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 • 2024 • Q1
Operator
Thank you for standing by. My name is Brilla, 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. [Operator Instructions] Please note, this event is being recorded. Thank you. I would now like to turn the conference 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 2024 Financial and Operating Results Conference Call. In addition to the press release issued today after the market close, 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, Halozyme'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 2. 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.
Helen Torley
Thank you, Tram, and good afternoon, everyone. Beginning on Slide 3. 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 3 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 3 key drivers, which will help you appreciate the Halozyme 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, DAR
Nicole LaBrosse
Thank you, Helen. The first quarter of 2024 is on track with our plans and supports our strong financial performance expectations for the full year from the continued momentum of our business. Let me now briefly touch on our capital allocation priorities on Slide 9. We remain consistently focused on a balanced 3-pillar strategy, which is: to invest in our current business, deploy capital through share repurchases and seek new growth opportunities through M&A. As we continue to execute on the $250 million ASR that was announced in the fourth quarter of 2023, the new $750 million share repurchase program that was recently approved by the Board in February is a reflection of the confidence in our long-term projections and durability of our business. We maintain a strong balance sheet with cash, cash equivalents and marketable securities of $463.5 million as of March 31, 2024, compared to $336 million on December 31, 2023. Our net leverage ratio was 2x at the end of the quarter, and we expect to reduce our net leverage ratio as we continue to grow EBITDA throughout the year. Turning now to Slide 10 for our detailed financial results for the first quarter. Revenue grew 21% to $195.9 million compared to $162.1 million in the prior year period. Royalty revenue for the quarter was $120.6 million, an increase of 21% compared to $99.6 million in the prior year period, primarily attributable to continued momentum of our Wave 2 products, DAR
Helen Torley
Thank you, Nicole. 2024 is off to a strong start, as you've just heard, with excellent momentum in the current business and major progress made in advancing new approvals and growth opportunities. These opportunities include: the FDA acceptance of Bristol's submission for their BLA for nivolumab subcutaneous with a PDUFA action date of February 2025, the potential new indication approval and launch for argenx's VYGART Hytrulo in CIDP in the United States in June, potential approval and launch of Ocrevus subcutaneous in Europe midyear, potential U.S. approvals and launches for Roche's Tecentriq subcutaneous and Ocrevus subcutaneous in September; and a Phase III data readout for J&J's Amivantamab subcutaneous. I want to close by thanking our terrific Halozyme team, our partners and collaborators for all of the hard work that resulted in such strong first quarter progress. Operator, we are now ready to open the call for questions.
Operator
[Operator Instructions] Your first question comes from the line of Vikram Purohit from Morgan Stanley.
Vikram Purohit
We had one on the pace of business development. Helen, you mentioned that there were some discussions ongoing with potential new partners for ENHAN
Helen Torley
Yes. Thank you, Vikram. Yes, I'm delighted to give an update on both of those areas that, obviously, is a strong focus for us. As we mentioned in the prepared remarks, in the quarter, we were delighted to see several companies progressing from technical discussions to terms discussions. And importantly, this is a stage that happens prior to negotiating and signing the CLA. So that is a very strong sign of progress. And this is really a result of conversations in the first quarter with more than 10 pharma and biotech companies, where at least one conversation has happened. In several occasions, we've had multiple conversations. In terms of the feedback, let me give you the very consistent feedback, which is, I think, a very strong sign for the value proposition that ENHAN
Operator
And your next question comes from the line of Jessica Fye with JPMorgan.
Jessica Fye
Sort of sticking with a similar theme here on kind of potential new deals. First, when you say that you're in terms discussions with several companies, should we think of those potential deals as being both pure ENHAN
Helen Torley
Yes. Thanks, Jess. With regard to the types of discussions, I can say we're having discussions on ENHAN
Operator
And your next question comes from the line of Michael DiFiore from Evercore ISI.
