Halozyme Therapeutics Incorporated (HALO) Options

First of all 5% growth is still growth.  

Secondly, that was a projection which did not include the US patent extension for rHuph20 from 2027 to 2029. Halo recieved the patent extension in EU earlier this year.  Halo has not included the US extensionin their revenue guidance because it is not granted yet.

Thirdly, that projection was before the latest deal with Argenx. This deal will contribute to revenue and EPS growth.

It is pretty safe to assume significant EPS growth until at least 2030. If Helen had remained focused on HVAI instead of looking for the next shiny object to spend our money on, we had plenty of time. We still do. She should back out.

Agreed. And if we are borrowing about $1.5B at 7%, we are adding over $100M in yearly interest payments. But I do think an acquisition is necessary to diversify and extend the durability of their revenues. According to Halo's own projections, revenue growth slows down to barely 5% in 2028, and, because of the patent cliffs, their revenue would probably decrease in 2029 without new sources of revenues, so they couldn't wait much longer.

Agreed with everthing you said. It is sad to see. Having said this, the market reaction is truly over the top. Halo has lost in market cap more than the $2.1 billion it might pay for Evotec.

I bought more today and will buy more tomorrow again. The acquisition is an absolute disaster but the market overreaction is also way too much. I don't see us going back to $60's without walking away from Evotec and perhaps a new CEO appointment. However, purely based on fundamentals and even assuming Evotec is worth half what Helen is willing to pay for it, we should be in the $50's in short order.

Agreed 100%

Thanks for posting. Was able to watch.
This has been a complete disaster. Everything was going so smooth
and this idiotic CEO F's everything up. Im just shocked and the timing couldn't of been worse for me.
Happy early Thanksgiving to the shareholders.

IH doesn't let me attach the link. Go to youtube and search for halozyme and filter for latest video. You will see Helen on Bloomberg TV today.

b

Helen on Bloomberg:



She is not backing down on this acquisition SO FAR. Sad! We are paying the price for it.

Evotech is a complicated company and it will take time for analysts, most of whom are totally unfamiliar with it, to get a handle on what goes on under the hood.

Thanks, that makes sense. I'd confused the NASDAQ ADR for the actual share price which trades in Europe but not here.

Another 5 million votes today against this acquistion announcement. Withdraw and step down!

I believe the ADR is half a share so PPS is very close to Halo's offer. This suggests the market thinks the deal will close quickly or that there is a small chance of another bid. I think we've lost more than $2B in market cap. It is as if the market thinks the acquisition is worse than useless. This seems like an overreaction but also that investors have no faith in Helen's judgment.

... or the rest of what you attributed to her in your post.

Not only you are in denial of reality, you dismiss and underestimate the EPS growth engine that is Enhanze until at least 2030. By then, HVAI will be done with trials and start continuing to EPS. 

You claim HVAI/autoinjectors are clunky and no one would want them. I disagree based on what I see in my practice with alternatives (long infusions, repeated IV insertions, port-a-caths). But let's assume for a moment that you are right and HVAI is no good. Would you then not agree that Helen should not have acquired Antares? Is it possible that Evotec is also a mistake as the market participants (largely institutional for halo) are opining now.

My opinion on Helen's decison is not "shameful". What is shameful is the 30% destrusction of shareholder value due to a poor decision that you keep defending. 

I read what Helen said today. She did not say or highlight any of following which you attributed to her in your post:

"HALO-ATRS-EVO will be a great powerhouse of a product producing company cranking out combos using, Enhanze, modified-Enhanze and fancy Auotinjectors, 

It's beyond "uncertainty". Halozyme has lost more in just a few days than the proposed purchase price of EVOTEC. Although I'm buying more today (it's absurd not to at these ridiculous levels), the market participants have spoken: this is a bad deal and we need better leadership at halo. This is certain. 

Over 11 million shares (votes) are in since the leak and we have lost about a third of halozyme's value in one week. BTW, 97% of halos ownership is institutional. So it is the institutions for the most part and not just the retail who disapprove this deal and has lost confidence in Helen.

Watch halo spring back to $50's if halo withdraws offer.

