Halozyme Therapeutics Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2023

There are 5 speakers on the call.

Operator

Hello, and welcome to the Halozyme Third Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now turn the conference over to Tram Bhui, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Operator

Thank you, operator. Good afternoon, and welcome to our Q3 2023 financial and operating results conference call. In addition to the press release issued today after the market close, 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 Doctor. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business and Nicole LaBrasse, our Chief Financial Officer, who will review our financial results for the Q3 2023.

Operator

On today's call, we will be making forward looking statements as outlined on Slide 2. 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 Thank you, Tom, and good afternoon, everyone. We're very pleased with our Q3 year to date 2023 financial and operating results, which reflects the continued strength and durability of our business.

Operator

We remain focused on supporting our growth trajectory and are well positioned for another record year. We are on track to meet our recently updated revenue guidance and delivered greater than 25% revenue growth for the year, including greater than 23% royalty revenue growth. I am also pleased to announce that as a result of our operational performance and close attention to expenses, we are raising EBITDA and non GAAP EPS guidance. EBITDA guidance has increased from $420,000,000 to $440,000,000 to $445,000,000 And non GAAP EPS guidance from $2.65 to $2.75 to $2.70 to $2.80 I'm pleased to forecast that strong performance on both top and bottom line growth this year. Moving to slide 3.

Operator

In addition, today we announced an acceleration of the $250,000,000 share repurchase remaining under the approved $750,000,000 share repurchase plan that we announced in 2021. This $250,000,000 share repurchase will be executed through an accelerated share repurchase with a finance institution this week, subject to market conditions. We have a disciplined and balanced capital allocation strategy at Halozyme, Investing to grow the business, return capital to shareholders through share repurchases and seek new growth opportunities through M and A. Our investments to grow the business in 2023 have resulted in substantial accomplishments, including our high volume auto injector. We plan to invest at similar levels to grow the business in 2024.

Operator

Our balance sheet is strong with continued projected EBITDA growth and cash generation throughout 2023. We have reduced our net leverage substantially and consistently each quarter from 3.2 times at the end of 2022 to 2.4 times at the end of the Q3 of this year. Given our strong balance sheet, decreasing leverage and continued EBITDA and cash generation, we decided to implement the announced $250,000,000 ASR using cash as we believe Halozyme is trading at a significant discount to our valuation, making sure we purchase a high return on investment opportunity. We will continue to seek growth opportunities through MA and have increased our technical search and evaluation due diligence capabilities With the addition of Manuel Sanchez Felix, who is a renowned leader in Drug Delivery Technologies and a prior Senior Fellow of Novel Drug Delivery Technologies at the Novartis Institute For Biomedical Research. At this time, we do not project any near term M and A transactions that would add to our leverage.

Operator

I'll move now to highlights in the Q3, which are shown on Slide 4. We reported total revenue of $216,000,000 which gives us confidence to achieve our full year revenue guidance of $825,000,000 to $845,000,000 representing greater than 25% year over year growth. With operating expense management a strong focus in 2023 and with EBITDA and non GAAP EPS Moving now to slide 5. As an industry leading drug delivery platform company, Halozyme has built a diversified and robust portfolio. Our ENHANZE technology combined with an innovative high volume Monster injector provides new and potentially improved therapeutic solutions for patients, our partners and healthcare providers.

Operator

Throughout the year, our ENHANZE partners have made significant progress with their commercialization and development activity, which are expected to result in strong and durable long term revenue growth for Halozyme. Before I provide additional details on each product, Let me summarize the strong performance and momentum in the quarter, which is delivering strong results today, while also advancing new ways of growth for Halozyme in the coming years. Our Wave 2 products DARZALEX FACTOR and FEZCO remain strong revenue drivers. The approval of argenx's Vygard HiKulu in the United States Antocentric subcutaneous in Great Britain increased the total number of commercial products to 7 and importantly signaled the start in 2023 of 2 new royalty revenue streams. The positive Phase 3 data for FasGuard Heartulo and CIGP will upon approval expand the commercial opportunity in a condition where there is significant high unmet need to date.

Operator

And the recent positive data announcements From 2 additional Wave 3 products, nivolumab subcu and ocralizumab subcu, support near term regulatory filings and commercial launches in the 2024 to 2025 time frame. I'll leave you with 2 key takeaways. Firstly, the multiple positive Phase 3 data readouts from our Phase 3 product in the last 19 months support a high success rate In the translation of Phase onetwo ENHANZE subcutaneous pharmacokinetic data into positive Phase 3 results, The high success rate from early clinical data to positive Phase 3 data to approval is not always fully appreciated. The likelihood of success for our partners utilizing ENHANZE technology when bridging from an IV approval to subcu is very high once early clinical data is generated. And secondly, as a result of the multiple positive Phase 3 data readouts, we are confident to project 9, royalty revenue generating products by 2025, a significant increase from 5 that we had as we entered 2023.

