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spk06: Thank you for standing by. My name is Prila, and I will be your conference operator today. At this time, I would like to welcome everyone to the HaloZyme first quarter 2024 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 would like to ask a question during this time, simply press the star followed by the number one on your cell phone keypad. If you would like to withdraw your question, please press the star. I'll try the number one again. Please note this event is being recorded. Thank you. I would now like to turn the conference over to Tram Bui. He is the Vice President of Investor Relations and Corporate Communications. Please go ahead.
spk04: Thank you, Operator. Good afternoon and welcome to our first quarter 2024 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 Torley, Halazime'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 turn the call over to Dr. Helen Torley.
spk03: Thank you, Tom, and good afternoon, everyone. Beginning on slide three, I'm very pleased to report that our first quarter 2024 operational performance was in line with our expectations and reinforces our confidence in our full-year financial guidance. There are three drivers of this confidence in our guidance. Our royalties, the expected milestone payments, and our EBITDA. Let me provide now some additional details on these three key drivers, which will help you appreciate the Halazan business model even more. I'll begin with royalties. The first quarter of 2024 marks the 15th consecutive quarter of greater than 15% year-over-year royalty growth. This provides robust support for continued royalty revenue growth in 2024, driven predominantly by our Wave 2 products, Darzelec Subcutaneous and Fezgo, with growing contributions projected from more recently launched and launching products, 5 Car High Trullo and Tocentric Subcutaneous. The second driver is Milestones. We have good visibility to our partner milestone revenues for the remainder of the year, where we project contributions from Wave 1, 2, 3, and 5 products. You may be surprised to see Wave 1 and 2 product milestones. This is a valuable feature of our agreements, where we can have milestone payments for attainment of pre-specified sales levels, potentially extending to occur many years after the original launch. Moving now to the Wave 5 product milestone, we predict a new product will enter the clinic in 2024, resulting in a milestone payment. In the first quarter, we recognized $14 million in milestone payments related to the approval and launch of Vive Dura, which is the brand name for a 5-car Hytrulo in Japan. I'll move now to provide a little more color on the cadence, quality, and probability of the milestone revenues in the upcoming quarters. In the second quarter, we will recognize a $15 million milestone related to the recently announced U.S. regulatory file acceptance for nivolumab subcutaneous, a Wave 3 product. In the third quarter, we project two additional milestone payments related to the Wave 3 products, including a regulatory filing and a first commercial sale. Also in the third quarter, we project a milestone for the Wave 5 product phase one study start I just mentioned. In the fourth quarter, it is notable that we project several commercial sales attainment milestones related to wave one, two, and three products. For all of the abrupt, we have strong visibility, including to the information and trends that give us confidence in these milestone achievements. In addition, we project milestone revenues from new deals and new nominations in 2024. While these may occur at any time in the next three quarters, for planning purposes, we project these in the fourth quarter. We're currently in very active discussions with multiple pharma and biotech companies and have progressed to terms discussions with several. Our strong operating performance and the achievements described above, together with our continued focus on operational expense management, result in confidence in delivering our full-year EBITDA, and we project that we will deliver 26% to 37% growth. The EBITDA quarterly growth cadence is projected to track well to the quarterly milestone payments I outlined earlier. All of these factors provide us with the confidence to reiterate our 2024 financial guidance, with total revenue expected to increase 10% to 19% year-over-year to $915 to $985 million. Royalty revenue continues to be the main driver, which is projected to increase 12% to 17% to $500 to $525 million. We project adjusted EBITDA growth of 26% to 37% to $535 to $585 million, and non-GAAP EPS growth of 28% to 41% to $3.55 to $3.90. With that overview, let me now move to the first quarter operational highlights, which are shown on slide four. The multiple advancements that our partners made in 2023 have paved a clear path for our strong outlook. We entered the year with seven approved enhanced partner products, and there were multiple noteworthy partner product approvals in new regions and new indications already achieved in the first quarter of this year. Beginning with recent approvals, Argenix's F-cortijimod subcutaneous within hands, which is the brand name in Japan of Vivedura, was approved in Japan for generalized myasthenia gravis, including options for patient self-administration. With the subsequent commercial launch of Vivedura, these events resulted in a combined $14 million in milestone payments to Helozyme. It was also exciting that Takeda's Hyculia, which is a Wave 1 product, received approval for an expanded indication in the United States and Europe during the first quarter. The new indication is for maintenance treatment of patients with chronic inflammatory demyelinating polyneuropathy, or CIDP. In addition, Roche received European approval for Ticentric subcutaneous. As a reminder, the potential U.S. approval is expected in September of this year. Also in the first quarter and more recently, multiple partners advanced regulatory progress towards potential approvals and additional milestones in royalty