Thank you very much for joining us, and very good afternoon. My name is Mohit Bansal. I am one of the biotech and pharma analysts here at Wells Fargo, and I'm very happy to have with us Helen Torley, the CEO and President of Halozyme. Thank you, Helen, for coming, joining us third time in a row, at least with me. But I think this is the fourth time for you here, right?
I've been coming for many years. I always enjoy the conference, Mohit.
Thank you. Thank you for being here. So maybe we can just get started with, you know, what is exciting with the company right now and what you're up to right now.
Yeah. So for those who don't know Halozyme, we're a company whose mission is to transform the patient experience for those patients receiving IV biologics, so that the treatment, instead of restricting them and having to go to infusion suites and spend time and disruption with that, they can receive the therapy in a way that fits their life. We do this through our proprietary enzyme called ENHANZE, which is able to transform IV drugs that take hours for infusions, often in infusion suites, into a simple, short-to-give subcutaneous injection, that's an injection under the skin, that can be given in just minutes. This is a mode of therapy that is transformative for patients. And indeed, in clinical studies, more than 90% of patients report a strong preference for receiving drugs subcutaneously versus intravenously.
This is already a very well-established way of treatment. It's used a lot in oncology today, and we're seeing increasing momentum in other exciting areas of growth, such as immunology and inflammation, and also neurology. With our technology, we now have eight approved products, and I'm sure during the course of the presentation, we'll talk about specifically what they are, and we're expecting two additional products approved by the middle of next year. This has given us a great deal of experience, which has given a very large safety database, which is a key point of differentiation for us, but also has been allowed us to demonstrate that meaningful commercial success and market acceptance of subcutaneous delivery, resulting in a very strong profile for the company. We gave out 2024 and five-year guidance actually earlier this year.
And it is this growth in these products and the commercial success that allowed us to give such strong growth guidance. The company was profitable in 2019 , and that profitability is simply growing. And to give you a sense of the momentum of the company, our total revenues in the five-year CAGR from 2023 to 2028 is 16%. Royalty revenues are growing at 20%, and because it's a licensing business model, our EBITDA, adjusted EBITDA, is actually growing even faster at 25%. So, these new launches, as I'm sure we'll talk about, are really driving incredible growth and future potential for Halozyme.
Great. I mean, that's where I want to start, because, I mean, you are kind of entering in a phase where you have Vyvgart launching. Well, Vyvgart is already launching, but at the same time, you have three more products coming through the pipe. So can you talk a little bit about that and what it means for Halozyme in terms of-
Yeah. We talk about our launches in waves. Wave two was Darzalex and Phesgo.
Mm-hmm.
Wave three includes the products that Mohit just mentioned, Vyvgart Hytrulo, Opdivo, Ocrevus, Tecentriq, and amivantamab, all sub-Q-ing our technology. What these are going to mean for the company is our. As an example, our royalty revenue projection for this year is $520 million-$555 million. The continued momentum of wave two, which is the Darzalex and Phesgo, with these wave three launches, mean that we are projecting achieving $1 billion in royalty revenues in 2027. That's very meaningful. Now, why is that occurring? When we think about these wave three products I just mentioned, the five products, analysts project as a group, that's $35 billion in revenue in 2028.
Now, we receive, on average, a mid-single-digit royalty on net sales of anything that converts to sub-Q. So obviously, we're starting with a very large pie, mid-single-digit royalty. That's a very attractive opportunity. And to put that into perspective, our wave two products that are driving this very strong projection for this year are about 20 billion in total potential. And so we're going to continue to see momentum from wave two. We're adding in wave three, where, by the way, all of them are now de-risked, either approved or positive phase III data. So this is real meaningful near-term revenue. And in each case, there is a strong value proposition for each of these products as to why patients would no longer get the IV and move to the sub-Q, as I'm sure we'll talk about.
Just to give some idea of the momentum here, we received approval for Vyvgart Hytrulo and a new indication, CIDP, in June. We've got two PDUFA dates coming up in September. One is for Ocrevus subcutaneous on September 13th. Tecentriq subcutaneous is on September 15th, and then Opdivo subcutaneous is December 29th, and then we expect amivantamab by mid-next year. So large products and this addressable market of $35 billion opening up, obviously, depending on how much we convert to sub-Q.
