Halozyme Therapeutics, Inc.

Good afternoon, everyone. I would now like to turn the conference over to Al Kildani, Vice President of Investor Relations and Corporate Communications for Halozyme Therapeutics. Mr. Kildani, please go ahead.

Good afternoon, and welcome to our first quarter 2020 Financial Results Conference Call. In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced on 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 Elaine Sun, our Chief Financial Officer, who will review our financial results for the first quarter 2020. During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties. I'll now turn the call over to Helen.

Thank you, Al, and it's really a delight to welcome Elaine to her first call as our Chief Financial Officer at Halozyme. I'd like to open this call by addressing two topics of greatest interest to the Halozyme investors today, one specific to our company and one affecting all companies. And those are, firstly, the recent FDA approval of Janssen's Darzalex FastPro, utilizing enhanced technology, and then the impact on our business from the COVID-19 pandemic. This is our first call since receiving the very exciting news on the 1st of May that Janssen received U.S. FDA approval for the subcutaneous formulation of Darzalex utilizing our enhanced technology, which will be commercialized with the brand name Darzalex FastPro. This represents one of the most significant events in the history of our company. This approval is for a product utilizing enhanced that is both fast-growing and a blockbuster drug in its IV form, with many years of exclusivity remaining. The U.S. approval follows on the heels of Janssen's recent receipt of a positive CHMP opinion for subcutaneous Darzalex Utilizing Enhance from the European Medicines Agency, which also recommended approval. This event generally means that marketing clearance in Europe is also on the horizon, potentially arriving in mid-2020. As you will note on slide three, Darzalex FASpro Utilizing Enhance Technology was granted a broad label, covering five of the seven indications for which the IV form is currently approved. We estimate that this label allows Darzalex Faspro utilizing enhanced to address the majority of multiple myeloma patients based on our assessment of analyst estimates for how Darzalex IV is used today. Importantly, this is the first time the FDA has approved a product utilizing enhanced for indications based on single arm studies. We view this as the first demonstration of an approach the FDA actually alluded to at the ODAC meeting for rituximab in 2017, during which it was stated that it might not be necessary to do large, complex comparative studies for each and every indication when evaluating in hands in combination with an already approved drug. In this case, Janssen submitted for approval based on two studies, The first is the Columba Phase III study, which examined subcutaneous daratumumab within hands compared to IV daratumumab in about 500 patients. And the second study is a Phase II single-arm study called Pleiades, which examined daratumumab SC in three earlier treatment lines in combination with different multiple myeloma treatments. We believe this is a huge win and very encouraging for the clinical development plans for all of our other enhanced collaboration partners. Most importantly, we view this as a terrific advance for patients suffering from multiple myeloma who are currently receiving treatment with IV Darzalex. We believe the ability to reduce the administration time from what is often four to six hours down to three to five minutes will offer tremendous convenience to patients and value to the healthcare system. This applies every day but obviously today the healthcare system is strained with the ongoing impact from COVID-19 pandemic and perhaps it's even more valuable at this time. This brings us to slide four and the second topic of great interest to investors and that is the COVID-19 pandemic. This has obviously created enormous challenges for so many people around the globe. Top of mind for everyone at Halosam are those directly impacted by the disease as well as those on the front lines of treating patients. The Halosan team is committed to doing our part to helping the community and I could not be prouder of how our employees have joined in this effort. Now, despite the challenges posed by COVID-19, I'm pleased to say we are maintaining our overall progress in our mission of providing patients with disruptive solutions that can lead to better patient experiences and outcomes. Let me now provide you with an update as to where the company stands today, operationally and financially during the pandemic. Halazine remains in a strong financial position today. With our nine partnerships, four products now approved, and multiple programs in development, we have a robust, diverse business model poised to generate solid growth and earnings. We have a strong balance sheet, and we remain confident in our long-term growth outlook. We've taken many measures to protect the health and well-being of our workforce. During this pandemic, the health and safety of our employees, their families, and our local communities is at our highest priority. As we began to see the emerging pandemic in February, we assembled a COVID-19 preparedness team to develop a plan for maintaining business continuity should the situation worsen. In mid-March, we successfully transitioned the majority of our staff to working from home and implemented a limited rotation for the small number of essential on-site employees in anticipation of a shelter-in-place mandate from the state of California. I'm pleased to report that we were able to quickly and successfully transition the majority of our staff to working from