revenues. In February, Ergenix announced FDA acceptance of their SBLA with priority review for bad cart hytrudo in CIDP with a PDUFA target action date in June of 2024. And Roche announced the potential approval for ocrelizumab subcutaneous in Europe in mid-2024 and FDA PDUFA target action dates in September of 2024 for both ticentric subcutaneous and ocrelizumab subcutaneous. Jensen announced U.S. and European regulatory submissions for a new indication for Darzalex subcutaneous as part of a regimen for transplant eligible newly diagnosed multiple myeloma patients. And BMS has announced the FDA acceptance of their BLA for nivolumab subcutaneous with a BADUFA target action date of February 2025. We're also pleased to report two pipeline advancements. Firstly, Argenix initiated registrational studies of F-critigemod subcutaneous with Enhance for a new indication thyroid eye disease. Excitingly, these studies will utilize F-critigemod with Enhance delivered by pre-filled syringe. And secondly, our partner, Veve, initiated another phase one study for VH4524184, which is an integrase inhibitor with Enhance. The performance of our Wave 2 products, along with the start of the launches of our Wave 3 pipeline and strong regulatory progress I've just discussed, give us high confidence in achieving our projections of $1 billion in royalty revenue in 2027. Let me now provide an update on each of our royalty revenue drivers, starting with Darzalex FastPro on slide 5. I'll begin each review by overviewing the potential opportunity size for subcutaneous and then cover recent progress and new opportunities. In the first quarter of 2024, J&J's Darzalex sales were $2.7 billion, up 21% year-over-year on an operational basis. This strong growth was driven by share gains in all regions, resulting in share gain of six points across all lines of therapy and of 10 points in the frontline setting. With subcutaneous penetration in excess of 90% in the United States and it estimated to exceed 80% outside the United States, subcutaneous Darvilex is driving the strong demonstrated and projected total brand growth. Analysts continue to expect Darvilex revenue to grow to exceed $17 billion in 2028. The potential approval in 2024 for the new indication of transplant-eligible newly diagnosed patients based on recent U.S. and European regulatory submissions would provide an important new frontline opportunity for Darzalex subcutaneous. I'll move now to Fesco, which is shown on slide 6. First quarter, Fesco sales increased 70% to 388 million Swiss francs, which represented the second best performer in Roche's self-described young portfolio. Roche recently highlighted that U.S. conversion is reaching 25% and global conversion was 41% in the quarter. With the strong launch update and ongoing geographic expansion, Roche has commented that it projects overall conversion will increase to approximately 50% over time as patients continue to convert from IV progetta. There remains a substantial conversion opportunity from Progetto to Fezgo, with Progetto generating almost one billion Swiss francs in sales in the quarter. I'll turn now to our Wave 3 products and product candidates, which are shown on the right-hand side of slide 7. The opportunity for Wave 3 is meaningful, with five products that analysts project will generate total sales of $35 billion in 2028. This compares to $20 billion for our Wave 2 products, which are driving the robust royalty revenue growth we see today. Importantly, Wave 3 is largely de-risked, with positive Phase 3 data and regulatory submission plans already reported by our partners for all products, with the exception of Johnson & Johnson's and Evantimab, where Phase 3 data and regulatory submissions are expected this year. Let me begin with FiveGuard Hytrulo, the subcutaneous version Vivecart Hatulo is currently approved for generalized myasthenia gravis in the U.S. and Europe, and also in Japan, where it has the brand name 5-Dura. Notably, the European and Japanese approvals also allow for patient self-administration subcutaneously. In 2023, Vivecart generated $1.2 billion in sales, and Ergenix continues to broaden ease of access and coverage for generalized myasthenia gravis securing the J-code for the subcutaneous formulation in January of this year. With Symphony data showing positive quarter-over-quarter growth for the brand, we look forward to growing adoption and use of subcutaneous Vivecar Hurtullo as the number of physicians prescribing Vivecar Hurtullo expands and use increases in the earlier lines of treatment. The potential approval of a new indication of CIDP in June in the United States represents another exciting near-term growth opportunity for Viagra-Hytrulo. This is the indication that will be a subcutaneous delivery only launch. Based on Argenix's research and comments, approximately 42,000 patients are receiving treatment for CIDP today. Only 20% of those patients are getting to remission on the current standard of care, and 50% of patients remain dissatisfied with the current burden of symptoms, signaling a real unmet need in this challenging condition. We appreciate the strong partnership with Ergenix and share their patient-centric vision as they also grow and expand their pipeline The recent initiation of two registrational studies evaluating F-cortisomide within hands administered by pre-filled syringe for thyroid eye disease represents another future opportunity with F-cortisomide. Moving now to Tocentric subcutaneous, which is approved for subcutaneous delivery in the UK and Europe, with both approvals covering all of the approved indications for Tocentric IV. Total revenue for Ticentric was almost 900 million Swiss francs in the first quarter of 2024. With potential U.S. approval in September of 2024, Roche has commented that they believe subcutaneous Ticentric will be largely protective of their IV formulation, with a very modest potential to add to brand growth, meaning the expectation is that the majority of subcutaneous use will be from patients currently on Ticentric IV switching