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Halozyme's Q4 Loss Wider-Than-Expected

Zacks Equity Research

Halozyme Therapeutics, Inc. (HALO) reported a fourth quarter loss of 19 cents per share, much wider than the year-ago loss of 4 cents per share and the Zacks Consensus Estimate of a loss of 17 cents per share. Lower revenues and higher costs led to the year-over-year increase in loss.

Fourth quarter revenues were $12.5 million, down 42.6% from the year-ago quarter. Revenues lagged the Zacks Consensus Estimate of $16 million.

In 2013, the company reported a loss of 74 cents per share, wider than the year-ago loss of 48 cents per share and the Zacks Consensus Estimate of a loss of 72 cents per share.

Revenues increased 29.5% to $54.8 million in 2013. Revenues, however, lagged the Zacks Consensus Estimate of $57 million.

Quarterly Details

Hylenex generated net sales of $4.0 million in the reported quarter (including a one-time adjustment of $1.1 million).

R&D expenses increased 12.7% year over year to $20.9 million. This increase was primarily driven by increase in clinical studies, partially offset by lower manufacturing costs.

SG&A expenses increased 34.1% year over year to $9.4 million. The increase was primarily attributable to increased commercial activities.

Pipeline Updates

Halozyme has a number of partnered programs. Halozyme’s partner Baxter International Inc. (BAX) submitted an amended biologics license application (:BLA) for HyQvia and pre-clinical data (for the treatment of primary immunodeficiency (:PI)) in response to the Complete Response Letter (CRL) issued by the U.S. Food and Drug Administration (:FDA) in 2012. Halozyme expects the FDA to give a response in six months.

Roche’s (RHHBY) MabThera SC (subcutaneous formulation of MabThera), developed using Halozyme’s rHuPH20, received a positive opinion from the European Committee for Medicinal Products for Human Use (CHMP) in Jan 2014 for the treatment of non-Hodgkin's lymphoma (:NHL). A final response regarding approval should be out shortly.

Meanwhile, the company is enrolling patients for its phase II study on PEGPH20 for pancreatic cancer. The primary endpoint of this study is progression-free-survival. Patient enrolment is expected to be completed in the second half of 2014. Halozyme intends to start another study on PEGPH20 in late 2014 in a solid tumor setting.

Top-line results from two studies should be out later this quarter − the CONSISTENT 1 study evaluating Hylenex recombinant as an adjunct in the treatment of  type I diabetes patients using insulin pumps and from a phase I/II proof-of-concept study on HTI-501 for the treatment of cellulite.

Additionally, Halozyme said that it is in discussions with the FDA regarding a label update for Hylenex so as to include important safety and efficacy data.

2014 Guidance

Halozyme expects net cash burn in the range of $45 million - $55 million in 2014.

Halozyme carries a Zacks Rank #2 (Buy). A better-ranked stock in the biopharmaceutical sector is Biogen Idec Inc. (BIIB) carrying a Zacks Rank #1 (Strong Buy).

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