Michael DiFiore
Congrats on all the progress. Two for me. Thoughts on -- obviously, Phesgo is becoming a huge product for you guys. Thoughts on how a Perjeta biosimilar may uptake -- may affect the uptake of Phesgo. And I ask because there's one that seems to be completing Phase III trials late this year. And separate question is, I think you mentioned for subcu nivo, you said that if it's approved, it would cover 75% of the IV indications. And my question is why not 100%? And could we expect the same 75% of the indications for subcu atezo?
Helen Torley
All right. Thanks so much, Mike. Well, with regard to Phesgo, obviously, you're right. It's showing very strong progress with 70% growth year-over-year in the first quarter. And that has resulted in 41% global conversion with the U.S. approaching 25%. And I do think what's going to be important for Roche is that they continue to support the conversion. They've talked about it reaching and exceeding 50%. And I certainly think the progress we're seeing, it might even do better. That's going to be important for the conversation we have about biosimilars. Because what we have seen, and I'd like to use Herceptin as, I think, a very relevant example for that. That Herceptin got to 60% share of sales were subcu after about 3 years. We meet with Roche every -- twice a year and hear that the share of the Herceptin subcu has remained sticky. And by that, we mean clinics that move to giving their patients and themselves, the staff experience, the convenience of subcu did not move to IV biosimilars. And it's because the value proposition is so strong in terms of convenience for patients, much shorter treatment time. Obviously, for Phesgo, the difference is between 5 to 8 minutes versus what can often be 2 to 2.5 hours for the sequential administration. And for a clinic, that means a lot less need for nursing time, oversight, et cetera, not to mention the pharmacy having to be involved in making up the IV. So I think what's going to be important is we continue to see this very strong progress to subcutaneous. And then I think the IV Perjeta will not, if we can look at that example with Herceptin, be an issue.
Michael DiFiore
Got it. Very helpful. And yes, my other question regarding the subcu nivo and if approved.
Helen Torley
Yes, sorry. Subcu nivo, yes, this is a comment that Bristol has made with regard to the 75% of the IV indications. And I'm not recalling off the top of my head, Mike, exactly what it is and the reason for it. But we do know that for Tecentriq outside the U.S., in U.K. and Europe, it got 100% of the indications. And that certainly would be the goal in the United States. So there is, I think, a couple of the patient indications, which I believe, actually, as I'm recalling this, I think it's where it is combined with the indications for CTLA4-Ig. So when it's a Yervoy IM combined indication, those are the ones that are being excluded when they give the 75%, because that combination was not studied.
Operator
And your next question comes from the line of Mohit Bansal with Wells Fargo.
Mohit Bansal
Congrats on the progress. I have 2 questions. So I'll ask first, so in terms of the partnership terms discussions, in general, did you expect the newer deals to have some kind of different kind of terms? Or do you think they could be generally the same and no meaningful change there?
Helen Torley
Yes. I think, Mohit, the way to think about it is there will be a difference if the partner is asking for exclusive rights to target versus nonexclusive. Obviously, with the economics for nonexclusive being lower as we have the opportunity to license that to multiple companies. Also, if it is a partner who has a product that is in earlier stages of development, there may be an opportunity for you to see a different distribution between less payments while the product is in development, while it's getting derisked and more of a weighting of the payments and a different balance of the royalties based on ones that has achieved regulatory approval and is derisked. So there could be a few of those nuances across these -- our agreements. But obviously, each of these will offer a new royalty revenue stream for Halozyme in -- for the mid-single digit for an exclusive deal and probably be lower than the mid-single digit if it's a nonexclusive deal.
Mohit Bansal
Got it. That's super helpful. And then one clarifying question. So I mean, the press release mentioned that there was a little bit lower bulk rHuPH20 sales. Should we read anything into it? Or it was just like a one-off thing?
Helen Torley
Yes. I'll ask Nicole to address that.
Nicole LaBrosse
Yes. Thanks for the question. So we were expecting that for the first quarter. You might recall, going into the year, we had indicated that our API sales just based on our partners' ordering patterns. And as we enter into firm -- the firm periods for our orders, we did have line of sight to the fact that those orders would be more weighted to the second half of the year. So this is all in line with our expectations.
Operator
And your next question comes from the line of Corinne Johnson with Goldman Sachs.
