Halozyme Therapeutics (HALO) Down 3.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Halozyme Therapeutics (HALO). Shares have lost about 3.8% 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 its most recent earnings report in order to get a better handle on the important drivers.
Halozyme Q2 Earnings & Revenues Beat Estimates
Halozyme delivered second-quarter 2023 adjusted earnings of 74 cents per share, which beat the Zacks Consensus Estimate of 63 cents. The company recorded earnings of 53 cents per share in the year-ago period.
Total revenues increased 45% year over year to $221 million in the second quarter. This was primarily driven by an increase in milestone revenues due to the approval and launch of partner Argenx’s Vyvgart Hytrulo.
The addition of product sales following the acquisition of Antares Pharma and higher royalty payments from J&J for subcutaneous Darzalex (daratumumab) also boosted the top line.
Revenues in the reported quarter surpassed the Zacks Consensus Estimate of $202 million.
Quarterly Highlights
Halozyme’s top line comprises of product sales, royalties and revenues under collaborative agreements.
Royalty revenues totaled $111.7 million in the first quarter, up 31% from the year-ago quarter’s level. This was mainly due to robust demand for JNJ’s subcutaneous Darzalex. Royalty revenues accounted for nearly 51% of the company’s net revenues during the reported quarter. Royalty revenues beat our model estimate of $100.4 million but missed the Zacks Consensus Estimate of $117.8 million.
Product sales totaled $73.9 million, about 60% higher than the year-ago quarter’s reported figure. Halozyme supplies API to ENHANZE partners like JNJ and Roche, which contributed to product revenues. Product sales beat the Zacks Consensus Estimate of $69.4 million and our estimate of $60.7 million.
Revenues under collaborative agreements amounted to $35.4 million, up about 71% from the year-ago quarter’s level. Collaboration revenues fell short of the Zacks Consensus Estimate of $37 million as well as our estimate of $37.1 million.
Adjusted EBITDA was registered at $115.1 million in the second quarter, marking a 31.2% increase from the prior-year quarter’s level.
Adjusted Net Income increased 30% to $98.4 million in the reported quarter.
Halozyme had cash, cash equivalents and marketable securities of $348.3 million as of Jun 30, 2023, compared with $275.6 million as of Mar 31, 2023.
2023 Guidance Updated
Halozyme increased the lower end of its previously issued revenue guidance to reflect its strong second-quarter results.
The company raised its total revenue expectations from $815-$845 million to $825-$845 million for 2023, indicating year-over-year growth of 25-28%. This improvement reflects continued higher royalty revenues from Darzalex SC and Phesgo, along with strong growth in royalty revenues and product sales.
Revenues from royalties are anticipated to increase approximately 23-26% to $445-$455 million year over year (unchanged).
The EBITDA projection has also been raised from $415-$440 million to $420-$440 million, excluding amortization costs, implying year-over-year growth of more than 30%.
The company expects adjusted earnings in the range of $2.65-$2.75 per share, up from $2.50-$2.65 (excluding stock-based compensation expenses), indicating an improvement of 20% year over year. Halozyme’s EPS guidance does not consider the impact of potential future share repurchases.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Halozyme Therapeutics has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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, Regeneron (REGN), a stock from the same industry, has gained 4.2%. The company reported its results for the quarter ended June 2023 more than a month ago.
Regeneron reported revenues of $3.16 billion in the last reported quarter, representing a year-over-year change of +10.5%. EPS of $10.24 for the same period compares with $9.77 a year ago.
For the current quarter, Regeneron is expected to post earnings of $10.98 per share, indicating a change of -1.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
Regeneron has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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