Halozyme Therapeutics (NASDAQ:HALO) reported robust financial results for Q3 2024, with significant year-over-year increases in revenue and profitability. The company raised its full-year guidance, reflecting confidence in its growth trajectory. In premarket trading, Halozyme's stock rose 5%, indicating positive investor sentiment.
Key Takeaways
- Halozyme's Q3 2024 revenue increased by 34% year-over-year to $290.1 million.
- The company raised its full-year revenue guidance to $970-$1,020 million.
- Premarket stock rose by 5% following the earnings announcement.
- Key product approvals and partnerships are driving future growth potential.
- The ENHANZE technology continues to strengthen Halozyme's market position.
Company Performance
Halozyme Therapeutics demonstrated impressive performance in Q3 2024, with a 34% increase in total revenue compared to the same quarter last year. The company's strategic focus on expanding its ENHANZE technology and securing key partnerships has been pivotal in driving growth. Halozyme's success in the subcutaneous drug delivery market, coupled with its strong financial results, underscores its competitive edge in the industry.
Financial Highlights
- Revenue: $290.1 million, up 34% year-over-year
- Royalty revenues: $155.1 million, up 36%
- Adjusted EBITDA: $183.6 million, up 60%
- Non-GAAP diluted EPS: $1.27, up 69%
- Cash and equivalents: $666.3 million
Outlook & Guidance
Halozyme has raised its full-year guidance, now projecting total revenue between $970-$1,020 million, representing a 17-23% growth. The company anticipates royalty revenues to reach $550-$565 million, reflecting a 23-26% increase. Adjusted EBITDA is expected to grow by 40-47%, reaching $595-$625 million. These upward revisions highlight Halozyme's confidence in its business strategy and growth prospects.
Executive Commentary
CEO Helen Torley stated, "We are well positioned to continue to deliver double-digit top and bottom-line growth in the coming years." CFO Nicole Abroff added, "Our robust financial results for Q3 exceeded expectations," emphasizing the company's strong performance and strategic execution. Torley further noted, "ENHANZE is the gold standard for rapid, subcutaneous large volume drug delivery," underscoring the technology's pivotal role in Halozyme's success.
Q&A
During the earnings call, analysts inquired about the conversion strategies for OCREVUS and Tecentriq subcutaneous formulations. The company also addressed questions regarding its MDACE patent portfolio and future product sales projections, providing clarity on its strategic initiatives and market positioning.
Risks and Challenges
- Market competition in the subcutaneous drug delivery space could impact growth.
- Regulatory hurdles for new product approvals may pose challenges.
- Economic fluctuations could affect healthcare spending and partnerships.
- Supply chain disruptions might impact production timelines and costs.
- Dependence on key partners for revenue growth could introduce risks if partnerships falter.
Full transcript - Halozyme Therapeutics Inc (HALO) Q3 2024:
JL, Conference Operator: Good afternoon. My name is JL, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Halozyme Third Quarter 2024 Financial and Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Please note this event is being recorded. I'll now turn the call over to Tram Bui, Holozymes' Vice President of Investor Relations and Corporate Communications. Please go ahead.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: Thank you, operator. Good afternoon, and welcome to our Q3 2024 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 Doctor. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business and Nicole Abroff, 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 will now turn the call over to Doctor.
Helen Torley.
Helen Torley, President and Chief Executive Officer, Halozyme: Thank you, Jerome, and good afternoon, everyone. Let me start on Slide 3. I am very pleased to report we delivered strong third quarter financial results with a 34% increase in total revenues to reach an all time high of $290,000,000 in the quarter. This was largely driven by royalty revenue, which increased 36% to another record amount of $155,000,000 This performance reflects the continued expansion and broadening of adoption of our ENHANZE drug delivery technology with continued strong growth of DARZALEX Subcutaneous, FEZCO and VIBGAR HYTULO. Based on our strong year to date performance, we are raising our total revenue, our royalty revenue, adjusted EBITDA and non GAAP earnings per share guidance ranges for the full year.
Notably, this year we now expect to deliver high double digit revenue growth of 17% to 23% and an impressive adjusted EBITDA growth of 40% to 47%. Nicole will go into more detail on this in a moment. Operationally, it was also another strong quarter. 2 current partners nominated new targets for ENHANZE under expanded licensing agreements, adding new revenue in terms of milestones and reinforcing the value of our leading drug delivery technology. We've also continued our focus on securing new ENHANZE deals and also new agreements for our small and our high volume auto injectors with discussions continuing and advancing.
Roche, one of our most tenured partners, gained 2 significant regulatory approvals with the FDA approval for Tecentriq subcutaneous with ENHANZE and for OCREVUS subcutaneous with ENHANZE. And adding to this, multiple partners continue to expand their geographic approvals and advance their clinical development programs. These achievements are key drivers of our current and future growth trajectory. They reinforce our leading position in rapid large volume subcutaneous drug delivery and illustrate the well proven success and predictability of our platform technology. I'll now move to Slide 4 and we'll provide some more details on these recent accomplishments.
