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Halozyme (HALO) Earnings & Revenues Miss Estimates in Q3

Zacks Equity Research

Halozyme Therapeutics, Inc. HALO) reported third-quarter 2019 loss of 17 cents per share, wider than the Zacks Consensus Estimate of a loss of 12 cents. The company had reported loss of 19 cents in the year-ago quarter.

Total revenues increased 80.5% year over year to $46.2 million, driven by higher product sales, partially offset by lower royalties. However, the top line missed the Zacks Consensus Estimate of $58.82 million.

Shares of Halozyme were down 4.6% in after-market trading on Nov 12, following the earnings release. However, the stock has gained 14.6% so far this year compared with the industry’s 1.2% growth.

 

 

Quarterly Highlights

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

Royalty revenues were $16.6 million in the third quarter, down 11.2% from the year-ago quarter. The decline was due to lower sales of Roche’s RHHBY breast cancer drug, Herceptin SC, which was partially offset by higher sales of Roche’s Rituxan Hycela and Takeda’s TAK HyQvia. These drugs are developed using Halozyme’s ENHANZE drug delivery technology.

Product sales, solely from the sale of bulk rHuPH20 to collaborators using the ENHANZE platform for drug development, increased 365% to $29.2 million in the third quarter. The significant increase was primarily attributable to sales of $20.1 million to Janssen, a subsidiary of J&J JNJ.

Revenues under collaborative agreements were $0.4 million compared with $0.6 million in the prior-year quarter.

Research and development expenses declined 14.1% to $30.5 million primarily due to lower expenses related to clinical studies, as the company progressed toward the completion of HALO-301 study on its lead pipeline candidate, PEGPH20.

General and administrative expenses were up 20.8% to $18 million in the reported quarter primarily due to costs related to commercialization initiatives to support oncology operations.

Business Developments

In November, Halozyme announced that the phase III study, evaluating a combination regimen of PEGPH20 as a first-line treatment for metastatic pancreas cancer, failed to meet the primary end-point of overall survival.

In October 2019, Halozyme’s partner Roche nominated one new undisclosed target for evaluation in clinical study, utilizing the ENHANZE technology. This triggered a $10-million milestone payment to Halozyme.In September 2019, Roche successfully completed the phase III FeDeriCa study, which evaluated a fixed-dose combination of Perjeta and Herceptin for subcutaneous administration, using Halozyme's ENHANZE drug delivery technology, for treating HER2-positive breast cancer.In August 2019, Roche initiated a phase I study to evaluate Ocrevus, utilizing the ENHANZE technology in patients with multiple sclerosis.

In October 2019, Halozyme’s another partner Bristol-Myers Squibb initiated a phase I study to evaluate relatlimab in combination with Opdivo, utilizing the ENHANZE technology.

Restructuring Initiatives

Earlier this month, Halozyme announced strategic actions as part of its restructuring plan to focus on its ENHANZE drug delivery technology and close oncology operations. These initiatives were planned following the failure of its lead pipeline candidate PEGPH20 in late-stage pancreatic cancer study.

The company will halt all clinical developmental activities related to PEGPH20 and oncology operations. As part of the plan, it will reduce headcount by 55% or 160 employees.

The restructuring and cost-saving efforts are likely to generate savings of $130-$140 million in 2020. Halozyme is anticipating a decline in operating expenses, excluding cost of goods sold, of $65-$75 million for 2020, most likely driven by lower research & development expenses, following the discontinuation of the PEGPH20 development. The company expects to reach sustainable profitability by the second quarter of 2020. It also authorized the initiation of a share repurchase program worth $350 million to be completed over the next three years.

2019 Guidance

Halozyme lowered its revenue guidance for 2019 to $195-$205 million from $205-$215 million mentioned earlier. The guidance was lowered due to delay in the initiation of a planned phase III study on a partnered candidate, partially offset by new unplanned target nomination. These activities generate revenues for the company either through product sales or milestone payments. It also lowered its guidance for Royalty revenues to $67-$69 million from $72-$74 million stated previously.

The company maintained its expectation for year-end cash, cash equivalents and marketable securities of $220-$230 million. It increased the outlook for operating expenses to $255-265 million from previously mentioned $215-225 million. The increase was led by anticipated one-time restructuring costs of $25-$27 million, which will be incurred in the fourth quarter.

Halozyme Therapeutics, Inc. Price, Consensus and EPS Surprise

 

Halozyme Therapeutics, Inc. Price, Consensus and EPS Surprise

Halozyme Therapeutics, Inc. price-consensus-eps-surprise-chart | Halozyme Therapeutics, Inc. Quote

Zacks Rank

Halozyme currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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