Good morning. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Investor Conference Call. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Please note, this event is being recorded. I'll now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.
Thank you, Operator. Good morning, and welcome to Halozyme's Investor Conference Call. In addition to the press release issued earlier this morning, you can find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business and provide preliminary 2025 revenue estimates, in addition to an update to our 2026 to 2028 financial guidance. On today's call, we will be making forward-looking statements as outlined on slide two. I would also refer you to our SEC filings for a full list of risks and uncertainties. During the call, both GAAP and non-GAAP financial measures will be discussed.
Certain non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in the press release and slide presentation. I will now turn the call over to Dr. Helen Torley.
Thank you, Tram, and thank you all for joining us this morning. The fourth quarter, and specifically the month of December, was a standout period for Halozyme. Never before have we executed on such a broad series of value-creating events in such a brief time. This execution is creating a value inflection for Halozyme, unlocking multiple drivers of long-term, durable, and profitable revenue growth. I'm incredibly energized by the pace of progress, and I'm very confident in the path ahead. Let me turn now to slide three. Here is our agenda for today. I will begin with the 2025 highlights, which are summarized on slide four. In 2025, we acquired two innovative long-duration IP subcutaneous delivery-enabling technologies. In November of 2025, we closed on the acquisition of Elektrofi, acquiring Hypercon, a novel clinic-ready in 2026, biologic hyperconcentration technology with IP to the mid-2040s.
I am pleased to announce that in late December 2025, we acquired Surf Bio, adding a second innovative biologic and small molecule hyperconcentration technology, also with long-duration IP to the mid-2040s. These acquisitions broaden our opportunity to collaborate exclusively and non-exclusively across a full range of leading and emerging targets and mechanisms of action. We are creating the next waves of major SC innovation following ENHANZE, which will last over a very long-term time horizon. In parallel, in 2025, we continued to demonstrate strong ENHANZE momentum. Highlights include the global regulatory approvals for ENHANZE, co-formulated with Johnson & Johnson's blockbuster product, RYBREVANT. This resulted in 10 globally approved blockbuster products now being commercialized with ENHANZE.
I am delighted to say that in late November and December, we signed three new ENHANZE collaboration agreements, signaling the recognition by biopharma that ENHANZE is the gold standard for large volume, rapid subcutaneous drug delivery. These three new agreements are a strong representation of the broad range of ENHANZE opportunities in discussion to date, with participation by established large pharma and smaller biotechs, and with target profiles including IV to subcutaneous conversion and subcutaneous extended dosing. You will note the continued broadening of therapeutic areas, too, now including obesity and inflammatory bowel disease, in addition to oncology. And I'm delighted to say that clinical planning has already kicked off for all three new Phase I study starts. Collectively, the 2025 events shown here create additional visibility and new revenue opportunity extending into the 2040s. Let me turn now to slide 5.
Our growth from 1 to 3 subcutaneous delivery technologies, each of which is royalty-bearing, capitalizes on and will help fuel the growing demand and trend for more subcutaneous delivery of drugs administered in the physician clinic and also in the patient's home. Moving to slide 6, let me review how our technologies address the challenges pharma faces to date in creating biologics that can be given subcutaneously. This will allow you to appreciate how our broadened portfolio, by providing tailored solutions to address each partner and product's specific needs, so dramatically increases our opportunity. Beginning on the left, many biologics require high volumes of injection to deliver the therapeutic dose due to the concentration and formulation limitations. As an example, the approved ENHANZE co-formulated partner products range from 5 milliliters to 23 milliliters volume of injection based on concentrations of 40 to 180 milligrams per mL.
Now, it's important to just mention here that only about 2 milliliters can comfortably be injected subcutaneously in a single injection due to the structure of the subcutaneous space, which is filled with hyaluronan. ENHANZE is the perfect solution for this, enabling rapid, large volume subcutaneous delivery by temporarily degrading the hyaluronan in the subcutaneous space, which results in volumes of 5 mL being able to be given in as little as 30 seconds, as we see with VYVGART Hytrulo with ENHANZE, or 15 milliliters in 3 minutes, as we see with DARZALEX FASPRO with ENHANZE. ENHANZE has demonstrated an unmatched track record of regulatory and commercial success when combined with antibodies and bispecifics, where it has enabled drugs previously given intravenously to be given subcutaneously, and extended the dosing interval of an already approved subcutaneous drug, HYQVIA, by allowing larger single doses to be administered.
Let me just take a moment to also highlight two new growth trends to watch for that are related to ENHANZE that I am very excited about, and where we are very busy in conversations with potential partners. The first is for use with nucleic acids, where there is strong interest in whether ENHANZE can enable the subcutaneous delivery of lipid nanoparticle and large volume nucleic acid conjugate formulations, while mitigating the inflammatory and immune responses usually seen with subcutaneous delivery. The second is for use of ENHANZE with certain antibody- drug conjugates, where there is interest in whether the change in the PK profile, and specifically the lower Cmax with an equivalent or greater AUC, can result in an improved risk-benefit profile.
