HALO Q2 2025: Expects Merck patent win, secures future royalties
- Robust Intellectual Property Defense: Management expressed strong confidence in prevailing against Merck in the patent infringement litigation—citing that a favorable district court decision or a settlement would protect future royalty revenue streams.
- Accelerating Adoption of Subcutaneous Products: Q&A responses highlighted strong conversion rates for key subcutaneous products such as DARZALEX and OCREVUS, which drive compelling revenue growth and improved treatment convenience.
- Upbeat Guidance and Pipeline Momentum: Updated guidance supported by new quarterly data and robust partner feedback, along with active developments in next-generation assets and auto injector programs, underscore a promising long-term revenue expansion trajectory.
- Ongoing IP Litigation Risk: The unresolved legal proceedings against Merck—with a pending district court schedule and multiple PGR challenges set for a March 2026 hearing—create uncertainty over future royalty revenue and potential settlement timing.
- Regulatory Uncertainty: Questions regarding the impact of evolving CMS Part B guidance and IRA policies raise the risk that changes in regulatory definitions could adversely affect product reimbursement and market dynamics.
- Dependence on New Catalysts: The heavy reliance on multiple new product launches and conversion catalysts introduces risk; if patient adoption or partner performance underperforms, full-year guidance and long-term royalty growth projections could be missed.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue | FY 2025 | $1.2B to $1.28B, YoY growth 18%-26% | $1,275M to $1,355M, YoY growth 26%-33% | raised |
Royalty Revenue | FY 2025 | $750M to $785M, YoY growth 31%-37% | $825M to $860M, YoY growth 44%-51% | raised |
Product Sales | FY 2025 | $340M to $365M | $340M to $365M, YoY growth 12%-20% | no change |
Collaboration Revenue | FY 2025 | $110M to $130M | $110M to $130M | no change |
Adjusted EBITDA | FY 2025 | $790M to $840M, YoY growth 25%-33% | $865M to $915M, YoY growth 37%-45% | raised |
Non-GAAP Diluted EPS | FY 2025 | $5.30 to $5.70, YoY growth 25%-35% | $6.00 to $6.40, YoY growth 42%-51% | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Intellectual Property Litigation | In Q1 2025, discussions focused on litigation against Merck with emphasis on distinguishing infringement from PGR matters ( ); Q3 2024 mentioned extending and protecting their patent portfolio ( ); Q4 2024 did not address this topic. | Q2 2025 provided detailed updates on the district court case against Merck, multiple PGR petitions, and a potential settlement option, stressing the strength of their patents ( ). | Recurring topic with increased emphasis – the focus on litigation has deepened with more detailed explanations and aggressive defense measures, underscoring a strategic legal stand. |
Subcutaneous Product Adoption and Conversion | Q1 2025 highlighted high adoption rates for products like DARZALEX FASPRO, Phesgo, and VYVGART Hytrulo with strong conversion percentages ( ); Q4 2024 provided detailed sales shares and conversion data ( ); and Q3 2024 focused on market expansion as subcu treatments enabled greater patient access ( ). | Q2 2025 emphasized even higher conversion for DARZALEX subcutaneous (96% in the U.S.) along with strong global adoption trends, reinforcing the success of subcu products ( ). | Consistent strength with slight improvements – subcutaneous adoption remains robust with incremental gains in conversion rates, demonstrating continued market confidence. |
Auto-Injector Pipeline Expansion and Innovation | Q1 2025 mentioned development agreements for both high- and small-volume auto-injectors in early-stage clinical settings ( ); Q4 2024 detailed confidential deals, exclusive supply arrangements, and innovative progress ( ); Q3 2024 described ongoing technical discussions with partners ( ). | Q2 2025 announced further advancements including plans for clinical testing of the small volume auto-injector, a human factor study for the high-volume device, and continued partner engagement ( ). | Progressing and maturing – builds upon previous deals with clearer timelines and study plans, reflecting increased partner interest and clearer product development paths. |
