Halozyme Therapeutics, Inc.

Good afternoon. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's second quarter 2026 financial and operating results conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please note, this event is being recorded. I will now turn the call over to Tram Bui, Haluzheim's Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to our second quarter 2026 Financial and Operating Results Conference Call. In addition to the press release issued today after the market closed, you could find a supplementary slide presentation that will be referenced during today's call in the investor relations section of our website. Leading the call would be Dr. Helen Torley, HALA XIM's president and chief executive officer, who will provide an update on our business, and Darren Snellgrove, our chief financial officer, 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 will now turn the call over to Dr. Helen Torley, and we will start on slide three.

Thank you, Tram, and good afternoon, everyone. I am pleased to report our results from an exceptionally strong second quarter, led by Enhanze royalty revenue growth and New Deal momentum that resulted in meaningful upfront milestones. You've heard me say before that Enhanze is a unique compounding platform engine. On this call, we will share multiple proof points demonstrating how Enhanze is delivering on all of the attractive features of a compounding platform engine. I'm talking about the repeatability of success, The scalability and diversification and the durability of revenues that result from this. The enhanced value proposition is attracting new partners and additional products from our current partners at a cracking pace. On top of this, Hypergon is already off and running as a second future combining platform engine for Halozyme, showing the same features and in fact doing so even earlier in the lifecycle than Enhance as we apply the knowledge and learnings of the last decade. Let's look now at what's new in the quarter. I will start with the broadening diversification and record growth of our royalty revenue streams. We are reporting increasing contributions of our newer launch products of DevoSC, OgrevisSC, and RypervanSC to our royalty revenues, with 80% growth quarter-on-quarter. This is repeating and building on top of the success and continued growth and performance of DarthalixSC, Weibgart Hedtrullo, and Fezgo. What I love about this is that over the last years, we've moved from all focus being on Darzell XIC performance to it then expanding to Fezgo and then to Weibgart Hytrulo as it was recognized just how much opportunity these products represented. Now we're expanding to six products to focus on. This is exactly what I meant by the compounding platform engine. Multiple winners, creating revenue diversification and durability. This broadened launch portfolio resulted in record total royalty revenue growth of 50% year-over-year to $308 million, providing strong support to and conviction for the 2026 to 2028 financial guidance and for the revenues in 2029 and beyond. Let me now move to the second highlight, the significant expansion in new partnerships for Nehanza and HyperCon in the quarter. In the second quarter, we signed four new collaboration and licensing agreements, and we signed a fifth agreement in July. We have never had this pace of new collaboration agreements in the history of Halozyme. And for those of you who asked, can they sign great new deals for Enhance? The answer is a resounding, emphatic, and demonstrated yes, with three of these five agreements being for Enhance. This year, we've added new Enhance agreements with GSK, Insight, and a third confidential partner, and we added two new hypercon agreements with Vertex and with the Roca. And I will add, not only did we broadly expand the number of partners, we also expanded use areas to beyond monoclonal antibodies into two new expanding and leading-edge modality areas, ADCs and nucleic acids. This means brand new growth opportunity for Enhance. The new CLAs contributed $35.5 million in upfront collaboration revenue in the quarter, approximately evenly split across Enhance and HyperCon. This was also an important contributor to record total revenue in the quarter. This is how we said we would and how we are bending the curve in the 2029 plus period. The third area I want to highlight is development portfolio expansion and progress. In the second quarter, we advanced our pipeline of future potential royalty streams with two new phase one study starts. It is our goal to have 13 enhanced development programs in 2026, which is also bending the curve in the 2029 plus period. Moving now to slide four, I'll highlight the second quarter financial results. For the second quarter, total revenue increased 48% year over year to $481 million, This was largely driven by robust royalty revenues of $308 million, a strong 50% year-over-year growth. The robust revenue performance resulted in adjusted EBITDA of $329 million, adjusted EBITDA margin of more than 65%, and non-GAAP earnings per share of $2.28, highlighting the strength