This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk07: Corporate Communications. Please go ahead.
spk00: Thank you, Operator. Good afternoon, and welcome to our third 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 Twirley, Hillizum'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 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 filing 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'll now turn the call over to Dr. Helen Twirley.
spk09: Thank you, Tom, and good afternoon, everyone. We're very pleased with our third quarter and year-to-date 2023 financial and operating results, which reflect the continued strength and durability of our business. We remain focused on supporting our growth trajectory and are well positioned for another record year. We are on track to meet our recently updated revenue guidance and deliver greater than 25% revenue growth for the year, including greater than 23% royalty revenue growth. I am also pleased to announce that as a result of our operational performance and close attention to expenses, we are raising EBITDA and non-GAAP EPS guidance. EBITDA guidance has increased from $420 to $440 million to $430 to $445 million, and non-GAAP EPS guidance from $2.65 to $2.75 to $2.70 to $2.80. I'm pleased to forecast that strong performance on both top and bottom line growth this year. Moving to slide three. In addition, today we announced an acceleration of the $250 million share repurchase remaining under the approved $750 million share repurchase plan that we announced in 2021. This $250 million share repurchase will be executed through an accelerated share repurchase with a finance institution this week, subject to market conditions. We have a disciplined and balanced capital allocation strategy at Helizine, investing to grow the business, return capital to shareholders through share repurchases, and seek new growth opportunities through M&A. Our investments to grow the business in 2023 have resulted in substantial accomplishments, including our high volume auto injector. We plan to invest at similar levels to grow the business in 2024. Our balance sheet is strong with continued projected EBITDA growth and cash generation throughout 2023. We have reduced our net leverage substantially and consistently each quarter from 3.2 times at the end of 2022 to 2.4 times at the end of the third quarter of this year. Given our strong balance sheet, decreasing leverage, and continued EBITDA and cash generation, we decided to implement the announced $250 million ASR using cash on hand, as we believe Helizine is trading at a significant discount to our valuation, making share repurchase a high return on investment opportunity. We will continue to seek growth opportunities through MA and have increased our technical search and evaluation due diligence capabilities with the addition of Manuel Santos-Felix, who is a renowned leader in drug delivery technologies and a prior senior fellow of novel drug delivery technologies at the Novartis Institute for Biomedical Research. At this time, we do not project any near-term M&A transactions that would add to our leverage. I'll move now to highlights in the third quarter, which are shown on slide four. We reported total revenue of $216 million, which gives us confidence to achieve our full-year revenue guidance of $825 to $845 million, representing greater than 25% year-over-year growth. With operating expense management a strong focus in 2023, and with EBITDA and non-GAAP EPS trending to above the low end of our recently updated guidance, today we increase guidance on these key measures of profitability. Moving now to slide five, As an industry-leading drug delivery platform company, Halozyme has built a diversified and robust portfolio. Our enhanced technology, combined with an innovative high-volume auto-injector, provides new and potentially improved therapeutic solutions for patients, our partners, and healthcare providers. Throughout the year, our enhanced partners have made significant progress with their commercialization and development activities. which are expected to result in strong and durable long-term revenue growth for Halazan. Before I provide additional details on each product, let me summarize the strong performance and momentum in the quarter, which is delivering strong results today, while also advancing new waves of growth for Halazan in the coming years. Our Wave 2 products, Dorsalix, Faspro, and Fezgo, remain strong revenue drivers. The approval of Organics' 5GAR Hikulo in the United States and to Centric Subcontainers in Great Britain, increased the total number of commercial products to seven, and importantly signaled the start in 2023 of two new royalty revenue streams. The positive phase three data for Five Guard Hyatulo and CIDP will, upon approval, expand the commercial opportunity in a condition where there is significant high unmet need today. And the recent positive data announcements from two additional wave three products Nivolumab SubQ and Ocrelizumab SubQ support near-term regulatory filings and commercial launches in the 24 to 25 timeframe. I'll leave you with two key takeaways. Firstly, the multiple positive Phase III data readouts from our Wave 3 products in the last 19 months support a high success rate in the translation of Phase I-II enhanced subcutaneous pharmacokinetic data into positive