HALO - NASDAQ
Halozyme Therapeutics, Inc.
HALO·NASDAQ
$69.82
+2.3%HealthcareBiotechnology
Halozyme Therapeutics, Inc. operates as a biopharma technology platform company in the United States, Switzerland, Ireland, Belgium, Japan, and internationally. The company's products are based on the ENHANZE drug delivery technology, a patented recombinant human hyaluronidase enzyme (rHuPH20) that enables the subcutaneous delivery of injectable biologics, such as monoclonal antibodies and other therapeutic molecules, as well as small molecules and fluids. Its flagship product is Hylenex recombinant, a formulation of rHuPH20 to facilitate subcutaneous fluid administration for achieving hydration to enhance the dispersion and absorption of other injected drugs in subcutaneous urography and to improve resorption of radiopaque agents. The company also develops Perjeta; RITUXAN HYCELA and MabThera SC for the treatment of non-Hodgkin lymphoma and chronic lymphocytic leukemia (CLL); RITUXAN SC for patients with CLL; and HYQVIA for the treatment of immunodeficiency disorders. In addition, it is developing Tecentriq for non-small cell lung cancer; OCREVUS for multiple sclerosis; DARZALEX for the treatment of patients with amyloidosis, smoldering myeloma, and multiple myeloma; nivolumab for the treatment of solid tumors; ARGX-113, a human neonatal Fc receptor; ARGX-117 to treat autoimmune diseases; and BMS-986179, an anti-CD-73 antibody. The company has collaborations with F. Hoffmann-La Roche, Ltd.; Hoffmann-La Roche, Inc.; Baxalta US Inc.; Baxalta GmbH; Pfizer Inc.; Janssen Biotech, Inc.; AbbVie, Inc.; Eli Lilly and Company; Bristol-Myers Squibb Company; Alexion Pharma Holding; ARGENX BVBA; Horizon Therapeutics plc; National Institute of Allergy and Infectious Diseases; Centre for the AIDS Programme of Research in South Africa; and ViiV Healthcare Limited for small and large molecule targets for the treatment and prevention of HIV. Halozyme Therapeutics, Inc. was founded in 1998 and is based in San Diego, California.
At a Glance
Live SnapshotMarket Cap$8.28B
EPS2.6400
P/E Ratio25.45
Earnings Date08/04/2026
Earnings Call Transcript
HALO • 2023 • Q1
Operator
Good afternoon, my name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Halozyme First Quarter 2023 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. [Operator Instructions] Please note this event is being recorded. I'll now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.
Tram Bui
Thank you, operator. Good afternoon and welcome to our First Quarter 2023 Financial and Operating Results Conference Call. In addition to the press release issued today after the market close, you can 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, Halozyme'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 for the first quarter 2023. 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 Helen Torley.
Helen Torley
Thank you, Tram, and good afternoon, everyone. Let me begin on slide three. Halozyme is a leading drug delivery platform company with a diversified and robust business, which include our ENHAN
Nicole LaBrosse
Thank you, Helen. The first quarter of 2023 is on track with our plans and supports our strong financial performance expectations for the full year. As Helen mentioned, we remain committed to our capital allocation strategy. In regards to our share buyback program, we are pleased that within the first quarter, we maximized our repurchase opportunity and completed the full $150 million plan for the year resulting in the repurchase of 4.2 million shares at an average price per share of $36.01. Our share buyback programs have resulted in the repurchase of 34.8 million shares since 2019 which contributed $0.09 to non-GAAP earnings per share in the first quarter. Our cash, cash equivalents and marketable securities were $275.6 million as of March 31st, 2023, compared to $362.8 million on December 31st of 2022 due to our Q1 share repurchases. Our balance sheet remained strong with projected cash generation and EBITDA growth in 2023. Our net debt to EBITDA ratio is 3.2 as of March 31, 2023, which is expected to be less than three by the end of the year. While we have completed our share repurchases allocated for the year, we will continuously evaluate our future use of capital and monitor market conditions and other factors while also preserving capital to fund revenue growth and durability via M&A. I'll now move to slide 14 for our detailed financial results for the first quarter of 2023. Revenue for the first quarter was $162 million compared to $117.3 million for the first quarter of 2022. The 38% year-over-year increase was driven by an increase in royalty revenue, primarily attributable to subcutaneous DAR
Helen Torley
Thank you, Nicole. I'd like to thank the Halozyme team and our partners and collaborators for the strong progress made in the first quarter of this year that setting us up for such strong growth in 2023. We're continuing to look forward to our commercial product and royalty revenue growth predict and we will increase the number of ENHAN
Operator
[Operator Instructions] Our first question is from Jessica Fye with JPMorgan. Your line is open.
Na Sun
Hey guys, this is Na Sun on for Jessica Fye. I think can you talk about like what have you seen with the IRA impact and like how has it impacted discussions with current partners and/or potential new partners? And then another one is thinking about how we are anticipating a step down in royalty rate for FASPRO in the EU, what does this mean for other J&J targets set to launch after 2024 and 2027 such as amivantamab and (Technical Difficulty)? Thank you.
