Oklo Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

There are 9 speakers on the call.

Operator

Afternoon. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Halozyme First Quarter 2023 Financial and Operating 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.

Operator

Please note this event is being recorded. I'll now turn the call over to Tran Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

Thank you, operator. Good afternoon, and welcome to our Q1 2023 financial and operating results conference call. Of our website. Leading the call will be Doctor. Helen Torley, Hellazyme's President and Chief Executive Officer, who will provide an update on our business And Nicole Labross, our Chief Financial Officer, will review our financial results for the Q1 2023.

Speaker 1

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 These financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. I will now turn the call over to Helen Torley. Thank you, Tram, and good afternoon, everyone. Let me begin on Slide 3.

Speaker 1

Halozyme is a leading drug delivery platform company with a diversified and business, which includes our ENHANZE royalty business, our auto injector technology business and a specialty commercial portfolio. I'm pleased to report that we executed our plan for the Q1 of 2023, achieving total revenue of $162,000,000 38% increase year over year. This performance sets us up well for the year and we expect strong Quarter over quarter revenue growth throughout 2023 that will result in another record revenue year. Turning now to Slide 4. I'm delighted with the momentum of our drug delivery business.

Speaker 1

Halozyme has established our leadership in rapid Subsidies drug delivery of ENHANZE and more recently with our differentiated auto injectors. Our partners are making Drivers of this growth include the potential approval of escretizumab subcu and atezolizumab subcu this year that will bring our approved products generating royalties from 5 products to 7 products. 2 additional blockbuster drugs, OCREVUS subcu and SeboSubQ continuing Phase 3 development with the potential to launch by 2025. An additional two products, amibankinumabSub and relacamab nivolumab subcu fixed dose combination also continue in Phase 3 clinical testing, the final phase before potential launch and royalty generation with the potential to launch between 20252027. And it is our goal to add to our already robust pipeline by adding 3 new agreements this year for ENHANZE, ENHANZE plus our high volume auto injector and also a small volume auto injector agreement.

Speaker 1

Turning to Slide 5, let me spend a moment on why so many partners are focused on and are so excited about subcutaneous drug delivery with ENHANZE. ENHANZE, when co formulated with our partner products, has demonstrated an ability to differentiate the subcutaneous product from IV. Subcu delivery decreases treatment time and treatment burden for patients. This in turn results in an improved patient experience With patients stating a strong preference for subcuant surveys. There may also be, as we saw in the case of DARZALEX subcutaneous, A lower rate of infusion related reactions.

Speaker 1

This can also translate into considerable advantages to the healthcare system. These advantages include less use of more costly hospitals and infusion centers and less use of healthcare practitioner time, A growing consideration in all regions of the world. Moving now to Slide 6, I'll provide an overview of our ENHANZE pipeline. We described this in terms of waves, with waves 12, the already launched products the wave 3 products, those that have the potential Launch between 2023 2025 and the Wave 4 products are those with potential for launch between 20252027. I'll go into more detail on waves 2, 3 and 4 in a moment.

Speaker 1

But before I do so, let me highlight an exciting event for one of our wave 1 products. Takeda received FDA approval for an expanded indication for IQVIA to treat primary immunodeficiency in children. IQVIA is now available to a broader community impacted by primary immunodeficiency who may prefer flexible treatment options in the management of these disorders. Enhance is the key value driver for our partners and our extensive development pipeline supports our expectations for royalty revenues To reach approximately $1,000,000,000 in 2027 with potential for growth beyond that. This projected growth is driven by new launches and the projected impact of core formulation patents.

Speaker 1

Let me now move to Slide 7 for an overview of our royalty revenues. We project $445,000,000 to $455,000,000 in royalty revenue in 2023, 23% to 20 Quarterly royalty revenue increased 43% year over year to $99,600,000 and we project strong quarter on quarter growth throughout 2023. 5 partner products using the ENHANZE drug delivery technology and commercialized in approximately 100 global markets are contributing to royalty revenue growth to date, With DARZALEX subcu and FESO, our Wave 2 products, the key growth drivers. While we project approval of efgartigimod subcu and Tecentriq subcu in the United States in 2023. We assume virtually no royalty revenues in 2023 from these products from our small volume auto injector business.

