Halozyme Therapeutics, Inc.

Good afternoon. My name is Kayla and I will be your conference operator today. At this time, I would like to welcome everyone to the Halo-Zyme second 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one. Please note this event is being recorded. I will now turn the call over to Tram Bui, HaloZyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Operator. Good afternoon and welcome to our second quarter 2025 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, HaloZone's President and Chief Executive Officer, who will provide an update on our business, and Nicole Labrosse, our Chief Financial Officer, will review our financial results as well as our outlook. 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 risk and uncertainties. During the call, both GAAP and non-GAAP financial measures will be discussed. Certain non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. I will now turn the call over to Dr. Helen Torley.

Good afternoon, everyone, and thank you for joining us today. Let me begin on slide three. I'm pleased to announce another record quarter, which highlights the significant growth and accelerating momentum we have across the business. Total revenue in the quarter was $326 million, representing a 41% increase over second quarter prior year. This robust growth was driven by continued strong royalty revenue performance, driven by our three established blockbuster subcutaneous therapies, Darzalex Subcutaneous, Subcutaneous Fezgo, and Five Car High Trullo. This quarter's royalty revenue grew an impressive 65% year-over-year to $206 million. An adjusted EBITDA increased an outstanding 65% over prior year second quarter to $226 million. This was driven by the accelerating growth of our high-margin royalty revenue streams as a result of increasing demand for products incorporating our leading drug delivery technology, Enhance. Based on this strong continued performance and the growth trends, I am pleased to announce that we are raising our 2025 financial guidance for the second time this year. We are now projecting total revenue of 1.275 to 1.355 billion dollars, representing 26 to 33% growth over 2024. This is a further increase to revenue guidance of $75 million after raising guidance by approximately $50 million in the first quarter reporting. 2025 full-year royalty revenue guidance is increased to $825 to $860 million, representing growth year-over-year of 44% to 51%. Adjusted EBITDA and non-GAAP EPS guidance have also been raised, and Nicole will go into more detail on this shortly. During the quarter, we completed the second $250 million share repurchase tranche of our authorized $750 million share repurchase plan. I'm pleased that we also initiated our third $250 million share repurchase program under the approved $750 million plan. Importantly, the strength of our revenue growth and the resulting strong cash generation enable us to be able to add this additional $250 million of share repurchases while being able to pursue our M&A goals. With regard to M&A, we are continuing to focus 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 the technology to multiple pharma partners. We heard your leverage and we're seeking deals that can be accomplished without the need for significant increases in net debt to EBITDA leverage. I'll move now to slide four. On the first quarter call, I highlighted multiple catalysts for our current portfolio which had just occurred or which we are expecting throughout the year that will drive incremental strong revenue and EBITDA growth for multiple years to come. There are now 14 catalysts of which I am pleased to note 11 have already occurred. While I will highlight these exciting growth catalysts in more detail as we review each product, I want to highlight and emphasize how each catalyst represents a meaningful revenue growth inflection for our royalty revenue. Let me begin with a new product approval and a new royalty revenue stream, which was for Ribravan Subcutaneous in Europe in April. Johnson & Johnson has commented on the critical role that subcutaneous Ribrovan is playing in achieving their ambitions to grow Ribrovan to become a $5 billion brand. There are two recent first-time approvals in a major region, specifically for Epdivo subcutaneous in Europe and for Vibgot-Hertullo in chronic inflammatory demyelinating polyneuropathy, or CIDP, also in Europe, both of which occurred in the second quarter. and which represents additional revenue inflecting opportunity as adoption grows in Europe. There have been five new indication approvals. Let me highlight Darzalex subcutaneous, which gained new indication approvals in smoldering multiple myeloma and in a new frontline indication in Europe, which expands their TAM in patients early in the disease and provides a meaningful new growth opportunity and revenue inflection opportunity to Helizam. Another new indication approval was the Weibgart-Hertullo prefilled syringe, which we know is already contributing and creating an inflection in the growth of Weibgart-Hertullo after just one quarter. And I will close on three major reimbursement milestones which have recently occurred, including Fesco's reimbursement in China and permanent J-codes added for Ocrevis-Sinuvo and Opdivo-Quantage, all of which add to and will expand our opportunity, adoption and create royalty revenue inflections. In our history as a company, we have never had such a broad and meaningful