Operator

And moving now to slide 6. These approvals are the key drivers of our projection of the potential to achieve approximately $1,000,000,000 in royalty revenues in 2027. Let me now move to slide 7. We set the goal for 2023 to deliver a new enhanced deal, a new high volume auto injector deal and a new small volume auto injector deal. We've made strong progress against these goals.

Operator

We were very pleased to announce a new enhanced partnership with Acumen Pharmaceuticals, which reinforces the growing recognition of the value of subcutaneous drug delivery. Acumen is focused on the development of targeted therapies for Alzheimer's disease and is leveraging their deep understanding of the amyloid beta oligomers to usher in a medical breakthrough. The Alzheimer's disease market is a key inflection point with recent and expected approval paving a new path for treatment. We're delighted to work with Acumen with the goal of creating a best in class subcutaneous delivery option that may ease the treatment burden for patients, caregivers and the healthcare system. Under the term of our nonexclusive agreement for their proprietary therapy, Halozyme receives an upfront payment and will be entitled to milestones in addition to a single digit royalty on net sales, reflecting the nonexclusive Nature Office agreement.

Operator

For our high volume auto injector, we have also made strong progress. We presented the full data from our clinical study, which demonstrated the Delivery of 10 ml of a representative biologic in 30 seconds with our auto injector was well tolerated by patients and one which of the patients would have again. The companies we presented the data to have been impressed and use our high volume auto injector plus ENHANZE as a breakthrough in the area of rapid auto injection of large volume biologic. With any breakthroughs comes excitement And so I'll now turn it over to something new. I am delighted that one of our current partners has agreed to test our current high volume auto injector device in a clinical test in 2024.

Operator

This is a step prior to the potential development of a customized high volume auto injector for the patient population this partner is considering. At least one other current partner is also considering proceeding with the development of a customized High volume auto injector for their patient population. We have not yet completed this agreement and remain focused to seek to get this completed in 2023, Recognizing this may now occur in 2024. As an established leader in rapid Subsidiary with ENHANZE and our differentiated auto injector technology, we remain the partner of choice across the industry. We're also seeing strong interest from pharma and biotech companies who are interested in understanding the potential implications of the final CMS guidance On drug price negotiations for Part D drugs.

Operator

In these guidelines, CMS affirmed its guidance that a fixed combination, which included 2 or more active ingredients, will be distinct drugs for the purposes of applying the IRRE price negotiation provision. Notably, Halozyme recombinant human hyaluronidase technology ENHANZE has been recognized as an active ingredient by the FDA. With those highlights, I'll now turn to Slide 8 for an overview of our royalty revenue and a more detailed review of the key products and drivers of growth. Royalty revenue for the Q3 of 2023 increased 15% year over year to approximately $114,000,000 and continues to be the key driver of our revenue growth. For the full year, we're reiterating our royalty revenue guidance of $445,000,000 $455,000,000 representing greater than 23% growth over 2022.

Operator

Our Wave 2 products DARZALEX FASPRO and FASCO are the current royalty revenue growth drivers will be illustrated on the next two slides. DARZALEX Faspro is a globally established joint of physicians using DARZALEX for multiple myeloma patients with 91% share in the United States and an estimated greater than 80% share outside the United States. With the overall brand performance driven by the use of subcutaneous formulation, total DARZALEX brand growth is now the key metric we use to measure DARZALEX subcutaneous growth and potential. In the Q3 of 2023, DARZALEX continued to drive Strong sales growth for Johnson and Johnson with an increase of approximately 21% year over year on an operational basis for approximately $2,500,000,000 in the quarter. This increase was driven by share gains in all regions and continued growth in the first line setting.

Operator

Analysts project annual DARZALEX sales will continue to grow and will be $17,000,000,000 by 2028. Turning now to Roche's FASBOL, which is shown on slide 10. VESQ is a combination of Perjeta and Herceptin delivered in a single 5 to 8 minute subcutaneous injection for patients with early and metastatic curcobreative breast cancer. I'll focus firstly on Perjeta to help them mentalize the opportunity for Perjeta. For the 9 months of 2023, Roche reported projected revenue of CHF 3,000,000,000.

Operator

Moving now to Festo. Festo sales grew an impressive 66% to more than CHF 800,000,000 contributing positively to the continued growth of Roche's impressive breast cancer treatment franchise. The global conversion rate from Projenta to Fezco continues to increase even as the number of launch countries increases. Vezco is now launched in 44 countries, up from 38 last quarter and the conversion rate increased to 37% in the Q3. Roche anticipates approximately 50% share over time.

