I'm pleased to be introducing our next company presenter, Halozyme Therapeutics, and Helen Torley, President and Chief Executive Officer. My name is Jason Gerber. I cover SMIDCap biotech and specialty pharma. So happy to be moderating this discussion. Maybe coming out of one Q, I don't know if you want to give it the lay of the land in terms of Halozyme, where you guys are at as a company. I know a lot of the focus is around optimizing ENHANZE-driven partnership, but also M&A could be a part of that as well. Would you guys look to maybe bring in new technology to help bring products along, help patients, and maybe even take clinical binary risk down the line as part of like strategy shift for the company?
Now, great summary, but if, yeah, we're very excited with our first quarter, which really does herald then a time of unprecedented growth and opportunity for Halozyme. Our strong first quarter performance was really driven by our three blockbuster products, Darzalex subcutaneous, Phesgo, and Vyvgart Hytrulo. And we expect those to continue to deliver growth not just for this year, for many years to come. Behind that, we have four products that have just launched. These are all household names you'll have heard of, Tecentriq subcutaneous, Ocrevus subcutaneous, Phesgo, and also Amivantamab subcutaneous. What's exciting about those is they are just at the beginning of their launch. We like to say they're warming up. They're going through the process of getting reimbursement. So they're going to start adding considerably in 2026 once all of that reimbursement is in place.
For the products that I've mentioned, all of these, there are 11 growth catalysts that have just happened or are about to happen that are going to add to and fuel the growth this year. These include new indications for some of the products, new regions coming on board, U.S. and Europe primarily, but also some very important reimbursement milestones that are going to accelerate adoption and growth, such as the recent day code that was received for Ocrevus and the expectation of a day code in the U.S. for Devo in July. All of that led us to increase our guidance. Our revenue guidance for the year is now $1.2 billion-$1.8 billion, which is some substantial growth over last year. We're very proud of our EBITDA, $790 million-$840 million, of which 75% is free cash flow.
That is why we're in such a great position to, as Jason mentioned, add on top of this incredibly strong and growing business, which is going to go for years to come by considering doing M&A. We are looking at drug delivery platforms, looking for similar durable long revenue streams as we see with ENHANZE, where we can find something that a pharma company needs and where we can do multiple licenses so we create more ENHANZE deals. We're also in the position to use our cash flow for capital return through serial repurchases. We also very recently were able to allocate another $250 million. We've already returned $1.55 billion since 2019, but we're adding another $250 million this year. We are in a terrific state in terms of the drivers of growth with many new catalysts that have not yet had an impact yet. Exciting times.
Okay. Yeah. You have got growth driven by these three really big hefty brands, right? You have got a pipeline of other sort of partnership opportunities, things that could be kind of later tail growth drivers for you. How should we think about the deal pipeline for you in the sense that if ENHANZE platform IP kind of runs through the end of the decade, you generate co-formulation IP. I guess one of the debates is like with the Keytruda litigation, right, is like would potentially other sponsors, once that kind of core platform IP, look to try to do some work around and avoid the partnership and the partnership economics. How do you kind of talk me through that and sort of like extending these more partnerships through ENHANZE going forward?
Yeah. ENHANZE is very clear to say is considered absolutely the gold standard for rapid large volume subcutaneous delivery. We've mentioned we've got 10 products approved, a million patients treated. Four companies who may have moved to try an alternate hyaluronidase, such as a modified hyaluronidase, all of them have come to us first. I think one of the reasons they may have gone is we have exclusive licenses on certain targets, so they were not able to work with us. We are going to, because we are the gold standard, because of the deep experience, Halozyme team, because of our safe and reliable supply, which we've been supplying very well for the last 10 years, I'm very confident companies who want to use subcutaneous for large volume delivery will come to Halozyme and our technology.
It often comes up what happens if your composition of matter is going to expire in 2029. The way our contract is structured has always been that if it is IP protecting the product, either from our composition of matter or through co-formulation patents, it is a mid-single digit royalty. If there is no IP, it is half of that. That is very logical to pharma who say, all right, half of a mid-single digit for access to your knowledge and know-how is actually very reasonable. We are continuing in a very active set of discussions both for IV to subcu conversion, which has been mostly what has been done in oncology and with Vyvgart Hytrulo initially for inflammation and immunology.
