Halozyme Therapeutics, Inc.

I'm simply press star one on your telephone keypad. I will now turn the conference over to Tram Bui. Please go ahead.

Thank you, operator. Good afternoon and welcome to our fourth quarter in full year 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 would be Dr. Helen Torley, Halenzyme'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 as well as our outlook. 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 hand the call over to Dr. Helen Toiley.

Thank you, Tram, and good afternoon, everyone. Moving to slide three. We're very pleased to report our strong financial and operating results in the fourth quarter and for the full year of 2023. These results are driven by our two leading differentiated drug delivery technologies in hands in our auto injectors and also by our two commercial products, Zysted and Hyalinex. Moving to slide four, for 2023, we delivered a 26% year-over-year increase in total revenue to $829 million and reached a record $448 million in royalty revenue, which represents a 24% year-over-year increase. Strong operational performance drove another year of double-digit earnings growth with adjusted EBITDA increasing 19% to $426 million and non-GAAP diluted earnings per share growth of 25% to $2.77 for the full year 2023. We also deployed $400 million to shareholders through share repurchases, reflecting strong cash flow and disciplined capital allocation priorities. Moving to slide 5, our achievements and our partner progress in 2023 contributed to the strong performance and paved the path for our strong long-term outlook. The total number of enhanced commercial products increased in 2023 from 5 to 7, with the approval of Organics' 5-car Hytrulo for generalized myosinogravus in the US and Europe, and the approval of Dicentric subcutaneous in Great Britain. We also had multiple positive Phase III data readouts, supporting regulatory submissions for approval of the enhanced subcutaneous formulations. Recall that we have a 100% success rate for approval of products delivered subcutaneously with enhanced when the Phase III trials have met their endpoints. Five Guard Hytrulo Phase 3 data in CIDP was the first positive Phase 3 readout, and upon approval, creates an expanded commercial opportunity in a condition where there is high unmet need today. Argenix has already submitted the supplemental BLA for this indication using a priority review voucher, which would support a potential approval by mid-year of 2024. We were also very excited with the positive data announcements from two additional Wave 3 products, Roche's ocrelizumab subcutaneous with Enhance and Brissomar Squibb's nivolumab subcutaneous with Enhance, supporting global regulatory submissions and potential launch in 2024 for ocrelizumab subcu and in 2025 for nivolumab subcu. We also continue to advance and expand our pipeline. Johnson & Johnson presented data at ASCO from the Phase 1 amivantamab subcu with Enhance trial. An important observation that was highlighted was the dramatically lower rate of infusion-related reactions, with the subcutaneous at 16% compared to 67% reported with intravenous amivantamab, which is commercialized as ribavant. Infusion-related reactions can include mild symptoms such as chills, breathlessness, and nausea, but can also be severe, making this reduction, if confirmed in the Phase III study, very meaningful to physicians. We are delighted that Johnson & Johnson recently announced strong progress with the Phase 3 study that they project will support submission of regulatory filings in 2024 for subcutaneous amifentamab with Enhance. Another significant achievement was Veve advancing testing of their broadly neutralizing antibody N6LS for HIV. Also in 2023, we reached an important milestone for our new high-volume autoinjector, as we successfully demonstrated the feasibility of administering a subcutaneous injection of 10 milliliters of a representative biologic immune globulin 10% with Enhance in approximately 30 seconds using our high-volume autoinjector. And we were pleased to add a new Enhance partner, Acumen Pharmaceuticals, in the fourth quarter. We're delighted to be working with them to develop a subcutaneous delivery option for ACU193 bringing together Acumen's deep understanding of Alzheimer's and the amyloid beta oligomers with our enhanced platform. Moving now to slide six. With our strong track record of success and progress, as we look ahead, we have high confidence in the visibility of our revenue, and we're delighted to recently share our 2024 guidance and our five-year financial outlook for the company. For 2024, we're delighted to project continued strong growth of revenue with a guidance range of $915 to $985 million, representing 10% to 19% year-over-year growth. Wealthy revenue remains our top driver of our revenues and is projected to be $500 to $525 million, representing growth of 12% to 17%. As