In September, we were delighted to announce 2 highly anticipated partner approvals, which reinforce ENHANZE's track record of 100% Phase 3 to regulatory approval success. The U. S. Approval of Roche's Tecentriqibrisa with ENHANZE represents the availability of the 1st and only subcutaneous anti PD L1 cancer immunotherapy. Approval was granted for all of the adult IV Tecentriq indications with treatment delivered as an approximately 7 minute subcutaneous injection.
Roche also received U. S. Approval of OCREVUS denovo with ENHANCE, which is our 8 partnered product approval and further extended ENHANCE's reach into neurology. With OCREVUS ZENUVO, multiple sclerosis patients can now receive their treatment of a 10 minute subcutaneous injection given twice a year compared to a multi hour treatment for the intravenous also given twice a year. This dramatic simplification of treatment also creates the opportunity for patients to receive their treatment outside an IV infusion facility potentially closer to their home.
These two recent approvals add to the significant growth opportunity we have right in front of us, building on and adding to the recent European launches of Tecentriq and OCREVUS subcutaneous with ENHANZE. Let me move now to the partner recruitment expansions. ENHANZE is the gold standard for rapid, subcutaneous large volume drug delivery. This has been established over the last 10 years as a result of the strong safety track record and the unmatched history of global regulatory approvals and commercial success. This success is supporting productive conversations with existing partners who have experienced firsthand the success they can achieve with ENHANZE.
We are pleased that this has resulted in 5 new target nominations in the quarter. In early October, we announced that argenx expanded their agreement for the exclusive license to ENHANZE by nominating 4 additional targets. Based on this expansion, argenx has now exclusively licensed ENHANZE for a total of 6 targets, including VIVEGAR HYDRULO. As part of the agreement, argenx will make a $30,000,000 payment to Halozyme for the 4 new targets. There are potential future milestone payments related to development progress, regulatory approvals and sales attainment of up to $85,000,000 per new target.
We are very excited to expand our relationship with argenx, who is an innovative leader in immunology. As their partner of choice for rapid large volume subcutaneous drug delivery, we appreciate their patient centric mission that is so closely aligned with our own commitment to improving the lives of patients through our innovative drug delivery technologies. In the quarter, Veeve also expanded their existing global collaboration and licensing agreement, which gives them exclusive access to our enhanced drug delivery technology for one additional undisclosed target. Now with that overview, I'll move now to discuss the progress of our milestone and royalty generating subcutaneous commercial products, starting with Johnson and Johnson DARZALEX on Slide 5. In the quarter, worldwide sales for DARZALEX increased almost 23% on an operational basis to represent the 1st asset in the J and J portfolio to reach $3,000,000,000 in a single quarter.
DARZALEX growth was primarily driven by share gains of 4 points across all lines of therapy with 7.7 points of growth in frontline setting as well as continued market growth. With conversion to DARZALEX VASPRO with ENHANZE exceeding 90% share of sales in the United States and with very high conversion rates outside the United States, subcutaneous DARZALEX is the driver of this remarkable continued strong DARZALEX growth. Further expanding DARZALEXCEPTINI's indications and opportunity, during the quarter, J and J announced additional new approvals and regulatory submissions. U. S.
And European approval were recently received for an additional indication for DARZALEX with ENHANCE in newly diagnosed multiple myeloma patients who are eligible for autologous stem cell transplant in combination with bortezomib, lenalidomide and dexamethasone. The company also announced the submission of a supplemental BLA to the Food and Drug Administration for approval of a new indication of DARZALEX FASTROKE as part of a quadruplet regimen for the treatment of adult patients with newly diagnosed multiple myeloma for whom atollofus stem cell transplant is deferred or who are ineligible. With that, I'll now turn to Roche's FESGO, which is shown on Slide 6. FESGO, which is a fixed combination of Perjeta and Herceptin with ENHANZE continues to demonstrate excellent growth momentum. Sales increased 58% to CHF 1,200,000,000 for the 1st 9 months of 2024.
Uptake remains strong as additional countries launch with 55 countries now launched. Conversion of PERJETA has also increased to 43% in those countries. FESKO is in a strong trajectory and is well positioned to reach and exceed 50% conversion by 2026. Also shown in the slide is updated analyst revenue consensus for Fezco. With the strong growth and momentum I've just discussed, Fezco is now projected to become a $3,500,000,000 brand in 2028.
As all of this $3,500,000,000 in sales represents subcutaneous sales on which Halozyme has paid a mid single digit royalty, Fezco represents another strong growth opportunity for Halozyme. Moving now to additional highlights on Roche's 2 most recent launch products, which are shown on Slide 7. I'll start with TECENTRIQ HIBREZA. Following European approval in January of this year, we were very pleased that similarly to Europe, the U. S.
Approval was granted for all of the adult IV indications. Tecentriqibreza co formulated with ENHANZE allows for an approximately 7 minute subcutaneous injection compared to 30 to 60 minutes for the IV infusion. Dimensionalizing the opportunity, Roche reported Tecentriq revenue of CHF2.7 billion for the 1st 9 months of 2024. Analysts project that 10 centriq will achieve $5,000,000,000 in 20.28. Roche has stated that they expect the majority of the sales of subcutaneous Tecentriq will come from conversion of the intravenous distortion.
Let me move now to Roche's OCREVUS INNOVO. I'm particularly excited for the U. S. Launch following the Food and Drug Administration approval in September. This approval follows closely on the European approval, which occurred in June of this year.