Helen Torley
Thanks, Na. With regard to what we've seen in IRA impact, I think we are making comments very similar to our partners and other people who are talking that there still is too little detail available yet to be able to do any assessment to understand if there is going to be impact because we call the guidance that came out initially really is focused on Part D, D as an dog, and the majority of our products are Part B. I will say that this sound very rarely has come up from any of our current partners just I think really based on the fact that they are waiting for more details to come out from CMS before really doing any analysis on it to understand any impact. So we continue to be excited about the growth of our products and the royalties as we look forward to the potential for $1 billion in 2027 and project the potential to be higher than that in 2031. And with regard to the step-down in royalty rate, the specific details on all of our contracts, as you know, are confidential. So we obviously in light of the European patent finding did give some commentary on the DAR
Operator
The next question is from Corinne Jenkins with Goldman Sachs. Your line is open.
Corinne Jenkins
Yeah, good afternoon, everyone. Maybe to one follow-on from the last question. It sounds like your current partners are bringing it up to you, but how is like the IRA guidance factoring in to any conversations that you're having with potential partners? And then the second one from me. You referenced business development. I'm curious how the integration of Antares and your target leverage goals factor into potential timing for any additional BD?
Helen Torley
Yeah. I'm happy to take the first part and I'll ask Nicole to discuss the target leverage. I would say since the guidance came out in March, Corinne, we have been in multiple conversations with potential new partners for ENHAN
Nicole LaBrosse
Yes, happy to. Thanks, Corinne. When looking at our leverage for ending the quarter, we were at 3.2 times net debt to EBITDA ratio and we're tracking to be delevered to less than three times by the end of the year. So we are tracking nicely with our expectations and also provides ample opportunity for future growth via M&A, looking at our leverage profile as well as our expected cash flow generation and expected EBITDA growth.
Corinne Jenkins
Okay, thanks.
Operator
The next question is from Mohit Bansal with Wells Fargo. Your line is open.
Mohit Bansal
Great. Thank you for taking my question. I have a couple of questions. So one on IRA, just staying with the team here. Do you expect some more clarity over a period of next six to 12 months from CMS, more about the Part B side of it? Should we expect something like that in your conversations with your partners? And the other question is actually more technical in terms of -- you mentioned that sequential royalties because they get reset, so there is -- the royalty revenues are not, despite the revenues are higher, royalty revenues are not higher. So that explains it. Are there -- is there anything else in terms of the Antares revenues or other product revenues in terms of seasonality we should be aware about in the first quarter as we go forward here? Thank you.
Helen Torley
Yeah, I'll take the question on IRA and Nicole will talk about the sequential royalties. Mohit, probably -- as you're probably seeing with many of our large pharma partners, there simply isn't the information available at the moment as to when CMS is going to talk with regard to the Part B guidance. And so nobody is really talking or speculating with regard to that. As you know, ENHAN
Nicole LaBrosse
In regards to sequential royalty quarter-over-quarter, yeah, we did mention a few factors driving that, one of them being the FX rates changing year-over-year, the other one being royalty tier that escalates during the year that is something that we see on both the ENHAN
Mohit Bansal
Helpful. Thank you.
Operator
The next question is from Michael DiFiore with Evercore ISI. Your line is open.
Michael DiFiore
Hi, guys. Thanks for taking my question. Two more ones on the IRA, but different versions. So just regarding CMS's Part D guidance document, I think for now everyone is operating under the assumption that Part B will look like very much like Part D. So assuming that's true, now that HALO's lawyers and policy teams have had some time to fully digest the guidance document, are there any nuances contained therein that perhaps make you incrementally more or less confident on how enhanced formulated products may qualify as single source drug? That's my first question. My other question is just to remind us how the EU, the EPO, DAR
Helen Torley
All right. Thanks, Mike, for those questions. Yes, a lot of interest obviously in the IRA, so we talked about this a lot when the guidance came out. And if we -- if there is an interpretation or the Part B guidance comes back similar to the Part D, our interpretation based on experts in Washington DC is if you focus on the part of the guidance that describes the fixed-dose combination. And, yes, we use an example of two corticosteroid drugs and talks about the both active ingredients not being considered the same as a single agent use alone. I think that is what we see as a perfect description of ENHAN
Michael DiFiore
Very helpful. Thank you.
Operator
The next question is from Jason Butler with JMP. Your line is open.
Roy Buchanan
Hi. It's Roy on for Jason. Thanks for taking our questions. Just a couple. I guess, Helen, you mentioned that the funnel of partnering discussions are at an all-time high. Just assuming that those are mostly candidates seeking their first approval as ENHAN
Helen Torley
Sorry, Roy, you cut up a little bit. So you're saying are those companies looking for approvals of their first indication, so development stage products or commercial products?
