By Jake King
On Friday morning, Halozyme Therapeutics (HALO) and one of its commercial partners, Baxter International (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.
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