Many healthcare stocks muddled along over the past week. That wasn't the case, though, for three stocks of companies operating in very different parts of the healthcare spectrum.
Shares of Halozyme Therapeutics (NASDAQ:HALO), Inovalon Holdings (NASDAQ:INOV), and Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) jumped by at least 16% this week. Here's why the stocks soared, and a look at whether they can go even higher.
Halozyme Therapeutics stock was the biggest healthcare winner of the week, with a gain of nearly 25%. The clinical-stage biotech benefited from a triple whammy of good news.
On Thursday, Halozyme announced a deal with Roche to license its Enhanze drug-delivery technology for development of an undisclosed target. That deal landed Halozyme an up-front payment of $30 million. Halozyme also stands to make up to $160 million in additional milestone payments plus royalties.
The biotech announced an even bigger deal on the same day, with Bristol-Myers Squibb (NYSE:BMY). That agreement allows Bristol-Myers Squibb to use Halozyme's Enhanze technology for up to 11 targets, one of which is the big drugmaker's PD-1 inhibitor Opdivo. Halozyme will pocket a tidy $105 million up front and has the potential to earn milestone payments of up to $160 million for each target Bristol-Myers Squibb selects. In addition, Halozyme will receive royalties on sales of any products that Bristol-Myers Squibb markets using Enhanze.
These two developments led to Halozyme's announcement of more good news. The biotech increased its financial guidance for 2017, with an increase of $130 million at the midpoint, reflecting the up-front payments from Roche and Bristol-Myers Squibb. Instead of burning through $75 million to $80 million this year, Halozyme now expects to have positive operating cash flow of $50 million to $60 million.
Inovalon shares jumped close to 17% higher this week. The big catalyst for the cloud-based healthcare platform provider was news of a huge win with the nation's largest health insurer.
On Tuesday, Inovalon announced that UnitedHealthcare, a UnitedHealth Group (NYSE:UNH) company, signed a five-year deal to implement the Inovalon ONE Platform. UnitedHealthcare plans to use the platform to provide clinical-quality outcomes insight and real-time data visualization for its health plans, including commercial and Medicare Advantage plans.
UnitedHealthcare joined a growing list of health insurers using Inovalon's technology. Inovalon's base of nearly 500 customers also includes several of the largest drugmakers, pharmacy chains, and technology providers in the world.
Teva stock has plummeted throughout much of 2017. However, the specialty- and generic-drug maker's share price vaulted 16% higher this week on news of a change at the top.
On Monday, the company announced that Kare Schultz would take over as president and CEO. Schultz will take the baton from Yitzhak Peterburg, who served as Teva's interim CEO after the abrupt departure earlier this year of former CEO Erez Vigodman.
The selection of Schultz as Teva's new CEO was well-received by investors. Schultz brings an impressive record of success in the pharmaceutical industry, most recently serving as CEO of Danish drugmaker Lundbeck. During his tenure at Lundbeck, Schultz implemented major restructuring initiatives that led to a big turnaround for the company.
Can they go higher?
In my view, Halozyme appears to be on track for even brighter days ahead. The company's list of partners reads like a Who's Who of the biopharmaceutical world. I especially like that Bristol-Myers Squibb has teamed up with Halozyme to use Enhanze with Opdivo.
I also think Inovalon's prospects look great. Although the stock is priced at nosebleed levels with shares trading at 45 times expected earnings, there's a huge untapped market for Inovalon's technology. I expect Inovalon will make some strategic acquisitions along the way that allow it to add to its capabilities and to its geographic reach.
Then there's Teva. Hiring Kare Schultz appears to be a good move, but I wouldn't want to be in his shoes. Teva faces a multitude of problems, from sinking sales of multiple sclerosis drug Copaxone to stiff headwinds in the U.S. generics market. The company also has a debt of $35 billion to service. Teva stock could go higher, but my hunch is that the honeymoon for Kare Schultz will end pretty quickly.
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