Halozyme Therapeutics, Inc.

Good afternoon. My name is Chantal and I will be your conference operator today. At this time, I would like to welcome everyone to the Halo Zyme third quarter 2022 financials and operating results conference call. All lines have been placed on mute to prevent any background noise. After your 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, please press star one again. Please note, this event is being recorded. I will now turn the call over to Tram Lui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Operator. Good afternoon and welcome to our third quarter 2022 Financial and Operating Results Conference call. In addition to the press release issued today after the market closed, you could find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website. Beginning 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 third quarter ended September 30, 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. 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 will now turn the call over to Helen Torley.

Thank you, Trom, and good afternoon, everyone. I'm pleased that our third quarter results continue to reflect both strong financial and operational performance across the business. I'll begin on slide three and what is excellent news. I'm delighted to announce that we achieved an all-time high quarterly royalty revenue of almost $100 million in the third quarter. This represents strong growth of 70% over prior year third quarter and continues to demonstrate the strength of all of our enhanced business. Total quarterly revenue was $209 million, also a record, with strong growth of 80% over same period prior year. Our total revenue growth results from our diversified portfolio, which includes growing enhanced revenues resulting from royalty and milestone revenue, incremental product sales and incremental royalties resulting from the sales of Teva's EpiPen, which utilizes our small volume auto-injector, and also from sales of Zyacid, our specialty commercial testosterone replacement therapy. We're pleased with this strong momentum and the growing diversification of our revenues. Over the past several years, and supported by the acquisition of Antares in May, we have built a leading subcutaneous drug delivery platform company with a specialty business that is compelling growth opportunities, diversified revenue streams, and extended revenue durability. We look forward to leveraging our enhanced capabilities to support current and new partners utilizing Enhance, our autoinjectors, and our autoinjectors plus Enhance, with the goals of increasing their product's competitiveness and reducing the burden of treatment for patients. With a dedicated focus on operational excellence for the combined business, our vision remains to deliver disruptive solutions that significantly improve patient experiences and positively influence outcomes. Based on strong year-to-date results, our communication with partners, and planned expenditures for the year, we're also reiterating our guidance for 2022. As previously disclosed, we expect total revenues of $655 million to $685 million for the full year 2022. We expect revenue from royalties to increase greater than 70% year over year to approximately $350 million to $360 million. I'll now move to slide four and provide more detail on our royalty revenue performance in the quarter. We're very pleased with the continued robust growth of this high-margin recurring revenue stream. In the third quarter, total royalty revenue was $99.6 million, representing 70% growth over the third quarter of 2021 and 17% sequential growth. These results include our enhanced royalties and the auto-injector device royalty stream. Our Wave 2 products, Starselect Subcutaneous and Fezgo, continue to drive our overall strong royalty revenue growth. The robust and rapid adoption of Darzalex SubQ in U.S. and Europe demonstrate that adoption shows no real barriers in both geographies. Fezgo, growing rapidly in Europe, demonstrates the acceptance of the fifth SubQ product with Enhance. Enhance SubQ products have clearly shown that they were adopted by peers, physicians, and patients worldwide. This bodes well for our Wave 3, 4, and 5 product launches. Moving now to slide five, which focuses on Darzalex. Darzalex Fast Bro, which is a subcutaneous version of Darzalex in the US, continued its remarkable growth story in Q3, achieving 85% share of total sales of Darzalex. And at the same time, total Darzalex sales also continued to demonstrate strong growth. On their third quarter update call, Janssen's parent Johnson & Johnson reported worldwide sales of Darzalex, including both the IV and subcutaneous forms, of $2 billion, an increase of more than 38% year-over-year on an operational basis. The increase in Darzalex sales was driven by share gains in all regions, continued strong market growth, and continued uptake of FASBRO, the subcutaneous formulation, within hands. Also illustrated in the slide is an update on analyst consensus for Darzalex total revenue. It is now projected to achieve $12 billion in sales in 2025, with strong continued growth driven by increased penetration into the earlier