Halozyme Shares Leap on Roche Agreement

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haolzyme therapeutics NEW YORK — Shares of biopharmaceutical company Halozyme Therapeutics Inc. jumped Wednesday after the company said it signed a deal with Roche worth up to a potential $581 million.

Shares of Halozyme soared $1.71, or 60 percent, to $4.56 on the American Stock Exchange in morning trading, following a flurry of premarket activity. The stock hit a new 52-week high of $4.93, eclipsing a previous high of $3.72.

The agreement calls for San Diego-based Halozyme's drug delivery technology, called Enhanze, to be used in Roche compounds. Roche will pay Halozyme $20 million upfront for the application of the technology to three predefined Roche biologic targets. Roche will have the option to exclusively develop and commercialize the technology with an additional 10 targets over the next 10 years.

Additional milestone payments for clinical trials and sales could add up to more than $111 million for the first three targets. Each of an additional 10 targets could bring $47 million a piece in milestone payments.

Roche also will invest $11 million in Halozyme, representing 5 percent of Halozyme's common stock.

"In every respect, both technically and commercially, this represents a landmark agreement for Enhanze technology and for Halozyme," said Dr. Jonathan Lim, Halozyme president and chief executive, in a statement.

Jefferies & Company analyst Eun K. Yang reaffirmed a "Buy" rating and increased her price target to $10 from $5 on the news.

"The Roche deal provides a strong validation for Halozyme's drug delivery technology and positions the company in solid financial standing going forward," she wrote in a note to investors

Furthermore, there is potential for more partnerships, she said, given that Roche is only the first partner and some of Roche's biologics are sold by Genentech in the U.S. Initial targets for development have not been disclosed, but Yang pointed out that possible candidates include Rituxan, Herceptin and Avastin, all made by Genentech.

Brean Murray Carret & Co. analyst Jonathan Aschoff reaffirmed a "Buy" rating and a price target of $5, also calling the deal a validation for Halozyme's technology. He also pointed to data from Halozyme's Phase I trial of Chemophase _ designed as a post-surgery chemotherapy treatment for superficial bladder cancer _ to work as an additional positive catalyst for the company. Those results are expected in the second half of 2007, he said.

© 2006 The Associated Press