Halozyme Therapeutics (HALO, Financial) has initiated legal proceedings against Merck (MRK) by filing a patent infringement lawsuit. This action, taken in the U.S. District Court in New Jersey, centers on allegations that the subcutaneous version of Merck's cancer drug Keytruda violates several patents owned by Halozyme.
The patents in question, which Halozyme began securing in 2011, pertain to its proprietary MDASE subcutaneous delivery technology. The disputed formulation of Keytruda has completed phase 3 clinical trials, and Merck has announced plans to roll out the subcutaneous product in 2025.
Halozyme alleges that Merck has developed this formulation without securing the necessary licensing for its technology. The company expected Merck to obtain a commercial license to use the intellectual property associated with MDASE, a step Merck has not taken. It should be noted that the patents Halozyme is enforcing do not involve its Enhanze licensing program.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Halozyme Therapeutics Inc (HALO, Financial) is $69.57 with a high estimate of $78.00 and a low estimate of $58.00. The average target implies an upside of 19.11% from the current price of $58.41. More detailed estimate data can be found on the Halozyme Therapeutics Inc (HALO) Forecast page.
Based on the consensus recommendation from 9 brokerage firms, Halozyme Therapeutics Inc's (HALO, Financial) average brokerage recommendation is currently 2.3, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Halozyme Therapeutics Inc (HALO, Financial) in one year is $79.35, suggesting a upside of 35.85% from the current price of $58.41. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Halozyme Therapeutics Inc (HALO) Summary page.
HALO Key Business Developments
Release Date: February 18, 2025
- Total Revenue: Exceeded $1 billion for the first time in 2024, growing 22% over the prior year.
- Royalty Revenue: Increased 27% to $571 million in 2024.
- Net Income: Increased 58% year over year to $444 million in 2024.
- Adjusted EBITDA: Increased 48% to $632 million in 2024.
- Non-GAAP EPS: Grew 53% to $4.23 in 2024.
- Free Cash Flow: Converted 74% of adjusted EBITDA into free cash flow, totaling $468 million.
- Cash and Equivalents: $596 million as of December 31, 2024.
- Net Debt: $929 million with a net leverage ratio of 1.3x.
- 2025 Revenue Guidance: Projected between $1.15 billion to $1.225 billion, representing growth of 13% to 21% year over year.
- 2025 Royalty Revenue Guidance: Expected to be $725 million to $750 million, representing growth of 27% to 31% year over year.
- 2025 Adjusted EBITDA Guidance: Projected between $755 million and $805 million, representing growth of 19% to 27% year over year.
- 2025 Non-GAAP EPS Guidance: Expected to be between $4.95 to $5.35, representing growth of 17% to 26% year over year.
- Share Repurchases: $250 million deployed in 2024, with a total of $1.55 billion returned since 2019.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Halozyme Therapeutics Inc (HALO, Financial) achieved record-breaking performance in 2024, with total revenue exceeding $1 billion for the first time, marking a 22% growth over the prior year.
- The company raised its financial guidance twice during the year and exceeded its raised guidance for royalty revenue, adjusted EBITDA, and non-GAAP EPS.
- Strong royalty revenue growth of 27% in 2024 resulted in $571 million in royalty revenue, driven by products like DARZALEX subcutaneous, Phesgo, and VYVGART Hytrulo.
- Halozyme Therapeutics Inc (HALO) extended the patent protection of ENHANZE in Europe to 2029, maintaining its royalty rate for DARZALEX subcutaneous and amivantamab subcutaneous.
- The company projects continued strong growth in 2025, with total revenue expected to reach between $1.15 billion and $1.225 billion, representing growth of 13% to 21% year over year.
Negative Points
- Despite strong performance, the company faces challenges with the U.S. patent reissue for ENHANZE, which is not yet reflected in their five-year financial outlook.
- The recent approvals of products like OCREVUS Zunovo, TECENTRIQ Hybreza, and OPDIVO Qvantig are expected to have minimal contribution to 2025 revenues, with more meaningful contributions anticipated in 2026 and beyond.
- The company is experiencing a temporary impact on royalty revenue due to annual contractual rate resets, particularly affecting DARZALEX, which may result in a 10% decrease in first-quarter royalty revenue compared to the fourth quarter of 2024.
- Halozyme Therapeutics Inc (HALO) is still in the process of securing new deals and nominations, with some discussions in early technical review stages, indicating potential delays in finalizing agreements.
- The company received a complete response letter from the FDA for amivantamab subcutaneous, related to observations at a manufacturing facility, delaying its U.S. approval.
