Evercore ISI made a case for a differentiated outcome, though it is speculation at this juncture. Time will tell...
We’ve been receiving lots of questions on HALO this morning - mostly on how vulnerable HALO might be to Medicare drug price negotiation, given its SC reformulation business model. You may ask, “doesn’t the IP on HALO’s ENHANZE tech expire in 2027”? Technically yes, but HALO has been flagging the fact that its partner companies have either secured or have applied for co-formulation IP, which extends the royalty term length and/or the time before royalty step-down. This makes 2027 less critical.
That said, we think today’s weakness is unwarranted and that HALO’s ENHANZE platform remains intact due to an important nuance within the CMS guidance document… which seems not to be getting much attention. Spoiler alert: a key passage in the CMS guidance docs implies that fixed-dose combo drugs/biologics are unique in terms of qualifying as single-source drugs.
On its face, CMS guidance says that it intends to aggregate all formulations/presentations of a drug will consider this aggregate as “single source”. If this was the only way single-source was defined, then yes, HALO would face significant headwinds to its US royalty streams… the biggest one being Darzalex Faspro
Simply put – CMS seems to view FDC’s of active ingredients/moieties as unique. At least this is our interpretation. See the image, below.
- CMS clearly states that a FDC of 2+ active moieties/ingredients will be “considered as one” for the purposes of identifying qualifying single-sourced drugs
Applying this example to biologics like Darzalex Faspro (and HALO’s future pipeline products) suggests that these products could very well be considered their own single source drug.
- If true, HALO’s reformulated products would have their own separate launch date and not be linked to that of the parent IV brand’s launch date… which would push back their eligibility for drug price negotiation.
Furthermore, CMS can’t have it both ways when considering biosimilar entry if it were to adopt a hard line and lump HALO’s reformulated products together with the original brand
- Biosimilar entry is expected for many of original IV brands of HALO’s partner companies, which would immediately eliminate HALO SC formulations from being considered as single-source.