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It has been about a month since the last earnings report for Halozyme Therapeutics (HALO). Shares have added about 4.2% 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 drivers.
Halozyme Q2 Earnings & Sales Beat Estimates
Halozyme reported second-quarter 2021 adjusted earnings of 66 cents per share (excluding stock-based compensation expense), which beat the Zacks Consensus Estimate of 43 cents. The company’s earnings were 24 cents per share in the year-ago period.
Total revenues increased 147.1% year over year to $136.5 million, primarily driven by milestone payments from ViiV Healthcare and J&J, and higher royalty revenues. The top line also beat the Zacks Consensus Estimate of $104 million.
Halozyme’s top line comprises product sales, royalties and revenues under collaborative agreements.
Royalty revenues were $45.8 million in the second quarter, up 188.9% from the year-ago quarter, mainly driven by strong sales uptake of J&J’s subcutaneous, Darzalex (Darzalex SC). In June, J&J’s drug received two label expansions in Europe in newly diagnosed adult patients with systemic light chain and in relapsed or refractory multiple myeloma. This was followed by a label expansion in the United States to include patients with multiple myeloma after first or subsequent relapse. Robust demand of the drug and multiple label expansions 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 $30.4 million in the quarter compared with $6.3 million in the year-ago quarter. The increase was driven by higher bulk API sales to ENHANZE partners, J&J and Roche.
Revenues under collaborative agreements were $60.3 million, up 82.6% year over year. Halozyme recorded an upfront payment of $40 million per the deal with ViiV Healthcare during the second quarter. The company also recorded $20 million in milestone payment related to Darzalex SC during the reported quarter. These payments drove the revenues under collaborative agreements.
Research and development (R&D) including stock-based compensation) expenses declined 10% year over year to $8.1 million mainly due to discontinuation of oncology drug development efforts and lower development activities related to PEGPH20. This decline was partially offset by higher costs to support additional ENHANZE targets.
Selling, general and administrative (SG&A) including stock-based compensation) expenses were $12.3 million, up 11.8% from the year-ago period.
2021 Guidance Raised
Halozyme raised its previously issued guidance for revenues and earnings for 2021. The company expects total revenues in 2021 to be between $425 million and $445 million, indicating year-over-year growth of 59. Previously, the company expected revenues to be between $375 million and $395 million. The increase in guidance was on the back of higher anticipated royalties, especially related to Darzalex SC, and signing of new agreement with ViiV Healthcare.
The company expects revenues from royalties to more than double year over year on the back of strong uptake of subcutaneous formulation of J&J’s Darzalex and growth in Roche’s Phesgo. Product sales are expected to increase 70% to 80% from 2020 levels.
The company expects adjusted earnings to be in the range of $1.85-$2.00 per share (excluding stock-based compensation expense), implying year-over-year growth of 65. Previously, the company expected the metric to be in the range of $1.55-$1.70 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
At this time, Halozyme Therapeutics has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Halozyme Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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