Halozyme Therapeutics, Inc.

Good afternoon. My name is Rex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halazime Q2 2022 earnings 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 star one. Thank you. At this time, I would like to introduce Tram Lui, Vice President of Investor Relations and Corporate Communication. You may begin your conference.

Thank you, Operator. Good afternoon and welcome to Halazine's second quarter 2022 Financial and Operating Results Conference Call. In addition to the press release issued today after the market closed, 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, Halazan's 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 second quarter into June 30th, 2022. On today's call, we will be making forward-looking statements. I refer you to our SEC filings for a full list of risks and uncertainties. Also during the 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. I'll now turn the call over to Helen Torley.

Thank you, John, and good afternoon, everyone. I'll begin on slide three. Our accomplishments in the first half of the year are illustrative of the many opportunities Halalime has to continue to enhance our growth. With the acquisition of Antares, we further expanded our growth opportunities adding a best-in-class auto-injector platform and a specialty commercial business, thereby augmenting Helazine's strategy. These additions further strengthened our position as a leading drug delivery company and extended our strategy to include specialty products. And we've continued to deliver operational excellence, achieving multiple drug delivery, commercial, and corporate development milestones. I'm happy to report that integration activities are proceeding to plan as we approach the 90-day time point and we're on track to achieve the goals we established. It is this combination of opportunity and execution that gives us confidence in our differentiated growth story. Focusing now on the financial performance highlights, we reported second quarter revenues inclusive of Ontario's revenue post the May 24th acquisition close of $152.4 million, a 12% year-over-year increase. This resulted in gap earnings per share of 16 cents and non-GAAP adjusted earnings per share of 53 cents. Our strong second quarter revenue results were driven by continued growth in royalty revenues from Enhance, and the addition of the post-closed royalty revenues from Autogenger devices and product sales as a result of the Antares acquisition. Based on the recent close of the Antares transaction and strong year-to-date results, together with the latest information from collaboration partners and planned expenditures for the year, we are raising our guidance for 2022. For full year 2022, we expect total revenues of $655 to $685 million, an increase from our prior guidance range of $530 to $560 million. This represents growth of 48% to 55% over 2021 total revenue. Absoluted earnings per share is updated to $1.20 to $1.35 a decrease from our prior guidance of $1.90 to $2.05, mainly due to acquisition-related costs in the current year. Adjusting for acquisition-related costs and other adjustments, we expect non-GAAP earnings per share to be $2.10 to $2.25, an increase from our prior guidance range of $2.05 to $2.20, representing an increase of 5% to 12% over 2021 non-GAAP diluted earnings per share. Let me now move to slide four, and I'll provide some more detail on royalty revenue performance. We continue to see and project robust growth in this high-margin recurring revenue stream. In the second quarter, total royalty revenue was $85.3 million, representing 86% growth over the second quarter of 2021 and 23% sequential growth. These results include enhanced royalties and the entire device royalty stream for the portion of the quarter that followed the nation's action close. Royalty revenue growth continues to be driven by our Wave 2 product launches, led by the successful ongoing global launches of Janssen's subcutaneous formulations of Darzalex and also by Rosas Fezgo. Based on strong momentum, we project an increase in royalty revenues for 2022. Year-over-year growth is now projected to be greater than 65%, resulting in royalty revenue of $340 to $350 million, an increase from our prior projection of 50% growth. This increased growth is driven by the addition of the Antares device royalty revenues and Darzalex subcutaneous performance. Moving now to slide five, I will provide some more color on Darzalex and Darzalex subcutaneous performance. Janssen's parent, Johnson & Johnson, reported second quarter worldwide sales of Darzalex including both the ID and subcutaneous forms, of $2 billion, an increase of more than 46% year-over-year on an operational basis. The company noted that Darzalex sales were driven by share gains in all regions, strong continued uptake, and increased use of subcutaneous formulations. Moving to subcutaneous Darzalex, SC's share continued to grow in the United States during the second quarter, with an 83% end-of-quarter share based on Symphony data. This is an increase from 80% share at the end of the first quarter. Additionally, Johnson & Johnson reported SC conversion grew to 80% in Europe. Moving now to the recent results by our partner, Roche. For the second quarter of 2022, Roche reported strong sales of Feudo, their combination treatment for patients with breast cancer that utilizes the enhanced technology. As a result of ongoing conversion and