Why Halozyme Therapeutics, Inc. Stock Jumped 21.2% in September

By Markets Fool.com

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What happened

Shares of Halozyme Therapeutics, Inc. (NASDAQ: HALO)a biotechnology company focused on enhancing drug delivery, rose 21.2% in September, according to data from S&P Global Market Intelligence. The stock tanked to begin the year, but following a handful of conference presentations last month, it appears back in favor.

HALO data by YCharts

So what

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Halozyme's ace in the hole is Enhanze, an enzyme that enhances efficacy of its partners' drugs by breaking down tissue surrounding their targets. Enhanze even allows subcutaneous injections (instead of inconvenient IV infusions) of multi-billion blockbuster cancer therapies Herceptin and Rituxan/MabThera from Roche, and it is a major component of immunodeficiency treatment Hyqvia fromShire. Although the Roche-partnered products aren't available in the U.S. yet, 2015 sales of these combination therapies containing Enhanze reached about $6.8 billion last year.

Halozyme's quickly growing revenue streams include sales of Hylenex (basically a solo version of Enhanze),a royalty percentage in themid-single digits on sales of all three commercial stage products containing Enhanze, plus significant milestone payments when these and drugs under development pass predetermined milestones.

HALO data by YCharts

Halozyme Therapeutics' impressive revenue growth excited investors, driving up the stock price when it seemed the company was on the express train to profit town midway through last year. Unfortunately, the market wasn't too thrilled earlier this year about rapidly increasing outlays for research and development pushing positive cash flows further into the future.

Halozyme Therapeutics posted a net loss of $46.7 million in the first half of the year, but finished June with about $245.5 million in working capital. The excess liquidity is due to some fancy financing that soured investors' moods in January. The company basically took out a high interest loan to be repaid with future royalties on its partnered commercial-stage products.

Now what

The company's future is looking bright, despite the increased debt load. Enhanze is currently in early stage clinical trials with three approved therapies, Roche's Perjeta, Johnson & Johnson's Darzalex, and AbbVie's Humira. Annual global revenue from the trio of popular drugs is expected to be about $24 billion in 2025. Halozyme Therapeutics is entitled to mid-single digit royalties on sales of combination products that arise from these collaborations.

In addition the the above therapies, it also has a longer lasting version of Enhanze in early stage clinical trials withMerck & Co.'s Keytruda, which is the groundbreaking immune-oncology therapy largely responsible for driving Jimmy Carter's advanced-stage melanoma into remission.

With plenty of irons in the fire, Halozyme Therapeutics has a shot at helping as many people as the former president's philanthropic ventures. Given its long cash runway, and a market cap of about $1.56 billion at recent prices, the biotech stock could do wonders for a long-term portfolio as well.

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Cory Renauer owns shares of Johnson and Johnson. You can follow Cory on Twitter, @TMFang4apples, or connect with him on LinkedIn for more healthcare industry insight.

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