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You are probably correct about this particular one from Eisai/Biogen. But that was just an example. I would have to do some more research to have details but several companies have developed SC formulations and got them approved: Regeneron, Amgen, Pfizer, etc. And others, like Merck, are in clinical development. So the question is, why are they doing it without Halo? It's hard for me to assume they are all stupid and misguided.
One of the reasons for the lack of new deals may simply be more competition, whether it is from companies like Elektrofi or large companies like Eisai and Biogen developing their own subcutaneous formulations.
https://www.fiercebiotech.com/biotech/lilly-gives-20-million-cash-injection-elektrofi-next-gen-subcutaneous-drug-collab
https://www.reuters.com/business/healthcare-pharmaceuticals/injected-version-eisaibiogen-alzheimers-drug-effective-side-effects-higher-2023-10-25/
I would say there are some signs of an exodus. 60 institutions sold out their positions last quarter, Bellevue included, which was one of our largest shareholders some time ago.
Agreed. The hope is that there is some kind of synergy between Halo and Antares. Unfortunately, there is no clear evidence for it yet.
Yes, PFE is going through some rough times but they signed their collaboration agreement with Halo in 2012. What is concerning is that Abbvie and Lilly also have not developed any Enhanze products and seem to have nothing in the works. Potentially huge deals have generated very little in revenues.
Thanks. I guess one direct competitor is Elektrofi. According to JPM, Argenx mentioned their collaboration at a recent cc. It started in 2021. Hopefully, it's still in early stages of development. I wonder if Halo will try to buy this company, or perhaps they have already tried.
https://www.elektrofi.com/news/blog-post-title-two-ja6h5-k7bd8
They released another PR about this. My understanding is that Halo claims they have no competition. Who do you see as Halo’s main competitors?
Maybe. I hope so. I just feel there are too many uncertainties to make it likely. Also, Helen expressed an interest in acquiring more companies, which I fear is another indication that demand for our technologies is weak. I am also concerned that Amgen may stop the development of Tepezza with us and do it on their own. I hope that's priced in because that product has been in phase 1 for a long time.
By the way, Humira was in development but dropped years ago. Pfizer, I believe, has never had an Enhanze product in clinical development. I'm not sure about Lilly.
Why would that keep them from making new deals? It makes the company more valuable.
What else do you think it could be?
I fear that it means demand for Halo's technology platforms is not very strong.
It's actually a phase 3 study and Roche will submit the data "in the coming months." That means approval is still at least a year away. It's a blockbuster drug but I suspect the market is trying to guess what the conversion rate will be. Obviously, this won't be another SC Darzalex. It is a 10 minute injection vs a 3 hour infusion, I believe, but it's only twice a year. And as you point out, for patients who have an injection reaction, the time savings won't really be significant. That is why I raised the question of how severe infusion-related reactions typically are. It looks like they have the potential to be more severe. The SC formulation may be more appealing to new patients and patients who have had severe infusion-related reactions.
"Late-breaking Phase III results show subcutaneous injection was non-inferior to intravenous infusion based on OCREVUS levels in the blood over 12 weeks"
"The OCARINA II data will be submitted to health authorities around the world in the coming months."
Thanks. I wonder how severe the infusion-related reactions typically are.
"The most common adverse events in the OCREVUS subcutaneous injection group were injection reactions (48% of all exposed patients), all of which were either mild or moderate. The most common AEs in the OCREVUS IV infusion group were infusion-related reactions (17%). A total of 4 and 7 serious AEs were experienced by 3 (2.5%) and 4 (3.4%) patients in the OCREVUS subcutaneous and IV infusion groups, respectively."
Yes, and overall the other two chats were more positive, partly because she emphasized that the next 4 potential Enhanze products are expected to have peak sales of $35 billion, if I remember correctly. Of course, we’ll have to see if the SC formulations are approved for all indications and what the conversion rate will be.