Roy Buchanan
Yes, development stage, correct.
Helen Torley
I am saying for mixture. It's a mixture of both of those.
Roy Buchanan
Okay.
Helen Torley
We traditionally worked with companies where they're getting their Phase 3 approval or they're already approval or approved and that's because ENHAN
Roy Buchanan
Okay. Interesting. And then one on the -- you mentioned that 10 mL auto injector a collaboration partner further development. Just what are they going to bring to the table that you didn't get from Antares? Thanks.
Helen Torley
So we actually is -- one of the I think very intriguing things about the Antares portfolio of auto injectors and the engineers that we have is that we've traditionally offered partners the option to customize the device for a specific patient population or disease. And so what we have as a working prototype, each partner will have to determine what their primary container they wanted to be. There'll be a little bit of customization, some might be 5 mL, 7 mL, 10 mL. So that will take a little bit of work, but specifically the form factors and other factors like needle debts and other are things each partner generally will like to customize to be right for their particular drug in their populations and their target population. So it's simply that customization work for it to move from prototype to development stage auto injector to a commercial auto injector.
Roy Buchanan
Okay, great. I'm going to throw in one more. The DAR
Helen Torley
I understand your question. I don't think we ever tested that because in our clinical studies with subcu DAR
Roy Buchanan
Got it. Thank you.
Operator
The next question is from David Risinger with SVB Securities. Your line is open.
David Risinger
Yes, sorry. Thanks very much. So I have a couple of questions please. First, the press release mentions planned investments in ENHAN
Helen Torley
Yeah, I'll take the first question and then I'll ask Nicole to take the next two. With regards to the planned investments, this really relates back to announcement we made maybe 18 months ago with regard to starting the development of a high yield rHuPH20 as well as room temperature stable rHuPH20. David, for our royalty term, I will just then highlight that we always receive the vast majority of cases a minimum of 10 years and after the first commercial sale. And so 2027 might be patent expiry, but we are going to be selling API to our partners and generating royalties to well past 2030 based on our development portfolio. And so we thought it was important for us to continue to invest to get to a higher yields API because that would be the expectation of our partners that we would continue to improve the processes. We also started the development of a more room temperature stable one. That might be more suitable for small molecules and circumstances where partners might want the patients to be able to carry, for example, an auto injector around with them. So that one continues in early development. We're making good progress with the high yield one and partners have expressed a lot of interest in that obviously as that -- it just helps us strengthen our ability to continue to supply a very high-quality API for our partners. With that --
Nicole LaBrosse
Yes. Thanks, David. With regards to the Antares contribution, it was accretive obviously to our revenue line and to our non-GAAP EPS in the quarter and continues to -- our expectations is that it continues to be accretive for the full year results for 2023. And then in regards to share repurchases, we did complete the full amount that we had allocated for the year, which was $150 million. We took the opportunity in the first quarter to maximize our buying during low prices. And so we were able to accelerate that and buy at the low prices and fully complete the amount that we had allocated for the year.
David Risinger
Thank you.
Operator
The next question is from Eun Yang with Jefferies. Your line is open.
Unidentified Analyst
Hi. This is Matt on for Eun. Just continuing on the ENHAN
Helen Torley
Yeah. So, different pathways for each of them. The higher yields one is the same cell line as our current one. And so it's much more likely that will be a simple comparability study that will be done and it will be then moved into the supply chain and we've done that before. This will take several years, but it should be a pretty seamless transition. And we've got several of our partners who have expressed interest in moving to that, obviously once it is approved and available. With regard to the more room temperature-stable, we continue in discussions on that. That was seen as being a bit more specific to small molecules and a bit of specific staffing for room temperature stability is needed. So nobody has signed up at this -- at this point in time, never expected to be a large driver of revenue because it's -- our subcu products are much more focused on the large volume biologics where room temperature stability is not needed because the product have to be refrigerated. So very pleased with the progress and the interest we've seen on the higher yields, continuing to have this offering for those partners who might want something that's more suitable for a small molecule and patient self-administration.
Operator
[Operator Instructions] The next question is from Caroline Palomeque with Berenberg Capital Markets. Your line is open.
Caroline Palomeque
Hi, thanks for taking the question. Can you discuss the current IV to subcu conversion rate trajectory for other products aside from the ones in your slide such as MabThera and HYQVIA? Thanks.
Helen Torley
So, Caroline, if I was understanding your question, what we saw with the Wave 1 products and those were predominantly long stem in Europe. Herceptin is a good example that got to about 50% share of sales after two years. And it got to 60% share of sales after three years. Biosimilars enters the market at that period of time and I can say that we do hear from Roche that the share has remained sticky in those markets where it did convert, but it didn't continue to grow after that. We don't have specific data on HYQVIA for me to be able to share. MabThera, we got to about 40% share of sales. And so, we're seeing a range where obviously we're very pleased to see DAR
Caroline Palomeque
That's helpful. Thanks.
Transcript from May 9, 2023
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