
  Other
  Transgene.
  Patents
    and Proprietary Rights
   11




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##### 



12




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##### 



Competition
  General.
  Basis of Competition.
  
    the quality and breadth of an organizations technology;
    the skill of an organizations employees and its ability to
    recruit and retain skilled employees;
    an organizations intellectual property estate;
    the range of capabilities, from target identification and
    validation to drug discovery and development to manufacturing
    and marketing; and
    the availability of substantial capital resources to fund
    discovery, development and commercialization activities.    Products.
  Government
    Regulation
    Preclinical Testing.
 13




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##### 



Clinical Testing.
  
    Phase 1 clinical trials are conducted with a small number
    of subjects to determine the early safety profile and the
    pattern of drug distribution and metabolism.
    Phase 2 clinical trials are conducted with groups of
    patients afflicted with a specified disease in order to provide
    enough data to evaluate preliminary efficacy and optimal dosages
    statistically and to expand evidence of safety.
    Phase 3 clinical trials are large-scale, multi-center,
    comparative trials, which are designed to gather additional
    information for proper dosage and labeling of the drug and to
    demonstrate its overall safety and efficacy.    Marketing Approvals.
    Other Regulation.
    Foreign Regulation.
  Possible Pricing Restrictions.
 14




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##### 



Sources
    of Supply
    Manufacturing
    291,000-square-foot
    Marketing
    Employees
   15




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##### 



ITEM 1A.
    RISK
    FACTORS  There are a number of risk factors that could cause our
    actual results to differ materially from those that are
    indicated by forward-looking statements. Those factors include,
    without limitation, those listed below and elsewhere herein.
  If we are unable to commercialize products, we may not be
    able to recover our investment in our product development and
    manufacturing efforts.
    Because our product development efforts depend on new and
    rapidly-evolving technologies, we cannot be certain that our
    efforts will be successful.
    
    these technologies or any or all of the products based on these
    technologies will be ineffective or toxic, or otherwise fail to
    receive necessary regulatory clearances;
    the products, even if safe and effective, will be difficult to
    manufacture on a large scale or uneconomical to market;
    proprietary rights of third parties will prevent us or our
    collaborators from exploiting technologies or marketing
    products; and
    third parties will market superior or equivalent products.  Because we are just becoming a late-stage development
    company, we cannot be certain that we can develop our business
    or achieve profitability.
    We are continually evaluating our business strategy, and may
    modify this strategy in light of developments in our business
    and other factors.
   16




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##### 



PRODUCT
    DEVELOPMENT RISKS
  Because we have limited experience in developing and
    commercializing products, we may be unsuccessful in our efforts
    to do so.
    
    develop products internally;
    complete laboratory testing and human studies;
    obtain and maintain necessary intellectual property rights to
    our products;
    obtain and maintain necessary regulatory approvals related to
    the efficacy and safety of our products;
    develop, expand and maintain production facilities meeting all
    regulatory requirements or enter into arrangements with third
    parties to manufacture our products on our behalf; and
    deploy sales and marketing resources effectively or enter into
    arrangements with third parties to provide these functions.    Because clinical trials for our products are expensive and
    protracted and their outcome is uncertain, we must invest
    substantial amounts of time and money that may not yield viable
    products.
     17




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##### 




    our inability to manufacture sufficient quantities of materials
    for use in clinical trials;
    variability in the number and types of patients available for
    each study;
    difficulty in maintaining contact with patients after treatment,
    resulting in incomplete data;
    unforeseen safety issues or side effects;
    poor or unanticipated effectiveness of products during the
    clinical trials; or
    government or regulatory delays.  131
  and/or
  We face risks in connection with our ABthrax product in
    addition to risks generally associated with drug development.
  in vitro in
    vivo
 18




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##### 



Because neither we nor any of our collaboration partners have
    received marketing approval for any product candidate resulting
    from our research and development efforts, and because we may
    never be able to obtain any such approval, it is possible that
    we may not be able to generate any product revenue.
    RISK FROM
    COLLABORATION RELATIONSHIPS AND STRATEGIC ACQUISITIONS
  Our plan to use collaborations to leverage our capabilities
    and to grow in part through the strategic acquisition of other
    companies and technologies may not be successful if we are
    unable to integrate our partners capabilities or the
    acquired companies with our operations or if our partners
    capabilities do not meet our expectations.
  day-to-day
  Although GSK has agreed to be our partner in the development
    and commercialization of HGS-ETR1, we may be unable to negotiate
    an appropriate co-development and co-marketing agreement.
   19




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##### 



Our ability to receive revenues from the assets licensed in
    connection with our CoGenesys transaction will depend on
    CoGenesys ability to develop and commercialize those
    assets.
    Because we depend on our collaboration partners for revenue,
    we may not become profitable if we cannot increase the revenue
    from our collaboration partners or other sources.
        
    develop marketable products;
    obtain regulatory approvals for products; or
    successfully market products.    If one of our collaborators pursues a product that competes
    with our products, there could be a conflict of interest and we
    may not receive the milestone or royalty payments that we
    expect.
    Reimbursement payments from our collaborators to fund our
    late-phase clinical trials will pay for approximately half of
    our late-phase clinical trial expenses and our ability to
    develop and commercialize products may be impaired if payments
    from our collaborators are delayed.
   20




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##### 



FINANCIAL
    AND MARKET RISKS
  Because of our substantial indebtedness, we may be unable to
    adjust our strategy to meet changing conditions in the
    future.
    
    payments of interest on, and principal of, our indebtedness will
    be substantial, and may exceed then current revenues and
    available cash;
    we may be unable to obtain additional future financing for
    continued clinical trials, capital expenditures, acquisitions or
    general corporate purposes;
    we may be unable to withstand changing competitive pressures,
    economic conditions and governmental regulations; and
    we may be unable to make acquisitions or otherwise take
    advantage of significant business opportunities that may arise.  To pursue our current business strategy and continue
    developing our products, we may need additional funding in the
    future. If we do not obtain this funding on acceptable terms, we
    may not be able to continue to grow our business and generate
    enough revenue to recover our investment in our product
    development effort.
      
    the amount of revenue or cost sharing, if any, that we are able
    to obtain from our collaborations, any approved products, and
    the time and costs required to achieve those revenues;
    the timing, scope and results of preclinical studies and
    clinical trials;
    the size and complexity of our development programs;
    the time and costs involved in obtaining regulatory approvals;
    the costs of launching our products;
    the costs of commercializing our products, including marketing,
    promotional and sales costs;
    our ability to establish and maintain collaboration partnerships;
    competing technological and market developments;
    the costs involved in filing, prosecuting and enforcing patent
    claims; and
    scientific progress in our research and development programs.    
    delay, scale back or eliminate some or all of our research and
    development programs;
    delay, scale back or eliminate some or all of our
    commercialization activities;
    lose rights under existing licenses; 21




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##### 




    relinquish more of, or all of, our rights to product candidates
    on less favorable terms than we would otherwise seek; and
    be unable to operate as a going concern.  Some of our operating leases contain financial covenants,
    which may require us to accelerate payment under those
    agreements or increase the amount of our security deposits.
    Our insurance policies are expensive and protect us only from
    some business risks, which will leave us exposed to significant,
    uninsured liabilities.
    INTELLECTUAL
    PROPERTY RISKS
  If patent laws or the interpretation of patent laws change,
    our competitors may be able to develop and commercialize our
    discoveries.
    If our patent applications do not result in issued patents,
    our competitors may obtain rights to and commercialize the
    discoveries we attempted to patent.
   22




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##### 



If others file patent applications or obtain patents similar
    to ours, then the Patent and Trademark Office may deny our
    patent applications, or others may restrict the use of our
    discoveries.
    Because issued patents may not fully protect our discoveries,
    our competitors may be able to commercialize products similar to
    those covered by our issued patents.
    We rely on our collaboration partners to seek patent
    protection for the products they develop based on our
    research.
    If we are unable to protect our trade secrets, others may be
    able to use our secrets to compete more effectively.
   23