Agreed. I listened to the call. She did not spell it out but obviously they don't have the cash for any meaningful acquisition, so they will have to stop the buyback program and probably sell shares, which of course is what they should have done to begin with. This would have allowed them to make a potentially more transformative acquisition. Recent good examples of well-run biotech companies that sell shares to invest in the future of the company are ARGX and RCKT. They of course usually do it right after releasing good news. We are paying a heavy price. In spite of Darzalex and to a lesser extent Phesgo exceeding expectations over and over, the stock is basically where it was about 3 years ago. What's troubling is that their interest in more acquisitions implies that they think Antares and Enhanze will not provide sufficient growth and durability of revenues.
The Tecentriq delay is a fairly significant setback especially since Darzalex Faspro's royalty rate out of Europe will be cut in half starting next year.
Did she really say that? Wow. Does it mean they will finally stop the buybacks?
They "maintained" on 8/15 and "reiterated" today. Let's hope they know something and they are right!
Do you know who are the analysts that have the $28 and $72 PTs?
From Nasdaq.com regarding Institutional Holdings in Q2 2023:
ACTIVE POSITIONS HOLDERS SHARES
Increased Positions 183 11,531,860
Decreased Positions 202 12,931,493
Held Positions 56 99,130,897
Total Institutional Shares 441 123,594,250
New and Sold Out Positions
ACTIVE POSITIONS HOLDERS SHARES
New Positions 50 2,293,083
Sold Out Positions 61 5,328,924
I believe most institutions will report within 45 days after the end of Q2, so the deadline is August 15. The previous deadline was around May 15. Bellevue used to be one of the largest shareholders. Unfortunately, they have been selling in the past several quarters. No life sciences hedge fund has a large position anymore. I remember Baker Bros. and others used to.
"they now have less than $100 million cash in the bank and are carrying about $1.5 billion in debt."
Thanks. I haven't paid much attention to that. I see that they also have $179M in marketable securities, presumably treasuries? Do we know if they still plan to spend another $250M in stock buybacks in 2024? I hope they don't just keep borrowing more money just to do that.
"Cash, cash equivalents and marketable securities were $275.6 million on March 31, 2023, compared to $362.8 million on December 31, 2022. The decrease was primarily due to the repurchase of common stock for $150 million in the first quarter of 2023."
"As of March 31, 2023, the Company has repurchased a total of 12.6 million shares for $500.0 million at an average price per share of $39.81 under our $750 million 3-year share repurchase plan approved in December 2021."
I am assuming you mean the earnings call. There was another one on 5/10, which was fairly similar and one yesterday too, that I haven't listened to yet. There weren't a lot of surprises and I thought Helen did an okay job, though it's hard to put a positive spin on the Q/Q royalty revenues decrease, IRA, the recent revocation of Janssen's co-formulation patent for Darzalex SC, the lack of new deals, and the uncertainty about the stepped down royalty rate in 2024 and 2027,
It's just so disappointing that the company spent $500 million to buy shares at an average price per share of $39.81! They could've done what most companies do at this stage. They had a couple of opportunities to sell some shares at around $50 and then they could've made a more transformative acquisition, which could have helped reassure investors a lot more than just repeating they are "delighted with the momentum" and confident that their revenue growth will be strong and durable. The Antares acquisition may turn out to be okay but for now it has lowered our margins and has not added a lot of revenues. The longer we have to wait for new deals, the more nervous the market will get.
Having said that, I think sentiment will turn more positive if and when SC Efga and hopefully SC Tecentriq get approved in June and September.
Today the xbi is up almost 5% and I don't see any option activity for Halo and of course the stock for now is barely up. From Nov 2021 to Nov 2022 halo was one of the best performing biotech stocks. But I fear that it's going to take an awful lot of good news for Halo to regain investors' trust and the stock to get back to $59. In the meantime, the fact that we've had no significant, positive news flow and no new deal announced since the small deal with Chugai in March 2022 is not helping.