There's a lot to talk about here. I want to start with the checkpoint, so PD-1 and PD-L1, Tecentriq and Opdivo are here. A big unknown is conversion, right? So I mean, we look at Phesgo, we look at Darzalex, there are ranges there. Darzalex was a big convert, like you saw a lot of conversion there. How should we think about the conversion for these checkpoint inhibitors? Because the companies are talking about 40%-60%. Do you agree with that, and what is your internal thought process there?
Yeah, I think the fact that companies are talking about 40%-60%, I think is very encouraging-
Right.
and exciting to hear.
Mm-hmm.
Because they are the ones who drive the strategy and make it happen.
Right.
We can look at benchmarks as to what's happened historically, and one of the benchmarks we use is the first launch product, which was Herceptin subcutaneous in Europe, and that got to 60% share of sales after about three years. So I do think that is where treatment is going from generally an hour as an IV just for receiving the treatment, down to five minutes. I think that is a very good analog to think about. When we listen to the calls of our partners, they are talking a lot about the sub-Q, so that tells you it's important to them.
Mm-hmm.
They're giving out their projections, which means that that's what their plans are. And so it's very exciting for us to hear this enthusiasm for it. Now, one of the things to think about, too, is for some of these products, they're coming up to the loss of the exclusivity. What we've also seen with the move to sub-Q is that patients certainly in Europe, rarely went back from the sub-Q to an IV biosimilar. And so once the market is converted, as an example, of Opdivo, a patient moves from IV Opdivo to sub-Q, even if biosimilars were to come in 2028 , there's a possibility that that patient will stay on the sub-Q.
I think that's very attractive for companies and motivation for them to move to convert the market fast, get the patients in the clinics, very comfortable with the sub-Q, and that remains a very strong clinical rationale for why patients stay on the sub-Q, and biosimilars don't get to address that part of the market for them.
That's very. So that's very helpful. I think, the other part I want to understand, I mean, on Ocrevus, I mean, Roche is talking a little bit about this is more of an expansion market versus, versus conversion market. So when you talk to them, what do you hear? I mean, like, is this, is this. Like, there could be one scenario, could be, like, initially, the, all the new patients come in, and then over a few time, it becomes sub-Q market, or, or, like, how do you think about it there?
Yeah, let me start by just talking about what the value proposition is here-
Right.
-because I think that'll inform us as to what might happen immediately and what would happen over time. So today, Ocrevus, it's an amazing drug, $7 billion, roughly, in sales in 2023. The leading drug in U.S. and EU5 for MS, and with the best long-term safety data. So it is just an incredible drug. For a patient receiving the IV today, between the treatment time and observation time, it's anything from three and a half to six and a half hours. That's the time the patient is in the infusion suite, in the chair, or being observed somewhere in the infusion suite. You can imagine that even if Ocrevus is only every six months, that is quite restrictive for the patient. The sub-Q was developed, and it is a 10-minute sub-Q injection with no observation time.
That's transformative for the patient, as you can imagine. For the healthcare system, what is incredibly important, and this is what Mohit was referring to about what Roche talks about, is not all patients can get access to infusion suites to get Ocrevus IV today. They either live too far away, or the chairs are full, or they don't want to block a chair with an Ocrevus patient, where they've got oncology patients. That, that type of dynamic is going on. And so what Roche sees as sub-Q will really allow new treatment centers to open. In community centers, it could be closer to the patient's home, much easier for the patient to travel, or even in the doctor's office, because it's a ten-minute sub-Q with no observation time.
And so Roche has actually dimensionalized that to say that they expect the availability of sub-Q will expand their market by $2 billion. That'll just be new patients coming in who previously did not have access to care. That refers to U.S. expansion of care as well as European. So this infusion capacity constraint is present in both areas. And so initially, you know, based on the comments of Roche, I think they're going to be directing their field teams at launch to be making doctors aware of sub-Q, especially doctors who have been reticent or couldn't use the IV. So you're going to see that market growth initially.