lines of treatment. I'll move now to Fezgo. On their third quarter call, Roche reported strong sales of Fezgo, a combination of Progetta and Herceptin for subcutaneous injection for patients with early and metastatic HER2-positive breast cancer. As sales continue to show a strong uptake in Europe and the U.S., Fesco revenue was 526 million Swiss francs for the first nine months of 2022, an increase of 150% year over year. Fesco's faster subcutaneous administration in just minutes compared to ours with standard intravenous administration has contributed to lower health care costs and use of resources and is rapidly becoming the lead in many markets. On the third quarter call, Roche reported 30% conversion in the early launch countries and stated that they expect Fesco to be an important medicine for years to come. Shugai, a member of the Roche group, also recently filed for regulatory approval in Japan, which could represent another opportunity for continued Fesco growth. Moving now to slide six, our next waves of potential launches are illustrated here. Focusing on wave three, these products represent the next set of royalty revenue opportunities with potential launches projected between 2023 and 2025. The wave three products are subcutaneous F-critizumab, atezolizumab, nifolimab, and ocrelizumab. Our future growth trajectory is also supported by potential launches of our wave four products in the 2025 to 2027 timeframe. Wave four is comprised of 11 partner products 10 of which are in ongoing Phase 1 clinical testing or have completed Phase 1 testing. I'm pleased to note that one of the Phase 4 products, Janssen's amivantamab, recently advanced into Phase 3 clinical testing. Slide 7 highlights the recent advancements in our Wave 3 products during the third quarter. In September, Argenix announced the submission of a biologics license application, or a BLA, to the FDA for the enhanced-enabled subcutaneous escritigimod for the treatment of generalized myasthenia gravis. Escritigimod subcutaneous is on track to be the first of our wave-free potential partner launches with potential U.S. approval anticipated in 2023. Escritigimod is an intravenous drug which has the brand name Vivegard. It's Argenix's flagship product, and it has been developed as an IV and a sub-Q for multiple autoimmune disease indications. Analysts project multi-billion dollar revenue potential for F-cortisumab. As the intravenous version, F-cortisumab has been approved and launched in the U.S., Japan, and as of September, also in Germany, for the treatment of adult patients with generalized myasthenia gravis. On their recent third quarter call, Argenix noted strong physician and patient demand for Viagard and reported total quarterly net product revenues of $131 million with 2,000 patients on treatment. In addition to the already submitted BLA application for myasthenia gravis, we are excited to be partnering with Ergenix to evaluate F-protegemod subcutaneous within hands in five additional autoimmune indications and expect multiple data readouts projected in 2023, including data in idiopathic thrombocytopenic purpura, chronic inflammatory demyelinating polyneuropathy, and also pemphigus. I'll move now to Roche. Roche is our most experienced partner with Enhance, and we're delighted that two of our four Wave 3 opportunities are with Roche. These are Decentric Subcutaneous and Aquavis Subcutaneous. Recently, Roche reported that their IV Decentric revenues increased 10% to 2.7 billion Swiss francs for the first nine months of the year, demonstrating continuous strength for this important product. We're looking forward to U.S. and European regulatory submissions for Roche's Decentric with Enhance. Supporting this, in August, Roche announced that its Phase III study evaluating the subcutaneous formulation of dicentric or tesolizumab was enhanced in patients with advanced non-small cell lung cancer met its co-primary endpoint. The study showed non-inferior levels of dicentric in the blood when injected subcutaneously compared to intravenous infusion in immunotherapy-naive patients with advanced or metastatic non-small cell lung cancer for whom prior platinum therapy had failed. The safety profile of the subcutaneous formulation with enhanced was also consistent with IV Ticentric. Subcutaneous Ticentric, upon approval, has the potential to reduce the treatment time for Ticentric to 3 to 8 minutes as a subcutaneous delivery, down from 30 to 60 minutes for IV treatment. Moving to Ocrevus. ROSE is experiencing strong recruitment for the phase 3 trial of subcutaneous ocrelizumab or Ocrevus with Enhance and expects hotline data for this trial in 2023. Ocrevus as an intravenous treatment, according to ROSE's remarks on the third quarter update call, is currently the number one treatment in the U.S. and EU5 for multiple sclerosis, both in terms of total share and new to brand share. Total revenues for the first nine months were 4.4 billion Swiss francs. With more than 250,000 patients treated globally, Roche also commented that Ocrevus is experiencing higher persistence than other multiple sclerosis drugs. Completing the phase 3 product, BMS continues to progress with