Now, for some disease conditions, such as autoimmune, neurology, nephrology, and cardiovascular diseases, patients and their physicians are seeking more rapid delivery options, including options that the patient can deliver at home. This is where Hypercon and the Surf Bio hyperconcentration technology come in. Each technology, through a different novel patented approach, can allow hyperconcentration of the biologic up to 500 milligrams per mL, or 3-4 times higher on average than is possible today. This can result in much smaller volumes for injection, potentially less than 2 mL, or between 2 mL and 10 mL. Importantly, feasibility of approximately 500 milligrams per mL has been demonstrated for both of the technologies, including with monoclonal antibodies, peptides, and even small molecules supporting the broad opportunity.
Volumes in the range of up to 2 mL will fit into a small volume autoinjector or 3-10 mL into Halozyme's proprietary high-volume autoinjector, enabling quick, simple delivery in seconds, given by the patient or a healthcare practitioner. Halozyme has become the one-stop shop for biopharma for subcutaneous delivery. Now, you may be asking, why do you need and why do you want two hyperconcentration technologies? Let me address that on slide 7. Strategically, two technologies that work differently to hyperconcentrate therapeutics expand our opportunity. This is because we can offer partners tailored options to fit their needs and meet their target product profiles, allowing them to select the approach that will be the best fit for their drug. It also allows us to work with more companies on leading and emerging top targets or mechanisms of action.
As shown on the slide, the Hypercon technology achieves concentrations of approximately 500 milligrams per ml through a novel patented dehydration process. This is an advanced technology with feasibility demonstrated in tens of tests with different monoclonal antibodies and other treatment modalities. Based on the strong progress made in advancing manufacturing and clinical testing readiness, we are projecting that two current partners will Phase I studies with Hypercon by the end of 2026 or before. The Surf Bio hyperconcentration technology also achieves concentrations of approximately 500 milligrams per ml. It achieves this through a combination of the use of a novel proprietary excipient that enables stable, dense, low-friction particles and spray drying. Multiple experiments have demonstrated feasibility of achieving stable formulations at approximately 500 milligrams per ml, including with monoclonal antibodies and small molecules.
With long-duration intellectual property to the mid-2040s for each technology and opportunities for patent life extension based on novel findings, each technology excitingly adds to Halozyme's long-term and durable royalty revenue opportunity. With those 2025 business highlights, let me now review the 2025 projected financial results, which are shown on slide 8. I'm delighted to say that based on our preliminary revenue estimates, we expect to exceed our 2025 total revenue guidance and to achieve our 2025 royalty revenue guidance, compared with the guidance estimates that were last updated in November of 2025. We now expect total revenue of $1.385 billion-$1.4 billion, 36%-38% growth over 2024. This is an impressive increase of $370 million-$385 million year-over-year.
This strong projected performance is predominantly driven by royalty revenue, which is projected at $865 million-$870 million, a 51%-52% increase and an almost $300 million higher than prior year. A truly outstanding performance, I think you will agree. Let me just mention that we are not providing the EBITDA and non-GAAP EPS update at this time, as we're still pending the accounting determination and conclusion of the impact of the recent M&A transactions that I just discussed. This information will be reported with the Q4 results. Let me move now to the 2026 guidance, which is shown on slide 9. I am very pleased to communicate that in 2026, a full one year earlier than the original projection, we project we will exceed $1 billion in royalty revenues.
Recall, I first provided this projection in January 2018, projecting achievement of $1 billion in royalty revenues in 2027. Many were skeptical at that time, wondering if we would navigate the then outsized concerns regarding patent cliffs in 2024 and 2027. You can see we came through this period very successfully, an important point to remember when I talk about our future growth drivers. I'm delighted to announce that based on the ongoing strength of our business, we are raising our 2026 guidance. We project total revenue in 2026 of $1.71 billion-$1.81 billion, a 23%-30% increase over our 2025 estimate, reflecting a $318 million-$418 million year-over-year increase.
This strong performance is driven by increased expectations for royalty revenue and product sales. Royalty revenue guidance is increased to $1.13 billion-$1.17 billion, a 30%-35% increase year-over-year, and reflecting an additional $263 million-$303 million versus prior year. Adjusted EBITDA and non-GAAP diluted EPS guidance are also increased from prior guidance ranges. I will highlight that non-GAAP diluted earnings per share is projected to be $7.75-$8.25, a meaningful increase of $1.25 above our prior guidance. I'll just note that the 2026 guidance does include approximately $60 million of new operating expense for advancement of the two new hyperconcentration technologies, Hypercon and Surf Bio, which were not included in our prior 2026 guidance.
Let me turn now to slide 10. We're also very pleased to provide our updated and raised longer-term guidance for the period 2026 to 2028. I will focus you on total and royalty revenue and then on non-GAAP diluted earnings per share. In 2028, we project total revenue to exceed $2 billion, a remarkable projected growth from the $1 billion in total revenue that was achieved in 2024. This is largely driven by continued robust royalty revenue growth, which is projected at $1.46 billion-$1.51 billion in 2028, a 26%-28% CAGR for the period 2024 to 2028.
