Evercore ISI maintains Outperform on Halozyme amid CMS draft

On Tuesday, Evercore ISI reiterated its Outperform rating on Halozyme Therapeutics (NASDAQ:HALO) following the latest draft guidance documents released by the Centers for Medicare & Medicaid Services (CMS). The new proposals for fiscal year 2028 have introduced criteria for Part B drugs, which could impact fixed-dose combination ( FDC (NSE:FDC)) products, including those developed by Halozyme. The CMS guidance suggests that an active ingredient in an FDC must be biologically active against the disease and result in a clinically meaningful difference. Despite regulatory uncertainties, Halozyme has demonstrated strong business fundamentals, with revenue growing over 25% in the last twelve months and maintaining healthy profit margins above 76%.

The draft guidance marks a departure from expectations set by the final Part D documents published in June 2023, which treated FDC drugs with two distinct active moieties as separate single-source products. This change has prompted discussions among stakeholders, with an open-comment period ending on June 26.

Halozyme’s product, hyaluronidase, is used to enhance the bioavailability of other drugs. The debate centers on whether hyaluronidase provides direct therapeutic activity or merely serves as a bioavailability enhancer. Data from the PALOMA-3 study, where subcutaneous amivantamab displayed statistically significant overall survival superiority over the intravenous formulation and a reduction in infusion-related reactions, supports the argument for direct therapeutic activity. Additionally, Halozyme has suggested increased lymphocyte trafficking as an alternative mechanism for hyaluronidase’s therapeutic benefit, backed by preclinical studies from Dr. CJ Porter.

The final decision by CMS on how to classify FDC drugs like those involving Halozyme’s hyaluronidase is pending. The outcome will determine if Halozyme needs to provide further evidence of enhanced efficacy benefits for its products. Trading at a P/E ratio of 13x and showing strong market performance with a 52% return over the past year, InvestingPro analysis suggests the stock is currently undervalued. For deeper insights into Halozyme’s valuation and growth prospects, including 12 additional ProTips and comprehensive financial analysis, investors can access the full Pro Research Report on the InvestingPro platform.

In other recent news, Halozyme Therapeutics reported a strong first quarter for 2025, with revenues reaching $265 million, a 35% increase from the previous year, and non-GAAP earnings per share (EPS) of $1.11, surpassing forecasts. The company attributed this growth to significant gains in royalty revenue and the launch of 10 new products. Despite these positive results, Leerink Partners downgraded Halozyme’s stock from Market Perform to Underperform, citing concerns over potential price negotiations for its combination products due to new draft guidance from the Centers for Medicare & Medicaid Services (CMS). This guidance could impact Halozyme’s drug pricing protections under the 2028 Inflation Reduction Act. Meanwhile, Benchmark maintained a Hold rating with a $75 price target, while TD Cowen raised its price target to $79, reiterating a Buy rating. The firm highlighted Halozyme’s robust performance and strategic activities as factors for potential future growth. Investors are closely monitoring these developments, especially in light of the regulatory challenges that could affect Halozyme’s long-term market strategy.

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