Operator

And we noted that the key drivers of uptake including limited nurse and chair capacity even in the United States and patient preference for subcu. Turning now to our Wave 3 products shown on Slide 11. I'll touch on recent event highlights and also upcoming value driving events to watch for. Always 3 products are now highly derisked with 1 major market approval and positive Phase 3 data announced for the remaining 3 products. Beginning with argenx's 5GART or efgartisimod, this is argenx's flagship high playing product and is being developed with ENHANZE in a total of 6 autoimmune disease indications today with 4 of these indications being developed as subcutaneous only delivery.

Operator

Analysts project that efgartitimod will be a multibillion dollar annual revenue ramp in 2028. The launch of REGENX's VIBGAR and VIBGAR HYTULO with ENHANZE for patients with generalized myasthenia gravis is progressing well, with growth of 22% quarter over quarter to $329,000,000 in the Q3 of this year. With the FDA approval of the subsea and its Versant Vibegar hytrual in June of 2023, Organix's goal is to expand the use of Vibegar By offering myasthenir gravis patients a new treatment delivery option and to move into earlier lines of treatment driving brand loyalty with their current prescribers. It is exciting that Vistar Hetulot is helping argenx achieve their goal. Argenx recently reported Initial feedback from doctors on 5CARTRUDA is broadly positive and they recognize the benefit of the simple 30 to 90 second subcutaneous injection, which is enabled by our enhanced technology.

Operator

Hytrullo is contributing to argenx expansion of the market with new prescribers with the majority of patients by Atrulio being Vygard naive. Argenx is also making progress 2 more myasthener gravis patients globally. In September, Bipart HEXRIL received a positive opinion from the CHMP, signaling a path for European approval for generalized myasthenia gravid with a self administration label later this quarter. Expanding the potential opportunity, argenx announced positive top line data from the ADHEAR study evaluating vibhargetrutl with ENHANZE For CIDP, with a 61% reduction in risk of relapse versus placebo, the safety and tolerability profile were reported to be consistent with the confirmed safety profile of VAGGAR when used in other indications. There is a significant unmet need in CIDP And we're excited that Organix will be filing with their priority review voucher and are busy preparing for 2024 launch.

Operator

And further expanding the opportunity, argenx recently confirmed 2 additional study readouts for Vyfarth etroub with the hand. The first in idiopathic thrombocytopenic purpura, which is expected in the Q4 and the second in pemphigus, which is expected around the end of the year. I'll move now to our additional products with Roche. The Great Britain approval of Roche's Tecentriq subcutaneous with ENHANZE in August MARCAR 7, ENHANZE commercial product approval. Based on the pivotal study conducted in non small cell lung cancer, Tecentriq subcutaneous was approved in Great Britain for all current IV indications, including certain types of lung, bladder, breast and liver cancer.

Operator

Halozyme's ENHANZE drug delivery technology allows for an approximate 7 minutes of cutaneous delivery, which compares with 30 to 60 minutes for the IV infusion. Roche commented on their recent quarterly call that they project the potential for Tecentriq subcu adoption in resource constrained markets to mirror the rapid conversion and high share attainment of FESTCO. With regard to upcoming regulatory actions Roche project the CHMP opinion in the Q4 of 2023 and U. S. Approval decision in 2024.

Operator

We're also pleased to note that as an IV treatment, Tecentriq continues to demonstrate strong growth. Year to date 2023, Roche reported IV Tecentriq revenues of CHF2.8 billion, an increase of 11% year over year. I'll move now to OCREVUS. Roche's Phase 3 Ocarina II trial evaluating OCREVUS subcutaneous with an HANDS met its primary and secondary endpoints, opening up the potential for people living with multiple sclerosis to receive their treatment in just 10 minutes twice a year and creating the possibility to administer OCREVUS in additional multiple sclerosis centers that do not have IV infrastructure or that have IV capacity constraints, which had the new growth opportunity. In October, Roche announced additional data showing subcutaneous injection with non inferior to intravenous infusion based on OCREVUS levels in the blood over 12 weeks.

Operator

Of note, OCREVUS subcutaneous injection was comparable to IV infusion and providing rapid and sustained depletion of B cells and near complete suppression of MRI lesion activity in the brain over 24 weeks. The safety profile of OCREVUS subcutaneous was reported to be consistent with the well established safety profile of the OCREVUS ID infusion. VILCARINA 2 data will be submitted to health authorities around the world with U. S. And European launches expected in 2024.

Operator

The OCREVUS in the IV formulation continues its impressive growth trajectory. For the 9 months year to date, Roche reported OCREVUS revenue of CHF4.8 billion, which represents an increase of 14% year over year. And moving to our 4th Wave 3 product with positive Phase 3 date, that's Bristol Myers Squibb subcutaneous nivolumab. BMS recently recorded positive top line data from the Phase 3 CheckMate 67T study, which is evaluating Opdivo subcutaneous in advanced or metastatic renal cell carcinoma. The study met its co primary pharmacokinetic endpoint And we see secondary endpoints demonstrating non inferiority of objective response rates versus IV nivolumab.