I will note that the 2028 royalty revenue projection does not include the potential U.S. manufacturing IP extension for ENHANZE, which would, we project, have the impact of maintaining the royalties for DARZALEX FASPRO and RYBREVANT FASPRO at the original mid-single-digit royalty rate in the United States from September of 2027 to March of 2029. Non-GAAP earnings per share is projected to more than double from 2024 to 2028, projected at $10.50-$11.10 in 2028, demonstrating the strength of our royalty business model and our strong fiscal discipline. I'll move now to slide 11 and just take a moment to highlight what truly differentiates our business. In two words, it is durability and profitability.
We have expanded from one to three subcutaneous delivery licensing technologies, ENHANZE, Hypercon, and Surf Bio, that each bring recurrent, long-duration royalties. Importantly, each of these businesses is also asset light, with the partners responsible for development and commercialization costs. As a result of the asset light model and our strong operational efficiency and excellence, we project for the 2026 to 2028 period that our gross margin will exceed 80%, our free cash flow will exceed 70% of our EBITDA, and operating margin will be greater than 60%. I will now turn to what excites me the most and what gives me such confidence in our future, our growth roadmap, beginning on slide 13.
This roadmap provides the multiple growth drivers in 2029 and beyond that give me incredible confidence, just as I had in 2018, that we have the strategy, the levers, the opportunities, and the financial strength to create an incredible growth performance for Halozyme for many years to come. I will begin with ENHANZE. The updated revenue and royalty guidance for 2026 to 2028 is driven by our 10 approved products. Our approved products include DARZALEX, which is in its 11th year post initial launch and is still delivering a magnificent greater than 20% year-over-year revenue growth, with sales of $14.3 billion in 2025.
DARZALEX FASPRO, with ENHANZE to date, commands more than 90% share of total DARZALEX sales and has been the key to this robust growth, enabling and expanding use of DARZALEX in the large front and second-line multiple myeloma patient populations. DARZALEX is a cornerstone to J&J's ambition to exceed $50 billion in oncology sales in 2030, and they have invested smartly in developing DARZALEX FASPRO to demonstrate its unassailable risk-benefit profile in so many multiple myeloma indications that I and many believe it will continue its remarkable growth trajectory, delivering robust royalty revenue to Halozyme for multiple years to come. A second blockbuster FC product with ENHANZE I will highlight is argenx's VYVGART Hytrulo. Approved in two subcutaneous indications today, 2025 total sales were $4.15 billion, a 90% growth year-over-year.
The mid-2025 launch of the prefilled syringe, which includes ENHANZE-formulated VYVGART Hytrulo, and which enables at-home and in-clinic subcutaneous delivery in as little as 30 seconds, was a key driver of this strong revenue performance and of the robust growth.... With high opportunities still available in the currently approved subcutaneous indications and multiple future SC indications in development, we are excited for the continued growth of VYVGART Hytrulo. Now, there are 8 additional approved subcutaneous products with ENHANZE, including 6 more recently launched and growing SC with ENHANZE products. These launched products represent substantial new royalty revenue opportunity for many years to come. Adding on top of this will be our development portfolio. For ENHANZE, we anticipate 6 new products will enter into Phase I clinical testing in 2026, resulting in a total of 13 ENHANZE development products.
The development products have the potential to launch in the 2028-2031 timeframe, based on a number of factors, including when they entered Phase I testing and considering our historical timeline of approximately 5 years. Now, I will note that excitedly, recent company innovations and FDA changes may support a 3- to 4-year development timeline in some cases, meaning an even shorter time to royalty revenues. And this is just a view from where we sit today. Following our strong 2025 performance with 3 new ENHANZE licensing agreements, interest from biopharma has never been higher. As the gold standard for SC delivery of monoclonal antibodies, we continue to be approached by many companies.
In addition to this, in response to data we have generated on the use of ENHANZE with nucleic acids and antibody-drug conjugates, we are fielding multiple incoming calls and gaining multiple meetings through our outreach to discuss how ENHANZE can improve the profiles of these newer treatment modalities. Based on this interest, I expect to sign between 1 to 3 new licensing agreements on ENHANZE this year, including with pharma and biotech companies. Importantly, with these new agreements, the ENHANZE royalty durability will extend into the 2040s. Moving now to Slide 14, let me now turn to Hypercon. We acquired Hypercon through the acquisition of Elektrofi in November of 2025. Elektrofi has 3 signed licensing agreements to date with argenx, Johnson & Johnson, and Eli Lilly.