Ocrevus Zenuvo with ENHANZE expands our reach in urology and offers multiple sclerosis patients a treatment administration time of just 10 minutes via subcutaneous injection with ENHANZE, which compares to multiple hours required for the IV infusion. The subcutaneous formulation offers patients all of the benefits that they expect from OCREVUS in terms of the strong clinical profile and every 6 months dosing, while easing the administration burden of receiving treatment. OCREVUS revenue increased 9% to CHF5 1,000,000,000 for the 1st 9 months of the year, driven by all regions. Roche has commented on the recent quarterly call that they are confident that the formulation with ENHANZE will expand OCREVUS' footprint in the multiple sclerosis market and represent an incremental $2,000,000,000 sales opportunity. The availability of subcutaneous also makes this possible by opening up the treatment opportunity at smaller community hospitals as an example, making it easier for patients to travel to receive treatment.
Roche also sees an opportunity for patients to convert from IV OCREVUS-two to the subcutaneous version. Roche has commented that they are seeing promising first signals regarding the uptake in the U. S, which is sporting market expansion. About 80% of the new starts on OCREVUS II Nuvo are coming from patients who are new to brand and who are not switches from OCREVUS IV. Let me move now to argenx and VIBGAR HYCUELO, which is shown on Slide 8.
Argenx (NASDAQ:ARGX)'s VIBGAR continues to experience strong momentum in its first indication of generalized myasthenia gravis. Argenx recently commented that they expect subcutaneous VIBGART will grow in importance with patients, physicians and payers. We're pleased that subcutaneous VIVE GARP with ENHANZE is already expanding the market by bringing in new patients and providers to VIVE GARP, with patients switching from oral medications to subcutaneous, including patients who don't have easy access to an IV infusion center. Moving now to chronic inflammatory demyelinating polyneuropathy, the second indication. While the launch is recent, argenx has commented that with the unmet medical need, they are happy to see high awareness for the subcutaneous option amongst patients and physicians.
Argenx expects to create fast and broad access for CIDP patients similar to what they accomplished in their launch in myasthenia gravis. We're also looking forward to the approval of a prefilled syringe for VIVEGAR HYTULA with ENHANZE, which will introduce a more convenient administration option for patients with gMG and also CIDP. The pre filled syringe vialate has a PDUFA action date of April 10, 2025. And Ergenx has also continued to expand its presence in additional regions. Most recently, its BLA for Efgartigimod subcutaneous with ENHANZE for JMG was approved in China, increasing number of approvals to more than 25 countries globally.
Given the strong launch of VIBGAR, multiple analysts currently project total sales to reach almost $5,000,000,000 in 20.28 for just the first two approved indications. We believe there is considerable opportunity to increase the total addressable market for VIVGAR as argenx continues to advance its pipeline and the product strategy by expanding to additional indications over time. We're pleased to be supporting 2 registrational studies evaluating Vyvacart HETRULO with ENHANZE administered by prefilled syringe in thyroid eye disease, an indication where there is still a high unmet need. In addition, in October, argenx initiated a Phase 3 study evaluating 5GAR HYTULO with ENHANZE for ocular myasthenergravis. And also recently, argenx initiated a Phase II trial in kidney transplant recipients with antibody mediated rejection.
Now beyond 5 gartetrulo, argenx has a robust pipeline of multi indication assets, including empasipirubart or ARGX-one hundred and seventeen. As an innovator committed to improving patients' lives, Argenx was at the forefront of recognizing the benefit of subcutaneous delivery. The early success of VIBEKAR at TRULO is a strong proof point in the value proposition of ENHANZE enabled subcutaneous delivery, and we are very pleased to have expanded our agreement with argenx from 2 to 6 nominations and to be their partner of choice for rapid large volume subcutaneous drug delivery. Let me now move to Slide 9 for an update on additional products that are awaiting regulatory approval and launch. I'll begin with Bristol Myers (NYSE:BMY) Squibb, nivolumab subcutaneous.
Bristol received regulatory filing acceptance in the U. S. Last quarter for nivolumab subcutaneous with ENHANZE with a PDUFA action date of December 29 this year. The European submission is also under review. Once approved, this would represent our 9th approved product with ENHANZE.
Nivolumab subcutaneous with ENHANZE has the potential to benefit both patients and physicians with a less than 5 minute treatment administration time. Opdivo, which is the brand name for IV nivolumab is currently $9,000,000,000 in annual sales. Bristol has stated that it projects the granted subcutaneous indications will represent 75% of these total sales. They also stated they expect to convert between 30% to 40% of the IV nivolumab to subcutaneous nivolumab. Johnson and Johnson's amifantamab subcutaneous with ENHANCE is also pending regulatory approval and is currently under priority review with the FDA.
Approval would represent our 10th launched partner product. Earlier this year, exciting data from the PALOMA-three trial for amivantamab subcutaneous was presented at ASCO. The presenters highlighted a 5 fold reduction in infusion related reactions as compared to the intravenous, a 5 fold reduction in treatment time and also they presented the results of an exploratory analysis, which revealed an improved overall survival rate for the subcutaneous treatment arm. During their last earnings call, J and J highlighted that they believe Rybovant, which is the brand name for amivantamab IV, is one of the 3 largest underappreciated assets in their portfolio in terms of revenue projections versus what analysts are currently estimating for the back half of this decade. What is clearly exciting is that the 5 recently launched and soon to be launched products represent almost $35,000,000,000 in total brand opportunity according to analysts and company estimates.