A very exciting growth area we are seeing more and more interest in is companies wanting to either do subcutaneous development right from the start for an indication because in inflammation and immunology, as an example, that is seen as the right standard of care, or to take their already subcu drug and being able to dose more because ENHANZE enables delivery of a larger volume, extend the dosing interval, take a drug that's every two weeks to every four weeks, every four weeks to every eight weeks for competitive differentiation. That is a real area of interest, particularly inflammation, as I mentioned, urology, nephrology, cardiovascular, where the goal appears to be more and more patient self-administration at home. Between ENHANZE and our alternate vectors, this is a very active area of discussion as well. New deals you'll see, continued IV to Sub-Q, but also subcutaneous extended dosing or Sub-Q development from the start with ENHANZE as well.
I feel like a lot of that is driven by the inherent attributes of the biologic in terms of the potency that can allow things like six-month dosing or annual dosing versus do you think there's a lot of interesting technologies that can take a lot of biologics that may not have otherwise been able to have those attributes that are out there and sort of your opportunity set for possible acquisition targets?
I didn't quite understand that, I must say. Please say if you don't mind repeating it.
Yeah. I mean, I guess certain biologics that can have these durable six-month or annual duration of.
Ocrevus as an example.
Yeah. I mean, do you feel like there are technologies out there that are available for license or acquisition to bring into the platform that you have that are out there, or do you think that it's more just the inherent attributes of the molecule and maybe be looking to acquire molecules and take more? When you talk about taking on more clinical binary risk, is it more along those lines?
I've seen many more technologies in the small molecule arena being able to create that longer acting. I've seen a lot less in the biologic space. I think that my impression would be that is much more the intrinsic property of the drug. Certainly an interesting area because long-acting, more convenient for patients is of interest to people, but a little bit more small molecules is where it's at today.
Okay. Looking beyond 2025, just sort of the potential cadence of ENHANZE-driven collaborations, what is your sense and feel for that? Do you expect to be pretty active in terms of partnering the technology still?
We absolutely do. We've historically signed approximately one deal a year. Often the deals are for multiple targets within that partner's portfolio. That is important because after we sign the deal, they might move one product forward one year, but two years, three years later, we're getting another product from it. That gives us an ongoing pipeline. As an example, last year, our current partners nominated five more targets and three of those are moving into the clinic this year. That creates a great backdrop for progress. We also look to sign new enhanced deals as one a year has been our cadence. Based on the tone and tenor of conversations we're having today, I'm confident we're going to sign an enhanced deal.
We also have auto injectors that we are working with partners on, and we are very proud to have gaining a lot of traction there, signing a small volume deal with a current partner at the beginning of the year, and just announced last week, signing a high volume auto injector development agreement as well. Definitely our impact and people's recognition of the skills we are bringing of not just the device development, but also the pharmaceutical development with the devices is, I think this is going to be an area we are going to be continuing to do new license agreements in as well.
Okay. Maybe just talk about the risks or lack of risks with the IRA guidance update today as it pertains to 2028+ and the IV to subcutaneous conversions and how that may or may not apply to the efforts that you have ongoing.
Yeah. The IRA, the section that has been most relevant for Halozyme is a section that relates to when a fixed combination drug is made up of two active ingredients. What the CMS put initially in the IRA for the Part D guidance was if you're a fixed combination of two active ingredients, you would be treated as a separate drug for price negotiations than the individual ingredient. That has been what has been in the final guidance for Part D. Today, the Part B guidance was announced for the first time. We were very pleased to see that core language that if you're a fixed combination of two active ingredients and where you bring clinical benefit, will be considered as a separate drug for price negotiation. Now, you probably saw there was a little bit of confusion around that.
There's a new paragraph that's been added that I think people are still struggling to interpret where the FDA is asking for feedback on fixed combination drug or an active ingredient and a fixed combination that doesn't have direct impact on the disease, but has clinical benefit. It's a very confusing, I think, sentence and statement. What's really important is they retain the previous language that what they're looking for is that each of the components is demonstrating clinical benefit. We're very proud to say not only are we an active ingredient as designated by the FDA, but we have many examples of the ENHANZE technology while it's delivering the drug subcutaneous, having a very meaningful impact on the patient. I'll give a couple of examples. Darzalex, you may be familiar with it. It's Janssen's drug. It's an IV, it's four to six hours on IV infusion.
