By Jake King
Halozyme Therapeutics (HALO) announced that it has licensed the use of its technology platform to Pfizer Inc. (PFE) to develop Pfizer's biologics with Halozyme's Enhanze technology. HALO's technology enables drugs to be self-injected subcutaneously (under the skin), instead of given by hour-long IV infusions in a hospital or clinic setting. Most importantly, investors have been disappointed that HALO has not engaged in major business development deals since its original blockbuster transactions with Baxter (BAX) and Roche (OTCQX:RHHBY), so the Pfizer deal is a major validation that big deals are still doable with this highly unique technology. Additionally, the August "scare" that the company's technology might have safety issues (see prior story here) is now off the table, as PFE has certainly done significant due diligence prior to doing this deal. Halozyme faced headwinds earlier in the year when the Cinryze and HyQ products came under scrutiny by the FDA. The scope of the deal with PFE is impressive and encompasses up to six distinct pipeline projects, not unlike the company's deal with Roche. It also comes with $8M in cash up front, royalties on sales of products using the technology, and up to a whopping $507M in future milestones.
PFE could be developing a series of "bio-betters" with HALO technology. It is unspecified which Pfizer products will take advantage of the HALO technology, but it could be developing a series of follow on biologics (generics of big biotech drugs). If PFE is going this route, the pathway to approval of these follow-on biologics could be accelerated like all generic drugs, and importantly, they would be "bio-better" products in that the quick self-injection would provide a major competitive advantage for these drugs once they enter the market.
HALO could trade to $8 or higher on the news. We have said that HALO is worth $7 on the Roche deal alone based on discounted future cash flows, and given the company's deals with BAX, VPHM (Viropharm), and now PFE, plus HALO's own pipeline, the shares should be trading in the double-digit range. Nevertheless, we would at least expect the shares to get to the $8 level or higher on this news and before year-end.
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