Episode Details

Halozyme Therapeutics (HALO) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): total revenue $481.0M vs $325.7M, +47.7%, against a ~$402M Street bar. Royalties $307.7M, +49.6%; product sales $129.6M, +59.0%. GAAP EPS $1.90 vs $1.33; non-GAAP net income $272.6M / $2.28 diluted EPS vs $191.3M / $1.54, against a $1.79 bar. Adjusted EBITDA $328.8M vs $225.5M, +45.8%, a 68.4% margin. Non-GAAP diluted shares 119.7M vs 124.0M. FY2026 guidance RAISED on all four lines: revenue $1.835-$1.910B, royalties $1.220-$1.245B, adjusted EBITDA $1.225-$1.280B, non-GAAP EPS $8.65-$9.00. The 8-K was accepted 4:08 p.m. ET Thursday Aug 6 (after the close); the stock closed Friday Aug 7 at $103.12 vs $85.76, up 20.24%, an all-time high. Halozyme beat by 27% - $2.28 non-GAAP against a $1.79 bar - grew revenue 47.7% to $481.0M, raised guidance on all four lines, and the stock added 20.24% to the highest close in its history. The quarter is outstanding and we say so. Our objection is two numbers printed beside it. FIRST: the guidance growth rates are measured against a broken base. Halozyme's own February release says adjusted EBITDA of $657.6M 'included acquired IPR&D expense of $284.9 million related to the Surf Bio acquisition', and that non-GAAP EPS of $4.15 'included an unfavorable impact of approximately $2.30 per share' from it. Clean, FY2025 was $942.5M of EBITDA and about $6.45 of EPS - so the guided '86% to 95%' is really 30-36% and the guided '108% to 117%' is really 34-40%, roughly a third of what was quoted. SECOND: the 10-K says the U.S. rHuPH20 patent behind the royalty rate 'expires in 2027', Europe in 2029, and the 10-Q says the rate is REDUCED - not terminated - with the size of that step-down undisclosed. Two tests both came back FALSE: the bar was never walked down, and the beat was not bought ($272.6M on last year's 124.0M shares is still $2.20, so 89% of the EPS growth is operating). THE CALL: AVOID (3/5, AN OUTSTANDING QUARTER, A GUIDANCE HEADLINE THAT FLATTERS IT, AND A PRICE THAT ALREADY PAYS FOR THE BULL CASE) — base-case value ~$82.0 vs ~$103.12 today. KEY METRICS: - CALL: AVOID 3/5, fair value ~$82 vs the $103.12 Aug 7 close (-20%). Bull $126, base $81, bear $48. Street: Buy, 27 analysts, avg $99 - itself BELOW the tape. - Revenue $481.0M, +47.7%; royalties $307.7M, +49.6%. Non-GAAP EPS $2.28 vs a $1.79 bar. Adj EBITDA $328.8M, +45.8%, a 68.4% margin. H1 free cash flow $413.1M. - FY2025 adj EBITDA of $657.6M included a $284.9M Surf Bio IPR&D charge. Clean base $942.5M, so the guided +86-95% is really +30-36%. US ENHANZE patent expires 2027. What to watch: UP: a disclosure quantifying the post-2027 royalty step-down as smaller than feared; a Q3 delivering the implied 24% H2 ramp ($694M vs $558M); more Hypercon deals with mid-2040s patent lives. DOWN: royalty growth below 30%; H2 missing the implied $694M; concentration above 69% of receivables; partners reformulating around the enzyme ahead of 2027. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.