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##### 



REGULATORY
    RISKS
  Because we are subject to extensive changing government
    regulatory requirements, we may be unable to obtain government
    approval of our products in a timely manner.
    Marketing Approvals.
    Foreign Regulation.
  Because we are subject to environmental, health and safety
    laws, we may be unable to conduct our business in the most
    advantageous manner.
    OTHER
    RISKS RELATED TO OUR BUSINESS
  Many of our competitors have substantially greater
    capabilities and resources and may be able to develop and
    commercialize products before we do.
   24




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##### 




    the quality and breadth of an organizations technology;
    the skill of an organizations employees and its ability to
    recruit and retain skilled employees;
    an organizations intellectual property portfolio;
    the range of capabilities, from target identification and
    validation to drug discovery and development to manufacturing
    and marketing; and
    the availability of substantial capital resources to fund
    discovery, development and commercialization activities.      If we lose or are unable to attract key management or other
    personnel, we may experience delays in product development.
  .
  If the health care system or reimbursement policies change,
    the prices of our potential products may be lower than expected
    and our potential sales may decline.
   25




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##### 



We may be unable to successfully establish a manufacturing
    capability and may be unable to obtain required quantities of
    our products economically.
      Because we currently have only a limited marketing
    capability, we may be unable to sell any of our products
    effectively.
    Because we depend on third parties to conduct some of our
    laboratory testing and human studies, we may encounter delays in
    or lose some control over our efforts to develop products.
    Our certificate of incorporation, bylaws and stockholder
    rights plan could discourage acquisition proposals, delay a
    change in control or prevent transactions that are in your best
    interests.
    
    authorize the issuance of up to 20,000,000 shares of
    blank check preferred stock that could be issued by
    our board of directors to increase the number of outstanding
    shares and discourage a takeover attempt;
    classify the directors of our board with staggered, three-year
    terms, which may lengthen the time required to gain control of
    our board of directors; 26




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##### 




    limit who may call special meetings of stockholders; and
    establish advance notice requirements for nomination of
    candidates for election to the board of directors or for
    proposing matters that can be acted upon by stockholders at
    stockholder meetings.  Because our stock price has been and will likely continue to
    be volatile, the market price of our common stock may be lower
    or more volatile than you expected.
    
    future announcements about our company or our competitors,
    including the results of testing, technological innovations or
    new commercial products;
    negative regulatory actions with respect to our potential
    products or regulatory approvals with respect to our
    competitors products;
    changes in government regulations;
    developments in our relationships with our collaboration
    partners;
    developments affecting our collaboration partners;
    announcements relating to health care reform and reimbursement
    levels for new drugs;
    our failure to acquire or maintain proprietary rights to the
    gene sequences we discover or the products we develop;
    litigation; and
    public concern as to the safety of our products.   27




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##### 



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    291,000-square-foot
    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   28




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##### 



PART II
  ITEM 5.  MARKET
    FOR REGISTRANTS COMMON EQUITY AND RELATED
    STOCKHOLDERS MATTERS
    High


Low2005First Quarter

$
12.95


$
9.08Second Quarter

$
11.58


$
9.12Third Quarter

$
15.08


$
11.68Fourth Quarter

$
14.06


$
7.752006First Quarter

$
13.80


$
8.46Second Quarter

$
11.90


$
9.80Third Quarter

$
11.97


$
9.40Fourth Quarter

$
13.83


$
11.90       
 29




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##### 



ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA    Years Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share and ratio data)Statement of Operations
    Data:Revenue  research and
    development contracts

$
25,755


$
19,113


$
3,831


$
8,168


$
3,568Costs and expenses:Research and development:Direct expenditures


209,242



228,717



219,549



191,483



191,162Charge for construction design
    changes


















14,238Total research and development


209,242



228,717



219,549



191,483



205,400General and administrative


53,101



42,066



35,728



43,608



44,175Lease termination and
    restructuring charges


29,510







15,408







Total costs and expenses


291,853



270,783



270,685



235,091



249,575Income (loss) from operations


(266,098
)


(251,670
)


(266,854
)


(226,923
)


(246,007
)Net investment income


166



12,133



21,267



40,508



58,449Gain on sale of equity investments


14,759



1,302



256



1,091



Gain (loss) on extinguishment of
    debt






(1,204
)


2,433







Charge for impaired investment


















(32,158
)Income (loss) before taxes


(251,173
)


(239,439
)


(242,898
)


(185,324
)


(219,716
)Provision for income taxes


















Net income (loss)

$
(251,173
)

$
(239,439
)

$
(242,898
)

$
(185,324
)

$
(219,716
)Net income (loss) per share, basic
    and
    diluted(1)

$
(1.91
)

$
(1.83
)

$
(1.87
)

$
(1.44
)

$
(1.71
)Other Data:Ratio of earnings to fixed charges


















Coverage
    deficiency(1)

$
(251,173
)

$
(239,439
)

$
(242,898
)

$
(185,324
)

$
(219,716
)  30




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##### 



ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA, CONTINUED  As of December 31,2006


2005


2004


2003


2002(In thousands, except per share and ratio data)Balance Sheet Data:Cash, cash equivalents, short-term
    investments, marketable securities and restricted
    investments(2)

$
763,084


$
646,220


$
952,686


$
1,262,458


$
1,491,740Total
    assets(3)


1,149,668



997,046



1,249,385



1,466,204



1,662,187Total debt and capital lease, less
    current
    portion(3)


751,526



510,000



505,131



503,664



503,281Accumulated deficit


(1,620,381
)


(1,369,208
)


(1,129,769
)


(886,871
)


(701,547
)Total stockholders equity


213,923



416,966



656,047



903,333



1,100,553     (1)
    
    For 2006, amounts include charges for lease termination and
    restructuring of $29,510, or $0.23 per share, that is
    partially offset by a gain on sale of equity investment of
    $14,759 or $0.12 per share. For 2005, amounts include a
    loss on extinguishment of debt of $1,204, or less than
    $0.01 per share. For 2004, amounts include a net charge of
    $12,975, or $0.10 per share, arising from a charge for
    restructuring of $15,408, or $0.12 per share, that is
    partially offset by a gain on extinguishment of debt of $2,433,
    or $0.02 per share. For 2002, amounts include charges
    aggregating $46,396, or $0.36 per share, arising from a
    charge for an impaired investment and a charge for construction
    design changes of $32,158, or $0.25 per share, and $14,238,
    or $0.11 per share, respectively.(2)
    
    Cash, cash equivalents, short-term investments, marketable
    securities and restricted investments for 2006, 2005,
    2004, 2003 and 2002 includes $61,165, $220,171, $215,236,
    $280,776 and $205,352 respectively, of restricted investments
    relating to certain leases.(3)
    
    Total assets for 2006, 2005, 2004, 2003 and 2002
    includes $61,165, $220,171, $215,236, $280,776 and $205,352
    respectively, of restricted investments relating to certain
    leases. Total debt and capital lease, less current
    portion for 2006, 2005, 2004, 2003 and 2002 does not
    include any operating lease obligations under various facility
    and equipment lease arrangements. See Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Liquidity and Capital Resources for
    additional discussion. 31




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##### 



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview
            
  in vitro in
    vivo
 32




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##### 



Overview
    (continued)
          Accounting for Stock Issued to Employees Accounting for
    Stock-Based Compensation Share-Based
    Payment
  Critical
    Accounting Policies and the Use of Estimates
   33




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##### 



Critical
    Accounting Policies and the Use of Estimates
    (continued)
    Investments. Accounting for Certain
    Investments in Debt and Equity Securities. other-than-temporary available-for-sale. available-for-sale held-to-maturity
  Leases. 20-year
  Accounting For Leases: Sale-Leaseback Transactions Involving
    Real Estate.
  Impairments of long-lived assets.
 34




---



##### 



Critical
    Accounting Policies and the Use of Estimates
    (continued)
    Revenue. Revenue Recognition
    in Financial Statements Revenue Recognition 00-21 00-21), Revenue Arrangements with Multiple Deliverables 00-21
    Research and Development.
  Stock Compensation.
 35




---



##### 



Critical
    Accounting Policies and the Use of Estimates
    (continued)
        No. 96-18, Accounting for Equity Instruments that are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods, or Services.
    Use of Estimates.
 36