their phase 3 study of subcutaneous nivolumab, or Avivo, utilizing Enhance in patients with renal cell cancer. BMS also recently initiated a second phase 3 study of nivolumab subcutaneous with Enhance in patients with melanoma. In addition, as you may be aware, the fixed dose combination of IV nivolumab and rilatilamab, called Obduolac, is now approved in the United States and Europe for the treatment of certain patients with advanced melanoma. We look forward to the results of the phase one study of subcutaneous administration of nivolumab and rilatilamab within hands and an update on future development plans by Bristol-Mars Squibb. The cumulative revenue opportunity for the wave three products is substantial. analyst projections for IV and subcutaneous versions increasing from $19 billion in 2022 to $27 billion in 2025. Kelazan's royalties from this large commercial opportunity will depend upon the timing of approval of the subcutaneous version within the projected 2023 to 2025 time window and the speed and peak of conversion to subcutaneous. I'll move now to our Wave 4 product and slide 8. Our goal is to continue to expand the number of products in development and to advance products to later stages of development towards regulatory approval and launch. Our goal for 2022 is to support initiation of at least 10 new studies, including achieving more than six new phase two or phase three trial starts for existing enhanced partner programs and to advance two new products to enter the clinic this year. I'm pleased to report that we are on track to meet this goal. Supporting this progress, in September, Janssen initiated a phase three study of lezatrinib, platamivantamide with enhanced in patients with epidermal growth factor receptor mutated advanced or metastatic non-small cell lung cancer. Also in the third quarter, we recognized $48 million in collaboration revenue, the majority related for Samara Squibb and Roche progressing towards development events. We are pleased with the continued progress by our partners. With four products in wave three with the potential to launch beginning next year in 2023, and a robust set of 11 wave four launch opportunities, we have multiple potential growth drivers of robust future royalty revenue growth. Moving to slide nine, our acquisition of Antares further strengthened our leadership in drug delivery. In the third quarter, we had multiple productive discussions with current partners, as well as potential partners on enhanced On our current small-volume auto-injectors, and also the opportunity to collaborate on a high-volume auto-injector, enable injections of up to 10 milliliters within hands. By combining an innovative auto-injector platform within hands, we see a unique opportunity for patient-friendly, high-volume, subcutaneous treatment delivery that can be utilized across a spectrum of disease areas for both small-molecule drugs and for biologics. We currently are conducting feasibility studies and expect to have a working prototype of our high-volume auto-injector by year-end that can then be incorporated into clinical testing. Our goal remains to expand the number of companies licensing both our enhanced and our auto-injector technologies. Let me now turn your attention to our specialty business, which includes Zyastad, Zalando and Nocturna. We remain focused on accelerating growth of diastate, our weekly, virtually painless subcutaneous testosterone replacement treatment, which is delivered by autoinjector. Every month, we are achieving new weekly high average prescription performance and believe there is still a significant opportunity to grow our share of the total testosterone replacement therapy market. To dimensionalize this, each market share point represents more than $20 million in incremental sales. With a growth rate that outpaces the overall testosterone replacement therapy market, our plan is to continue to switch patients from intramuscular injections, which can be associated with pain and can require physician or healthcare practitioner administration. Intramuscular testosterone represents about 75% of the approximately 8.5 million annual testosterone replacement therapy prescription market volume to date. We also recently launched Telando, our twice-a-day oral testosterone replacement treatment. Our access team remains focused on gaining and expanding coverage by payers for Telando. We expect that our negotiations with the pharmacy managers will be similar in duration to other commercial launches, which can take 6 to 12 months until access is established. I'll move to slide 10 now. Before I hand the call over to Nicole, let me reiterate our commitment to our strategic growth and capital allocation priorities. In summary, we expect to enhance our growth by investing in the growth of our drug delivery business and our commercial business. We continue to return capital to shareholders with our share buyback, and we will also continue to seek opportunities for external growth, noting that our current focus remains on driving operational excellence of the Antares acquisitions. I'll now turn the call over to Nicole to discuss our third quarter financial results. Nicole?