Operator

The safety profile of subcutaneous of divo was described by BMS as consistent with that of the ID of divo. On the recent quarterly call, BMS management indicated that Azevo subcutaneous has the potential to open up a regulatory approval, an indication that constitutes 65% to 75% of the Opdivo business today. Importantly, they further commented that Subcutaneous has the potential to extend franchise durability into the 2,030. BMS reported IV sales of Opdivo of $2,300,000,000 in the Q3 of 2023, an increase of 11% year over year. In total, these Wave 3 products Represent substantial near term new royalty revenue opportunity for Halozyme with analyst projections for total product sales of approximately $35,000,000,000 by 2028.

Operator

What is exciting and something that is, I think, very important to highlight Is that this $35,000,000,000 projected opportunity is significantly higher than the $20,000,000,000 opportunity, which is projected for our Wave 2 product, those that are driving the strong royalty revenue growth we see today. I'll move now to slide 12 and where I'll touch on some highlights from our Wave 4 Our longer term growth trajectory is supported by these Wave Core products with potential launches in the 2025 to 20 27 timeframe and the potential to add multiple sustainable new royalty revenue streams. WayForward is comprised of 10 partner products, 2 of which are progressing in Phase 3 study and one recent advancement into a Phase 2b study. The remaining products are in ongoing Phase 1 clinical testing or have completed Phase 1 study. The 2 most advanced Wave 4 products are approved as IV products and are in Phase 3 subcutaneous studies.

Operator

These are Johnson and Johnson subcutaneous formulation of amumetimab And BMS's fixed dose combination of nivolumab plus rilatinib was in hand. Notably, Johnson and Johnson presented strong data at ESMO from the Mariposa study, demonstrating that the regimen of amibantamab and lazeprinib, The same regimen that FIND study in the subcu versus IV study reduced the risk of progression and death by 30% Compared to ogemetronib or Tagrissob, overall survival data is now awaited. Continuing the progress, we recently initiated enrollment of a Phase 2b study, which is comparing the efficacy, safety, peak and tolerability of N6 Alliance with ENHANCE, which is given in combination with cabotegravir and comparing that to the standard of care in adults with HIV. Turning now to Slide 13. We recently presented the positive clinical data results of our high volume OTH injector study at the 13th Annual POD Conference.

Operator

There was strong interest in the data, which demonstrates the feasibility of administering a subcutaneous injection 10 ml of a representative biologics immunoglobulin 10% within hand in approximately 30 seconds using our high volume auto injector. We're pleased by the acknowledgment by partners and potential partners that this is a breakthrough in terms of rapid, Large volumes of Canadian drug delivery via off injector and we're also delighted with the progress we've been making in advancing with 2 current partners. I'll turn now to our commercial portfolio. XYOSTED is a weekly virtually painless subcutaneous testosterone replacement treatment, which is delivered by our proprietary auto injector. Our strategy is to convert patients not achieving the treatment goals with intramuscular injections of testosterone replacement therapy.

Operator

XYOSTED demand in the Q3 continued to grow, contributing to a 32% increase in year to date demand growth this year compared to 2022. We're on a positive trajectory to achieve approximately $100,000,000 in the XYOSTED sales in 2023, representing a 20% increase from the run rate following the acquisition. And in a further update, we recently made the to terminate the Talando licensing agreement and return the license to Lipotene effective January 31, 2024. This decision was made due to the inability to obtain economically acceptable coverage with pharmacy benefit managers. We'll now focus all of our promotional sales and marketing activity on driving XYOSTED growth.

Operator

With that, I'll turn the call over to Nicole, who will discuss Our financial results for the Q3 of 2023. Nicole? Thank you, Helen. Our financial performance in the Q3 sets us up well for another record year. We achieved top and bottom line growth in line with our plans and supporting our financial performance expectations for the full year.

Operator

Our balance sheet remains strong with continued EBITDA growth and cash generation in 2023 and beyond. Our cash, cash equivalents and marketable securities were $483,300,000 as of September 30, 2023 compared to $348,300,000 as of June 30, 2023. Our net leverage ratio is 2.4 times as of September 30, 2023 compared to 2.9 times as of June 30, 2023. We expect to continue to decrease net leverage with EBITDA growth. Turning to slide 14, and as Helen mentioned, Today, we announced an acceleration of the $250,000,000 of share repurchases remaining under the approved $750,000,000 share repurchase plans announced in 2021.

Operator

The $250,000,000 share repurchase will be conducted under an ASR. This brings our total share buyback since the inception of the first program in 2019 to $1,300,000,000 which has benefited the current quarter non GAAP EPS by $0.15 Given our strong balance sheet, decreasing leverage In continued EBITDA and cash generation, we decided to implement the $250,000,000 ASR now, Take advantage of this buying opportunity. We will continue to have a disciplined and balanced focus on our capital allocation efforts With a focus on driving value for shareholders through investing to grow the business, shareholder return and seeking new growth opportunities through M and A with no near term plans to add to our leverage. Turning now to Slide 15 for our detailed financial results for the Q3 of 2023. Revenue for the Q3 was $216,000,000 compared to $209,000,000 in the prior year period.

