Good afternoon, everyone. Thank you for joining our next session with Halozyme. My name is Dave Risinger. I cover diversified biopharmaceuticals for Leerink Partners, and it's very much my pleasure to welcome Dr. Helen Torley, who is the company's President and CEO. And appreciate you making the trip out here to be with us, so thank you for joining. I thought we would start at a high level just to set the stage a bit. So could you talk about your key priorities for this year and how you're focusing your time?
Yeah. So for those who don't know, Halozyme is a company that has two subcutaneous drug delivery platforms, one called ENHANZE and the second one is our autoinjector technology. And we also have two commercial products, XYOSTED and Hylenex. Our business model is, through our licensing, to make money through milestone payments, sales of products, but most importantly, our royalties. Our platform in ENHANZE, as an example, has already resulted in seven approvals to date of major products, as I'm sure we'll discuss in a moment, and we're expecting three more approvals by the end of 2025. What's very exciting about Halozyme, David, is that we're in a period of very strong growth. Our 2023 results showed more than 20% growth in our revenues, our royalty revenues, and our Adjusted EBITDA.
2024 guidance shows continued strong projected growth in the double digits, as an example, for revenues projected at $915 million-$985 million. Royalties growing to $500 million-$525 million. Because of our business model, this licensing model, our Adjusted EBITDA is actually growing even faster than our revenues, and so we are projecting Adjusted EBITDA of $535 million-$585 million. Also, because of our business model, we can project a little bit out into the future. Recently, we provided a five-year outlook for our revenues, royalty revenues, and our Adjusted EBITDA, which shows continued strong growth across our platform, achieving $1 billion in revenues in 2025. By 2027, we're projecting $1.5 billion in total revenues. $1 billion will be royalty revenues and, impressively, about $1 billion in Adjusted EBITDA.
You can imagine my whole focus is on assuring we deliver on that already strong revenue growth, but focusing on new opportunities to further accelerate that growth. I'll mention a couple of where I'm focused. Obviously, we've got lots of approvals coming up. We've got the next wave of products that's not actually included in terms of royalties in that projection. We call that wave four. We want to make sure we're supporting our partners and moving those products into and through the clinic to approvals. So that's number one priority. And then new growth will come from signing new ENHANZE deals and having our current partners moving new targets into the clinic, either alone or in combination with our new technology, which is called our high-volume autoinjector. All of that adds royalty revenue streams on top of what I've already described to you. And then capital allocation.
That's always, as we have a high cash flow business, a very important thing. Investing in the business, determining our share repurchases right. But we're also very focused, and I'm very focused on, is there another acquisition that would make sense for Halozyme? Finding something that would further accelerate our growth but also extend the durability of our revenues, focusing most likely in the drug delivery space. So that's how I spend my time. It's all about growth, growth, growth, and operational efficiency to continue to deliver this very strong Adjusted EBITDA and grow our EBITDA margin, which we project will get to over 70% by 2028.
Excellent. That's a very helpful perspective and very impressive growth prospects ahead. So with respect to the company's operations and employee base, if you could also set that stage for context as well, please.
Yeah. So ENHANZE, we're the inventors of ENHANZE. Our role with our partners is to obviously license it to them, but then we actually play a very active operational role. We're responsible for ENHANZE on the oversight of the production of the API. That is the enzyme, rHuPH20, that is the secret sauce in being able to deliver drugs subcutaneously. We sit on project teams with our partners, providing advice on formulation work, regulatory strategy, development strategy as well, as well as work to determine CMC strategy, as an example. So it's a very collaborative relationship we have with our partners, and we're able to bring all of the experiences we've gained from the 10 soon-to-be approvals but multiple other interactions with regulatory authorities around the world to help speed and increase the probability of success of their development plans.
On the device side, similar model where we're responsible for the design and the development and oversight of the manufacturing of autoinjectors. We have several partners today, Teva being the most notable one. For example, their EpiPen uses our device. And so as companies work with us to develop drug-device combinations, similar idea where we work with them on exactly their design, and then we work collaboratively to assure that, again, it's an out-licensed model with different suppliers, but we oversee the manufacturing of the molds, as an example, the assembly of the devices, and often we have a role in the construction of the drug-device combinations as well. So once again, a highly operational role for this licensing model. And then for oversight of the API manufacturing, that's again one where we have got great expertise internally.