of our diversified royalty portfolio and the operating leverage that's inherent in our differentiated business model. Moving now to slide five. Based on the strong second quarter, and in particular the robust royalty revenue growth, we are pleased to raise full year 2026 guidance. What I will highlight is the increase in total revenue guidance of $110 million at the midpoint. This is driven by the increased projected royalty revenues from established products and the new launch products that I discussed earlier. and also by the upfront milestones resulting from what has already been a record year for new collaboration and licensing agreements. Let me move now to slide six and I'll provide additional detail on the key business drivers in the quarter, beginning with the current Enhance portfolio. In the second quarter, the contribution from the more recently launched subcutaneous products with Enhance, including Okravis de Novo, Obdivo Qvantage, and Ribrovant Subcutaneous increased by approximately 80% quarter-on-quarter. Okavis Zenuvo is demonstrating how enhanced-enabled subcutaneous delivery can compound the value for our partners' products by expanding the accessible patient population. On their second quarter call, Roche reported that the number of patients receiving the subcutaneous formulation increased to 44,000. Contrast that with the 17,500 patients at the end of the fourth quarter of 2025, and you can see just how many new patients have been added for this every six months subcutaneous treatment. Zenovo is now the fastest-growing anti-CD20 multiple sclerosis brand in the United States. Roche noted that approximately 60% of the U.S. Okra vs. Zenovo starts are coming from community practices. Demonstrating how enhanced enabled delivery can reach new sites of care, enabling access to Ocrevus for new patients. Reflecting this momentum, Roche reaffirmed its expectation for 9 billion Swiss francs in peak Ocrevus IV and subcutaneous sales by 2029, including approximately 2 billion Swiss francs of growth resulting from the expanded accessibility created by Ocrevus Zenovo. Moving now to Bristomar Squibb. Bristol's Obdivo QVantage continued its strong launch trajectory, with subcutaneous conversion reported to have increased to 15% while on track for BMS's targeted 30% to 40% conversion rate. This resulted in global sales growth of more than 200% year-over-year to $261 million in the second quarter. Based on this, Obdivo QVantage is projected to exceed $1 billion in annualized revenue. Johnson & Johnson's Ribrovent Faspro is another strong example of how Enhance creates value for our partners and for Halosyme. For the second quarter of 2026, J&J highlighted rapid uptake of Ribrovent Faspro, contributing to the strong 62% year-over-year growth. Supporting growth acceleration in the upcoming quarters, the permanent J-code was awarded on July 1st. This has been a contributor to broadening adoption and growth in multiple prior subcutaneous launches. J&J also commented that they have submitted a filing to the FDA for head and neck cancer. We are pleased to note that the FDA recently granted priority review to the filing, meaning an FDA review timeline of approximately six months. Upon approval, this new indication would expand the opportunity for Ribrovent Faspro beyond its existing lung cancer indications into this new area of high unmet need. It is certainly very exciting to see the growth and contribution of these three newer launch brands, where for these three brands alone, the total IV and subcutaneous opportunity based on total sales is projected to be $25 billion in 2028. This is resulting in a diversified set of six products contributing royalty revenues where the total opportunity now exceeds $55 billion. I'll move now to Darzalex subcutaneous, Weibgart Hedrullo, and Fezgo, beginning with Darzalex. Darzalex continued to demonstrate robust revenue growth, increasing approximately 18% year-over-year to over $4 billion in the quarter, with virtually all global sales being for Darzalex subcutaneous within hands. J&J attributed the strong performance to continued market growth and share gains across all lines of therapy, including nearly 11 percentage points of share gain in the frontline setting. It's also worth noting that following the FDA approval in March, the all-subcutaneous regimen of Tecvalier plus Darzalex Faspro is bringing new hope to patients with relapsed and refractory multiple myeloma. I'll move now to Ergenics, Total Vivegard sales grew 60% year-over-year to $1.5 billion in the second quarter, driven by continued strong adoption of the enhanced-enabled Vivegard Hydrido pre-filled syringe, which I will refer to as the PFS. The PFS is expanding the prescriber base and bringing more patients into therapy, with approximately 80% of US PFS patients in the quarter reported to be new to Vivegard. This demonstrates how enhanced by supporting continued innovation and administration can meaningfully broaden patient reach and support long-term product growth. Driving continued growth, recent regulatory and clinical milestones continue to expand