Wells Fargo has downgraded its rating for Halozyme Therapeutics (HALO, Financial), a U.S. biotechnology company, from "Overweight" to "Equal Weight," with a target price set at $62, indicating limited upside potential. This year, Halozyme's stock has surged by 50%, compared to the S&P 500's approximately 21% rise. As of the close of trading on Monday, Halozyme's shares fell 9% to $53.85.
While new product launches present a reason for holding Halozyme stock, Wells Fargo believes that market expectations already reflect this. The key products Vyvgart, Opdivo, Ocrevus, and Tecentriq, which are anticipated to drive growth in the medium to short term, have been accounted for by the market, especially after Halozyme releases its 2024-28 guidance in early 2024.
Wells Fargo forecasts the company's earnings per share to be $3.81 for 2024 and $4.69 for 2025, while market projections are slightly higher at $3.98 and $4.75, respectively. Additionally, Wells Fargo views Halozyme's recent licensing agreement with argenx SE (ARGX) as positive in the long term; however, they anticipate reduced royalties from Vyvgart when the Enhanze patent expires in 2027 or 2029.
Analysts noted that both Darzalex and Vyvgart, two crucial products, might face discontinuation in the same year. According to their model, by 2028, these products are expected to contribute about 58% of Halozyme's royalties. Despite this, analysts pointed out that the stock is undervalued due to its potential royalty streams, and future deals could provide upside potential.
Last month, JPMorgan also downgraded Halozyme from "Overweight" to "Neutral," citing a fair valuation.