Speaker 1

This remains stable and largely driven by Teva's generic EpiPen. Moving now to Slide 8, I'll provide more details on DARZALEX. Janssen's DARZALEX continues its amazing growth story, Growing approximately 26% year over year on an operational basis in the Q1 of 2023 to approximately $2,300,000,000 This increase was driven by share gains in all regions, continued growth of the market and strong adoption of DARZALEX FASPRO, the subcutaneous formulation with ENHANZE. J and J expects DARZALEX to continue to grow in the first line setting. Analysts are now projecting annual DARZALEX sales will reach $16,500,000,000 in 2028.

Speaker 1

DARZALEX Acute is the globally established choice of physicians using DARZALEX for myeloma patients. With the share of 88% in the United States and as last reported by Janssen, now exceeding 80% outside the United States. The key metric we're now tracking is the overall brand performance as this is driven by the subcu. DARZALEX subcutaneous is a key growth driver of our royalty revenues in 2023 and will continue to contribute meaningfully until at least 2,030. Turning now to Roche's FESGO on Slide 9.

Speaker 1

FESGO is a combination of PERJETA and Herceptin This allows for a single 85% of patients preferred fescope's subcutaneous administration over the intravenous formulation of PERJETA and Herceptin. For the Q1 of 2023, Roche reported SESG sales of approximately CHF240 1,000,000, an increase of 72% year over year. In the initial 30 months countries, Bessekar is now 35%, exceeding 40% outside the United States, With the U. S. And Germany approaching 20%.

Speaker 1

Roche, with their focus on patients, is a pioneer who clearly recognizes The benefits of subcutaneous drug delivery for patients and for the healthcare system overall. We project continued growth from FESTCO in 2023 beyond. Roche is also developing a path for patient self administration of FESTCO with an on body injector and expect pivotal Phase 1 data from this program in the second half of the year. Next up are our Wave 3 products, which are shown on Slide 10. These products represent the next set of royalty revenue opportunities for Halozyme with potential launches projected between 2023 2025.

Speaker 1

The Wave 3 products are subcutaneous at creativimod, atezolizumab, nivolumab and ocralizumab, all of which are approved in at least one indication as an ID formulation. This gives us confidence in the likelihood of approval for ENHANZE enabled subcutaneous versions of these products. I will summarize the key advancements and events occurring this year with this exciting portfolio, where analysts project Total sales, including IV and SubQ, to reach approximately $35,000,000,000 in 20.28. Argenx's subcutaneous F.rotuitimod for generalized myasthenergravis has an FDA PDUFA date of June 20, 2023. Argenx has also submitted a marketing authorization application to the European Medical Agency.

Speaker 1

And let's predict potential total efgrotizimod annual revenue of approximately $7,000,000,000 in 20.28. The launch of the IV formulation is certainly progressing well with a reported $401,000,000 in 2022 and growth of 25 percent quarter over quarter to $218,000,000 in the Q1 of this year. We are excited that subcutaneous efgartigimod has the potential to be the first of our Wave 3 partner launches with U. S. Approval and commercial launch projected Midyear 2023.

Speaker 1

On the recent quarterly call, argenx management commented on the importance of gaining traction in early line patients for the continued trajectory and that the succuthemous approval may help achieve this. Asergenics' flagship pipeline product, efgartigimod is being developed for the treatment of multiple autoimmune disease indications argenx has announced plans to expand and add additional indications, including a new study planned for thyroid eye disease for later this year. Inogenix projects multiple data readouts in 2023. This includes data in chronic inflammatory demyelinating polyneuropathy Now in July of 2023, 2 additional Phase 3 data readouts are projected for the Q4 of 2023 And 2 additional serious autoimmune conditions idiopathic thrombocytic purpura and temphagous. I'll move now to Roche.

Speaker 1

At the beginning of the year, Roche announced their BLA to the FDA for subcutaneous atezolizumab with ENHANZE was accepted with a PDUFA date of September 15, 2023. Subcutaneous tislelizumab has the potential to offer greater convenience for patients and physicians with an approximately 7 minutes of continuous administration time compared to 30 to 60 minutes for IV treatment. Roche believes this represents a significant advancement for patients, the healthcare system where resources are constrained as well as for payers. In the Q1 of 2023, Roche reported IV Tecentriq revenues of CHF 920 1,000,000, an increase of 15% year over year, driven by higher demand in the U. S.

Speaker 1

And in Europe. Roche also We reported Q1 2023 revenues of CHF1.6 billion for OCREVUS, which represents an increase of 14% year over year and annualizes at over US7 $1,000,000,000. OCREVUS is our 3rd wave 3 opportunity. With more than 300,000 patients treated globally, OCREVUS remains the number one treatment in the U. S.

