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5 Reasons Why You Should Add Halozyme (HALO) to Your Portfolio

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·4-min read
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Halozyme Therapeutics HALO licenses its novel drug delivery technology, ENHANZE, for the development of the subcutaneous administration of drugs. This promising technology has attracted partnerships with several pharma players that drive its royalties, which form a major portion of its total revenues.

This biopharmaceutical company recently agreed to acquire Antares Pharma to complement its ENHANZE technology. Moreover, its restructuring initiatives implemented over the last two years have helped it to reduce its operating expense and focus on the high-growth, high-margin ENHANZE technology.

Here we discuss five reasons why adding Halozyme stock to one’s portfolio may prove to be beneficial in 2022.

Rising Estimates and Share Price: Earnings estimates for Halozyme have improved 4.2% for 2022 and 4.8% for 2023 over the past 30 days.  The stock has gained 31.5% in the past three months against a decrease of 9.6% for the industry.

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Zacks Investment Research


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ENHANZE Technology Driving Revenues: Halozyme’s proprietary drug delivery technology, ENHANZE has been key driver of the company’s success in the past couple of years. Several large pharma players, including J&J JNJ and Roche RHHBY, have signed collaborations with Halozyme to develop a subcutaneous (SC) formulation for one of their popular drugs. These drugs like — J&J’s Darzalex and Roche’s Herceptin, Phesgo and Rituxan — were first approved for intravenous (IV) administration. The SC formulation makes administration simpler compared to IV. The strong adoption of the SC formulation of these drugs, especially J&J’s Darzalex SC, has been driving Halozyme’s royalties in the past few quarters.

Currently, Halozyme has 11 collaborations and five marketed partnered drugs based on this technology. The marketed partnered drugs are driving royalties for Halzoyme while the under-development drugs indicate the potential for additional royalties as well as milestone payments. The company expects to generate $1 billion in annual royalties from its ENHANZE technology by 2027, an almost five-fold increase compared to 2021 royalties.

Encouraging Guidance for 2022: Halozyme expects total sales for 2022 to be between $530 million and $560 million. This indicates year-over-year growth of 20%-26% from 2021 sales on the back of strong uptake of the subcutaneous formulation of J&J’s Darzalex as well as growth in Roche’s Phesgo. The company expects revenues from royalties to increase approximately 50% year over year to $300 million.

Antares Pharma Acquisition: Halozyme signed an agreement to acquire privately-held Antares Pharma for approximately $960 million in April. The acquisition will add an industry-leading auto-injector platform, which will likely complement Halozyme’s ENHANZE technology. Halozyme will also add three proprietary products to its portfolio, following the completion of the transaction expected by June end. The company expects the Antares acquisition to accelerate top-and bottom-line growth and enhance cash flow generation over the next five years.

Encouraging Restructuring Initiatives: Following the failure of its lead pipeline candidate, PEGPH20, in the phase III HALO-301 study, Halozyme initiated an operational review to support future growth in November 2019. The company has discontinued all clinical developmental activities related to PEGPH20 and oncology operations. This enabled Halozyme to solely focus on its high-growth, high-margin ENHANZE technology. As part of the plan, the company reduced its headcount by 55%. As a result of these restructuring activities, the company reduced operating expenses in the past two years with the trend expected to continue in 2022.

Conclusion

Strong demand for some of its partnered drugs like J&J’s Darzalex SC and Roche’s Phesgo will be key drivers for Halozyme’s top line over the next few quarters. Moreover, Halozyme has several other partners developing SC formulations of their drugs/candidates. A potential approval for these under-development drugs will boost royalties going forward.

One of the leading partnered candidates is argenx’s ARGX efgartigimod. ARGX successfully completed a phase III study evaluating an SC formulation of its efgartigimod in generalized myasthenia gravis.

argenx is planning to file a biologics license application by the end of 2022. A potential approval will likely boost revenues for Halozyme through additional royalties in 2023.

However, there are certain concerns that will likely offset some of the above-anticipated gains to the top line. These include rising biosimilar competition for key partnered drugs — Roche’s Herceptin and Rituxan. This is unfavorably impacting Halozyme’s royalty revenues and is likely to continue going forward.

Nevertheless, Halozyme carries a Zacks Rank #2 (Buy) and looks like a good investment now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Halozyme Therapeutics, Inc. Price

Halozyme Therapeutics, Inc. Price
Halozyme Therapeutics, Inc. Price

Halozyme Therapeutics, Inc. price | Halozyme Therapeutics, Inc. Quote


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