Halozyme Therapeutics (HALO) posted stronger-than-expected Q1 results, with revenue beating consensus on continued royalty-driven outperformance and sustained momentum across its Enhanze portfolio, Morgan Stanley said in a note emailed Tuesday.
Halozyme's profitability was strong with non-GAAP earnings at $1.60 per share, up 44% year on year, which reflects operating leverage even though it saw increased spending after recent acquisitions, the note said.
The company still expects Enhanze royalties to be over $1 billion for the first time this year and indicated a sustained margin expansion to more than 65% in the 2026 to 2028 period, backed by "operating leverage and growth in high-margin royalty streams," Morgan Stanley said.
Also, recent collaboration projects with companies like GSK (GSK), Vertex (VRTX), and Oruka (ORKA) boost the scalability of Enhanze and Hypercon and support "visibility into sustained royalty growth into the next decade," according to the note.
The investment firm also highlighted Halozyme's "clear capital allocation framework," which includes the launch of a new $1 billion share buyback plan, with at least $400 million expected this year, as well as more investment in its technology platforms and plans for deleveraging.
Morgan Stanley has an overweight rating on Halozyme and decreased the company's price target to $93 from $96.
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