---



##### 



Results
    of Operations
  Years
    Ended December 31, 2006 and 2005
  Revenues.
    Expenses.
      HGS-ETR1
     37




---



##### 



Results
    of Operations (continued)
   Years Ended December 31, 2006 and 2005 (continued)
    project-by-project
             38




---



##### 



Results
    of Operations (continued)
   Years Ended December 31, 2006 and 2005 (continued)
      1 4 3 4
  Net Income (Loss).
    Years
    Ended December 31, 2005 and 2004
  Revenues.
  Expenses.
     39




---



##### 



Results
    of Operations (continued)
   Years Ended December 31, 2005 and 2004 (continued)
    LymphoStat-B
    project-by-project
          1 4 3 4
 40




---



##### 



Results
    of Operations (continued)
   Years Ended December 31, 2005 and 2004 (continued)
     Net Income (Loss).
  Liquidity
    and Capital Resources
    available-for-sale.
     41




---



##### 



Liquidity
    and Capital Resources (continued)
     Clinical Trial Status as of
    December 31,(2)Product
    Candidate(1)

Indication

2006

2005

2004ACTIVE CANDIDATES:Albumin Fusion
    Proteins:Albuferon

Hepatitis C

Phase 3

Phase 2

Phase 2Antibodies:LymphoStat-B

Systemic Lupus
      Erythematosus

Phase 2(3)

Phase 2

Phase 2LymphoStat-B

Rheumatoid Arthritis

Phase 2(4)

Phase 2

Phase 2HGS-ETR1

Cancer

Phase 2

Phase 2

Phase 2HGS-ETR2

Cancer

Phase 1

Phase 1

Phase 1HGS-TR2J

Cancer

Phase 1(5)

Phase 1

Phase 1CCR5 mAb

HIV

(6)

Phase 1

ABthrax

Anthrax

(7)

(7)

(7)INACTIVE CANDIDATES:Therapeutic proteins:BlyS

Immunodeficiency

(8)

(8)

(8)Mirostipen

Cancer

(8)

(8)

(8)Repifermin

Mucositis

(8)

(8)

(8)Repifermin

Wound Healing

(8)

(8)

(8)Albumin Fusion
    Proteins:Albuleukin

Cancer

(8)

(8)

(8)Other:LymphoRad131

Cancer

(9)

(9)

Phase 1     (1)
    
    Includes only those candidates for which an Investigational New
    Drug (IND) application has been filed with the FDA.(2)
    
    Clinical Trial Status defined as when patients are being dosed.(3)
    
    Initial Phase 2 trial completed; Phase 3 enrollment
    initiated in 2006; patient dosing began in February 2007.(4)
    
    Initial Phase 2 trial completed; extension safety study
    ongoing.(5)
    
    Clinical development suspended in 2006.(6)
    
    Initial Phase 1 trial completed, further development under
    review.(7)
    
    U.S. Government has executed the second phase of the
    contract in 2006, placing an order for 20,001 doses of ABthrax.
    In addition, clinical development and manufacturing activities
    are underway. As of December 31, 2005, only the first phase
    of the contract (comparative testing) had been executed.(8)
    
    Clinical development discontinued in 2004 or prior.(9)
    
    Clinical development discontinued in 2005.   42




---



##### 



Liquidity
    and Capital Resources (continued)
                43




---



##### 



Liquidity
    and Capital Resources (continued)
       Payments Due by PeriodOne Year


Two to


Four to


AfterTotal


or Less


Three Years


Five Years


Five Years(dollars in millions)Contractual
    ObligationsLong-term debt 
    convertible
    notes(1)

$
572.6


$
11.5


$
23.0


$
303.0


$
235.2Long term debt 
    BioMed(2)


541.8



23.1



47.6



49.5



421.5Capital lease obligation


0.6



0.2



0.4







Operating
    leases(3)


482.8



30.6



56.7



46.6



348.9Unconditional purchase
    obligations(4)


1.6



1.6











Other long-term liabilities
    reflected on our balance
    sheets(5)


















Total contractual cash
    obligations(6)

$
1,599.4


$
67.0


$
127.7


$
399.1


$
1,005.6     (1)
    
    Contractual interest obligations related to our convertible
    subordinated notes included above total $62.7 million as of
    December 31, 2006. Contractual interest obligations of
    $11.5 million, $23.0 million, $23.0 million and
    $5.2 million are due in one year or less, two to three
    years, four to five years and after five years, respectively.(2)
    
    Contractual interest obligations related to BioMed are included
    above and aggregate $488.7 million as of December 31,
    2006. Contractual interest obligations of $23.1 million,
    $47.6 million, $49.5 million and $368.5 million
    are due in one year or less, two to three years, four to five
    years and after five years, respectively.(3)
    
    Includes Traville headquarters operating lease with BioMed with
    aggregate payments of $394.9 million. Lease payments of
    $16.9 million, $34.7 million, $36.1 million, and
    $307.2 million are due in one year or less, two to three
    years, four to five years and after five years, respectively.
    The operating lease obligations shown above are the gross
    amounts, not considering sublease income. Contractual sublease
    income of $1.7 million, $2.9 million,
    $2.5 million and $1.3 million is due in one year or
    less, two to three years, four to five years and after five
    years, respectively. Certain of our operating leases contain
    financial covenants with respect to minimum levels of
    unrestricted cash, cash equivalents and marketable securities
    and minimum levels of net worth. We believe we may not be able
    to meet the minimum net worth covenants during 2007. In the
    event we are unable to obtain a waiver for this covenant from
    our lessors, we may be required to accelerate the payment for
    certain equipment leases, including any end of lease term
    purchase obligations, at an aggregate cost of up to
    $19.5 million. In addition, with respect to one facility
    lease, we may be required to increase the amount of our security
    deposit by approximately $1.5 million.(4)
    
    Our unconditional purchase obligations relate to commitments for
    capital expenditures. 44




---



##### 



Liquidity
    and Capital Resources (continued)
   (5)
    
    In the event we reach certain development milestones for
    Albuferon, LymphoStat-B and ABthrax, such as successful
    completion of Phase 3 trials or regulatory approval, we
    would be obligated to make payments of up to $13.0 million
    over the next five years. Our other products are in either
    Phase 1 or Phase 2 and would also obligate us to make
    certain milestone payments should they reach Phase 3 or
    regulatory approval. These other payments could result in
    aggregate milestone payments of $21.0 million. Because we
    cannot forecast with any degree of certainty whether any of our
    products will reach these milestones, we have excluded these
    amounts and any royalty payments from the above table.(6)
    
    For additional discussion of our debt obligations and lease
    commitments, see Note I, Long-Term Debt and Note J,
    Commitments and Other Matters, of the Notes to the Consolidated
    Financial Statements.      Off-Balance
    Sheet Arrangements
         45




---



##### 



Safe
    Harbor Statement under the Private Securities Litigation Reform
    Act of 1995
   46




---



##### 



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   47




---



##### 



ITEM 9.
    CHANGES
    AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Form 10-K
  Changes
    in Internal Control
    Management
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f) 15d-15(f)
  
    pertain to the management of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the Company;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Companys assets that could have a material effect on the
    financial statements.     48




---



##### 



ITEM 9A.
    CONTROLS
    AND PROCEDURES (continued)  
 Management
    Report on Internal Control over Financial Reporting
    (continued)
       ITEM 9B.
    OTHER
    INFORMATION   49




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON INTERNAL CONTROL OVER FINANCIAL REPORTING
                      50




---



##### 



PART III
  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   51




---



##### 



PART IV
  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES      PageNumberReport of Ernst & Young
    LLP, Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets at
    December 31, 2006 and 2005


F-3Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004


F-4Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2006, 2005 and 2004


F-5Consolidated Statements of Cash
    Flows for the years ended December 31, 2006, 2005
    and 2004