As a Sub-Q with our ENHANZE technology, it's three to five minutes. That in itself is a major impact on the patient. Let me give you the FDA definition of clinical benefit. It's where you can measure the impact of an intervention on how a patient feels, functions, or survives. Think about a patient. They're sitting in an infusion suite for four to six hours, or they're in the doctor's office getting a shot for three to five minutes. What do you think about the feel and function there? That is not all because Darzalex will also reduce infusion-related reactions. That happens when you get an IV drug where the patient can get low blood pressure, fast heart rate, sweat. They can even have pulmonary anaphylaxis. The rate of infusion-related reactions is three times lower with the subcutaneous than the IV. Incredibly meaningful for patients.
That is a side effect that patients fear, nurses fear, and doctors fear. That is just a Darzalex. Amivantamab, another Janssen drug, the reduction in infusion-related reactions is fivefold. It is 67% down to 17%. It is so incredibly meaningful. I will say in that particular instance in the clinical study for registration, there also was an improvement in overall survival and an exploratory endpoint. Now, you may ask, how can that happen if the Sub-Q is just trying to be equivalent to the IV, which is what our pathway is? Our exposure of the drug can be different for patients, and that could be improving it. Also, the very fact you are doing subcutaneous injection exposes the drug to more lymph nodes and white cells in the lymph nodes, and that can be amplifying the efficacy that you see.
We have a very strong story of many of the clinical benefits that in each of our partner products, I'll say not sitting in infusion suites, you don't have a port, you don't have the risk of sepsis for the patient. You're not sitting in infusion suite, you're not picking up infections from people around you. The whole story is incredibly strong as to how our fixed combination is active. Today's reaction, we overgrown, misunderstood. Some people put out reports that had erroneous information in them. This will all become clear, but we're very confident that the drugs that include ENHANZE that are potentially coming up for negotiation will be treated separate from the IV.
That's clear, and I guess in the package insert that the HA is treated as its own.
In Darzalex Faspro in particular, it is listed as an active ingredient. We also have a file, just another supporting point. Hylenex is our version. It is used in eye surgery. It has its own separate BLA. It is a drug. Yeah.
Okay. While that language is similar for the Part D drugs and now Part B, I guess the vagaries of this paragraph that you cited, I guess in a comment period rolled into and perhaps post-comment period, maybe there is greater clarity around, I guess, the added benefits that options or combinations like yours may provide for patients.
Yeah. I mean, I think there's a good sense of it. I think what we'll be doing is obviously will be part of that comment period. We already believe our partners. So our partners, Janssen, CMS, Roche, all of them feel very strongly about the important clinical benefit they're bringing. I expect that they will be putting the information in the comment period as well. We also have been very active meeting with members of Congress and Senate who oversee the implementation of the IRA to make sure that the Sub-Q is very differentiated in their minds as well. That everybody is recognizing this is not, this is a very active part. Not only does it bring all these clinical benefits, but it can just aid the patient's ease to getting access to care, staying on therapy. It's a whole value proposition. We'll be very active in making sure it's understood and there's no misconceptions about this being a very active and clinically important benefit for patients.
Yeah. It seems like the stock move was in excess of even, would not the worst case be a lot of the drugs that have even gone through IRA, it's like a one-time 20% price adjustment, and then you can kind of regrow off of those reset bases, right? So even if you were to entertain worst-case outcomes.
I would agree with that. I think it seems like that was little. There is another factor just to say that if a drug has got a biosimilar that is imminently launching, they will not be subject. That also could be a factor in some of the drugs that we work on where the IV version may have a biosimilar entering the market. They will not be part of the IRA negotiating period. Yeah, all of these make it a massive overreaction.
Okay. Let's get back to the business. So capital deployment, you've done some share buyback activity. How do you weight share repurchases versus other forms of capital deployment right now?
Yeah. We're in a terrific position where we're investing in the business. We are planning to grow inorganically to add to the growth that we have organically and still have the wherewithal and the ability to be doing capital allocation to share repurchases. That's exactly what we announced last week with the new $250 million share repurchase. We had just finished one that had started in December of last year, and we've historically done about $250 million a year. We're very pleased to be in a position to do all three of these things. All of them very important. Investing in our business, there's a lot of growth to come there, but adding M&A, these drug delivery platforms, and continuing to return capital to share repurchases.
