Halozyme Therapeutics, Inc.

Good afternoon. My name is Bailey and I will be your conference operator today. At this time, I would like to welcome everyone to Halo Zyme's first quarter 2025 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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one. Please note, this event is being recorded. I will now turn the call over to Trom Bui, Halozyme's Vice President of Investor Relations in Corporate Communications. Please go ahead.

Thank you, Operator. Good afternoon, and welcome to our first quarter 2025 Financial and Operating Results Conference call. In addition to the press release issued today after the market closed, We could find a supplementary slide presentation that would be referenced during today's call in the investor relations section of our website. Leading the call will be Dr. Helen Torley, Halazan's President and Chief Executive Officer, who will provide an update on our business, and Nicole Labrosse, our Chief Financial Officer, 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 filing 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 will now turn the call over to Dr. Helen Torley.

Good afternoon, everyone, and thank you for joining us today. It really has been a tremendous start to 2025. Before I describe the many events and successes in the first quarter, let me begin by thanking the many shareholders and sell side analysts who participated in our investor feedback interviews earlier this year. We really appreciate your feedback and it has been invaluable. Your feedback helped us understand more granularly the role that we are playing in different investor portfolios, and we're very pleased to be considered your consistent stock grower. Not surprisingly, each of you recognize our leadership in drug delivery for biologics and how this foundation can be expanded to additional areas of drug delivery. All investors agreed on key themes about Halazine. For example, no investor wants Halazine to invest in drug development binary risk. We agree. All investors want to make sure that we maximize the organic growth represented by Enhance and our autoinjectors by fully investing where there are opportunities. Again, we agree, and later this year, we will settle an update about potential new enhanced uses and the opportunity. All investors encourage us to also seek to grow inorganically through M&A. While opinions differed about the exact destination for our M&A, all investors want us to remain disciplined about our net leverage, and we listen to your feedback. With this in mind, I am pleased to reiterate our strategy. Our goal, said simply, is to grow organically and through serial acquisitions, excelling in licensing disruptive drug delivery platform technologies that improve the patient treatment experience and result in better outcomes. With the strategy, we aim to deliver strong and durable revenue and EBITDA growth well into the next decade. We will achieve this performance by continuing to focus first and foremost on organic growth, We will continue to invest in and grow in hands and our auto injector businesses, for we are absolutely the best position company to capitalize on the growing pharma and patient priority for at home patient delivered treatment. We will also seek to grow inorganically through M&A. Our focus here is on identifying new drug delivery platforms where the business model results in long durable revenue streams, such as through royalties. and where we see the opportunity to license to multiple pharma partners. We heard you in leverage and we will be seeking deals that can be accomplished without the need for significant increase in net debt to EBITDA leverage. And we heard how much our share buybacks are appreciated by our investors given the high IRR they have delivered. I am pleased to announce that we are planning to continue this in 2025. announcing today the plan to repurchase $250 million in shares. Let me now move to the Q1 performance, beginning on slide three. Now here's how I'd like you to think about our business, our performance, and our future. Firstly, we have three blockbusters that are driving our current growth. We'll go into more detail on those in a moment. Secondly, we have 11 new growth catalysts that have either just happened or will happen in the next month. These catalysts will drive our growth for multiple years to come. And thirdly, we have several products in our development pipeline plus our auto-injector technology that will drive additional future growth. As an example, today we are pleased to announce our very first high-volume auto-injector agreement. Turning now to slide four, let me briefly highlight the strong first quarter results. Total revenue increased 35% year-over-year to $265 million, with royalty revenue increasing by 39% to $168 million, primarily driven by the three blockbusters, Darzalex Subcutaneous, Fezgo, and Fivegar Hurtulo. Adjusted EBITDA increased to $162 million, and non-GAAP EPS increased to $1.11, both representing approximately 40% year-over-year growth. Net income also grew an impressive 54% in the quarter to $118 million. Let me now expand on the three blockbusters that are key revenue drivers and that are projected to keep growing for years to come. Darzalex Fastpro, Fezgo, and Viagra Hytrulo. I'll begin with Darzalex shown on slide five. In the first quarter, Johnson & Johnson reported another strong quarter of growth for Darzalex, which increased 22% year-over-year on an operational basis to $3.2 billion. The growth was primarily driven by continued share gains of approximately three points across all lines of therapy and approximately five points in the frontline setting, as well as through market growth. Darzalex Subcutaneous with Enhance, which is marketed as Darzalex FastPro in the United States, accounts for approximately 95% of all Dorsalix sales in the United States and commands a similarly high proportion of share in the major ex-US markets. And Dorsalix continues to set the standard in multiple myeloma treatment, with Johnson & Johnson's commitment to its clinical advancement