F-6Notes to Consolidated Financial
    Statements


F-8         ExhibitNo.3
.1*

Certificate of Incorporation of
    the Registrant (Filed as Exhibit 3.1 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 1993,
    Exhibit 3.3 to the
    Form 10-K
    for the fiscal year ended December 31, 1997,
    Exhibit 3.1 to the
    Form 8-K
    filed December 16, 1999 and Exhibit 3.1 to the
    Form 10-Q
    filed July 31, 2001).3
.2*

By-laws of the Registrant (Filed
    as Exhibit 3.1 to the Registrants
    Form 8-K
    filed October 18, 2006).4
.1*

Form of Common Stock Certificate
    (Filed as Exhibit 4.1 to the Registrants
    Form S-3
    Registration Statement, as amended (Commission File
    No. 333-45272),
    filed September 6, 2000).4
.2*

Rights Agreement between the
    Registrant and American Stock Transfer & Trust Company,
    as Rights Agent, dated as of May 20, 1998 (Filed as
    Exhibit 4 to the Registrants
    Form 8-K
    filed May 28, 1998).4
.3*

Indenture dated as of
    June 25, 1999 between the Registrant and The Bank of New
    York, as trustee, including the form of
    51/2% Convertible
    Subordinated Notes due 2006 (Filed as Exhibit 4.1 to the
    Registrants
    Form 8-K
    filed June 28, 1999).4
.4*

Indenture dated as of
    October 4, 2004 between the Registrant and The Bank of New
    York, as trustee, including the form of
    21/4% Convertible
    Subordinated Notes due 2011 (Filed as Exhibit 4.1 to the
    Registrants
    Form 8-K
    filed October 4, 2004).4
.5*

Indenture dated as of
    August 9, 2005 between the Registrant and The Bank of New
    York, as trustee, including the form of
    21/4% Convertible
    Subordinated Notes due 2012 (Filed as Exhibit 4.1 to the
    Registrants
    8-K filed
    August 9, 2005).4
.6*

Registration Rights Agreement
    dated as of August 9, 2005 by and among the Registrant and
    the Initial Purchasers named therein (Filed as Exhibit 4.2
    to the Registrants
    Form 8-K
    filed August 9, 2005).10
.1*

Retirement Agreement, dated
    March 24, 2004, with William A. Haseltine, Ph.D. (Filed as
    Exhibit 99.3 to the Registrants
    Form 8-K
    filed March 26, 2004).10
.2*

Employment Agreement, dated
    May 6, 2004, with Craig A. Rosen, Ph.D. (Filed as
    Exhibit 10.1 to the Registrants
    Form 10-Q
    filed August 6, 2004).10
.3*

Employment Agreement, dated
    November 21, 2004, with H. Thomas Watkins (Filed as
    Exhibit 10.1 to the Registrants
    Form 8-K
    filed November 23, 2004).10
.4*

Form of Executive Agreement (Filed
    as Exhibit 10.5 to the Registrants
    Form 10-K
    for the fiscal year ended December 31, 2004). 52




---



##### 



ExhibitNo.10
.5*

2000 Stock Incentive Plan, as
    amended (Filed as Exhibit A to the Registrants
    Definitive Proxy Statement on Schedule 14A filed
    April 18, 2001 and Annexes A and B to the
    Registrants Definitive Proxy Statement on
    Schedule 14A filed April 16, 2004).10
.6*

Amended and Restated 2000 Employee
    Stock Purchase Plan dated May 21, 2003 (Filed as
    Exhibit 10.7 to the Registrants
    Form 10-Q
    file on August 11, 2003).10
.7*

Lease Agreement between Maryland
    Economic Development Corporation and Human Genome Sciences,
    Inc., dated December 1, 1997 (Filed as Exhibit 10.67
    to the Registrants
    Form 10-K
    for the fiscal year ended December 31, 1997).10
.8*

Lease Agreement between Maryland
    Economic Development Corporation and Human Genome Sciences, Inc.
    dated December 1, 1999 (Filed as Exhibit 10.43 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 1999).10
.9*

Amended and Restated Participation
    Agreement and Appendix A to the Amended and Restated
    Participation Agreement between Human Genome Sciences, Inc.,
    Wachovia Development Corporation and the other parties named
    therein dated June 30, 2003 (Filed as Exhibit 10.2 to
    the Registrants
    Form 10-Q
    filed August 11, 2003).10
.10*

Amended and Restated Lease
    Agreement between Wachovia Development Corporation and Human
    Genome Sciences, Inc. dated June 30, 2003 (Filed as
    Exhibit 10.3 to the Registrants
    Form 10-Q
    filed August 11, 2003).10
.11*

Amended and Restated Agency
    Agreement between Wachovia Development Corporation and Human
    Genome Sciences, Inc. dated June 30, 2003 (Filed as
    Exhibit 10.4 to the Registrants
    Form 10-Q
    filed August 11, 2003).10
.12*

Amended and Restated Security
    Agreement between Wachovia Development Corporation and Wachovia
    Bank, National Association, and accepted and agreed to by Human
    Genome Sciences, Inc., dated June 30, 2003 (Filed as
    Exhibit 10.5 to the Registrants
    Form 10-Q
    filed August 11, 2003).10
.13*

Amended and Restated Assignment of
    Liquid Collateral Agreement between Human Genome Sciences, Inc.
    and Wachovia Development Corporation dated June 30, 2003
    (Filed as Exhibit 10.6 to the Registrants
    Form 10-Q
    filed August 11, 2003).10
.14*

Omnibus Agreement between Maryland
    Economic Development Corporation, Wells Fargo Bank Northwest,
    National Association, Human Genome Sciences, Inc., Allfirst
    Bank, a division of M&T Bank and the other parties named
    therein dated June 26, 2003 (Filed as Exhibit 10.1 to
    the Registrants
    Form 10-Q
    filed August 11, 2003).10
.15*

Lease Agreement between Wells
    Fargo Bank Northwest, National Association as Trustee under
    Trust Agreement and Human Genome Sciences, Inc. dated
    October 25, 2001 (Filed as Exhibit 10.22 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 2001 and amended by
    Exhibit 10.15 hereto).10
.16*

Cash Collateral Pledge Agreement
    between Human Genome Sciences, Inc., Allfirst Bank and Allfirst
    Trust Company National Association dated October 25, 2001
    (Filed as Exhibit 10.23 to the Registrants
    Form 10-K
    for the fiscal year ended December 31, 2001).10
.17*

Guarantee by Human Genome
    Sciences, Inc. as Guarantor in favor of Allfirst Bank, as Agent
    dated October 25, 2001 (Filed as Exhibit 10.24 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 2001 and amended by
    Exhibit 10.15 hereto).10
.18*

Amendment No. 1 dated
    March 29, 2002 to Lease Agreement between Wells Fargo Bank
    Northwest, National Association as Trustee under
    Trust Agreement and Human Genome Sciences, Inc. dated
    October 25, 2001 (Filed as Exhibit 10.25 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 2001).10
.19*

Amendment No. 1 dated
    March 29, 2002 to Guarantee by Human Genome Sciences, Inc.
    as Guarantor in favor of Allfirst Bank, as Agent dated
    October 25, 2001 (Filed as Exhibit 10.26 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 2001).10
.20*

Form of Restricted Stock Agreement
    (Filed as Exhibit 10.20 to the Registrants
    Form 10-Q
    filed August 1, 2005). 53




---



##### 



ExhibitNo.10
.21*

Purchase Agreement dated as of
    August 4, 2005 by and among the Registrant and the Initial
    Purchasers named therein (Filed as Exhibit 10.1 to the
    Registrants
    Form 8-K
    filed August 9, 2005).10
.22*

Asset Purchase Agreement dated as
    of December 12, 2005 by and between TriGenesys, Inc and the
    Registrant (Filed as Exhibit 10.22 to the Registrants
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.23*

First Amendment to Employment
    Agreement, dated December 13, 2005, with Craig A.
    Rosen, Ph.D. (Filed as Exhibit 10.23 to the
    Registrants
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.24*

Letter Agreement, dated
    December 13, 2005, with Steven C. Mayer. (Filed as
    Exhibit 10.24 to the Registrants
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.25*

