Halozyme Therapeutics, Inc.

Good afternoon. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Halo Design first quarter 2023 financial and operating 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'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, please press star one again. Please note this event is being recorded. I'll now turn the call over to Tran Bui, Halo XAMPP's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Operator. Good afternoon and welcome to our first quarter 2023 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. Leading the call will be Dr. Helen Toiley, Helizyme's President and Chief Executive Officer, who will provide an update on our business, and Nicole Labrosse, our Chief Financial Officer, will review our financial results for the first quarter 2023. On today's call, we will be making forward-looking statements as outlined on slide two. I would also refer you to our SEC filings for a full list of risk and uncertainties. During the call, both GAAP and non-GAAP financial measures will be discussed. Certain 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, Tom, and good afternoon, everyone. Let me begin on slide three. K-Lizam is a leading drug delivery platform company with a diversified and robust business, which includes our enhanced royalty business, our auto-injector technology business, and a specialty commercial portfolio. I'm pleased to report that we executed our plan for the first quarter of 2023, achieving total revenue of $162 million, a 38% increase year over year. This performance sets us up well for the year, and we expect strong quarter-over-quarter revenue growth throughout 2023 that will result in another record revenue year. Turning now to slide four, I'm delighted with the breadth and momentum of our drug delivery business. Kalexam has established our leadership in rapid, substance drug delivery of enhanced, and more recently, with our differentiated auto-injectors. Our partners are making strong progress with their commercialization and development activities, that are expected to result in strong and durable long-term growth. Drives of this growth include the potential approvals of F-Critizumab sub-Q and Atezolizumab sub-Q this year that will bring our approved products generating royalties from five products to seven products. Two additional blockbuster drugs, Ocrevus sub-Q and Ophevo sub-Q, continue in phase three development with the potential to launch by 2025. An additional two products, amivantamab sub-Q and relapnamab nivolumab sub-Q fixed dose combination also continue in phase three clinical testing, the final stage before potential launch and royalty generation with the potential to launch between 2025 and 2027. And it is our goal to add to our already robust pipeline by adding three new agreements this year for enhanced, enhanced plus or high volume autoinjector and also a small volume autoinjector agreement. Turning to slide five, let me spend a moment on why so many partners are focused on and are so excited about subcutaneous drug delivery with Enhance. Enhance, when co-formulated with our partner products, has demonstrated an ability to differentiate the subcutaneous product from IV. Sub-Q delivery decreases treatment time and treatment burden for patients. This in turn results in an improved patient experience with patients stating a strong preference for sub-Q in surveys. There may also be, as we saw in the case of Darzalex subcutaneous, a lower rate of infusion-related reactions. This can also translate into considerable advantages to the healthcare system. These advantages include less use of more costly hospitals and infusion centers and less use of healthcare practitioner time, a growing consideration in all regions of the world. Moving now to slide six, I'll provide an overview of our enhanced pipeline. We describe this in terms of waves, with waves 1 and 2, the already launched products, the wave 3 products, those that have the potential to launch between 2023 and 2025, and the wave 4 products are those with the potential to launch between 2025 and 2027. I'll go into more detail on waves 2, 3, and 4 in a moment, but before I do so, let me highlight an exciting event for one of our wave 1 products. Takeda received FDA approval for an expanded indication for Hycuvia to treat primary immunodeficiency in children. Hycuvia is now available to a broader community impacted by primary immunodeficiency who may prefer flexible treatment options in the management of these disorders. Enhancing the key value driver for our partners and our extensive development pipeline supports our expectations for royalty revenues to reach approximately $1 billion in 2027, with potential for growth beyond that This projected growth is driven by new launches and the projected impact of co-formulation patents. Let me now move to slide seven for an overview of our royalty revenues. We project $445 to $455 million in royalty revenue in 2023, 23 to 26% growth over 2022. Quarterly royalty revenue increased 43% year over year to $99.6 million, and we project strong quarter-on-quarter growth throughout 2023. Five partner products using the enhanced drug delivery technology and commercialized in approximately 100 global markets are contributing to royalty revenue growth today, with Darzalex SubQ and Fezgo, our Wave 2 products, the key growth drivers. While we project the approval of F-Critizumab SubQ and Decentric SubQ in the United States in 2023, We assume virtually no royalty revenues in 2023 from these products due to launch timing and the standard time it takes for physicians to be confident regarding reimbursement. Also included in our royalty revenue is revenue from our small volume auto-injector business. This remains stable and largely driven by Teva's generic EpiPen. Moving on to slide 8, I'll provide more details on Darzalex. Janssen's Darflex continues its amazing growth story, growing approximately 26% year-over-year on an operational basis in the first quarter of 2023 to approximately $2.3 billion. This increase was driven by share gains in all regions, continued