Everybody, thank you for joining us. Today marks the second day of our seventh annual Healthcare Conference. I had the pleasure of hosting Dr. Helen Torley, CEO of Halozyme. Helen, welcome. Thank you so much for making time for us today, and before that, we have a lot of questions before we kind of get into the nitty-gritty details of things. We'd love to kind of get your highlights of the business, highlights of 2024, and what we could look forward to in 2025.
Yeah, so for those not familiar with Halozyme, we are a biotech company where our mission is to create medicines working with our partners that fit the patient's lives rather than the patient having to have the inconvenience and burden, for example, of having to go to infusion centers. We have two key drug delivery technologies. One is called ENHANZE that enables large volume, rapid subcutaneous delivery of drugs. And we work with partners on that. And those are leading partners, for example, Janssen and Bristol. And we also have an auto -injector business as well. As we reflect, Mike, on 2024, it's been an amazing year in terms of the performance of the business. We've had three products approved, resulting in a total of eight ENHANZE products approved. And each of these products generates milestones and royalties for Halozyme that are resulting in substantial revenue growth for the company.
We recently actually just updated our guidance for the year based on the strength of our royalties to robust growth of revenues between 17% and 23%, with our EBITDA growth being almost double that. That really is, I think, a very nice testament to the leverageability and profitability of this business. Three highlights just to mention. The approvals I would like to talk about include VYVGART Hytrulo, which was approved in 2023 for myasthenia gravis and has continued to see a very strong trajectory for the subQ product. We're seeing the initial impact of the approval in CIDP as well, with a large bolus of patients coming in in September and really contributing considerably to strong uptake of VYVGART. We also saw Ocrevus subQ approved in the United States in September. Now, Ocrevus as an IV is a multi-billion dollar brand, $7+ billion .
As an IV, it's anything from four and a half to six hours for a patient to get their treatment and observation. With the subQ treatment, after the first couple of injections, it's just 10 minutes total treatment and observation time. That's transformational, as I am sure you can imagine. And then we also have Tecentriq, which was approved. That is Roche's drug where, as an IV, it's anything from 30-60 minutes, and now patients can receive it in just five-seven minutes. So those are three highlights of what's driving the very strong business. And we expect the approval of nivolumab or Opdivo subQ in December and amivantamab subQ next year. And so great momentum, progress with that ENHANZE business, and also continued success with our auto-injector business as well.
Got it. Okay. Now, thank you for that, Helen. So just want to address the 800 lb gorilla in the room is that the Evotec deal that came and went caught a lot of investors. I want to say by surprise, but they were not completely understanding of the deal just because it would have been so transformative. So just to kind of level set, why did you pursue this deal? And was it because at this time were there really no compelling deals in the drug delivery space to pursue?
Yeah, let me tackle that last question first and say, no, there were no compelling deals in drug delivery. And earlier this year, we talked about expanding our aperture to also look at other areas that were a fit for our capabilities, but would be perhaps more focused on enabling new drugs being created. And as we opened that aperture and we evaluated our core criteria, we came across Evotec and we evaluated that. Mike, as you know, Halozyme is already a very successful company with a large revenue base. For example, if we look out to 2027, we project about $1.5 billion in revenues, of which $1 billion is coming from royalties.
So with M&A, what we're trying to do is to add on top of that already substantial revenue and find opportunities that will add to the revenue growth, diversify the revenue, and also extend durability of revenue into the 2030s and beyond. We want that revenue to be profitable so that we can also add to and extend the EBITDA, which is already a very strong profile for the company. But we think M&A and using our cash to do that is also going to be returning great value to our shareholders as well. And so we came across Evotec and it hit a lot of those criteria based on our outside assessment, which was based on four to six months of extensive diligence and work. We worked with two outside consulting groups. We did interviews with more than 50 current and prior customers of Evotec.