Co-development and
    Commercialization Agreement between Novartis International
    Pharmaceutical Ltd. and Human Genome Sciences, Inc., dated
    June 5, 2006 (Filed as Exhibit 10.1 to the
    Registrants
    Form 10-Q
    filed August 9, 2006).10
.26*

Purchase and Sale Agreement
    between BioMed Realty, L.P. and Human Genome Sciences, Inc.,
    dated May 2, 2006 (Filed as Exhibit 10.2 to the
    Registrants
    Form 10-Q
    filed August 9, 2006).10
.27*

Lease Agreement between
    BMR-Belward Campus Drive LSM LLC and Human Genome Sciences,
    Inc., dated May 24, 2006 (Filed as Exhibit 10.3 to the
    Registrants
    Form 10-Q
    filed August 9, 2006).10
.28*

Lease Agreement between BMR-Shady
    Grove Road HQ LLC and Human Genome Sciences, Inc., dated
    May 24, 2006 (Filed as Exhibit 10.4 to the
    Registrants
    Form 10-Q
    filed August 9, 2006).10
.29*

Solicitation (as amended) and
    Modification of Contract awarded by the Department of Health and
    Human Services to Human Genome Sciences, Inc. dated
    June 24, 2006 (Filed as Exhibit 10.5 to the
    Registrants
    Form 10-Q
    filed August 9, 2006).12
.1

Ratio of Earnings to Fixed Charges.21
.1

Subsidiaries.23
.1

Consent of Ernst & Young
    LLP, Independent Registered Public Accounting Firm.31i
.1

Rule 13a-14(a)
    Certification of Principal Executive Officer.31i
.2

Rule 13a-14(a)
    Certification of Principal Financial Officer.32
.1

Section 1350 Certification of
    Chief Executive Officer.32
.2

Section 1350 Certification of
    Chief Financial Officer.     *
    
    Incorporated by reference.
    
    Confidential treatment requested for certain portions of this
    Exhibit pursuant to
    Rule 24b-2
    under the Securities Exchange Act of 1934, as amended, which
    portions are omitted and filed separately with the Securities
    and Exchange Commission. 54




---



##### 



SIGNATURES
      By:
    /s/  H.
    Thomas Watkins         Signature

Title

Date/s/  H.
    Thomas WatkinsH.
    Thomas Watkins

President, Chief Executive Officer
    and Director (Principal Executive Officer)

February 28, 2007/s/  Timothy
    C. BarabeTimothy
    C. Barabe

Senior Vice President and Chief
    Financial Officer (Principal Financial Officer and Principal
    Accounting Officer)

February 28, 2007/s/  Argeris
    N.
    Karabelas, Ph.D.Argeris
    N. Karabelas, Ph.D.

Chairman of the Board

February 28, 2007/s/  Richard
    J. DanzigRichard
    J. Danzig

Director

February 28, 2007/s/  Jürgen
    Drews, M.D.Jürgen
    Drews, M.D.

Director

February 28, 2007/s/  Tuan
    Ha-NgocTuan
    Ha-Ngoc

Director

February 28, 2007/s/  Augustine
    LawlorAugustine
    Lawlor

Director

February 28, 2007/s/  Max
    Link, Ph.D.Max
    Link, Ph.D.

Director

February 28, 2007/s/  Kevin
    P. StarrKevin
    P. Starr

Director

February 28, 2007/s/  Robert
    C.
    Young, M.D.Robert
    C. Young, M.D.

Director

February 28, 2007  55




---



##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageNumberReport of Ernst & Young
    LLP, Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets at
    December 31, 2006 and 2005


F-3Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004


F-4Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2006, 2005 and 2004


F-5Consolidated Statements of Cash
    Flows for the years ended December 31, 2006, 2005 and 2004


F-6Notes to Consolidated Financial
    Statements


F-8  F-1




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                    F-2




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  CONSOLIDATED BALANCE SHEETS
  December 31,2006


2005(dollars in thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
96,942


$
12,268Short-term investments


226,475



169,961Collaboration receivables


64,479



700Prepaid expenses and other current
    assets


4,153



5,388Total current assets


392,049



188,317Marketable securities


378,502



243,820Long-term equity investments


15,437



18,493Property, plant and equipment (net
    of accumulated depreciation and amortization)


285,177



304,809Restricted investments


61,165



220,171Other assets


17,338



21,436TOTAL ASSETS

$
1,149,668


$
997,046LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$



$
3,120Accounts payable and accrued
    expenses


36,959



32,251Accrued payroll and related taxes


15,378



14,330Accrued exit and restructuring
    expenses


4,243



6,399Deferred revenues


35,371



3,335Total current liabilities


91,951



59,435Long-term debt, net of current
    portion


751,526



510,000Deferred revenues, net of current
    portion


83,530



5,900Accrued exit and restructuring
    expenses, net of current portion


6,111



Other liabilities


2,627



4,745Total liabilities


935,745



580,080Stockholders equity:Preferred stock 
    $0.01 par value; shares authorized  20,000,000;
    no shares issued or outstanding






Common stock 
    $0.01 par value; shares authorized  400,000,000;
    shares issued and outstanding of 133,820,053 and 131,049,798 at
    December 31, 2006 and 2005, respectively


1,338



1,310Additional paid-in capital


1,836,560



1,786,549Accumulated other comprehensive
    loss


(3,594
)


(1,685
)Accumulated deficit


(1,620,381
)


(1,369,208
)Total stockholders equity


213,923



416,966TOTAL LIABILITIES AND
    STOCKHOLDERS EQUITY

$
1,149,668


$
997,046    F-3




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005


2004(dollars in thousands, except share and per share amounts)Revenue  research and
    development contracts

$
25,755


$
19,113


$
3,831Costs and expenses:Research and development


209,242



228,717



219,549General and administrative


53,101



42,066



35,728Lease termination and
    restructuring charges


29,510







15,408Total costs and expenses


291,853



270,783



270,685Income (loss) from operations


(266,098
)


(251,670
)


(266,854
)Investment income


27,131



24,218



40,298Interest expense


(26,965
)


(12,085
)


(19,030
)Gain on sale of equity investments


14,759



1,302



255Gain (loss) on extinguishment of
    debt






(1,204
)


2,433Income (loss) before taxes


(251,173
)


(239,439
)


(242,898
)Provision for income taxes










Net income (loss)

$
(251,173
)

$
(239,439
)

$
(242,898
)Basic and diluted net income
    (loss) per share

$
(1.91
)

$
(1.83
)

$
(1.87
)Weighted average shares of common
    stock outstanding, basic and diluted


131,815,414



130,772,233



130,041,071   Share-Based Payment Accounting
    for Stock-Based Compensation
 F-4




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  Unearned


AccumulatedAdditional


Portion of


OtherCommon Stock


Paid-In


Compensatory


Comprehensive


AccumulatedShares


Amount


Capital


Stock Options


Income (Loss)


Deficit


Total(dollars in thousands, except share amounts)Balance 
    December 31, 2003


129,433,448


$
1,294


$
1,762,191


$



$
26,719


$
(886,871
)

$
903,333Comprehensive income (loss):Net loss






















(242,898
)


(242,898
)Unrealized loss on investments


















(17,220
)






(17,220
)Cumulative translation adjustment


















7







7Comprehensive loss


























(260,111
)Exercises of 1,022,625 and 70,956
    options relating to employee stock option and stock purchase
    plans, respectively


1,093,581



11



8,663















8,674Stock option modification expense










4,151



(4,151
)










Compensatory stock options earned














4,151











4,151Balance 
    December 31, 2004


130,527,029



1,305



1,775,005







9,506



(1,129,769
)


656,047Comprehensive income (loss):Net loss






















(239,439
)


(239,439
)Unrealized loss on investments


















(11,177
)






(11,177
)Cumulative translation adjustment


















(14
)






(14
)Comprehensive loss


























(250,630
)Exercises of 430,655 and 92,114
    options relating to employee stock option and stock purchase
    plans, respectively


522,769



5



4,436















4,441Stock option modification expense










6,985















6,985Restricted stock expense










123















123Balance 
    December 31, 2005


131,049,798



1,310



1,786,549







(1,685
)


(1,369,208
)


416,966Comprehensive income (loss):Net loss






















(251,173
)