to Ticentric subcutaneous with Enhance. I'll move now to Ocrevus. In the first quarter of 2024, Ocrevus IV generated approximately 1.7 billion Swiss francs in revenue for Roche, increasing 8% year over year. Ocrevus remains the market leader in the U.S. and EU5, with approximately 24% global market share. The approval of subcutaneous ocrelizumab will dramatically change the patient treatment experience. Today's treatment and observation time can be from three and a half to six and a half hours for the IV given every six months. The target for total time for subcutaneous treatment and observation is 10 minutes, also every six months. Importantly, Rosas commented that they see ocrelizumab subcutaneous being a standalone blockbuster opportunity, expanding use of ocrelizumab to treatment centers without IV infrastructure or with IV capacity limitations. supporting even stronger brand growth in the future. Roche recently announced that the European Medicines Agency's Committee for Medicinal Products for Human Use has recommended the approval of ocrelizumab subcutaneous for its multiple sclerosis indications. The European Commission is expected to give a final decision on the approval in mid 2024. Roche also announced that the ocrelizumab subcutaneous has a PDUFA action date in the United States of September of 2024. The key data supporting these approvals is from the Ocarina-2 study. Roche recently presented updated longer-term results from the Ocarina-2 study at the 76th American Academy of Neurology annual meeting. The results highlighted the significant potential benefits of subcutaneous ocrelizumab for patients with both relapsing and progressive forms of multiple sclerosis. The data showed that patients receiving ocrelizumab subcutaneous experienced near complete suppression of relapse activity, with 97.2% of patients experiencing no relapse during the treatment phase. In addition, it was reported that patients treated with subcutaneous ocarbis experienced appropriate B-cell suppression and impressive near-complete suppression of new inflammatory disease activity. Notably, patients reported a very high 92% satisfaction level, and 90% of patients felt that it was very convenient to receive the ocrelizumab subcutaneous injections. These results demonstrate the potential of subcutaneous ocrelizumab as a treatment option that can be matched to the individual needs of patients with MS and also healthcare professionals. Approval of ocrelizumab subcutaneous will represent our eighth approved subcutaneous product within HANS. I'll turn now to Bristol-Myers Squibb Nivolumab subcutaneous within HANS. Bristol-Myers Squibb recently announced the FDA acceptance of its biologic license application for nivolumab subcutaneous co-formulated with Enhance and assigned a PDUFA action date of February 2025. BMS reported that Abdevo, which is nivolumab which is delivered intravenously, generated approximately $2.1 billion in sales in the first quarter of 2024. With subcutaneous nivolumab projected to cover up to 75% of the IV indications over time, BMS has commented that nivolumab subcutaneous will help them extend their immuno-oncology franchise well into the next decade. Approval of nivolumab subcutaneous will represent our ninth Enhance-approved partner product. I'll move now to Johnson & Johnson's amivantamab subcutaneous with Enhance. Amivantamab subcutaneous remains on track with the potential for launch in 2025. Amivantamab is already approved as an IV treatment under the brand name Ribravent, with Johnson & Johnson projecting that Ribravent will become a multi-billion dollar brand. We look forward to Johnson & Johnson presenting the Phase 3 Amivantamab with enhanced subcutaneous data at an upcoming medical meeting. Approval will represent our 10th enhanced partner product. I'll now move to slide 8 for an update on our Wave 4 pipeline. which is expected to support our future growth trajectory with potential launches in the 2025 to 2027 timeframe. We have six products currently in development, reflecting a range of therapeutic areas, including oncology, neurology, immune disease, and HIV. Our two most advanced programs that are in phase three development are Ticada's Immune Globulin 20%, which is TAC881 with Enhance, and Bristol-Marsco's Novolumab Relatumab Fixed-Dose Combination Subcutaneous with Enhance. The phase 3 studies of TAC881 and nivolumab plus rilatilamab continue to progress. Also advanced into later stage development is these broadly neutralizing antibody, N6LS, which is progressing in an ongoing phase 2 study. As I close out this section on our upcoming launches and pipelines, let me now highlight the actions and progress we are making as we seek to expand and add additional partners and development products. that will further add to and extend our revenues in the post-2027 timeframe. These continue with its mission to transform the treatment experience for HIV patients and recently initiated a new phase one study for an integrase inhibitor, VH4524184, given subcutaneously with Enhance. And we're also excited that Acumen announced they plan to initiate a phase one study of a subcutaneous version of ACU193 for the treatment of Alzheimer's disease in mid-2024. We've also continued to be in very active discussions with multiple pharma and biotech companies regarding Enhance and also our high-volume autoinjector. We've progressed several companies to the stage of discussing terms for Enhance. This is the final stage prior to negotiation of the collaboration and licensing agreement. With regard to our high-volume auto-injector, in the first quarter, a current partner completed a human factor study of the high-volume auto-injector to evaluate device usability. Based on the results that were shared confidentially with Halazan, the test was a success. We continue in discussions with that partner and several additional companies who are expressing interest in our high-volume auto-injector. With that overview, I'm pleased to now turn the call over to Nicole, who will discuss our financial results in more detail.