We identified that this was a really unique opportunity to do exactly what we wanted, add to the revenue, diversify the revenue, extend the revenue, but importantly, also grow that EBITDA and cash flow from the business as well. Importantly, from the point of view of operating the company, it was a great fit too to Halozyme's capabilities. We are a company that's obviously been able to take an innovative idea and create a billion-dollar business, and Evotec has got opportunities just like that. We also are, I think, very well known for our operational excellence. We are a very efficient organization. I've mentioned that our margins are extremely high. That's because we run a very efficient ship. The trains run on time at Halozyme, and I think that would have been very beneficial to the combined company as well. And then thirdly, our fiscal discipline.
We keep a strong focus on the bottom line and we're very good at moving on from things that don't work or don't have the potential we thought, so all of that mix of the profile of the business, the fit to our operational style and skills, and in particular, the lovely long revenue tails that are associated with each of the Evotec businesses made it a super fit for us. Unfortunately, the other party was not interested, and so we've moved on, focused on our great ENHANZE business, which is in great shape, and growing that through new deals.
Got it. No, thank you for that, Helen. So needless to say, it sounds like Halozyme would still be willing to pursue a similarly transformative deal if the opportunity presented themselves. Is that fair to say?
Yeah, we've got a high bar with these criteria. I mean, we've looked for two and a half years since we did the last transaction. But I would say that we do think using our strong cash balance to add to our growth and extend the durability of our growth is a great use of capital if it fits our profile, if we identify we are the right owners for that business, and it's a great fit for our operating model. And yeah, if we find one, that's exactly the criteria. But I will say again, we're in no rush to do so. We've put out a multi-year guidance that's available on our website. We've got plenty of time. We will only transact when something meets that high bar. And we have found the right fit for us to make it a great success.
Got it. Got it. So since really nothing has changed since the announcement of the Evotec deal, it's business as usual. What would you say to investors who perhaps in the process of trying to digest the Evotec deal and making sense of it? Would you say to investors that that maybe perhaps lowered their terminal growth assumption for Halo in their model because of the whole confusion surrounding the Evotec deal?
Yeah, the Halo business is unchanged. Let me just be very clear. We just reiterated our multi-year guidance and also our FY 2024 guidance, and so there's absolutely no reason for anyone to have changed any of their terminal growth assumptions for the business, Mike. As we sit here today, I can tell you that the leadership team are incredibly excited about the years of growth we have ahead of us with all these launches. We've got a robust pipeline in our wave four and five, but importantly, subQ delivery is really a way we hear from company after company they're thinking about for areas like immunology and inflammation, neurology, oncology, and so we have a very robust set of partnering conversations going on that gives me confidence that we're going to sign more ENHANZE deals, more high volume auto injector deals.
That is new growth over on top of what we've already communicated. That is a very robust and healthy business. The reason for M&A is coming from that position of power and strength. That is a great time, and that is the right time to do M&A to build on the success you already have.
Right. And I think I've asked you multiple times, Helen, that your long-term guidance after 2028 has been stress tested backwards and forwards. It remains solid, but it represents only things that you have a line of sight into. You're currently marketing products, and I think a couple of your late stage, I think wave four products. Anything else in terms of new deals would be upside. So that's what investors are kind of concerned about, frankly. I mean, so you briefly touched upon it just now. I mean, maybe speak to future opportunities that may be presenting themselves soon.
Yeah. I mean, in terms of new deals, I'll break it into three buckets. We've got ones for ENHANZE only, ones for ENHANZE with our innovative high volume auto-injector, and then our small volume auto-injector as well. With ENHANZE, that is our technology that enables the conversion of IV drugs to be able to be given in short, simple subcutaneous injections. It also can, by enabling larger volume, extend the dosing intervals for already subQ delivered drugs, and I will say we're in a range of conversations at the moment with different sizes of pharma, from pharma, large pharma to smaller biotech companies about each of those opportunities, not just the IV to subQ conversion, but really, really seeing a lot more focus on this subQ extended dosing, particularly, as I mentioned, in areas like neurology, immunology, where that seems to be the way things are going.
Based on the status and progress of those conversations, that's why I'm so confident we are going to sign additional deals there, and so each company has their own timeline, and that's not unfortunately something we can ever predict, but the pace and progress is what gives me that confidence.
