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Halozyme (HALO) Q4 Earnings and Revenues Miss Estimates

Zacks Equity Research

Halozyme Therapeutics, Inc. HALO reported fourth-quarter 2019 loss of 24 cents per share, wider than the Zacks Consensus Estimate of a loss of 18 cents. The company had reported loss of 1 cent in the year-ago quarter.

Total revenues declined 10.9% year over year to $53.7 million due to lower royalties and collaboration revenues, partially offset by higher product sales. The top line also missed the Zacks Consensus Estimate of $55.22 million.

Shares of Halozyme were down 1.5% in after-market trading on Feb 24, following the earnings release. However, the stock has gained 22.6% in the past year against the industry’s 3.5% decline.

Quarterly Highlights

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

Royalty revenues were $17.2 million in the fourth quarter, down 10.9% from the year-ago quarter. The decline was due to lower sales of Roche’s RHHBY breast cancer drug, Herceptin SC, amid biosimilar competition.

Product sales, solely from the sale of bulk rHuPH20 to collaborators using the ENHANZE platform for drug development, increased 112.5% to $22.7 million in the fourth quarter. The significant increase was primarily attributable to higher sale of bulk rHuPH20 to Janssen, a subsidiary of J&J JNJ.

Revenues under collaborative agreements were $13.7 million compared with $30.2 million in the prior-year quarter. The significant decline was due to recognition of $25 million upfront payment from Roche related to the expansion of their collaboration agreement in the year-ago quarter.

Full-Year Results

Halozyme reported total revenues of $196 million in 2019, up 29.1% year over year. The company reported a loss of 50 cents per share, compared with the loss of 56 cents in the year-ago period.

Business Developments

In July 2020, regulatory decisions in the United States and Europe are expected related to the approval of subcutaneous formulation of J&J’s blood cancer drug, Darzalex, using ENHANZE technology. In February, the FDA accepted Roche’s regulatory application seeking approval for subcutaneous administration of the fixed-dose combination of Perjeta and Herceptin utilizing ENHANZE technology. A decision is expected by Oct 18, 2020. Halozyme also anticipates its collaboration partners using the ENHANZE technology to initiate at least three new phase III, one phase II and at least five phase I clinical studies this year. These potential regulatory updates and clinical study initiations will likely generate significant milestone payments for the company in 2020.

In December 2019, Janssen selected to develop JNJ-61186372 using ENHANZE technology, targeting EGFR and cMET in solid tumors.

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. Its another partner Bristol-Myers Squibb initiated a phase I study to evaluate relatlimab in combination with Opdivo, utilizing the ENHANZE technology in the same month.

Restructuring Initiatives

Following the failure of a phase III study on its lead pipeline candidate, PEGPH20, Halozyme announced strategic actions as part of its restructuring plan to focus on its ENHANZE drug delivery technology. As part of the plan, the company has started workforce reduction to cut headcount by 55% or 160 employees.

In November 2019, 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. The company has halted all clinical developmental activities related to PEGPH20 and oncology operations.

The company stated that it has completed the majority of the restructuring and anticipates to achieve sustainable profitability by the second quarter of 2020.

The restructuring and cost-saving efforts are likely to generate savings of $130-$140 million in 2020. Halozyme anticipates 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.

2020 Guidance

Halozyme reiterated its view for revenues and earnings in 2020 provided last month. The company expects total revenues in 2020 to be between $230 million and $245 million, indicating year-over-year growth of 17-25%. It expects reported earnings to be in the range of 60-70 cents per share.

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 & Key Pick

Halozyme currently carries a Zacks Rank #2 (Buy).

Regeneron Pharmaceuticals, Inc. REGN is another stock to consider among the biotech stocks, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Regeneron have moved up from earnings of $26.96 to $28.31 for 2020 and from $28.33 to $28.93 for 2020 in the past 30 days. The company pulled off a positive earnings surprise in three of the last four quarters and missed once, with the average being 1.44%.

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