home and we've been able to maintain a high level of productivity. In addition to the proactive planning by our business continuity team and the hard-working commitment of our employees, We were able to do this because of the nature of our collaboration-driven business model. And as we think ahead to the time when our workforce returns to the office, our preparedness team has already developed a plan that we will continue to refine based on the national, state, and local guidelines. With regard to our business programs, I'll now describe what we know today, what we don't yet know as the global community works to fight COVID-19. To date, based on latest partner feedback, We continue to project that the majority of our clinical study starts that we expected in 2020 will still occur in 2020 with delays of between one to two quarters from the original plan date. We know of one non-milestone bearing clinical trial start that has been delayed as a result of COVID-19 where we do not yet have information on the new target start date and also of two phase one trials where enrollment has been impacted resulting in an expected longer time to study completion. Moving to the new enhanced deals, we have one of the broadest slates of ongoing discussions with both biotech and pharma companies that we've ever had. We did see some slowing in the pace of discussions in March and April. Based on company feedback, we expect this will revert to the usual pace of conversations in the second quarter. Let me now move to an update on our supply chain. We're working closely with our contract manufacturers to ensure the safety and reliability of our supply. We're in frequent contact with our CMOs to hear updates and to ensure the integrity of our API supply. Based on this feedback, we currently do not expect an interruption in our ability to supply our API or Hyalinex as a result of COVID-19. Our contract manufacturers continue to operate as an essential business during the pandemic and have communicated that they have not identified any significant risk, delay or concern resulting from COVID-19 that may have a substantial effect on delivery of any product. We'll obviously continue to monitor the operations of our contract manufacturers and their ability to continue to provide us with our products. Turning now to regulatory, while regulators have curtailed some activities during the pandemic, we're pleased to report that our major initiatives with regulatory agencies around the globe appear to be proceeding at a normal pace. As examples, earlier this month, Janssen received USFDA approval for Darzalex FastPro utilizing Enhance after submission of its BLA in July of 2019. Janssen also received a positive CHMP opinion for Darzalex SC utilizing Enhance in late April, following their July 2019 submission in Europe, demonstrating things are on track. and we're also pleased to note that Janssen submitted their NDA in Japan for Darzalex SC utilizing Enhance in late April. And looking ahead, after submitting the BLA with the FDA for the subcutaneous fixed-dose combination of Progetta Herceptin utilizing Enhance in December of 2019, an action date of October 18, 2020 was assigned. We're certainly encouraged that the FDA and the EMA remain highly engaged with our partners during the pandemic. So in summary, based on all of the latest updates from our partners and suppliers, as well as our planned expenditures, we feel confident maintaining our guidance for 2020 at this time. It's obviously difficult to predict how the pandemic recovery will unfold in the coming quarters. Therefore, we will continually monitor the situation and we'll provide updates if new information emerges. In summary, despite the challenges posed by COVID-19 pandemic, we've continued to execute very well on our strategy and remain in a strong position to drive future growth for Halazan. I'll move now to a deeper update on our key partner programs beginning on slide five with Darzalex. In its current IV form, Darzalex generated approximately $3 billion in sales in 2019 and grew approximately 50% globally in the first quarter of 2020 compared to the first quarter of 2019. Analysts currently project sales for Darzalex franchise of $3.9 billion in 2020 and $7.8 billion in 2024. Jensen has stated that the subcutaneous formulation of Darzalex utilizing enhanced is a core part all of this future growth strategy, supporting their goals of expansion into the frontline setting, in addition to treatment in the community setting. The potential value proposition of Daratumumab SC with Enhance is strong. With the U.S. approval just granted and EU approval potentially in mid-2020, we're extremely excited about the launch of Darzalex FASBRO utilizing Enhance and what this means for our Enhance franchise. We believe Darzalex Faspro will provide the strongest validation to date of the commercial potential of our enhanced drug delivery technology. And after an initial period post-launch during which formulary approvals, EMR orders, and reimbursement are established, we expect the uptake of Darzalex Faspro enhanced will be robust, resulting in strong growth in royalty revenues for Halazime. Turning now to slide six on the next product we expect our partners to launch, the subcutaneous fixed-dose combination of Progetta and Herceptin utilizing enhanced technology, which is indicated for patients with early and metastatic HER2-positive breast cancer. The subcutaneous fixed-dose combination of Progetta and Herceptin is an important first, combining two therapeutic antibodies in a single fixed-dose formulation utilizing enhanced, enabling a five- to eight-minute subcutaneous injection compared with a one and a half to two and a half hour injection at four, the sequential IV administration