We expect 2 partners to initiate Phase I clinical studies for already approved blockbuster drugs, incorporating the Hypercon technology by the end of 2026 or earlier. Based on development time frames, we project potential approvals in the 2030, 2031 time frame. Excitingly, additional feasibility testing with additional drugs is ongoing and planned, and based on this, we see the potential for an additional 3-5 launches by the mid-2030s. Strategically, I also want to highlight that Hypercon also provides Halozyme with the opportunity to transition current partners from ENHANZE to Hypercon. I mentioned earlier the increasing interest from patients and the healthcare practitioners for at-home, smaller volume, rapid sub-Q delivery.
By applying a Halozyme Hypercon technology, current ENHANZE partners have the potential to significantly lower the volume of injection and enable delivery by autoinjector, further strengthening their competitive differentiation by meeting the patient and healthcare practitioner needs. For Halozyme, this could extend royalties at a mid-single-digit rate into the 2040s. With the opportunities I just outlined and Halozyme's subcutaneous development expertise, we see a path to Hypercon delivering approximately $1 billion in royalty revenues in the mid-2030s or approximately 5 years after the first launches. As shown in Slide 15, is a summary of our expanded commercial and development portfolio. There will be an almost doubling of the number of commercial and development products, increasing from 19 total commercial and development products by the end of 2026 to 36 in 2028.
Recalling my comments on a conservative, approximately 5-year development timeline, this crystallizes the multiple new royalty revenue streams projected over the upcoming years. Now, the final and a very important growth driver is additional M&A, as is shown in Slide 16. It is our goal to continue to evaluate drug delivery technology opportunities where we can leverage our strong expertise. And we will also seek to utilize and deploy our strong cash flow to add growing revenue businesses, adding assets and companies where Halozyme can add to and accelerate the value creation. We project that our future acquisitions will add revenue extending into the 2040s, and importantly, could begin to add growing revenue in the nearer term. Let me move to our 2026 goals. 2026 will be another incredible year of execution.
We project supporting 6 new ENHANZE products and 2 new Hypercon products to begin Phase I clinical studies, bringing our total products in development to 15. Further supporting momentum and success, current partners have multiple Phase Ii and Phase Iii data readouts, further expanding the commercial opportunity. It is our plan to deliver 3 or more new licensing agreements in 2026, with a projection of between 1 and 3 new ENHANZE deals and 1 to 2 Hypercon new deals. We will also seek to complete additional acquisitions, targeting strong revenue and margin growth opportunities. Let me close with a few reflections. I've been the CEO at Halozyme now for 12 years. In this time, Halozyme has successfully navigated multiple challenges and defied popular wisdom, delivering strong, repeated year-over-year growth. We have created a unique N of 1 business.
I know this can make it more challenging to model, but the results are very evident. We cannot, due to contract obligations, always tell you the play-by-play... But what I want to leave you with today is that I know the play-by-play, I have a team that's delivered and will deliver again, and finally, that I have never been as confident or more excited in Halozyme's future. With that, operator, we will open the call for questions, and I'll be joined by Nicole for the Q&A session.
At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Sean Laaman with Morgan Stanley. Please go ahead.
Good morning, Helen and Nicole, and congratulations on such a strong financial performance and strategic outlook. Helen, just you mentioned a couple of things that are interesting. So, you know, the nucleic acid ADC opportunities. I wonder if you could say, even ballpark that, and give us your sense of what the opportunity might mean in terms of size and how that compares to your current business. And the other question is, you know, the transition potentially of ENHANZE products onto Hypercon. You know, it, you know, could you give us a ballpark of what you think the opportunity there is, like, how many products might be open to transition and how that might extend the IP runway? But thank you.
Yeah. Thanks, Sean, for the questions. With regard to nucleic acids and ADCs, I can talk about that in terms of the numbers of products, because as you can well imagine, it's a growing and emerging field where, if we try to look for analyst projections or evaluate pharma, the numbers are pretty incomplete. But if you just think about all the announcements you see for throughout 2025 of companies acquiring and companies advancing different types of ADCs and nucleic acids, I can say this is a very strongly growing class of product that is expected to be the predominant wave in years to come, diminishing over time the dominance of the antibodies.
And so that's why we're so excited to be able to play in this new and emerging field. Our Chief Scientific Officer, Chris Wahl, has been generating data, engaging with tens of companies on this potential to see whether the profile of the products can be changed into basically an improved risk, benefit, or efficacy profile, depending on which modality we're talking about. And so bottom line, Sean, it's an exciting area that is very rapidly growing, and we're delighted to be seeing the strong interest we have with so many incoming inquiries on it.
With regard to Hypercon, you know, it's still pretty early in our days and our conversations, but what we wanted to highlight and make sure was visible to all of our investors is that the field of sub-Q delivery is evolving, and ENHANZE was a major, major innovation in terms of being able to allow patients to get rapid high-volume sub-Q delivery. But the market is moving, and the demand of the physicians and the patients and the pharma companies is really trying to get to more at-home therapy. And so we don't believe our partners will be static, even with their exciting blockbuster drugs. They want to be able to have the best offering for patients. They want to be able to have the most competitive sound profile.