I think over time, both Roche, but also word-of-mouth of patients, if patient has an option of six and a half hours versus 10 minutes, there's gonna be word of mouth saying, "I want to convert from my IV to the sub-Q." So, I think initially, think about market growth being the focus, and but then we're gonna start seeing conversion of more and more patients to the sub-Q.
That completely makes sense, actually. So let's just talk about the new partnerships here a little bit, because that's also a key area of focus. So I mean, where do you stand with the new collaborations? And I mean, you have many avenues, ENHANZE, ENHANZE plus auto-injector or auto-injector alone. So where are the talks right now? And then, I mean, like, what do you get to... What do you hear from your partners when you discuss these things?
Yeah, so we are constantly talking to pharma-
Mm-hmm.
And to biotech to seek to get new deals using ENHANZE to convert their IV drugs to sub-Q, or to take sub-Q drugs today and extend the dosing interval. We're in active discussion with a broad range of multiple companies today. On our second quarter call, we talked about being in term discussions with some and being in technical evaluation stage, and that has continued to progress throughout the time since the earnings call, which was about a month ago. That progress and the number of discussions we have is what gives me the confidence we're going to see additional new deals this year, at least one additional deal this year. In those conversations, Mohit, we hear time and time again that ENHANZE is seen as the gold standard for rapid, high volume sub-Q delivery.
And the excitement partners have comes in part from the fact that we've got so many approved products. The regulators are very comfortable with the profile, but we also have a large established safety database of over 800,000 patients. And so, we know we are the exciting game in town, and we've just got to work through the decision processes at these companies to move forward with these new deals. So, more to come on that as we progress through this year.
Got it. I think, like, so investor focus is rightly on the new deals, new partnerships as well, but there's one more area where, you know, you are partners with many of the existing large cap pharma biotech companies, and there are so many undisclosed targets, so that's where we have not seen a lot of movement there, so like, we'd love to understand where are you with that. I mean, I think the process is you actually work with them, and then they have targets, and you work with them, but can you talk about this process a little bit, and then, is there a reason why not a lot of movement we have seen here or?
Yeah, I'm glad you brought this up, because I think it's a little bit under-recognized that when our partners sign a deal with us, they often have one or two drugs in mind that they name out of the gate. But they often take additional slots because they anticipate that as our portfolio matures or as they acquire new products, they'll have different opportunities in the portfolio. And so that's the way the construct is. And I'm very pleased to say, for our active partners to date, they all have two or more products in development, and it's come from this process where they perhaps had one product in mind, but over time... I'll use Janssen, started off with Darzalex, more recently started working on amivantamab as the time became right for them.
And so we've got about, in our current partnerships, over 20 slots that can be taken by various partners for them simply to say, "Is this target free for me to work on?" And they pay a nomination fee, and they can work on that product. Now, to the point of what's the process, I think it's two ways. The partners themselves come to us-
Right.
If they have looked at their portfolio and say, "I think we've got an opportunity here to convert this IV to sub-Q or sub-Q extended dosing." But we also have a separate team who are focused on expanding the opportunity within a company. Often, if we're working in the oncology group, the immunology group might not be even aware of it or talking about it. And so it's our job to go into those groups and talk about ENHANZE, talk about what it can do for their product and enhance the target product profile and get them to move forward. So it's always a question of the right target, the right time, and that being, you know, the value and the company wanting to invest to do a sub-Q, Mohit.
So very active in discussion there, too. I can say at the moment with multiple of our partners looking at evaluating some earlier stage, clinical stage assets for them to be moving forward with ENHANZE. So, that's another great area for growth for us and not one we neglect.
Got it. Got it. This is very helpful. And then, so, in terms of, you know, the... One of the questions we get a lot is about competition. ENHANZE is kind of unique and but then there are some new companies coming up. I mean, I don't know whether that is a delivery technology versus, you know, converting something into sub-Q, because there's Elektrofi, there are other stuff, there's other stuff as well. So would love to get your thoughts on how do you see competition, and what is the value proposition of ENHANZE that you think differentiates ENHANZE versus the competition?