spk02: Thank you, Helen. The first quarter of 2024 is on track with our plans and supports our strong financial performance expectations for the full year from the continued momentum of our business. Let me now briefly touch on our capital allocation priorities on slide 9. We remain consistently focused on a balanced three-pillar strategy, which is to invest in our current business, deploy capital through share repurchases, and seek new growth opportunities through M&A. as we continue to execute on the $250 million ASR that was announced in the fourth quarter of 2023. The new $750 million share repurchase program that was recently approved by the Board in February is a reflection of the confidence in our long-term projections and durability of our business. We maintain a strong balance sheet with cash, cash equivalents, and marketable securities of $463.5 million as of March 31, 2024, compared to $336 million on December 31, 2023. Our net leverage ratio was two times at the end of the quarter, and we expect to reduce our net leverage ratio as we continue to grow EBITDA throughout the year. Turning now to slide 10 for our detailed financial results for the first quarter. Revenue grew 21% to $195.9 million compared to $162.1 million in the prior year period. Royalty revenue for the quarter was $120.6 million, an increase of 21% compared to $99.6 million in the prior year period, primarily attributable to continued momentum of our Wave 2 products, Darzalex FastPro and FezGo. Research and development expenses were $19.1 million, compared to $18 million in the first quarter of 2023. The increase was primarily due to planned investments in enhance. Selling, general, and administrative expenses were $35.1 million in the quarter, down from $37.4 million in the prior year period, primarily due to reductions in commercial marketing expense, offset slightly by increased compensation expense. Growing revenues and relatively flat operating expenses resulted in EBITDA growth of 56% to $115.7 million from $74.3 million in the prior year period. GAAP diluted earnings per share was 60 cents and non-GAAP diluted earnings per share was 79 cents. This is compared with GAAP diluted earnings per share of 29 cents And non-GAAP diluted earnings per share of 47 cents in the first quarter of 2023. Turning now to slide 11 in our 2024 guidance. We continue to see robust growth in our business, and as Helen mentioned, we are reiterating our full-year 2024 guidance of revenues of $915 to $985 million, representing growth of 10 to 19%. Adjusted EBITDA of $535 to $585 million, representing growth of 26 to 37%. And non-GAAP diluted EPS of $3.55 to $3.90, which is growth of 28 to 41% year over year. As you refine your models, I'd also like to reiterate the following. We continue to expect milestones and API sales to be substantially weighted in the second half of the year, with the second quarter flat to the first quarter. For royalties, we expect continued expansion of Wave 2 products and launched Wave 3 products, partially offset by a royalty rate step-down for Darjelex SD outside the U.S. Q2 royalties will be similar to Q1, with sequential growth in Q3 and Q4 to achieve the $500 to $525 million guidance. Non-GAAP diluted EPS growth of 28 to 41% reflects adjusted EBITDA growth of 26 to 37%, as well as the impact of our 2023 share repurchases. I will now turn the call back to Helen. Thank you, Nicole.
spk03: 2024 is after a strong start, as you've just heard, with excellent momentum in the current business and major progress made in advancing new approvals and growth opportunities. These opportunities include the FDA acceptance of Bristol's submission for their BLA for nivolumab subcutaneous with a BDUFA action date of February 2025. The potential new indication approval and launch for Ergenix's 5-car Hertullo in CIDP in the United States in June. Potential approval and launch of Ocrevus subcutaneous in Europe mid-year. Potential U.S. approvals and launches for Roses Dyscentric subcutaneous and Ocrevus subcutaneous in September. And a phase 3 data readout for J&J's amibantumab subcutaneous. I want to close by thanking our terrific Halazam team, our partners and collaborators for all of the hard work that resulted in such strong first quarter progress. Operator, we are now ready to open the call for questions.
spk06: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press the star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press the star 1 again. If you are called upon to ask your question and are listening by a loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press the star one to join the queue. Your first question comes from the lineup. Vikram Pruhit from Morgan Stanley, your line is open.
spk12: Hi, thank you for taking our questions. We had one on the pace of business development Helen, you mentioned that there were some discussions ongoing with potential new partners for Enhance. Just wanted to see if you could provide some more color on kind of what the cadence of those discussions could be throughout the rest of the year and kind of the different stages that they're at and how you might expect those to turn into new agreements throughout the course of the year and 2025. And then on the high-volume auto-injector, just also wanted to see if you could provide some more detail on how those discussions are progressing and what it would take, given where some of those discussions are now, to move towards closed agreements. Thank you.
