Halozyme Therapeutics ( HALO Quick Quote HALO - Free Report) has been riding on its proprietary drug delivery technology, ENHANZE, over the past couple of years. The company’s promising technology attracted several large pharma companies to develop the subcutaneous (“SC”) formulation of their commercialized drugs using ENHANZE including J&J ( JNJ Quick Quote JNJ - Free Report) and Roche ( RHHBY Quick Quote RHHBY - Free Report) . Recently, a biotech company, argenx ( ARGX Quick Quote ARGX - Free Report) successfully completed a late-study evaluating the SC formulation of its commercialized drug, Vyvgart. Currently, the company has 11 collaborations and five marketed partnered drugs based on this technology.
Shares of Halozyme have gained 3.1% so far this year against the
industry’s decrease of 12.1%. Image Source: Zacks Investment Research
Halozyme mainly derives its revenues from royalties on the sale of drugs developed using ENHANZE. For the past few quarters, royalty revenues have been driven by J&J’s Darzalex Faspro, the SC version of its blockbuster cancer drug, Darzalex, available for intravenous administration. In May 2020, the FDA approved the subcutaneous administration of J&J’s Darzalex, followed by approval in Europe in June.
Several label expansions of the drug have been approved since its first approval and more are likely to happen going forward. J&J has reported strong uptake of Darzalex since its launch, most likely due to the convenience of administration compared to intravenous. The drug is likely to continue its strong growth momentum in the next few quarters, bringing more royalties for Halozyme.
Roche has developed three drugs using Halozyme’s ENHANZE technology, including Rituxan Hycela, Phesgo injection and Herceptin SC. Sales of these drugs also drive royalties for Halozyme.
Roche is also developing the subcutaneous formulation of Tecentriq and Perjeta. Their successful development followed by potential approval will boost Halozyme’s royalties going forward.
Last month, argenx announced that a phase III study, ADAPT-SC, evaluating the subcutaneous (‘SC”) formulation of its generalized myasthenia gravis therapy, Vyvgart (efgartigimod), met the primary endpoint of reduction in IgG, the most common type of antibody found in blood circulation.
argenx is planning to submit a biologics license application for the same later in 2022.
Halozyme expects to generate $1 billion in annual royalties from its ENHANZE technology by 2027.
Halozyme also supplies bulk API to collaborators using the ENHANZE platform for drug development, which it records under product sales. The sale of bulk API also brings a good chunk of its revenues every year. Halozyme expects at least five partnered products to enter mid- to late-stage development and four new partnered products to enter clinical-stage in 2022. The higher number of research activities for partnered products as well as higher demand for commercialized partnered drugs will continue to boost bulk API sales this year.
Following the failure of its lead pipeline candidate, PEGPH20, in 2019, Halozyme initiated restructuring of its business to support future growth. The restructuring activities have reduced operating expenses in the past two years with the trend expected to continue in 2022.
However, rising biosimilar competition for Roche’s Herceptin and Rituxan is a cause of concern. Lower sales of these drugs amid competition will hurt Halozyme’s royalties going forward. However, potential new drugs and the strong uptake of Darzalex Faspro are likely to offset the loss.
Halozyme currently carries a Zacks Rank #3 (Hold). You can see
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