the long-term opportunity for VADGAR-Hetrulo. VADGAR is now the first and only therapy approved across all GMG serotypes, including seronegative patients. The U.S. approval in seronegative GMG in May expands the addressable opportunity by approximately 11,000 patients. Positive Phase III data in ocular myasthenia gravis further highlights the opportunity to expand the franchise and drive future growth upon approval. Moving now to Fezgo. Fezgo continues to demonstrate the value of enhanced enabled subcutaneous delivery within Roche's HER2 franchise. During the first half of 2026, Fezgo delivered strong growth of 18%, with global conversion reaching 54% in the 85 launch countries. Roche reiterated its expectation for at least 60% conversion at peak and highlighted Fezgo is a key component of the franchise's long-term durability. I'll move now to slide 7. Looking beyond the current decade, our future launch portfolio represents With the potential to expand and further diversify our royalty revenue streams and deliver durable revenue for many years to come. Beginning in the 2029 plus timeframe, we have three revenue engines. The first is our 10 currently approved enhanced products. The second are the multiple launches that are arising from our growing and robust enhanced development portfolio. And the third is HyperCon partner products. We project that by year-end of 2026, we will have up to 13 enhanced partner products in development, with potential approvals beginning in the 2029 plus timeframe. These programs represent the next generation of royalty-producing assets and extend our future opportunity beyond the currently approved portfolio. During the second quarter, two new enhanced targets initiated Phase 1 testing. This is resulting in nine development products and keeps us well on track for the 13 development products by year end. This broad and growing portfolio of future potential launches clearly demonstrates why we're so confident that Enhanze will be a significant long-term revenue driver for Halazime. I will now move to HyperCon, which we intend to make into a second compounding platform engine and recreate the amazing success of Enhanze. Hypercon is designed to address growing demand for lower volume subcutaneous administration, enabling highly concentrated formulations that can potentially support at-home and physician office administration. We made strong progress in the quarter, advancing preparations to provide clinical supply to support the first Hypercon clinical starts in the first half of 2027. Our projected first launch timing for these two new products is in the 2030-2031 timeframe, and we continue to expect HyperCon to launch multiple products and achieve approximately $1 billion in royalty revenue in the mid-2030s. Let me now turn to the new collaboration and licensing agreements, which are summarized in slide 8. I mentioned at the start that this has been our most successful year ever, with record performance for Enhance and for HyperCon. The pace of recent collaboration activity reflects the growing importance of subcutaneous delivery across the biopharmaceutical industry. Pharma and biotech companies are increasingly focused on improving the patient treatment experience, reducing treatment burden, expanding access across sites of care, and differentiating their products. In the second quarter, we announced the new Enhance Agreement with GSK, which included the opportunity to use Enhance in a new use area with antibody drug conjugates. In July, we announced a second agreement with Insight, working with Insight on a subcutaneous formulation of its first-in-class mutant calorectalin-targeted monoclonal antibody. Today, we are pleased to announce a third new agreement signed in the second quarter with an undisclosed partner to explore the use of Enhance with a nucleic acid therapeutic. This is the first of what we hope will be several collaborations in this emerging area where Enhance brings the potential to enable subcutaneous delivery of large volume nucleic acid conjugate formulations and LNPs while mitigating the inflammatory and immune response that can be otherwise generated from subcutaneous administration. We are excited to expand into these two new areas of ADCs and nucleic acids that represent brand new growth market segments for Enhance. and where we estimate that there are at least 100 commercial and development products that may benefit. Also in the second quarter, we signed two new HyperCon collaboration agreements, one with Vertex and one with Uruka. These agreements establish strategic platform relationships that have the potential to expand over time through additional targets and future development programs. When we combine the up to 13 enhanced development and many more. Thank you for joining us today. We're also continuing to evaluate selective M&A opportunities that can expand our drug delivery technology offering and royalty duration. But any external opportunity must meet our criteria of a strong strategic fit, durable value creation, and attractive returns. With that, I'm pleased to turn the call over to Darren.