Guidance, Pipeline Momentum & Business Development | Q1 2025 featured raised full‐year guidance, robust pipeline catalysts, and share repurchase initiatives ( ); Q4 2024 communicated increased guidance and laid out durable royalty streams ( ); Q3 2024 highlighted full‐year guidance improvements and strong earnings projections ( ). | Q2 2025 raised guidance further to $1.275–$1.355 billion, citing 11 of 14 catalysts achieved, robust pipeline momentum, and active share repurchase programs, with strong revenue and EBITDA projections ( ). | Upward trajectory with sustained momentum – guidance and pipeline strength continue to improve, reflecting a solid business development track record and robust catalyst rollout. |
Regulatory Uncertainty and Approval Risks | Q1 2025 mentioned regulatory processes indirectly; Q4 2024 addressed a CRL for amivantamab subcutaneous and patent extension issues for DARZALEX, highlighting potential delays ( ); Q3 2024 discussed pending approvals and noted strong regulatory track records ( ). | Q2 2025 focused on regulatory uncertainty by addressing IRA concerns through submission of a comment letter, along with proactive litigation updates, thereby preparing to mitigate approval risks ( ). | Increased proactive engagement – the company is actively addressing regulatory challenges and uncertainties, strengthening its stance by engaging with regulators and stakeholders. |
Partner Deal Announcements and Execution Uncertainty | Q1 2025 explained that timing for partner announcements (especially for auto-injector deals) depended on partners’ internal processes ( ); Q4 2024 emphasized confidentiality and ongoing detailed discussions on new deals ( ); Q3 2024 noted active discussions, particularly in auto-injector collaborations ( ). | Q2 2025 reported that discussions with new partners are progressing well and that at least one new ENHANZE deal is on track for announcement, with partner conversations moving forward steadily ( ). | Steady and partner-dependent – while execution timing remains subject to partner internal reviews, progress is consistent and on track across periods. |
Dependence on New Catalysts and Product Launches | Q1 2025 identified 11 catalysts and detailed multiple product launches (VYVGART, OCREVUS, etc.) driving revenue expectations ( ); Q4 2024 layered new product approvals and pipeline nominations for long-term growth ( ); Q3 2024 underscored significant brand opportunities from recent launches and partner expansions ( ). | Q2 2025 reported that 11 out of 14 catalysts have been achieved with new indications and approvals (e.g., new DARZALEX indications, Ribrovant approval) enhancing the revenue outlook, alongside efforts to secure additional ENHANZE deals ( ). | Consistently expanding – new catalysts and product launches continue to drive growth, reinforcing long‐term revenue potential with an expanding pipeline. |
Royalty Revenue Volatility and Stability | Q1 2025 showed robust and diversified royalty revenue growth with strong performance from key products ( ); Q4 2024 acknowledged quarterly volatility due to contractual resets but emphasized stable long-term streams ( ); Q3 2024 reported solid royalty growth with raised full-year guidance ( ). | Q2 2025 recorded a 65% year-over-year growth in royalty revenue with expectations for sequential quarterly growth, underlining the durability of multi-year royalty streams from launched products ( ). | Stable with expected short-term variability – although minor quarterly fluctuations persist, the long-term royalty revenue remains solid and continues to grow. |
M&A Strategy Uncertainty in Drug Delivery | Q1 2025 outlined a disciplined, measured approach to M&A targeting platforms that deliver durable royalty streams ( ); Q4 2024 made minimal mentions; Q3 2024 did not provide specific commentary. | Q2 2025 reiterated a focus on pursuing drug delivery platform opportunities that generate long-term revenue without adversely affecting net leverage, maintaining a selection process that remains cautious ( ). | Consistently cautious – the strategy remains unchanged with a disciplined approach minimizing execution risk while targeting growth-enhancing acquisitions. |
Expanded Pipeline and New Indications | Q1 2025 detailed a robust pipeline including key approvals for VYVGART, OCREVUS, and auto-injector developments ( ); Q4 2024 described additional nominations and approvals driving pipeline durability ( ); Q3 2024 emphasized partner expansions and significant upcoming approvals ( ). | Q2 2025 presented an expanded pipeline with nine product candidates—including Phase 3 assets from Bristol and Takeda—and multiple new product indications (e.g., Ribrovant, new DARZALEX indications) that enhance the overall market opportunity ( ). | Broadening and deepening – the pipeline continues to expand with new indications and candidates, reinforcing future revenue streams and market opportunities. |