This represents an even larger opportunity than the DARZLEK, subcutaneous and fesco opportunity where analyst projections are $20,000,000,000 in 20.28. As Talazam receives on average a mid single digit royalty and subcutaneous sales, you can clearly see how these products will add significant revenue over the next years and result in our projecting to achieve greater than $1,000,000,000 in royalty revenue in 2027. Let me now move to Slide 10, where I'll mention a few highlights and some of our future potential launch products. Bristol Myers has continued to advance their Phase III study for nivolumab plus rilatlumab with ENHANZE in first line non small cell lung cancer. The IV combination is already approved and has the brand name of DUOLEG.
Takeda also continues to advance our Phase 3 study with TAK-eight eighty one, their 20% IgG product candidate, which is progressing in a Phase 3 trial for the treatment of primary immunodeficiency. With all of this continued strong growth of our approved product, the exciting launches that are just beginning and the regulatory and clinical advancements, we are well positioned to continue to deliver double digit top and bottom line growth in the coming years. Let me now transition to slide 11 and I'll make some comments on intellectual property. Our extensive patent estate supports the durability of our revenue streams and we continue to take actions to extend and protect our IP portfolio. In June, we were granted a new patent for ENHANZE by the European Patent Office, which extended patent coverage of our technology in that region to March 6, 2029.
This resulted in an update to our guidance. We currently have a similar pending reissued patent in the United States that we're confident will be granted. We look forward to providing an updated financial outlook if that reissue patent is granted with similar claims. And as a pioneer in developing human hyaluronidases for subcutaneous administration medicines, we were very excited to introduce our MDACE patent portfolio that broadly covers modified human hyaluronidases. Halozyme created the first soluble human hyaluronidase that was active at neutral PH, which we call ENHANZE.
Notably, we did not stop there. We continued to innovate and experiment. And over many years and thousands and thousands of experiments, we created a large and comprehensive library of modifications, and we characterized those modifications. This groundbreaking work and other research projects created the technology protected by the MDase patents, which are distinct from the patents that cover the truncated human hyaluronidase that we license as our ENHANZE technology. Now why are we discussing the MDs portfolio now?
There really are 2 key reasons. Firstly, we've recently been issued multiple new MDs patents, bringing the total granted and pending patents to nearly 100. And we wanted to distinguish the MDACE patents from ENHANZE to avoid any confusion. Secondly, as an intellectual property licensor, we always are looking for new opportunities to commercialize our discoveries and to enable others to bring forward new solutions and therapies that help patients. The ENHANZE technology is the derisk gold standard for conversion of IV therapies to subcutaneous administration.
However, we do recognize that not every drug and biologic supplier might be able to or select to use ENHANZE, but they do wish to utilize or are utilizing Halozyme's pioneering modified hyaluronidase intellectual property. It's in those cases that the MDase patents are now available for license and would open up new opportunities for Halozyme that do not impact our ENHANZE business. I'll now hand the call over to Nicole, who will discuss our financial results in more detail.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: Thank you, Helen. I'll begin with an overview of our Q3 performance and then review the increased guidance ranges for 2024 that are resulting from our strong progress. Our robust financial results for the Q3 exceeded expectations due to higher revenues from royalties and collaboration revenues in the quarter. The result is an impressive 34% increase in total revenue from prior year with adjusted EBITDA and non GAAP earnings per share growth outpacing our top line growth at 60% 69% respectively, a clear demonstration of the significant leverage we have with our high margin business model. Let me now turn to Slide 12 for our detailed financial results for the Q3.
Revenue grew 34 percent to $290,100,000 compared to $216,000,000 in the prior year period. Royalty revenues for the quarter were $155,100,000 an increase of 36% compared to $114,400,000 in the prior year period. The continued growth of subcutaneous DARZLEX, Fezco and VIBGART HiTRULO were the main drivers of our royalty revenue growth in the quarter. The contribution from all three products exceeded our expectations for the quarter, resulting in an increase in guidance for the full year. Collaboration revenues for the quarter were $48,400,000 compared to $15,000,000 in the prior year period.
The performance exceeded our expectations for the quarter due to the meaningful expansion of our argenx collaboration. Research and development expenses were $18,500,000 compared to $17,300,000 in the prior year period. The increase was primarily due to increased compensation expense. Selling, general and administrative expenses were $41,200,000 in the quarter, up from $35,300,000 in the prior year period, primarily due to increased compensation expense and consulting and professional service fees. Adjusted EBITDA increased 60 percent to $183,600,000 from $114,900,000 last year.