a result of our disciplined approach to expense management and our business model, we are projecting adjusted EBITDA in the range of $535 to $585 million, a remarkable 26 to 37% growth. I'll focus now on the five-year financial outlook. Total revenue is projected to reach $1 billion in 2025 and grow to greater than $1.5 billion in 2027 and 2028. with royalty revenue continued to be the key driver projected at $1 billion in 2027. And impressively, we project adjusted EBITDA will go faster than revenue in every year of the five-year outlook to an impressive $1 billion in 2028 with a five-year CAGR of 23%. I'll now turn to slide seven and review royalty revenue drivers in a bit more detail. Our Wave 2 products, Darzalex FastPro and Fezgo, launched in 2020, have driven the impressive royalty revenues and growth illustrated on this chart and have many years of impressive growth ahead for them. Moving now to slide 8 and to Darzalex FastPro enabled buy-in hands. With subcutaneous penetration in excess of 90% in the U.S., total brand growth has become the key driver for understanding subcutaneous performance for this product. In 2023, total DARS-like sales continued to deliver strong growth for Johnson & Johnson, increasing approximately 23% year-over-year on an operational basis to $9.7 billion. This strong growth was driven by share gains in all regions and continued growth in the first-line setting. Supporting future growth in first-line, it is notable to highlight that Johnson & Johnson recently submitted a supplemental BLA to the FDA to support a new indication for Darzalex Fasbroke with enhance for multiple myeloma in newly diagnosed adult patients who are eligible for autologous stem cell transplant. The results from their Perseus study, recently published in the New England Journal of Medicine, supported this submission. The addition of Darzalex FastPro to standard of care treatment resulted in a statistically significant and clinically meaningful improvement over today's standard of care alone in progression-free survival, complete response or better, and minimal residual disease negativity. As we look forward, analysts continue to expect annual sales of Darzalex to grow to approximately $17 billion by 2028, driven in large part by the first-line opportunity. I'll move now to Fesco, which is illustrated on slide nine. Fesco offers the potential for patients with breast cancer to receive treatment as a simple subcutaneous injection over five minutes after the first dose, and a total treatment and observation time of about 20 to 38 minutes, which compares to two and a half to seven and a half hours total treatment and observation time for the IV. With this strong value proposition, Fesgo sales continued at an impressive rate of growth in 2023, increasing 64% to 1.1 billion Swiss francs for the full year as Roche continued to expand into additional markets while also driving global conversion rates higher. Roche reported a 39% conversion rate in 46 launch countries. As we look at regional uptake, strong growth and contribution was reported for all regions, U.S. sales were 423 million Swiss francs, growing at 48%, and now representing close to 40% of total revenue. EU is growing at 52%, and international was reported to be growing at greater than 150%. Rocha stated that it expects continued growth of Fesco, with increasing conversion from the IV treatment Progetta, which reported sales of 3.8 billion Swiss francs in 2023. With rose projecting peak conversion of approximately 50%, we're excited to see the strong performance and the future growth that lies ahead for Fezgo. I'll now move to slide 10 and a focus on our Wave 3 products and product candidates. What you see in the left panel are the 2023 launches, and as you move across the slide to the right, the multiple product, regional, and indication launches that are projected this year and next. I will highlight that positive phase three data and regulatory submission plans have been reported by our partners for all products with the exception of aminfantamab that has not yet reported its phase three data. We are very excited with the large opportunity for the wave three, which is now comprised of five products that are projected by analysts to generate total sales of approximately $35 billion in 2028. I will start with 5-Cart Hercula with Enhance, which was approved in generalized myasthenia gravis in the US in June of 2023 and in Europe in November. 5-Cart Hercula with Enhance offers myasthenia gravis patients a new, faster treatment delivery option delivered by healthcare practitioners in just 30 to 90 seconds. Notably, the European approval also allows for patient self-administration subcutaneously. With the Vivecart Hytrulio subcutaneous launch just six months ago, Argenic's focus has been on broadening commercial coverage and securing the date growth, which was accomplished in January of this year. With this, we project growing adoption for Vivecart Hytrulio. The successful launch of Vivecart, with $1.2 billion in revenue in 2023, supports the unmet need that exists for the treatment of generalized myasthenia gravis and the attractiveness of the Vivecart clinical profile. 