Operator

The revenue increase was primarily driven by higher ENHANZE product sales, royalty growth and XYOSTED sales growth, offset by the timing of milestones recognized in the prior year period. Recall that the timing of the milestone for Tecentriq SC in the U. S. Was planned for the Q3 and is now expected in 2024. Royalty revenue for the quarter was $114,400,000 an increase of 15% compared to $99,600,000 in the prior year period, driven by continued strong uptake of J&J's FPT-two STARZBLACK as well as Roche's besco.

Operator

Research and development expenses for the 3rd quarter $17,300,000 compared to $16,700,000 in the prior year period. And SG and A expenses were $35,300,000 compared to $34,500,000 in the prior year period. The increases are primarily due to an increase in compensation expense. EBITDA in the quarter was $124,600,000 compared to $109,900,000 in the prior year period, reflecting the write off of a contingent liability related to Talendo. GAAP diluted earnings per share In the quarter was $0.61 and non GAAP diluted earnings per share was $0.75 Turning now to Slide 16.

Operator

We are reiterating our top line guidance and raising our EBITDA and non GAAP EPS guidance for the full year 2023. We expect total revenues of $825,000,000 to $845,000,000 representing growth between 25% and 28% over prior year total revenue. We expect loyalty revenues of $445,000,000 to $465,000,000 an increase of 23% to 26% year over year, driven by continued strength in our enhanced Wave 2 products, including DARZALEX ST and FEZCO, as well as a full year auto injector royalty contribution. We now expect EBITDA of $430,000,000 to $445,000,000 an increase from $420,000,000 to $440,000,000 representing growth of 37% to 41% over 2022 EBITDA due to strong expense management and the release of the Calendly related contingent liability. We now expect non GAAP diluted earnings per share of $2.70 to $2.80 an increase from $2.65 to 2 $0.75 representing annual growth of 22% to 27 which reflects our strong year to date results and expense management.

Operator

With that, I'll now turn the call back over to Helen. Thank you, Nicole. It has been another strong quarter of execution, significantly advancing our royalty revenue generating portfolio and growth opportunity. We're excited to further expand current and new partner opportunities for ENHANZE and the high volume auto injector and we continue to see additional opportunity I want to thank everyone on the Halozyme team and our partners and collaborators for the strong progress year to date. With that, we'd now be delighted to take your questions.

Operator

Operator, please open the call for question and answer. Thank you. Your first question comes from the line of Mohit Bansal with Wells Fargo. Your line is open.

Speaker 1

Great. Thank you very much for taking my question and congrats on all the progress. I have a 2 part question regarding the auto injector. So The partner you mentioned, who is looking at auto injector, could you help us understand, is it related to like someone who so Is it for a product which already is using entire technology and that now Could be converted into an auto injector, something like that? And then the other part of the question is, could you help us understand how much time does it take For an auto injector technology like when someone conceptualizes that to actually converting it into a real product, What is the process there?

Speaker 1

How much time does it take? Thank you.

Operator

Thanks, Mahesh, and thanks for those two questions. With regard To the two updates we gave on high volume auto injector progress, one partner moving into a clinical study as a first That before moving forward to the development of a custom auto injector for one of their patient populations. And the Second one, which is also a current partner who's evaluating moving forward into a development agreement, as those have not Dan sufficiently first has signed a deal. I'm unable to provide any additional information, but they are both partners who are very With regard to the auto injector timeline, the high volume one, It is all going to depend actually on what the product is that's being used. Is it already a subcu, as an example, is a very important driver of the timeline?

Operator

And the second one is what primary container the partner wants to use and is that immediately available? If it's already a subcutaneous product using ENHANZE And it's the primary container that's available. We estimate the time line in around the 2 year time frame. It needs to be a comparative study done, Stability work needs to be done. Human factors studies need to be done, but we estimate that can be done in about 2 years.

Operator

And that, as you say, starts to generate revenues for Halozyme. If it's the case of a product that's currently an ID and this going to be something that is adding ENHANZE and going into an auto injector. Think of that more like the time line we see for an ENHANZE product Because that which is approximately 5 years, 4.5 to 5 years from first in human to approval, that really would have to go through the comparability To show that the subcu dose is the same as ID and while that's happening, all of the device development and the device stability and the human factor studies can happen in parallel. So 2 years to 5 years, I think is a reasonable timeframe depending on the type of product, Mohit.

Speaker 1

Thank you very much. Appreciate it.

Operator

Your next question comes from the line of Michael DiFiore with Evercore ISI. Your line is open.