Team members who have worked at CDMOs have overseen CDMOs, and so we're highly engaged in assuring high reliability of our supply of API to partners who are then responsible for the coformulation work. A little bit about why our margins are so high, you can imagine we're, as I've described it, mostly and this is on the ENHANZE side, we're mostly in an advisory role, and so we're not spending the cost for making the coformulated product. It doesn't cost us for the clinical studies or for the commercialization, but we're there every step of the way, providing advice as needed and as requested. And we found that that helps speed development for the partners and increases the probability of success.
Great. Since you touched on it, on manufacturing, could you just expand a little bit more on the API efficiencies you've been driving, and those will grow in coming years. How are you going about driving those efficiencies, and what are the additional opportunities ahead?
Yes. Our ENHANZE API, it's basically an enzyme that's produced through biologic processes. And so over the years, we've introduced a new generation of our API, which has got properties that allow it to have a higher yield. If it's higher yield, the cost per gram will go down for our partners. And frankly, that's what companies would do themselves or expect as the demand increases. We're reaching a point with our current approach where we didn't see an opportunity to dramatically increase our yield. And so what we started, I think it was about two years ago, David, was a new approach using us. It'll still be ENHANZE, but it's a new approach that will allow us to have substantially higher yield. So by 2026, we'll introduce an API that has got higher yield that will further reduce the cost for our partners. That's a prudent move.
A good partner does that. It also reduces the complexity of manufacturing because you'll need less lots. Even though our demand is going up, if we can get substantially higher yield, it's going to make our whole supply chain just more efficient as well, which takes some risk out of the whole process. By 2026, that new high yield will be available for our partners. We're very excited to have continued to collaborate with them. Again, this meets their expectations that we're investing to increase this yield.
That's very helpful. And then with respect to the high-volume autoinjector, could you just remind people what you've mentioned recently about the additional validation ahead and then talk about optionality for partners to sign on for that in the future?
Yes. So I've mentioned that we do subcutaneous drug delivery. Just taking a step back, if you were to try and inject a drug underneath your skin, after about 1, 1.5 mL injecting it under the skin, you would start to get a bleb on your skin. It would start to expand, and it would get harder and harder to push it in because there's a substance underneath your skin that's called hyaluronin. It is part of the structure of your skin, and it fills the subcutaneous space, leaving no space around it.
What ENHANZE does, it targets and degrades that hyaluronan, basically allowing fluid to go into the space that the hyaluronan was previously in and allowing an injected drug to spread like a big pancake, if you like, so that it is spread over a much wider area and can then be exposed to the lymphatics and be absorbed. Our largest approval in terms of volume that can be injected in one setting is actually for HyQvia, which was our first approval. There you can inject 300 mL in one hour because the hyaluronan is degraded immediately by our enzyme called ENHANZE, which is a hyaluronidase, and it creates this ability for the fluid just to spread out. Without that, as I mentioned, you would get this pain, this swelling, and actually, the drug actually leaks out because there's nowhere for it to go.
So when we started this concept of developing a high-volume autoinjector, we recognized there was a gap in the market. Nobody could deliver between 2 and 10 mL via an autoinjector. And that's because you need ENHANZE. ENHANZE is absolutely essential because there's nowhere for the liquid to go. If you tried to do it with an autoinjector, you'd damage the tissue, and frankly, all of the fluid would come out again. So when we acquired Antares in 2021, we started to invent this new autoinjector. Last year, we were very excited to take it into the clinic. What we did was we took some IgG, combined it with ENHANZE because you need ENHANZE to be able to inject these large volumes, and tested it in 23 patients. Acceptability was incredibly high to receive this. There was no pain, and there was no back leakage.
This is the first time that it's been demonstrated the feasibility to deliver 10 mL of a biologic with ENHANZE in just 30 seconds. That's a speed of 20 mL a minute. Now, without ENHANZE, if you were trying to put in a SubQ delivery, you'd probably do 0.5 mL a minute. That's 40 x faster because of the ENHANZE and the autoinjector technology. Our goal with that is really, and the high volume is to have it used by our current partners to expand on those current relationships, hopefully have them move additional products into the clinic where this is a great way to deliver their drugs, but also expand on our current ENHANZE collaborations by attracting new people by the joint offering of ENHANZE with the high-volume autoinjector.
