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 Zyme second quarter 2023 financial and operating results conference call. 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. Please note this event is being recorded. I'll now turn the call over to Tram Bui, Halo Zyme's Vice President, Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good afternoon, and welcome to our second quarter 2023 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, will review our financial results for the second 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 risks 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'll now turn the call over to Dr. Helen Twirley.

Thank you, Tram. Good afternoon, everyone. I'll begin on slide three. We are very pleased with our second quarter 2023 results, where we delivered strong year-over-year top-line and bottom-line growth. With our partners, we announced multiple milestone-bearing value-creating events for the next wave of subsistence products that we project will deliver meaningful royalty revenues, our Wave 3 products. Most notably, Argenic's VibeGuard Hytrulil that is co-formulated with Enhanced received FDA approval for generalized myosinogravus in June, making this the sixth approved product utilizing Enhanced. We're excited that co-formulated products using Halazine's Enhanced technology continue to deliver substantial potential benefits for patients and for the healthcare system. Another notable event in the quarter was the publication on June 30th of the final CMS guidance for the Medicare drug price negotiation program, which was created under the Inflation Reduction Act. The final guidance applies to 2026 and to Medicare Part D drugs. The final guidance treats fixed combination products, which include two or more active ingredients or monocytes as distinct drugs for the purposes of applying the negotiation provisions. A combination product will be treated as distinct from a product that contains only one of the combination product active ingredients. We believe that if the single ingredient product becomes subject to negotiation and a capped price, the fixed combination product will be subject to its own separate negotiation eligibility timeline. Today, our fixed combination products are healthcare practitioner administered and covered under Medicare Part B. In light of the Part D final guidance, our assessment remains that if CMS continues this approach regarding combination products when the Part B drugs become eligible for negotiation, our partners, such as these drugs, which are co-formulated with Enhance, would be treated as separate from the IV versions of these drugs. We believe a capped price imposed on any IV version of the drug would then not apply to the Enhance combination products, Instead, the enhanced combination product would be subject to its own negotiation eligibility timeline. We believe this outcome is appropriate because of the added patient benefit that is represented by the enhanced combination product. Our enhanced enzyme, RePH20, is listed by the FDA as an active ingredient in various combination products. Closing out these highlights, I'm also delighted to announce that our clinical test of our high-volume autoinjector was a success. confirming both the feasibility and tolerability of rapid injection of 10 milliliters of a biologic with our high-volume auto-injector. All of this progress strengthens our confidence in achieving our updated full-year 2023 financial guidance, where we have raised our non-GAAP EPS range and increased the lower end of the range for total revenue and for EBITDA. With that summary, let me provide some details on the events during the quarter that are driving revenue in 2023 and beyond. Turning to slide four, Halozyme is a leading drug delivery platform company with a diversified and robust portfolio, which includes our enhanced royalty business, our auto-injector technology business, and our specialty commercial products. As an established leader in rapid subcutaneous drug delivery with enhanced and our differentiated auto-injector technology, We remain the partner of choice across the industry. Moving on to slide five. In the second quarter, our partners made significant progress with their commercialization and development activities related to our Wave 3 products. Wave 3 is comprised of four products that are projected to launch between 2023 and 2025, and which are expected to result in strong and durable long-term growth for HaloVans. On June 20th, the first of our Wave 3 products, LabCart Hytrulo with Enhancement for generalized myasthenia gravis, received FBA approval and launched shortly thereafter. The approval and launch resulted in milestone revenue to Helizine in the border. Helizine will also receive royalties on net product sales. Shortly thereafter, on July 17th, Argenix announced positive data of their HEAR study. which evaluated