growth of the market, and strong adoption of Darflex FastPro, the subcutaneous formulation within hands. J&J expects Darflex to continue to grow in the first-line setting. Analysts are now projecting annual Darzalex sales will reach $16.5 billion in 2028. Darzalex SubQ is the globally established choice of physicians using Darzalex for myeloma patients, with a share of 88% in the United States, and as last reported by Janssen, now exceeding 80% outside the United States. The key metric we now track is the overall brand performance, as this is driven by the SubQ. Darzalex subcutaneous is a key growth driver of our royalty revenues in 2023 and will continue to contribute meaningfully until at least 2030. Turning now to Rosas Fezgo on slide nine. Fezgo is a combination of Progetta and Herceptin for subcutaneous injection for patients with early and metastatic HER2-positive breast cancer. This allows for a single five to eight-minute subcutaneous treatment compared with a lengthier IV treatment schedule. Roche recently reported that 85% of patients preferred Fesco's subcutaneous administration over the intravenous formulation of Progetta and Herceptin. Over the first quarter of 2023, Roche reported Fesco sales of approximately 240 million Swiss francs, an increase of 72% year-over-year. In the initial 30-month countries, Fesco share is now 35%, exceeding 40% outside the United States, with the U.S. and Germany approaching 20%. Roche, with their focus on patients, is a pioneer who clearly recognizes the benefits of subcutaneous drug delivery for patients and for the healthcare system overall. We project continued growth from Fezgo in 2023 and beyond. Roche is also developing a path for patient self-administration of Fezgo with an on-body injector, and expect pivotal phase one data from this program in the second half of the year. Next up are our wave three products, which are shown on slide 10. These products represent the next set of royalty revenue opportunities for Halosamp with potential launches projected between 2023 and 2025. The wave three products are subcutaneous F-criticumab, atezolizumab, nivolumab, and ocrelizumab, all of which are approved in at least one indication as an ID formulation. This gives us confidence in the likelihood of approval for enhanced enabled subcutaneous versions of these products. I will summarize the key advancements and events occurring this year with this exciting portfolio, where analysts project total sales, including IV and sub-Q, to reach approximately $35 billion in 2028. Argenix's subcutaneous F-crititumod for generalized myasthenia gravis has an FDA PDUFA date of June 20th, 2023. Argenix has also submitted a marketing authorization application to the European Medical Agency. And let's predict potential total equity to mod annual revenue of approximately $7 billion in 2028. The launch of the ID formulation is certainly progressing well with a reported $401 million in 2022 and growth of 25% quarter over quarter to $218 million in the first quarter of this year. We are excited that subcutaneous F-criticumot has the potential to be the first of our Wave 3 partner launches, with U.S. approval and commercial launch projected mid-year 2023. On the recent quarterly call, Organics Management commented on the importance of gaining traction in early-line patients for the continued trajectory, and that the subcutaneous approval may help achieve this. As Ergenix's flagship pipeline product, Efcar Chitimod, is being developed for the treatment of multiple autoimmune disease indications, with subcutaneous development currently in six indications. I will note that four of these indications today are subcutaneous-only indications. Ergenix has announced plans to expand and add additional indications, including a new study plan for thyroid eye disease for later this year. And Ergenix projects multiple data readouts in 2023. This includes data in chronic inflammatory demyelinating polyneuropathy, now in July of 2023. Two additional phase three data readouts are projected for the fourth quarter of 2023 in two additional serious autoimmune conditions, idiopathic thrombocytopenic purpura and pemphigus. I'll move now to Roche. At the beginning of the year, Roche announced their BLA to the FDA for subcutaneous tezolizumab with enhance was accepted with a BDUFA date of September 15th, 2023. Subcutaneous tezolizumab has the potential to offer greater convenience for patients and physicians within approximately seven minutes subcutaneous administration time compared to 30 to 60 minutes for IV treatment. Roche believes this represents a significant advancement for patients the healthcare system where resources are constrained, as well as for payers. In the first quarter of 2023, Roche reported IV2-centric revenues of 920 million Swiss francs, an increase of 15% year-over-year, driven by higher demand in the U.S. and in Europe. Roche also reported first quarter 2023 revenues of 1.6 billion Swiss francs for Oprivis, which represents an increase of 14% year-over-year and annualizes at over $7 billion. Ocrevus is our third Wave 3 opportunity. With more than 300,000 patients treated globally, Ocrevus remains the number one treatment in the U.S. and the EU5, both in terms of total share and new-to-brand share, with a higher retention rate than other therapies for multiple sclerosis. The goal with subcutaneous ocrevis is to significantly shorten the treatment and observation time compared to the IV, where the IV is currently 3.5 to 6 hours. With the data read out for the phase 3 trial of subcutaneous ocrelizumab within hands expected later this year, subcutaneous delivery could lower the target total administration and observation time for the first and second dose to one hour and to just 10 minutes for administration and observation for each subsequent dose. Roche is excited that the substantive data will provide an opportunity to expand the market and provide access to patients for whom intravenous dosing is not viable. Moving now to our fourth wave three product, Nifolimab. EMS reported observable IV sales of $2.2 billion