And so it's not going to be a static field in our view. So, it's a space for our investors to watch, and we're very excited about this potential evolution, which will, just as I mentioned in the call, add to the durability of our revenue, potentially at the mid-single-digit rate.
Wonderful. Thank you. If I can just squeeze one more in. So you've given, I think, a billion-dollar royalty aspiration for Hypercon, I believe it was, into the 2030s, which is quite substantial. And then you've announced the acquisition of Surf Bio, and you're implying that there's a fairly fertile ground there for further M&A. So, you know, fair to assume that, you know, maybe all these acquisitions are gonna contribute more materially to what than what ENHANZE will, sorry, into the 2030s. So ENHANZE might not be the dominant portion of your business.
You know, it's still very much our aspiration to continue to grow ENHANZE. And Sean, what I will say is, as you look at that 15 total products that we're projecting in development at the end of 2026, 13 of those will be ENHANZE. And so, ENHANZE is definitely with the 3 deals we signed at the end of last year, the ongoing conversations we're having this year, and my expectation of between 1-3 new ENHANZE deals this year, and the potential for our partners to be moving more products into the clinic, even as we speak, ENHANZE is still going to be a robust contributor. So that is absolutely our goal and will remain the very important platform for Halozyme for many years to come.
Adding to that, as you say, we've got Hypercon now, where we are projecting up to $1 billion by the mid-2030s, and then M&A will be layered on top of that. And I think you know I think you're absolutely getting our message from today, which is Halozyme has multiple growth drivers, and we have the financial wherewithal and the execution abilities to be able to pull all of these levers in parallel. And that's what got me so excited about the future and the future growth trajectory for Halozyme.
Wonderful. And thank you, and congratulations again, Helen.
Okay. Thank you.
The next question comes from the line of Brendan Smith with TD Cowen. Please go ahead.
... Great. Thanks for taking the questions, guys, and congrats on all the updates here. Really great to see. Maybe just quickly wanted to first ask about a little bit more on the kind of relative strategy for implementing Elektrofi versus Surf Bio technology. I guess, how should we really think about which areas, drugs, or, like, types of partnerships are more likely to use each once, you know, they really kind of get their feet here? And then, you know, I just wanted to ask also about your commentary regarding the FDA changes, potentially expediting the development timeline for ENHANZE. Can you expound on that just a little bit more? And, if you see any read-through from some of those kind of helping the path for Elektrofi or Surf Bio? Thanks.
Yeah. Thanks for the question, Brendan. And yeah, well, we're very excited to have the two hyper concentration technologies, which are working differently. And I think that's very important to remember because that means that they may be more or suitable for one type of modality versus another. Each of them has demonstrated feasibility across a range of monoclonal antibodies and different protein and protein conjugates, and I will say Surf Bio has also demonstrated feasibility in the small molecules. And what we believe will happen, and is already beginning to happen, is partners will come to us and discuss their target product profile. Is this going to be delivered in the physician's office? Is it gonna be delivered by a physician at home? Is it gonna be delivered by the patient themselves?
Then look at the actual formulation of the product and identify which of our technologies is going to be the best match to that profile. And by having the three technologies, now we'll be able to work with a broader range of companies. We'll be able to work across exclusive and non-exclusive targets. And I think you can see exactly how this so excitingly broadens the partners and the number of products that we'll be able to work on in the future. So hopefully that addressed your question with regard to that. And each of the technologies, it's our goal to continue this exciting model we have, which is asset light, with the milestone and royalty collaboration style agreement. We have those for ENHANZE.
You, you know that for, Elektrofi, they were able to command very similar types of, structure and royalties as to what we have done with ENHANZE, and we are projecting exactly the same with Surf Bio. So, it really will be based on a profile, that, that partners can choose which one best fits their goals. The, the FDA changes, this has been, in conversation over, over time, Sean, with regard to the technologies. As, as, you know, we've now got over 1.3 million patients treated with ENHANZE globally, there's a lot more of comfort in the safety profile. And we saw, as an example, the innovator, argenx, being able to have a Phase III study in myasthenia gravis that was just, approximately 100 patients large.
And each of our partners now goes to the FDA and is introducing more and more innovative styles of studies. You know, there's opportunities to not do large, controlled Phase III studies, perhaps doing more of an internal control, which can reduce the sample size. I think these designs will become public over the next months and years as current partners advance. And as we can talk about that in more detail, we'd be delighted to do so. But I think it's a nice reflection of the fact that ENHANZE has been and is the gold standard, and that's why the studies are getting more and more streamlined and creative and innovative.
Translating that to Elektrofi and Surf Bio, I think will go through the same profile, where there might initially be some of the larger, more standard studies, a single large Phase III study, for example, for approval, of Surf Bio or the Hypercon technology. But over time, I think there's going to be the same type of recognition that these studies can be more and more streamlined, especially if you're comparing it to an already approved drug. So, we are delighted to partner and see some of the great ideas that are coming from our partners and supported by the excellent clinical team we have here at Halozyme.
All right, great. Thank you.