Okay.
I was going to move to the High Volume Auto-Injector, but.
Well, that was kind of a perfect segue into my next question. I think previously you mentioned that in terms of the deals that are kind of on the docket that may materialize, most of them are still kind of classical ENHANZE deals. Is that still the case?
I would say the majority are. That's probably just a simple fact of it covers an entire range. ENHANZE is approved for delivery of drugs for anything from 5 ml to 600 ml. So simply by the opportunity set, we have more opportunities than that. I would say ENHANZE with a high-volume auto-injector. That will either be with one of our current partners who already have ENHANZE-enabled drugs or a new partner who would do ENHANZE with a high-volume auto-injector. Now, our high-volume auto-injector is a brand new innovation in this space. It'll deliver anything from 3 to 10 ml in well under 30 seconds for the lower volumes there. You cannot do that.
If you try to inject yourself with a volume of fluid yourself in your subcutaneous space, after 2 ml, you would start to get a lot of pain, a lot of swelling, and a lot of induration. It'll get hard. What happens is when you inject with ENHANZE, it creates channels to spread the drug more broadly. And so you're able to inject it. So in terms of new deals for HVI, the high volume auto-injector, we are talking with current partners about the potential next step in development of the HVI, which has been tested in a clinical study we did so far, but now is moving forward. And also one or two outside companies who are coming to find out more about it to understand about that delivery between 3 ml and 10 ml.
Again, it's taking a little longer than we thought to get to a deal there, but I'm very pleased with the conversations we're in at the moment and the progress we're making.
Got it. Got it.
The small volume auto-injector, we have a special space in small volume auto-injector. It's not one of the large mass-produced inexpensive small volume auto-injectors. It is one that is more of a custom device for if you want to have high reliability or a high viscosity drug. And again, I'm pleased to say we're in a lower number of conversations on the small volume auto-injector given that opportunity I described. But again, making progress in conversations there too.
Got it. I just want to, Helen, I want to focus a little bit on the recent Argenx deal because on one hand, it was a new deal, but on the other hand, some investors' questions I got were questioning the lower, comparatively lower economics tied to that deal, so was this an exception because Argenx is such a long-standing partner, or can we expect future deals to kind of just reflect the same type of economics?
No, we were thrilled to expand the opportunity with Argenx. Everyone's probably familiar with the great success they're seeing with VYVGART. And so what they did recently was expand from two targets that we're working with to six of their targets. And in their announcement, they were very gracious to allow us to kind of recognize that they were picking us as their subQ delivery mechanism of choice to integrate us so broadly into their portfolio. We're obviously very pleased with the success of VYVGART. And what this does now is significantly increase our opportunity to spread to new different patient populations. And so in that context, Mike, absolutely. In the context of this growing relationship and the integration into their portfolio, we did have a discussion on the negotiation.
The terms that we landed within that deal really do reflect that significant broadening of opportunity that this expansion brought to Halozyme.
Okay. Because also too, I think inherent in this renegotiation, I think the original deal terms for VYVGART and their other compound, and name escapes me right now.
And Empasiprubart.
Exactly. Those also got renegotiated as well. Right? Can maybe kind of describe the revised economics on those two original targets plus the four others?
Yeah. So what we did was for all of the products in that deal, there's going to be mid-single digit royalties up until the ENHANZE patent expiry, which is 2029. No, I'll focus on VYVGART. For VYVGART, it will continue. There'll be a change to the royalty rate, but it will continue at a mid-single digit rate until 10 years after the launch. And so that'll be till 2033. After that, there will be a change again, a step down in the royalties, but it will continue into the 2040s, which is when the co-formulation patent changes. And so this is a product that analysts are projecting already to be a multi-billion dollar opportunity just based on the first two indications. As we're looking out, there's going to be many more indications. We're working with them on myositis, on thyroid eye disease, scleroderma. There's many more indications to come.
And so we're very excited to be having this mid-single digit royalty on VYVGART into 2033.