spk03: Yeah, thank you, Vikram. Delighted to give an update on both of those areas. That obviously is a strong focus for us. As we mentioned in the prepared remarks, in the quarter, we were delighted to see several companies progressing from technical discussions to terms discussions. And importantly, This is a stage that happens prior to negotiating and signing the CLA. So that is a very strong sign of progress. And this is really a result of conversations in the first quarter with more than 10 pharma and biotech companies where at least one conversation has happened. And in several occasions, we've had multiple conversations. In terms of the feedback, let me give you the very consistent feedback, which is, I think, a very strong sign for the value proposition that Enhance provides and how companies are thinking more and more about subcutaneous. The first bit is companies definitely are thinking more and more about subcutaneous delivery right from the start, particularly in diseases like autoimmune disease, CNS disease, and oncology. Moving to Enhance, it's very clear they see Enhance as a gold standard for rapid subcutaneous delivery for patients, particularly in the autoimmune, CNS, and oncology areas, but in all areas as well. And why they think that is because they see Enhance as a highly de-risked product with a strong safety track record and a great history of global regulatory approvals and commercial success. And we've always talked about that, that the companies are very focused on the safety profile. They don't want something experimental that could delay their progress with development or do something to their commercial product. So that's a very important fact, and it's great to see that our messaging on that and our data on that is well received. While IV to sub-Q conversion is the main focus of discussions, we are seeing more and more companies wanting to get to extended dosing for sub-Q delivery, two weeks to a month, one month to three months, that type of thing. And again, particularly in autoimmune and chronic diseases. And we're seeing focus expand from the traditional monoclonal antibody space to companies inquiring about use of enhanced with bispecifics, nucleic acid therapies, and also antibody drug conjugates. And so great, very consistent feedback in all of those areas. In terms of the evaluation and decision-making process, as we've described before, each company is unique. They have their own process for technology approval and then for budget approval. each of which moves at a different pace. And so it's an end of one with each company, which makes it always hard to project the exact timeline for signing each deal. But what we can say in the quarter was we had multiple technical discussions advancing to the decision makers and separately, Several of those then advancing to terms discussion, the last decision point prior to negotiation of the CLA. So excellent progress, Vikram, where based on the breadth and depth of discussion and the progress, I'm confident in signing enhanced deals based on all of this strong progress. I'll move to the high-volume autoinjector, where we are delighted with the interest we're seeing since we communicated our Phase I clinical study data, and we're in discussions with current partners, but also potential new partners as it relates to HVI. We talked in the past, the HVI really is truly groundbreaking. We hear that often in conversations. It's not something that's been done before, and many believe it could not actually be done. Within this space, there's been a bit of a history of some of the prior types of on-body injectors and other technologies not meeting biotech and pharma expectations. And so what we experience are two things. One, as we've talked about, companies want to try it. They want to test it. And that was obviously an example of one of our current partners who completed a human factors study to evaluate device usability in the first quarter. We were delighted that that was a success and we continue in discussions with that partner and also with other potential partners. And the second area is as companies start thinking about getting into development agreement and commercialization, they want to understand and have confidence in the device development plan. and specifically key aspects like availability of the primary container they want to use, the manufacturing plan, including the sites, the capacity, the equipment, the slots to meet their demand projections. And so I think all of these are very good signs of progress in terms of the depth of questions people are getting into, really wanting to understand when this can be commercialized for them and how it will fit. And so the great news is the Halo Xyme team has deep experience in developing and commercializing devices, having done it many times with the small volume otter injectors, And so all of this work on the manufacturing plan is also well underway at this time. So we continue in discussions, and we expect those to also advance to development agreements. Again, hard to pin the exact time, but the progress has been very strong.
spk11: Appreciate it. Thank you.
spk06: And your next question comes from the line of Jessica Fai with JP Morgan. Please go ahead.
spk07: Great. Thanks for taking my question. Sort of sticking with a similar theme here on kind of potential new deals. First, when you say that you're in terms discussions with several companies, should we think of those potential deals as being both pure enhanced deals and auto injector deals as well? Second, should we think of the terms of these new potential deals at similar economics to Halo? as the existing kind of portfolio of deals. And lastly, I think in the past you had talked about a partner who was interested in a customized high-volume autoinjector for their patient population. Is that one among the several companies with whom you're in these terms discussions?
spk03: Yeah, thanks, Jess. With regard to the types of discussions, I can say we're having discussions on enhanced alone, and I would say that is the most frequent discussion we're having. But we are also having discussions on enhanced with a high-volume auto-injector, as well as small-volume auto-injector as well. So across the portfolio, but definitely the enhanced is the highest volume of the conversations, and particularly the ones that we're seeing advancing at this point in time. With regard to terms, in the past we have mostly done terms for products and companies who are looking for exclusive agreements and exclusive rights. I will say that as ever we are talking to companies also about non-exclusive rights. And so there is a difference in our terms between exclusive rights and non-exclusive rights. So I would say you could see some differences in that. But in some of the areas we're talking about, these certainly are areas of strong interest for multiple companies. And so it would be our goal if we did non-exclusive deals to seek to get multiple agreements. And obviously, we'll find ourselves in potentially even a stronger position if we were to be successful with that. And then the customized HVI, All of the discussions on HVAI, frankly, are an element of some customization. Depending on the volume the partner wants to inject, they have to identify what the primary container is going to be, and they may have a preference and a thought for that. They may also, depending on the patient population, have a preference for needle depth, and the viscosity of the drug may dictate a certain difference in the needle girth. And so there is always an element of customization in the discussions of the HVI, Jess. Nothing major, but all kind of appropriate for really having an offering that is the right thing for that partner's patient population and drug.
spk01: Thank you.
spk06: And your next question comes from the line of Michael DiFiori from Evercore ISI. Your line is open.
spk11: Hi, guys. Thanks for taking my question. Congrats on all the progress. Two for me. Thoughts on, obviously, you know, Fezgo is becoming a huge product for you guys. Thoughts on how a Progetta biosimilar may uptake, may affect the uptake of Fezgo? And I ask because there's one that seems to be completing phase three trials late this year. And separate question is, I think you mentioned for subcunevia, you said that if it's approved, it would cover 75% of the IV indications. My question is, why not 100%? And could we expect the same 75% of the indications for subcuatezo? Thank you.