Speaker 1

And EU-five, both in terms of total share and huge brand share, with a higher retention rate than other therapies for multiple sclerosis. The goal with subcutaneous ocrevus is to significantly shorten the treatment and observation time compared With the data readout for the Phase 3 trial of subcutaneous ocralizumab with ENHANZE Expected later this year, subcutaneous delivery could lower the target total administration and observation time for the first and second dose to 1 hour and to just 10 minutes for administration and observation for each subsequent dose. Roche is excited that the subcutaneous data will provide an opportunity to Moving now to our 4th Wave 3 product, nivolumab. BMS reported Opdivo IV sales of $2,200,000,000 in the Q1 of 2023, an increase of 15% year over year or 17% excluding FX. BMS believes that subcutaneous delivery of drug pushes science forward They are progressing with their Phase 3 registration study of subcutaneous nivolumab utilizing ENHANZE in patients with renal cell carcinoma.

Speaker 1

Our waste free products represent substantial derisked near term new royalty revenue opportunity for Halozyme, driven by 2 potential approvals this year and the Phase 3 readout of subcutaneous opralizumab. The opportunity represented here in terms of analyst projections for total product sales is approximately $35,000,000,000 in 20.28, which is significantly higher than the opportunity for our Wave 2 products, which are driving our strong royalty revenue growth today. Moving to Slide 11, I'll review our Wave 4 partner product development pipeline with Enhance. Our longer term growth Wave 4 is comprised of 10 partner products, 2 of which are in Phase 3 and the remaining 8 are in an ongoing Phase 1 clinical testing or have completed Phase 1. In 2023 and beyond, our goal is to continue to expand the number of products in development and to advance products through development to regulatory approval and launch, adding multiple new royalty revenue streams.

Speaker 1

The 2 most advanced products are Janssen's subcutaneous amelantamab And BMS's fixed dose combination of nivolumab plus rilatinib with inharmine. Both are already approved and showing strong growth as IV treatment and are in Phase 3 clinical testing at subcu version. Janssen initiated their Phase 3 study of livatinib And recently, BMS also initiated the Phase 3 study, RELATIVITY-1 hundred and twenty seven, with the goal of demonstrating that drug exposure level of nivolumab plus rilatinib fixed So combination with ENHANZE is not inferior to IV administration of the same combination, with this study being done in patients with Previously untreated metastatic or unresectable melanoma. Other notable programs in our Wave 4 Pipeline includes focus on innovation for HIV. These cabotegravir and gensys ropilgrin, both already approved as I'm in oral delivery, Are in Phase 1 development as subcutaneous drugs with ENHANZE.

Speaker 1

VIVA stated their goal with subcutaneous delivery is to further extend the dosing interval, thereby further freeing patients of the burden of treatment and the disease. VIVA is also in Phase 1 development with N6LS, A development stage broadly neutralizing antibody for HIV. I'll move now to our new growth opportunities. We remain highly engaged in new partnership discussions for ENHANZE and our auto injectors. I'm excited that the funnel of discussions is at an all time high, driven by high interest in subcutaneous drug delivery.

Speaker 1

While the timing is always difficult to predict, we are confident that we will achieve our goals for 2023 for 1 new ENHANZE deal, 1 new ENHANZE plus high volume auto injector deal and 1 new small volume auto injector deal. We're experiencing strong interest in learning more about our high volume auto injector for rapid delivery of up to 10 ml, which is enabled by ENHANZE. This approach will offer a truly differentiated opportunity for patient friendly, high volume, We have a working prototype ready for clinical testing and expect to initiate and complete human feasibility studies by midyear. We look forward to signing an agreement with a current or a new partner to collaborate on the custom development and are tracking nicely towards this goal. I'll turn now to our commercial portfolio, which includes XYOSTED and Talando and are shown on Slide 12.

Speaker 1

XYOSTED is our weekly virtually painless subcutaneous testosterone replacement treatment, which is patients delivered by Auto Indectar. Our growth strategy remains focused on converting patients from intramuscular injections, the most common treatment approach today. In the quarter, we saw strong growth of XYOSTED physician demand, achieving new weekly high average prescription performance every month. We successfully navigated the Q1 resetting of the high deductible for commercial patients through our copay card program, Helping assure affordability was not a barrier for starting or staying on XYOSTED. Sales to wholesalers slightly light demand in the quarter as a result of Change in our 3PL distribution channel.