Speaker 2

Hi, guys. Thanks so much for taking my question and congrats on all the progress, especially congrats on today's newly announced deal with Acumen. My first question is why is this deal non exclusive? Is the A beta target still up for grabs from any other manufacturer? And if so, Would this potential future manufacturer have the option of securing an exclusive deal outside of Acumen of course?

Speaker 2

And my second question is regarding subcu OCREVUS. How should we think about the maximum IV to subcu conversion rate in the U. S. Assuming that launches next year. I mean, if we think back to Rituxan HYCELA's launch in the EU, Roche adopted a much more proactive biosimilar defense strategy compared to the U.

Speaker 2

S. And launched HYCELA roughly 4 years prior to biosimilar entry. And as a result, the max IV to subcu conversion rate in Europe With 60%. And I guess my ultimate question is, could we expect a similar 60% conversion here in the U. S?

Speaker 2

Thank you.

Operator

Right. Thank you for that question, Michael. We actually do have another partner that is confidential who has the Non exclusive access to the amyloid data. And in light of that, the opportunity with Acumen Was nonexclusive given that we already had somebody who has the target nonexclusively. And I think that's a nice example as to how when So I think that answered that question.

Operator

And we're excited to be working with Acumen on their novel approach to this very dreaded disease where we're seeing significant advances and support all This is as a key mechanism where we may be able to see, real benefits for patients. With regard to subcutaneous OPREVUS, What we're hearing from Roche, if you've been listening to their prepared remarks, is Roche has felt that their growth of the OCREVUS Has been a little limited by the lack of infusion, the seat capacity, both outside the U. S. And in the U. S.

Operator

And also sites who are able to have ID infrastructure. In light of that, there's a lot of commentary from Roche as to think about this A little bit like, FASPRO became after the conversion was done, which is they're going to be trying to grow the overall market as a primary goal and also have some switch. But it's going to be a little bit of a different dynamic than the one you mentioned for Rituxan Hycella where it was switched before biosimilars. I think we're going to see both dynamics happening. And we're very excited by that because it means that patients who are living far away and have poor access, patients in rural communities or countries where there isn't good access to IV therapies are going to be able to start on OCREVUS, which is The leading therapy for multiple sclerosis in the U.

Operator

S. And EU-five. So we'll see a market growth strategy And the conversion strategy, because we haven't seen exactly this dynamic happen before, it's hard to pay exactly how much Conversion will happen, but we certainly are seeing for Fastbro, if I can turn your attention to that, that the availability of Fastbro is what's been fueling The dramatic growth we're seeing of DARZALEX in the last couple of years and it's what's projected to be taking DARZALEX from an $8,000,000,000 brand last year to a $16,000,000,000 brand next year. So new ways to think about it, but I think equally exciting in terms of The opportunity we're going to see here for Okra this year, it will be 10 minutes sub Q, 2 times a year instead of 3.5 to 6 hours, I'd be twice a year and very likely closer to the patient's home.

Speaker 2

Super helpful. Thanks so much.

Operator

Your next question comes from the line of Corrine Jenkins with Goldman Sachs. Your line is open. Great. Maybe a couple from us. First, could you just talk to us about some of the drivers of XYOSTED growth this quarter is I think pretty meaningful.

Operator

Are you seeing an inflection? And what pockets are driving that? Yes. Thanks, Corinne. But with SAI SAID, we're going to focus on 2 drivers.

Operator

First one is driving that conversion In the physician's office, get the patients identified who are not doing well on their I'm XYOSTED and getting them on to Sorry, their I'm testosterone therapy and getting them on to XYOSTED. And the second one is very careful at Canton in the office To make sure the office is filling in any prior authorizations that might be required, but also making sure when the patient gets the prescription filled, They're being more successfully connected with the COPE assistance and other programs we've put in place. So it's that pull of all of the programs and a higher rate of identification of patients that really is driving the growth that we're seeing. Now we do predict, Yes, we're still under 5% share. All of this overall market, which is dominated by the I'm sickening, which is our Conversion target, that's what we're trying to switch patients from.

Operator

So a lot of growth still to come with the strategy that is beginning to really pay dividends. Yes, helpful. Thank you. And then maybe one last one from us. It sounds like there's a number of partners that are circling around the auto injector.

Operator

What's your sense Some of the gating factors or things they'd like to better understand before actually signing on the deal and what will they be exploring with the studies next year? Yes. As I mentioned in the prepared remarks, really when we've been presenting it, we've had comments like fantastic Breakthrough, never thought this was possible. And I think it is the degree of innovation that's represented here, Corinne, that like with any new innovation, There is always a period of inertia. And I will see it's exactly what we saw within hands if I go back to right when I was in the We just done a couple of the deals.