Yeah, as we sit here today, there is nobody-
Mm-hmm.
Nobody who is approved for rapid sub-Q delivery of biologics, and so we have no direct competition for that space.
Right.
That is obviously very important to us, and we look at how all the actions we've been able to take over the years that help strengthen and solidify that position, such that if there ever was anyone else to enter the market, we would still be the first choice. That comes from a number of areas. First and foremost is our team. Our team has developed an incredible expertise in sub-Q delivery, but also in the regulatory development and CMC strategies you need to get rapid approval of transforming a drug from IV to sub-Q, as an example, and our partners truly value that and benefit from it as we help them refine their development plans and get to the market faster.
The second one is what I talked about, the fact that we have eight products, soon to be 10, and have now over 800,000 patients in a safety database where partners can evaluate risk of immunogenicity, safety profile. When we talk to new partners, it's usually about the first question that's asked is: What's the immunogenicity profile? Because the worry is when you put two biologics together, that can create a risk of immunogenicity. So the fact that we have had such deep and wide experience is incredibly reassuring. That is hard for anyone to be able to catch up to.
Right.
Frankly, nobody will ever catch up to us. So our team and that both help provide a lot of competitive protective moat for us, frankly, in terms of rapid subcutaneous delivery. Other technologies out there, you talked about are very early, experimental, unproven, and so we do not view those as competitive. For rapid sub-Q delivery, companies come to us.
Got it. And then there's always this, like, I mean, now that you now have an extended patent for ENHANZE in Europe, actually. But this topic always comes up because could there be a biosimilar for ENHANZE and a fellow manufacturer or biotech could actually do it on their own versus coming to you or partnering with you? How do you see that as a risk?
For biosimilars, we do not see ENHANZE as an attractive commercial opportunity for a biosimilar company. The reason for that is, of the 10 products we've been talking about today, they are patent protected to at least 2030, and many of them until beyond 2040. This is through either the partner product's own IP-
Mm-hmm.
Or through the co-formulation patents that have been granted or we expect to grant in the next period of time. And so if you're a biosimilar company looking at that, the opportunity is not near term, and it's going to be very small over the next ten years. So we know biosimilar companies will have to do clinical studies to work in this space. This immunogenicity question is a very important one, and that's why we have to do studies. So high cost of entry, low commercial opportunity, biosimilars are not a worry for us with regard to ENHANZE.
Got it. Got it. And then talk to us about the auto-injector as well. I mean, you had some data recently, and that gives you some validation. So, how much of auto-injector is part of the discussion when you talk to the partners as well?
Yeah. So, just for everybody in the room who might not be familiar, we acquired a company called Antares in 2022, who were in small volume auto-injectors, and they had a great technology for that. We had the vision to be able to transform that knowledge of auto-injectors with our ENHANZE enzyme to enable the first high-volume auto-injector that could deliver 10 mL of a biologic in just 30 seconds. People thought, "That can't be done, this is impossible," but we were able to demonstrate in a clinical study last August, the ability to do that in 23 patients, where they received their treatment very straightforwardly, without pain, and with a high degree of patient acceptance. And so now we're talking to current partners, but also potential new partners about the ability to use the high-volume auto-injector.
It'll be used for where the patient volume is, or the drug volume is anything from 3 mL-10 mL, so it's a subsegment of the whole ENHANZE opportunity. You do not need it to be able to inject patients with an ENHANZE-enabled drug. Most of the drugs today are simply administered through a butterfly and a push. But for, I think, therapeutics, where the goal would be patient self-administration at home, as an example, the high-volume auto-injector offers a very exciting additional opportunity. So talking to partners, several of them are thinking about it, testing it, playing with it. I can't under stress the innovation this represents and the fact nobody thought this was possible.
So they're all having to play with it a little bit at this point in time to prove and demonstrate that it is as usable for patients, and as acceptable for patients. But, the majority of conversations are probably more enhanced only, but where the profile is right, the high-volume auto-injector is a great additional offering for us to meet this vision of making the therapy fit into the patient's life.
