Eye on Halozyme Therapeutics

Feb.15.07 | About: (HTI)

We have spoken favorably on Halozyme Therapeutics (HTI) in the past. Yesterday the Company announced an expansion of their relationship with Baxter Healthcare and positive results from its Phase IIIB study on the use of HYLENEX from the Infuse-Morphine Study. The stock rose impressively on this news; over 11% during regular trading and over 5% on the announcement of the positive Phase IIIB results.

The company originally came to my attention on December 5, 2006 when it announced it had entered into an agreement to apply HTI proprietary Enhanze technology to Roche's biological therapeutic compounds.

The technologies that are the focus of the Roche and Baxter relationships are called Enhanze™ and HYLENAX respectively. Both technologies use proprietary formulations of human enzymes known as hyaluronidases. These enzymes break down hyaluronic acid a major component of skin and cartilage, allowing easier penetration and diffusion of drugs administered by injection. Enhanze is used for the transportation of large molecules such as monoclonal antibodies and is the subject of the Roche deal. Roche will use it on 13 products and the deal is worth over $600 million; $20 million up front and $111 million for three of the products assuming milestones are achieved, $11 million equity investment at 25% premium and $47 million for each of the other products chosen by Roche. Roche will use the technology with Rituxan, Avastin and Herceptin as well as others not disclosed.

These products are from the corporate relationship between Roche and DNA. HYLENEX is used for small molecules, such as morphine, and for hydration and is the subject of the original sales and marketing relationship with Baxter. This agreement was expanded to a strategic relationship yesterday. The new agreement will cover the use of HYLENEX recombinant with Baxter’s proprietary and non-proprietary small molecule drugs. HTI will receive an initial payment of $10 million, an equity investment of $20 million and will receive further milestone payments in the future. In addition, after the market had closed on Wednesday, HTI and Baxter announced the presentation of results of a Phase IIIB clinical trial showing that subcutaneous administration of morphine with HYLENEX accelerated the time to maximal blood levels of morphine by 33% versus morphine with placebo, and appeared safe and well- tolerated.

The valuation of HTI is now over $550 million and is set to rise even higher on the basis of this news. In 2007 HTI will announce results of an Enhanze clinical trial. The stage of the trial and product remain undisclosed although the results will be announced in 1Q. In addition, we should see the commercial launch of HYLENEX in Q2 and the complete enrollment of Chemophase phase I/II study in 3Q 2007. There may also be other collaborations along the lines of the Roche deal, in 2007. We could see further trial announcements during the year. The stock is very event driven and will remain so in 2007. However, we do not expect the same increases in stock price in 2007 seen since December 2006 on the basis of positive news from the events mentioned.

HTI 1-yr chart

Disclosure: Author has no position in HTI.