geographic expansion, Second quarter sales of Fezgo were 325 million Swiss francs, an increase of 241% year over year. Fezgo, with its short five to eight minutes of cutaneous administration time, is proven to be an attractive option for patients in the healthcare system, especially in countries where infusion capacity is limited, with some countries now reporting up to 90% adoption. We continue to expect strong quarter-over-quarter growth as a result of the ongoing launches in Europe and the rest of the world and through continued penetration in oncology accounts in the United States. We're also excited that Roche is initiating a study of FEDCO with giridestrin and frontline HER2-positive, ER-positive metastatic breast cancer patients, opening up the potential for a future oral and sub-Q treatment regimen. And just a brief comment on our Wave 1 products, which include Mapsara subcutaneous, which is also called Rituxan Hycella, and subcutaneous Herceptin, or Herceptin Hylecta. We continue to project a modest decline in royalties from these mature products as a result of the ongoing impact related to biosimilar competition to the IV products. I will note that these products are still contributing nicely as a recurring source of revenue. Illustrated on slide 6 is an overview of the enhanced portfolio. I'll focus your attention on Wave 3 and 4, which represent new royalty revenue opportunity for Halazan. Our Wave 3 products represent the next set of opportunities with potential launches protected between 2023 and 2025. You will note that we've expanded Wave 3 to 4 products, as we're now including Okravis, following a recent update from ROSE that the top-line data from the Phase 3 SC study will be available in 2023. Moving now to slide seven, I'll begin with the most advanced of our wave three products, Ticentric and F-Cortisomide. We are delighted that both of these products recently announced positive phase three subcutaneous study data results. Most recently, Roche announced that its phase three study evaluating subcutaneous formulation of Ticentric or Tizolizumab with enhancements in patients in advanced non-small lung cancer met its co-primary endpoints. A study showed non-inferior levels of Dicentric in the blood when injected subcutaneously compared with intravenous infusion in immunotherapy-naive patients with advanced or metastatic non-small cell lung cancer for whom prior platinum therapy has failed. The safety profile of the subcutaneous formulation was also consistent with IV Dicentric. We believe these positive results further demonstrate the opportunity for a co-formulation of Enhance to potentially benefit patients by reducing the treatment time for T-centric to three to eight minutes as a sub-Q delivery, down from 30 to 60 minutes for IV treatment. Roche plans to share findings of the study at an upcoming medical meeting and submit for regulatory approval to health authorities globally, including the US Food and Drug Administration and European Medicines Agency. During the first half of 2022, Dicentric administered intravenously had revenues of 1.8 billion Swiss francs, growing 11% year-over-year, with Roche reporting strong uptake in lung cancer in the adjuvant setting. I'll move now to Argenix and F-critizumab. Following positive results announced in March of 2022, Argenix is on track to submit the biologics license agreement for F-critizumab with enhanced and myosinogravus to the U.S. Food and Drug Administration by the end of this year. We believe EFKR Digimod SC is on track to be the first of our Wave 3 potential partner launches with potential approval anticipated in 2023. EFKR Digimod IV, which has the brand name FiveGuard, was approved by the FDA in December of 2021 and in Japan in January of 2022 for the treatment of adult patients with generalized myasthenia gravis. On their recent second quarter call, Argenix reported a strong global launch for FiveGuard, with Q2 revenues of $75 million, with an estimated 1,400 patients on treatment, up from approximately 400 patients in Q1. Argenics management further commented that F-cortisomab within hands is currently being evaluated in four additional indications, with multiple data readouts projected in 2023, including data in adipathic thrombocytopenic purpura, chronic inflammatory demyelinating polyneuropathy, and tensicus. With analyst consensus of almost $3 billion in sales for F-crititumab in 2026, we're excited to be partnering with Ergenix on this important new therapy for autoimmune diseases. And closing out the wave three products, BMS continues with their evaluation of nivolumab sub-Q in their phase three study. I'll move now to slide eight. Illustrated on slide eight is the enhanced pipeline by stage of development. Our goal remains to continuously expand the number of products that are in development and to advance products to later stages of development and launch, with many of these events resulting in milestone revenue payments to Halosan. Highlighted on this slide are the wave four potential launches. These products, if they continue in development, have the potential to launch in the 2025 to 2027 timeframe. 