Halozyme Therapeutics, a De-Risked Business Model?

Distinctive features and future outlook for this noteworthy US biotech firm

In the competitive landscape of biotechnology, where innovation meets substantial risk, Halozyme Therapeutics has carved out a unique niche. As evidence of its success, the company boasts a 100% success rate in achieving positive bioavailability results in Phase 3 non-inferiority studies when transitioning from intravenous (IV) to subcutaneous (SC) administration, following Phase 1 positive data.

This fact alone is a performance, as the success rate is usually under 10% as I wrote in this article, about the success rate in clinical development.

Leveraging its proprietary enzyme technology platform, Halozyme has established itself as a pioneer in enhancing drug delivery and efficacy. This article explores the unique features that set Halozyme apart and provides insights into its future prospects.

Company overview

Halozyme Therapeutics is renowned for its innovative enzyme-based technology platforms that enhance the delivery and efficacy of drugs. The company’s flagship technology, Enhanze temporarily degrade hyaluronan, a gel-like substance in the body. This allows for the more efficient dispersion and absorption of injected drugs, enabling larger volumes to be administered subcutaneously (SC) rather than intravenously (IV).

Halozyme’s business model focuses on strategic partnerships with major pharmaceutical and biotechnology companies. By licensing its technology, Halozyme enables its partners to reformulate their existing drugs for subcutaneaous administration, which can improve patient convenience and compliance, reduce healthcare costs, and extend the lifecycle of drugs.

We therefore understand the success rate of Halozyme in Phase 3. The drugs already exist but the administration process changes and uses Halozyme technological platform.

While Enhanze is the flagship technology, the company actually owns 3 delivery platforms:

• Small Volume Auto-Injector (SVAI) - 0 to 2 mL. 4 approved SVAI products (1 proprietary + 3 partner products)

• High Volume Auto-Injector (HVAI) - 2 to 10 mL.

• Enhanze. 7 approved partnered products

Revenue breakdown

The company's revenues are segmented into three distinct streams:

• Firstly, royalties represent the primary and fastest-growing revenue source, accounting for more than 50% of total revenue. This stream includes royalties earned from partnered products.

• Secondly, product sales are driven by commercial products like Xyosted and Hylenex, as well as sales of Enhanze and auto-injector devices to collaboration partners.

• Thirdly, collaboration revenue encompasses income from development, regulatory, and commercial milestones achieved in Enhanze and SVAI (High Volume Administration Interface) development programs, both ongoing and anticipated through new partnerships.

Why using Halozyme platforms

SC injections are generally less invasive and more comfortable than IV infusions. This flexibility in administration not only improves patient comfort but also provides greater flexibility in managing treatment schedules and daily routines. Moreover, the cost-effectiveness of SC administration may lead to lower healthcare costs related to treatment course.

Pipeline and synergies

Currently, Halozyme generates royalties from seven approved products, with expectations to increase this to 10 by 2025. Existing products as of 2023 include Darzalex, Phesgo, HyQvia, Rituxan Hycela, and Herceptin Hylecta. New additions in 2023 are Vyvgart and Hytrulo, along with Tecentriq SC. Looking ahead to 2024-2025, potential new products such as Atezolizumab SC, Ocrelizumab SC, Nivolumab SC, and Amivantamab SC are anticipated.

Halozyme's Enhanze platform, combined with auto-injector technology, facilitated the development of the first High Volume Administration Interface (HVAI), capable of delivering 2-10 mL doses in under 30 seconds. This innovative capability presents a significant potential source of future revenue for the company.

This growth trajectory is projected to boost royalty revenues from $448M in 2023 to more than $1B in 2027 (royalties are now 54% of total revenues and should be 65% in 2028).

Patent cliff

Like all biotechnology firms, Halozyme faces the challenge of patent and royalty expirations, necessitating a continuous race to innovate and develop new products. The year 2030 looms as a significant patent cliff for Halozyme, influencing the company's current valuation with a focus on prudent foresight and strategic planning.

Outlook