Subcutaneous Biologics Adoption Will Expand ENHANZE's Global Reach

Key Takeaways

• Halozyme benefits from the global shift to subcutaneous drug delivery, driving robust royalty growth and expanding margins through its ENHANZE platform and new biologic launches.
  
• Advancing proprietary technologies and efficient operations enable value-accretive deals, increasing revenue streams and supporting sustained earnings growth.
  
• Regulatory uncertainty, revenue concentration, narrow pipeline focus, patent risk, and rising competition threaten sustained growth, earnings visibility, and long-term market positioning.

Catalysts

A biopharmaceutical company, researches, develops, and commercializes of proprietary enzymes and devices in the United States and internationally.

• The accelerating adoption of subcutaneous drug delivery in place of traditional intravenous administration, evidenced by rapid conversion rates (e.g., DARZALEX subcutaneous now 96% in the US) and label expansions (Phesgo for at-home administration), positions Halozyme's ENHANZE platform as a core beneficiary of the global shift towards more patient-friendly, convenient, and cost-effective treatment modalities. This structural shift is expected to support continued robust growth in royalty revenues and net margin expansion over the long term.
  
• The broadening market for biologic therapies, driven by an aging global population and increased incidence of chronic diseases, is materially expanding the addressable market for Halozyme's partners' therapies. With multiple new indication approvals (e.g., DARZALEX in smoldering multiple myeloma, VYVGART Hytrulo in CIDP) and expanding TAM, Halozyme is poised for durable, high-margin royalty revenue growth as partner drugs are increasingly prescribed to new patient populations.
  
• The company's expanding network of global partnerships and the ramp-up of recently launched subcutaneous biologics (e.g., OCREVUS ZUNOVO, Opdivo Qvantig, Tecentriq Hybreza, RYBREVANT SC) provide a robust set of new and diversified royalty streams that are still early in their adoption curve. As these launches mature and penetration increases, especially in emerging and international markets, significant sequential revenue and EBITDA growth is anticipated.
  
• Internal pipeline advancement, including next-generation auto-injector technologies (high-volume, small-volume) and proprietary drug delivery platforms, creates opportunities for additional high-margin revenue streams. Growing pharma interest in enabling at-home delivery for biologics via these new devices suggests incremental future contributions to revenue and margin improvement.
  
• Operational leverage and efficiency, as demonstrated by strong free cash flow generation, high incremental adjusted EBITDA margins, and disciplined R&D and SG&A spend, allow for ongoing share repurchases and the capacity to pursue value-accretive M&A. This supports both near-term EPS growth and the company's ability to deploy capital toward expanding its long-term earnings power.

Halozyme Therapeutics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Halozyme Therapeutics's revenue will grow by 18.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 47.3% today to 54.2% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $9.08) by about September 2028, up from $557.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, down from 16.0x today. This future PE is lower than the current PE for the US Biotechs industry at 15.3x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Halozyme Therapeutics Future Earnings Per Share Growth

Risks

• Heightened regulatory and reimbursement risk, including ongoing uncertainty around CMS draft guidance, the Inflation Reduction Act (IRA), and global push for healthcare cost containment, threatens the ability to sustain premium pricing on partnered therapies, potentially limiting royalty revenue growth and long-term net margin improvement.
  
• Significant concentration of revenue in a small number of key partnerships (notably J&J's DARZALEX, Roche's Phesgo, and argenx's VYVGART Hytrulo) exposes Halozyme to material top-line volatility if one or more major partners switch suppliers, lose exclusivity, face biosimilar competition, or fail to maintain commercial momentum, which could adversely impact revenue and earnings visibility.
  
• Halozyme's growth is highly dependent on the ENHANZE platform and its adoption for subcutaneous delivery; this limited internal pipeline diversification creates vulnerability to disruptive innovations in drug delivery or changing clinical/regulatory preferences, risking future revenue streams and long-term profit growth if ENHANZE's market relevance declines.
  
• Intensifying patent risk, exemplified by ongoing IP litigation and numerous PTAB post-grant review (PGR) challenges initiated by Merck and others, may result in unfavorable legal outcomes or settlements, threatening long-term protection for key assets and eroding the company's royalty base, thereby compressing future revenues and profitability.
  
• Increasing competition from alternative drug delivery systems (e.g., next-generation injectors, new subcutaneous administration technologies, or transformational modalities such as gene/cell therapies) may erode Halozyme's competitive advantage, limit new partnership opportunities, and place pressure on royalty rates and earnings growth.

Valuation

• The analysts have a consensus price target of $70.556 for Halozyme Therapeutics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $91.0, and the most bearish reporting a price target of just $51.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.0 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 7.0%.
• Given the current share price of $76.07, the analyst price target of $70.56 is 7.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.