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Here's Why Halozyme Therapeutics, Inc. Is Soaring Today

By Brian Feroldi - Updated Sep 14, 2017 at 11:46AM

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Shareholders can look at a trio of positive updates for today's big jump.

What happened

Shares of Halozyme Therapeutics (HALO -1.14%), a small-cap biotech focused on creating products that help other drugs work more effectively, rose by 16% as of 10:45 a.m. EDT on Thursday. Investors can thank a trio of positive news announcements -- including two new deals with a couple of big pharma companies -- for today's big move.

So what

Here's a review of the three announcements that caused traders to cheer today.

First, Halozyme announced that it has licensed its proprietary Enhanze drug-delivery technology to Roche (RHHBY 0.26%) for exclusive development of an "undisclosed therapeutic target." The deal calls for Roche to provide Halozyme with a $30 million up-front payment and the ability to earn up to $160 million in additional payments plus royalties if all milestones outlined in the agreement are met. 

Business people shaking hands and smiling

Image source: Getty Images.

Next, the company announced a new global collaboration and licensing agreement with Bristol-Myers Squibb (BMY -0.54%). The deal provides Bristol-Myers with access to the company's Enhanze technology on up to 11 new immuno-oncology drug targets. As part of the collaboration, Bristol-Myers will make an up-front payment of $105 million to Halozyme and allow the company to earn up to $160 million in additional payments plus royalties on each of the 11 collaboration targets. When taken together that represents about $1.76 billion in potential payments. 

Finally, the partnership and financial news allow the company to substantially increase its financial guidance for the full-year 2017. Halozyme now expects revenue to land between $245 million to $260 million, which represents an increase of $130 million over its prior range. What's more, the company now expects to produce positive operating cash flow between $50 million to $60 million for the year. That's a welcome change from its prior guidance of $75 million to $85 million in operating cash burn. Lastly, the company's year-end cash balance guidance was raised by $135 million and is now expected to land between $380 million to $395 million.

Given all of the positive news, it is easy to understand why shares are rocketing higher today.

Now what

The news out of Halozyme over the last year and a half hasn't exactly been universally positive. In fact, over the last 18 months, investors have had to deal with setbacks like a discounted capital raise, discontinued development of a few partnership programs, and a major clinical setback. These factors have weighed heavily on Halozyme's stock, so today's updates should be seen as a breath of fresh air for the company's long-term bulls.

Thankfully, today's vote of confidence from both Roche and Bristol-Myers should go a long way toward reassuring investors that Halozyme's Enhanze technology is the real deal. Combined with a padded bank account and the potential to earn nearly $2 billion in additional milestone payments, I see plenty of reasons to remain bullish on this small-cap company's future.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Halozyme Therapeutics, Inc. Stock Quote
Halozyme Therapeutics, Inc.
$42.91 (-1.14%) $0.49
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
$74.16 (-0.54%) $0.41
Roche Holding AG Stock Quote
Roche Holding AG
$41.75 (0.26%) $0.11

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