Vivecart Hytrulo within hands in patients with chronic inflammatory demyelinating polyneuropathy, or CIDP. With a 61% reduction in risk of relapse versus placebo, this marks the second positive readout of the six indications for Vivecart Hytrulo that are currently being evaluated. Moving now to the second of our wave three products that had positive clinical study results in the quarter. On July 13, Roche reported that their phase 3 Ocarina 2 study of Ocrevus subcutaneous co-formulated with enhanced met the primary and secondary endpoints in patients with relapsing forms of multiple sclerosis or with primary progressive multiple sclerosis. The study evaluated subcutaneous Ocrevus total treatment time in 10 minutes, which compares with multiple hours of treatment time with CID. We are excited by all of this progress and what it can mean for patients, as you will see summarized on slide six. Enhance, which is an active ingredient with independent actions when co-formulated with our partner product, allows for rapid subcutaneous delivery of large volume drugs. In multiple published studies, subcutaneous delivery decreases treatment time and treatment burden for patients, resulting in an improved patient experience. And as we saw with Darzalex subcutaneous, there may also be a lower rate of potentially life-threatening infusion-related reactions, which is a clear clinical benefit for patients. Subcutaneous delivery of drugs co-formulated with enhance have also been demonstrated to translate into meaningful cost savings and advantages for the healthcare system, including decreased healthcare practitioner time and resource utilization, greater patient throughput, and decreased drug wastage. As global infusion fat capacity constraints become more acute, subcutaneous delivery can play a vital role in allowing more patients to be able to access therapy and to receive their planned treatment on time. I'll now provide an overview of our financial performance. For the quarter, we reported total revenues of $221 million, representing a 45% year-over-year increase. The key driver of revenue and revenue growth is our royalty revenues, which are shown on slide seven. Second quarter 2023 royalty revenues increased 31% year-over-year to a record $111.7 million. We project continued quarter-and-quarter growth of royalty revenues throughout the year. For the full year, we're maintaining our projection of $445 million to $455 million in royalty revenues representing 23 to 26% growth over 2022. Dark White, Fast Goat, and Best Goat, our Wave 2 products, are the 2023 Royalty Revenue growth drivers. And also included in the Royalty Revenues is the contribution from our small volume auto-injector business, which remains stable and largely driven by TAVA's generic EpiPen. I will note that for 2023, we are assuming nominal Royalty Revenues for 5.0 Trullo and no geocentric subcutaneous royalty revenues. And this is based on the timing of approval and the timeline it takes for physicians to be confident regarding reimbursement. Moving on to Darzalex in slide eight. Janssen's Darzalex growth remains impressive with combined IV and subcutaneous revenue increasing approximately 23% year over year on an operational basis in the second quarter of 2023 to approximately $2.4 billion. This increase was driven by share gains in all regions and continued growth of the market, which was previously reported to be the result of increased penetration into the frontline treatment setting. Analysts project annual DARS-like sales of $16.7 billion in 2028. DARS-like subcutaneous is a globally established choice for physicians who are using DARS-like for the treatment of multiple myeloma patients. With 90% share in the United States, and an estimated 80% share outside the United States. With the overall brand performance now driven by the use of the subcutaneous formulation, total Darzalex brand growth, which was 23% year-over-year, is also the key metric to measure Darzalex subcutaneous growth and performance. Turning now to Roche's Fezgo, which is shown on slide 9. Fezgo is a combination of Progetta and Asbestin, for subcutaneous injections for patients with early and metastatic HER2-positive breast cancer. This allows for a single five to eight-minute subcutaneous treatment compared with a much lengthier IV treatment schedule. Of note, 85% of patients preferred Fezgo's subcutaneous administration over the IV formulation of Progetta and Herceptin. For the first half of 2023, Roche reported Fezgo sales of 517 million Swiss francs. an increase of 69% year-over-year. Fesco is now launched in 38 countries, a recent increase of eight countries, and represents 35% share, which Roche recently commented that they are expecting to grow to 50% share over time. Roche also recently highlighted that share in Great Britain is 92%, and that US share continues to grow. We're also anticipating a