Okay. I'm not as close to the story, but you did endeavor to make a pretty significant acquisition for a company of your size that did not work out ultimately. You withdrew the offer. Should investors take that as a sign that diversification of M&A is a very high priority for you? Do you feel like, hey, that was a great opportunity for us. We can still grow irrespective of whether we do M&A in the near to medium term?
Yeah. No, we definitely are coming from a very strong position of strength. I started with talking about our great guidance, 2025 guidance. If I look at our 2023 to 2028 guidance, our revenue CAGR is 20%. Our EBITDA, adjusted to EBITDA CAGR, is 25%. We have an incredible story, and we put out the long-term guidance through 2028. From that position of strength, though, we see the opportunity to do drug delivery technology acquisitions to add and build on that. We believe if we can find the right platforms, that will create new value for our shareholders. That obviously is very attractive. In addition to doing the share repurchases, there is sufficient cash flow for us to be able to do both. We are just looking to optimize the return for our shareholders with both at the same time.
Yeah. There are some, I guess, legal matters that are ongoing that could extend maybe the tail of some royalty streams, starting maybe with Darzalex and the patent reissue. Can you talk about where we are with that and what are the implications?
Yes. Our composition of matter patent goes to 2029 in Europe. At the moment, in our multi-year projections, we make an assumption that we'll see a step down in the royalty rate for Darzalex in 2027 because that's when our current last patent expires. What we've done is apply for a new patent that relates to the product that's produced from our manufacturing process. That will, if issued, go to 2029. Now, there's two products where this is important. Today, we make an assumption that Darzalex and amivantamab step down in 2027. If we get this new patent in the U.S. issued, we will continue at the mid-single-digit royalty rate until 2029 for Darzalex and amivantamab. If I can just dimensionalize that for you, analyst projections have U.S. Darzalex is about $9 billion in 2027.
If you can imagine it, instead of getting a step down, we're getting the full mid-single-digit rate. If you do the math, you can see that's a very attractive step up for that period of time. Only relevant to that, our other partner products are not stepping down at that time because of co-formulation patents and other enhanced patents that are in place. That is why that patent is so important and has such meaningful value in that 2027, 2028, 2029 period.
Yeah. Okay. The litigation matter with Merck on Keytruda, is that primarily pertaining to the life of the ENHANZE composition IP that's sort of end of this decade, or could there be potential implications for, I guess, damages that even would extend beyond that? What are sort of the remedies that are sought here?
Yeah. So it's over everybody in the room. We license today our ENHANZE technology. That's our hyaluronidase enzyme to our partners today. But when we were creating and inventing ENHANZE, we also created multiple modified hyaluronidases. And those are in our about 100 patents covering the modified hyaluronidases. We have identified that Merck is infringing our modified hyaluronidases. And so we filed an infringement lawsuit seeking damages, but also injunctive relief related to that. The royalty, our goal, and we approached Merck with this, first of all, was to get license. Asking for milestones and royalties very similar in structure to our current ENHANZE agreement. Our MDASE patents go to 2032 in Europe and 2034 in the U.S. So that's how long we would expect to get royalties when we prevail and get a license for the MDASE with Merck. Anybody else who is commercializing a product using a hyaluronidase to deliver a modified hyaluronidase to deliver large volume biologic substitutes.
It's pretty early days in that litigation. Is that fair to say?
Yes. We filed fairly recently in the litigation. Merck is involved in their court now for a response, which would be expected in the next weeks, and then it will move forward after that.
Okay. There are some, I guess, pending co-formulation patents for concentric or pervasive types of products. Are there any other co-formulation extending patents that you're working on for other partner products that could extend the tails on those?
Yes. Actually, let me just make a comment. I should have said in Keytruda, it is just always very interesting to recognize that was a $7 billion in sales last quarter. Again, just to dimensionalize the impact of that, when if we were to get a mid-single-digit royalty on a product that will be $30 billion, that really could have a very large impact on us. I always want to be sure everyone is understanding the math there. Co-formulation patents, we have been very successful in getting co-formulation patents. Let me begin with why that is so important to us. I think I covered it earlier. When we get a co-formulation patent, in every case, when it is issued, it goes for 20 years for the partner product from when it is filed.
It has the effect in our contract of us getting royalties for an extended period of time, longer than the 10 years that is the base in our contract. Generally, in almost every contract, it goes for the full 20 years. We can be getting six, seven, eight years, sometimes extended time in terms of the duration of that. The impact of a co-formulation patent in many of our contracts also maintains a royalty rate at the mid-single-digit royalty rate. There are some differences to that. The Janssen contract is an exception. The impact of the co-formulation patent just adds two years, two important years at the end of the life cycle of a very large drug. It does not stop the co-form, sorry, the step down in royalty rate when our last patent expires. Still, it is bringing value.