spk03: All right. Thanks so much, Mike. With regard to Fezgo, obviously, you're right. It's showing very strong progress with 70% growth over a year in the first quarter. And that has resulted in 41% global conversion. with the U.S. approaching 25%. And I do think what's going to be important for Roche is that they continue to support the conversion. They've talked about it reaching and exceeding 50%, and I certainly think the progress we're seeing, it might even do better. That's going to be important for the conversation we have about biosimilars, because what we have seen, and I like to use Herceptin as I think a very relevant example for that, that Herceptin got to 60% share of sales, whereas SubQ, after about three years, we meet with Roche twice a year and hear that the share of the Herceptin SubQ has remained sticky. And by that, they mean clinics that moved to giving their patients and themselves as staff experience the convenience of SubQ did not move to IV biosimilars. And it's because the value proposition is so strong in terms of convenience for patients, much shorter treatment time. Obviously, for Fezgo, the difference is between five to eight minutes versus what can often be two to two and a half hours for the sequential administration. And for a clinic, that means a lot less need for nursing time, oversight, et cetera, not to mention the pharmacy having to be involved in making up the IVs. So, you know, I think what's going to be important is we continue to see this very strong progress to subcutaneous. And then I think that the IV progetta will not, if we can look at that example with Herceptin, be an issue.
spk11: Got it. Very helpful. And yeah, my other question regarding the subcunevo and
spk03: This is a comment that Bristol has made with regard to the 75% of the IV indications. I'm not recalling off the top of my head, Mike, exactly what it is and the reason for it. But we do know that for Ticentric outside the U.S., UK and Europe, it got 100% of the indications and that certainly would be the goal in the United States. So there is, I think, a couple of the patient indications, which I believe, actually, as I'm recalling this, I think it's where it's combined with the indications for CTLA-4-IG. So when it's a Yervoy combined indication, those are the ones that are being excluded when they give the 75% because that combination was not studied.
spk11: Got it. Very helpful. Thanks again.
spk06: Thank you. And your next question comes from the line of Mohit Bansal with Wells Fargo. Please go ahead.
spk00: Great. Thank you very much for taking my question and congrats on the progress. I have two questions. So I'll ask first. So in terms of the partnership terms discussions, in general, do you expect the newer deals to have some kind of different different kind of terms or you think they could be generally the same and no meaningful change there?
spk03: Yeah, I think, Mahi, the way to think about it is there'll be a difference if the partner is asking for exclusive rights to a target versus non-exclusive, obviously with the economics for non-exclusive being lower as we have the opportunity to license that to multiple companies. Also, if it is a partner who has a product that is in earlier stages of development, there may be an opportunity for you to see a different distribution between less payments while the product is in development, while it's getting de-risked, and more of a weighting of the payments and a different balance of the royalties based on once the product has achieved regulatory approval and is de-risked. So there could be a few of those nuances across these agreements, but obviously each of these will offer a new royalty revenue stream for Helizyme for the mid-single digit for an exclusive deal and probably be lower than the mid-single digit if it's a non-exclusive deal.
spk00: Got it. That's super helpful. And then one clarifying question. So, I mean, the press has mentioned that there was a little bit lower bulk Rhu PH 20 sales. Should we read anything into it? It was just like a one-off thing.
spk02: Yeah, I'll ask Nicole to address that. Thanks for the question. So we were expecting that for the first quarter. You might recall going into the year we had indicated that our API sales, just based on our partners' ordering patterns and as we enter into the firm periods for our orders, we did have line of sight to the fact that those orders would be more weighted to the second half of the year. So this is all in line with our expectations.
spk00: Got it. Super helpful. Thank you very much.
spk06: Thank you. And your next question comes from the line of Corrine Johnson with Goldman Sachs. Please go ahead.
spk05: Hi. I wanted to clarify one of the comments you made on the term discussions you're having being a mix across enhanced-only auto-injector and auto-injector-only and just kind of give a sense for, you know, the breakdown there. And then on the auto-injector with enhanced partnerships, I guess, are these companies that have already gone through or are fine without doing the human factor studies you've highlighted as being a key focus for one of the potential partners? Or will that be another item that you need to check off before announcing a deal? Thanks.
spk03: Yeah, thanks, Corinne. In terms of the discussions, definitely more conversations happening around enhanced only. And again, that is based on the volume of the drugs that we're discussing predominantly. For those where there is a product that is falling into the, for example, 3 to 10 ml, we are having discussions with several companies with regard to high volume products. auto injector and its applicability really to give state-of-the-art delivery for that company. And then there are a few conversations on small volume. That really is a lesser focus for us as we have a unique set of circumstances where our SVI is the best. areas where somebody is looking for high reliability or there is a high viscosity drug. So that really is how to think about the number of conversations we're having. I would say in the conversations on the HVI, as I mentioned, All companies will want to hold it and test it. That definitely is something that we're seeing. Again, it's something that hasn't been done before. This is a breakthrough, and so they want to test it. Whether they'll want to do human factor studies, I don't think we know that yet, but certainly companies are wanting to evaluate it themselves in terms of understanding how it delivers, etc., So, have to stay tuned for any more information as to whether there will be more human factor studies, but definitely there is an evaluation period where they want to play with it themselves.
spk06: Okay, thanks. Your next question comes from the line of Jason Butler with Citizens JMP. Please go ahead.
spk09: Hi. Thanks for taking the question. Helen, wondering if you're able to comment yet on the sales potential for the Wave 4 pipeline, or give us some context about, you know, how that magnitude might compare to Wave 1 or Wave 2, or Wave 1, 2, or 3. And then secondly, can you just give us an update on Zyastad, and specifically, what are you seeing in the market in terms of promotion sensitivity? just in the context of your measured spend on that product. Thanks.