Speaker 1

Our goal remains to achieve approximately $100,000,000 in XYZED revenue in 2023, representing a 20% increase from the run rate following the acquisition. And we're also still focused on gaining access for Telamido, Our oral testosterone treatment. To date, we have not yet reached agreement with pharmacy benefit managers on an appropriate rebate rate. And until AXIS is established, we are projecting low revenues for TALANO in 2023. Before I hand the call over to Nicole, let me reiterate our commitment to our strategic growth and capital allocation priorities, which are shown on Slide 13.

Speaker 1

We are committed to maximizing our revenue growth and durability to create long term value for all of our stakeholders. We're investing strategically in ENHANCE and our AutoZetra Technologies, while continuing to return capital to shareholders with our share buyback plan. We've completed $500,000,000 of the $750,000,000 3 year share buyback program, which was approved by the Board in December of 2021, and this includes $150,000,000 share buyback completed in the Q1 of 2023. We're also actively evaluating M and A opportunities, taking additional platforms or companies with de risked assets I'll now turn the call over to Nicole to discuss our financial results for the Q1 of 2023. Nicole?

Speaker 1

Thank you, Helen. The Q1 of 2023 is on track with our plans and supports our strong financial performance expectations for the full year. As Helen mentioned, we remain committed to our capital allocation strategy. In regards to our share buyback program, we are pleased that within the Q1, we maximized our repurchase opportunity and completed the full $150,000,000 planned for the year, resulting in the repurchase of 4,200,000 shares At an average price per share of $36.01 Our share buyback programs have resulted in the repurchase of 34,800,000 shares since 2019, which contributed $0.09 to non GAAP earnings per share in the Q1. Part of cash, cash equivalents and marketable securities were $275,600,000 as of March 31, 2023, compared to $362,800,000 on December 31, 2022 due to our Q1 share repurchases.

Speaker 1

Our balance sheet remains strong with projected cash generation and EBITDA growth in 2023. Our net debt to EBITDA ratio is 3.2 as of March 31, 2023, which is expected to be less than 3 by the end of the year. While we have completed our share repurchases allocated for the year, we will continuously evaluate our future use of capital and monitor market conditions and other factors, while also preserving capital to fund revenue growth and durability via M and A. I'll now move to Slide 14 for our detailed financial results for the Q1 of 2023. Revenue for the Q1 was $162,000,000 compared to $117,300,000 for the Q1 of 2022.

Speaker 1

The 38% year over year increase was driven by an increase in royalty revenue, primarily attributable to subcutaneous DARZALEX Given the addition of product sales as a result of the Antares Pharma acquisition, royalty revenue for the quarter was $99,600,000 an increase of 43% compared to $69,600,000 in the prior year period. I'll mention that royalty revenue for the quarter saw a small sequential decline of 6% from $106,000,000 in the Q4 of 2022. This is due to the expected impact of changes in FX rates, annual royalty rate tiers and EpiPen seasonality. Some of our contracts include tiered royalties that escalate annually as volumes build over the course of the year. The threshold for increased rates was exceeded in Q1 and therefore the increased rates will apply for the remainder of the year.

Speaker 1

Amortization of intangibles was $17,800,000 in the Q1 due to the acquisition in which Halozyme acquired intangible assets that are amortized over a useful life related to the auto injector technology platform, XYOSTED and TOLANDO. We project amortization of intangibles to be similar for each quarter in 2023. Research and development expenses for the Q1 was $18,000,000 compared to $11,900,000 in the Q1 of 2022, primarily due to an increase in compensation expense related to the ongoing combined larger workforce to support the device platform in Regulatory, Quality and Manufacturing, as well as planned investments in ENHANCE. SG and A expenses were $37,400,000 compared to $13,800,000 for the Q1 of 2022, Primarily due to an increase in compensation expenses related to the ongoing combined larger workforce, including the addition of Commercial resources and sales and marketing for our testosterone replacement therapy products. EBITDA in the quarter $74,300,000 compared to $76,400,000 in the Q1 of 2022.