Operator

It took a couple of companies to come in and do it and then the waves happened after that. So I think we're just seeing that traditional innovation adoption curve and people moving into the clinic now to test it is going to help generate additional data. And just because it was so remarkable, we show them a video Of patients receiving the therapy and it's invisible to see that the patients had received 10 ml into the abdomen, I think in just 30 seconds. So I think it's a wonderful reflection of the innovation and people are doing their work now to evaluate that, think about the further patient populations and in the case of one partner I mentioned moving into a clinical study next year. So we're going to see more of that over the next In months, I believe.

Operator

Helpful. Thanks. Your next question comes from the line of Jason Butler with JMP Securities. Your line is open.

Speaker 3

Hi. Thanks for taking the question. Just one on the accelerated buyback. I mean, now that you're wrapping up this buyback, can you just talk to us about how you're thinking about future return to shareholder capital? And I guess put that in the context of your appetite for bringing on new technologies.

Speaker 3

Thanks.

Operator

Yes. I'll ask Nicole to direct that. Yes. Thanks, Jason. So as we think about our capital allocation It really remains unchanged.

Operator

We're focused on the 3 pillars that we've been focused on, which is really continuing to invest in our current platform, Continuing to return capital to shareholders and we're very excited to take advantage of this buying opportunity now and accelerate The remaining portion on the current plan to do that starting this quarter. And then also again very much continuing to look For growing that revenue growth, that durability long term via M and A, we implemented the ASR this quarter because there are no near term plans to grow via M and A and we wanted to deploy our capital and the best way to return value to shareholders, but that will very much

Speaker 3

Great. And then just one more For me on Fazco, can you just speak to how you think about peak adoption here and how the self administration product Could drive whether it could drive further adoption for the subcu?

Operator

Yes. Thanks, Jason. On Fairfield, On Roche's comments, obviously, what we're seeing every quarter is an increase in the overall conversion. But I'll just mention that Every quarter there's always 4 to 6 countries being added, which is losing the overall conversion. So that 37%, 38% reflects the range from Very recent start of conversion up all the way up to I think they've mentioned 92% conversion in Europe.

Operator

With U. S. Based on latest comments maybe 2 quarters ago at 20% at that time, Roche has commented that they expect Up to to get to 50% conversion, with that obviously continuing to be a range of recently launched markets and also High conversion in those markets where we're seeing resource constraints, nursing shortages, IV capacity constraints. And so we're obviously delighted with the very progress we're seeing and the continuous growth to come as we get to that 50% overall conversion of the market. And I wouldn't be surprised myself If it was able to go even further than that based on the value proposition that we're seeing here.

Operator

And just to reiterate that, for Breast cancer patients, many of them moms, many of them working, instead of having to be an infusion center for The treatment which can take up to 1.5 hours, but then there's the observation. The injection of VESGO is given in just 5 minutes or so with a shorter observation time. That means a mom can go in before work, At lunchtime, after work and not be able to take have to take so much time. So it's a strong value proposition and I am expecting more growth to come. The focus of the OnBody, which does include Fezco, so sometimes people ask if that's what enhancing it.

Operator

Yes, and Enhance is an intrinsic part of Fezco, Which also included Herceptin and Perjeta. The goal with that is to allow for more at Home therapy. And so I haven't heard Rose comment if that how much they think that will impact the growth and grow the market. But based on patient population we just described, I think this is going to be a very nice option for certain segment of that population who that fits better into their lifestyle.

Speaker 3

Okay, great. Thank you.

Operator

Your next question comes from the line of Vikram Parodi with Morgan Stanley. Your line is open.

Speaker 4

Hi, good evening. Thanks for taking my questions. So we had 2, 1 on capital allocation, 1 on the auto injector. So going back to some of your prepared remarks, it sounded like there's a renewed focus on business development and M and A. And so while we understand that you're not anticipating any near term M and A, could you speak generally about the profile of businesses and the profile of assets that you'd find additive to the fold in Halozyme?

Speaker 4

And then on the auto injector, just a clarification. Are the economic terms associated with these potential initial contracts, Would they be in line with economics in terms associated with your current Enhance contracts? Thanks.

Operator

All right. With regard To BD and M and A, as Nicole mentioned, we didn't find any near term opportunities, But we are continuing to look at that remains one of our 3 core pillars, which is to seek growth through deploying our capital for M and A. As a leader in drug delivery, we are looking for derisked broadly licensable assets Where we can see a path to near term accretion. So some form of drug delivery that is something major pharma, major biotech Cannot do themselves and which they would be needing to license from a company that has that specific asset. There are assets out there to anticipate that question.

Operator

It just has to fit a grid of criteria for us, including that past in near term accretion. So we'll keep looking. We spent a number of years looking for the Antares acquisition, and so We will just keep focusing on that. But also as Nicole mentioned, the what we consider to be the undervaluation of the Halozyme Stock made the share repurchase the right thing we believe to return capital to shareholders given the strong opportunities that that represented. With regards to the high volume auto injector, what we're going to see is because the high volume auto injector has to be used with ENHANZE, Strategically, this is positioned to help us expand the number of current partner assets in the clinic and moving into the clinic, but also to allow us to find more ENHANZE partnerships.