So high-volume autoinjector always associated with royalties because it has to be used with ENHANZE, and we'll get product sales on top of that as well.
So what would the rough timing be for the high-volume autoinjector administration? And I'm sure it's quite a range, but.
So if it was 5 mL because it can work from anything from 2 mL to 10 mL, that's the way we've created it because different partners will have different volume needs. Within our portfolio, just to give examples, our argenx's VYVGART Hytrulo is 5.5 mL. Phesgo is 10 mL. So different drugs, different sizes. So we can do anything, but 5 mL with the autoinjector, we estimate, would be between 10 and 15 seconds, and the full 10 mL is about 30 seconds. So obviously, much faster than anyone can do that. In fact, people can't do it today because they don't have the combination of ENHANZE with our autoinjector technology.
Yeah, that's very impressive. Okay, great. And so I guess thinking ahead, so just add on a little bit more. You have a current partner who's evaluating it. Could you talk about that and then speak to, as you're working on new partnerships ahead? So I guess you can have partnerships with existing customers for that specifically, but for partnerships ahead, that might include ENHANZE for the first time. For example, how might these agreements evolve, particularly if you're combining the two?
Yes. And just to kind of further elaborate on the value proposition, what could this mean for patients? Because that's important as we think about it being used by our partners and new partners. So you can imagine that today, if somebody is receiving a 5-10 mL injection and is either doing it at home or in the doctor's office, this gives the patient the ability to be able to have it done in well under a minute, as opposed to with the options they have today. As an example, if they were using an on-body pump, the 0.5 mL per minute, which is the average for those, a patient could take up to 60 minutes. So you're done, and your injection is done quickly. So that's fantastic, I think, for a patient or for the caregiver who might be the one administering it.
If it's even in a doctor's office, imagine that they don't have to have patients sitting there or somebody pushing in a slow infusion. So all of this helps with the efficiency and throughput of patients in a doctor's office as well. So we think this will be a great way, the high-volume autoinjector, for our current partners to consider adding it to products in their portfolio. If they already have an ENHANZE agreement, this would be product sales. The model for autoinjectors is obviously we'll continue to get and excitingly, if we can move new products into the clinic with this, new royalty revenue streams associated with it. And then the addition on top of that is the cost-plus model for the high-volume autoinjector. Similarly, for new partnerships, we have two models of partnerships. For ENHANZE, it can be exclusive. It can be non-exclusive.
We would have the partner obviously take out the contract for ENHANZE, and then the product sales would be a separate agreement. But in parallel to that, then ENHANZE obviously leading to royalties, and then the product sales would be on top of that as a separate part of the agreement. So a very nice way for us to attract new customers but also add additional royalty revenue streams, which is the business that we're in.
Got it. Then is there any more color you can provide on attracting new customers? You've mentioned, obviously, you expect additional customers to be signed this year. Any more color on that?
Yes. So last year, we're able to introduce the high-volume autoinjector and continue to talk with partners about ENHANZE with that or ENHANZE on its own. If your volume is over 10 mL, that is generally given by a subcutaneous push, usually by a healthcare professional. That works very well as well. An example of that is DARZALEX FASPRO. So I'm sure everybody in the room is familiar with daratumumab, the $10 billion brand that is J&J's treatment for multiple myeloma. Today, nine out of 10 patients get our SubQ version, and that's just in under three years since the launch. That's because the SubQ version was able to transform the patient treatment experience from 4-6 hours on average for the IV to just 3-5 minutes for the SubQ. So that would be an example.
That's a 50-minute sorry, a 15 mL, 3-5 minutes subcutaneous push, just to give an example. With regard to where we see this headed, we have been talking with different partners. We are very active in our outreach to companies where we see an opportunity for their IV drug to be transformed, just like DARZALEX, into a SubQ product that improves the treatment patient experience but importantly, can increase their competitive differentiation as examples. There's a number of products, I'm sure everybody can think about, where this would be beneficial. We reach out to those companies. We obviously also get incoming calls as well. Last year, we felt that companies were a little distracted by their IRA.
I'm happy to say, as we've entered this year, the pace of conversations, the engagement of companies seems to be back to more of a normal pace, suggesting that the strategies are settled in terms of the IRA, and now companies are really focused on assessing new technologies and making decisions. And so we definitely are pursuing opportunities today for ENHANZE, ENHANZE with our high-volume autoinjector, and also for our small-volume autoinjector. So we have autoinjectors that deliver up to 2 mL. We actually have interest in those as well. So broad set of opportunities and some very exciting opportunities in there. I look forward to updating on as the year progresses.