set of growth catalysts, creating new additional incremental royalty streams and revenue inflection across so many products. These catalysts extend beyond supporting our growing commercial success, but also reflect the important role our enhanced technology is playing in significantly enhancing patient access, improving convenience for patients, and addressing unmet patient needs. I'll now focus on the three blockbuster products that are driving our remarkable current growth, starting with Darzalex, which is shown on slide five. Johnson & Johnson reported strong second quarter results for Darzalex, with revenue increasing almost 22% to $3.5 billion in the quarter. Growth was driven by share gains of approximately four points across all lines of therapy and almost eight points in the frontline setting, in addition to market growth. I want to highlight two critical points here. Firstly, the subcutaneous delivery of Darzalex within hands has reached 96% conversion in the United States with a similarly high conversion rate outside the United States, meaning that it is the subcutaneous treatment version on which Halosam receives a mid-single-digit royalty that is driving and benefiting from the strong growth I just mentioned. And secondly, quarter after quarter, Johnson & Johnson has commented on the robust share gains for dorsal subcutaneous in the frontline setting. This is important as frontline patients as a whole have a longer survival and often a longer duration of treatment compared to the later line patients. The increased penetration of frontline is what is driving today's strong growth and we project that it will continue for many years to come. Moving now to the recent catalysts that provide new opportunity and growth. Starthalic subcutaneous recently received two new approvals in Europe. The first is for subcutaneous starthalics as part of a quadruplet regimen for newly diagnosed patients regardless of transplant eligibility. And the second is for high-risk smoldering multiple myeloma. The approval in high-risk smoldering multiple myeloma was based on the Phase III Aquila study. which showed a significantly reduced risk of progression to active multiple myeloma or death by 51% compared to the current standard of care, which is active monitoring. The new indication addresses a longstanding unmet clinical need and marks a critical advancement in the early intervention of the disease for those who are at high risk. To help you dimensionalize this opportunity, in Europe in 2022, approximately 35,000 patients were diagnosed with multiple myeloma of whom 15% had smoldering multiple myeloma. For those with high-risk smoldering multiple myeloma, half will progress to multiple myeloma within two years. For these patients, this approval for Darzalex subcutaneous marks the first ever approved therapeutic intervention and the hope that progression to full-blown multiple myeloma can be slowed. Turning to the U.S. regulatory approval status, In May, Johnson & Johnson announced the U.S. Food and Drug Administration Oncologic Drug Advisory Committee voted in favor of the benefit-risk profile of Darzalex Faspro for the treatment of adult patients with high-risk smoldering multiple myeloma. The projection from analysts for Darzalex is approximately $18 billion in sales in 2028, and Halazan will earn royalties in Darzalex with Enhance through 2032. Turning to our second blockbuster, Roche's Fezgo, which is shown on slide six. Fezgo, which is the combination of Progetta, Herceptin, and Enhance, represented the leading growth driver in Roche's pharma portfolio, with first half 2025 revenue of 1.2 billion Swiss francs, or approximately 1.5 billion US dollars, reflecting a 55% year-over-year growth. There was strong uptake across all regions, with the global conversion from Progetta to Fezgo at 46% across 78 launch countries, which increased from 58 launch countries in the first quarter. The convenience of Fezgo was also reinforced in April, with a CHMP recommendation for European label expansion, allowing administration outside of clinical settings, such as at home by a healthcare professional, once safety has been established. This label expansion represents another growth catalyst for Fezgo. Roche Project's conversion from Progetto will continue, bringing an improved treatment experience for patients and the potential to significantly reduce treatment administration costs. We're pleased with Fezgo's increasing reach and the impact of our enhanced technology platform with royalties at the full mid-single-digit rate through 2030. Let me move now to slide seven, Our partnership with Ergenix reflects a shared mission to provide innovative new treatment options for patients globally. The success of Vivegard and of Vivegard Hytrulo, which is a subcutaneous formulation within HANZ, are a great demonstration of how innovation can support patient outcomes. Vivegard Hytrulo continues to be a key driver of the exceptional growth of Vivegard total sales, which increased 97% year-over-year in the second quarter to $949 million. 