H.C. Wainwright maintains Halozyme stock Buy rating, $72 target

On Thursday, H.C. Wainwright analyst Mitchell Kapoor reaffirmed a Buy rating and a $72.00 price target for Halozyme Therapeutics (NASDAQ:HALO), following patent challenges from Merck (NSE:PROR) & Co. Kapoor highlighted that Merck has contested seven of Halozyme’s patents related to its hyaluronidase enzyme platform. Merck’s actions come as it seeks to introduce a subcutaneous version of its cancer drug KEYTRUDA, coformulated with a competing enzyme, to address an impending revenue gap expected by 2028 due to patent expirations.

Merck began petitioning U.S. patent regulators last year to reevaluate certain patents awarded to Halozyme for its MDASE platform, arguing that the patents are excessively broad. According to Kapoor, Merck’s efforts indicate a strategic move to bypass Halozyme’s patents to market its injectable KEYTRUDA, as the company anticipates up to 40% of patients may switch to the injectable form within 18-24 months of its release. The U.S. Food and Drug Administration (FDA) is currently reviewing the subcutaneous formulation of KEYTRUDA, with a potential approval for the U.S. market expected later in the year. With a market capitalization of $7.3 billion and a robust gross profit margin of 76.5%, Halozyme appears well-positioned to defend its intellectual property.

Halozyme’s management has interpreted Merck’s post-grant review challenge as a strong indication that Merck recognizes its formulation of KEYTRUDA may infringe on Halozyme’s patented technology. Kapoor’s reiteration of the Buy rating and $72 price target reflects confidence in Halozyme’s patent position and its potential market impact. InvestingPro analysis suggests the stock is currently undervalued, trading at an attractive P/E ratio of 17x while maintaining strong financial metrics. For deeper insights into Halozyme’s valuation and growth prospects, access the comprehensive Pro Research Report available on InvestingPro.

The ongoing patent dispute is a significant development for both companies. Halozyme’s enzyme platform is a key component of its business, and the outcome of this challenge could have implications for its future revenue and market share. Meanwhile, Merck is seeking to protect its KEYTRUDA franchise, which is a major source of income for the company. The FDA’s decision on the subcutaneous version of KEYTRUDA will be a critical factor in this corporate narrative. Halozyme’s strong financial position is evident in its "GREAT" financial health score from InvestingPro, supported by consistent cash flows and moderate debt levels.

In other recent news, Halozyme Therapeutics reported robust fourth-quarter earnings, with adjusted earnings per share of $1.26, surpassing the analyst estimate of $1.15. The company’s revenue for the quarter reached $298 million, exceeding the consensus forecast of $294.15 million. For the full year 2024, Halozyme achieved total revenue of $1.015 billion, marking a 22% increase from the previous year and the first time the company has surpassed $1 billion in annual revenue. Looking forward, Halozyme has projected total revenue for 2025 between $1.15 billion and $1.225 billion, representing growth of 13% to 21%, with expected adjusted earnings per share in the range of $4.95 to $5.35.

In another development, JMP Securities maintained a Market Outperform rating for Halozyme, raising the stock target to $78, following strong fourth-quarter results that exceeded expectations. H.C. Wainwright also lifted its price target for Halozyme to $72, maintaining a Buy rating after the company reported revenues slightly above consensus estimates. Halozyme’s ongoing patent dispute with Merck over its subcutaneous Keytruda candidate remains a focal point, with JMP Securities suggesting the situation could positively impact the company’s stock value in the long term.

The strong performance was largely driven by the growth of key products using Halozyme’s ENHANZE technology, including DARZALEX Faspro and Phesgo. The company’s recent regulatory approvals for products utilizing its technology are expected to support continued growth beyond 2025. Halozyme’s financial position remains solid, with approximately $596 million in cash at the end of 2024, supporting future operations and strategic initiatives.

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