It has been about a month since the last earnings report for Halozyme Therapeutics (HALO). Shares have added about 16.2% 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 its most recent earnings report in order to get a better handle on the important drivers.
Halozyme's Q3 Earnings and Revenues Surpass Estimates
Halozyme Therapeutics reported third-quarter 2022 adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate of 52 cents. Adjusted earnings were also higher than our estimate of 56 cents per share. The company’s earnings were 55 cents per share in the year-ago period.
Total revenues increased 80% year over year to $209 million, primarily driven by strong royalty payments from J&J for subcutaneous Darzalex (daratumumab). The addition of product sales following the acquisition of Antares Pharma in May and higher collaboration revenues also boosted the top line. The top line beat the Zacks Consensus Estimate of $188 million.
Total revenues were also higher than our estimate of $187.7 million in the reported quarter.
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 $99.6 million in the third quarter, up 70% from the year-ago quarter, mainly driven by robust demand for J&J’s subcutaneous Darzalex and to a lesser extent, Roche’s Phesgo. Royalty revenues generated nearly 47.6% of the total revenues for the company during the third quarter.
Product sales were $61.4 million in the quarter, significantly up from the year-ago quarter. The company supplies API to ENHANZE partners like J&J and Roche.
Revenues under collaborative agreements were $48 million, up almost 49% year over year. This increase was due to milestone recognitions from Roche and Bristol Myers.
Research and development expenses increased 96.5% year over year to $16.7 million, mainly due to planned investments in the ENHANZE technology, as well as one-time compensation costs incurred by HALO related to the Antares Pharma acquisition.
Selling, general and administrative expenses were $34.5 million, significantly up from the year-ago period. The rise was mainly on account of one-time compensation costs incurred by HALO for the Antares Pharma acquisition as well as higher compensation expenses related to the ongoing combined larger workforce.
Halozyme reiterated its guidance for revenues and earnings that it had provided in August.
The company expects total revenues in the range of $655-$685 million in 2022.
The revenue guidance indicates year-over-year growth of 48-55%. It expects the Antares transaction to contribute $115-$125 million in revenues.
HALO expects revenues from royalties to increase more than 70% year over year to approximately $350-$360 million, up from the previously provided guidance of $340-$350 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.
The company expects adjusted earnings to be in the range of $2.10-$2.25 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -11.43% due to these changes.
Currently, Halozyme Therapeutics has a great Growth Score of A, though it is lagging a lot 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.
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 belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Myriad Genetics (MYGN), has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Myriad reported revenues of $156.4 million in the last reported quarter, representing a year-over-year change of -6.5%. EPS of -$0.19 for the same period compares with -$0.02 a year ago.
Myriad is expected to post a loss of $0.15 per share for the current quarter, representing a year-over-year change of -650%. Over the last 30 days, the Zacks Consensus Estimate has changed -12.1%.
Myriad has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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