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Bristol-Myers (BMY) Collaborates With Halozyme for ENHANZE


Bristol-Myers Squibb Company BMY recently entered into a collaboration and license agreement with Halozyme Therapeutics, Inc. HALO.

Per the agreement, Bristol-Myers will use Halozyme’s ENHANZE drug delivery technology. This will facilitate subcutaneous administration of Bristol-Myers’ immuno-oncology drugs.

ENHANZE technology is based on a proprietary recombinant human hyaluronidase enzyme (rHuPH20) that temporarily degrades hyaluronan (chain of natural sugars in the body) to enable dispersion and absorption of other injected therapeutic drugs.

Per the terms of the agreement, Bristol-Myers will pay an initial $105 million to use ENHANZE technology. The company has also designated multiple immuno-oncology targets including programmed death 1 (PD-1) and has an option to select additional targets within five years from the effective date. The collaboration may extend to a maximum of 11 targets. Halozyme is entitled to milestone payments of up to $160 million for each nominated collaboration targets and additional milestone payments for combination products. Moreover, Bristol-Myers is also required to pay Halozyme royalties on drugs using the ENHANZE technology developed under the collaboration.

For Bristol-Myers, the transaction is expected to have a dilutive impact on the bottom line in 2017 and 2018 by approximately one cent and by 5 cents in 2019.

In addition, Halozyme licensed ENHANZE technology to Roche Holdings AG RHHBY for exclusive development of an undisclosed therapeutic target. Per the terms of this deal, Halozyme will receive $30 million initially with the potential to earn milestone payments of up to $160 million subject to the achievement of specified development, regulatory and sales-based milestones. Halozyme will also receive tiered, mid-single digit royalties on sales of commercialized products.

Concurrent to these deals, the company raised its sales guidance. Shares of Halozyme were up 21% following the news.

Meanwhile, the news bodes well for Bristol-Myers’ too. We note that Bristol-Myers’ Opdivo became the first PD-1 inhibitor to be approved for a hematological malignancy — classic Hodgkin lymphoma in both the United States (May 2016) and the EU (November 2016). Label expansion into additional indications might give the product access to a higher patient population and increase the commercial potential of the drug. The company had earlier suffered a setback in January 2017 when it decided not to pursue the accelerated regulatory pathway for the regimen of Opdivo plus Yervoy in first-line lung cancer in the United States based on a review of available data. Currently, Opdivo is facing competitive challenges in the United States. With the FDA approving Merck & Co.’s MRK Keytruda, for the first-line treatment of metastatic nonsquamous NSCLC, the company is expected to suffer further loss of market share. Hence, an access to larger populations will improve sales.

Share Price Movement

Bristol-Myers’ stock has gained 7.5% year to date compared with the industry’s 14.5% gain.

Zacks Rank

Bristol-Myers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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