Halozyme, J&J slide as analyst cuts rating on CMS draft guidance

TipRanks

Wed, May 14, 2025, 8:00 AM 3 min read

Shares of Halozyme Therapeutics (HALO) and Jonhson & Johnson (JNJ) are nether unit connected Tuesday aft Leerink downgraded the stocks to Underperform and Market Perform, respectively. This comes aft the Centers for Medicare and Medicaid Services issued draught guidance for 2028 Inflation Reduction Act cause terms controls, which the steadfast says creates hazard that hyaluronidase operation products whitethorn not beryllium protected from IRA terms negotiations for 13 years aft combo approval.

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DOWNGRADES ON CMS ACTION: On Tuesday, Leerink expert David Risinger downgraded Halozyme to Underperform from Market Perform with a terms people of $47, down from $63, and Leerink downgraded Johnson & Johnson to Market Perform from Outperform with a terms people of $153, down from $169. The firm, however, is not making immoderate changes to its gross projections this clip arsenic it awaits last guidance from CMS successful the 2nd fractional of 2025.

Leerink explains that the catalyst for its downgrades is that CMS issued draught guidance for 2028 IRA cause terms controls that creates hazard that hyaluronidase operation products whitethorn not beryllium protected from IRA terms negotiations for 13 years aft combo approval. The “surprise” is CMS draught guidance connection suggests that operation products, which bash not heighten efficacy, whitethorn beryllium negotiated 13 years aft the archetypal progressive constituent was approved, alternatively than 13 years aft operation approval.

The steadfast notes that Halozyme could look U.S. gross unit from Opdivo SC successful 2028, Darzalex Faspro successful 2029 and Ocrevus SC successful 2031. In addition, CMS enactment whitethorn trim caller concern opportunities to licence ENHANZE. A caveat is that the Street already anticipates the company’s Faspro royalty to diminution from 5% to 2.5% successful 2029 and spell to zero successful 2032. Its caller concern thesis connected Halozyme is that Leerink expects shares to underperform due to the fact that it volition beryllium hard for investors to delegate worth to the company’s large maturation drivers since they could commencement to rotation implicit successful 3-5 years.

Regarding Johnson & Johnson, the steadfast notes Darzalex Faspro whitethorn beryllium terms controlled successful 2029 alternatively than 2034 arsenic it had been assuming. In the lawsuit of Darzalex, it was approved successful November 2015, and Darzalex Faspro was approved successful 2020. Leerink has been modeling that Darzalex Faspro volition make $10.7B successful U.S. income successful 2028, oregon 16% of J&J Worldwide Pharma income of $66.4B and 10% of full institution income of $96.8B. The steadfast believes that U.S. Darzalex’s nett publication could beryllium astir $8.6B successful 2028, oregon 22% of its full institution operating nett estimation of $39.1B. If it is terms controlled successful 2029, the drug’s U.S. nett publication could instrumentality a meaningful hit, it points out. Leerink’s caller concern thesis is that J&J’s 5-year maturation prospects are astatine hazard of downward revisions if Darzalex Faspro is terms controlled successful 2029, and we are not anticipating an upward re-rating of the banal successful the near-medium term.