Speaker 1

A year over year comparison reflects a $25,000,000 milestone payment in the Q1 of 2022, which did not repeat in the Q1 of 2023, as well as the impact of year over year increases in operating expenses. GAAP diluted earnings per share was $0.29 in the Q1 and non GAAP diluted earnings per share was 0 point 4 $7 Turning now to our 2023 guidance on Slide 15. We are reaffirming our full year 2023 guidance. We expect total revenues of $815,000,000 to $845,000,000 representing growth between 23% to 28% Over 2022 total revenue. We expect total revenue to be primarily driven by continued strength in ENHANZE Wave 2 products, STARZLEX SC and Fezco, as well as a full year of Antares product sales and auto injector royalty contribution.

Speaker 1

We expect revenue from royalties to increase between 23% to 26% over revenue from royalties in 2022 to a range of $445,000,000 to $455,000,000 Please note again that our 2023 guidance includes milestone payments We expect EBITDA of $415,000,000 to $440,000,000 representing growth of more than 30% over 2022 EBITDA, which excludes the impact of amortization costs related to the Nterius acquisition. Finally, we expect non GAAP Diluted earnings per share of $2.50 to $2.65 With that, I'll now turn the call back over to Helen. Thank you, Nicole. I'd like to thank the Halozyme team and our partners and collaborators for the strong progress made in the Q1 of this year that's setting us up for such Strong growth in 2023. We're continuing to look forward to our commercial product and royalty revenue growth, projecting we'll Increased the number of ENHANZE commercial partner products from 5 to 7 products with the approvals of subcutaneous escartizumab and atezolizumab.

Speaker 1

We also expect pipeline progress and expansion with Phase 3 data for subcutaneous opralizumab and for subcutaneous efgartigimod as well as 2 new targets entering the clinic from our current partners. Continued progress in the development of our high volume multi injectable in hand is expected, as well as adding new collaboration partners with the goal of signing multiple new collaboration agreements across our platform. And we continue to expect revenue growth resulting from our commercial products. These events all support our strong full year revenue and EBITDA growth guidance. With that, we would now be delighted to take your questions.

Speaker 1

Operator, would you please open the call?

Operator

Our first question is from Jessica Fye with JPMorgan. Your line is open.

Speaker 2

Hey, guys. This is Na Son on for Jessica Fye. I think, can you talk about like what have you seen with the IRA impact? And like How does how has it impacted discussions with current partners and or potential new partners? And then another one is thinking about how we are anticipating a step down in royalty rate for FASPRO, in the EU, what does this mean for other J and J targets set to launch after 2024 and 2027, such as amivantamab and rilpivirang?

Speaker 2

Thank you.

Speaker 1

Yes. Thanks, Nav. With regard to what we've seen on IRA impact, I think we are making comments very similar to our Partners and other people that are talking that there still is too little detail available yet to be able to do any assessment. I do understand if there is Going to be impact because recall the guidance that came out initially really is focused on Part D as in dog and the majority of our products are Part B. I will say that this very rarely has come up from any of our current partners, just I think really based on the fact that they are waiting for more details to come out from CMS Before really doing any analysis on it to understand any impact.

Speaker 1

So we continue to be excited about the growth of our products And the royalties as we look forward to the potential for $1,000,000,000 in 2027 and project the potential to be higher than that in 2,031. With regard to the step down in royalty rates, the specific details in all of our contracts, as you know, are Confidential. So, we obviously, in light of the European patent finding did give some commentary on the DARZALEX

Operator

The next question is from Corrine Jenkins with Goldman Sachs. Your line is open.

Speaker 3

Yes. Good afternoon, everyone. Maybe to one follow on from the last question. It sounds like your current partners aren't bringing it up to you, but how is Like the IRA guidance factoring into any conversations that you're having with potential partners. And then the second one for me, you referenced business development.

Speaker 3

I'm curious how the integration of Antares and your target leverage goals factor into potential timing for any additional BD?

Speaker 1

Yes. I'm happy to take the first part and I'll ask Nicole to discuss the target leverage. I'd say since the guidance came out in March, Corinne, we have been in multiple conversations with potential new partners for ENHANZE and ENHANZE plus HBI. And I do not believe I can remember IRA coming up even in those conversations. I really think it is Majority of people who have got drugs that are the large volume injectables are in Part B.

Speaker 1

And everybody recognizes that the guidance So far isn't related to that. So we're really not having conversations of any frequency with regard to that. Nicole, will you take the question on the target leverage and thinking about future M and A?