Phase III results. The high success rate from early clinical data to positive phase three data to approval is not always fully appreciated. The likelihood of success for our partners utilizing enhanced technology when bridging from an ID approval to sub-Q is very high once early clinical data is generated. And secondly, as a result of the multiple positive phase three data readouts, we are confident to project nine royalty revenue generating products by 2025 a significant increase from five that we had as we entered 2023. And moving now to slide six, these approvals are the key drivers of our projection of the potential to achieve approximately $1 billion in royalty revenues in 2027. Let me now move to slide seven. We set the goal for 2023 to deliver a new enhanced deal, a new high volume auto-injector deal, and a new small volume auto-injector deal we've made strong progress against these goals. We were very pleased to announce a new enhanced partnership with Acumen Pharmaceuticals, which reinforces the growing recognition of the value of subcutaneous drug delivery. Acumen is focused on the development of targeted therapies for Alzheimer's disease and is leveraging their deep understanding of the amyloid beta oligomers to usher in a medical breakthrough. The Alzheimer's disease market is a key inflection point with recent and expected approvals paving a new path for treatment. We're delighted to work with Acumen with the goal of creating a best-in-class, subcutaneous delivery option that may ease the treatment burden for patients, caregivers, and the healthcare system. Under the terms of our non-exclusive agreement for their proprietary therapy, Kaleozyme received an upfront payment and will be entitled to milestones in addition to a single-digit royalty on net sales reflecting the non-exclusive nature of this agreement. For our high-volume autoinjector, we have also made strong progress. We presented the full data from our clinical study, which demonstrated that delivery of 10 mLs of a representative biologic in 30 seconds with our autoinjector was well tolerated by patients and one which the patients would have again. The companies we presented the data to have been impressed and viewed our high-volume AutoInjector Plus enhanced as a breakthrough in the area of rapid auto injection of a large volume biologic. With any breakthrough comes excitement and some inertia to something new. I am delighted that one of our current partners has agreed to test our current high-volume AutoInjector device in a clinical test in 2024. This is a step prior to the potential development of a customized high-volume autoinjector for the patient population this partner is considering. At least one other current partner is also considering proceeding with the development of a customized high-volume autoinjector for their patient population. We have not yet completed this agreement and remain focused to seek to get this completed in 2023, recognizing this may now occur in 2024. As an established leader in rapid, subcutaneous drug delivery within hands in our differentiated autoinjector technology, we remain the partner of choice across the industry. We're also seeing strong interest from pharma and biotech companies who are interested in understanding the potential implications of the final CMS guidance on drug price negotiations for Part D drugs. In these guidelines, CMS affirmed its guidance that a fixed combination which included two or more active ingredients will be distinct drugs for the purposes of applying the IRA price negotiation provisions. Notably, halosam's recombinant human hyaluronidase technology enhanced has been recognized as an active ingredient by the FDA. With those highlights, I'll now turn to slide eight for an overview of our royalty revenue and a more detailed review of the key products and drivers of growth. Royalty revenue for the third quarter of 2023 increased 15% year-over-year to approximately $114 million and continues to be the key driver of our revenue growth. For the full year, we're reiterating our royalty revenue guidance at $445-$455 million, representing greater than 23% growth over 2022. Our Wave 2 products, Darlix, Fastflow, and Fezgo, are the current royalty revenue growth drivers and will be illustrated on the next two slides. Darzalex FastPro is the globally established choice of physicians using Darzalex for multiple myeloma patients with 91% share in the United States and an estimated greater than 80% share outside the United States. With the overall brand performance driven by the use of subcutaneous formulation, total Darzalex brand growth is now the key metric we use to measure Darzalex subcutaneous growth and potential. In the third quarter of 2023, DARS lights continue to drive strong sales growth for Johnson & Johnson, with an increase of approximately 21% year-over-year on an operational basis to approximately $2.5 billion in the quarter. This increase was driven by share gains in all regions and continued growth in the first-line setting. Analysts predict annual DARS-like sales will continue to grow and will be $17 billion by 2028. Turning now to Roche's Fezgo, which is shown in slide 10. Fezgo is a combination of Progetta and Herceptin delivered in a single five to eight minute subcutaneous injection for patients with early and metastatic HER2-positive breast cancer. I'll focus