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Halozyme Therapeutics (HALO) Down 34.4% 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 34.4% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Halozyme’s Q4 Earnings Beat Estimates, Revenues Miss

Halozyme Therapeutics, reported fourth-quarter 2022 adjusted earnings of 48 cents per share, narrowly beating the Zacks Consensus Estimate of 47 cents. Adjusted earnings were also higher than our model estimates of 44 cents per share. The company’s earnings were 42 cents per share in the year-ago period.

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Total revenues increased 78% year over year to $181.4 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 and higher collaboration revenues boosted the top line. Revenues, however, missed the Zacks Consensus Estimate of $186 million. Total revenues also missed our model estimates of $182.9 million in the reported quarter.

Quarterly Highlights

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

Royalty revenues were $106 million in the fourth quarter, up 69% from the year-ago quarter. This was mainly driven by robust demand for J&J’s subcutaneous Darzalex and to a lesser extent, Roche’s Phesgo. Royalty revenues generated nearly 58.6% of the total revenues for the company during the reported quarter.

Product sales were $61.1 million in the quarter, significantly up from the year-ago quarter. The company supplies API to ENHANZE partners like J&J and Roche, which contributes to its product revenues.

Revenues under collaborative agreements were $14.4 million, indicating a 16.5% increase year over year.

Research and development expenses increased 123.2% year over year to $22.6 million. This was 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 $37.7 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.

Full-Year 2022 Results

The company’s adjusted diluted earnings for 2022 were $2.21 per share, compared with $2.00 in the year-ago period.

2023 Guidance

The company maintained its previously issued financial guidance for 2023, in January.

The company expects total revenues in 2023 to be between $815 million and $845 million, indicating year-over-year increase of 23-28%. This growth can be attributed to continued strength of Darzalex SC and Phesgoalong, with revenues from royalty.

The company expects revenues from royalties to increase approximately 23-26% year over year to $445-$455 million. Collaborative revenues are expected to be flat year over year.

The company expects adjusted earnings in the range of $2.50-$2.65 per share (excluding stock-based compensation expense), implying year-over-year growth of more than 10%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -25.57% due to these changes.

VGM Scores

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. 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 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 is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Vertex Pharmaceuticals (VRTX), a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended December 2022 more than a month ago.

Vertex reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +11.1%. EPS of $3.76 for the same period compares with $3.37 a year ago.

Vertex is expected to post earnings of $3.09 per share for the current quarter, representing a year-over-year change of -12.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.9%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Vertex. Also, the stock has a VGM Score of C.

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