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Morgan Stanley lowered its rating on the company to Equal Weight, a neutral grade that suggests the stock is fairly valued. The firm set its price target at $109, which is just above the current average of $111 across all analysts who cover the stock.
This follows a similar move by Leerink Partners earlier in the week. While the company recently reported record royalty growth, some analysts are taking a more cautious stance on how much room the stock has to rise after its strong performance earlier this year.
Source: Morgan Stanley
Halozyme analyzed new final rules from the government regarding how Medicare negotiates drug prices. The company expects these rules to have little to no impact on the royalties it collects from partners through at least 2035.
This is important because Halozyme makes its money by taking a cut of sales from other companies' drugs. If the government forced those partners to lower their prices significantly, Halozyme's cut would usually shrink too. This confirmation suggests the company's long-term income stream is safer from these specific regulatory changes than some might have feared.
Source: PRNewsWire
Leerink Partners lowered its rating on the stock from a buy-equivalent to Market Perform, which suggests they expect it to perform in line with the broader market rather than beat it. This change comes just after the company reported its latest quarterly earnings.
While the company recently reported record royalty growth, some analysts are weighing that success against the eventual expiration of its older patents. This downgrade takes the average price target across all firms to about $110, which is roughly 8 percent above where the stock trades now.
Source: Leerink Partners
After Halozyme reported its November results, we updated our fair value and cut our quality score to 4.0. We added the company's new $1.5 billion debt pile and its recent acquisitions of Elektrofi and Surf Bio to what we track. We raised our projections for how much the company earns from royalties on its drug delivery technology. We also updated our expectations for patent protection in Europe after a court ruling blocked a competing product from Merck.
Halozyme earned $2.39 per share this quarter, beating the $2.30 analysts expected. Total revenue rose 39 percent to $493 million, fueled by a 44 percent jump in royalties. These royalties are the fees Halozyme collects when partners like Roche or Johnson & Johnson use its enzyme to turn intravenous drugs into quick under-the-skin injections.
The company also raised its full-year profit forecast, now expecting earnings to grow more than 110 percent over last year. This growth shows the power of Halozyme's business model: once a partner builds the technology into a major drug, Halozyme collects a high-margin cut of every sale with almost no extra cost to itself. The stock fell about 3 percent today, but that likely reflects a broad market sell-off rather than these strong results.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Management consistently sets a conservative bar and clears it, with seven beats in the last eight quarters proving the business is growing faster than their own forecasts.
| Expectation | |
|---|---|
| EPS | $2.57 |
| Revenue | $551M |
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