(251,173
)Unrealized loss on investments


















(1,927
)






(1,927
)Cumulative translation adjustment


















18







18Comprehensive loss


























(253,082
)Exercises of 2,651,029 and 119,226
    options relating to employee stock option and stock purchase
    plans, respectively


2,770,255



28



23,405















23,433Stock option compensation expense










26,095















26,095Restricted stock expense










511















511Balance 
    December 31, 2006


133,820,053


$
1,338


$
1,836,560


$



$
(3,594
)

$
(1,620,381
)

$
213,923    F-5




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005


2004(dollars in thousands)Cash flows from operating
    activities:Net income (loss)

$
(251,173
)

$
(239,439
)

$
(242,898
)Adjustments to reconcile net income
    (loss) to net cash used in operating activities:Charge for lease termination and
    restructuring


28,953







14,468Stock-based compensation expense


26,606



7,108



4,151Depreciation and amortization


20,105



18,447



21,579Gain on sale of long-term equity
    investments


(14,759
)


(1,302
)


(309
)Accrued interest on short-term
    investments, marketable securities and restricted investments


(5,607
)


(1,582
)


9,463Non-cash reimbursement of CoGenesys
    expenses


(4,818
)






Non-cash expense and other


5,307



3,144



(14,214
)Changes in operating assets and
    liabilities:Collaboration receivables


(16,279
)


47



Prepaid expenses and other current
    assets


1,236



(457
)


619Other assets


4,056



4,298



5,195Accounts payable and accrued
    expenses


9,578



(1,826
)


8,471Accrued payroll and related taxes


1,539



8,101



(2,831
)Accrued exit and restructuring
    charges


(5,006
)


(4,144
)


Deferred revenues


54,591



(3,284
)


2,248Other liabilities


(1,162
)


(4,056
)


(4,843
)Net cash used in operating
    activities


(146,833
)


(214,945
)


(198,901
)Cash flows from investing
    activities:Capital expenditures 
    property, plant and equipment


(9,719
)


(90,247
)


(105,750
)Capitalized interest


(2,527
)


(5,764
)


(3,839
)Proceeds from sale of property,
    plant and equipment










16,600Purchase of short-term investments
    and marketable securities


(538,314
)


(253,952
)


(336,829
)Proceeds from sale of long-term
    equity investments


24,127



4,600



4,397Proceeds from sale and maturities
    of short-term investments and marketable securities


504,970



548,936



630,055Net cash provided by (used in)
    investing activities


(21,463
)


203,573



204,634Cash flows from financing
    activities:Proceeds from sale-leaseback of
    property, plant & equipment


220,252







Proceeds from issuance of long-term
    debt






223,332



271,483Payments on long-term debt


(3,120
)


(221,067
)


(272,891
)Proceeds from sale and maturities
    of restricted investments


57,670



288,626



156,708Purchase of restricted investments


(44,968
)


(295,441
)


(178,562
)Proceeds from issuance of common
    stock (net of expense)


23,433



4,443



8,673Payments on capital lease


(297
)


(328
)


(338
)Net cash provided by (used in)
    financing activities


252,970



(435
)


(14,927
)Net increase (decrease) in cash
    and cash equivalents


84,674



(11,807
)


(9,194
)Cash and cash
    equivalents  beginning of year


12,268



24,075



33,269Cash and cash
    equivalents  end of year

$
96,942


$
12,268


$
24,075  F-6




---



##### 



SUPPLEMENTAL
    DISCLOSURES OF CASH FLOW INFORMATION, NON-CASH OPERATING,
    INVESTING AND FINANCING ACTIVITIES
  Year Ended December 31,2006


2005


2004(dollars in thousands)Cash paid during the year for:Interest

$
25,540


$
17,570


$
22,760Income taxes

$



$



$
                  F-7




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE A) 
    The Company
        (NOTE B) 
    Summary of Significant Accounting Policies
  Use of
    Estimates
    Principles
    of Consolidation
    Cash
    Equivalents, Short-term Investments, Marketable Securities and
    Long-term Equity Investments
    available-for-sale. available-for-sale
 F-8




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE B) 
    Summary of Significant Accounting Policies
    (continued)
   Cash Equivalents, Short-term Investments, Marketable
    Securities and Long-term Equity Investments (continued)
    Investment
    Risk
    Other-Than-Temporary
    Impairment of Investments
  other-than-temporary No. 115-1, The Meaning of
    Other-Than-Temporary
    Impairment and Its Application to Certain Investments.
  Depreciation
    and Amortization
    Buildings

30 yearsLand improvements

lesser of the lease term or the
    useful lifeProduction equipment

5-10 yearsLaboratory equipment

3-10 yearsComputer equipment and software

3-5 yearsFurniture and office equipment

3-5 yearsLeasehold improvements

lesser of the lease term or the
    useful life    Impairment
    of Long-Lived Assets
  Accounting
    for the Impairment or Disposal of Long-Lived Assets.
 F-9




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE B) 
    Summary of Significant Accounting Policies
    (continued)
  Fair
    Value of Financial Instruments
        Leases
  Accounting for Leases
  Stock-Based
    Compensation
    Accounting for Stock Issued to
    Employees
     F-10




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE B) 
    Summary of Significant Accounting Policies
    (continued)
   Stock-Based Compensation (continued)
   No. 96-18, Accounting for Equity Instruments that are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods, or Services.
    Year Ended December 31,2005


2004Net income (loss), as reported

$
(239,439
)

$
(242,898
)Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(51,971
)


(110,562
)Add: Stock-based compensation
    included in net income (loss)


7,108



4,151Pro forma net income (loss)

$
(284,302
)

$
(349,309
)Net income (loss) per share:Basic and diluted  as
    reported

$
(1.83
)

$
(1.87
)Basic and diluted  pro
    forma

$
(2.17
)

$
(2.69
)       Revenue
    Recognition
  item(s) item(s); item(s), item(s)
 F-11




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE B) 
    Summary of Significant Accounting Policies
    (continued)
   Revenue Recognition (continued)
     Research
    and Development
    Financing
    Costs Related to Long-term Debt
    Patent
    Application Costs
    Capitalization
    of Interest
    Net
    Income (Loss) Per Share
  Earnings Per Share
 F-12




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE B) 
    Summary of Significant Accounting Policies
    (continued)
   Comprehensive
    Income (Loss)
  Reporting Comprehensive Income available-for-sale
    Year Ended December 31,2006


2005


2004Net income (loss)

$
(251,173
)

$
(239,439
)

$
(242,898
)Net unrealized gains (losses):Short-term investments and
    marketable securities


4,314



(6,197
)


(15,018
)Long-term equity investments


6,254



(3,987
)


7,370Restricted investments


1,626



(1,875
)


(4,725
)Foreign currency translation


18



(14
)


7Subtotal


12,212



(12,073
)


(12,366
)Reclassification adjustments for
    realized (gains) losses included in net loss


(14,121
)


882



(4,847
)Total comprehensive income (loss)

$
(253,082
)

$
(250,630
)

$
(260,111
)               Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes  An
    Interpretation of FASB Statement No. 109 Accounting for Income Taxes.
 F-13




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE B) 
    Summary of Significant Accounting Policies
    (continued)
   Recent Accounting Pronouncements (continued)
    Fair Value Measurements
  Sources
    of Supply
     Reclassifications
   F-14




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE C) 
    Investments
    December 31, 2006Gross


GrossAmortized


Unrealized


Unrealized


FairAvailable for Sale

Cost


Gains


Losses


ValueU.S. Treasury and agencies

$
74,245


$
598


$
(663
)

$
74,180Corporate debt securities


153,106



101



(912
)


152,295Subtotal  Short-term
    investments


227,351



699



(1,575
)


226,475U.S. Treasury and agencies


180,678



524



(1,807
)


179,395Corporate debt securities


199,986



384



(1,263
)


199,107Subtotal  Marketable
    securities


380,664



908



(3,070
)


378,502Investment in CoGenesys


14,818











14,818Investment in Corautus






619







619Subtotal  Long-term
    equity investments


14,818



619







15,437Cash and cash equivalents


1,527











1,527U.S. Treasury and agencies


30,011



14



(715
)