firstly on Progetta to help dimensionalize the opportunity for Fezgo. For the nine months of 2023, Roche reported Progetta revenue of 3 billion Swiss francs. Moving now to Fezgo, Fesco sales grew an impressive 66% to more than 800 million Swiss francs, contributing positively to the continued growth of Roche's impressive breast cancer treatment franchise. The global conversion rate from Progetta to Fesco continues to increase, even as the number of launch countries increases. Fesco is now launched in 44 countries, up from 38 last quarter. and the conversion rate increased to 37% in the third quarter. Roche anticipates approximately 50% share over time, and they noted that the key drivers of uptake include limited nurse and chair capacity, even in the United States, and patient preference force of two. Turning now to our Wave 3 products, shown in slide 11, I'll touch on recent event highlights and also upcoming value-driving events to watch for. Always-free products are now highly de-risked with one major market approval and positive Phase III data announced for the remaining three products. Beginning with Ergenix's 5-GART or F-Cartesimod, this is Ergenix's flagship pipeline product and is being developed with Enhance in a total of six autoimmune disease indications today, with four of these indications being developed as subcutaneous-only deliveries. And let's project that F-crititumine will be a multi-billion dollar annual revenue brand in 2028. The launch of Ergenix's Vivecart and Vivecart Hytrulo with enhanced for patients with generalized myosinia gravis is progressing well, with growth of 22% quarter over quarter to $329 million in the third quarter of this year. With the FDA approval of the substantive version Vivecart Hytrulo in June of 2023, Argenix's goal is to expand the use of 5Guard by offering myosinographic patients a new treatment delivery option and to move into earlier lines of treatment, driving brand loyalty with their current prescribers. It is exciting that 5Guard Hedtrulo is helping Argenix achieve their goal. Argenix recently reported that initial feedback from doctors on 5Guard Hedtrulo is broadly positive and they recognize the benefit of this simple 30 to 90 second subcutaneous injection which is enabled by our enhanced technology. Hetrulo is contributing to Orgenic's expansion of the market with new prescribers, with the majority of patients for Hetrulo being VibeGuard-naive. Orgenic is also making progress reaching more Mycenae Gravis patients globally. In September, VibeGuard-Hetrulo received a positive opinion from the CHMP. signaling a path for European approval for generalized myasthenia gravis with a self-administration label later this quarter. Expanding the potential opportunity, Argenix announced positive hotline data from the ADHERE study, evaluating 5-part HETRULO with enhance for CIDP. With a 61% reduction in risk of relapse versus placebo, The safety and tolerability profile were reported to be consistent with the confirmed safety profile of VibeGuard when used in other indications. There is a significant unmet need in CIDP, and we're excited that Argenix will be filing with their Priority Review Voucher and are busy preparing for a 2024 launch. And further expanding the opportunity, Argenix recently confirmed two additional study readouts for VibeGuard and True with Enhanced. The first in idiopathic thrombocytopenic purpura, which is expected in the fourth quarter, and the second in pemphigus, which is expected around the end of the year. I'll move now to our additional products with Roche. The Great Britain approval of Roche's Ticentric Subcutaneous with Enhance in August marked our seventh Enhance commercial product approval. Based on the pivotal study conducted in non-small cell lung cancer, Tocentric subcutaneous was approved in Great Britain for all current IV indications, including certain types of lung, bladder, breast, and liver cancer. Kiloenzyme enhanced drug delivery technology allows for an approximate seven minutes of subcutaneous delivery, which compares with 30 to 60 minutes for the IV infusion. Roche commented on their recent quarterly call that they project the potential for T-centric sub-Q adoption in resource-constrained markets to mirror the rapid conversion and high share attainment of FedGov. With regard to upcoming regulatory actions, Roche projects the CHMP opinion in the fourth quarter of 2023 and U.S. approval decision in 2024. We're also pleased to note that as an IV treatment, T-centric continues to demonstrate strong growth Year to date, 2023, Roche reported IV to centric revenues of 2.8 billion Swiss francs, an increase of 11% year over year. I'll move now to Ocrevus. Roche's phase three Ocarina 2 trial, evaluating Ocrevus subcutaneous within hands, met its primary and secondary endpoints, opening up the potential for people living with multiple sclerosis to receive their treatment in just 10 minutes, twice a year. and creating the possibility to administer Ocrevus in additional multiple sclerosis centers that do not have IV infrastructure or that have IV capacity constraints, which adds a new growth opportunity. In October, Roche announced additional data showing subcutaneous injection was non-inferior to intravenous infusion based on Ocrevus levels in the blood over 12 weeks. Of note, Ocrevus subcutaneous injection was comparable to IV