Most of the other ones, most ones as an example, the royalty rate stays at the mid-single digit for the entire period of the extra 20 years. It is very attractive for us. Five of our first launch products have got co-form patents. All of the other ones, such as Tecentriq, Ocrevus, and amivantamab, have filed. We fully expect to get more co-form patents. These are filed when something novel that has not been described before happens when the product is co-formulated. We are the pioneer in this area. There is a lot that has not been described in this area. The interaction between hyaluronidase and each of the new mechanisms of action we are pairing our drugs with, the clinical setting, all are fertile ground for new co-formulation patents. We expect to get many, many more of these and lots of activity in this area.
Our partners are equally as motivated to us. Even though it extends the duration and keeps the royalty rate, it provides them with protection. It is a very mutually collaborative process we go through to find those inventions to file.
Yeah. You mentioned just how widely used Keytruda is. Opdivo is obviously used a lot as well. What do you see as the paradigm in the future for PD-1 Sub-Q delivery? And do you envision that's a physician administered? It just kind of reduces the time in the chair versus the patient administered when you're kind of like getting longer duration cancer treatment, multi-year. How does that look and evolve?
Yeah. I think we're obviously excited to see this massive move to Sub-Q, I mentioned, and ideally at home for many therapies. I think for oncologic therapies, it's all going to come down to the risk-benefit profile of the product and can it be safely administered at home. Recently, we just in Europe, Phesgo, which is a mixed combination of our technology with Herceptin and Perjeta, was approved for healthcare administration, healthcare practitioner administration in the home. Not for patient administration, but it's still in the home. I think the PD-1s, PD-L1s, it would come down to the FDA as to is there any kind of side effect that could happen that would be better for the patient to be under physician vigilance. I think drugs like Darzalex are unlikely to because they have infusion-related reactions. It is certainly a big trend, and it will all depend on the safety profile. I think if you are not expecting adverse reactions at a higher rate that could be a concern, absolutely that could happen.
I see. So a lot of the immune-related reactions, I don't know if they're typically experienced earlier on for the patient, or maybe they need a provider nearby that as time goes by, if there's some sort of acclimation and less of those.
If there was something like that. Drugs like Vyvgart Hytrulo, I'll just mention that, that obviously is not oncology, but in inflammation and immunology, we just got approval of its prefilled syringe in the United States. That will be a 20-second push for the patient with myasthenia gravis and CIDP. A very, very important advance. Patient can just get treatment on their own time, how they want to do it, different safety profiles than some oncology drugs. I think it will come down to the FDA looking at that for what's going to be appropriate.
Yeah. I'm ultimately trying to get my head around what drives that kind of broad shift ahead of potential biosimilars for the IV alternative to that, if there's any sort of payer resistance or if there's a push for that because physicians maybe are inundated with not having enough chair space and time, but then you may have to give chemo, right? You may have to have the patient in the chair anyway. I don't know. I'm just trying to get my head around a lot of considerations there.
Yeah. I think if we specifically focus on the oncology drugs, I think the drivers are absolutely going to be where companies have said they're going to see the conversion is in the regimens which are all non-IV. There are plenty of regimens for Keytruda and Opdivo and also Tecentriq, which is a PD-L1. We'll put it in there. Where the patient is either on monotherapy or with oral chemotherapy or with other subcutaneous therapy, in which case that move towards all non-IV, I think, is going to be where these products are first used. We have heard even if a patient is getting a regimen where they've got several agents, some of which are IV, they often have to be given sequentially.
It can mean an hour less in the chair for a patient if they can simply get a quick shot of their PD-L1 at the end of that or the beginning of that. That hour is important for the patient from the point of view of time in chair, but also that chair can be turned over and used for somebody else. Offices are thinking about that as well in terms of there are infusion capacity constraints. Patients cannot get into chairs. Anything that can free up capacity for treating a new patient so they are not delaying patient care is going to be a driver for that as well. I think those are the key things I think about when you are thinking about use of the PD-1s.
We're out of time. So thank you so much for joining us at the conference.
Appreciate that. Thanks so much, Jason. Thank you.