Halozyme Therapeutics (HALO) is in the business of developing and commercializing recombinant human enzymes that transiently modify tissue under the skin. Their effort facilitates the injection of other therapies, or correct diseased tissue structures, for clinical benefits. Halozyme's Enhanze technology is designed to temporarily break down a substance in the body that forms a barrier between cells so that drugs can be absorbed faster. That would allow some drugs to be delivered by an injection instead of an IV drip. This could have huge ramifications in medical treatments, patient care and, of course, cost savings for the health care industry. Those factors amount to a real game changer in industry. John Eastman interviewed Halozyme CEO Dr. Gregory Frost at length about European regulators position on Herceptin, potential roadblocks ahead, the stock downgrade by analysts, and affects on industry that the company's Enhanze may have upon approval.
In mid-January, Halozyme was floating in the $8.00 range, up from $7.00, at the beginning of January. Their ascension was helped by news of a BMO Capital Markets outlook upgrade from "neutral" to "outperform". Accompanying that upgrade was a price target ascension from $4.00 to $12.00 per share. Key partnerships and key deals with firms like Roche (RHHBY.OB), Pfizer (PFE), ViroPharma (VPHM) and Baxter (BAX) also added to its allure and climb. But the underlying fact about HALO is its technology and potential to be a game changer in the administration of drugs to patients. Significant to their flagship product, is that well-funded big pharmaceutical firms want their product to succeed, as it aids in the administration of their own developed drugs and remedies and reduces the cost to do so.
But by the end of January, the company experienced over a 20% drop in its share value driven by a multitude of factors; none of which, included a negative clinical study or performance report. What did cause the downward plunge was a downgrade to "neutral" from "outperform" by the analyst firm Wedbush. Others followed, including Jefferies, as they issued an "underperform" rating for the stock. BMO Capital almost held its stance by keeping their outperform rating, but caved by lowering its price target. The root of the analyst's actions was comments made by Roche who, in conjunction with Halozyme, is developing an injectable version of its breast cancer and gastric cancer drug Herceptin. Roche mentioned the prospect of a delay in European review of the injectable product (only to Herceptin SubQ) and downplayed the importance of the drug in its long-range plans.
The reality of the current statements made by Roche is that Herceptin may be delayed a bit for CHMP opinion, but 2013 may still be feasible. There appear to be no current roadblocks or indicators otherwise and big pharma players Roche, ViroPharma, and the world's biggest drug company; Pfizer, are moving forward with testing. So if not 2013, then perhaps an early 2014 may be realistic and a great catalyst to watch for.
The share price issue is not unfamiliar to Halozyme. In August of 2012, the FDA suddenly stopped the study of a ViroPharma International drug, designed for patients with a rare genetic disease that causes swelling that used Halozyme's enzyme. FDA statements indicated that there was concern about possible side effects on fertility, reproduction and fetal development from antibodies produced in response to the enzyme. But by September, ViroPharma issued news that the FDA gave the company permission to resume testing with the science intact.
Currently hovering around the $6.10 range, with a Market CAP of approximately $700 million, a good entry point may exist at this range for a long term play. A 20% move can happen quickly in either direction. The volatility of the past 6 months has been notable, but the science and strength of the company's product has been consistent and is notable as well.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.