Stirring things up again, aye? Never made any comments on what the deal will do the sp short term, how the finicky markets sees the deal, or how the deal would be financed, So as typical you twist my post and get all chest-pounding and spiteful....Such treatment of a fellow poster and investor, and such disrespect for Dr. Torley, shameful..........

Dr. Torley highlighted most of what I have been saying:

---HALO-ATRS-EVO will be a great powerhouse of a product producing company cranking out combos using, Enhanze, modified-Enhanze and fancy Auotinjectors,

---The stand alone business off HALO-ATRS isn't showing much a future in a couple years with the lack of new outside interest in what HALO has to offer.....

-- An internal drug source is a great solution....so eventually even the clunky HVAI will find a drug....but will take years for it to work it's way through clinical trials, big'ol scary lump is going to be a hard to sell to clinicians, and patients....IMO......

Anyhow keep up the effort.... I guess......hope you find another pot to stir....I'm out of here......but hanging on to shares.......It's a keeper....Wonder what they will name the new combined company...Hmmmm....got some digging to do.....

SR.....

That’s correct I did say that. I still believe that it will but didn’t take this transaction into account because like you I had no idea that it was happening. It was leaked for a reason and I think the PE firm is somehow behind it. We would never have know until a definitive agreement was reached that this was going to happen. For now uncertainty rules and that’s why the stock is cratering.

I don’t know why the print is 5.50. When you look at market cap it is close to the purchase price. This tells me there is something to do with outstanding shares showing in Europe vs us. It’s telling us that the market is confident that a deal will be made.

It already went up last week quite a lott. It's Market cap now is close to $2 billion. You're confused with dollar versus euros when you look at the share price.

This is what I want.

... and by the way, you also predicted that halo will continue to go up after this last conference call. I don't blame you. Most did not think that Helen would pull the trigger on a large acquisition so soon and before HVAI. Just a week ago we were at $62. Clearly the market is shocked as well..

Howee, the EVO stock is barely moving off the ~$5.50 spot, what do you make of this? It seems there is no belief that this deal will happen.

My bullishness after the last 2 conference calls were based on fact and not a lie resiction: Halozyme beat eatimates and raised guidance. Your PRESICTION of drift was proven wrong by history (not predictions) when halozyme went from $50 to $60's.

My bullishness of halozyme is because if the power of ENHANZE and the EPS growth it has produced for the past several years and will for at least 5 more. I have like halozyme not because of Helen but despite of her failure as a CEO. She was handed a goldmine by her predecessor and she has fumbled 3 times now. Anyone who has read my post over the years on this board knows, I have had this her second strategic failure in 2023. Before that I was willing her to give chances.

Halozyme is still a great company and should do well overtime. But they would be doing far better now and in near future with a better strategic thinker at the helm.

Don't take my word for it. Facts speak for themselves: (these values are as of Friday, they are even worse for halo today):

Trailing PE’s 
Halozyme: 15.11 Halozyme’s 5-Year Average: 29.9 S&P 500 Index Average: 30.4 Pharmaceuticals Industry Average: 49.7 
Forward PE’s: Halozyme: 9.2 Halozyme’s 5-Year Average: 22.8 S&P 500 Index Average: 23.1 Pharmaceuticals Industry Average: 17.1 
Source: finviz and refinitiv

How about closing some deals instead. 3 from last year???

over 30% drop in shareholder value in one week. Halozyme, forget Evotec, buy back more shares at these levels, focus on delivering on HVAI. Do acquisition when you have regained trust.

I don’t think emotionally when it comes to investments. I also don’t really care about overbought or oversold conditions on stocks. Just a few weeks ago you were arguing about my very accurate drifting comments because you thought the stock was going to the moon and now you’re firing Helen because she thinks making an acquisition is best for the company moving forward and the stock is selling off. Let’s see what happens before we make any decisions one way or another. The market will take care of itself once all of the information is digested. Meanwhile selling at 10x net Gaap earnings is crazy so I would expect a recovery once the traders and short sellers exit. Very easy stock to manipulate.

If this keeps up Halozyme will find itself with an unsolicited offer to buy them out in the high 70's low 80's.

