Some biotechnology firms have had one heck of a 2013 thus far: Clovis Oncology Inc. (NASDAQ:CLVS) presented monster data for their cancer drug at ASCO and saw its' shares explode as much as 130% overnight. Pharmacyclics (NASDAQ:PCYC) shares have risen over 100% over the past 12 months on the heels of its cancer compound and promising pipeline. Ligand Pharmaceiticals (NASDAQ:LGND) has seen big time success with its cancer drug Kyprolis and have seen their shares double since the start of the year.
There have also been the usual suspects on the other side of the coin: Amarin (NASDAQ:AMRN) continues to get clobbered, as their heart drug Vascepa has turned out to be a bust. Arena Pharmaceuticals (NASDAQ:ARNA) finally got FDA approval on their obesity drug Belviq... Only no one cares. With a max 5% weight loss, sales will most likely be slow to gain traction. Rigel Pharmaceuticals (NASDAQ:RIGL) saw their shares get beat into the pavement, after phase 3 results for their arthritis drug failed to show efficacy and Astra Zeneca dumped the program.
As you can see, it's boom or bust when dealing with small cap biotechs. So, how do you separate the men from the boys? How do you distinguish science from science fiction?
Answer: homework, homework, homework.
Today I will focus on Halozyme Therapeutics (HALO). Halozyme has been around for a while... 2004 to be exact. Their technology is called Hylenex, an FDA approved new drug delivery method which breaks down tissue temporarily (subcutaneous injection) to deliver doses of drugs quickly and efficiently.
Halozyme has shown that this method can be used safely and effectively with a broad range of already existing drugs which are traditionally administered with an IV. Here's the key... Administering these drugs with traditional IVs can take up to 2 hours in a hospital setting. With Halozymes' technology the same drug can be administered to the patient in only 5 Minutes.
Obviously, this is a huge game changer in how drugs are delivered and patient care is improved. It's also a clear winner in regards to cutting costs of patient care, which insurance companies eat up.
Halozyme wasted no time forging lucrative partnerships with drug titans Roche, Baxter, Viropharm and most recently Pfizer.
2013 has been quite the transformational year for the small biotech firm out of San Diego, CA. Once deemed unproven and misunderstood, Halozyme has evolved from a obscure clinical drug discovery firm with promising ideas, into a company armed with one of the most robust pipelines in the space. With two approved products under their belt already, the most recent being last month when the European Medicines Agency granted approval for their drug Hyqvia which is partnered with Baxter , Halozyme looks to be cash flow positive as early as Q2 2014.
The most intriguing thing about Halozyme is that its biggest catalysts have yet to come and are on the horizon in the very near future. Undoubtedly, the most important event is the European medicines agency opinion later this month on Halozyme and Roches' drug candidate Herceptin SC. Herceptin is already the leading breast cancer drug in the world with revenues north of $7BB last year alone. This new version of the drug will certainly breed new life into the Herceptin franchise for Roche, and create a steady reliable revenue and royalty stream for Halozyme in the process.
Herceptin SC approval this month would likely pave the way for Mabthera SC approval, another Halo/Roche partnered drug, which is also up for European approval later this year. Mabthera is one of the top lymphoma franchises in the world generating $4BB in revenues as of last year. Since both drugs have already been approved and have been on the market for some time, the fact that the new version of these drugs use the same mechanism of action from Halozymes' drug delivery platform. I believe it is a smart bet that if European regulators approve Herceptin SC, Mabthera SC would follow suit.
It is important to remember that there are always risks when considering biotechs based on approvals from regulatory agencies. Halozyme had a bit of trouble last year when the FDA delayed approval for Hyqvia and requested additional information before approving the drug. This actually ended up helping Halozyme with their EMA approval, as management was quick to provide that additional data with their application in Europe. We will also hear from the FDA this quarter in regards to the Hyqvia application and since the EMA granted European approval just last month, it is likely the FDA will deem it has enough data to grant approval as well.
My conclusion is that although it may be a bumpy ride at times, there is a ton of upside to this story. With Halozyme finally firing on all cylinders, I certainly think it is time to get behind the wheel.
Disclosure: I am long HALO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.