IBD Stock Of The Day Halozyme is entering a new wave of development — leading HALO stock to surge into a breakout Wednesday.
Late Tuesday, Halozyme announced Johnson & Johnson would test a treatment combination in lung cancer patients. The combo will use Halozyme's drug delivery system, Enhanze.
This is the first product from Halozyme's so-called "Wave 4" to begin final-phase testing. The first wave of products launched in 2021 with the second following in 2023. Fourth-wave products will launch in 2025 and beyond.
Johnson & Johnson expects this combination of drugs — dubbed amivantamab and lazertinib — to bring in a peak of more than $5 billion in sales, SVB Securities analyst David Risinger said in a note to clients.
"If the combination succeeds Halozyme could be eligible to receive royalties on another blockbuster potential product," Risinger said. "Amivantamab royalties are not reflected in our Halozyme estimates and represent upside."
HALO Stock: Two Caveats To Breakout
In afternoon trades on today's stock market, HALO stock soared 8.5% to 49.71. That pushed the stock above a buy point at 49.18 out of a cup-with-handle base, MarketSmith.com shows.
There are two caveats to the breakout. The volume in the handle was a little high and Halozyme shares are extended from their 50-day moving average.
During the September quarter, adjusted Halozyme earnings jumped nearly 35% to 74 cents per share. That easily beat forecasts for 51 cents, according to FactSet. Sales rocketed more than 80% to $209 million. Analysts called for just $191.2 million.
Halozyme attributed the massive sales growth to an increase in royalties from subcutaneous shots of Johnson & Johnson's Darzalex. Darzalex, a blockbuster multiple myeloma treatment, uses Halozyme's Enhanze delivery system. Revenue from that quarter included $99.6 million in royalties, up 70%.
Halozyme says it also recognized milestone revenue from deals with Bristol Myers Squibb and Roche.
The company also noted the addition of product sales from its Antares Pharma acquisition. Halozyme finished that $1 billion buyout in May. Antares makes an auto-injector used in products like Teva Pharmaceuticals' allergic reaction treatment EpiPen.
Guidance Largely Maintained For 2022
For the year, Halozyme maintained its guidance for $655 million to $685 million in sales, a year-over-year increase of 48% to 55%. That includes $115 million to $125 million from the Antares takeover and $350 million to $360 million in royalties. Adjusted earnings are expected to be $2.10 to $2.25 per share.
The guidance includes a $10 million boost — at the midpoint — in royalty expectations, Evercore ISI analyst Michael DiFore said in a report. Halozyme also expects a lower contribution from collaboration and milestone payments due to updated timelines for payments.
HALO stock analysts currently forecast $675.1 million in sales, including $356 million in royalties, and adjusted profit of $2.17 per share.
DiFore kept his outperform rating on HALO stock.
Halozyme shares have a strong Relative Strength Rating of 93, according to IBD Digital. This puts shares in the leading 7% of all stocks in terms of 12-month performance. HALO stock has a lower Composite Rating of 87, meaning its technical and fundamental metrics are in the top 13% of all stocks regardless industry group.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