GAAP diluted earnings per share was $1.05 and non GAAP diluted earnings per share was $1.27 This is compared with GAAP diluted earnings per share of $0.61 and non GAAP diluted earnings per share of $0.75 in the Q3 of 2023. We maintained a strong balance sheet with cash, cash equivalents and marketable securities at $666,300,000 on September 30, 2024, compared to $529,000,000 on June 30, 2024. The increase was primarily a result of cash generated from operations. Our net leverage ratio was 1.4 times at the end of the quarter, and we still expect to reduce our net leverage ratio as EBITDA continues to grow. As a result of our strong year to date performance and expectations for continued momentum in the Q4, we are raising our guidance ranges for the full year as shown on Slide 13.
We now expect total revenue of $970,000,000 to $1,020,000,000 an increase year over year from $829,000,000 which represents an increase of 17% to 23% over 2023. This includes our expectation that collaboration revenue will contribute $130,000,000 to $150,000,000 and product sales will contribute $290,000,000 to $305,000,000 for the full year. We expect royalty revenues of $550,000,000 to $565,000,000 an increase year over year from $448,000,000 which represents 23% to 26% growth over 2023. The increase in our expectation for the year is due to the strong performance of subcutaneous DARZLEX, Fezco and VIVGAR HYTULO. We expect adjusted EBITDA of $595,000,000 to $625,000,000 an increase from $426,000,000 in 2023, a 40% to 47% year over year increase.
And we expect non GAAP diluted EPS of $4 to $4.20 an increase year over year from $2.77 which is a 44% to 52% increase over 2023. With that, I'll now turn the call back over to Helen.
Helen Torley, President and Chief Executive Officer, Halozyme: Thank you, Nicole. Our strong year to date performance is a reflection of the execution of our strategy and the power of our durable high growth business model. This resulted in a meaningful raise in our expectations and our financial guidance for the year, resulting in impressive year over year growth and setting us up for a strong start to 2025. We have multiple drivers that will support our continued growth, including an exciting series of launches that are just beginning or soon to commence. I'd like to close by recognizing and thanking the Halozyme team and all of our collaborators whose continued dedication and performance has made this such a remarkable quarter and year.
Operator, we are now ready to open the call for questions.
JL, Conference Operator: Thank you. The floor is now open for questions. Your first question comes from the line of Vikram Purejit of Morgan Stanley (NYSE:MS). Your line is open.
Morgan, Analyst, Morgan Stanley: Hi, everyone. Thanks for taking our question. This is Morgan on for Vikram. So one from us on the OCREVUS and TECENTRIQ recent launches. Although it's early, what's your current view on subcu conversion for these products and how that could ramp in the coming quarters?
And what that may look like long term
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: on a steady state basis? Thank you.
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. Thanks, Morgan. We'll start with OCREVUS. And I think it's important to note there and Roche reiterated this on their quarterly call just a week or so ago. Their goal with the subcu is not to immediately convert the IV to subcu.
So it's not a conversion strategy. It's very much a market growth strategy where they see the availability of subcutaneous as allowing more treatment centers and more throughput of patients at infusion suites community hospitals because of the much shorter treatment time with subcutaneous and the easier approach to subcu, which doesn't require as much infrastructure. Indeed, they commented that they see the availability of subcu will expand the OCREVUS market by about $2,000,000,000 So initially for OCREVUS, field force will be very much focused on getting new prescribers and helping those new prescribers set up and start using OCREVUS. If I move to Tecentriq, obviously, Tecentriq continuing to perform well in its key tumor indications as an IV given over 30 to 60 minutes. Within that, there are patients who are receiving Tecentriq as an example as monotherapy or for whom they're on a complex regimen where they want to have a shortened regimen.
And in that instances, there's going to very much be a field force focus to convert those patients from the IV to the subcu because of a much simpler regimen. And so we are going to see conversion focus with TECENTRIQ, market growth for OCREVUS. Roche has not given out any numbers as to where they see the conversion. Our approach has generally been to look at the success they had with Herceptin subcu in Europe, which got to 60% share of volume and then to have a range around that depending on is the company driving for that subcu conversion. So particularly for Tecentriq, I'd think about it in those terms.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: Thank you.
JL, Conference Operator: Your next question comes from the line of Brendan Smith of TD Cowen. Your line is open.
Brendan Smith, Analyst, TD Cowen: All right, great. Thanks so much for taking the question. Congrats on the solid quarter. I wanted to first actually kind of piggyback on that last question about Okervis subcu. You call up the language from Roche about that $2,000,000,000 Just to kind of better understand that or maybe contextualize it a bit, I mean, if consensus for peak sales is around $9,000,000,000 $10,000,000,000 there, that might suggest only about 20% share of the subcu.
Is that maybe the right way to think about that? Or is this 2,000,000,000 really kind of new to brand patients that would be in addition to IV to subcu switchers? And then maybe just really quickly on the Wave 4 pipeline, are you able to give us any sense of at what point we might learn about the additional Roche and Chugai drugs, just whether target indication is like after Phase 2 data or something like that? Just trying to understand when we might start focusing more on that wave. Thanks very much.
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. Thanks, Brandon. And thanks for asking that question because I do think the way Roche has been talking about it has led people to be a little bit confused. So there's going to be a market expansion, which is on top of the IV opportunity. And so if it's at $9,000,000,000 my view is this is going to take the total growth in the next several years to be $11,000,000,000 So you do add on the additional $2,000,000,000 But the original IV sales of the $9,000,000,000 will, we strongly believe, be converted.
