Seeking Alpha
, PropThink (350 clicks)
Long/short equity, deep value, event-driven, newsletter provider
Profile| Send Message|
( followers)  

By Jake King

On Friday morning, Halozyme Therapeutics (NASDAQ:HALO) and one of its commercial partners, Baxter International (NYSE:BAX), announced that the European Union's Committee for Medicinal Products for Human Use (CHMP) recommended the granting of approval for HyQvia, Baxter's immune globulin (IG) product that utilizes HALO's subcutaneous injection technology. This product is expected to be highly differentiated as the only true once-monthly, injected immunoglobulin product on the market. Given BAX's leadership in the space, HyQvia should gain significant share of the $6B IVIg market. Based on the announcement, HyQvia 100 mg/ml subcutaneous solution is intended for replacement therapy in adults (>18 years) in primary immunodeficiency syndromes, such as:

  • congenital agammaglobulinaemia and hypogammaglobulinaemia
  • common variable immunodeficiency
  • severe combined immunodeficiency
  • IgG subclass deficiencies with recurrent infections

We had pointed to this potential approval and its ability to re-energize shares of HALO in a prior article. In our view, confidence in HyQvia's U.S. approval should begin to come back into this name given the EU recommendation. Baxter recently met with the FDA and is expected to comment on the product's approval potential, likely when it reports Q1 earnings.

The delay in the CHMP's opinion on the marketing approval of HALO and Roche's subcutaneous Herceptin product, a major driver of the stock, has weighed on HALO since Jan. 30. Importantly, we believe the negativity around this product is already priced into the stock, and if a positive CHMP recommendation is issued in Q2, as we expect, the stock should rise back to prior levels in the $7-$8 range.

Other key catalysts for HALO are data regarding the company's treatment for cellulite at a major dermatology conference, and most importantly, Phase II data at ASCO for the company's potential treatment for pancreatic cancer (PEGPH20 combined with Gemzar). Both the cellulite and pancreatic cancer assets are not included in analysts' numbers, so positive clinical results - particularly for the PEGPH20 asset - could send shares of HALO up significantly. These are what's known as "free call options" in the stock, and given HALO's low valuation relative to where it typically trades, we believe the stock is a good bet on primary value drivers and associated free call options for upside.

Source: Halozyme Is Attractive Again After EU Opinion On HyQvia

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 relationships (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. Our full disclaimer is available at www.propthink.com/disclaimer.