infusion and providing rapid and sustained depletion of B cells and near complete suppression of MRI lesion activity in the brain over 24 weeks. The safety profile of Ocrevus subcutaneous was reported to be consistent with the well-established safety profile of the Ocrevus ID infusion. The Ocarina 2 data will be submitted to health authorities around the world with US and European launches expected in 2024. The Ocrevus in the IV formulation continues its impressive growth trajectory. For the nine months year-to-date, Roche reported Ocrevus revenues of 4.8 billion Swiss francs, which represents an increase of 14% year-over-year. And moving to our fourth wave 3 product with positive phase 3 dates, that's Bristol-Myers Squibb subcutaneous nivolumab. BMS recently reported positive top-line data from the Phase III Technique 67T study, which was evaluating obdivo subcutaneous in advanced or metastatic renal cell carcinoma. The study net its co-primary pharmacokinetic endpoint and a key secondary endpoint, demonstrating non-inferiority of objective response rate versus IV nivolumab. The safety profile of subcutaneous subdivo was described by BMX as consistent with that of the ID of devo. On the recent quarterly call, BMX management indicated that a devo subcutaneous has the potential to open up a regulatory approval, an indication that constitutes 65 to 75% of the subdivo business today. Importantly, they further commented that subcutaneous has the potential to extend franchise durability into the 2030s. BMS reported IV sales of upheaval of $2.3 billion in the third quarter of 2023, an increase of 11% year-over-year. In total, these Wave 3 products represent substantial near-term new royalty revenue opportunity for Halazan, with analyst projections for total product sales of approximately $35 billion by 2028. What is exciting and something that is, I think, very important to highlight is that this $35 billion projected opportunity is significantly higher than the $20 billion opportunity which is projected for our Wave 2 products, those that are driving the strong royalty revenue growth we see today. I'll move now to slide 12, where I'll touch on some highlights from our Wave 4 partner product development pipeline within HAN. Our longer-term growth trajectory is supported by these Wave 4 products with potential launches in the 2025 to 2027 timeframe and the potential to add multiple sustainable new royalty revenue streams. Wave 4 is comprised of 10 partner products, two of which are progressing in Phase 3 studies and one recent advancement into a Phase 2B study. The remaining products are an ongoing Phase 1 clinical testing or a completed Phase 1 study. The two most advanced wave four products are approved as IV products and are in phase three subcutaneous studies. These are Johnson & Johnson's subcutaneous formulation of amibantamab and BMS's fixed dose combination of nivolumab plus relatinamab within hands. Notably, Johnson & Johnson presented strong data at ESMO from the Mariposa study, demonstrating that the regimen of amibantamab and lezetranib The same regimen that's being studied in the CEPQ versus IV study reduced the risk of progression and death by 30% compared to oedimetrinib or to Grissom. Overall survival data is now awaited. Continuing the program, we recently initiated enrollment of a Phase IIb study, which is comparing the efficacy, safety, peak intolerability, of N6LS with Enhance, which is given in combination with cabotegravir, and comparing that to the standard of care in adults with HIV. Turning now to slide 13, we recently presented the positive clinical data results of our high-volume autoinjector study at the 13th annual POD conference. There was strong interest in the data, which demonstrates the feasibility of administering a subcutaneous injection of 10 mLs of a representative biologic immune globulin 10% within hands in approximately 30 seconds using our high-volume autoinjectors. We're pleased by the acknowledgement by partners and potential partners that this is a breakthrough in terms of rapid, large-volume subcutaneous drug delivery via autoinjectors. And we're also delighted with the progress we've been making in advancing with two current partners.
spk01: I'll turn now to our commercial portfolio.
spk09: Zyosed is a weekly, virtually painless subcutaneous testosterone replacement treatment, which is delivered by our proprietary auto-injector. Our strategy is to convert patients who are not achieving their treatment goals with intramuscular injections of testosterone replacement therapy. Zyosed demand in the third quarter continued to grow, contributing to a 32% increase in year-to-date demand growth this year compared to 2022. We're on a positive trajectory to achieve approximately $100 million in Zysted sales in 2023, representing a 20% increase from the run rate following the acquisition. And in a further update, we recently made the decision to terminate the Talando licensing agreement and return the license to licensing, effective January 31st, 2024. This decision was made due to the inability to obtain economically acceptable coverage with pharmacy benefit managers. We'll now focus all of our promotional sales and marketing activities on driving ZYSED growth. With that, I'll turn the call over to Nicole, who will discuss our financial results for the third quarter of 2023. Nicole?