When you think about what the difference is going to be for a patient, instead of up to 3.5 hours to 5.5 hours in an infusion suite, it's going to be 30 minutes in an infusion suite. And so there is also going to be that conversion of the IV to subcu. I think what you're going to see is it's going to be phased. The initial launch focus is on expanding the market. And over time, we're going to see the conversion begin and grow as well.
But when we're hearing from Roche, they very much want to highlight this is not just a cannibalization opportunity. So don't think about the pie staying the same size it is today. The pie is going to get bigger and then also going to be the opportunity to convert that bigger pie to be more subcu sales. Just on that, they also made a comment on their call that they are seeing already the strategy at work in the U. S, obviously, very recent launch in the U.
S, but they're seeing that 80% of new starts on OCREVUS denovo are new to brand. So very much supporting that approach they have where they don't want to cannibalize their IV sales, they want to further expand their opportunity while they also will be able to over time get that subcu conversion too. With regard to the specific Roche and Shigai products that are listed on our Wave 4 portfolio, Unfortunately, until the partners want to discuss exactly what those indications are and announce their plans for them, we are unable to discuss it any further. So can't give any updates at this time.
Brendan Smith, Analyst, TD Cowen: All right. Thanks very much. Appreciate it. Your
JL, Conference Operator: next question comes from the line of Mike DeFior of Evercore ISI. Your line is open.
Mike DeFior, Analyst, Evercore ISI: Hi, guys. Thanks so much for taking the question and congrats on the solid quarter. 2 for me. First question is, any status update regarding your expectations for new collaboration deals to be made before the end of the year? And I have a follow-up.
Helen Torley, President and Chief Executive Officer, Halozyme: All right. Thanks, Mike, for that. You saw probably that we have provided our guidance for the year on the collaboration, expecting $130,000,000 to $150,000,000 And we're very pleased with the progress we've made here, obviously, strong contributions from the expanding the agreement with Argenx, in particular in the quarter. I will say we're not letting, our feet off the gas pedal, and we're remaining very focused on gaining new deals and additional new nominations, as we close out 2024. But if you do take a look at our guidance, you can see where the range we're predicting based on what we have line of sight on today is in that $130,000,000 to $150,000,000 range.
Mike DeFior, Analyst, Evercore ISI: Got it. Got it. And my follow-up question is regarding MDACE. Considering that the MDACE licensees are non inclusive and won't involve Halozyme support services or API supply as you previously noted, how will licensees manage development and regulatory challenges typically that are typically supported in traditional ENHANZE partnerships? And how may this affect Emdeis' adoption and commercial success compared to ENHANZE?
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. I will be clear and say, we do expect that the vast majority of companies are going to want to and be able to work with ENHANZE. And so as we think about where we're going to be focusing and our growth is going come from, it's going to be new partners and expanded partnerships related to ENHANZE. But as we pointed out, there may be instances where somebody is unable to or for some reason doesn't want to work with ENHANZE, but they are utilizing our modified hyaluronidase IP, we are in that instance only going to grant them a license as you point out. Now we obviously don't have a modified hyaluronidase VP product substance.
So that company will have to do what we did for the last 10 years, which is identify how to develop a product, engage with the regulatory authorities, start developing that safety database we have to demonstrate the product is safe and effective. But we would not propose to help them, because we are going to be continuing to support our current ENHANZE partners. But we will license the IP, because they're going to be using their MDase, the modified hyaluronidase for the same purpose as ENHANZE. And obviously, that's where the value of our IP is being realized.
Mike DeFior, Analyst, Evercore ISI: Got it. Very helpful. Thanks so much.
JL, Conference Operator: Your next question comes from the line of Jason Butler of Citizens JMP. Your line is open.
Brendan Smith, Analyst, TD Cowen: Hi. Thanks for taking the question.
Jason Butler, Analyst, Citizens JMP: Just one on VIVGAR HYTULO and the prefilled syringe. Can you maybe just speak to the progress there with FDA and how your work with other collaborators or other products has inputted into this regulatory process? Thanks.
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. Thanks, Jason. If you listen to the call today, as we did, our Genex provided the update and just summarized that they are expecting a PDUFA action date that is going to be in April. We don't have any other information that we can share with regard to that, but we are excited that they are obviously progressing with that in studies that are ongoing both in thyroid eye disease and other indications now. Again, this really has been work that we have done obviously in providing the ENHANZE for that prefilled syringe work, but I will say argenx has been lead with regard to the actual mechanical work in that.
We obviously continue to advise on the formulation of ENHANZE. And so we don't have any information other than that I can share, Jason.
Brendan Smith, Analyst, TD Cowen: Okay, great. Thanks for taking the question.
JL, Conference Operator: Your next question comes from the line of Corrine Johnson of Goldman Sachs. Your line is open.
Corrine Johnson, Analyst, Goldman Sachs: Hi, good afternoon everybody. Maybe could you expand a little bit on the primary drivers of that increase in royalty revenues? You mentioned the products that are driving it, but I'm curious if there was additional indications within DARZALEX, etcetera, better than expected conversion on the key products or anything else that you could kind of point to?