Operator

So the HCI is always going to be associated with a royalty payment for the drug, But that is primarily going to be driven by ENHANZE. And the model that's most likely for the high volume auto injector Will be development payment as it's being created, but and then product sales, We would make money on the number of devices that were purchased in the sale of the created

Speaker 2

product. Got it. Thank you.

Operator

Your next question comes from the line of Nath Sun with J. P. M. Chase. Your line is open.

Operator

Hey, guys. This is Na san on for Jess Fye. Question on The nonexclusive deal, I guess, is there more are you seeing more interest In nonexclusive deals from potential partners. And then another one on the auto injector. What is the pathway for developing the auto injector into a self administered auto injector?

Operator

The first auto injector Phase 1 is still administered by a physician. Thanks. All right. I will take the one on the auto injector. Maybe I'll ask Nicole to comment afterwards on The non exclusive of that deal.

Operator

Because this was a prototype, not in the first time this has ever been done to attempt to deliver 10 ml in 30 seconds. We thought it was prudent and appropriate for patients that we had a healthcare administered approach to it. What we will find now is that partners are going to be moving the partners that we mentioned is likely going to move into the clinic to do And frankly, there's nothing additional that has to be done other than to write the protocol that way. It's very simple. It's a injector or place the device and the auto injector On the abdomen and click a button and hold it there.

Operator

So it's going to be very straightforward for patients to do. But the only reason we didn't do it in the first study was because it's never been done before. Having seen how well tolerated it was and how well it worked, we have no hesitation in supporting patient studies at this stage then. So it will simply be the patient does that himself. And while this is a larger volume than some other auto injectors, The actual mechanism of doing it is tried and tested.

Operator

I'll say tried and tested by, it seems like 100 of 1000 patients around the world CLP wins. It's very similar to that. It's just a larger volume and a longer hold time. Nicole, do you want Comment on the interest in non exclusive deals at the moment? Yes, happy to, Non.

Operator

So I will say, historically, we always have Tried to market exclusive and non exclusive deals. I think historically the interest has been on the exclusive side, but obviously that comes with a higher price Tag as well. We're very interested in non exclusive deals. We see the benefit of reaching more partners and more patients that way. So I think both you'll see coming through and we'll continue to pursue both types of models.

Operator

Thank you. Your next question comes from the line of Mitchell Kapoor with H. C. Wainwright. Your line is open.

Speaker 2

Hi, everyone. Thanks for taking the questions. I wanted to ask about the evolution of the royalty revenue business. And Right now, we have a lot of it coming from DARZALEX and Fezco. But obviously, we'll have FEVGAR, HITRULO and Centric, subcutaneous and others that will be making up a little bit more of the revenue royalty revenue business share.

Speaker 2

Could you just kind of comment on How soon you expect meaningful uptake to occur for some of these other agents? And then also on the Tecentriq subcutaneous approval in 2024, Can you just comment on when you'll have a new PDUFA date or what is kind of the gating items to get into that timeline?

Operator

Okay. All right. With regard to the evolution and thanks for asking that question because we're very excited that the Wave 3 products No, all 4 of them largely derisked with 1 approval and 3 positive Phase 3 studies. So looking Very encouraging for launches of these products in the 2023 to 2025 timeframe. And importantly, as I mentioned, if you look at where these products are projected to be in terms of size by 2028, it's $35,000,000,000 in sales of the product, which is substantially higher than the $20,000,000 we're seeing with DARZALEX and PHESGO today.

Operator

So we're very excited about How attractive that whole opportunity is. Depending on how you define meaningful, All four products are going to be commercialized by 2025, with several of them launching 1 to 2 years before that. So I think 2024 late 2024, 2025, 2026, 2027 is where we're really going to see these products Growing very nicely following what we've seen in the past, which has been maybe a 2.5 to 3 year to peak conversion. So definitely going to be a very nice addition to The continued contributions from the Wave 1 and Wave 2 products, but adding 4 new very attractive royalty revenue streams in 2023, 2024, 2025 and then on to 2027 and beyond.

Speaker 2

Great. Thank you. And on the TECENTRIQ new date for potential Approval, is that something more narrow that you'll have a time on as we get closer to that? Or do we

Speaker 1

have an assigned date at this point?

Operator

Yes. As far as we're aware, Roche has not communicated any assigned date. What they did state was that the filing will go in by year end this year. And assuming a standard 10 month review time, Mitch, I mean that would take it into, Let's say the September, October timeframe, but Roche has not communicated anything about that as of yet.

Speaker 2

Okay, great. Thank you all very much. Thank you.

Operator

That is all the time we have for the question and answer session. This will conclude today's conference call. We thank you for joining. You may now disconnect your line.

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Earnings Conference Call
Halozyme Therapeutics Q3 2023
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