Why Halozyme Therapeutics Inc. Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Halozyme Therapeutics (NASDAQ: HALO  ) , a biopharmaceutical company focused on the development of human enzymes, gained as much as 24% after reporting its third-quarter earnings results.

So what: For the quarter, Halozyme reported a tripling in its revenue from the prior year to $16 million as its net loss shrank modestly to $19.3 million, or an adjusted EPS loss of $0.17, from $20 million in the year-ago period. By comparison, Wall Street had been expecting Halozyme to report just $14.6 million in revenue (a decisive beat), but also expected a narrower loss of just $0.15 per share. Halozyme's revenue soared on the heels of the European launch of Herceptin SC and HyQvia. The launches of these two drugs also resulted in milestone payments of $10 million and $4 million, respectively, which will be recognized in upcoming quarters.

Now what: The good news here is that Herceptin SC, a subcutaneous version of cancer drug Herceptin that can be delivered rapidly compared to the IV version, has a shot at being a real revenue growth driver for Halozyme moving forward. The downside is that it's probably going to be a few years before Halozyme is profitable based on product sales alone, which makes its current $1.5 billion market valuation potentially frothy. This is certainly a name that biotech-savvy investors would be smart to have on their watchlist, but at its current price I'm perfectly happy remaining on the sidelines.

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  • Report this Comment On November 08, 2013, at 3:17 PM, baloneyspotter wrote:

    Actually the market cap is not that large here. Have you looked at the current revenue for many of these drugs that are IV form now, that can easily convert to SQ? They are in the billions, and it will not take that long for Halozyme to be quite profitable. Anyway, very few of you articles have any due diligence and are short and brief and basically say the same thing, to warn people not to be invested, with all due respect. Thanks!

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