Your next question comes from the line of Michael DiFiore with Evercore ISI. Please go ahead.
Hey, guys. Thanks so much for taking my question, and congrats on all the, all the progress. Two for me. Just Hypercon and Surf Bio, could you maybe walk us through the key differences between the, the two technologies a little more? Like, I noticed that both technology platforms are able to formulate monoclonal antibodies. Why would one why would using one tech platform for a monoclonal antibody be more suitable than the other? And at this stage of the game, is one technology more scalable than the other? And I have a follow-up.
All right. Thanks, Mike. Yes, just getting down to the basics of how each of them works, they, they work quite differently, with the Surf Bio, Bio being a polymer technology, that lowers surface tension during the processing, which results in higher protein stability and the potential, to, to, obviously, create these hyper-concentrated, formulations up to 500 milligrams per mL. Hypercon does exactly the same, achieving up to 500, milligrams, sorry, per mL, through a dehydration process.
So each of them takes a different approach, and as I was mentioning earlier, what we see and expect, and that certainly seems to be confirmed in early conversations, is depending on the particular molecule, and that would include monoclonal antibodies, that our partners are wanting to hyper concentrate, there may be one approach that is deemed to be more suitable from the get-go than the other one. And so, the partners will be selecting based on their formulation and their goals, exactly which of these technologies is going to be the best fit... We're very excited about the progress of these technologies. Obviously, Hypercon is the more advanced one.
We're expecting 2 Phase I studies to start in 2026, and we can say that Chase and the team have been doing an excellent job in getting everything ready, including the manufacturing to be supportive of that. The Surf Bio technology is earlier. We're projecting being able to be in the clinic by the end of 2027, early 2028. And so we're gonna be working on advancing the non-clinical excipient qualification, the GMP manufacturing. So probably a little bit early to be able to comment on relative scalability of one versus the other, but both of them offering a differentiated approach for partners to meet their target profiles.
Excellent. If I could just squeeze one follow-up that kind of just piggybacks on the previous question regarding potential accelerated timelines for FDA approval. If we assume that a biosimilar ENHANZE were to come on the market, you know, after 2029, like, given the fact that you said the FDA is very comfortable with ENHANZE, given its long historical safety profile, does that view from the agency still hold true with biosimilar versions of ENHANZE? Or could the FDA make biosimilar versions of ENHANZE not have an accelerated timeline to approval? Thank you.
Yeah, let me, let me just make a couple of comments about the likelihood of biosimilars coming, first of all, Mike. And you know, we, we have co-formulation patents for the majority, or expect co-formulation patents to be issued for the majority of our products. And the actual co-formulation patents, which relate to the combination of partner molecules with our rHuPH20, we believe will be sufficient to preclude the ability for the biosimilars making an identical rHuPH20 to launch.
Now, for that means then that a biosimilar company can't follow the exact same path we have, which does bring our expectation that a biosimilar company for an individual product would need to do a pretty full clinical development program, which would enable them to demonstrate to the FDA no risk of immunogenicity as well as comparability. And so for the biosimilar companies, it's not going to be a straightforward pathway, because of the patent status of most of our partner product, as well as the FDA still wanting for biologics, that demonstration we believe of no immunogenicity, which was a very important question, if you recall, for us to demonstrate over the years.
Excellent. Thank you.
The next question comes from the line of Mohit Bansal with Wells Fargo. Please go ahead.
Okay, thank you very much for taking my question and congrats on all the progress. So, I have one detailed question. I mean, excuse my naivety, but is there a potential for ENHANZE platform or any of these Hypercon technologies to actually help out with the longer-acting, or making the drugs longer-acting? Because from my read, it looks like ENHANZE actually increases the absorption, and that could be, that could make it faster-acting rather than longer-acting. One thing like that, like, could you be in the GLP space, making them longer-acting or things like that? That's the part I want to understand. And then the second one is, is there any FTC risk with the Surf Bio deal, given that there are some similarities here with the Elektrofi? Thank you.
Yeah, thanks, Mohit. With regard to the longer-acting, we are actually engaged with partners on being able to, and I'll call it extending the dosing interval, which is, I think, a similar concept. But, it really comes down to, within ENHANZE, you can deliver a larger dose, and that larger dose, depending on what happens to the PK profile, can extend that time where it's delivering the efficacious level, levels in the blood. And so you can go from, as an example, a drug that's delivered every two weeks at a certain dose, by being able to increase the dose in a single injection, extend that dosing interval as an example, to four weeks.
The best example we have of that in our portfolio is actually HYQVIA, where we are able to with the ability to deliver up to more than 600 milligrams of immune globulin have the patient treated every 4 weeks, whereas the IV is every 3 weeks. And if the patient was to have a sub-Q without ENHANZE, they would have to have multiple smaller injections because, obviously, you can't put in as large a volume. And so the concept is commercially available as HYQVIA, and we do have certainly partners talking with us about that today, being able to get from that 2 weeks to 4 weeks as an example, or even 4 weeks to 8 weeks. So, doesn't make it longer-acting, but it does extend the dosing interval.