Excellent. Okay. And then with respect to the pace and magnitude of conversion from IV to subcutaneous, clearly, there have been some steep ramps. Could you just speak to that recent experience and then what some of the manufacturers have been suggesting publicly about their hopes for some of your partner products?
Yeah. Let me speak about, to begin with, all the reasons why people move from IV to SubQ because there's benefits for patients and caregivers for the doctor's practices but also for the healthcare system. So from a patient perspective, I describe that experience of 4.5, 4-6 hours down to 3-5 minutes for DARZALEX. Upcoming launch will be for Ocrevus. That's anything from 3.5-6.5 hours down to 10 minutes. So obviously, for the patient, this means instead of them having to spend an entire day traveling to an infusion suite and in an infusion suite chair, a patient can be in and out in a lunchtime. The caregiver can drop them off before work. It just puts the patient back in control.
We have a vision in the company that instead of important medications controlling a patient's life, we're helping important medications fit the patient's life so they can get the treatments that fit their schedule. So the patient benefit, I think, is very clear. There's an additional benefit we sometimes see, which is reduced infusion-related reactions. Now, that is a systemic reaction to the biologic drug that's being injected, can be causing shivering, breathlessness, nausea, low blood pressure. It can be very severe, so it's something that doctors don't want to happen. Our SubQ can, in instances, and DARZALEX is a super example where the infusion-related reactions went from 35%-just 13%, so a dramatic reduction. So that's another benefit for patients who don't want to experience that sickness that you can get. For the doctor's practices, they're able to see more patients.
They're able to have nurses and other staff allocated to different things rather than overseeing long infusions. That is very good for them in terms of the efficiency of how they're using their staff. For the healthcare system, there's multiple studies show that SubQ dramatically reduces the cost of care because you need less of the doctors, nurses, and pharmacists. So all of those are reasons why we see strong uptake of the drug. Talking to some of the upcoming launches, we obviously, David, are very familiar with VYVGART Hytrulo. So VYVGART Hytrulo is our argenx's drug, which has been approved now for one autoimmune disease called generalized myasthenia gravis. And we're expecting it to be approved in June for the second one, CIDP.
This is an instance where the SubQ is launching just about a year after the launch of the IV, and it's a brand new class of drugs called an anti-FcRn. So our argenx is busy at the moment building the marketplace. It's at $1.2 billion last year, so it's done very well, but they still have an opportunity to penetrate into new populations. So what our argenx is going to focus on is having the SubQ speed up the growth of the market, not cannibalize their already IV share, but they want to use it to get new doctors to adopt the drug. Much easier to use a SubQ than it is an IV, as you can imagine, but also use it to help even deepen further penetration into the early lines of therapy, use it before IVIG.
So it's really for them a market growth story rather than convert and cannibalize what they already have, which is very smart when you think about it, and that's a new class. Now, the CIDP, I should mention, is only going to be available as a SubQ version, and so that is all going to be very nice share for us. So we're predicting some very nice revenues will come to us, obviously, from the VYVGART Hytrulo. I'll move to Ocrevus. That is Roche's drug for multiple sclerosis, already a $7 billion brand. What Roche has talked about, though, is the fact that there are around the world, particularly outside the U.S., but also in the U.S., there are constraints in the number of infusion chairs. And so patients who need and could get Ocrevus aren't getting it.
They can't get it either because they live too far away from the infusion suite or there aren't enough because it takes six hours for the patient to be treated. They just can't see enough patients. So what's very exciting about SubQ and the positioning Roche has for it is to use it to allow new community hospitals to get into the business of administering Ocrevus because they can do it as a 10-minute SubQ injection and also potentially even physician offices. So they say that Ocrevus SubQ is going to be a standalone blockbuster opportunity, add on to and accelerate the growth of overall Ocrevus. Now, I do think with a value proposition of 3.5-6.5 hours to 10 minutes, we're going to see some conversion, but the company's strategy isn't to target the conversion.