5-Cart Hirtrulo adds the potential to expand the number of physicians using 5-Cart and to expand use in the earlier lines of treatment. I'll now move to an exciting additional opportunity for 5-Cart Hirtrulo and that's CIDP or chronic inflammatory demyelinating polyneuropathy. Based on Organics' research and recent comments, 42,000 patients receive treatment today for CIDP. It's a condition where there is a high unmet need just 20% of patients get remission on the current standard of care treatment, and 50% of patients report that they remain dissatisfied with the current burden of symptoms. The 61% reduction in risk of relapse with 5-GAR-Hertrulo versus placebo, shown in the ADHERE study, would, upon approval, offer an important new option for patients. And I'll highlight that this indication will be available only as a subcutaneous treatment enabled by Enhance. With the recent submission and use of their Priority Review Voucher, Argenix projects the possibility of approval for this new indication in the United States in mid-2024. Moving now to Ticentric. Ticentric as an IV remains a key growth driver for Roche, with revenue growing 9% year-over-year to 3.8 billion Swiss francs in 2023. Ticentric subcutaneous within hands was granted regulatory approval in Great Britain last year and in the European Union in January of 2024 for all of the approved IV indications. It is given as an approximately seven-minute subcutaneous delivery, which compares to 30 to 60 minutes for the IV infusion. With UK conversion already reaching 18%, essentially in one quarter, Roche believes that the opportunity for subcutaneous adoption remains significant. The US approval is projected in September of this year. Moving now to Ocrevus. Ocrevus, as an IV, is a leading treatment in the US and EU5 for multiple sclerosis, with more than 300,000 patients treated globally and a higher retention rate than other multiple sclerosis medicines. For the full year, Ocrevus generated an impressive 6.4 billion Swiss francs, which we estimate to be about 7 billion US dollars. in revenue for rote, which represents 13% year-over-year growth. Ocrelizumab subcutaneous within hands creates a possibility for people living with multiple sclerosis to receive their treatment in just 10 minutes twice a year, which compares to three and a half to six and a half hours for the IV treatment and observation time. Roche commented on the recent quarterly call that they project the addition of availability of ocrelizumab sub-Q, which is enabled with Enhance, to create a standalone blockbuster opportunity. As we have seen with Darthalix subcutaneous, the availability of the subcutaneous delivery option can result in or accelerate market growth. We project the availability of ocrelizumab subcutaneous with Enhance can create increased growth in two key ways. Firstly, by allowing current multiple sclerosis centers to increase the number of patients treated as a result of improved throughput based on shorter time needed for each patient occupying an infusion chair. And secondly, by expanding the number of treatment centers by enabling multiple sclerosis centers that do not have IV infrastructure today to start administering ocrelizumab subcutaneously. Following the completed regulatory submissions in the US, EU, and UK in 2023, We project the approval of ocrelizumab subcutaneous to represent our eighth Enhanced Royalty Revenue Generating product in 2024. Our next Wave 3 product is Bristol-Myers Squibb Numbolimab subcutaneous with Enhanced, which is the brand name Obdivo as the IV. Obdivo IV sales were $9 billion in 2023, increasing 9% year-over-year, showing continued strong growth. In January, Bristol-Myers Squibb presented the detailed results of Checkmate 67T, the phase three IV versus subcutaneous registration enabling study at ASCO GI. As announced previously, the trial met the primary endpoint of non-inferiority of the two co-primary endpoints, C average over 28 days and C min. A key powered secondary endpoint of overall response rate was also reported. Non-inferiority was also demonstrated with the overall response rate of 24.2% for the subcutaneous and 18% for the IV. Given in just five minutes, nivolumab subcutaneous has the potential to be practice-changing and to improve the patient's treatment experience. Bristol-Marsquib commented that the subcutaneous could potentially extend the franchise through the end of this decade and into the early 2030s, with the subcutaneous approval projected to cover up to 75% of the IV indications. And lastly, we were excited to have recently added Johnson & Johnson's amibantumab subcutaneous within-hands into our Wave 