potential path for patient self-administration at Fesco, with an on-body injector, with pivotal Phase 1 data from Roche's study expected in the second half of the year. I'll turn now to our Wave 3 products, which are shown on slide 10. As noted earlier, these products represent the next group of royalty revenue opportunities for Halovent, with four potential launches projected between this year and 2025. Let me start with F-Cartigimont. The launch of Ergenix's Vivecart intravenous formulation in patients with generalized myasthenia gravis is progressing well, with growth of 24% quarter over quarter to $269 million in the second quarter of this year. Analysts project that Escritizumab will be a multi-billion dollar annual revenue brand in 2028. The recent SD approval and launch of Vivecart Hytrulo with Enhance provides a new 30 to 90 seconds A healthcare practitioner administered subcutaneous injection options with a shorter monitoring time for patients with generalized myasthenia gravis. F-criticimod is Argenix's flagship pipeline product and is being developed within hands in a total of six autoimmune disease indications today. And four of these indications are being developed as a subcutaneous-only delivery. Data in the first of these subcutaneous-only indications was recently reported by Argenix. On July 17th, Argenix amends positive top-line data from the ADHERES study, evaluating 5-part HyTRULO was enhanced for chronic inflammatory semi-aligned aging polyneuropathy. The study met its primary endpoint with a statistically significant p-value of 0.000039 and demonstrated a 61% reduction in the risk of relapse with 5-part HyTRULO compared to placebo. The safety and tolerability profile were consistent with the confirmed safety profile of five guards, and we look forward to Argenix presenting detailed data from the study at an upcoming medical meeting and to preparing for global regulatory submissions. Argenix has commented that work is now underway to evaluate the size of the addressable CIBB population and the opportunity, which is informed by the positive adhered study data. We continue to project two additional study readouts for vipar hetrulo within hands this year with data in idiopathic thrombocytopenic purpura and pemphigus expected in the fourth quarter. Moving now to Roche, we're looking forward to the potential approval of ticentric subcutaneous within hands in the third quarter with Roche's U.S. PDUFA Day of September 15, 2023. Subcutaneous atezolizumab has the potential to offer greater convenience for patients and physicians within approximately seven minutes of subcutaneous administration time, which compares to 30 to 60 minutes for the IV treatment. We believe this represents a significant advancement for patients, healthcare providers, and for payers. For the first half of 2023, Roche reported IV decentric revenues of 1.9 billion Swiss francs, an increase of 12% year over year, which is driven by growth in the adjuvant non-small cell lung cancer and frontline hepatocellular cancer. Moving now to Ocarbis. This is the third of the four wave 3 opportunities that have now announced positive phase 3 data with Enhance. The Ocarina 2 study met the primary and secondary endpoints, supporting proceeding with regulatory findings for Ocarbis subcutaneous injections co-formulated with Enhance, demonstrating the potential for treatment in just 10 minutes which compares to ours for the intravenous formulation. We look forward to Roche sharing detailed results of the trial at an upcoming medical meeting and to submitting data for regulatory approval to health authorities globally. Ocrevus as an IV continues its impressive growth trajectory. In the first half of the year, Roche reported Ocrevus revenues of 3.2 billion Swiss francs, which represents an increase of 15% year over year. and annualizes now to greater than $7 billion. With a 22% share of patients globally and with more than 300,000 patients treated, Ocrevus remains the market leader in the U.S. and EU5. Roche expects further market share gains with the approval of subtenues administration of Ocrevus, creating the possibility for patients to receive treatment in additional multiple sclerosis centers. Those that don't have IV infusion infrastructure or where there are ID capacity constraints, potentially adding new growth opportunity for the brand. The fourth wave three product is subcutaneous nivolumab. Bristol-Myers Squibb is also progressing with their phase three registration study of subcutaneous nivolumab utilizing enhanced in patients with renal cell carcinoma. BMS reported up to evil ID sales of $2.1 billion in the second quarter of 2023. an increase of 5% year-over-year, excluding FX. We are delighted with the advancement and pending regulatory approval for our Wave 3 pipeline. In total, these products represent substantial near-term new royalty revenue opportunity for HalosX. Analyst projections for the total product sales for these products is approximately $35 billion in 2028, including the ID and sub-Q formulations. I will note that this is significantly higher than the opportunity for our Wave 2 products, which are driving our strong duality revenue growth today. Moving to slide 11, I'll touch on some highlights from our Wave 4 partner product development pipeline within HAMS. Our longer-term growth trajectory is supported by these Wave 4 products, with its development continued potential for launches in the 2025 to 2027 time frame. 