Got it. That makes sense. And maybe talking a little bit about the ENHANZE IP as well. I mean, you got the European patent extension, and you did talk about possibility of having something similar in the U.S. So where are you on that, and could we hear something sooner rather than later?
Thanks, Mohit. We were very excited to get the European additional patent. This was a patent that covers the product that's produced through our manufacturing process, and why it was so significant is that, in terms of our licensed patent rights on ENHANZE, this enabled us to continue to get with our agreement with, Janssen, an additional five years on daratumumab in terms of full rate royalties in Europe. So we had previously modeled in our five-year guidance that there would be a step down in 2024 in Europe, which was when the previous last patent expired. This new patent issuing takes that out to March 2029 . So very exciting and covering the specific, product that is produced from our manufacturing process.
That resulted in us updating our guidance, and as you heard, 20% royalty revenue growth, and obviously a result of that very exciting finding. Now, today, we still assume there'll be a step down in the U.S. in 2027, which is when our current last patent expires, where we have a similar opportunity to the one we uncovered in Europe, to file and have filed for a reissue patent, similarly covering the product produced in the manufacturing. If this is granted with similar claims to Europe, which is our expectation, this will move the U.S. final patent for ENHANZE out to March 2029 as well.
Similarly to what happened in Europe, this would allow us to update our guidance, where instead of there being a step down in the royalty rate, for Janssen products in September 2027 , it would push out for another 18 months and not step down until March 2029 . So that's incredibly valuable for us. As you can imagine, a drug like Darzalex, but also amivantamab at that period of time, getting an additional 18 months. So, not on our current guidance, but very excited to see that, and obviously, we would update our guidance when that issues and if it has the impact we expect, it to have at that period of time.
Got it. No, this is helpful. One topic, I mean, which was a major topic last year, the IRA, CMS, and, I mean, when the prices came out, it doesn't seem like the prices were that bad, so people are less worried about that. But, I mean, how do you think, like, how do your partners think about IRA? Because, I mean, at least, I mean, it seems like ENHANZE products would probably be excluded from the IRA negotiation because they are two active moieties. But again, when you talk to your partners, I mean, how do they see IRA as an impact, near term and long term?
Yeah, I think there is. There's different perspectives on it. So far, what has come out on the IRA refers to the Part D drugs-
Mm-hmm.
Which are patient administered, and most of the ones we worked on are Part B. So there is a little bit of a wait and see, to see what will actually be in the Part B guidance.
Right.
Now, that is expected anytime now, people are saying, so-
Right
Hopefully we will see that. We absolutely expect to see the same in the Part B guidance as to what we saw in the Part D guidance with regard to two active moieties, and I'll talk about that in a moment and why it's so important. So what the Part D guidance said is, if you have a fixed combination drug that's made up of two active ingredients, it will have a separate negotiation timeline and a separate pricing discussion than its single product. That obviously could mean, depending on when the subcutaneous drug launches, an additional several years before price negotiations. Now, ENHANZE is designated by the FDA as an active ingredient.
What the IRA was trying to do, we believe, with this section about active ingredients and fixed combinations, is to recognize where there is additional clinical benefit. So when you think about what ENHANZE can do, it can allow for rapid subcutaneous injection, it reduces infusion rate reactions. I mean, we all sorts of benefits. We do believe that the principle there, which is recognizing where there's a difference in benefit, will apply on Part B just as it did in Part D. We have some partners, such as Janssen, who, on their last earnings call, talked about the fact that for drugs like Faspro, based on the fact it's with ENHANZE, they believe the negotiation or the price impact for the sub-Q won't happen till 2033.
So that's 13 years after 2020 , which is when the sub-Q launched, so that's an additional five years. We've other partners who are a little bit more skeptical, saying, "That sounds too good to be true. There's no way that's going to say we want to see it in writing." And so, I would say that we're for sure standing ready as soon as we see the Part B guidance, and it's confirmed to go back to those companies where we've identified they have a great opportunity, to make them aware of this, and hopefully that's going to result in more people wanting to move forward with ENHANZE in this setting, because it's a recognition of the clinical benefit.
That, that's first and foremost what you've got to think about this as, and that's what our mission is all about, and so we'll be ready to talk about that very shortly with them.