continuing to solidify its role as the backbone of treatment across front and second-line patients. Moving now to the first of the 11 new growth catalysts which is a recent European approval of a Darzalex-based quadruplet regimen for patients with newly diagnosed multiple myeloma, regardless of transplant eligibility. Further support, near-term growth, and the analyst estimates for Darzalex to reach $17 billion in sales in 2028, with the subcutaneous formulation driving this growth and the vast majority of the sales. We project royalties on Darzalex subcutaneous through 2032. Let me move now to slide six and Roche's Fezgo, which is the combined therapy of Progetta, Herceptin, and Enhance. Fezgo continues to demonstrate strong adoption and commercial success. In the first quarter, Fezgo was the number one growth driver in Roche's pharmaceutical portfolio, with sales increasing 52% to approximately $675 million, with strong performance in international regions. Our second new growth catalyst is Fesgo gaining national reimbursement drug listing in China, with Roche commenting on their Q1 call that the growth in China is accelerating noticeably following the listing which happened earlier this year. Conversion from Progettis to Fesgo is ongoing, reaching 47% in the 58 launch countries in the first quarter, with expectations for conversion to reach more than 50% across global markets in 2025. In April of 2025, the CHMP recommendation in Europe to expand the FESCO label to allow administration outside of a clinical setting is our third growth catalyst. Availability of this option will deliver on patient preference for at-home administration. We see this also as an important step in freeing up cancer care capacity in the clinical settings. Sales of Fezgo are projected to reach approximately $3.3 billion by 2028, entirely from the enhanced-enabled subcutaneous formulation, where we earn a mid-single-digit royalty on net sales through 2030. The product's strong growth and broad geographic uptake underscore the commercial success possible with enhanced-enabled therapies. Let me now move to Argenix's Vivecart and Vivecart Hytrulo, which is the subcutaneous version enabled by Enhanced. These are shown in slide 7. Today, Vivegard-Hertullo is approved for two indications in the United States, generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy, and for one indication, generalized myasthenia gravis in Europe. In the United States, Vivegard-Hertullo with Enhance has played a pivotal role in adding new prescribers and new patients in the first approved indication, generalized myasthenia gravis. reaching patients earlier in the treatment paradigm, and accessing new-to-brand patients. Moving now to the second approved U.S. indication, CIDP, Vivegard-Hartullo was approved as a subcutaneous-only treatment recently in September of 2024. Argenix has reported initial strong demand from patients and physicians, highlighting the unmet need for safe and effective treatment alternatives. As reported in February of 2025, more than 1,000 CIDP patients were in therapy. For CIDP, Argenix has stated that they have attained favorable or highly favorable coverage for 90% of U.S. lives. They further commented that their recent sales force expansion has contributed to deeper community reach, noting that 25% of prescribers for CIDP are new to Vivegard. In Europe, Vivegard Hydrillo was approved for generalized myasthenia gravis in November of 2023. Vivecart total sales reached $2.2 billion in 2024, with continued strong growth, especially of Vivecart Hetrulo projected in 2025. Turning now to slide eight, I'll comment on the growth catalyst number five, six, and seven. In April of 2025, the FDA approved the new option for patients to self-inject Argenix's Vivecart Hetrulo pre-filled syringe. which contains the same Vivegard, which is co-formulated with Enhance, as is in the vial, and where Halazine receives the same mid-single-digit royalty on net sales. This FDA approval of the pre-filled syringe is our fifth new growth catalyst. The Vivegard Hotrula pre-filled syringe is approved as a 20 to 30-second subcutaneous injection, which is administered by a patient, a caregiver, or a healthcare professional, and will contribute to Vivegard Hotrula's strong growth trajectory for 2025 and beyond. The prefilled syringe also received a positive recommendation in Europe for use in generalized myasthenia gravis patients in February of this year. This is projected to result in approval in the second quarter of 2025 and is our sixth growth catalyst. In April of 2025, Argenix received a positive opinion for Weibgart-Hertullo from the CHMP in Europe for the indication of chronic inflammatory demyelinating polyneuropathy. With approval expected to occur mid-year 2025 following the CHMP opinion, this new indication, which we expect to be for the vial and for the pre-filled syringe, will significantly expand the opportunity and add new growth. And this is our seventh new growth catalyst in 2025. Viveguard is just starting its journey of innovation. As you will see on slide 9, Argenix has multiple active subcutaneous programs in development within HANS, including for ocular myasthenia gravis and for thyroid eye disease, which will further fuel the revenue growth. With Halosam earning royalties through the early 2040s, FiveGuard Hyatulo represents one of the most significant and durable contributors to our long-term financial performance. Continue to expand the new growth catalyst and now move to slide 10 and the four additional recently launched products that are just warming up and are at the start of what promised to be exciting launches. Let me begin with Ocrevus Zenubo with Enhance, which was approved last year for multiple sclerosis as an approximately 10 minutes subcutaneous injection. This compares with multiple hours that is typically required for the intravenous administration. Importantly, and the eighth new growth catalyst, Roche recently reported that Ocrevus Zenuvo received its permanent J-code in the US on April 1st, which they stated will help accelerate uptake in the