After a quick 50% drop in stock price, some insider buying would have helped restore some trust and confidence. As far as I know, no one has stepped up so far.
JPM sees the CMS initial guidance on implementing the 2026 negotiation process as a headline negative for the sector. However,
"...we see fairly limited impact from the updates by CMS. Specific to Keytruda and Darzalex, we see the inclusion of hyaluronidase in newer formulations of these medications as resulting in the CMS continuing to treat Darzalex Faspro and eventually SubQ Keytruda as separate products....
Both SubQ Keytruda and Darzalex Faspro include hyaluronidase, which we view as a second active ingredient (and therefore a separate drug)."
I hope they are right.
The other issue that may have spooked investors lately is competition from companies such as Alteogen, Merck and perhaps others using hyaluronidase.
Thank you. Wow. What a brutal selloff. It seems to me the problem now is "Trust leaves on horseback and returns on foot..." and sometimes it never returns. I've been following these issues pretty closely and I feel pretty foolish for not selling any shares in the high 50s. I hope I am not deluding myself in thinking that we are close to the bottom.
Imho Halo got really lucky with Darzalex Faspro and the pandemic, which definitely accelerated the conversion rate to SC. They also got lucky that biotech valuations came down when they were flush with cash. But instead of investing in growth they wasted money with stock buybacks. They knew about the concentration risk and all the other issues and they could have at least tried to make a transformative acquisition. Antares may turn out to be okay but it remains to be seen. Even Pfizer is not using their cash for stock buybacks because they know that fewer shares and no growth would still mean a lower stock price. But for a company like Halo, I've always thought it was a terrible decision.
I can’t find this PR on halo’s website or anywhere else.
Halo's lawyers must have drafted this. It says "we also do not believe..." instead of "this decision will not impact...". So, the uncertainty is there, which obviously the market does not like. I wonder if they could've told us in advance that this decision was not going to impact royalty revenue until at least 2030. If so, why didn't they do it?
I imagine part of the concern is that this decision will encourage others to oppose other co-formulation patents both in EU and US. Both MS and JPM were pretty positive but that hasn't stopped the selling for now.
The note from MS was not co-authored by multiple attorneys. Is there another "article"? Below is a large portion of the note:
"What are the implications? (1) The detailed reason behind the revocation is not
known yet, but we expect the EPO to issue a detailed written decision 1-6 months
from now. As such, it is difficult to fully understand the read-through from this
revocation decision to the U.S. counterpart patent (Exhibit 1). Once the detailed
written decision is issued, we will primarily focus on: (a) the EPO's commentary
on obviousness, which could provide insights on the strength of other coformulation
patents and (b) their commentary on the amino acid sequence of
rHuPH20, which could have implications on whether the patent covers the actual
co-formulation. Mgt. commented that the main focus of the oral hearing was on
obviousness. (2) We also note that EP3,827,845B - another co-formulation
patent covering Darzalex Faspro - is also opposed at the EPO. The EP '845 Patent
has a broader claim scope than that of the EP '770 Patent (Exhibit 1), mainly in
the amount of hyaluronidase. As such, we see a negative read through on the EP
'845 Patent due to the revocation decision. The decision on the EP '845 Patent is
expected in Dec. 2023 - Dec. 2024.
What can J&J do in addition to appeal? There is still a patent application pending
in Europe (EP4,085,929A), so depending on the reason for revocation, J&J may be
able to pursue claims in this application that cover the co-formulation but avoid
the deficiencies that are the basis for the revocation.
The authors of this material are not acting in the capacity of attorneys, nor do they
hold themselves out to be acting as such. This material is not intended as either a
a legal opinion or legal advice. The information provided herein does not provide all
possible outcomes or the probabilities of any outcomes. The result of any legal
dispute or controversy is dependent on a variety of factors, including but not limited
to, the parties' historical relationship, laws pertaining to the case, relative litigation
talent, trial location, jury composition, and judge composition. Investors should
contact their legal advisor about any issue of law relating to the subject matter of
this material."