With regard to the FTC, the Elektrofi acquisition did undergo a standard HSR review. A period in that time expired, and we were able to move forward and close the transaction. And for the Surf Bio, it isn't subject to FTC review because of the size of the entity.
Got it. Helpful. Thank you very much, Helen.
The next question comes from the line of David Risinger with Leerink Partners. Please go ahead.
Yes, thanks very much. So, congrats on the financial updates, Helen. I had two questions, please. First, you had set initially the 2028 targets back in 2024. So can you comment on why you're not rolling annual targets out to 2030 today? And then second, I believe there was an additional DARZALEX formulation patent, a hyaluronidase patent, issued late last year. Could you—so considering that, could you remind us about what you are expecting for the timing of the conclusion of DARZALEX's U.S. royalties in the 2030s, and DARZALEX ex-U.S. royalties in the 2030s? So, what is the timing for each of those to go to zero in the 2030s? I'm curious. And I'm just curious if that's changed at all. Thank you.
All right. Well, let me ask Nicole to address the guidance. And I think, David, you'll agree that not a lot of companies give five-year guidance. There's not a lot of companies give three-year guidance even. But Nicole, talk about the future.
Yeah, as Helen mentioned, we are, you know, pleased that we're able to give this multi-year view that, again, many companies don't do. And this is because we really focus on the 10 products that are globally approved today. But when we look at beyond 2028, and as we outlined, a lot of those growth potentials today is because we see so many drivers beyond 2028. So we know we have the expectation of 15 products that are in development with ENHANZE, the potential we talked about with the Hypercon technology to achieve $1 billion in royalty revenue in that time horizon.
And again, adding on the opportunity we have with our strong cash flow projections to continue to grow with a additional royalties, royalties and our revenue, high growth revenue, high margin businesses, with the addition of M&A, are all the growth drivers that we see beyond 2028.
Thanks, Nicole. With regard to the duration of the royalty term with J&J for DARZALEX, just to be very clear in that, our current royalty term is projected to end in 2032 for both US and the EU. However, you know, it's really important to consider this will be, at that time, an $18-$19 billion brand for J&J, which is almost all sub-Q at that time. We do expect in the upcoming years to be entering into additional conversations with J&J to continue to expand our relationship with them. When you think about the importance of that product, and especially it's a cornerstone to their $50 billion ambition, it's going to be very important that they do not have any discontinuity or risk to that.
So I wouldn't think about their revenue disappearing, David, as you suggested there. I think they'll be in our mutual interest to come forward with another type of agreement. It wouldn't be exactly the same, I don't think, as the one we have today, but that certainly is in our ambitions and plans, that we continue durable revenue with DARZALEX for years to come, after the current expiry of the current licensing term. And put yourself in their shoes, I think, and you'll see that that's in their very good interest as well.
Thank you.
The next question comes from the line of Jason Butler with Citizens JMP. Please go ahead.
Hi, thanks for taking the questions, and congrats on the results today and the acquisition. Two for me. Can you maybe, Helen, talk about to what extent the more recently approved products like Ocrevus, Opdivo, and Tecentriq Hybreza contribute to guidance in 2026 and beyond? And just how do you think about the biggest, you know, royalty growth drivers over the next couple of years? And then second for me, obviously, you've now acquired two companies that are a clear strategic fit. How do you think about prioritizing future potential acquisitions, both in terms of timing and business strategy? Thank you.
That's great. Well, I'll ask Nicole to talk about the color of the royalties and the contributions moving forward.
Yeah, the near term, and especially in 2026, the biggest drivers will continue to be the three largest drivers that we see currently, which is really focused on DARZALEX, PHESGO and VYVGART. But as you mentioned, the four more recently launched products are growing in contribution in 2026, and then certainly in future years as well, are contributing to that growth that you see year-over-year.
Yeah, and when we have our Q4 call, I think we'll be able to talk a little bit more about that as our partners do make more comments. There were some comments made at J.P. Morgan, but we do expect to be able to provide more color, particularly on Ocrevus and Opdivo, where the presenters at J.P. Morgan were certainly speaking very enthusiastically as to the pattern of growth that we're seeing there. On M&A, Jason, you know, absolutely, these were a very strong strategic fit for us. Being focused on the ability to expand our drug delivery offerings.
As I mentioned in my prepared remarks, we also are expanding to also look at opportunities where there is a business that is growing and where Halozyme can see a path to us delivering more value. Now, what's important as you think about that, is that could bring potential near-term revenues for it that grow into the future and further add to what's already a very exciting growth story over the next 5, 7, 10 years. And so we think about that having our eyes very much on the ball in both of those areas. But very much, I think the new news today is just an excitement about potential opportunities to add growing revenue and margin businesses.
Great. Thank you.
The next question comes from the line of Corinne Johnson with Goldman Sachs. Please go ahead.