You're right. Killing the deal will not return us to our highs. Not with the threat of Helen making cowboy acquisitions

Stock Rafter and Howee, Do you still like this deal? XBI (biotech sector) is up today yet, value destruction continues at halozyme. Do you still think it's because of RFK? Nonsense. Market participants dislike this deal even worse than I thought. I thought there would be a rebound with the threat of dilution removed, but now it's clear investors don't like this acquisition at its core.

It's time for the Board of Directors to dismiss Helen. Watch Halozyme soar to new highs if the BOD withdraws the offer to EVOTEC and replaces Helen.

I'll load up more at $35

I'll load up more at $35

https://finance.yahoo.com/news/halozyme-fund-proposed-evotec-takeover-222421136.html

Helen plans to borrow to pay for the acquisition. No dilution. Stock will go uo tomorrow. 

Debt is far better than dilution. Better yet would be to walk a way from this premature move entirely.

Finish the HVAI with Roche first. Show Antares was worth it, then and only then shop around for a second acquisition.

https://seekingalpha.com/news/4300274-halozyme-plans-finance-21-takeover-of-evotech-in-cash-report

Wells take

https://x.com/BiotechAnalysst/status/1857737637727015367

Wells take: 

Wells take on the acquisition announcement:

"Biotechnology

Wells take:

"Biotechnology

So let me see if we can understand your view here. You are saying no one is interested in the autoinjector and therefore Helen should spend $2.1 billion of shareholders money so that halozyme through Evotec can become its own customer for a product that you say no one else wants?!?

That is one hell of a business model. 

BTW, I agree that the autoinjector (Antares acquisition) has been a failure so far. You are actually making my case. 

To correct the first mistake, you don't make a second one. If in a few years, if no one wants the Evotec products/services, would you then propose that Helen buys another company that would be using Evotec solutions? Nonsense!

howeeme....thanks......"I’m with stock rafter on this one. ".......don't get many kind words on this thread.....

Biotechinvestor....you just want to stir things up....you wrote...."BTW, you contradict yourself in your message. On one hand you say no one would want a "huge lump under the skin' and then in the next paragraph you claim the EVOTEC acquisition will help with autoinjectors?! "

Antares has multiple types of autoinjectors, not just the clunky HVAI 10ml injector, and you know that!

No company has publicly shown any interest in the HVAI, but sadly no company has shown any public interest in any of Antares injectors in years. If Dr Torley can get her hands on a source of drugs, and the DOD industry, that could use some of those autoinjectors, she has my encouragement, not my bashing............

SR

... IH cut out the following from my last post under “from the latest earning report”:

Cash and cash equivalents $154,318,000
Marketable securities, available-for-sale $511,988,000

From the latest earnings call:


So how would Halozyme be able to come up with the rest of the cash needed to buy Evotec ($2.1 billion) without a loan or dilution? Here are some possibilities:

1) In 2022, Halozyme "entered into capped call transactions with certain of the initial purchasers of the Convertible Notes and/or their respective affiliates and/or other financial institutions (collectively, the "Capped Call Counterparties"). The capped call transactions are expected generally to reduce potential dilution to holders of the Company's common stock on any conversion of the Convertible Notes or at the Company's election". Perhaps Helen sold or exercised these options at a significant profit when Halozyme traded in the $60s. Based on the amount of convertible bonds issued in 2022 which these capped call profits were designed to offset, I would estimate the profit in these call options for Halozyme to be $500 mill to $750 mil. I am not sure if this value is already accounted for in the "marketable securities, available-for-sale" on the balance sheet (line item mentioned above). Any accountants on this board?



AND,


2) Helen is at the finish line with new deals for HVAI and Enhanze with large upfront payments to Halozyme.


Without 1 and 2, I don't see how we don't get diluted or issue more debt. Even with 1 and 2, this was a premature acquisition, the leak/announcement was handled poorly, and there is a potential bidding war from private equity. Helen should show discipline and walk away from it now.


Market participants emphatically disliked this deal, and they voted it down with over 10 million shares since the news leaked on Thursday. Helen should take zero comfort in what a handful of permabears and closet bears think of this acquisition on message boards. The real grade came from market participants and it was a thumping F minus.