Thanks for posting these emails. And I saw Halo's PR this morning. Still, it is concerning that the stock has dropped so much. I'm having a hard time believing all the sellers have been foolish and misinformed.
You have to request it 3 days in advance, I believe. I did not do it.
Yes, I had read that. But I assumed the analyst meant in the US. Otherwise, why would anybody go through the trouble of challenging this co-formulation patent in EU now? Why not wait? The information about the COM patents is public, I would think. If there is no issue until 2029, why have other analysts asked questions about this over and over in the past couple of years? It's hard to believe the MS analyst is the only one to have figured this out. If the co-formulation patent for Darzalex Faspro is protected until 2029, why has Helen not told us so? She said they are allowed to talk about public information.
In any case, I hope the MS analyst is right. We will find out soon. at least as far as Europe is concerned.
How do you expect royalty revenues to grow if we have a stepped down royalty rate, from 4% to 2%, possibly for all products? Unfortunately, I suspect that is what the market is afraid of.
MS is still positive but obviously there’s a lot of fear of an unfavorable decision.
Did Antares have a partnership with Lilly
Yes, for now. MS came out with another 12 page note today : A Framework to Understand
Hyaluronidase-Based SubQ IP - Darzalex Faspro as A Case Study. They say patent implications for Enhanze technology "represent an area of investor focus."
I don't feel comfortable posting the whole thing. Apparently, Darzalex Faspro in the US is protected by the COM patent of daratumumab, which expires in 2029. So, the main concern is about Europe but they think the hearing in March may prove informative for understanding the defensibility of subQ co-formulation patents.
"The co-formulation patent underlying subQ Darzalex is facing an
invalidity challenge in Europe in the near-term, and we believe the outcome of this
event should provide investors with clarity into IP strength."
I hope you're right. But new deals would start generating royalties in 6-7 years, and not every deal has created new products. It's only pretty close to a sure thing when they reach phase 3 trials. A stepped down royalty rate on Darzalex Faspro starting from 2024 would be a major blow. And I suspect the market would expect other co-formulations patents to be challenged successfully.
Henderson sold a significant portion of his holdings, though. And he is not the first one to do that. That, together with the stock action, the various uncertainties, etc., is concerning to me.
I'm not sure. There are a lot of factors at play that determine the conversion rate, duration of IV administration, whether it's administered with other drugs that have to be IV, incentives for doctors, etc.
Labarre sold 10,000 shares on 2/27, Henderson 20,000 on 3/1. Helen donated 10,000 on 3/1.
I think so but I seem to remember they expect an 80% conversion rate for most enhanze products, which I am not sure is realistic. What do you think of the recent insider sales?
The note is dated March 1.
But imo the biggest catalyst is the oral hearing on Darzalex Faspro coming up on 3/14 to 3/15. If JNJ and Halo lose and Halo's royalty rate is cut in half, Halo will lose about 2% of JNJ's revenues from Europe. Since revenue in Europe is likely to be about $3B in 2024, Halo would lose about $60M in royalties and more in the following years. The stock may be weak now because of the imminent risk. Below is another MS note from today:
European Opposition Upcoming Catalysts (Exhibit 5):
Oral hearing on Darzalex Faspro co-formulation patent: European
oppositions allow challengers to invalidate patents centrally at the
European Patent Office, rather than individually at the national courts.
This '770 Patent is important because it: (1) covers the subQ formulation
using Halozyme’s Enhanze technology and (2) has the potential to extend
the exclusivity period from the composition of matter patent from 2031 to
2036. A brief decision is expected at the end of the oral hearing, with a
detailed written decision expected in 2Q-3Q 2023.
Exhibit 5: Tracked European oppositions
Drug Patent
owner Challenger Next
catalyst
Catalyst date
(M/D/YY)
Challenged
patent
Darzalex
faspro JNJ straw man
opponent
oral
hearing
3/14 to
3/15/23 EP3,370,770