Halozyme Therapeutics, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the HaloZyme fourth quarter 2020 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Thank you. I would now like to turn the conference over to Al Kildani, Vice President of Investor Relations and Corporate Communications for Halo Zion Therapeutics. Mr. Kildani, please begin.

Thank you. Good afternoon and welcome to our fourth quarter and full year 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 fourth quarter and full year 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. 2020 marked a year of tremendous growth for Haleland, which has created strong momentum as we enter 2021. Let me begin with a brief review of the 2020 performance. Total revenues in 2020 were $267.6 million, up 37% from 2019, and our earnings per share were $0.91. Both revenue and earnings per share were within our most recent financial guidance range. Our strong financial results kept a transformational year for Hanazan that saw a number of significant accomplishments. These included the two SBA approvals and two European Commission approvals for enhanced-based products, including Janssen's subcutaneous form of Darzalex and Roche's Bezgo. A return to royalty revenue growth driven by the strong uptake of subcutaneous Darzalex, which is known as Darzalex Faspro in the U.S. and Darzalex SC in Europe. The expansion of our development pipeline, including two products moving into phase three development. The signing of a new enhanced partnership with Horizon Therapeutics to develop a sub-QT and its version of CAPESA. And continued execution of our capital return program, resulting in $150 million in share repurchases during 2020 for a total of $350 million share repurchases since the board authorized this three-year $550 million plan in November of 2019. This remarkable progress in 2020 was achieved against the backdrop of the global COVID pandemic, a challenge we were able to navigate thanks to the hard work and dedication of our partners, suppliers, and employees. The progress and expansion of our enhanced partner pipeline provides confidence in the potential of our long-term growth prospects as we anticipate the potential for multiple waves of product launches in the upcoming years. Moving now to 2021, We expect revenues of $375 to $395 million, which would represent growth of 40% to 48%, driven primarily by an expected doubling in royalty revenue. The expected gap earnings per share of $1.40 to $1.55 would represent growth of 54% to 70%. Recall that our guidance does not include any contribution from potential new enhanced deals. Let me now turn to slide three for a discussion of our royalty revenue growth. In 2021, we projected doubling in royalty revenues. This strong growth is driven by both subcutaneous Darzalex and Fezgo. As illustrated in the left-hand chart, in the fourth quarter, we saw revenue from royalties grow 86% year over year and 34% sequentially. This growth was propelled by the launch of Darflex FASPRO in the US and Darflex SC outside the US and resulted in full-year 2020 royalty revenue of $88.6 million. For 2021, we project Darflex FASPRO and Darflex SC growth will continue, driven by ongoing adoption and penetration in the already launched markets and by additional launches around the world. For Fesco, we project robust growth in 2021, driven by increased adoption and penetration in the US, and also by the start of the European launches, following the European Commission approval in December of 2020. For full year 2021, with the strong 2020 launch, we project that sustaining star selects will remain the key driver of royalty revenues at a level that is substantially higher than Fesco. We're now in a position where the high margin recurring portion of our revenues is also the fastest growing segment. Let me turn now to slide four, and I'll highlight our key commercialized products. We have five products now approved in both the U.S. and Europe utilizing our enhanced technology. Let me now provide some color on the most recent product launches, representing our Wave 2 launches, beginning with subcutaneous Darzalex. During the fourth quarter, Janssen's parents, Johnson & Johnson, reported worldwide sales of Darvoix, including the IV and SC forms, of $1.25 billion, up 49% year-over-year on an operational basis. While J&J does not provide a breakdown of sales between the IV form of the drug and the subcutaneous form utilizing in hand, we can share, based on data from Symphony Health, that by October of 2020, just five months after the May approval, 40% share of sales of overall darsalic in the United States was the subcutaneous version. I think you'll agree this is a remarkably fast update and really speaks to the value proposition that the subcutaneous version can bring for patients. Supporting the impressive growth expectations are also potential additional approvals and launches in new countries and indication expansion for subcutaneous Darzalex. These opportunities include the potential approval of the subcutaneous form of Darzalex in Japan for multiple myeloma patients, Potential growth from sales in the newly approved indication