Why Is Halozyme Therapeutics (HALO) Up 6.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Halozyme Therapeutics (HALO). Shares have added about 6.1% 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 Earnings & Revenues Miss Estimates in Q3

Halozyme Therapeutics reported third-quarter 2019 loss of 17 cents per share, wider than the Zacks Consensus Estimate of a loss of 12 cents. The company had reported loss of 19 cents in the year-ago quarter.

Total revenues increased 80.5% year over year to $46.2 million, driven by higher product sales, partially offset by lower royalties. However, the top line missed the Zacks Consensus Estimate of $58.82 million.

Quarter in Detail

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

Royalty revenues were $16.6 million in the third quarter, down 11.2% from the year-ago quarter. The decline was due to lower sales of Roche’s breast cancer drug, Herceptin SC, which was partially offset by higher sales of Roche’s Rituxan Hycela and Takeda’s (TAK) HyQvia. These drugs are developed using Halozyme’s ENHANZE drug delivery technology.

Product sales, solely from the sale of bulk rHuPH20 to collaborators using the ENHANZE platform for drug development, increased 365% to $29.2 million in the third quarter. The significant increase was primarily attributable to sales of $20.1 million to Janssen, a subsidiary of J&J (NYSE:JNJ) Revenues under collaborative agreements were $0.4 million compared with $0.6 million in the prior-year quarter.

Research and development expenses declined 14.1% to $30.5 million primarily due to lower expenses related to clinical studies, as the company progressed toward the completion of HALO-301 study on its lead pipeline candidate, PEGPH20. However, the study was discontinued in November following failure to meet primary endpoint.

General and administrative expenses were up 20.8% to $18 million in the reported quarter primarily due to costs related to commercialization initiatives to support oncology operations.

2019 Guidance

Halozyme lowered its revenue guidance for 2019 to $195-$205 million from $205-$215 million mentioned earlier. The guidance was lowered due to delay in the initiation of a planned phase III study on a partnered candidate, partially offset by new unplanned target nomination. These activities generate revenues for the company either through product sales or milestone payments. It also lowered its guidance for royalty revenues to $67-$69 million from $72-$74 million stated previously.

The company maintained its expectation for year-end cash, cash equivalents and marketable securities of $220-$230 million. It increased the outlook for operating expenses to $255-265 million from previously mentioned $215-225 million. The increase was led by anticipated one-time restructuring costs of $25-$27 million, which will be incurred in the fourth quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -43.75% due to these changes.

VGM Scores

Currently, Halozyme Therapeutics has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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.