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 studies. Our goal is to continuously expand the number of products in development and to advance products through development to regulatory approval and launch, adding multiple sustainable new royalty revenue streams. The two most advanced products are Janssen's subcutaneous formulation of amivantamab and Bristol-Morris Group's fixed-zone combination of nivolumab plus rilatamab was enhanced. Both are already approved as IV treatments, and the subcutaneous formulations are in Phase III clinical testing. Notably, Janssen presented data at ASTHO this year from their Phase I Paloma study for subcutaneous amibenzimab in solid malignancies. The study was designed to identify the Phase II dose. Also reported was data that showed a reduction in all-grade infusion-related reactions, from 67% with the IV regimen to just 16% with subcutaneous amibanzumab with Enhance. This data point reinforces the opportunity to drive clinical benefit for patients with our Enhance technology. Let me comment now on new deals. We remain highly engaged in new partnership discussions for Enhance and for our autoinjector technology. It remains our goal to sign a new Enhance deal, a new high volume autoinjector deal and a new small volume autoinjector deal this year. We believe that clarity on the IRA and the recent positive results of our HVEI clinical study will serve to further advance and expand these discussions. Turning back to slide 12, I'll provide a review of the high-level results of the HVEI clinical study. We were delighted that it was such a success. The results demonstrated the feasibility of administering a subcutaneous injection 10 mLs of a representative biologic, which was immune globulin 10% within hands, in approximately 30 seconds using our high-volume autoinjectors. The injection was delivered successfully, was well-tolerated, and all 23 subjects stated that they would be willing to have the injection by the autoinjector again. No one to date to our knowledge has been able to effectively inject 10 mLs of a biologic subcutaneously in approximately 30 seconds. With a combination of our two proprietary and differentiated technologies in hand and our autoinjector technology, we're in a unique position to demonstrate that this could be done. With these positive results, we expect to advance the strong interest that we have already garnered. The high-volume autoinjector will offer a truly differentiated solution for patient-friendly, high-volume subcutaneous drug delivery that can be utilized across the spectrum of disease areas for both small molecule drugs and for biologics. Let me turn now to our commercial portfolio. Zyacet is our weekly, virtually painless subcutaneous testosterone replacement treatment, which is delivered by autoinjector. Our strategy is to convert patients who are not achieving their treatment goals with intramuscular injections of their testosterone replacement treatment. In the second quarter, we saw strong sequential demand growth with 38% demand growth in the first half of 2023 compared to the first half of 2022. Our goal remains to achieve approximately $100 million in Zyacin revenue in 2023, representing a 20% increase from the run rate following the acquisition. And we also remain focused on gaining access for Telando, our oral testosterone treatment. At this time, we have not yet reached agreement with pharmacy benefit managers on an appropriate rebate rate. And until this access is established, we're continuing to project low revenues for Telando in 2023. I'll move now to our capital allocation priorities, which are shown in slide 13, and I'll focus on our approach to growth through M&A. Investing in M&A is a key strategy to maximize our revenue growth and durability, which we believe will create long-term value for all of our stakeholders. We'll continue to focus on evaluating platforms and technologies that can extend our leadership in drug delivery with a clear line of sight to increasing and extending the durability of our revenues. We're focused on technologies that can be broadly licensed, leverage our demonstrated expertise, and partnering with biopharma companies. Now, with that, I'm going to turn the call over to Nicole, who will discuss the financial results for the second quarter of 2023. Nicole?