Maybe you could talk a little bit, given that Surf Bio technology is preclinical, what they've shared in terms of immunogenicity and also, you know, what they showed that got you comfortable stepping in to make this acquisition at this time? I know with Elektrofi, it was that they were, you know, entering the clinic, so curious what you saw with the Surf Bio technology here.
Yeah, thanks, Corinne. Yeah, it very excitingly, you know, when we think about this, the Surf technology is a couple of years behind the Hypercon technology, but have followed a very similar path of engaging with multiple pharma companies to demonstrate the feasibility of being able to create these stable 500 milligram per mL high syringeability formulations. And so, you know, that was obviously the very first thing. There is an early initial, but it absolutely appropriate for the stage of development, toxicology work that's been completed extremely well.
In terms of the manufacturing, that also has been set up in a way that impressed us and gives us confidence as to this being able to be progressed to be clinic-ready by the end of 2027 or in 2028. So, but very, very nice overall package, recognizing it was earlier, and that obviously, the difference in the acquisition price, I think, very nicely highlights the opportunity we have here to create value with Surf Bio over the next couple of years as we advance it to the clinic.
Great. I think you mentioned $1 billion in Hypercon royalties by 2035 or mid- to mid-2030s. Does that include partnerships beyond the three they've already established? And how did you think about kind of quantifying that guide? Thanks.
Yeah. So, you know, obviously, we have a very clear line of sight as to how we will get there. We can't provide details on the play-by-play just due to partner confidentiality. But I'll point you back to some of the comments I made in the prepared remarks, Corinne, to say that, you know, we're expecting two products to enter the clinic this year, and based on ongoing feasibility testing, the possibility of an additional three to five launches by over the next several years after that. And it really is that pattern of engagement and progress that gives us that line of sight.
Thank you.
The last question comes from the line of Mitchell Kapoor with HCW. Please go ahead.
Good morning. Congrats on the strong year, Mitchell Kapoor. I have a two-part question. First, you raised the 2026 guidance by 20% at the midpoint and signed 3 new ENHANZE agreements. Did this raise capturing those contributions, or does this still reflect the conservative floor that you've previously guided to? And also, now that you have two hyperconcentration platforms, is there a specific viscosity or volume threshold that dictates when a partner would choose Surf Bio over Hypercon? And how do these economics compare to the standard ENHANZE, ENHANZE royalty? Thank you.
All right. I'll tackle the second one, and then I'll ask Nicole to talk about the guidance raise. And, you know, we still are, I think, Mike, at the experimental stage with the Surf Bio, so can't really talk about any limits to the viscosity or volume. What I can say that has been remarkable and was very striking to our teams as we were doing our diligence is that up to this 500 mg/mL concentration I talked about, the viscosity is incredibly low. The syringeability is like, as my team described it, like injecting water. So I think that's the important thing to think. We're not trying to reach the limits of viscosity.
We're trying to create highly concentrated molecules that don't have viscosity, and both of these technologies in the non-clinical area have demonstrated that very beautifully. Based on what's publicly available, with regard to the Elektrofi Hypercon contract terms, those are very similar to ENHANZE, and it certainly will be our expectation. There are no collaboration and licensing agreements yet for this Surf Bio technology, but I can say that we would expect it to be in a similar range to what has been publicly announced with ENHANZE, and also with the Hypercon technology. Nicole, can you address that question?
Yes, so with respect to 2026, the raise from our previous guidance really is driven by royalties and the strong trajectory we've seen with the top three drivers from DARZALEX, Ocrevus, PHESGO and VYVGART Hytrulo. And then also, you'll see that we increased our expectations for product sales, which is driven by increased expectations for our sale of API to our partners. And you mentioned the new collaborations. That really had an impact in 2025. As you see, we did increase our expected range for 2025 collaboration revenue. That's driven by upfront revenues received. And then the go-forward contribution will be more modest compared to our current products as those products continue to move through development.
Great, thank you very much.
Nicole, there was one other question that came in as a write-in question that maybe I'll ask you to just address. Could you say more as to why you haven't reported exactly what accounting treatment is going to be addressing Surf Bio? And what are the ranges and choices there, and what any implications we should know about?
Yeah, and you all have seen that, in our 2025 preliminary results, we did say that EBITDA and non-GAAP EPS will be reported in February when we report our final results for the quarter. That is because we're working through the accounting treatment. We're working with our advisors on that, as part of closing our year-end financials. The different treatments really come down to whether they are accounted for as a business combination or an asset acquisition, and a business combination being what you've seen us do in the past, where really the acquisition and the assets are on your balance sheet. But in the event that there is an asset acquisition in of IPR&D, you may have seen other companies where that is recorded as a one-time P&L charge.
That could be the impact of the Surf Bio technology being in the preclinical development stage. So if that is the case, you will see a one-time charge in the fourth quarter of 2025, and that will be reflected in our EBITDA and non-GAAP EPS results in 2025. Thank you.
Thank you, Nicole.
There are no further questions at this time. Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.