of Herceptin and then Progetta. According to Roche's first quarter financial results, Progetta IV sales experienced 22% global growth driven by continued update in the early breast cancer space. Analysts currently project $4.1 billion in global sales in 2020 for Progetta, growing to more than $5.4 billion in 2024. As we announced in February, Roche's BLA filing in the US was accepted by the FDA and assigned an action date of October 18, 2020. Roche expects to launch this drug in the US this year. Regulatory submissions have also been completed in the EU, and we expect that following a positive CHMP opinion, approval would occur in 2021. On its most recent quarterly call, Roche indicated that it sees the SC, Progetta, Herceptin combination utilizing enhanced technology as offering an advance and an advantage for the strained healthcare system. And then the past has also alluded to the fact that the combined product may offer some interesting pricing flexibility in the very competitive breast cancer segment. I'll turn now to slide seven. Illustrated on this slide are the currently commercialized products that are approved or in development within HANZ. These are eight very successful products. We now have multiple examples to support that these carry a low risk of development within HANZ. When a product is already approved, the pathway to approval within HANZ has been a non-inferiority PK study to identify the dose, and then usually a phase three study that focuses on demonstrating non-inferiority of the selected PK and efficacy endpoints. To date, all approved products that have had a successful Phase 1 and moved to Phase 3 have been approved. Now excitingly, based on FDA feedback, many of our current partners are discussing leaner development programs designed to gain a full set of labeled indications for the IV without the need to do a separate controlled clinical trial for each indication. This faster development time allows earlier access for more patients to an IC formulation, potentially. And the breadth of label that was just granted to Darzalex FastPro utilizing Enhanced certainly provides encouraging evidence of this development strategy. I'll move now to slide 8 and to our currently commercialized products. Roche continues with its global commercialization of products utilizing our Enhanced technology. including Mabthera, Rituxan Hycella, and Subcutaneous Herceptin with Enhance. Although royalty revenues from these products are anticipated to decline modestly this year as a result of the ongoing impact from biosimilars, Roche recently commented that it has seen an increased level of interest from physicians in Subcutaneous Herceptin. While it's too early to call this a trend, it is certainly worth noting in the current environment where reducing the amount of time in the presence of others is desired. Moving now to our development products, on slide nine you can see a summary of the pipeline products that are being developed utilizing Enhance. Based on the most current information we have from our partners, our target for nine new trial starts in 2020 is unchanged. The phase two trial we projected has been accomplished, and I'll detail this in a moment, and we continue to project three phase three trial starts and five new phase one starts in 2020. Let me just provide two program updates. With regard to the Phase 2 start just mentioned, Ergenix recently initiated their Phase 2 study of F-Cortegemod utilizing our enhanced technology in CIDP patients that they had announced in December of 2019. This study has an innovative design intended to result in a faster time to a go-no-go decision for advancement to a potential Phase 3 study. In addition, Ergenix is evaluating a bridging strategy for F-Cartigimod with Enhance in Myasthenia gravis. Moving now to Alexion, they recently informed us that they no longer plan to evaluate Alexion 1810 in the renal basket study as they had announced in January of this year. There was no milestone associated with this study. And moving back to side 10, the progress of our Enhance portfolio is projected to drive the strong growth in milestone revenues between now and the end of 2022. Based on the latest information we have from partners, we continue to project cumulative milestone revenues in the next three years of $350 to $450 million. This growth in projected milestone revenues has been driven by the larger milestone payments associated with new target approvals and the increase in the number of products advancing to later stage development. many of which are also associated with larger milestones. And this near-term milestone revenue precedes the royalty revenues and is an important and strong indicator of future royalty revenue potential, which we project to be approximately $1 billion in 2027, based on a non-risk-adjusted revenue projection for programs currently in or planning to be in development. Let me turn now to slide 11, an overview of our approach to capital return. As a reminder, our first priority is to drive the growth of our enhanced business by maximizing the value of our current collaborations and working to sign new collaboration partners. With a strong free cash flow, our next priority is returning capital to investors via share repurchases. Elaine will discuss the details of our recent share repurchase activities in just a moment. and in addition to our commitment to capital return, we will evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating our long-term revenue growth. In evaluating this, we are seeking an approach where there is high growth and high margin, similar to our enhanced business. Now with that update, I'm very pleased now to turn the call over to Elaine for a discussion of the first quarter financial results.