3 potential launches with the potential for launch in 2025. Johnson & Johnson recently indicated that they expect Phase III data from the Paloma III trial for amivetamab with enhanced pluslazatranib in 2024, supporting U.S. and European regulatory filings also in 2024. Amivetamab is already approved as an IV under the brand name Ribravent, with Johnson & Johnson projecting Ribravent will become a multi-billion dollar brand. Let me now move to slide 11, where I'll provide an update on our Wave 4 pipeline, which is projected to support our future growth trajectory with potential launches in the 2025 to 2027 timeframe. We currently have a robust pipeline with seven exciting products in development. This reflects AMI Ventimap moving to Wave 3 based on the updated potential launch timing and Amgen's decision to not move forward with a subcutaneous version of Tepeza within HEMS. Jonathan and Johnson have also made the decision to not proceed with repelvrine subcutaneous. The wave four portfolio comprises of products across a range of therapeutic areas, including oncology, neurology, immune disease, and HIV. We have two products in phase three development. This includes Bristomar, Squiz, Novolumab with Rilatilumab with Enhance, where the phase three study is underway. The IV version of Duolac is projected by analysts to be a multi-billion dollar brand in 2028. The goal with the subcutaneous version is to offer a shorter, simpler treatment option, reducing patient burden and healthcare resources. Takeda's TAC-881, which is a 20% IgG within hands for primary immune deficiency, is the second phase three development program. This will be the second 20% IgG to launch and will expand Takeda's immune-globulin offering for patients, creating a lower volume and potentially shorter treatment schedule. Last year, our VIVE collaboration also progressed with subcutaneous delivery of N6LS, enabled by Enhance. N6LS is a broadly neutralizing antibody for HIV, and it is advanced into a Phase IIb study in combination with Tabetegrefer as a two drug regimen for HIV treatment. Because of the rapidly changing nature of HIV and its potential to develop resistance to certain treatments, VIVE, based on HIV community feedback, has stated that there continues to be a need for medicines with unique mechanisms of action, like the broadly neutralizing antibodies, which may open up a completely new approach to treating HIV. Separately, we continue to be pleased to collaborate with Ergenix on ARGX117, now named M-passive rubract. And in addition, we have two remaining programs in Wave 4 that are confidential at the request of our partners. I'll move now to slide 12. Let me now spend a moment on our high-volume auto-injector. We were excited last year to demonstrate delivery of 10 mLs of a representative biologic co-formulated with Enhance in just 30 seconds with our innovative new high-volume autoinjector. Enhance is the key ingredient that makes this possible. For patients, this can offer the option for home delivery or rapid delivery in the physician's office. Our goal with the high-volume autoinjector offering is to expand upon established Enhance collaborations and add new collaboration partners. I'm pleased to announce that one of our current partners is initiating a human factors test of the high volume auto-injector to evaluate device usability. This test is scheduled to start this quarter. I'll turn now to new enhanced deals. We continue to have strong and expanding interest by existing and new partners. While we were disappointed by the slow progress in decision-making by companies in 2023, we remain confident in our ability to expand our pipeline in 2024. This year started with expanded interest from potential new partners, with a busy schedule of meetings in January and February already, with partners expressing interest in Enhance, the high-volume auto-injector, and in some cases, the small-volume auto-injector technology. I look forward to providing updates and progress on new agreements throughout the year. I'll now turn to our commercial portfolio. ZySED sales achieved $100 million in 2023, demonstrating strong growth. This sales attainment met our target revenue for the year and break even in the fourth quarter. This performance reflects successful execution of our three-pronged strategy, which includes targeting the switch of patients who are not achieving their treatment goals with intramuscular injections, enhancing adherence with specialty pharmacies executing educational programs to support patients staying on treatment, and continued actions to improve the net sales price. With a market of more than 9.5 million scripts a year and our share approaching 5%, we see a clear path for continued growth in revenue and EBITDA contribution in 2024, with a CAGR projection of 25% through 2028. Let me now turn the call over to Nicole, who will discuss our financial results in more detail.