Halozyme Therapeutics, Inc.

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halo Zyme first quarter 2022 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Dawn Shotland, you may begin your conference.

Good afternoon and welcome to our first quarter 2022 financial results conference call. In addition to our press release issues today after the 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 Dr. Helen Torley, Taylor's Arms President and Chief Executive Officer, who will provide an update on our business, and Nicole Labrosse, our Chief Financial Officer, who will review our financial results for the first quarter. On today's call, both GAAP and non-GAAP financial measures will be discussed. The non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. During the call, we'll 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 our CEO, Helen Torley.

Thank you, Dawn. 2022 is also a very strong start for Halazine from both an operational and a capital allocation standpoint. In April, we announced our planned acquisition of Antares Pharma, which is on track to close in the second quarter. This acquisition strengthens Halazam's position as an industry leader in drug delivery and provides revenue growth and diversification. Halazam and Antares also share a common culture built around the same mission, innovating to improve the lives of patients. We look forward to building an even stronger company together with our Antares colleagues and are excited about the greater impact we will continue to drive for patients, customers, and shareholders. Nicole and her finance team have secured financing to support the acquisition with access to very favorable debt structure. She will provide more color around that during her remarks. As we progress to the completion of the Ontario's acquisition, we've continued our demonstration of executional excellence and delivered on the key first quarter milestones. Shown in slide three are SELAZAN's strategic and capital allocation priorities. These are to invest to maximize enhanced revenue growth and durability, to continue to return capital to our shareholders, and to grow through M&A. Notably, we're making strong progress on each of these. I'll start by reviewing our Q1 operational performance. I'm pleased to report that our first quarter results provided a strong start to 2022 for Helizine. We reported first quarter revenues of $117.3 million, a 32% year-over-year increase, resulting in GAAP Q1 2022 earnings per share of 43 cents and non-GAAP adjusted earnings per share of 47 cents. This performance is driven by strong enhanced royalty revenue growth and the booking of a milestone payment associated with the signing of what is our 12th enhanced collaboration agreement with Shugai Pharmaceutical. As I will also highlight, we continue to see strong momentum in our enhanced development portfolio. Turning now to slide four, in the first quarter, we had record quarterly royalties of $69.6 million, representing 89% growth over first quarter 2021 and 11% sequential growth. This growth continues to be driven primarily by the successful ongoing global launch of Janssen's subcutaneous forms of Darzalex and also by Roche's Fezgo. Based on the strong momentum, we predict continued royalty revenue growth in 2022 with growth of approximately 50% to approximately $300 million. We're delighted with the continued robust growth of this high margin recurring revenue stream. Turning now to slide five, I'll now provide highlights of our key commercialized products that are contributing to the strong royalty revenues. We currently have five partner products commercialized in approximately 100 global markets that are using the enhanced drug delivery technology. It's estimated that these products have been used to treat more than 600,000 patients globally. Our Wave 2 products, Janssen's Darzalex SubQ and FastPro, and Roche's Fezgo, are the current royalty revenue growth drivers and continue to have substantial growth opportunities ahead for each of them. I'll provide additional color on each of these in a moment. Moving now to the Wave 1 products, Roche continues with its global commercialization of Mapthera SC, which is also called Rituxan Hycella, and subcutaneous Herceptin or Herceptin-Hylecta. We project continued decline in royalties from these mature products as a result of the ongoing impact related by similar competition to the IV products. Let me now provide some additional details on the Wave 2 products, beginning with Darzalex, shown on slide 6. During the first quarter of 2022, Janssen's parent, Johnson & Johnson, reported worldwide sales of Darzalex, including both the IV and subcutaneous forms, of $1,856,000,000, which was up 40.3% year over year on an operational basis. This strong operational growth was driven primarily by subcutaneous formulation penetration and meaningful share grains across all lines of therapy and in all regions. As illustrated on the slide, Daratumumab sub-Q share continued to grow in the U.S. during the first quarter. with 80% end-of-quarter share being attributed to Darzalex FastPro, the sub-Q version, based on Symphony data. This is an increase from 76% share in December of 2021. Moving to the second of our wave two products, our partner Roche reported during the first quarter 2022 that Fezgo, one of their newly approved products, is helping to drive growth by providing patients with a new delivery option that decreases the overall administration and monitoring time from patients from two to eight hours to just 20 to 40 minutes. Sales for the quarter were 146 million Swiss francs, up 410% from a year ago. We continue to expect strong quarter over quarter growth of Fesgo as a result of the ongoing launches in Europe and rest of world as reimbursement is attained and through continued penetration and oncology accounts in the United States. Moving to slide seven, here we illustrate how the non-risk adjusted royalty revenues are projected to grow over time, driven by multiple new launches that we project will add royalty revenues incremental to those resulting from the Wave 1 and 2 products that we just discussed. These new potential launches form at three additional waves, which we call Wave 3, 4, and 5. And as a brief reminder, the Wave 3 products are currently in or have completed Phase 3 studies and have the potential to launch between 2023 and 2025. Wave 4 is comprised of the 11 products that are currently in Phase 1 development, which, if they continue in development, have the potential to launch between 2025 and 2027. And Wave 5 will be comprised of products entering the clinic later this year and in the years to come. This quarter, we saw important progress advancing Waves 3 and 4. This included the announcement by Ergenix that ADAPT-SC, the pivotal study of SCF corticimod and generalized myasthenia gravis, had met its primary endpoint. Roche initiating a Phase III study of subcutaneous ocrevis with Enhance, and Veve initiating their second Phase I study, this time evaluating Enhance with N6LS, which is a broadly neutralizing antibody being evaluated for the treatment and prevention of HIV. Each of these advances brings us closer to potential new royalty revenues. Let me now provide