spk03: Yeah, happy to do that. So for the Wave 4, as we talked about, between Wave 4 and Wave 5, we have nine products that are in development now, which we're obviously very excited about. We aren't giving projections for Wave 4, but I certainly can say that we're excited about some of the products that I mentioned earlier, including nivolumab, rilatilumab, which Brisa Marsquive talks about being a blockbuster brand, and also Tac 20%, which has a very high potential as well. And then behind that is Veve's N6LS. So some of the other products are a little earlier in their development, and there aren't good estimates as to their potential, but I think all of them, we can say, are meeting substantial patient unmet need, but a little premature for us to be giving projections on Wave 4 and Wave 5. But a very exciting set of products across multiple therapeutic areas. With regard to Ziosted, we have a very focused and clear strategy for Ziosted with our sales representatives really focusing on driving and identifying the patients that are not doing well on IM therapy. and having the conversion and assuring that the patient is connected to all of the great services that we provide to assure affordability. We feel we've got the right size of the sales force, the right amount of promotional spend, which actually is less than last year because we've been able to optimize that as we understood better. So we're at, I think, the right footprint and operating expense to be driving this very nice growth that we saw last year to 100 million, and we're projecting, as you know, strong CAGR over the next five years with the current footprint that we have, which is less than 100 representatives.
spk09: Great. Thank you.
spk06: Your next question comes from the line of Brandon Smith with TD Cowan. Please go ahead.
spk13: Hi, thanks very much for taking the question. Maybe first on the latest repurchase program, actually just wondering if you can confirm over what period of time you expect to complete the full $750 million and how we should think about the cadence of buybacks, whether you're kind of planning for steady increments in each quarter or if you'll concentrate it more in certain parts of the year. And then I just wanted to ask quickly about the VivGuard Hytrulo pipeline. Can you maybe remind us which indications are going directly into the enhanced sub-Q or if there are some where they either plan to use IV exclusively or IV first and then run confirmatory studies. Just trying to understand what part of that broader portfolio would be focused on the SC. Thanks. That's great.
spk03: Thanks. Thanks, Brandon, and welcome. I'll ask Nicole to address your share repurchase question.
spk02: Yeah, thanks, Brandon. So for the $750 million authorized plan, we did not time bound that plan, but to give you a sense in how we've performed historically, our prior two plans, and especially the prior plan, which was a similar size, we completed in less than three years. So you can think about that level of cadence of historically how much we have repurchased, totaling to date $1.3 billion deployed to share repurchases. So it continues to be an important pillar of our capital return strategy. But the specific cadence is something that we continue to monitor as we deploy our cash amongst the pillars and really balance it between investments in our current business as well as investments in growing the business through M&A.
spk03: Great, and I'll take the question on 5-Cart Hetrulo. So, obviously, Tim Van Haramaren, the CEO of Ergenix, has talked about his vision that patients with autoimmune disease are going to be able to self-administer 5-Cart Hetrulo over time where possible. And this really is, you're going to see reflected in his development portfolio where more and more indications are moving towards subcutaneous treatment. What I can say based on what's being shared publicly is that, obviously, generalized myasthenia gravis started as an IV, but the sub-Q obviously launched beginning last year. CIBP this year is a sub-Q indication only. And pemphigoid, I believe, is a subcutaneous indication only. We're delighted this quarter to be announcing that with our genics that they've started two sub-Q studies in TED that are phase three registration studies. And as far as I'm aware, there are no IV studies that are listed on clinicaltrials.gov. So I think that there's a strong opportunity to be another sub-Q only indication. And so I think this will roll out to more information on these over time as our genics articulates how they're going to go towards all of the 15 indications. But I think to meet Tim's vision of this, or VibeGuard really being transformative for patients with autoimmune disease, it's my expectation the majority of indications will be sub-Q.
spk13: All right, great. Thanks very much.
spk06: Your next question comes from the line of Mitchell Kapoor with HSC Wainwright. Please go ahead.
spk14: Hi, everyone. Thanks for taking the question. I wanted to ask on DARS-ELECT, the ex-US royalty step down in March, with that happening, how much volume growth in the coming quarters do you need to kind of stay on pace for the 500 million royalty revenues? Or I guess, what would be the necessary performance of some of these wave three launches that you would need to see this year to be successful and kind of meet that threshold?
spk03: Super. I'll ask Nicole to address that.
spk02: Yeah, see, thanks for that. So, we had included in our forecast the expected step down related to OUS sales for Darzalex SC. So, that is part of our plans. It's the driver for our forecast, which demonstrates that we expect Q1 and Q2 royalties to be relatively flat with where we exited 2023. So, that's why you see that phenomenon And our expectations for 2024 is that Q1 and Q2 will be flat. But because the brand is expected to grow, that will offset that royalty rate reduction and as well as continued growth with Fezgo, our other Wave 2 product. And as you mentioned, contribution from our Wave 3 launched products. And that's what gives us the confidence to project sequential growth in the third quarter and the fourth quarter of 2024, allowing us to achieve our total royalty projections for the full year of $500 to $525 million.