29,310Corporate debt securities


30,812



5



(489
)


30,328Subtotal  Restricted
    investments


62,350



19



(1,204
)


61,165Total

$
685,183


$
2,245


$
(5,849
)

$
681,579   December 31, 2005Gross


GrossAmortized


Unrealized


Unrealized


FairAvailable for Sale

Cost


Gains


Losses


ValueU.S. Treasury and agencies

$
56,991


$



$
(1,140
)

$
55,851Corporate debt securities


115,421



3



(1,314
)


114,110Subtotal  Short-term
    investments


172,412



3



(2,454
)


169,961U.S. Treasury and agencies


68,156



11



(2,075
)


66,092Corporate debt securities


181,181



108



(3,561
)


177,728Subtotal  Marketable
    securities


249,337



119



(5,636
)


243,820Investment in CAT


9,368



2,531







11,899Investment in Corautus






6,594







6,594Subtotal  Long-term
    equity investments


9,368



9,125







18,493Cash and cash equivalents


1,762











1,762U.S. Treasury and agencies


86,895



24



(1,775
)


85,144Corporate debt securities


134,821



69



(1,625
)


133,265Subtotal  Restricted
    investments


223,478



93



(3,400
)


220,171Total

$
654,595


$
9,340


$
(11,490
)

$
652,445  F-15




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE C) 
    Investments (continued)
      Short-term investments, Marketable securities and Restricted
    investments  unrealized losses
    December 31, 2006Loss Position


Loss Positionfor Less Than


for Greater ThanTwelve Months


Twelve Months


TotalFair


Unrealized


Fair





Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesU.S. Treasury and agencies

$
15,110


$
240


$
19,452


$
423


$
34,562


$
663Corporate debt securities


51,344



252



84,632



660



135,976



912Subtotal  Short-term
    investments


66,454



492



104,084



1,083



170,538



1,575U.S. Treasury and agencies


56,585



1,089



20,500



718



77,085



1,807Corporate debt securities


64,222



456



47,267



807



111,489



1,263Subtotal  Marketable
    securities


120,807



1,545



67,767



1,525



188,574



3,070U.S. Treasury and agencies


4,888



153



21,599



562



26,487



715Corporate debt securities


2,608



7



25,632



482



28,240



489Subtotal  Restricted
    investments


7,496



160



47,231



1,044



54,727



1,204Total

$
194,757


$
2,197


$
219,082


$
3,652


$
413,839


$
5,849   F-16




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE C) 
    Investments (continued)
  December 31, 2005Loss Position


Loss Positionfor Less Than


for Greater ThanTwelve Months


Twelve Months


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesU.S. Treasury and agencies

$
3,108


$
32


$
52,742


$
1,108


$
55,850


$
1,140Corporate debt securities


20,257



45



92,850



1,269



113,107



1,314Subtotal  Short-term
    investments


23,365



77



145,592



2,377



168,957



2,454U.S. Treasury and agencies


9,247



163



54,135



1,912



63,382



2,075Corporate debt securities


57,864



814



105,722



2,747



163,586



3,561Subtotal  Marketable
    securities


67,111



977



159,857



4,659



226,968



5,636U.S. Treasury and agencies


28,933



570



49,656



1,205



78,589



1,775Corporate debt securities


67,974



755



54,856



870



122,830



1,625Subtotal  Restricted
    investments


96,907



1,325



104,512



2,075



201,419



3,400Total

$
187,383


$
2,379


$
409,961


$
9,111


$
597,344


$
11,490   other-than-temporarily
   Other
    Information
    Short-Term


Marketable


RestrictedInvestments


Securities


InvestmentsAmortized


Fair


Amortized


Fair


Amortized


FairMaturities

Cost


Value


Cost


Value


Cost


ValueLess than one year

$
227,351


$
226,475


$



$



$
10,539


$
10,489Due in year two through year three










162,038



160,664



38,601



37,659Due in year four through year five










218,627



217,838



13,210



13,017Due after five years






















Total

$
227,351


$
226,475


$
380,665


$
378,502


$
62,350


$
61,165    F-17




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE C) 
    Investments (continued)
  Other Information (continued)
      Year Ended December 31,2006


2005


2004Net proceeds on sale of
    investments prior to maturity

$
334,250


$
510,800


$
688,802Realized gains


14,888



1,618



6,543Realized losses


(767
)


(2,499
)


(1,696
)       (NOTE D) 
    Collaborations and U.S. Government Agreement
    Agreement
    with Novartis
    Agreements
    with GlaxoSmithKline (formerly SmithKline Beecham
    Corporation)
   F-18




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE D) 
    Collaborations and U.S. Government Agreement
    (continued)
   Agreements with GlaxoSmithKline (formerly SmithKline Beecham
    Corporation) (continued)
            License
    Agreement and Manufacturing Services Agreement with
    CoGenesys
   F-19




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE D) 
    Collaborations and U.S. Government Agreement
    (continued)
   Collaboration
    reimbursements with respect to Novartis, GSK and
    CoGenesys
     U.S. Government
    Agreement
  in vitro in vivo
   Other
    Collaboration Agreements related to the 1996 GSK
    Agreement
     Other
    Collaborative and License Agreements
     F-20




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE D) 
    Collaborations and U.S. Government Agreement
    (continued)
   Other Collaborative and License Agreements (continued)
        (NOTE E) 
    Collaboration Receivables
    (NOTE F) 
    Property, Plant and Equipment
    December 31,2006


2005Building (Large-Scale
    Manufacturing Facility)

$
187,367


$
Laboratory and production equipment


84,596



61,504Computer equipment and software


33,534



28,559Land and improvements


30,521



22,982Leasehold improvements


23,679



30,996Furniture and office equipment


6,517



5,123Construction in-progress


2,047



239,183368,261



388,347Less: accumulated depreciation and
    amortization


(83,084
)


(83,538
)$
285,177


$
304,809    F-21




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE F) 
    Property, Plant and Equipment (continued)
    (NOTE G) 
    Other Assets
    December 31,2006


2005Deferred financing costs, net of
    accumulated amortization of $4,226 and $2,057, as of
    December 31, 2006 and 2005, respectively

$
13,435


$
13,565Prepaid services


3,800



5,000Deferred charge for residual value
    guarantee






2,797All other assets


103



74$
17,338


$
21,436       Guarantors Accounting and Disclosure
    Requirements for Guarantees, Including Indirect Guarantees of
    Indebtedness of Others
 F-22




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE
    H)  Accounts Payable and Accrued
    Expenses
    December 31,2006


2005Professional fees

$
25,108


$
17,587Accrued expenses


7,734



5,922Fixed asset purchases


864



5,403Accrued interest


3,253



3,339$
36,959


$
32,251       (NOTE I) 
    Long-Term Debt
    December 31,





December 31,Debt

2006 Interest Rates


Maturities


2006


20055.5% Convertible Subordinated
    Notes due 2006









$



$
3,1202.25% Convertible
    Subordinated Notes due 2011


2.25
%


October 2011



280,000



280,0002.25% Convertible
    Subordinated Notes due 2012


2.25
%


August 2012



230,000



230,000BioMed debt


11.0
%


May 2026



241,526



751,526



513,120Less current portion














(3,120
)$
751,526


$
510,000     2007


$         2008


2009


2010


2011


280,0002012 and thereafter


282,961$562,961    F-23




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE I) 
    Long-Term Debt (continued)
    3 4 3 4 3 4 3 4 3 4
  3 4
  1 4 1 4 1 4 1 4 1 4 1 4 1 4 1 4
  1 4 1 4 1 4
 F-24




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE I) 
    Long-Term Debt (continued)
  1 4 1 4 1 4 1 4 1 4
  1 2
    December 31,2006


2005Carrying


Fair


Carrying


FairAmount


Value


Amount


Value5.5% Convertible Subordinated
    Notes due 2006

$



$



$
3,120


$
3,0732.25% Convertible
    Subordinated Notes due 2011


280,000



296,100



280,000



228,2002.25% Convertible
    Subordinated Notes due 2012


230,000



223,675



230,000



176,525BioMed debt


241,526



241,526







$
751,526


$
761,301


$
513,120


$
407,798          F-25




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE J) 
    Commitments and Other Matters
   Leases
    Gross Operating