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: And then could you also talk
Corrine Johnson, Analyst, Goldman Sachs: a little bit about where you stand on potential auto injector partnership deals? We haven't really seen anything yet. I'm just curious if there's any additional work you're doing
: to kind of prove out that technology? Thanks.
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. Small bits of color we can bring based on what our partners have stated publicly. I think we can say for DARZALEX, they reported a very strong quarter, obviously with a great sequential and year over year growth. And what they are talking about is just continued expansion of 4 points of share gains across all indications and 7.7 points of share gain in the frontline. And recall the frontline is actually the largest population of multiple myeloma patients and those are the patients who stay on therapy the longest.
And so I really think the growth that we've seen over the last several years has been fully enabled by the availability of subcu to expand as we're getting new indications into that frontline setting. So that's really, I think, where it's very exciting. If we turn to VIBEKAR HYTULO, based on the call this morning, what we heard was that the majority of the revenue is obviously still coming from the gMG indication where they're continuing to see broadening adoption of 5GAR and also 5GAR HYTRULO with 5GAR HYTRULO really helping move into that early line of therapy. So that is on a strong trajectory. What has begun to impact with 5GAR HITRULO is the CIDP indication.
Specific comments were made about the fact that 300 patients on therapy, many of whom who came on in September, really occurring after the peer policies were in place. And so that actually bodes very well for continued strong growth as those patients that will be reflected as a full quarter in the next quarter. And so those are some of the key drivers. I'd say for Fezco, it's just continuing on that very nice trajectory that we've seen, as there's just growing recognition of what this means for patients to be able to have, just the more simpler regimen and allow them to get back to their life. So in summary, a mix of new indications, strong execution by the partners and the availability of subcu to really penetrate into earlier lines of therapy where patients tend to stay on therapy longer.
: And then on the auto injector side?
Helen Torley, President and Chief Executive Officer, Halozyme: Sorry, on the auto injector, yes. I mentioned on the call, Corinne, we are continuing discussions both with the high volume auto injector and also small volume auto injector. Similarly, two comments I made on the enhanced discussions, there just always is a process we go through as the companies go through their technical evaluation process and then their decision process. So we're moving our way through those processes with those companies. And so no updates on that today, but continuing to make progress and that still remain very confident we're going to be signing and announcing deals.
: Thank you.
JL, Conference Operator: Your next question comes from the line of Mitchell Kapoor of H. C. Wainwright. Your line is open.
Mitchell Kapoor, Analyst, H.C. Wainwright: Hey, everyone. Thanks for taking the question. Just wanted to know a little bit more about the M days platform opportunity. Can you just give a little context to how big or narrow of an opportunity this might be based on how many types of opportunities might be out there for this when you do have the ENHANZE platform and the eligible partners that were likely focused on that side of the business for the BB partnerships.
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. Thanks, Mitch. And what we've talked about is the fact that we do anticipate ENHANZE will continue to be what people will come and want to license. It's a gold standard. It's the most regulatory and commercially derisked.
So that is where our primary focus is. But we are aware that there are companies who may be considering developing a modified hyaluronidase. And in that instance, they may not want to work with ENHANZE or they may not be able to work with ENHANZE, but that's why they've chosen this modified hyaluronidase. But if they're using a modified hyaluronidase, we believe they will be using some of our modified hyaluronidase IP. And that's why we have made these licenses available to them.
So we don't think this is in terms of the number of deals going to be like we do with ENHANZE and we're talking about new partners with the frequency of which we've done over the years, Mitch. But for anyone who is developing or thinking about developing a drug with a modified hyaluronidase, that's going to be the opportunity for us. It's an emerging field and so we haven't we can't really comment on how many people we think will want to do that. But the great news is it's another growth driver for us if companies are developing modified hyaluronidase subcu drugs copying what we have been doing with ENHANZE.
Mitchell Kapoor, Analyst, H.C. Wainwright: Great. Thank you for taking my question and congrats on the quarter.
Helen Torley, President and Chief Executive Officer, Halozyme: Thank you.
JL, Conference Operator: Your next question comes from the line of Mohit Bansal of Wells Fargo (NYSE:WFC). Your line is open.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme0: Great. Thank you very much for taking my question. I have two questions. So one is, how should we think about your guidance update philosophy going forward? Because I understand that you'll be providing guidance to 25 as next year rolls over, but should we be expecting updates for subsequent years as well as expectations change?
That's number 1. And number 2, for
JL, Conference Operator: the
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme0: Amdis platform, how differentiated it is from your enhanced platform? I'm asking from the point of view of your existing partners who have exclusive licensing with certain products. If it kind of infringes upon that, what gives you comfort that your existing partners would be fine with that?
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. I'll ask Nicole to comment on your question on the guidance and I'll talk about MDiv.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: Yes. Thanks for the question, Ovi. So from a guidance perspective today, we are focused on the Q3 results and the full year updated guidance, which we're really excited to raise for top line and bottom line for the full year. And you saw we do republish our 5 year projections. Those are unchanged at the moment, but we continue to evaluate those.
In the new year, we'll give more line of sight and color into our updated expectations for 2025.
