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Today, we are following up on mid-cap biopharma concern Halozyme Therapeutics, Inc. (NASDAQ:HALO) as the company issued an important FY2024 guidance update on Thursday. The company also provided updated 5-Year guidance that was triggered by a new European patent for ENHANZE®. The improved guidance resulted in a just over 12% rise in the shares in trading yesterday. This added to the rally in the equity since Halozyme reported quarterly results one month ago.
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Halozyme Therapeutics is headquartered in San Diego and has a fairly unique business model in the industry. The company enhances the delivery of other approved injected drugs via an advantageous subcutaneous formulation through its ENHANZE drug delivery platform. By doing so, it improves infusion times for these existing drugs and collects royalties on commercialized sales and milestone payouts as well. With Thursday's big rally, the stock trades for around $51.00 a share and sports an approximate market capitalization of $6.55 billion.
May 2024 Company Presentation
First Quarter Results:
The company posted Q1 numbers on May 7th. Halozyme Therapeutics delivered a non-GAAP profit of 79 cents a share, besting the consensus by seven cents a share. Revenue rose a tad under 21% on a year-over-year basis to a bit under $196 million, which was some $4 million under aggressive median analyst projections.
Royalty revenue came in at $120.6 million, which was up 21% from the same period a year, and the growth was primarily driven by sales from subcutaneous DARZALEX® (daratumumab) and Phesgo®. The rest of the revenue came from milestone payouts and collaboration revenue.
New Guidance:
Management bumped up FY2024 by $20 million and expects it to be in a range of $935 million to $1,015 million now. The represents growth of 13% to 22% over FY2023. The primary driver of this was management boosted estimate revenue estimates from XYOSTED® from $520 million to $555 million.
Leadership also now sees non-GAAP earnings per share of $3.65 to $4.05. The would-be growth of 32% to 46% over FY2023. Previous guidance was in the range of $3.55 to $3.90 a share. This earnings guidance does not consider the impact of potential future share repurchases, it should be noted. Halozyme announced a $750 million stock buyback authorization earlier this year.
Sales also could get a nice boost in the first quarter when the partnership between Halozyme and Bristol-Myers Squib (BMY) developing a subcutaneous formulation of BMY's blockbuster Opdivo results in FDA approval and becomes the first and only subcutaneously administered PD-1 inhibitor.
May
Finally, factoring in the patent win in Europe, management revised their five-year guidance higher.
June Company Presentation
Analyst Reaction & Balance Sheet:
Following the revised guidance, TD Cowen ($59 price target) and H.C. Wainwright ($65 price target) reiterated their Buy ratings on HALO. JMP Securities reissued their Buy rating as well with a $72 price target and the following commentary from their analyst covering Halozyme Therapeutics:
The issuance of a new European patent for ENHANZE has led to a favorable adjustment in the company’s royalty and total revenue projections for the fiscal year 2024 and beyond. This patent not only extends the duration of higher royalty rates for DARZALEX SC sales in Europe but also applies to all current and future ENHANZE licensees across 37 European countries, effectively preventing a previously expected royalty rate reduction."
Halozyme ended the first quarter with approximately $463 million worth of cash and marketable securities on its balance sheet, up nicely from the $336 million of cash/marketable securities it closed FY2023 with.
Valuation & Conclusion:
Even with the shares just over 10% rise in trading on Thursday, HALO still is more than reasonably valued at just over 13 times forward earnings (based on the mid-point of the just issued new guidance). I currently large position in HALO via covered call holdings. Most of which were acquired in the mid to high $30s, where the stock trading when I posted my last article on the mid-cap name in January of this year.
Most of that position will be redeemed over the next couple of months as those holdings expire in the money. I am not going to chase the recent rally in Halozyme Therapeutics, Inc. stock that has seen the shares climb more than 20% over the past month. However, if HALO falls back to the mid to high $40s during the next pullback in the overall market, I will likely start to accumulate additional shares with covered call orders at that time.
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