some more details on F-cortegemod. F-Cartigimod, as an IV administration, was approved by the U.S. Food and Drug Administration in December of 2021 for the treatment of adult patients with generalized myosinia gravis. And just last week, Argenix announced positive results in its Phase III Advanced Study, which is evaluating F-Cartigimod IV for the treatment of adult patients with idiopathic thrombocytopenic purpura. We congratulate Argenix on this terrific news. Provided in slide eight is a summary of the results of the ADAPT-SC study, which is evaluating of F-critizumab with enhanced in myasthenia gravis. And this is the most advanced of five indications that are currently being evaluated as sub-Q administration with enhanced. The ADAPT-SC study met its primary endpoint, demonstrating non-inferior total IgG reduction at day 29 with subcutaneously administered F-critizumab compared to intravenous administration. Based on these results, Argenix has stated it plans to submit a biologic license application to the U.S. Food and Drug Administration by the end of 2022. EFCA-TIJMOD Subcutaneous is on track to be the first of our Wave 3 potential partner launches, which are launches that we project will occur between 2023 and 2025, with the potential approval for EFCA-TIJMOD SubQ anticipated in 2023. Let me move now to slide nine and the discussion of the enhanced development portfolio. It is our goal to continuously expand the number of products that are in development and to advance products to later stages of development and launch. As in many cases, this is associated with milestone revenue payments to Helizine. I'll begin with an overview of the enhanced partner product pipeline as of May 2022. We now have four products in phase three development. These are shown at the bottom of the slide and include Argenix's Efkartizumab in multiple indications, BMS's Nivolumab, Roche's Atezolizumab, and I'm pleased to announce that the phase three study of Roche's Ocrevus as a subcutaneous delivery has now also started. We consider Efkartizumab, Nivolumab, and Atezolizumab as our wave three launch products with the potential to launch between 2023 and 2025. Ocrevus is the first of our wave four potential launch products which recall have the potential to launch in the 2025 to 2027 timeframe. All four of these products are currently approved as IV drugs. Analysts project that the total revenue potential for both the IV and subcutaneous formulations for this set of potential launches will exceed $20 billion in 2025. And what will be key for Halozyme is going to be the pace of the conversion from IV to sub-Q and the peak conversion share attained. Moving to the top of the slide, We currently have 11 products that are in or have completed Phase 1 clinical testing. Here, I'm also pleased to report that during the quarter, our enhanced partner, Veve, initiated a Phase 1 study to evaluate the safety and pharmacokinetics of N6LS, administered subcutaneously with the enhanced technology. N6LS is a broadly neutralizing antibody for the treatment and prevention of HIV. These phase one products, should they proceed in development, will also be our wave four potential launches. And as you will note, they include a number of already commercialized and successful drugs and cover a range of therapeutic areas and diseases. Looking ahead for 2022, we continue to expect further pipeline progress and expansion and continue to project at least five new phase two or phase three trial starts for existing enhanced partner programs and four new products entering the clinic this year. Let me now move to slide 10. As we continue to drive long-term, durable growth, I'm also delighted that we announced a new collaboration and licensing agreement with Shigai Pharmaceutical, R12, further strengthening our royalty business and validating Halazime as a partner of choice for patient-convenient subcutaneous drug delivery. As an illustration, based on historical development timelines for enhanced products, a product entering development in 2023 would have the potential to launch post-2027, adding revenue and growth as part of our wave five. Moving now to slide 11, our pipeline and New Deal progress have driven strong milestone revenues for Halazem historically, and we project this growth will continue and remain a key contributor to our capital allocation progress. As you can note, we have met or are on track to meet the prior three-year milestone revenue guidance ranges. For the three-year period of 2022 to 2024, we expect to increase milestones again to $450 million to $500 million in total milestones, resulting from a mix of development, commercial, and new agreement milestones. Let me now move to say a few words regarding Intari's acquisition. Just a month ago, we announced our agreement to acquire Intari's Pharma, whose business consists of a best-in-class, differentiated royalty-revenue-generating auto-injector platform that offers new licensing opportunities and a growing commercial business with three proprietary products. As shown in slide 12, this transaction is fully aligned with our previously announced capital allocation priorities for 2022. These priorities are to invest to maximize our enhanced revenue growth and durability, to continue to return capital to our shareholders through share repurchases, and at the center of the slide to seek to acquire a platform technology where Halazan can operationalize it and create additional value while also adding to and further extending our revenue durability. Antares is the perfect partner for this and fulfills each of our business development criteria. The transaction is expected to be accretive to Halazan's 2022 revenue and non-GAAP earnings and to accelerate top and bottom line growth through 2027 with multiple growth drivers beyond 2027. We expect to build on Ontario's core auto-injector platform technology and capabilities to drive incremental, durable revenue opportunities with additional intellectual property protections for Ontario's technology in place beyond 2030. In 2027 and beyond, we expect Ontario's multiple growth drivers will be highly additive, coming in the form of its growing testosterone replacement product business, revenues from partner products, and new partnerships with companies seeking subcutaneous administration for both small and large molecule products. Moving to slide 13, the combined company further extends our leadership and position as a partner of choice for patient-convenient subcutaneous treatment delivery. We believe that Antares' autoinjector technology is complementary to our enhanced technology. potentially allowing the injection of larger volumes of certain drugs subcutaneously or to deliver faster injections. Antares' successful development and partnership of its technology platforms offers a widely licensable product suite that can be broadly applied across a spectrum of market segments. We're very much looking forward to welcoming the Antares team to Helizine and leveraging our joint expertise to unlock new subcutaneous drug delivery opportunities that have the potential to help patients globally. With that, I'll now turn the call over to Nicole for a discussion of our first quarter financial results.