The AI (artificial intelligence) is interesting to me. With a good data set and analysis, generated with AI, it’s possible to develop very robust and flexible processes. If you can develop a process with as many knobs as you can turn, real time, following real-time and historical data, to maximize efficiency and total product, that could be huge. I know how difficult it can be to deal with a suboptimal process, and it’s especially difficult to change it after the process has been validated and filed with regulatory agencies. If you can develop a product, with knobs (adjustments), assisted with AI data and analysis, built into the process at an early stage, and then subsequently validated and filed with that flexibility, you could have a killer process. Maximum efficiency, success rate, total product, product quality, and regulatory flexibility I love the potential of AI.

Well said!

I have posted about her failure to deliver on her promises in 2023 multiple times on this board. That was why halozyme had a terrible year in 23 while the XBI and IBB did so well. With better performance in 2024, investors moves on. However, with this new major fumble, the scar has reopened. 

I posted on this board that Halozyme would do much better with a new CEO in 2023 and believe it again today. Amazing assets, exceptional margins and EPS growth are all undervalued due to poor management. Ripe to soar to all time highs with new leadership.

Holding to my shares and adding. Either the BOD will wake up activists investors will get involved with this amzaing diamond-in-the-rough.

Just to be clear, the royalty business model is not new. It is the essence of the core of HALO's business and has really always been, at least since the first Roche deal back in the end of '06. The cancer and diabetes sidelines were a failed attempt by previous management to diversify, and Helen ditched all of that when she came on board and the cancer indication ultimately failed in trials and no partner could be found for diabetes.

Agree with this but surprised you left out how disappointed we are that the promises/predictions/happy noises Helen has been making about new partnership deals for Enhanze royalties have not happened as she said they would. Didn't she promise 3 new deals during 2023, or some such? Hasn't she been saying on quarterly conference calls that the talks are getting down to the nitty-gritty, negotiating terms of one or more deals?

-- Disillusioned

-- OJ

Agree with this analysis.

I am also disenchanted by the EvoTec news because the market was already showing signs of having difficult understanding the new, royalty-driven Halozyme business model, and this will really muddy the waters. Also, it puts us back in the risky business of drug discovery, which I thought we left behind. I am not a happy camper, very glad I sold half my shares at $55 a few weeks ago.


-- OJ

Then we can agree to disagree. I trust Helen to do the right thing. Not much else I can do. We’ll see what happens. The PE firm will take their money and run Halo will own this company soon.

I think the main reason the market reacted negatively is that we don’t have the cash for the acquisition and we have about $1.5B of debt. We don’t have the cash because we (foolishly imo) spent over $2B in stock buybacks and about $1B to acquire Antares. Additionally, they haven’t even announced that they will end the stock buybacks.

The second reason is that Evotec has lower margins than Halo and lost about $150M in the first three quarters of 2024. Even worse, revenues declined 1% from 2023. Of course, this doesn’t mean that there isn’t value there and stockrafter may be right that there are potential synergies with Halo. But, like Antares, it is a struggling company and not an obvious good fit, so it all kind of feels like deja vu, and not in a good way, since the Antares business has disappointed so far.

Finally, I agree that the Kennedy news caused panic and probably added 5% or more to the damage. The xbi traded almost 30 million shares and closed over 5% yesterday. Many biotech stocks were down 6 to 10%.

I'm not sure about this deal but I'm skeptical. The widespread use of the term "AI -Artificial Intelligence" in the EVO landscape makes me cringe, it sounds like empty hype and nothing groundbreaking to back it up. The company Evotec has a great deal of cash flow, but is not profitable. Helen might be able to fix that. It is something she did accomplish at HALO, I'll give her that.

Friday's drop was compounded by a perfect storm of JFK Jr., combined with Options expiry, as well as the uncertainty surrounding HALO's proposed takeover of EVO. A bad day for sure, but when the dust clears, I'm pretty sure the pps will recover somewhat, especially if HALO can pull off the deal without dilution, as Howee seems to think.

I'm neutral but haven't sold a share, so I guess I'm slightly optimistic that this might be a positive development. Time will tell. One thing to keep in mind is that if the companies do merge, there will necessarily be a change in the BOD and other corporate officers, which I'm in favor of. EVO top brass are not just going to take a payout and disappear. Some of them will be awarded spots on the management team and the BOD will likely be enlarged to accommodate new German members. All in my humble opinion. Stay tuned.