Halozyme Buoyed By Good Herceptin News

| About: Halozyme Therapeutics, (HALO)

Halozyme Therapeutics (NASDAQ:HALO) has cleared one major hurdle in its aim of becoming a profitable company by 2014. Its Roche-partnered subcutaneous Herceptin equalled the intravenous formulation on blood concentration and efficacy endpoints in a phase III breast cancer trial that should pave the way for a European filing in 2012.

With multiple products in mid and late-stage trials and new partnerships expected, the California group is due for a stock uplift in coming months as investors begin to see value in its technology and pipeline; shares were already up 18% to $7.30 in early trading today, a 10-month high. Announcement of encouraging topline data from the Herceptin trial helps to validate its approach but it must continue to deliver on its partnered programmes to sustain investor interest.


Halozyme’s business model rests on the reformulation of existing drugs, particularly biological agents, from IV to subcutaneous delivery through the use of its recombinant human PH20 (rHuPH20) enzyme, which breaks down hyaluronan in human tissue which in turn allows penetration and diffusion of therapeutic drugs. Transforming an IV antibody into a subcutaneous agent would be quite a breakthough for biologics, while reducing both pharmacy preparation and treatment time, thereby improving the efficiency of health care. In the case of Herceptin, subcutaneous delivery takes about five minutes compared to 30 minutes of IV infusion.

Subcutaneous Herceptin was tested against the IV drug in combination with chemotherapy in 500 patients before and after breast cancer surgery. Roche and Halozyme announced the reformulation displayed equivalent results on the endpoints of serum concentration and pathologic complete response; full data will be presented at an upcoming medical meeting, with the San Antonio Breast Cancer Symposium a likely forum.

Secondary endpoints of progression free survival and overall survival were not announced, but with dosing having begun only two years ago that data is unlikely to be available for some time.

Success with Herceptin would represent a significant step forward. Whilst the company has made progress in getting a product using the technology on the market in the form of paediatric rehydration agent Hylenex – currently suspended because of glass particles found in vials – Herceptin represents a much bigger market opportunity and demonstrates the broader potential of the technology.

On the horizon

The second biggest upcoming catalyst lies in its partnership with Roche, in which up to eight targets may be selected. Halozyme has reformulated a second Roche cancer antibody, Rituxan; phase III results in non-Hodgkin’s lymphoma are expected next year. Should both subcutaneous formulations succeed in the clinic, only EU submissions are expected because of differences in reimbursement policies between European and US payers, says Eric Le Berrigaud, an analyst with Bryan Garnier in Paris.

However, outside of that partnership Hylenex could also grow to be a $100m product, according to analysts at Roth Capital Markets. Following the manufacturing issues, Halozyme reacquired rights from Baxter Laboratories, a relaunch is expected next year and a new marketing partnership is keenly awaited.

Other upcoming events include possible regulatory approval of the Baxter-partnered subcutaneous immune globulin treatment HyQ for primary immunodeficiency, and partnership for its subcutaneous ultrafast insulin analogue, which both use the same technology.

With $76m in the bank on June 30, $30m in partnership revenues in the first half of 2011 and a forecast cash burn of $30-$35m, Halozyme may be in a position to become profitable within two years – according to EvaluatePharma forecasts it will become cash positive in 2013, matching guidance from chief executive Greg Frost of turning in a profit in the 2012-2014 range.

However, its products in development and technology need to continue to perform. A stumble from subcutaneous Herceptin or the failure to secure a partner for Hylenex or subcutaneous insulin will do a great deal to reverse today’s gains.