WHAT TO DO NOW: We sent a special bulletin early today with some new buys, but given the action, we’re forced to cut bait on another recent buy—Halozyme (HALO) is collapsing today after a downgrade that cited a patent invalidation in Europe and some potential Medicare changes that could be negatives. Combine that with the sell-on-strength trend that’s out there and HALO is cracking today—it’s disappointing, but the right thing to do is to make sure a bad situation doesn’t get any worse. We’ll swallow the loss on our small position and hold the cash for now.
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The major indexes opened up a touch this morning, and we already reviewed the overall evidence in this morning’s bulletin, so we won’t rehash it here. Suffice it to say that, while the near term could see some weakness, more and more of the top-down evidence is looking good.
That said, individual growth stocks are still seeing selling on strength, mostly those that are near their highs. This morning, Halozyme (HALO) was downgraded by one analyst who mostly cited some Medicare-related worries that could again impact the firm’s pricing protections as early as 2028. (We also read that a patent in Europe may have been invalidated, though we haven’t been able to confirm that.)
Exact details aside, the resurfacing of worries regarding pricing (and possibly patents) is a big hang-up—in the conference call last week, management said it sees all of its patents good through at least 2030, with the vast majority valid into the 2040s … but this morning’s news obviously looks to be changing that perception.
Could HALO bounce from here, especially if management and/or other analysts come to its defense? Of course. But there’s no question today’s decline is wildly abnormal; at the very least, the uncertainty surrounding the patents and future earnings is back in play.
If you want to trim some and hold some for a bounce, you can, but we (thankfully) started with “only” a half-sized stake—and given the meltdown, we’re going to swallow the loss and make sure a bad situation doesn’t get any worse and then look to reinvest the proceeds into a stronger name going ahead. SELL HALO
Don’t hesitate to email me directly (mike@cabotwealth.com) if you have any questions.
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