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Why Is Halozyme Therapeutics (HALO) Up 28.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Halozyme Therapeutics (HALO - Free Report) . Shares have added about 28.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Halozyme Therapeutics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Halozyme Q3 Earnings & Revenues Beat Estimates

Halozyme reported third-quarter 2020 earnings of 25 cents per share, beating the Zacks Consensus Estimate of 20 cents. The company had reported a loss of 17 cents in the year-ago quarter.

Total revenues increased 41.3% year over year to $65.3 million primarily due to milestone payments from Roche and argenx. The top line also beat the Zacks Consensus Estimate of $60 million.

Quarterly Highlights

Halozyme’s top line comprises product sales, royalties and revenues under collaborative agreements.

Royalty revenues were $23.9 million in the third quarter, up 44.1% from the year-ago quarter mainly driven by strong uptake of J&J’s subcutaneous Darzalex (Darzalex SC) in multiple myeloma patients, which was launched during the second quarter. However, royalties were hurt due to lower sales of matured partnered drugs like Rituxan Hycela and Herceptin Hylecta due to biosimilar competition.

Product sales, solely from the sale of bulk rHuPH20 to collaborators using the ENHANZE platform for drug development, decreased 69% to $9 million in the third quarter. In the prior-year quarter, the company had recorded a bulk sale to J&J.

Revenues under collaborative agreements were $32.3 million compared with $0.4 million in the prior-year quarter. The significant increase was due to the company’s recognition of milestone payments from Roche and argenx related to their pipeline progress.

Research and development (R&D) expenses declined 74.6% year over year to $7.7 million mainly due to discontinuation of oncology drug development efforts.

Selling, general and administrative (SG&A) expenses were $11.7 million, down 34.9% from the year-ago period. The decline was due to lower compensation and commercial-related expenses as a result of a restructuring initiatives announced last year.

The company repurchased its own common stock worth $58.9 million during the third quarter.

2020 Guidance Maintained

Halozyme raised its view for revenues and earnings for 2020. The company expects total revenues in 2020 to be between $250 million and $260 million compared with $230 million and $245 million previously expected. The guidance indicates year-over-year growth of 28-33%. The revenues guidance includes royalties of $80-85 million, revenues under collaboration of $115-120 million, and product sales of $52-57 million.

It expects earnings to be in the range of 80-85 cents per share. The company previously expected earnings to be in the range of 60-75 cents per share.

Increased guidance for 2020 indicates higher outlook for royalties and greater visibility on anticipated milestone revenues.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 40.35% due to these changes.

VGM Scores

At this time, Halozyme Therapeutics has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Halozyme Therapeutics has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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