Speaker 4

Yes, happy to. Thanks, Karen. When looking at our leverage for ending the quarter, we were at 3.2 times a net debt to EBITDA ratio And we're tracking to be delevered to less than 3 times by the end of the year. So we are tracking nicely with our expectations And also provides ample opportunity for future growth via M and A, looking at our leverage profile as well as our

Operator

The next question is from Mohit Bansal with Wells Fargo. Your line is open.

Speaker 5

Great. Thank you for taking my question.

Speaker 6

I have a couple of questions. So one on IRA, just staying with the team here. Did you expect some more clarity over a period of next 6 to 12 months from CMS, More about the Part B side of it. Should we expect something like that in your conversations with your partners? And the other question is actually or technically in terms of the you have mentioned that sequential royalties Because they get reset, so the royalty revenues are not despite the revenues are higher, royalty revenues are not higher.

Speaker 6

So that Are there anything else in terms of the entire revenues or other product revenues in terms of seasonality we should be aware about In the Q1 as we go forward here? Thank you.

Speaker 1

Yes. I'll take the question on IRA and Nicole will talk about the sequential royalties. Mohit, probably and as you're probably seeing with many of our large pharma partners, there simply isn't the information available at the moment as to When CMS is going to talk with regard to the Part B guidance. And so nobody is really Talking or speculating with regard to that. As you know, ENHANZE is an active ingredient.

Speaker 1

The subcu injection would not be possible without ENHANZE. We also are seeing benefits like as an example of DARZALEX Reduced infusion related reactions. And so we look forward to learning more, but recognize that we are going to be Indicating very strongly that ENHANZE brings a lot of active benefits to patients With regard to being part of the new combinations with the subcu DARZALEX.

Speaker 4

In regards to sequential royalty, quarter over quarter, yes, we did mention a few factors driving that, One of them being the FX rates changing year over year. The other one being royalty tiers that escalate during the year. That is something that we see on both the Enhance and the Antares royalty side to answer your question there. But importantly, those thresholds, It's really only impactful to the 1st few months of the year and those thresholds are exceeded within the Q1. So it does not impact the remainder of the year.

Speaker 4

And then the also item we see in Q1 is epi royalties do have a seasonal pattern where Q1 is the lowest of the year. So that's just a little bit more flavor on seasonality. But overall, our quarterly results for royalties are tracking very nicely to our plans And our expectations to meet the guidance we set out for the year, which is $445,000,000 to $455,000,000 for the year, Representing greater than 20% year over year growth for royalties.

Speaker 6

Helpful. Thank you.

Operator

The next question is from Michael DiFiori with Evercore ISI. Your line is open.

Speaker 7

Hi, guys. Thanks for taking my question. You had 2 more ones on the IRA, but different versions. So just regarding CMS' Part D guidance document, I think for now everyone's operating under the assumption that Part B will look like very much like Part D. So assuming that's true, now that HALO's lawyers and policy teams have had some time to fully digest the guidance document, Are there any nuances contained therein that perhaps make you incrementally more or less confident on how ENHANZE formulated products may qualify as single source drug.

Speaker 7

That's my first question. My other question is that Just remind us how the EU, the EPO DARZALEX FASPRO patent revocation Is specific to just DARZALEX FASPRO and why there wouldn't be any read across to your other EU co formulation patents? Thank you.

Speaker 1

All right. Thanks Mike for those questions, Jeff. A lot of interest obviously in the IRA. So we talked about this a lot when the guidance came out. And If there is an interpretation or the Part B guidance comes out similar to the Part D, our interpretation based on experts D.

Speaker 1

C. Is if you focus on the part of the guidance that describes the fixed dose combination and we actually use an example of 2 corticosteroid drugs And talks about the both active ingredients not being considered the same as a single agent used alone. I think that is what we see as a perfect description of ENHANZE because the RU PH20 is designated in multiple documents from the FDA as an act Now why is that? It's because as I mentioned earlier, it does make the whole subcutaneous delivery possible That allows for a shorter injection. It allows for reduced infusion related reactions on occasion.

Speaker 1

And frankly, patients would not be able to See the therapy in such a simple short way nor with the healthcare system be able to accrue the benefits Of the shorter time. So certainly, our reading at this point in time, if it's identical, is that the subcu will be treated as a separate Single source agent than the IV drugs, but with all the appropriate caveats that CMS has to issue the specific guidance For Part B. Moving to the EU patent, yes, I think for people A few weeks ago, Janssen had one of their 2 approved European co formulation patents for darazolexum revoked, And they still have, I'll note, another one that's under review. This was a single relocation of the first patent. So They have a second patent that remains as well as another patent pending.

