On November 2, 2021 Halozyme Therapeutics, Inc. (NASDAQ: HALO) reported financial results for the third quarter ended September 30, 2021 and provided an update on its recent corporate activities and outlook (Press release, Halozyme, NOV 2, 2021, View Source [SID1234594101]).
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"Our strong 2021 performance continued in the third quarter fueled by 145% growth over the prior year period in revenue from royalties. We continue to project that full year royalty revenue in 2021 will be more than double 2020 royalty revenue. Our topline growth in turn resulted in strong profitability for the quarter," said Dr. Helen Torley, president and chief executive officer. "We look forward to additional study starts before year-end as our partners continue making progress in the clinic developing products utilizing our ENHANZE technology, with the goal of providing patients with additional treatment options."
Recent Partner Highlights:
In July 2021, Janssen elected the target HIV reverse transcriptase, representing the third target selected by Janssen for development with ENHANZE.
In July 2021, Janssen received U.S. Food and Drug Administration approval for DARZALEX FASPRO in combination with pomalidomide and dexamethasone for patients with multiple myeloma after first or subsequent relapse.
In October 2021, Janssen’s DARZALEX FASPRO was approved by the China National Medical Products Administration (NMPA) for the treatment of primary light chain amyloidosis, in combination with bortezomib, cyclophosphamide and dexamethasone (D-VCd) in newly diagnosed patients. This followed a similar approval Janssen Pharmaceutical K.K. received in August 2021 from Japan’s Ministry of Health, Labour and Welfare (MHLW) for DARZQURO (Daratumumab SC) for the additional indication of systemic AL amyloidosis.
Recent Corporate Highlights:
During the third quarter, the Company repurchased approximately 1.6 million shares of common stock for $64.7 million at an average price per share of $41.40. Year-to-date through the third quarter of 2021, Halozyme has repurchased a total of 4.4 million shares of common stock for $189.7 million at an average price of $43.35. In October 2021, the Company repurchased an additional 0.3 million shares of common stock for $10.3 million, resulting in a total of $200.0 million in share repurchases in 2021 and completing the Board-authorized three-year share repurchase plan that began in November 2019. Under the program a total of 22.3 million shares were repurchased for $550.0 million at an average price per share of $24.72.
Third Quarter Financial Highlights
Revenue for the third quarter was $115.8 million compared to $65.3 million for the third quarter of 2020. The year-over-year increase was primarily driven by an increase in royalty revenue primarily attributable to subcutaneous DARZALEX (daratumumab) and an increase in product sales. Revenue for the quarter included $58.6 million in royalties, an increase of 145% compared to $23.9 million in the prior year period.
Cost of product sales for the third quarter was $18.6 million, compared to $5.6 million for the third quarter of 2020. The year-over-year increase was primarily driven by higher product sales, principally the sales of bulk rHuPH20 to the Company’s partners.
Research and development expenses for the third quarter were $8.5 million, compared to $7.7 million for the third quarter of 2020. The increase is primarily due to an increase in compensation expense, including stock-based compensation, for personnel to support additional ENHANZE targets entering clinical development.
Selling, general and administrative expenses for the third quarter were $13.2 million, compared to $11.7 million for the third quarter of 2020. The increase was primarily due to an increase in compensation expense, including stock-based compensation, for personnel to support additional ENHANZE targets entering clinical development.
Operating Income: On a GAAP basis in the third quarter of 2021, operating income was $75.6 million, compared to an operating income of $40.3 million in the third quarter of 2020.
Net Income: On a GAAP basis in the third quarter of 2021, net income was $216.6 million, compared with net income of $36.2 million in the third quarter of 2020. Non-GAAP net income was $80.5 million in the third quarter of 2021, compared with Non-GAAP net income of $44.0 million in the third quarter of 2020.1
Earnings per Share: On a GAAP basis in the third quarter of 2021, diluted earnings per share was $1.48, compared with $0.25 in the third quarter of 2020. On a Non-GAAP basis diluted earnings per share was $0.55, compared with diluted earnings per share of $0.31 in the third quarter of 2020.1
Third quarter financial results include the reversal of substantially all of the valuation allowance recorded against the Company’s deferred tax assets. This reversal resulted in the recognition of a non-cash income tax benefit during the quarter of $142.5 million, or $0.97 earnings per diluted share. The Company maintains a full valuation allowance on its deferred tax assets (DTAs) until there is sufficient evidence to support the reversal of all or some portion of these allowances. On a periodic basis, the Company reassesses the valuation allowance of its DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all of the Company’s DTAs will be realized. As of the third quarter, the Company has demonstrated profitability and cumulative pretax income as well as forecasting revenue growth. After assessing both the positive and negative evidence, the Company determined that it was more likely than not that its DTAs would be realized and released substantially all of the valuation allowance related to federal and state DTAs as of September 30, 2021.
Cash, cash equivalents and marketable securities were $815.9 million on September 30, 2021, compared to $368.0 million on December 31, 2020.
During the third quarter, the Company repurchased 1.6 million shares of common stock for $64.7 million at an average price of $41.40. In October 2021, the Company repurchased an additional 0.3 million shares of common stock for $10.3 million, completing its Board-authorized three-year share repurchase plan that began in November 2019. Under the program a total of 22.3 million shares were repurchased for $550.0 million at an average price per share of $24.72.
Financial Outlook for 2021
The Company is increasing the lower end of revenue and operating income guidance ranges to reflect strong third quarter results. In addition, the Company is increasing GAAP diluted earnings per share guidance to reflect an income tax benefit related to the release of a valuation allowance for its deferred tax assets, and increasing the lower end of Non-GAAP diluted earnings per share guidance. The Company now expects:
Revenues of $430 million to $445 million, increased from prior guidance of $425 million to $445 million, representing year-over-year growth of 61%-66%;
GAAP Operating Income of $265 million to $280 million, increased from prior guidance of $260 million to $280 million, representing year-over-year growth of 84%-94%;
GAAP Net Income of $380 million to $395 million, up from prior guidance of $235 million to $255 million due to the income tax benefit recorded in Q3 2021; and Non-GAAP Net Income of $285 million to $300 million, compared to prior guidance of $280 million to $300 million;1
GAAP Diluted Earnings per Share of $2.60 to $2.70, up from prior guidance of $1.55 to $1.70 due to the income tax benefit recorded in Q3 2021; and
Non-GAAP Diluted Earnings per Share of $1.90 to $2.00, compared to prior guidance of $1.85 to $2.00, representing year-over-year growth of 70%-79%.1
Webcast and Conference Call
Halozyme will webcast its Quarterly Update Conference Call for the third quarter of 2021 today, Tuesday, November 2, 2021 at 4:30 p.m. ET/1:30 p.m. PT. Dr. Torley will lead the call, which will be webcast live through the "Investors" section of Halozyme’s corporate website and a replay will be available following the close of the call. To register for this conference call, please use this link: View Source After registering, you will receive an email confirmation that includes dial in details and unique conference call codes for entry. Registration is open through the live call. However, to ensure you are connected for the full call, please register a day in advance or at minimum 10 minutes before the start of the call.