11 partner products are in ongoing phase one clinical testing or have completed phase one testing. Let me provide some key updates during the quarter. Shugai initiated a phase one study to evaluate the pharmacokinetics, pharmacodynamics, and the safety of a targeted antibody administered subcutaneously within hands. It is notable that we announced our collaboration and licensing agreement with Shugai in March of this year, making this the fastest time to phase one dosing in our history at just over two months. This is a strong signal that this collaboration is off to a great start. In June, our partner, Veve, initiated enrollment in a phase one single-dose escalation study to evaluate pharmacokinetics, safety, and tolerability of long-acting cabotegravir administered subcutaneously within hands. This was the second target and the third trial to be initiated since we announced this agreement just over a year ago. Additionally, our partner, Takeda, recently reported positive top-line results for their phase three advanced one clinical study of IQVIA, which is immune globulin 10% with enhanced, in patients with chronic inflammatory demyelinating polyneuropathy, which is also called CIDP, and is a rare autoimmune disease. The clinical study met its primary endpoint for maintenance treatment of CIDP, and Takeda plans to submit applications for HyCuvia's regulatory approval in the United States and European Union by the end of 2022. In addition to these significant advances in the first half of the year, We continue to expect further pipeline progress and expansion for the remainder of the year. We predict this will result in more than 10 new study starts in 2022, including more than six new Phase II or Phase III trial starts for existing enhanced partner programs and two new products entering the clinic this year. You may also have noticed that we recognized $15 million in collaboration revenue in the second quarter. This was related to an anticipated study start by a partner in the third quarter. And concluding this enhanced development program overview, I'm pleased to announce that in June, BMS nominated an undisclosed target, resulting in a $5 million payment. This will add to BMS's ongoing portfolio, which includes a subcutaneous version of nivolumab, which is in phase three testing, and a subcutaneous nivolumab-relatinumab combination, which is in phase one development. We are very pleased with the progress of our partner development pipeline and we look forward to supporting the significant enhanced growth opportunities that these represent. Now I'll give you a bit more color regarding the Antares acquisition and our integration progress since the transaction closed on May 24th. Summarized on slide nine is the current Antares portfolio. Our excitement regarding the new opportunities that the Antares portfolio brings is high. With decades of experience in device development engineering, we gained a strong internal development team who specialize in creating custom designed drug delivery devices that are tailored to the patient and the therapeutic need. We've activated teams made up of individuals from both companies whose goal it is to expand the number of companies licensing our autoinjector technology. Work is also underway to design and create a large volume autoinjector which by combining the innovative and carries out injector platform within hands, will offer a unique approach for patient-friendly subcutaneous treatment delivery. What is so exciting is that we see opportunity for large volume subcutaneous delivery across the spectrum of disease areas for both small molecule drugs and biologics. The strong cultural fit across our companies, including a focus on innovation for patients, have meant that the teams are hitting the ground running. We're also excited to have added three proprietary products, Ziosted, Talando, and Nocturna. Our focus with Ziosted, our weekly virtually painless subcutaneous testosterone replacement treatment, which is delivered by autoinjector, is to grow share through gaining patients who previously have been receiving intramuscular treatment. I'm pleased that Ziosted achieved its highest number of weekly prescription units recently, a sign of its continued growth. And with our field force expansion executed, We launched Tolando several weeks ago in June. Our access team is focused on gaining and then expanding payer coverage as our field team is educating physicians on Tolando, a twice-a-day oral testosterone replacement treatment that does not require dose titration. Moving now to slide 10, the acquisition of Antares. through revenue resulting from commercial product sales and from the innovative auto-injector platform is projected to add durable revenue and revenue growth on top of the already strong revenue growth potential we see for enhanced. Our projected enhanced growth is resulting from growth in royalty revenues from the multiple waves of potential new launches we have just discussed. Moving now to slide 11, the Antares acquisition fully aligns with our previously announced capital allocation priorities. These priorities were to invest to maximize enhanced revenue growth and durability, to continue to return capital to our shareholders through share repurchases, and to seek to acquire a platform technology that would add to and further extend our revenue durability. As you can see from the updated guidance for the year, and in line with our prior comments, this transaction is expected to be a creed to hail Atlanta's 2022 revenue and non-GAAP earnings, and supports our growth strategy to 2027 and beyond. I'll now turn the call over to Nicole to discuss our second quarter financial results and provide more detail on the combined company guidance. Nicole?