You're going to see the market growth once again. Those are exciting. And then the third one is Tecentriq SubQ. That value proposition in terms of time is seven minutes versus 30-60 minutes for the IV. But what's very exciting, and I think underrecognized here, is the SubQ is offering for the first time for patients an all-non-IV regimen for many of the indications for Tecentriq. Either the Tecentriq is used as its own as monotherapy or it's being used with oral chemotherapy. So imagine now patients getting their cancer care do not need to be in an infusion suite necessarily, depending on where the SubQ is delivered. And so that is, I think, a wonderful value proposition as well.
So that one, we usually, in terms of uptake, we've seen as an example in Europe, Herceptin with a similar value proposition in terms of time get to 60% share of sales volume. So we do see this will have a robust uptake for Tecentriq as well.
That's very helpful. So all of that makes a lot of sense. It's clearly better for the patient, clearly better from a time standpoint, etc. But the U.S. economics are a little peculiar, right? So in Europe, physicians do not have economics tied to infusion shares or infusion centers, and in the U.S., they do. And so do you have a sense for, let's say, for a prescribing physician of Ocrevus whether they would make less money if the SubQ was administered instead of the IV? I just don't have a sense for that. I know that in Europe, that's not relevant because the physicians are never making money off of infusion centers.
Yeah. So two things. The oncologists definitely have a lot of infusion centers. I would say for neurologists, not all of them are associated with infusion centers. So it's a less relevant dynamic outside of oncology, but it still can be relevant, David. So the ASP and the reimbursement for the drug will be similar between the two. We don't think that's where there would be a difference. There is a small difference in the fee the offices would get for administering an IV, which is considered more complex than for a SubQ. As an example, when Herceptin launched, the difference was between $180 and $90. So not a big difference.
And again, if you're thinking about this for the office practice manager who's thinking about the use of that chair, instead of 1 patient sitting in it for 6.5 hours, they could see six patients in that same time frame if they chose to. And so it's all about the efficiency and effectiveness of the use of the resources in these clinics and these clinic sessions. And it takes a while. We've seen with the uptake of Phesgo, that is Roche's drug for breast cancer, where instead of the patient having two sequential IVs, it takes 2.5 hours, they get a single, simple five-minute injection. Once the offices understand this, we are seeing a very nice adoption and more offices moving to the SubQ Phesgo and getting deeper with their patients.
But the office practice manager needs to understand it and think that through in terms of the change to practice. But it hasn't proved a barrier. And we can say for DARZALEX, where there would have been a difference between the IV and the SubQ because it's such a long infusion, that wasn't a barrier at all. We were at 50% conversion in six months because of the value proposition, particularly those reduced infusion-related reactions. So it takes a little slower for the U.S. is what we've seen if there isn't the reduction in infusion-related reactions. But definitely, all countries recognize the benefit of SubQ.
That's very helpful context. And so where is the conversion now on Phesgo? Has that been disclosed by Roche, or can you comment on that?
It's disclosed at high level. So it's 39% share in the 46 launch countries. That does include the U.S. and most of the big European countries. I would say there are countries in Europe like the U.K. and the Nordics that are in the 80%. Those go very fast because the healthcare system absolutely sees the cost savings for SubQ. U.S. is now 40% of the revenue of PHESGO, which is CHF 1.1 billion or CHF 1.2 billion. So obviously, a very successful launch. U.S. was slower to start but catching up nicely with now representing 40% of the sales.
Excellent. That's super helpful. We're almost out of time. So I guess maybe just to follow up, you can't obviously share what M&A you're going to do in the future, and it depends on what's available and at the right price. But I think you suggested that you're potentially drawn to new formulation technologies that are validated or very close to validated. But is there any more color you can provide on, I don't know, the size of acquisitions you're seeking or anything else that would shed some light on that?
I'd say maybe more than or different from new formulation, but new drug delivery technologies, which I think is very important because that's a very broad set of opportunities. We've actually identified more than 30 areas that could be of interest there. It really comes down to finding the technology that is de-risked, that is broadly licensable. Big pharma and biotech can't do it themselves and would want to access it from us, and where we see a clear line of sight to important royalty streams on top of our already large revenues that would be meaningful and would add durability of those revenues. So we have strict criteria. We're not in any hurry to do an M&A. We very much are wanting the right fit as we did with Antares, but looking very broadly in the whole drug delivery space.
Got it. Great. This has been very helpful. Thank you so much for taking the time.
We appreciate the opportunity. Thank you.