of newly diagnosed adults with light-chain amyloidosis following U.S. FDA accelerated approval in January of 2021 for the use of DARS-led Spaspro in this indication. In this indication, it's used with bortezomib, cyclophosphamide, and dexamethasone. Consistent with this being an accelerated approval, Janssen will conduct confirmatory trials while the therapy is made available in the U.S. to the indicated patients. And there's also the potential for approval and launch in light chain amyloidosis in Europe. And additionally, there's the potential for U.S. and European approval for subcutaneous Darzalex utilizing a hand in combination with pomalidomide and dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who've received at least one prior line of therapy. With the launch of Substantaneous Darzalex off such a strong start, high growth in the overall Darzalex franchise, and the anticipation for expanding indications and geographies, you can see why we expect Substantaneous Darzalex to be a strong driver of revenue growth for Halazine. Let me move now to Feltil. This is a fixed dose combination of two abrasive antibodies, Progetta and Herceptin, which is administered in five to eight minutes compared to several hours needed for the IV version. Fesco was launched in the United States in the third quarter of 2020 and was approved in Europe in late December, with loans expected to begin during the first quarter of 2021. For the fourth quarter, Roche reported Fesco sales of approximately 16 million Swiss francs. With the European launch beginning in Q1 and the expectation of increased adoption and use in the United States, we anticipate strong growth in Fezbo sales and contribution to Kayla Zambrosi in 2021. Let me now move to slide five and a discussion of the enhanced development portfolio. Building on our portfolio of five commercialized partner products, we predict the expansion of our development pipeline to now 16 products by the end of 2021. with an expected five new Phase I study starts. In June of 2020, Dr. Samara Squibb initiated a Phase I-II study of ipilimumab in combination with nivolumab utilizing the enhanced technology. BMS recently informed us that they've made a portfolio prioritization decision to not continue the study. BMS will retain the CTLA-4 target for potential future study. In addition, we anticipate two products that are currently in Phase 1 will progress into Phase 3. This would result in a total of four products being evaluated in seven separate indications Phase 3 studies utilizing the enhanced technology by the end of 2021. Based on Halo 5's historical development timeline, these four Phase 3 products form our potential Wave 3 launches, with potential launches occurring in the time window of 2023 to 2025. In addition, we project 12 products will begin or will have completed Phase 1 development in 2021. Based on historical development timelines, if these development programs progress, these 12 products would form the potential wave 4 launches with launch in the time window of 2025 to 2027. We believe this advancing pipeline of products utilizing chance is setting up the potential for multiple waves of future product launches that will deliver long-term growth in revenues, cash flow, and profitability. Let me now just give a brief partner-by-partner discussion of key programs. Beginning with our Janix, which is now conducting four phase three trials for four indications of F-Cortisomide. This really is a remarkable feat achieved in less than two years from deal signing. Earlier this month, Argenix announced that it reached a goal decision for its ADHER trial, evaluating subcutaneous F-cortisomide within hands in chronic inflammatory demyelinating polyneuropathy, or CIDP. Argenix plans to now continue enrollment after the planned efficacy and safety assessment and will include approximately 130 patients to support potential registration of SCF-cortisomide for the treatment of CIDP. During the fourth quarter of 2020, Argenix met with the FDA to discuss the potential for a bridging study for SCF-Cartuzumab in myasthenia gravis, or MG. Recall that earlier in 2020, Argenix announced positive results from its ADAPT trial, evaluating the IV form of F-Cartuzumab in MG. Following FDA feedback, Argenix is moving forward with a small, focused trial designed to enable a fast path to registration for SCF-Cartuzumab. Argenic also recently initiated its Phase III address trial in pemphigus vulgaris and foliaceus, which are two serious skin barrier diseases associated with painful blistering. And Argenic also continues with its fourth potential indication with a Phase III trial evaluating SCF-particomod with enhanced and immune-throated cytopenic purpura. We are delighted to be working with Ergenix on this exciting product, which is one of our potential Wave 3 launches in the 2023 to 2025 timeframe, and which analysts predict could have multi-billion dollar potential. Moving to Ergenix's second nominated target, which is ARGX117. This is being evaluated in a recently initiated Phase 1 study in healthy volunteers with data expected in mid-2021. ARGX117 targets C2 and is planned to be