spk08: Thank you, Helen. Our financial performance in the third quarter sets us up well for another record year. We achieved top and bottom line growth in line with our claims and supporting our financial performance expectations for the full year. Our balance sheet remains strong with continued projected EBITDA growth in cash generation in 2023 and beyond. Our cash, cash equivalents, and marketable securities were $483.3 million as of September 30th, 2023, compared to $348.3 million as of June 30th, 2023. Our net leverage ratio is 2.4 times as of September 30, 2023, compared to 2.9 times as of June 30, 2023. We expect to continue to decrease net leverage with EBITDA growth. Turning to slide 14, and as Helen mentioned, today we announced an acceleration of the $250 million of share repurchases remaining under the approved $750 million share repurchase plan announced in 2021. The $250 million share repurchase will be conducted under an ASR. This brings our total share buybacks since the inception of the first program in 2019 to $1.3 billion, which has benefited the current quarter non-GAAP EPS by 15 cents. Given our strong balance sheet, decreasing leverage, and continued EBITDA and cash generation, we decided to implement the $250 million ASR now, take advantage of this buying opportunity. We will continue to have a disciplined and balanced focus on our capital allocation efforts, with a focus on driving value for shareholders through investing to grow the business, shareholder return, and seeking new growth opportunities through M&A, with no near-term plans to add to our leverage. Turning now to slide 15 for our detailed financial results for the third quarter of 2023. Revenue for the third quarter was $216 million, compared to $209 million in the prior year period. The revenue increase was primarily driven by higher enhanced product sales, royalty growth, and diocese sales growth, offset by the timing of milestones recognized in the prior year period. Recall that the timing of the milestone for decentered S&P in the U.S. was planned for the third quarter and is now expected in 2024. Royalty revenue for the quarter was $114.4 million, an increase of 15% compared to $99.6 million in the prior year period, driven by continued strong uptake of J&J's subcontinuous Darglex as well as Roche's Fezgo. Research and development expenses for the third quarter was $17.3 million, compared to $16.7 million in the prior year period. And SG&A expenses were $35.3 million, compared to $34.5 million in the prior year period. The increases are primarily due to an increase in compensation expense. EBITDA in the quarter was $124.6 million. compared to $109.9 million in the prior year period, reflecting the write-off of a contingent liability related to Tillando. Gas diluted earnings per share in the quarter was 61 cents, and non-gas diluted earnings per share was 75 cents. Turning now to slide 16, we are reiterating our top-line guidance in raising our EBITDA and non-gas EPS guidance for the full year 2023. We expect total revenues of $825 to $845 million, representing growth between 25% and 28% over prior year total revenue. We expect loyalty revenues of $445 to $455 million, an increase of 23% to 26% year-over-year, driven by continued strength in our enhanced wave 2 products, including Darzalex SE and Fezgo. as well as a full-year auto-injector royalty contribution. We now expect EBITDA of $430 to $445 million, an increase from $420 to $440 million, representing growth of 37 to 41% over 2022 EBITDA, due to strong expense management and the release of a collando-related contingent liability. We now expect non-GAAP diluted earnings per share of $2.70 to $2.80, an increase from $2.65 to $2.75, representing annual growth of 22% to 27%, which reflects our strong year-to-date results and expense management. With that, I'll now turn the call back over to Helen. Thank you, Nicole.
spk09: It has been another strong quarter of execution, significantly advancing our royalty revenue-generating portfolio and growth opportunity. We're excited to further expand current and new partner opportunities for Enhance and the high-volume auto-injector, and we continue to see additional opportunity for growth. I want to thank everyone on the Hale Design team and our partners and collaborators for the strong progress year to date. With that, we'd now be delighted to take your questions. Operator? please open the call for questions and answers.
spk07: Thank you. If you have a question, please press Star 1 on your telephone keypad. To withdraw your question, simply press Star 1 again. Your first question comes from the line of Mohit Banzal with Wells Fargo. Your line is open.
spk03: Great. Thank you very much for taking my question, and congrats on all the progress. I have a two-part question regarding the autoinjector. The part that you mentioned of who is looking at autoinjectors, could you help us understand is it related to like someone who, so is it for a product which already is using enhanced technology and that now could be converted into an autoinjector, something like that? And then the other part of the question is, could you help us understand how much time does it take for an autoinjector technology, like when someone conceptualizes that to actually converting it into a real product. What is the process there? How much time does it take? Thank you.
spk09: Thanks, Mahit, and thanks for those two questions. With regard to the two updates we gave on high volume autoinjector progress, one partner moving into a clinical study as a first step before moving forward to the development of a custom autoinjector for one of their patient populations, And the second one, which is also a current partner, is evaluating moving forward into a development agreement. As those have not advanced sufficiently for us to sign the deal, I'm unable to provide any additional information, but they are both partners who are very experienced with our enhanced technology. With regard to the auto-injector timeline, the high volume one, It is all going to depend actually on what the product is that's being used. Is it already a sub-Q? As an example, it's a very important driver of the timeline. And the second one is what primary container the partner wants to use, and is that immediately available? If it's already a subcutaneous product using Enhanced, and it's a primary container that's available, we estimate the timeline in around the two-year timeframe. needs to be a comparative study done. Stability work needs to be done. Human factors studies need to be done. But we estimate that can be done in about two years. And that, as you say, starts to generate revenues for Halazine. If it's the case of a product that's currently in ID, and this is going to be something that is adding enhanced and going into an autoinjector, think of that more like the timeline we see for an enhanced product. because that which is approximately five years, four and a half to five years from first in human to approval, that really would have to go through the comparability to show that the sub-Q dose is the same as IV. And while that's happening, all of the device development and the device stability and the human factor studies can happen in parallel. So two years to five years, I think, is a reasonable timeframe depending on the type of product.
spk06: Thank you very much. Appreciate it.
spk07: Your next question comes from the line of Michael DeFiore with Evercore ISI. Your line is open.