Speaker 1

This was a specific instance where With the judgment of the court that because Janssen had published a clinical trial protocol that mentioned the invention That they relied on in the patent before they filed the patent, that meant that they were not able to Use that invention, which was reduced infusion related reactions to support that particular patent. Now the reason this is only For this single patent from DARZALEX is that other of our partners relied on other inventions To support their patents. So one of the core things about co formulation patents is it has to be novel, not described before an invention. And so By definition, all of our partners are looking at their data to look for something different. And so that's why there's no read through to any of the other patents that are filed or any of our other European partners.

Speaker 1

And companies are careful to make sure that they do Get the filings first to the patent office before they make the data public. I'll also just comment that, just in case anyone has the question, any The U. S. Does not have the same exact approach as Europe with regard to this Pre publication and a clinical protocol, and so there is no read through to the United States either. I'll just also comment the next step in Europe could be for Janssen to file an appeal.

Speaker 1

If Janssen did file an appeal, The patent would be un revoked and usually the appeal process can take 3 to 4 years. But again, I'll also mention that Janssen continues to have other Athension, for Halozyme, we're very confident in our revenues in 2023 and to continue to receive royalties from Janssen until at least 2,030. So there was a tension to this, but we certainly are feeling very well about our Janssen royalties and the very strong growth that we're seeing there.

Speaker 7

Very helpful. Thank you.

Operator

The next question is from Jason Butler with JMP. Your line is open.

Speaker 5

Hi, Soren on for Jason. Thanks for taking our questions. Just a couple. I guess, Helen, you mentioned that the funnel of partnering discussions are at an all time high. Just assuming that those are mostly candidates seeking their first approval as ENHANZE Formulations?

Speaker 1

Sorry, Rory, you cut up a little bit. So you think are those companies looking for approvals Of their first indication, so development stage product or commercial product?

Speaker 5

Yes, development stage, correct.

Speaker 1

I would say it's a mixture. It's a mixture of both of those. We've traditionally worked with companies Where they're getting to their Phase 3 approval or they're already approval approved and that's because ENHANZE can really help enhance the competitiveness Orban, a product. We are talking more and more and have some very interesting Conversations ongoing with companies who are looking at optimizing their PK profile. And so that's a different approach where you're not Trying to bridge to the already approved, but you could do something if you have a C MAX, for example, associated toxicity, Enhance can help with that or you want to get to a very extended dosing interval.

Speaker 1

So very nice mix of discussions, Roy.

Speaker 5

Okay. And I think then one on the you mentioned that 10 ml auto injector, a collaboration partner, for further development. Just what are they going to bring to the table that you didn't get from Antares? Thanks.

Speaker 1

So it actually is one of the, I think very intriguing things about the Antares portfolio of auto injectors and the engineers that we have is That we've traditionally offered partners the option to customize a device for a specific patient population or disease. And so what we have is a working prototype. Each partner will have to determine what their primary container they want it to be. There'll be a little bit of customization, some might be 5 ml, 7 ml, 10 ml. So that will take a little bit of work, Specifically, the form factors and other factors like needle depth and other are things each partner generally will like to customize To be right for their particular drug and their populations and their target population.

Speaker 1

So it simply is that customization work for it to move from prototype to Development stage auto injector to a commercial auto injector.

Speaker 5

Okay, great. I'm going to throw in one more. The DARZALEX injection site reaction results that you mentioned, is that achievable with a lower Those of ENHANZE that you use to achieve the subcu injection itself, that makes sense?

Speaker 1

I understand your question. I don't think we ever tested that because in our clinical studies with septidarzolex, it was Only one dose of the RUPH20 used in each injection to my knowledge, Ryan. So I think it's a very, very small dose. And so I don't think that the dose ranging for RUPH20, we know the amount it takes. So it Probably never tested, but I will say some very small dose that's used in all of our products.

Speaker 1

Got it. Thank you.

Operator

The next question is from David Risinger with SVB Securities. Your line is open.

Speaker 8

Yes, sorry. Thanks very much. So I have a couple of questions, please. First, The press release mentions planned investments in ENHANZE. I was hoping that you could provide some more color on that, Helen, particularly since ENHANZE is Set to lose U.