evaluated for the treatment of multifocal motor neuropathy. We expect to receive a milestone payment in the near term related to the subcutaneous component of this study. As we've just heard, Argenix is making rapid progress in the clinic with subcutaneous forms of its drugs utilizing enhanced, evaluating a broad range of potential indications with the goal of accommodating patient preference and to adjust to the new normal for patients who may not always have easy access to all sites of care. During the fourth quarter, we were delighted to expand our collaboration and licensing agreement with Argenix to now include a total of up to six targets. I'll move now to Roche. During the fourth quarter, Roche does the first payment in a Phase III trial, evaluating Dicentric in previously treated locally advanced or metastatic non-small cell lung cancer patients. This is also one of our Wave III potential launch products. In addition, Roche continues with its Phase I study, evaluating SC administration of Ocrimizumab or Ocrevus with Enhance. Moving to Janssen, in addition to the successful launch of subcutaneous form of Darzalex, in November 2020, Janssen initiated a phase one study of amibantanam, EGFR, and met bispecific antibody within hands in advanced solid tumors. Moving on to Bristol-Myers Squibb, Bristol is continuing with an exciting set of immuno-oncology target clinical studies, having publicly announced selection of five of the available 11 targets. BMS has four phase one studies within hands. These include nivolumab SC in two studies, one is a monotherapy and one in combination with SC-relapvinib, as well as studies of subcutaneous anti-CD73 and subcutaneous TIN3. I'll move now to our newest partner, Horizon Therapeutics. In November, we signed a collaboration and licensing agreement with Horizon, providing exclusive access of enhanced for SC formulations of medicines targeting IGF-1R. We received an upfront milestone payment of $30 million. Horizon intends to use Enhance to develop an SC formulation of Tepeza, which is indicated for the treatment of thyroid eye disease, a serious progressive and vision-threatening rare autoimmune disease. The Tepeza franchise has an anticipated peak sales potential of $3.5 billion, according to Horizon. We're pleased with our collaboration with Horizon and look forward to future clinical milestones. Our expanding immaturing pipeline is setting up multiple waves of potential future approvals and launches that can drive long-term revenue growth. Furthermore, we continue to see additional future potential growth from two sources. The first is new enhance deals, where we continue to have a broad slate of discussions with both biotech and pharma companies. As to timing, while I'm confident we will find additional deals as ever, the timing is difficult to predict. And the second source of growth is through our current partners nominating new targets and advancing them into the clinic. With more than 20 open slots available, we're excited for the growth opportunity that exists here too. Now the growth and the progress of our enhanced portfolio is projected to drive strong growth and milestone revenues in the coming years. Illustrated on slide six in the blue bars is our projected milestone outlook over the next three years from 2021 to 2023, as well as comparable three-year outlooks that we presented in each of the prior two years. As shown in the green bars, we're performing well against these projections. For 2021 through 2023, we project $400 to $450 million in milestones, showing a continued progression in the growth of our milestone revenue. Now, this near-term milestone revenue is an important and strong indicator for future royalty revenues. We project royalty revenue potential of approximately $1 billion in 2027, based on our non-risk-adjusted revenue projections for programs we currently have the line of sight to and assuming global sales in all indications. I'll turn now to slide 7 to discuss our approach to value creation and capital returns. We have three capital allocation priorities, maintaining a strong cash balance sheet, share repurchases and internal and external growth. We anticipate the strong projected free cash flow driven by and hand will support both our ongoing commitment to capital return as well as our longer term M&A strategy. As mentioned earlier, we have made strong progress with our three-year $550 million share repurchase program, with $350 million completed to date. We will target repurchasing up to $125 million worth of common shares in 2021, pending market conditions and other factors. In addition, we continue to evaluate the potential for new technology platform expansion through acquisition, with the goal of accelerating and extending long-term revenue growth. We see opportunity to create incremental value for other platform technologies, applying Halazan's proven partnering and commercialization capability. With Enhanced still early in its growth cycle, we have the opportunity to be highly selective. And with that update, I'll now turn the call over to Elaine for a discussion of the fourth quarter and full year 2020 financial results.