spk04: Hi, guys. Thanks so much for taking my question, and congrats on all the progress. Especially congrats on today's newly announced deal with Acumen. My first question is, why is this deal non-exclusive? Is the A-beta target still up for grabs from any other manufacturer? And if so... would this potential future manufacturer have the option of securing an exclusive deal outside of Acumen, of course? And my second question is regarding sub-Q Ocrevus. How should we think about the maximum IV to sub-Q conversion rate in the U.S., assuming that launches next year? I mean, if we think back to Rituxan Hycella's launch in the EU, Roche adopted a much more proactive biosimilar defense strategy compared to the U.S. and launched Hycella roughly four years prior to buy a similar entry. And as a result, the max IV to sub-Q conversion rate in Europe was 60%. And I guess my ultimate question is, could we expect a similar 60% conversion here in the US? Thank you.
spk09: Right, thank you for that question, Michael. We actually do have another partner that is confidential who has the non-exclusive access to the amyloid beta. And in light of that, the opportunity with Acumen was non-exclusive given that we already had somebody who has the target non-exclusively. And I think that's a nice example as to how when we're able to do non-exclusive deals, we can license to multiple different partners. So, I think that answered that question. And, you know, we're excited to be working with Acumen on their novel approach to this very dreaded disease where we're seeing significant advances and support all of the amyloid beta hypothesis as a key mechanism where we may be able to see real benefits for patients. With regard to subcutaneous ocrevus, what we're hearing from Roche, if you've been listening to their prepared remarks, is Roche's felt that their growth of their OrcaVis has been a little limited by the lack of infusion seat capacity, both outside the US and in the US, and also sites who are able to have ID infrastructure. In light of that, there's a lot of commentary from Roche's to think about this A little bit like Faspro became after the conversion was done, which is they're going to be trying to grow the overall market as a primary goal and also have some switch. But it's going to be a little bit of a different dynamic than the one you mentioned for Rituxan Hycella, where it was switched before biosimilis. I think we're going to see both dynamics happening. And we're very excited by that because it means that patients who are living far away and have poor access, such as patients in rural communities or countries where there isn't good access to IV therapies, are going to be able to start on Ocrevus, which is bleeding therapy for multiple sclerosis in the US and EU5. So we'll see a market growth strategy and a conversion strategy. And because we haven't seen exactly this dynamic happen before, it's hard to peg exactly how much conversion will happen. But we certainly are seeing for FASBRO, if I can turn your attention to that, that the availability of FASBRO is what's been fueling the dramatic growth we're seeing of Darzalex in the last couple of years, and it's what's projected to be taking Darzalex from an $8 billion brand last year to a $16 billion brand next year. So new way to think about it, but I think equally exciting in terms of the opportunity we're going to see here for Okra this year, where it'll be 10 minutes sub-Q two times a year instead of three and a half to six hours IV twice a year. and very likely closer to the patient's home. Super helpful. Thanks so much.
spk07: Our next question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is open.
spk11: Great. Maybe a couple from us. First, could you just talk to us about some of the drivers of the Zyastad? Growth this quarter is, I think, pretty meaningful. Are you seeing an inflection, and what pockets are driving that?
spk09: Yes, thanks Corinne. With Zyastad, we've got a focus on two drivers. First one is driving that conversion in the physician's office to get the patients identified who are not doing well on their IM Zyastad and getting them onto, sorry, their IM testosterone therapy and getting them onto Zyastad. And the second one is very careful attention in the office to make sure the office is filling in any prior authorizations that might be required, but also making sure when the patient gets a prescription filled, they're being more successfully connected with the co-pay assistance and other programs we've put in place. So it's that pull through of all of the programs and a higher rate of identification of patients that really is driving the growth that we're seeing. And we do predict we're still under 5% share of this overall market, which is dominated by the IMC, which is our conversion target. That's what we're trying to switch patients from. So a lot of growth still to come with the strategy that is beginning to really pay dividends.
spk11: Yeah, helpful. Thank you. And maybe one last one from us. It sounds like there's a number of partners that are circling around the auto-injector. What's your sense of some of the gating factors or things they'd like to better understand before actually signing on the deal and and what will they be exploring with the studies next year?
spk09: Yeah, the mentions and prepared remarks, really, when we've been presenting it, we've had, you know, comments like, fantastic, breakthrough, never thought this was possible. And I think it is the degree of innovation that's represented here, Corinne, that like with any new innovation, there is always a period of inertia. And I will say it's exactly what we saw within hands. If I go back to, you know, right when I was in the company and when we just done a couple of the deals, it took a couple of companies to come in and do it. And then the waves happened after that. So I think we're just seeing that traditional innovation adoption curve and people moving into the clinic now to test it is going to help generate additional data. And just because it was so remarkable, we show them a video of patients receiving the therapy and it's invisible to see that the patients had received 10 mLs into the abdomen. I think in just 30 seconds. So I think it's a wonderful reflection of the innovation and people are doing their work now to evaluate that, think about it for their patients, populations, and in the case of one partner I mentioned, moving into a clinical study next year. So we're going to see more of that over the next months, I believe. Helpful, thanks.
