By Jake King
Halozyme Therapeutics (HALO) will likely continue to move higher Monday after an upgrade from BMO Capital Markets, which has increased its outlook from Neutral to Outperform. The analyst's price target was raised from an over-bearish $4.00 to a highly bullish $12.00 per share. Nothing new fundamentally was raised by the analyst, although the upgrade demonstrates that bearish sentiment is disappearing, particularly because the company is expected to see its first major product (in collaboration with Roche) hit the market in the next several months.
Roche (OTCQX:RHHBY) expects to receive European approval of its SC Herceptin drug (Roche's $6 billion cancer treatment combined with Halozyme's subcutaneous delivery technology) this quarter, and could launch the drug before mid-year. In addition, Roche's SC MabThera (also a $6 billion franchise that is preparing to leverage Halozyme technology) could receive European approval later this year.
On top of these key milestones, the company has a partnerships with ViroPharma (VPHM) and Baxter (BAX) to enhance their key value drivers, Cinryze and Gammagard, by making them much more convenient for patients to use, and therefore significantly more competitive. HALO has its own pipeline, however the most significant recent event for the company centered around its new partnership with Pfizer (PFE) to enhance up to 6 compounds with HALO's technology. This deal not only boosted confidence that the company's technology is still of interest throughout the drug industry, but also affirmed that it remains safe, as skepticism on safety plagued the stock last year (See here).
Pfizer obviously conducted significant due diligence on the technology before the deal, hence, analysts are regaining confidence. The Roche assets alone are worth approximately $7-$8 per share based on a discounted cash flow valuations, and with so much more in the pipeline, including the VPHM, BAX, and PFE partnerships, BMO's $12 price target looks achievable in the next 12 months. Expect shares of HALO to continue to trade higher on confidence coming back into the name; analysts becoming more bullish into the approval and launch of Herceptin; and more visibility on the Pfizer product candidates.
Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Jake King. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein.You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. PropThink was not compensated to publish this article. Our full disclaimer is available at www.propthink.com/disclaimer.