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Halozyme Therapeutics (HALO) Down 10.6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Halozyme Therapeutics (HALO - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Halozyme Therapeutics due for a breakout? 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 drivers.

Halozyme Q2 Earnings and Sales Beat, Ups '22 Outlook

Halozyme reported second-quarter 2022 adjusted earnings of 53 cents per share (excluding stock-based compensation expense), which beat the Zacks Consensus Estimate of 50 cents. The company’s earnings were 66 cents per share in the year-ago period.

Total revenues increased 11.7% year over year to $152.4 million, primarily driven by strong royalty payments, especially from J&J and the addition of product sales following the completion of the acquisition of Antares Pharma. However, growth in revenues was partially offset by lower revenues under collaboration agreements. The top line also beat the Zacks Consensus Estimate of $132.02 million.

Quarterly Highlights

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

Several companies are using Halozyme’s ENHANZE technology for developing a subcutaneous formulation of their currently marketed drugs. The company has five marketed partnered drugs based on this technology, including the subcutaneous formulation of J&J’s Darzalex and Roche’s Phesgo.

Royalty revenues were $85.3 million in the second quarter, up 86.4% from the year-ago quarter, mainly driven by strong sales uptake of J&J’s subcutaneous Darzalex and to a lesser extent by Roche’s Phesgo. Royalty revenues generated nearly 56% of the total revenues for the company during the second quarter. Robust demand for J&J’s subcutaneous Darzalex, multiple label expansions and continued launches in new territories and an additional contribution from Roche’s Phesgo are likely to drive Halozyme’s strong royalty revenues.

Product sales, solely from the sale of bulk API to collaborators using the ENHANZE platform for drug development, were $46.3 million in the quarter, up 52.5% from the year-ago quarter. The company supplies API to ENHANZE partners like J&J and Roche.

Revenues under collaborative agreements were $20.7 million, down 65.6% year over year. This significant fall was due to the receipt of a $40 million upfront payment from ViiV Healthcare in the year-ago quarter,

Research and development ([R&D] including stock-based compensation) expense increased 91.9% year over year to $15.5 million, mainly due to planned investments in the ENHANZE technology as well as one-time compensation costs incurred by HALO related to the recently-completed Antares Pharma acquisition.

Selling, general and administrative (SG&A) expenses (including stock-based compensation) expenses were $57.5 million, up 366.5% from the year-ago period. This significant rise was on account of one-time compensation costs incurred by HALO in relation to the recently completed Antares Pharma acquisition.

2022 Guidance Raised

Following the completion of the acquisition of Antares Pharma, Halozyme raised its guidance for revenues and earnings for 2022. HALO expects the Antares acquisition to be accretive to Halozyme’s 2022 earnings and also support its growth strategy over the next five years and beyond.

The company now expects total revenues in 2022 to be between $655 million and $685 million, up from the previously provided range of $530 million and $560 million. This new revenue guidance indicates year-over-year growth of 48. It expects the Antares transaction to contribute $115 million to $125 million in revenues.

The company now expects revenues from royalties to increase greater than 65% year over year to approximately $340 million to $350 million, up from the previously provided guidance of $300 million on the back of strong uptake of the subcutaneous formulation of J&J’s Darzalex, growth in Roche’s Phesgo and additional royalty revenues from auto-injector devices following the Antares acquisition. While collaborative revenues are expected to be flat year over year, product sales are expected to increase as a result of the Antares acquisition.

The company now expects adjusted earnings to be in the range of $2.10-$2.25 per share (excluding stock-based compensation expense), up from the previous guidance of $2.05-$2.20.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -10.4% due to these changes.

VGM Scores

At this time, Halozyme Therapeutics has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Halozyme Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Halozyme Therapeutics is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Gilead Sciences (GILD - Free Report) , a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended June 2022 more than a month ago.

Gilead reported revenues of $6.26 billion in the last reported quarter, representing a year-over-year change of +0.7%. EPS of $1.58 for the same period compares with $1.87 a year ago.

For the current quarter, Gilead is expected to post earnings of $1.52 per share, indicating a change of -42.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Gilead. Also, the stock has a VGM Score of B.


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