spk07: Your next question comes from the line of Jason Butler with JMP Securities. Your line is open.
spk12: Hi, thanks for taking the question. Just one on the accelerated buyback. I mean, now that you're wrapping up this buyback, can you just talk to us about how you're thinking about future return of shareholder capital? And I guess put that in the context of your appetite for bringing on new technologies. Thanks.
spk09: Yeah, I'll ask Nicole to address that.
spk08: Yeah, thanks, Jason. So, as we think about our capital allocation strategy, it really remains unchanged. We're focused on the three pillars that we've been focused on, which is really continuing to invest in our current platforms, continuing to return capital shareholders. And we're very excited to take advantage of this buying opportunity now and accelerate the remaining portion on the current plan to do that starting this quarter. And then also, again, very much continuing to look for growing that revenue growth, that durability long term via M&A. We implemented the ASR this quarter because there are no near-term plans to grow via M&A, and we wanted to deploy our capital in the best way to return value to shareholders. But that will very much continue to be a focus in the longer term as we grow the business.
spk12: Great. And then just one more for me on Fesco. Can you just speak to how you think about peak adoption here and how the self-administration product could drive, whether it could drive further adoption? Is this up to you?
spk09: Yes, thanks, Jason. On Rose's comment, obviously what we're seeing every quarter is an increase in the overall conversion, but I'll just mention that every quarter there's always four to six countries being added, which is diluting the overall conversion. So that 37%, 38% reflects a range from very recent start of conversion all the way up to, I think they've mentioned, 92% conversion in Europe. with U.S. based on latest comments maybe two quarters ago at 20% at that time. Roche has commented that they expect to get to 50% conversion, with that obviously continuing to be a range of recently launched markets and also high conversion in those markets where we're seeing resource constraints. nursing shortages, IV capacity constraints. And so we're obviously delighted with the very strong progress we're seeing and the continuous growth to come as we get to that 50% overall conversion of the market. And I wouldn't be surprised myself if it was able to go even further than that based on the value proposition that we're seeing here. And just to reiterate that, for breast cancer patients, many of them mums, many of them working, instead of having to be an infusion center for the treatment, which can take up to one and a half hours, but then there's the observation, the injection of Fezgo is given in just five minutes or so with a shorter observation time. That means a mom can go in before work, at lunchtime, after work, and not be able to have to take so much time. So it's a strong value proposition and I am expecting more growth to come. The focus of the on-body, which does include Fezgo, so sometimes people ask, is that got enhanced in it? Yes, enhanced is an intrinsic part of Fezgo, which also included Herceptin and Progetta. The goal with that is to allow for more at-home therapy. And so I haven't heard Rose comment if that, how much they think that'll impact the growth and grow the market, but based on the patient population, we've just described, I think this is going to be a very nice option for a certain segment of that population who that just fits better into their lifestyle.
spk06: Okay, great. Thank you.
spk07: Your next question comes from the line of Vikram Purohit with Morgan Stanley. Your line is open.
spk13: Hi, good evening. Thanks for taking our questions. So we had two, one on capital allocation, one on the auto injector. So going back to some of your prepared remarks, it sounded like there's a renewed focus on business development and M&A. And so while we understand that you're not anticipating a near-term M&A, could you speak generally about the profile of businesses and the profile of assets that you'd find additive to fold into Halo's line? And then on the auto-injector, just a clarification, are the economic terms associated with these potential initial contracts, would they be in line with economics and terms associated with your current enhanced contracts? Thanks.
spk09: All right. With regard to BD and M&A, as Nicole mentioned, we didn't find any near-term opportunities, but we are continuing to look because that remains one of our three core pillars, which is to seek growth through deploying our capital for M&A. As a leader in drug delivery, we are looking for de-risked, broadly licensable assets, where we can see a path to near-term accretion. So, some form of drug delivery that is something major pharma, major biotech cannot do themselves and which they would be needing to license from a company that has that specific asset. There are assets out there to anticipate that question. It just has to fit a grid of criteria for us, including that path to near-term accretion. We will keep looking. We spent a number of years looking for the Antares acquisition, and so we will just keep focusing on that. But also, as Nicole mentioned, what we consider to be the undervaluation of the Halazine stock made the share repurchase the right thing, we believe, to return capital to shareholders, given the strong opportunity that that represented. With regard to the high-volume auto-injector, What we're going to see is because the high volume autoinjector has to be used with enhanced, strategically this is positioned to help us expand the number of current partner assets in the clinic and moving into the clinic, but also to allow us to find more enhanced partnerships. So the HCI is always going to be associated with a royalty payment for the drug, but that is primarily going to be driven by enhanced. And the model that's most likely for the high-volume auto-injector will be development and payment as it's being created, and then product sales, where we would make money on the number of devices that were purchased in the sale of the created product.
