Halozyme Therapeutics, Inc.

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.

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.

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.