Halozyme Therapeutics' (HALO) strength in royalty revenues and cost discipline will drive Q3 earnings, Morgan Stanley said in a note Monday.

Morgan Stanley expects Q3 revenue of $346 million and diluted earnings of $1.47 per share, both slightly above consensus estimates.

Halozyme's revenue and earnings should benefit from its Enhanze platform, which generates diversified revenue streams, Morgan Stanley said.

Investor focus is likely to remain on the impact of the US Centers for Medicare and Medicaid Services final guidance on drug price negotiations, which could pose long-term headwinds to Halozyme's revenue outlook, the note said.

Morgan Stanley also noted the company's planned $750 million acquisition of drug delivery business Elektrofi, which could extend Halozyme's revenue from 2030 onwards.

Morgan Stanley maintained its overweight rating on Halozyme Therapeutics and trimmed its price target to $79 from $80.