in the first quarter of 2023, an increase of 15% year over year, or 17% excluding FX. BMS believes that subcutaneous delivery of drugs pushes science forward, and they are progressing with their Phase 3 registration study of subcutaneous nivolumab utilizing enhanced in patients with renal cell carcinoma. Our Wave 3 product represents substantial B-risk near-term new royalty revenue opportunity for Halazan, driven by two potential approvals this year and the Phase 3 readout of subcutaneous opralizumab. The opportunity represented here in terms of analyst projections for total product sales is approximately $35 billion in 2028, which is significantly higher than the opportunity for our Wave 2 products, which are driving our strong, wealthy revenue growth today. Moving to slide 11, I'll review our Wave 4 partner product development pipeline within HAN. Our longer-term growth trajectory is further supported by these Wave 4 products with potential launches in the 2025 to 2027 timeframe. Wave 4 is comprised of 10 partner products, two of which are in Phase 3, and the remaining eight are in ongoing Phase 1 clinical testing or have completed Phase 1. In 2023 and beyond, our goal is to continue to expand the number of products in development and to advance products through development to regulatory approval and launch, adding multiple new royalty revenue streams. The two most advanced products are Janssen's subcutaneous amivantamab and BMS's fixed dose combination of nivolumab plus rilatilamab with Enhance. Both are already approved and showing strong rules as IV treatment and are in phase three clinical testing as sub-Q versions. Janssen initiated their phase three study of lezatinib plus amivantamab with Enhance in 2022. in patients with EGFR-mutated advanced or metastatic non-small cell lung cancer. And recently, BMS also initiated the phase three study, Relativity 127, with the goal of demonstrating that drug exposure level of nivolumab plus rilatinamab six-dose combination within hand is not inferior to IV administration of the same combination, with this study being done in patients with previously untreated metastatic or unresectable melanoma. Other notable programs in our wave four pipeline include a focus on innovation for HIV. These cabotegravir and janicetralpilverine, both already approved as IM and oral delivery, are in phase one development as subcutaneous drugs within hand. Beef has stated their goal with subcutaneous delivery is to further extend the dosing interval, thereby further freeing patients of the burden of treatment and the disease. Steve is also in Phase 1 development with N6LS, a development stage broadly neutralizing antibody for HIV. I'll move now to our new growth opportunities. We remain highly engaged in new partnership discussions for ENHANZ and our autoinjectors. I'm excited that the funnel of discussions is at an all-time high, driven by high interest in subcutaneous drug delivery. While the timing is always difficult to predict, we are confident that we will achieve our goals for 2023 for one new enhanced deal, one new enhanced plus high volume autoinjector deal, and one new small volume autoinjector deal. We're experiencing strong interest in learning more about our high volume autoinjector for rapid delivery of up to 10 ml, which is enabled by enhanced. This approach will offer a truly differentiated opportunity for patient-friendly, high-volume subcutaneous start delivery that can be utilized across a spectrum of disease areas for both small molecule drugs and biologics. We have a working prototype ready for clinical testing and expect to initiate and complete human feasibility studies by mid-year. We look forward to signing an agreement with a current or a new partner to collaborate on the custom development and are tracking nicely towards this goal. I'll turn now to our commercial portfolio, which includes Zysted and Calando, and are shown in slide 12. Zysted is our weekly, virtually painless subcutaneous testosterone replacement treatment, which is patient-delivered by autoinjector. Our growth strategy remains focused on converting patients from intramuscular injections, the most common treatment approach today. In the quarter, we saw strong growth of Zysted physician demand, achieving new weekly high average prescription performance every month. We successfully navigated the first quarter resetting of the high deductible for commercial patients through our co-pay card program, helping assure affordability was not a barrier for starting or staying on Ziastad. Sales to wholesalers slightly lagged demand in the quarter as a result of a change in our 3PL distribution channel. Our goal remains to achieve approximately $100 million in Ziastad revenue in 2023, representing a 20% increase from the run rate following the acquisition. And we're also still focused on gaining access for Talando, our oral testosterone treatment. To date, we have not yet reached agreement with pharmacy benefit managers on an appropriate rebate rate. And until access is established, we are projecting low revenues for Talando in 2023. Before I hand the call over to Nicole, let me reiterate our commitment to our strategic growth and capital allocation priorities, which are shown on slide 13. We are committed to maximizing our revenue growth and durability to create long-term value for all of our stakeholders. We're investing strategically in Enhance and our auto-injector technologies while continuing to return capital to shareholders with our share buyback plan. We've completed $500 million of the $750 million three-year share buyback program, which was approved by the Board of Directors in December of 2021. And this includes $150 million share buyback completed in the first quarter of 2023. We're also actively evaluating M&A opportunities, seeking additional platforms or companies with de-risk assets or platforms or technologies where we see the opportunity for significant revenue growth and durability. I'll now turn the call over to Nicole to discuss our financial results for the first quarter of 2023. Nicole. Thank you, Helen.