Net OperatingYear Ending December 31,

Leases


Sublease Income


Leases2007

$
29,704


$
(827
)

$
28,8772008


31,880



(1,200
)


30,6802009


24,268



(1,226
)


23,0422010


23,098



(1,252
)


21,8462011


23,486



(1,278
)


22,2082012 and thereafter


348,915



(1,305
)


347,610$
481,351


$
(7,088
)

$
474,263            F-26




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE J) 
    Commitments and Other Matters (continued)
   Leases (continued)
                    F-27




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE J) 
    Commitments and Other Matters (continued)
  Capital
    Expenditures
     401(k)
    Plan
    Contingent Liabilities
      (NOTE K) 
    Stockholders Equity
   Stock Option and Employee Stock Purchase Plans
    Year Ended December 31,2006


2005


2004Employee stock option and employee
    stock purchase plan compensation expense

$
26,095


$



$
Restricted stock awards


511



123



Stock option modification expense






6,985



4,151Total

$
26,606


$
7,108


$
4,151    F-28




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE K) 
    Stockholders Equity (continued)
   Stock Option and Employee Stock Purchase Plans (continued)
  Stock
    Incentive Plan
        Weighted-


Weighted-AverageAverage


Remaining


AggregateExercise


Contractual Term


IntrinsicShares


Price


(Years)


Value(1)Outstanding at January 1, 2006


29,301,035


$
18.90Granted


4,783,510



10.96Exercised


(2,634,029
)


8.57






$
9,111Forfeited


(1,881,868
)


11.90Expired


(2,732,541
)


26.42Outstanding at December 31,
    2006


26,836,107



18.22



5.39



29,554Vested or expected to vest at
    December 31, 2006


25,718,513



18.52



5.26



28,323Exercisable at December 31,
    2006


19,385,477



20.83



4.26



21,347     (1)
    
    Aggregate intrinsic value represents only the value for those
    options in which the exercise price of the option is less than
    the market value of the Companys stock on
    December 31, 2006, or for exercised options, the exercise
    date.   F-29




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE K) 
    Stockholders Equity (continued)
   Stock Option and Employee Stock Purchase Plans (continued)
   Stock Incentive Plan (continued)
            Year Ended December 31,2006Expense





ExpenseIncluding





Excluding


2005


2004Stock Option


Stock Option


Stock Option


Expense as


Expense asCompensation


Compensation


Compensation


Reported


ReportedCosts and expenses:Research and development

$
209,242


$
(16,140
)

$
193,102


$
228,717


$
219,549General and administrative


53,101



(9,955
)


43,146



42,066



35,728Total

$
262,343


$
(26,095
)

$
236,248


$
270,783


$
255,277      F-30




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE K) 
    Stockholders Equity (continued)
   Stock Option and Employee Stock Purchase Plans (continued)
   Stock Incentive Plan (continued)
        Years Ended December 31,2006

2005

2004Expected life:Stock options

4.9 years

4.4 years

5.9 yearsEmployee stock purchase plan rights

1.0 years

1.0 years

1.0 yearsInterest rate

4.3% - 5.1%

3.8% - 4.2%

3.7%Volatility

38.0% - 48.0%

38.0% - 40.0%

40.0%Dividend yield

0%

0%

0%     Expected Life of Stock-based Awards
  Interest Rate
  Volatility
  Dividend Yield
  Employee
    Stock Purchase Plan
   F-31




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE K) 
    Stockholders Equity (continued)
   Employee Stock Purchase Plan (continued)
    Restricted
    Common Stock
      Weighted-AverageGrant-Date FairShares


ValueRestricted common stock at
    January 1, 2006


110,000


$
13.22Granted


12,000



10.56Vested


(17,000
)


13.43Forfeited






Restricted common stock at
    December 31, 2006


105,000



12.88     (NOTE L) 
    Preferred Share Purchase Rights
       F-32




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE M) 
    Income Taxes
    Year Ended December 31,2006


2005


2004Federal income tax provision at 34%

$
(85,399
)

$
(81,409
)

$
(82,585
)State taxes, net of federal tax
    benefit


(11,041
)


(10,732
)


(11,024
)Tax credits, principally for
    research and development


(7,305
)


(6,930
)


(6,975
)Stock option deduction for which
    no book benefit is available






(560
)


(1,475
)Other


4,146



2,426



1,457Increase in valuation allowance on
    deferred tax asset


99,599



97,205



100,602$



$



$
     Current


Long-TermAsset


AssetDecember 31, 2006Net operating loss carryforward

$



$
555,508Research and development and other
    tax credit carryforwards






59,651Capital loss carryforward






12,933Lease impairment charge






5,489Net unrealized losses on
    investments






1,392Equity based compensation






4,559Deferred revenue


13,660



32,259Depreciation






3,333Reserves and accruals


3,066



7,128Other






69216,726



682,944Less valuation allowance


(16,726
)


(682,944
)$



$
   F-33




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE M) 
    Income Taxes (continued)
  Current


Long-TermAsset


Asset/(Liability)December 31, 2005Net operating loss carryforward

$



$
512,953Research and development and other
    tax credit carryforwards






52,509Capital loss carryforward






10,605Loss on impaired investments






8,899Net unrealized losses on
    investments






648Deferred revenue


992



2,575Depreciation






(945
)Reserves and accruals


8,027



2,683Other






5249,019



590,451Less valuation allowance


(9,019
)


(590,451
)$



$
       Year Ended December 31,2006


2005


2004Current:Federal

$



$



$
State










Foreign taxes










Deferred










$



$



$
     (NOTE N) 
    Facility-Related Exit Costs and Other Restructuring
    Charges
   F-34




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE N) 
    Facility-Related Exit Costs and Other Restructuring Charges
    (continued)
               F-35




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
   (NOTE N) 
    Facility-Related Exit Costs and Other Restructuring Charges
    (continued)
            Former CEOSeverance


Relatedand


Benefits


FacilitiesBenefits


Charges


Related


TotalBalance as of January 1, 2006

$
20


$
442


$
5,937


$
6,399Provision recorded:Wing C










6,440



6,440Quality Building










2,521



2,521Subtotal


20



442



14,898



15,360Cash paid






(424
)


(4,562
)


(4,986
)Accrual adjustment


(20
)










(20
)Balance as of December 31,
    2006

$



$
18


$
10,336



10,354Less current portion














(4,243
)$
6,111   F-36




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE O) 
    CoGenesys
          (NOTE P) 
    Net Loss Per Share
    Year Ended December 31,2006


2005


2004Numerator:Net loss

$
(251,173
)

$
(239,439
)

$
(242,898
)Denominator:Denominator for basic and diluted
    earnings per share  weighted-average shares


131,815,414



130,772,233



130,041,071Net loss per share, basic and
    diluted:Net loss per share

$
(1.91
)

$
(1.83
)

$
(1.87
)    F-37




---



##### 



HUMAN
    GENOME SCIENCES, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands, except share and per share data)
  (NOTE Q) 
    Related Parties
          (NOTE R) 
    Quarterly Financial Information (unaudited)
    1st Quarter


2nd Quarter


3rd Quarter


4th Quarter2006Revenue

$
6,840


$
2,225


$
6,679


$
10,011Income (loss) from operations


(64,958
)


(77,020
)


(58,975
)


(65,145
)Net income (loss)


(62,139
)


(61,258
)


(60,832
)


(66,944
)Net income (loss) per share, basic
    and diluted


(0.47
)


(0.47
)


(0.46
)


(0.50
)2005Revenue

$
1,105


$
2,854


$
5,882


$
9,272Income (loss) from operations


(62,522
)


(58,972
)


(58,022
)


(72,154
)Net income (loss)


(59,582
)


(55,986
)


(54,363
)


(69,508
)Net income (loss) per share, basic
    and diluted


(0.46
)


(0.43
)


(0.42
)


(0.53
)          F-38