Halozyme Signs Deal with Roche, Continues to Impress

From BioHealth Investor

I recommended Halozyme Therapeutics (HTI) in August (and mentioned it again last week that I was holding it in my biotech portfolio) as a nano-cap biotech. What I liked best about them were their humanized hyaluronidase products which have application to in vitro fertilization and for enhanced drug delivery.

After the Markets closed last night Halozyme issued a press release that they had signed a deal with Roche "potentially worth more than $600 million" according to Reuters. A pet peeve of mine is biotech deals in which the total of all milestone payments is cited as the value of the deal. I find this a bit misleading, in that there is no guarantee completion of these milestones will occur. Regardless, for a company with $17M in current assets at the end of q3, receiving $20M, the upfront payment, is substantial and impressive. I’m also highly impressed at how well this company controls its burn rate: I’m convinced they will use the money very well.

The deal with Roche involves application of Halozyme’s Enhanze, which uses the hyaluronidase enzyme to break down tissue, permitting better absorption of drugs into the body. This is also highly significant in that it validates that the targets Halozyme is pursuing are of interest to big pharmaceutical companies. With companies like Pfizer looking to fill emptying pipelines, I think there is more good news to come for HTI.

News of this deal sent the stock up over 50%. A prudent approach after such an increase, depending on level of risk tolerance, might be to sell some. For me, I firmly believe this stock will still go higher, especially once their Hylenex product, marketed with Baxter (BAX), is launched next year. Just the same, I’ll probably put in a stop sell order for most of my HTI around $3.5-3.75—low enough that it doesn’t get triggered "accidentally" (this is still an illiquid stock that can behave erratically) but high enough to assure some nice profit.

All in all, this company continues to impress me.

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