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Bristol-Myers Squibb Co (BMY) just announced that it has struck a deal with young biotechnology company Halozyme Therapeutics, Inc. (HALO) that will see the former pick up access to the latter’s proprietary drug delivery technology.
On the same day, Halozyme announced a second deal that sees drugmaker behemoth Roche Holding Ltd. (ADR) (RHHBY) gain exclusive access to the same technology in an as yet undisclosed therapeutic target.
The Bristol-Myers Squibb deal is the bigger of the two by a considerable multiple and, as such, it accounts for the majority of the upside run we have seen in Halozyme subsequent to the two developments hitting press. With that said, it’s impossible to ignore a company like Roche validating your technology, so even though this deal isn’t as large as the Bristol-Myers Squibb one is from a monetary perspective (at least, that is, from an upfront capital injection) it still holds a large degree of significance.
So why are these two household name healthcare companies rushing to pick up exclusive rights to a small biotechnology company’s proprietary tech?
Let’s try and figure it out.
The technology in question is called Enhanze and, as mentioned, it is designed to enhance drug delivery across a variety of drug types. It’s rooted in what the company calls its recombinant human hyaluronidase enzyme, or rHuPH20), which removes traditional limitations on the volume of biologics and drugs that can be delivered subcutaneously, or just under the skin.
When drugs are administered simultaneously, not all of the delivery reaches the target (be that the bloodstream or the liver or another). This means that quite a high concentration of the active compound needs to be administered. If the active compound in question is toxic, high concentration delivery isn’t an option. Intravenously, the chances of a drug reaching its target are far higher and this means that this latter delivery method is far better suited to toxic drugs.
With Enhanze, the idea is to take a drug that normally needs to be administered intravenously because of its toxicity and package it in a way that it becomes less toxic, even at high concentrations. Lower toxicity at high concentrations means it can delivered subcutaneously. There are numerous advantages associated with simultaneous delivery, primarily rooted in patient experience. An improved patient experience, however, also generated leads to a lower cost for the facility carrying out the administration. Additionally, a subcutaneous delivery could also translate to quicker efficacy.
Combine this group of advantages with the drug type that Bristol-Myers Squibb is aiming to combine with Enhanze and things become clear. The drug type in question, initially, is initially the company’s immuno oncology assets, led by its PD-1 asset Opdivo. If the technology works, it could reduce the delivery time necessary for patients undergoing treatment with Opdivo (currently around one hour of intravenous administration) to just a quick and easy series of shots.
So what does the deal look like?
Bristol-Myers Squibb will pay $105 million up front to Halozyme to develop subcutaneous formulations of molecules against PD-1 and 10 other immuno-oncology targets. There are up to $160 million in milestone payments associated with every asset the company pursues, meaning total potential remuneration for Halozyme if Bristol-Myers Squibb scores with all 11 development assets comes in at around $1.8 billion.
To add some perspective, that’s pretty much exactly the amount that Halozyme was valued at (market capitalization) preannouncement.
To quickly address the Roche deal, the latter has paid $30 million up front to gain access to the technology for the above-mentioned undisclosed asset and there are an additional $160 million in milestone payments up for grabs for Halozyme if things pan out positively.
So what now?
Now we wait to see whether Enhanze can actually improve the Bristol-Myers Squibb assets, and initially Opdivo, as the company has claimed. If it can, this is only the start of the upside we will see in Halozyme longer-term.
Disclosure: the author has no positions in any of the stocks mentioned.