Got it. No, this is helpful. Maybe a couple of housekeeping questions. Like, not housekeeping questions, but yeah, like, I mean, buyback is one question we get. I mean, you did announce some buyback, and you've done a few since February when you announced it. So what is your philosophy there, and would you be looking, like, in future, I mean, how would you think about opportunities to buyback?
Yeah, so as a company, we have been committed to share buybacks. As you mentioned, in the second quarter, we completed a $250 million ASR, which was part of our second share buyback plan. At this point, over the last five years, we've returned $1.3 billion to our shareholders through share buybacks, and we think that is a very good way to return value to our shareholders. At the beginning of the year, we got a new share buyback plan reauthorized for $750 million. Now, what we will do now is evaluate what we're going to do with that with regard to market conditions and other factors.
We also want to evaluate what the other use of capital is.
Right
And what is the best for the business. And so our capital deployment as a company has always focused on investing in the business, consider share buyback, but also growth through M&A. And so between share buybacks and, M&A, that's exactly what Nicole, my CFO, and I are constantly talking about. Where is the best return based on what we're seeing available at M&A, or based on the market, conditions and other factors, is it time to do a share buyback? And so we've got that flexibility, to deploy capital in the way that's going to be the best return, for our shareholders. So, you know, we're very excited about the potential for growth through M&A.
We are looking at areas to add additional platforms with a strong preference for licensing style platforms like we have, but where the acquisition can add meaningful growth over what is already our substantial and growing revenue. We're looking in drug delivery, we're looking in other types of technologies that companies need to license to make new drugs, with everything looking to have it fit into our Halozyme capabilities, but also for it to be largely de-risked, because that's very important as well in terms of our profile as a company, where we have established ourselves as having a lower risk profile than binary risk R&D. That would be a choice versus doing additional share buybacks.
We'll make the choices as these opportunities present themselves to us, Mohit.
So in terms of size, do you have any thought about the size of the business development part opportunities or?
We don't. You know, what we are very focused on, as I mentioned, is de-risk assets that can add meaningfully to the revenue. Now, you know, is it a single asset? Is it several smaller things? That all will really be driven by what we're seeing out there and the opportunity and our belief that in Halozyme's hands, we're going to be able to add additional value over the acquisition price for the product. But we will, we'll maintain a very strong discipline in this. Our last acquisition, we took two years to find because we have a number of criteria we want it to hit.
Because we've got such a strong growth story, as I started the conversation with, we're not in any urgency to do this, so we can take the time to find the de-risk assets that fits our profile, that will add meaningfully to the revenue and the durability of the revenue. So it's got to fit the profile for us to take action on that.
Got it. I think you can probably anticipate my last question. I ask it every year. Fast-forward one year, September 2025 , I hope you're here.
Me too.
I mean, you have been coming here longer than me, so... So, so what would make you look back at the year and say it was a great year?
Yeah, I think by that time we will have had all of our wave three launches-
Mm-hmm
Launching, and I hope that we, and I expect that we will be seeing that tens of thousands of patients around the world are getting this transformative treatment experience, where we hear from patients that how it just it is totally different for them in terms of recovering from whatever illness they have, that they're not trekking to an infusion suite every two or three weeks, but they are getting a simple, straightforward treatment. Now, that is what motivates the employees of the company. That obviously translates into meaningful revenue for the company, so we should be well on our way to that $1 billion at that period of time. I expect to see a robust and exciting pipeline behind that.
Right.
Wave four, we've got six products in wave four, but we will be adding more products that will be adding to that and leading to the next waves of launches in the 2028-2030. So a broadening of the pipeline as well, I would expect to see. And if we have found the right transaction to do, but only if we found the right transaction to do-
Right
We may even have additional opportunities to further grow and add to the durability of our revenue. Because Halozyme is a growth story. We are all about revenue growth, we're all about durable revenue growth, and we're all about profitable revenue growth. That is what you will see us executing on, and we'll have made substantial progress by 2025.
Awesome. On that high note, thank you, Helen, for coming.
I appreciate it. Thanks so much.