Leerink Partners downgraded Halozyme Therapeutics (NASDAQ:HALO) from Market Perform to Underperform and sharply reduced its price target to $47 from $63, citing heightened regulatory risk and valuation concerns.
The downgrade follows new draft guidance from the Centers for Medicare & Medicaid Services (CMS) related to the Inflation Reduction Act (IRA). The proposed rules introduce uncertainty over how long hyaluronidase-based drug combinations will be shielded from price negotiations. As a result, the company’s shares plunged more than 24% intra-day today.
Notably, CMS suggests that price control eligibility may begin 13 years after the original active ingredient’s approval, not the combination product’s, potentially accelerating pricing pressure on key Halozyme-linked therapies.
Although revenue projections remain unchanged for now, Leerink adjusted its valuation framework, increasing the discount rate from 8% to 12% and lowering the terminal growth assumption from -15% to -25%. These changes reflect reduced long-term confidence in Halozyme’s pricing power under the new regulatory landscape.
The firm is holding off on further revenue model changes until final CMS guidance is issued in the second half of 2025.