5-Guard Hachulo is now approved in the United States and Europe in two indications, generalized myasthenia gravis and CIDP. The subcutaneous formulation with Enhance has been essential to broaden 5-Guard's reach to gain new prescribers and new patients in both indications. And the pre-filled syringe for subcutaneous delivery, which is also enabled by Enhance, is playing a key role in reaching even more patients earlier in the treatment paradigm. I'll begin with generalized myasthenia gravis and provide some more details. Argenix reported a strong quarter in generalized myasthenia gravis, marking the 14th quarter of consistent growth. The launch of the pre-filled syringe is helping Argenix reach new GMG patient segments, particularly those who have previously been out of reach for the HCP-administered option. Argenix further commented, that they see that myosinogravus total addressable market to be 60,000 patients in the United States, which is significantly higher than the initial estimates at launch, which were of 17,000 patients. This increase is driven by the potential addition of seronegative myosinogravus and ocular myosinogravus indications, plus the availability of biologics, adding 25,000 patients to the addressable population. The pre-filled syringes emerging is a key differentiator that will help increase penetration into this additional 25,000 patient opportunity. I'll turn now to CIDP. As of the end of June, Argenix reported over 2,500 CIDP patients had been treated globally with 5-GAR-Hetrulo. A majority of these patients are in the United States. Argenix also noted that the launches in Japan and Germany are off to a fast start. This momentum was driven by the unmet need, meaningful outcomes driven by the safety and efficacy profile, and the availability of the pre-filled syringe. With an estimated 12,000 patient population, there is significant growth opportunity ahead in CIDP. Recall, only Vivecart-Hertullo within hands is approved to treat CIDP, So 100% of sales are subcutaneous, on which Halosime receives a mid-single-digit royalty. Moving now to the pre-filled syringe, which was approved in the United States and Europe in the second quarter. Argenix, on their second quarter call, commented that the introduction of the pre-filled syringe led to a notable increase in demand in the United States. Argenix reported that pre-filled syringe drove record patient adoption, with 50% of pre-filled syringe users being entirely new to the brand and the rest switching from vial or IV. The pre-filled syringe also broadened the prescriber base, with over 1,000 physicians writing prescriptions in the first quarter of launch, 15% of whom were first-time prescribers of any Viagra product presentation. This really is a testament to the innovative technology, convenience of treatment, and suggests that the pre-filled syringe is a long-term growth enabler for all current and future indications for Vivegard-Hartullo. Vivegard-Hartullo is a prime example of a durable contributor to our long-term financial expectations, with analyst projections of $7 billion just in myasthenia gravis and CIDP, and Halazine earning royalties through the early 2040s. Now, in addition to these three blockbusters that are driving our growth today, we have four recently launched products with Enhance. Okravis Sunuvo, Tessandra Cabriza, Obdiva Quantage, and RibraVent Subtitanious, which are still early in their launches and will become more meaningful contributors in 2026 and beyond. I'll now move to slide eight and begin with Okravis. Roche reported continued good momentum for Ocrevus, with total revenue increasing 8% to 3.5 billion Swiss francs, or approximately 4.4 billion US dollars in the first half of 2025. Roche recently affirmed that they are confident in their outlook for Ocrevus to grow high single digits in 2025. Ocrevus Zenova with Enhance was approved in 2024 and allows for an approximately 10-minute subcutaneous injection which compares with multiple hours that is typically required for the intravenous administration and monitoring time. In the second quarter, Roche reported that almost 7,000 patients have already been treated with the subcutaneous formulation globally. With 50% of new Orcavis-Zenuvo patients in the United States and Germany being reported as being naive to the brand, Orcavis-Zenuvo is expected to continue to increase access and reach more patients. Existing large academic centers are adopting Zenuvo as a more convenient option for patients, while community neurologists with more limited IV capacity are seeing it open up the patient population they are able to treat. The ongoing launch of the subcutaneous formulation within hands is expected to continue to accelerate in the United States following the permanent J-code, which was granted on April 1st. We look forward to increasing adoption of subcutaneous coming from both switches, from the IV formulation, and from new-to-brand patients. The total brand opportunity for Ocrevus is projected by analysts to be $10 billion in 2028, and Halazine will earn royalties on the subcutaneous formulation at its full mid-single-digit rate until 2030, and at a step-down rate until at least 2034. I'll move now to Roses Ticenter Cow Breeza with Enhance. Ticentric Hybriso was approved in the United States and Europe in 2024 for all of the IV indications, and the enhanced enabled formulation offers patients and providers with a more convenient seven-minute subcutaneous injection. Roche has previously commented that it is their strategy to convert the IV to subcutaneous use. Ticentric represented 1.7 billion Swiss francs of revenue in the first half of 2025. Looking forward, analysts project revenue of approximately $4.5 billion in 2028. Halazan will earn royalties on net sales of the subcutaneous formulation at its full mid-single-digit rate until the 