Corinne Jenkins
I wanted to clarify one of the comments you made on the term discussions you're having being a mix across ENHAN
Helen Torley
Yes. Thanks, Corinne. In terms of the discussions, definitely more conversations happening around ENHAN
Operator
Your next question comes from the line of Jason Butler with Citizens JMP.
Jason Butler
Helen, wondering if you're able to comment yet on the sales potential for the Wave 4 pipeline or give us some context about how that magnitude might compare to the Wave 1 or Wave 2 -- or Wave 1, 2 or 3? And then secondly, can you just give us an update on XYOSTED? And specifically, what are you seeing in the market in terms of promotion sensitivity just in the context of your measured spend on that product.
Helen Torley
Yes, happy to do that. So for the Wave 4s, as we talked about, between Wave 4 and Wave 5, we have 9 products that are in development now, which we're obviously very excited about. We aren't giving projections for Wave 4, but I certainly can say that we're excited about some of the products that I mentioned earlier, including nivolumab-relatlimab, which Bristol Myers Squibb talks about being a blockbuster brand, and also TAK 20%, which has a very high potential as well. And then behind that is ViiV's N6LS. So some of the other products are a little earlier in their development, and there aren't good estimates as to their potential. But I think all of them, we can say, are meeting substantial patient unmet need, but a little premature for us to be giving projections on Wave 4 and Wave 5, but a very exciting set of products across multiple therapeutic areas. With regard to XYOSTED, we have a very focused and clear strategy for XYOSTED with our sales representatives really focusing on driving and identifying the patients that are not doing well on IM therapy and having the conversion and assuring that the patient is connected to all of the great services that we provide to assure affordability. We feel we've got the right size of the sales force, the right amount of promotional spend, which actually is less than last year because we've been able to optimize that as we understood better. So we're at, I think, the right footprint and operating expense to be driving this very nice growth that we saw last year to $100 million. And we're projecting, as you know, strong CAGR over the next 5 years with the current footprint that we have, which is less than 100 representatives.
Operator
Your next question comes from the line of Brendan Smith with TD Cowen.
Brendan Smith
Maybe first on the latest repurchase program. Actually just wondering if you can confirm over what period of time you expect to complete the $400 -- $750 million, excuse me, and how we should think about the cadence of buybacks, whether you're kind of planning for steady increments in each quarter or you'll concentrate it more in certain parts of the year. And then I just wanted to ask quickly about the VYGART Hytrulo pipeline. Can you maybe remind us which indications are going directly into the ENHAN
Helen Torley
Thanks, Brendan, and welcome. I'll ask Nicole to address your share repurchase question.
Nicole LaBrosse
Yes. Thanks, Brendan. So for the $750 million authorized plan, we did not time bound that plan. But to give you a sense in how we've performed historically our prior 2 plans and especially the prior plan, which was a similar size, we completed in less than 3 years. So you can think about that level of cadence of historically how much we have repurchased, totaling to date $1.3 billion deployed to share repurchases. So it continues to be an important pillar of our capital return strategy. But the specific cadence is something that we continue to monitor as we deploy our cash amongst the pillars and really balance it between investments in our current business as well as investments in growing the business through M&A.
Helen Torley
And I'll take the question on VYGART Hytrulo. So obviously, Tim Van Hauwermeiren, the CEO of argenx, has talked about his vision. That patients with autoimmune disease are going to be able to self-administer VYGART Hytrulo over time where possible. And this really is -- you're going to see reflected in his development portfolio, where more and more indications are moving towards subcutaneous. What I can say based on what's been shared publicly is that obviously, generalized myasthenia gravis started as an IV, but the subcu obviously launched beginning last year. CIDP this year, sorry, is a subcu indication only. And pemphigoid, I believe, is a subcutaneous indication only. We're delighted this quarter to be announcing that with argenx that they've started 2 subcu studies in TED that are Phase III registration studies. And as far as I'm aware, there are no IV studies that are listed on clinicaltrials.gov, so think that's a strong opportunity to be another subcu-only indication. And so I think this will roll out to more information on these over time as argenx articulates how they're going to go towards all of the 15 indications. But I think to meet Tim's vision of this -- or VYGART really being transformative for patients with autoimmune disease, I -- it's my expectation, the majority of indications will be subcu.