Got it. And I don't cover Argenx. That's another analyst on our team. But if you look at Argenx's pipeline and the targets they have available, the potential targets for Halozyme, presumably a lot of those won't launch until the latter half of the decade. So if those targets are signed up with Halozyme, it would have a very short-lived kind of royalty rate at the mid-single digit range. Are we thinking about that correctly? I mean, what would you say to that?
Yeah, it would be a potentially short, but a very long tail because all of our partners seek to get the co-formulation patents. And when we get the co-formulation patents, those go from the time of filing for 20 years. And so think of it still being an attractive royalty rate, perhaps not at the same mid-single digit royalty rate as we enjoy today, but lasting well into the end of the 2040s in that instance. And so a very attractive opportunity for us given the multi-dollar potential that could be there for some of these drugs.
I see. I see. Switching gears now just in the interest of time, I want to just touch upon DARZALEX FASPRO. I want to drill down on the patent litigation front. I think not too long ago, you announced that the second co-formulation patent that Janssen has recently got, I guess, not invalidated by the EPO. And one question I get from investors is, what's the worst case scenario that upon appeal, that this DARZALEX's co-formulation patents completely go away? I know you also have J&J also has kind of a backup application. So what's the worst case, I guess, chances or scenario that all three, meaning the first two co-formulation patents and this future application gets invalidated?
Yeah, we are confident and believe that Janssen is going to prevail in at least one of these patents. And as you say, Mike, two of them have been challenged. One of them is currently under appeal. A second one, we believe, will shortly be under appeal. And the third one hasn't issued yet. And what gives us this confidence is that there is an opportunity for Janssen to still be in discussion, particularly on the one that hasn't issued, given feedback from the European Patent Office and also their learnings along the way to make modifications and changes to that patent. It's not a static process. And so they have a lot of opportunity to shape this to be able to get a successful co-formulation patent, certainly the third one, but also to challenge and win potentially on some of the ones that are under appeal today.
So a lot of negotiation to happen there, but the European process is very, I think, in favor of Janssen and this opportunity on this back and forth with the EPO that's happening.
That's very helpful. Again, I just want to touch upon Merck because obviously it's partnered with Alteogen that has competing high yield hyaluronidase that competes with you guys. But Merck recently filed a request for a post-grant review asserting that one patent of Halozyme's, one ENHANZE patent, either lacks proper written description or is not enabled or is obvious. What do you make of this? And I guess, what's the likelihood of Merck prevailing here after all these years of ENHANZE being on the market?
Yeah, we are very confident that we are going to prevail in this post-grant review because of the strength and validity of what we call our MDase patents. That's short for modified hyaluronidase. And for clarity, we have two sets of patents. One is for ENHANZE that we license to our ENHANZE partners. But we also, because we were a pioneer in this space, created a whole other area that's called modified hyaluronidase, where we have 100 issued or pending patents today. And it's one of those modified hyaluronidase ones that's being challenged by Merck. If people aren't familiar with the post-grant review, this is something that typically happens when somebody is concerned that they may be infringing. And so we must say we were expecting it. We were ready for it. And it is only one of our patents. So again, we will prevail.
We have a very strong body, and we have, as the pioneer in this area that was doing work years before anyone else came into the modified hyaluronidase space, that gives us additional confidence that we are the ones who have created a great set of patents and claims that cover a multitude of areas around modified hyaluronidase.
Wow. It's interesting because you think Merck would have done their diligence just being Merck. So I know there's a safe harbor around clinical trials, but I think once Merck makes obvious steps towards commercialization, then if need be, that's when Halozyme could step in and pursue potential litigation. Is that fair to say?
You know, what we did in making our MDase patents public was to alert people that they're available for license. And it certainly would be our preference that companies who are using our IP in any way to be able to deliver drugs subcutaneously with a modified hyaluronidase, that they approach us to take a license. That would be a preferable approach.
Got it. Unfortunately, we're at time, Helen. This has been immensely helpful. Thank you so much for speaking with me, and we wish you the best of luck in 2025.
Great. Thanks, Mike. Appreciate it.
All right.