2040s. Now moving to Bristol-Mars Squibb Updevo subcutaneous with Enhance, which was granted FDA approval at the end of 2024 and approval in Europe in May. BMS recently reported that the early feedback in the U.S. is encouraging, with the three-minute subcutaneous treatment saving patients, caregivers, and providers time, while also improving clinic efficiency, increasing patient comfort, and reducing treatment complexity. Additionally, few report procedures streamline care, allowing physicians to treat more patients. In the second quarter, Avdeeva Global sales were approximately $2.6 billion, up 7%, driven primarily by demand. PMS reported that the US launch of Quantage is progressing well with sales of approximately $30 million with the use across all indicated tumor types. The permanent J-code that was received on July 1st will support additional conversion. The strong year-to-date performance of Opdivo plus Opdivo Quantage are now projected to result in mid to high single-digit growth of global Opdivo sales for the full year. Analysts predict total brand sales of $9.5 billion in 2028. I'll move now to Johnson & Johnson's Riborvant Subcutaneous, which represents our 10th approved partner product. Riborvant Subcutaneous, co-formulated with Enhance, was approved in Europe in April of 2025 for use in combination with Lasatranib for the first-line treatment of adult patients with advanced EGFR-mutated non-small cell lung cancer. The subcutaneous delivery with enhanced reduces administration time from multiple hours to minutes and results in a five-fold reduction in the potentially serious adverse event of infusion-related reactions when compared to the IV formulation. Furthermore, in an exploratory analysis, the subcutaneous formulation improved overall survival compared to the IV formulation. In the second quarter, Johnson & Johnson reported ribofan revenue of $179 million representing an increase of over 100% year-over-year and growth of approximately 27% sequentially, which was driven by continued strong launch uptake. There were share gains in both first and second lines of treatment and consistent growth in intent to prescribe. Riborvant subcutaneous lymph enhance is currently under FDA review in the United States. Our 10 launch products are on track to deliver over $1 billion in royalty revenue, now possibly even before 2027. Recall that 10 years ago I made the projection that we would achieve $1 billion in royalty revenue in 2027, and we are delivering according to this guidance. Notably, we also project all products will continue to generate royalties to at least 2030, and that many are expected to continue into the 2040s. On slide nine is an overview of our pipeline, which includes a total of nine product candidates and highlights multiple future potential new growth drivers and royalty streams that I will remind you are not included in our multi-year royalty guidance. Bristol's subcutaneous nivolumab plus rilatilumab and Takeda's TAC881 are the first potential new royalty revenue growth drivers with potential to launch in the next two years. Both are progressing in phase three. In addition, we have one product in phase two testing and six products that are in planning, are in, or have completed phase one studies. This includes Argenix 213, Argenix's next generation FCRM blocker, which recently started a phase one study. We expect two additional new target phase one trial starts, one this year and one that has now moved into 2026. Now also adding to our new growth will be new nominations and new deals. Our new partner discussions with Enhance are progressing well, and we're on track for at least one new Enhance deal announcement this year. Our conversations range from approved IV treatment, where the partner wishes to move to subcutaneous, developmental IV assets, where the partner wishes to move to sub-Q for an improved treatment patient experience, and products that are already subcutaneous, where the goal is subcutaneous extended dosing, also for improved patient experience, but also improved adherence and compliance. Let me now turn to our autoinjector business, which consists of two partner products, Teva's EpiPen and their version of teriparatide, plus the actresses Theatrogrel, which is in development with our small volume autoinjector for the prevention of myocardial infarction. As announced on our Q4 2024 call, we were pleased to have signed a development agreement for our small volume autoinjector with a current partner. We expect to enter clinical testing with this partner in 2026. We also announced a high-volume autoinjector development agreement, also with a current partner, on our first quarter 2025 call. And we are projecting to conduct a human factors study on usability by the end of this year. In parallel, we have been investing in advancing our high-volume devices for clinical readiness. We expect our 5mL high-volume autoinjectors to be ready for use in clinical human studies in the fourth quarter. In addition, the updated design of our 10 ml high volume autoinjector will be ready for partner testing in a non-clinical setting also in the fourth quarter. And we're continuing to seek new partner agreements for both the small volume and the high volume autoinjectors. Where I'm pleased to say we're hearing consistently from pharma that there is a clear goal to enable more and more at-home delivery of biologics by the patient. I'm now pleased to turn the call over to Nicole.