spk14: Okay, great. And separately, could you just provide any update on progress towards a next generation enhanced technology, or is that something that's a little further away?
spk03: Yeah, we, a couple of years ago, had talked about having a more room temperature stable enhanced that we have been talking to different current partners and potential partners about. It's a different structure than enhanced, and it has slightly more extended IP to 2032 in Europe and 2034 in the United States. Because the majority of products we continue to work on are enhanced, products that need to be refrigerated such as antibodies and by specifics we have found that there so far is limited interest to a new enhance that our current enhance does everything people need it to do and importantly it's coming with this 800,000 a patient database now establishing the safety and the very strong regulatory track record of success around the world and with multiple approvals in up to 100 countries. And so I will say that because Enhance does everything people need and the products have to be refrigerated anyway, we haven't seen traction with it. I do think in the future if we had a small molecule where the goal was that the patient would be able to carry an autoinjector around with them, that might be the type of product that Enhance the partners would want to use the additional enhanced form, but that's a very limited opportunity. And so far, while we're in discussions, we haven't advanced those discussions.
spk14: Okay, great. That's super helpful. Thank you, Helen, and thank you, Nicole. I really appreciate it.
spk03: Thanks, Mike.
spk06: Your next question comes from the line of David Reisinger with Learning Partners. Please go ahead.
spk10: Yeah. Thanks very much, and thank you as well from my side on the updates. So my questions have been asked. I just have one more, which is the company spent 19 million on R&D in the first quarter. Is that basically the run rate that we should be expecting going forward, so maybe 75 million plus a year? And could you just provide some more color? I think that is primarily on Enhance, but I'm not sure. Could you just help us understand that spending, whether it's for internal activities of innovation, whether it is spending, you know, to help partners develop their products, just any more color on that would be helpful. Yes, Nicole will address that.
spk02: Yes, happy to, David. So your first question on the run rate, I will say that the amounts you saw in the first quarter are expected to grow for the remainder quarters of the year as we make investments in our product development. And so I would advise you to build that into your models as well. growth from the amounts that you saw in the first quarter. And where we spend our R&D dollars is on the enhanced side, as well as the HVAI development. We're making investments in the development of the high-volume autoinjector this year. And so that is another driver of the expenses that we see in this year.
spk10: Thank you. And could you just add a little more color? Since Enhance is going off patent in 2027, what What is the product development that you're doing in the R&D line?
spk02: One example, and we've talked about the higher yield API that we're making investments in that are expected to be available to our partners in 2026. That is a good example of the investments we're making that will benefit our partners, and in particular, their cost in buying the API from us.
spk03: And David, I'll just mention while the U.S. patent is expiring in 2027, that's basically the composition of matter patent. As we have shown, we expect based on co-formulation patents that we're going to continue to receive royalties. on all of our royalty streams until 2030 for many of them, beyond 2030 for a number of them, and beyond 2040 for another. And so we have got very durable revenues, and so it does make sense for us to invest to have the best and lowest cost API because we have got 20 years still ahead of us, or plus that, for our product enhance. And so it's a very wise investment given the durability and length and long stream of royalties we are expecting.
spk10: Got it. Thank you.
spk06: And our next question comes from the line of Joe Catanzaro with Piper Sandler. Please, go ahead.
spk08: Hi. Yeah, thanks for taking my question. I had maybe a quick one that maybe goes back to the discussion around Ticentric Updivo SubQ. As it relates to the early days of Ticentric SubQ in the EU, wondering if you have any early data points there on conversion rates, where you're seeing we're seeing use, I guess, within indications and settings and then maybe stepping back more generally. Is it fair to us to assume what we see around the Ticentric sub-Q trajectory will be comparable to maybe what we will ultimately see for Opdivo sub-Q in the 2025 timeframe? Thanks.
spk03: Yeah, Roche has not provided a lot of details. They did on their fourth quarter call talk about the fact that after one quarter in the UK, they'd seen 18% conversion, which I think is a very strong performance for such a short period of time. But since the European launch in January, they haven't talked about the conversion. And recall for Europe, we're going to see countries rolling out over the course of the year as reimbursement is obtained. So we look forward to ROSE providing some updates on that. With regard to comparing the uptake for Opdivo, you know, Ticentric is going to have a different cadence of the the timing of approvals that I think you'll have to factor in as you're thinking about that because Tocentric obviously is going to have Europe going first, US coming nine months later. I would have an expectation that, and we still have to see based on what Bristol says about the Updevo European file acceptance and launch timing, that that will be closer together. Apart from that, I think the factors are probably going to be pretty similar in terms of strong value proposition where patients get the opportunity for treatment in just five minutes approximately instead of up to 60 minutes, and strong patient preference for ticentric that we can talk about where 71% of patients preferred subcutaneous ticentric, really citing less time in clinic. The administration of the subcutaneous was much more comfortable for them, and the treatment was less emotionally distressing for them. All of those are good factors, but I think the launch cadence might be one of the factors that would make these launches not identical, but strong value proposition for both.
spk08: Okay, great. That's helpful. Thanks for taking the question.
spk06: Thank you, and we have reached the end of our Q&A session. Thank you, presenters, and ladies and gentlemen, that concludes today's call. Thank you all for joining me now. Disconnect.
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