second half of 2025. Outside the United States, work continues to gain that all-important reimbursement in each country. Roche reported that 50% of patients who started on Ocrevus Zenuvo were naive to the brand, providing Roche with confidence that Zenuvo will open up new patient populations to Ocrevus and not simply cannibalize existing share. Roche believes that Ocrevus Zenuvo could represent an incremental approximately $2 billion opportunity for the brand through this expansion, resulting in an approximately $10 billion analyst projection for ID and subcutaneous Ocrevus in 2028. Ocrevacinubo is projected to earn helozyme royalties at its full mid-single-digit rate until 2030 and at a step-down rate until at least 2034. I'll move now to Roche's Tocentric Hybrido with Enhance, which gained FDA and EMA approval in 2024. The approvals were for all of the intravenous indications, offering patients the convenience of an approximately seven-minute subcutaneous injection. With a permanent J-code in place and work continuing to gain reimbursement in all countries, the strategy is to convert IV-tocentric patients to Tocentric Hybrisa. Kalazine will earn royalties on Tocentric Hybrisa at the full mid-single-digit rate until the 2040s. Moving now to Bristomar Squibb of DevoQuantage, the subcutaneous formulation of nivolumab with Enhance, which was granted FDA approval at the end of 2024 in the United States. BMS is focused on continuing to increase breadth of prescribing in both the community and academic settings. And the permanent J-code, our ninth new growth catalyst, is expected on July 1st. The J-code is expected to drive adoption of the subcutaneous formulation in the second half of the year. BMS recently commented that they're receiving promising early feedback from practices and patients on the subcutaneous formulation, which is a three to five minute subcutaneous injection. Use is predominantly happening in the community setting and is occurring across multiple tumor types. In April of 2025, BMS announced the positive CHMP opinion for Abdevo subcutaneous within hands, representing our 10th new growth catalyst. We anticipate European approval in mid-2025. I'll move now to subcutaneous ribavant, which is Johnson & Johnson's innovative EGFR cement inhibitor. Johnson & Johnson gained European approval of subcutaneous ribavant, co-formulated with Enhance in April of 2025, for use in combination with lazetranib in the first-line treatment of adult patients with advanced EGFR-mutated non-small-cell lung cancer. Subcutaneous ribavant represents a more convenient, patient-friendly formulation, reducing administration time from multiple hours required for the IV to just five minutes for the subcutaneous. Importantly, there is a five-fold reduction in infusion-related reactions compared to the IV formulation. Work is now underway to gain reimbursement for subcutaneous riborant in each country. And our 11th new growth catalyst is the potential U.S. approval of riborant subcutaneous. J&J is continuing to work on gaining this approval in 2025. I wanted to also highlight recent data on Ribrovan. Very excitingly, the results of the Phase III Mariposa trial were presented at the European Lung Cancer Congress in March of 2025. The combination of Ribrovan and Leuzetranib significantly reduced the risk of death by 25% versus Tegrizo, which is considered by many to be the current standard of care in patients with newly diagnosed EGFR-mutated non-small cell lung cancer. with a projected improvement projected of more than 12 months survival benefit over this current standard of care. This is certainly a potentially important advance for patients with this type of cancer, where only 20% of patients survive beyond five years today. With our now 10 launch products, which are shown on slide 11, we remain on track to deliver over $1 billion in royalty revenue in 2027, with all products continue to generate royalties to at least 2030 and many expected to continue to the 2040s. I'll move now to slide 12 and to some highlights on our pipeline that represent potential new growth drivers, the royalty revenues of which are not included in our multi-year guidance. During the first quarter, Acumen reported top-line results for Cipernatec subcutaneous with Enhance for Alzheimer's disease, which support further clinical development for the subcutaneous formulation with Enhance. We've also reported positive phase 2 data for N6LS subcutaneous with Enhance in combination with Cavitagravir. The study demonstrated the promise of an every four-month treatment in combination with Cavitagravir. This is another terrific example of how Enhance can support a more extended dosing interval, reducing the treatment burden for patients. And we were also very hard at work during the quarter, continuing discussions with several companies and entering into discussions with multiple new companies with regard to new deals. I'm pleased to announce that we have signed our first development agreement with the current Enhanced partner for development of our high-volume auto-injector. The majority of the ongoing discussions continue to focus on Enhanced alone and Enhanced with the high-volume auto-injector if the volume is between 2 to 10 mLs. I can update that we are progressing through the multi-step review and decision-making committees in several of these discussions. And turning to our small volume autoinjector business, I'm pleased to say that one of our current partners is progressing now to test the small volume autoinjector in a phase one study. There has not been a time in Halosan history when we have been in such a strong position in terms of having 10 de-risk proven approved substance products with 11 recent or soon-to-happen events that are catalysts to expand opportunity, adoption, and growth. The underlying continued strength of DARS-like subcutaneous, Fez-grown Weibgart-Hertullo, plus these new growth catalysts have resulted in the increased 2025 guidance, which Nicole will review in a moment after she discusses our first quarter results in more detail. Nicole? Thank you, Helen.