Helen Torley, President and Chief Executive Officer, Halozyme: All right. And maybe I'll take a step back and just say, we talked about all of the experiments that we did, and the experiments, that we did on the human hyaluronidase area. And we came up with ENHANZE that we patented, and that's a truncated human hyaluronidase. But we also did lots of experiments, 1,000 and 1,000 of experiments on different structures of hyaluronidases and we call those our modified hyaluronidase. So ENHANZE has got one structure.
The modified hyaluronidases have different structure from ENHANZE. And when we have licensed ENHANZE, we are only licensing the IP to the structure and the activities that are related to that specific ENHANZE structure, Mohit. So that's why our partners will not are not upset or surprised or anything because they're totally different products and patent portfolios, firstly. Now our ENHANZE partners do not need unlikely to want the Emday's portfolio because they have ENHANZE, which does what it needs to do, which is this delivery of drugs, high volume rapid subcu delivery. But there are some people and partners and makers of drugs and biologics who perhaps can't work in ENHANZE or don't want to work in ENHANZE and have chosen or will choose to work in a modified hyaluronidase.
And what we wanted everyone to recognize is because of our pioneering work in this area, we have actually got an extensive patent portfolio that covers many modified hyaluronidases. And so for those companies, if they want to develop, a modified hyaluronidase for doing the same thing as ENHANZE, which is the rapid large volume sub delivery, we wanted to make them aware that we are open and willing to license our patents that relate to the modified hyaluronidase. So it's a different product, it's a different structure, but Halozyme was really the pioneer of making these new offerings that have enabled such an important advancement for patients. So let me just check-in and see. Did that clarify for you the difference between these 2?
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme0: Very helpful. Thank you very much, Helen, and Karl. Really appreciate it.
Helen Torley, President and Chief Executive Officer, Halozyme: Thank you.
JL, Conference Operator: Your next question comes from the line of Jessica Fye of JPMorgan. Your line is open.
: Hey, guys. This is Na san on for Jessica Fye. Congratulations on a strong quarter. My question goes back to MDAYS. I think can you just give us examples of how in what case would a partner be unable to work with ENHANZE?
And I think I've always thought about ENHANZE giving exclusive targets as a sort of defensive for attractive and how it's attractive for and defensive for its partners. So for M Days, wouldn't it give sort of like a escape hatch, if you will, for competitors? And then secondly, I noticed that for the collaboration revenue guidance, the top range came down a little bit. Can you just talk about a little bit like what is driving that? Thank you.
Helen Torley, President and Chief Executive Officer, Halozyme: Yes. So with regard to the situation where people couldn't work with ENHANZE, and I think it's a great question, and you're quite right, because we do the exclusive targets, if somebody was unable to work with us because we had already licensed an exclusive target, they might choose to work with a modified hyaluronidase. What we are doing here, however, is not enabling any partner to work and develop a modified hyaluronidase subcu enabled drug against that target. We are simply because we're not supporting them from a clinical development perspective and we're also not supplying the API. We are simply making them aware that if they want to go down that path, we have got strong IP in that area that is available for license.
And this is why as we have conversed and shared this approach with our current partners, we have really received no pushback or concerns that have been voiced on it because we're not enabling and supporting the development of drugs that are doing anything against the exclusive license of ENHANZE. We are simply recognizing and seeking to create value for Halozyme from our inventions that were done all those years ago related to the modified hyaluronidases. So I hope that clarified that. And in terms of the guidance ranges, yes, we are where we sit today, we've got a line of sight to $130,000,000 to 150 $1,000,000 We are continuing, as I mentioned earlier, to work hard to gain new deals and additional new nominations. But that was our best estimate based on where we are today for how the year is going to end.
We certainly are going to be nicely above 130 in terms of collaborations. And so we're definitely fully in line with our original guidance. We just tightened the range a little.
JL, Conference Operator: Your last question comes from the line of David Risinger of Leerink Partners. Your line is open.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme1: Thanks very much. So my key questions have been asked. So I just wanted to ask about product sales. So if you could just, educate a little bit more, Helen, with respect to why product sales are flattish in 2024? And then why they are expected to grow by 50% over the next 4 years?
So I see your 2028 target for revenue is up about 50% from $300,000,000 this year to roughly $450,000,000 in $28,000,000 Thanks so much.
Helen Torley, President and Chief Executive Officer, Halozyme: That is a great question. I'm going to pass over to Nicole.
Tram Bui, Vice President of Investor Relations and Corporate Communications, Halozyme: Yes. Thanks, David. So in product sales, what you see in product sales are, one, the products that we sell to our collaboration partners, to our API in our devices, that is where we've talked about historically, those can be lumpy quarter over quarter. We are making investments to have lower cost API for our partners. So over the longer term, that revenue stream will actually decline for us because as we make lower cost materials, that gets passed on to our partners in savings.
So that is one of the drivers in product sales. And then also we have our proprietary product sales. Those are the sales that you see annually year over year are increasing and also trending this year in line with our expectations for the full year. I will point out that products our proprietary product sales, you saw a slight decrease in sequential quarters in the Q3 and that's due to a seasonality that we historically experienced in the Q3 where we do see a dip in demand in the summer months and that is a part of our plans and you'll see that in the results for the Q3.
JL, Conference Operator: With no further questions, this concludes our Q and A session. And this also concludes today's conference call. You may now disconnect.
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