Halozyme Therapeutics (NASDAQ:HALO) is an progressive biopharmaceutical firm that has developed a singular platform know-how, ENHANZE, that enables for the subcutaneous supply of biologics, which has the potential to revolutionize the best way we ship and administer life-saving medicine. With a number of main companions, together with Roche (OTCQX:RHHBY), AbbVie (ABBV), and Bristol-Myers Squibb (BMY), the corporate has the potential to generate important income from royalty funds and milestone funds.
Why ENHANZE know-how is an actual deal
Halozyme’s drug supply know-how, known as Enhanze, permits the subcutaneous supply of organic medicine. Biologics are massive, advanced molecules produced utilizing dwelling cells and used to deal with a variety of illnesses, together with most cancers, autoimmune issues, and diabetes. Nevertheless, most biologics are at present administered via intravenous (IV) infusion, which could be time-consuming and inconvenient for sufferers. Subcutaneous injection is an alternate route of drug administration that entails injecting the drug beneath the pores and skin into the fatty layer between the pores and skin and muscle. This route of administration has a number of benefits over IV infusions. Firstly, it’s much less invasive and could be self-administered by sufferers, decreasing the necessity for hospital visits and making remedy extra handy. Secondly, it may well result in extra constant drug ranges within the physique, because the drug is launched slowly from the injection web site over time. Thirdly, it may well scale back the chance of uncomfortable side effects related to IV infusions, corresponding to infections and blood clots.
Halozyme’s Enhanze know-how works by briefly breaking down the hyaluronan matrix within the subcutaneous area, which creates a bigger and extra permeable area for the drug to diffuse into. This enables for extra speedy and environment friendly absorption of the drug, leading to larger bioavailability and quicker onset of motion. Enhanze has been efficiently used to allow subcutaneous supply of a variety of biologic medicine, together with Roche’s Herceptin and Genentech’s Rituxan.
Along with the advantages for sufferers, Enhanze may also present important business benefits for pharmaceutical firms. By enabling subcutaneous supply, Enhanze can prolong the life cycle of present organic medicine and create new income streams. It may possibly additionally enhance affected person adherence to remedy, which may improve drug efficacy and scale back healthcare prices related to hospitalizations and issues.
IRA overhang could also be overblown
The current CMS steering associated to Medicare drug worth negotiations beneath the Inflation Discount Act (IRA) has brought on some uncertainty amongst buyers relating to the long-term worth proposition of HALO’s applied sciences because it pertains to the Medicare portion of partner-product gross sales. Nevertheless, we consider that this concern is overblown and that the affect on HALO needs to be minimal, significantly because the massive majority of HALO’s medicine (and pipeline) fall beneath Half B, except for HyQvia (which needs to be exempt anyway).
Zooming out, the long-term development outlook stays interesting
Regardless of this short-term concern, HALO has a considerable near-medium development outlook. The corporate is anticipated to obtain FDA approval for subcutaneous variations of efgartigimod and daratumumab within the coming months, which needs to be a constructive catalyst for the inventory. Though the FDA delayed the approval of SC efgartigimod, we consider it’s going to get accredited finally within the quick future primarily based on the sturdy PK/PD equivalence knowledge.
Constructive long-term development potential
One of many key drivers of HALO’s long-term development potential is the ENHANZE platform know-how. The know-how has already been licensed to a number of main companions, together with Roche, AbbVie, and Bristol-Myers Squibb, and has generated important income within the type of royalty funds and milestone funds. As well as, HALO has a powerful pipeline of potential new ENHANZE merchandise, which might generate extra income streams over the long run. Between 2019 and 2023, the royalty income grew from ~$70M to $450M, which is a higher than 600% improve. We anticipate the expansion in royalty income to extend constantly via partnerships and attain ~1Bn by 2027 with wave 1-4 ENHANZE merchandise.
Halozyme has a powerful observe document of creating profitable partnerships. We consider the corporate’s sturdy pipeline of potential new merchandise will proceed attracting curiosity from main biopharmaceutical firms.
- Potential delays within the medical trial timelines for Wave 3+ subcutaneous merchandise, together with BLA choices from the FDA, slated for 2023, or an FDA submitting for Tecentriq in 2023 publish Ph3 leads to 1Q23.
- Any unexpected partnership or authorized points which might affect collaboration and milestone revenues or potential royalties, significantly associated to the ENHANZE platform when first-generation API turns into generic in 2024 and 2027.
- Drug pricing headwinds: Decrease-than-expected gross sales coming from the corporate’s partnered merchandise, significantly as a result of potential affect of CMS drug worth negotiation.
- Rising competitors and potential erosion of long-term royalties, significantly because the US Enhanze patent expires in 2027 and extra producers might develop Enhanze formulations in-house for future candidates. Moreover, novel formulation know-how rivals might emerge.
We provoke HALO inventory with a purchase score. We consider that HALO is a compelling funding alternative for long-term buyers. Whereas there could also be some short-term uncertainty associated to the CMS steering and the potential for generic competitors, we consider that the corporate’s sturdy near-medium development prospects and its distinctive platform know-how (IV to SC translation), and a number of potential new drug launches (efgartigimod and daratumumab) make it a pretty funding alternative. Moreover, the corporate’s sturdy observe document of creating profitable partnerships (Roche, AbbVie, and Bristol-Myers Squibb) and its potential to generate important income from royalty funds and milestone funds make it a compelling funding alternative for long-term buyers in search of publicity to the biopharmaceutical sector with a decrease diploma of binary medical danger.