Speaker 8

S. Exclusivity in 2027. And then just a couple of financial questions. What was the impact of And Terez, on the non GAAP earnings or EPS in the quarter and regarding share repurchases, did you mention that you have Finish that up for the year. Thanks very much.

Speaker 1

Yes. I'll take the first question and then I'll ask Nicole to take the next 2. With regard to the planned investments, this really relates back to an announcement we made maybe 18 months ago with regard to starting the development of A high yield RU Page 20 as well as a room temperature stable RU Page 20. David, we for our royalty term, I'll just highlight that we always receive In the vast majority of cases, a minimum of 10 years after the first commercial sale. And so 2027 might be patent But we are going to be selling API to our partners and generating royalties to well past 2,030 based on our development portfolio.

Speaker 1

And so we thought it was important for us to continue to invest to get to a higher yield API, Because that would be the expectation of our partners that we would continue to improve the processes. We also are Good progress with the high yield one and partners have expressed a lot of interest in that. Obviously, as that just helps us strengthen our ability to continue to supply a very high quality API for our partners. With that?

Speaker 4

Yes. Thanks, David. With regards to Centari's contribution, it was Accretive, obviously, to our revenue line and to our non GAAP EPS in the quarter and continues to our expectations is that it And you'd be accretive for the full year results for 2023. And then in regards to share repurchases, we did complete the full amount that we had allocated for the year, which was for the year, which was $150,000,000 We took the opportunity in the Q1 to maximize our buying during low prices. And so we were able to accelerate that and buy at the low prices and fully complete the amount that we had allocated for the year.

Speaker 8

Thank you.

Operator

The next question is from Eun Yang with Jefferies. Your line is open.

Speaker 5

Hi, this is Mac on for Yoon. Just continuing on the Enhance partnering conversations with the next gen, are HU PH20. Have you identified any partners Who are specifically interested in these next gen APIs? And if so, when will the improved Products be ready for clinical investigation? Thank you.

Speaker 1

Yes. So different pathways for each The higher yield one is the same cell line as our current one. And so it's much more likely that will be a simple And we've done that before. This will take several years, but it should be a pretty Seamless transition. And we've got several of our partners who have expressed interest in Moving to that, obviously, once it is approved and available.

Speaker 1

With regard to the more room temperature stable, we continue in discussions on that. That was seen as being a bit more specific to small molecules and the specific setting for room temperature stability is needed. So nobody signed up at this point in time. Never expected to be a large driver of revenue because it's Our subcu products are much more focused on the large volume biologics where room temperature stability is not needed because the products have So very pleased with the progress and the interest we've seen on the higher yields continuing to have this offering For those partners who might want something that's more suitable for a small molecule and patient self administration.

Operator

The next question is from Caroline Palomeque with Berenberg Capital Markets. Your line is open.

Speaker 1

Hi, thanks for taking the question. Can you discuss the current IV to subcu conversion rate trajectory for other products, aside from the ones in your So Carolyn, if I was understanding your question, what we saw with the Wave 1 product and those were predominantly launched in Europe. Herceptin is a good example that got to about 50% share of sales after 2 years and it got to 60% share of sales After 3 years. Biosimilars entered the market at that period of time. And I can say that we do hear from Roche that the share has remained sticky in those markets where it did convert, But it didn't continue to grow after that.

Speaker 1

We don't have specific data on HIKUVIA for me to be able to share. Her, MAPSARY got to about 40% share of sales. And so we're seeing a range. We're obviously, we're very pleased to see DARZALEX up there at 88% in the U. S, greater than 80% outside the U.

Speaker 1

S. And really, it's very clear now that the SEPQ is driving That amazing revenue growth of overall DARZALEX that you're seeing by aiding the penetration into the frontline and second line populations, which are the larger populations Patients stay on therapy longer. And so we usually think about a target of around 60% Conversion at 3 years and then we look at the products and we say, do we think it's going to be a bit higher than that? Is it going to be a bit lower than that? But overall, very pleased with the progress we're seeing.

Speaker 1

And I'll just point out, FESGO, after a slow start and very nice quarter over quarter growth, and now 35% share With Roche and us expecting continued conversion as physicians and patients really do see The benefit of this particularly in the adjuvant setting. That's helpful. Thanks.

Operator

We have no further questions at this time. And this will conclude today's conference call. Thank you everyone for participating.

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Earnings Conference Call
Oklo Q1 2023
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