spk06: Got it. Thank you.
spk07: Ladies and gentlemen, if you have a question, it is star one. Your next question comes from the line of Nasun with JPM Chase. Your line is open.
spk10: Hey, guys. This is Nasun. I'm for JustFi. Question on the non-exclusive deal. I guess, is there more, are you seeing more interest in non-exclusive deals from potential partners? And then another one on the autoinjector, what is the pathway for developing the autoinjector into a self-administered autoinjector? The first autoinjector, phase one, is still administered by a physician, thanks.
spk09: All right. I will take the one on the auto-injector. Maybe I'll ask Nicole to comment afterwards on the non-exclusive deals. Because this was a prototype and the first time this had ever been done to attempt to deliver 10 mLs in 30 seconds, we thought it was prudent and appropriate for patients that we had a healthcare administered approach to it. What we will find now is that some partners are going to be moving, the partner that we mentioned, is likely going to move into the clinic to do a patient self-administered. And frankly, there's nothing additional that has to be done other than to write the protocol that way. It's very simple. It's an injector or place the device and the auto-injector on the abdomen and click a button and hold it there. So it's going to be very straightforward for patients to do, but the only reason we didn't do it in the first study was because it's never been done before. Having seen how well tolerated it was and how well it worked, we have no hesitation in supporting patient studies at this stage then. So it'll simply be the patient does that themselves. And while this is a larger volume than some other autoinjectors, The actual mechanism of doing it is tried and tested. I'll say it's tried and tested by it seems like hundreds of thousands of patients around the world with GLP-1. It's very similar to that. It's just a larger volume and a longer hold time. Nicole, do you want to comment on the interest in non-exclusive deals at the moment?
spk08: Yes, happy to, Nan. So I will say, you know, historically, we always have tried to market exclusive and non-exclusive deals. I think historically the interest has been on the exclusive side, but obviously that comes with a higher price tag as well. We're very interested in non-exclusive deals. We see the benefit of reaching more partners and more patients that way. So I think both you'll see coming through and we'll continue to pursue both types of models.
spk01: Thank you.
spk07: Your next question comes from the line of Mitchell Kapoor with HC Wainwright. Your line is open.
spk02: Hi, everyone. Thanks for taking the questions. I wanted to ask about the evolution of the royalty revenue business. And right now we have a lot of it coming from Darzalex and Fezgo. Obviously, we'll have safeguard high, true low and centric subcutaneous and others that will be making up a little bit more of the revenue royalty revenue business share. Could you just kind of comment on how soon you expect meaningful uptake to occur for some of these other agents? And then also on the centric subcutaneous approval in 2024, can you just comment on, you know, when you'll have a new do for day or what is kind of the gating items to getting to that timeline?
spk09: All right, with regard to the evolution, and thanks for asking that question because we're very excited that the Wave 3 products are now, all four of them, largely de-risked with one approval and three positive phase three studies. So looking very encouraging for launches of these products in the 2023 to 2025 timeframe. And importantly, as I mentioned, if you look at where these products are projected to be in terms of size by 2028, it's $35 billion in sales of the product, which is substantially higher than the $20 million we're seeing with Darzalex and Fezgo today. So we're very excited about how attractive that whole opportunity is. You know, depending on how you define meaningful sales, All four products are going to be commercialized by 2025, with several of them launching one to two years before that. So I think late 24, 25, 26, 27 is where we're really going to see these products growing very nicely following what we've seen in the past, which has been maybe a two and a half to three year to peak conversion. Definitely going to be a very nice addition to the continued contributions from the Wave 1 and Wave 2 products, but adding four new very attractive royalty revenue streams in 23, 24, 25, and then on to 27 and beyond. Great. Thank you.
spk06: And on the Ticentric, you know, new date,
spk02: for potential approval, is that something more narrow that you'll have a timeline on as we get closer to that? Or do we have an assigned date at this point?
spk09: Yeah, as far as we're aware, Roche has not communicated any assigned date. What they did state was that the filing will go in by year end this year. And assuming a standard 10-month review time, Mitch, I mean, that would take it into, you know, let's say the September, October timeframe. But Roche has not communicated anything about that as yet.
spk06: Okay, great. Thank you all very much. Thank you.
spk07: That is all the time we have for the question and answer session. This will conclude today's conference call. We thank you for joining. You may now disconnect your lines.
Disclaimer