Operator
Your next question comes from the line of Mitchell Kapoor with H.C. Wainwright.
Mitchell Kapoor
Wanted to ask on DAR
Helen Torley
Super. I'll ask Nicole to address that.
Nicole LaBrosse
Yes. Thanks for that. So we had included in our forecast, the expected step-down related to OUS sales for DAR
Mitchell Kapoor
Okay. Great. And separately, could you just provide any update on progress towards a next-generation ENHAN
Helen Torley
Yes. We, a couple of years ago, had talked about having a more room-temperature stable ENHAN
Operator
Your next question comes from the line of David Risinger with Leerink Partners.
David Risinger
Yes. And thank you as well from my side on the updates. So my questions have been asked. I just have one more, which is the company spent $19 million on R&D in the first quarter. Is that basically the run rate that we should be expecting going forward, so maybe $75 million plus a year? And could you just provide some more color? I think that is primarily on ENHAN
Helen Torley
Yes. Nicole will address that.
Nicole LaBrosse
Yes, happy to, David. So your first question on the run rate. I will say that the amount you saw in the first quarter are expected to grow for the remainder quarters of the year as we make investments in our product development. And so that I would advise you to build that into your models as well, growth from the amounts that you saw in the first quarter. And where we spend our R&D dollars is on the ENHAN
David Risinger
And could you just add a little more color? Since ENHAN
Nicole LaBrosse
Yes. One example, and we've talked about the higher-yield API that we're making investments in that are expected to be available to our partners in 2026. That is a good example of the investments we're making that will benefit our partners, in particular, their cost in buying the API from us.
Helen Torley
And David, I'll just mention, while the U.S. patent is expiring in 2027, that's basically the composition of matter patent. As we have shown, we expect, based on co-formulation patents, that we're going to continue to receive royalties on all of our royalty streams until 2030 for many of them, beyond 2030 for a number of them, and beyond 2040 for another. And so we have got very durable revenues. And so it does make sense for us to invest to have the best and lowest-cost API because we have got 20 years still ahead of us, or plus that, for our product, ENHAN
Operator
And our next question comes from the line of Joe Catanzaro with Piper Sandler.
Joseph Catanzaro
Yes. I had maybe a quick one that maybe goes back to the discussion around Tecentriq, Opdivo subcu. As it relates to the early days of Tecentriq subcu in the EU, wondering if you have any early data points there on conversion rates, where you were seeing use, I guess, within indications and settings. And then maybe stepping back more generally, is it fair to us to assume what we see around the Tecentriq subcu trajectory will be comparable to maybe what we will ultimately see for Opdivo subcu in the 2025 time frame?
Helen Torley
Yes. Roche has not provided a lot of detail. They did on their fourth quarter call talk about the fact that after 1 quarter in the U.K., they've seen 18% conversion, which I think is a very strong performance for such a short period of time. But since the European launch in January, they haven't talked about the conversion. And recall for Europe, we're going to see countries rolling out over the course of the year as reimbursement is obtained. So we look forward to Roche providing some updates on that. With regard to comparing the uptake for Opdivo, Tecentriq is going to have a different cadence of the timing of approvals that I think you'll have to factor in as you're thinking about that. Because Tecentriq, obviously, is going to have Europe going first, U.S. coming 9 months later. I would have an expectation that -- and we still have to see, based on what Bristol says about the Opdivo European file acceptance and launch timing, that, that will be closer together. Apart from that, I think the factors are probably going to be pretty similar in terms of strong value proposition where patients get the opportunity for treatment in just 5 minutes approximately instead of up to 60 minutes. And strong patient preference for Tecentriq that we can talk about, where 71% of patients preferred subcutaneous Tecentriq, really citing less time in clinic. The administration of the subcutaneous was much more comfortable for them, and the treatment was less emotionally distressing for them. And so all of those are good factors. But I think the launch cadence might be one of the factors that would make of these launches not identical, but strong value proposition for both.
Transcript from May 7, 2024
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