HALO Momentum Expected To Continue

The recent sharp decline in Halozyme Therapeutics (NASDAQ:HALO) last week in fact presented a major buying opportunity for investors, with the shares up roughly 57% since bottoming on July 2nd (see our previous coverage). Investors bidding up the shares have told PropThink that the stock was clearly oversold, and agree that the products being developed with Roche suggest a valuation for HALO in the $7-$8 range by themselves. With $102 million in cash ($1 per share) and no debt, management reiterating on its conference call that it expects to become profitable in 2014, and statements that HALO may have preclinical data to address the FDA’s requests for the Baxter (NYSE:BAX) and ViroPharma (NASDAQ:VPHM) product candidates, the stock remains a good value and could continue to trade higher.

While analysts lowered their price targets on HALO due to delays for the BAX and VPHM products, Wall Street still believes the stock can climb to $9 a share in the next 12 months. Roche will host its Investor Day on September 5th, and HALO will host its Analyst Meeting on October 2nd, both of which could act as catalysts for the shares, particularly with Roche backing that there are no regulatory concerns with its Halozyme-enhanced product candidates (subcutaneous Herceptin and subcutaneous Rituxan). Another reason for HALO shares to remain strong is the company’s potential treatment for pancreatic cancer, called PEG-PH20. At the current share price, the market is assigning little to no value to this potential blockbuster drug given the focus on later-stage assets. Importantly, Phase II data is anticipated in 1Q 2013, and if PEG-PH20 demonstrates efficacy in this insidious disease, HALO could hit new highs, with this becoming a major value driver of the stock.

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