Product Sales and Seasonal Variability Challenges | Q1 2025 noted significant product sales growth and forecasted seasonal weighting (higher sales in later quarters) ( ); Q4 2024 outlined seasonal dips due to contractual and milestone resets, expecting lower Q1 sales ( ); Q3 2024 described “lumpy” sales with a seasonal summer dip in proprietary product sales ( ). | Q2 2025 reported a modest 3% increase in product sales over the previous year, with little emphasis on seasonal variability in the discussion ( ). | Steady growth with reduced emphasis on seasonality – while past calls highlighted seasonal dips and resets, Q2 shows moderate sales growth with less focus on variability, suggesting improved forecasting or timing effects. |
Licensing and Platform Model Uncertainty | Q1 2025 stressed the company’s commitment to licensing its drug delivery platforms and a measured M&A approach to enhance revenue streams ( ); Q4 2024 discussed new licensing agreements, confidential deal details, and expanding ENHANZE nominations ( ); Q3 2024 provided an in-depth analysis differentiating the mature ENHANZE platform from the emerging MDASE offering ( ). | Q2 2025 reiterated robust licensing discussions and partner engagements focused on new ENHANZE deals, while leveraging strong litigation outcomes to support their platform model, with no major changes reported regarding uncertainty ( ). | Steady confidence with emerging nuances – while the core ENHANZE platform remains strong and stable, some uncertainty persists around the new MDASE opportunities, though overall licensing activity remains positive. |
-
Merck Litigation
Q: What is the status of the Merck patent case?
A: Management is suing Merck for infringing 15 patents and expects a district court scheduling order within a couple of months. They also noted that four PGR petitions have been filed with hearings set for March 2026 and first common issue decisions expected on 06/02/2026. -
MDACE Royalties
Q: When will MDACE royalty clarity come?
A: There is no definite timeline; clarity may arrive if Merck settles or following a successful district court outcome, which could take several years. -
PGR Settlement
Q: How likely is a Merck settlement on PGRs?
A: Management is confident in its case, expecting settlement only when Merck opts to resolve the issue—pending PTAB challenges won’t affect the district court’s final ruling. -
Regulatory Outlook
Q: Will regulatory changes impact your pricing?
A: They remain confident, having submitted a joint letter to CMS and engaged with officials to protect the benefits of subcutaneous delivery, expecting no impactful changes. -
Long-term Guidance
Q: Will you update long-term guidance ranges?
A: Guidance is updated as new data points emerge; full-year projections are refined quarterly, while long-term updates occur annually, reflecting strong catalyst performance. -
Gearing Targets
Q: What are your leverage and gearing targets?
A: They currently maintain a net leverage ratio near 1x and are comfortable increasing to about 3x for the right M&A opportunities. -
Next-Gen Assets
Q: Any CMS or biosimilar impacts on next-gen assets?
A: Management has not coordinated with J&J on this; they note that most next-generation assets are either subcutaneous only or launching concurrently, so CMS issues aren’t a major concern. -
Acrivus Patient Mix
Q: Are Acrivus patients new or switching?
A: For Ocrevus (Acrivus), about 50% of U.S. patients are new to the brand with the remainder switching, aligning well with expectations. -
Auto Injector Interest
Q: What interest exists in high-volume auto injectors?
A: There is strong interest, with multiple discussions underway and partners anticipating prototype testing later this year. -
Neurology Uptake
Q: How is neurology conversion and device testing progressing?
A: Neurology launches, including Ocrevus and CIDP treatments, are seeing robust uptake due to reduced administration times; human factor studies for auto injectors are being conducted to ensure optimal usability.
Research analysts covering HALOZYME THERAPEUTICS.