Halozyme Therapeutics, Inc. Q3 FY2025 Earnings Call

Good afternoon. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Third Quarter 2025 Financial and Operating Results Conference Call. Please note, this event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good afternoon, and welcome to our third quarter 2025 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 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 Dr. Helen Torley.

Good afternoon, everyone, and thank you for joining us today. I will begin on Slide 3. I am very pleased to report another quarter of record royalty revenue of $236 million, a remarkable 52% increase year-over-year, resulting in total revenue of $354 million, reflecting 22% growth year-over-year. These results were driven by the continued success of our three established blockbuster subcutaneous therapies: DARZALEX subcutaneous, Phesgo, and VYVGART Hytrulo. Adjusted EBITDA growth exceeded total revenue growth, increasing 35% over the prior year's third quarter to $248 million, which illustrates the strength of our royalty-based business model. Our core ENHANZE drug delivery technology continues to drive significant momentum in our business, demonstrating the powerful opportunity for subcutaneous delivery to reshape healthcare. ENHANZE allows treatments that once required lengthy infusions in hospitals or infusion suites to be administered in minutes, providing convenience in the doctor's office and in the patient's home. For patients, this means less travel time, fewer invasive procedures, and greater independence while maintaining efficacy and safety. Simultaneously, it reduces the strain on healthcare systems by lowering overall care costs and freeing up hospital and infusion center capacity. Turning to Slide 4, year-to-date, we have achieved 13 of the 15 growth catalysts, including new product approvals, expanded indications, geographic outreach, and key reimbursement milestones across major markets. These catalysts bolster both our near- and long-term revenue prospects. This quarter, we secured two significant indication approvals for our leading growth drivers. First, DARZALEX subcutaneous received European Commission approval for a new indication in smoldering multiple myeloma, offering another vital growth catalyst for the franchise. Smoldering multiple myeloma is a precursor to active multiple myeloma, extending DARZALEX subcutaneous access to an early disease stage patient population and potentially increasing treatment duration and lifetime patient value. The second indication was for Argenx’s VYVDURA pre-filled syringe with ENHANZE, which was approved in Japan for self-injection for generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. Delivered as a once-weekly 30- to 90-second subcutaneous injection, VYVDURA can be self-administered at home, removing the need for extensive infusions in clinical settings. The pre-filled syringe with ENHANZE simplifies administration, reduces treatment burdens, and potentially improves patient adherence. Rounding out the 15 growth catalysts, we anticipate two additional significant U.S. approvals this year, one for DARZALEX subcutaneous in smoldering multiple myeloma and another for RYBREVANT subcutaneous in EGFR-mutated non-small cell lung cancer. I'll now move to Slide 5. Fueled by the ongoing strong performance of our core ENHANZE technology, we are raising our full year 2025 guidance ranges. We now project total revenue of $1.3 billion to $1.375 billion, reflecting 28% to 35% growth over 2024. Royalty revenue is expected to grow 49% to 54% to $850 million to $880 million for the full year, primarily driven by our three blockbuster subcutaneous therapies: DARZALEX subcutaneous, Phesgo, and VYVGART Hytrulo with ENHANZE. We expect adjusted EBITDA of between $885 million and $935 million, representing year-over-year growth of 40% to 48%, and non-GAAP diluted earnings per share of $6.10 to $6.50, reflecting year-over-year growth of 44% to 54%. Moving now to Slide 6, we recently announced the acquisition of Elektrofi, which advances our vision to enable at-home administration of biologic therapies. This strategic initiative supports our goal of broadening our portfolio of drug delivery technologies. With Elektrofi's innovative technology, we aim to extend subcutaneous delivery to a wider range of biologics, reinforcing our focus on patient-centered drug delivery technology solutions. By utilizing Elektrofi's Hypercon technology, we can achieve concentrations of 400 to 500 milligrams per ml or as much as four to five times higher than many current conventional formulations. This breakthrough makes it possible for more drugs to be administered at home via auto-injector, which is of high interest for pharmaceutical and biotech companies, particularly in inflammation, immunology, neurology, nephrology, and oncology. By integrating three innovative drug delivery technologies—ENHANZE, our auto-injectors, and Hypercon—we will create a new commercial opportunity for our partners and reinforce Halozyme's position as the partner of choice in patient-focused drug delivery, broadening our long-term growth outlook. Moving to Slide 7, it’s important to note that Hypercon is at a value inflection point. We have three partner agreements in place, leading to two products projected to enter the clinic and begin clinical development of the Hypercon formulation by the end of 2026 or sooner. Each of these products, with different formulations, is already approved and has achieved blockbuster sales. With Halozyme's established expertise in subcutaneous drug delivery, we are well positioned to identify opportunities that could accelerate approval times and unlock significant new revenue potential through advancing new nominations and signing new agreements. The addition of Elektrofi's Hypercon technology enhances our offerings, enabling us to deliver top-tier solutions and maintain strong momentum in transforming the subcutaneous delivery landscape. Now let me turn to Slide 8, where I will discuss our current growth drivers for the quarter. Starting with DARZALEX, its exceptional performance continued this quarter. Sales for DARZALEX increased 20% operationally to $3.7 billion, primarily fueled by strong share gains of about 5.7 points across all therapy lines and nearly 9 points in the frontline setting, along with overall market growth. This represents the seventh consecutive quarter of frontline growth of five points or more, highlighting the brand's ongoing momentum. With 96% of sales from the subcutaneous formulation with ENHANZE in the United States and over 90% global subcutaneous share, ENHANZE is delivering value to patients sooner in treatment as they live longer on therapy. DARZALEX is, and we expect will remain, the gold standard for multiple myeloma treatment, maintaining more than 50% market share across all therapy lines. There are two additional new catalysts expected to sustain the strength of DARZALEX subcutaneous. These include the recent European Commission approval for high-risk smoldering multiple myeloma, marking the first approved treatment for this early disease stage. We also anticipate potential U.S. approval for smoldering multiple myeloma following a favorable FDA ruling on the risk-benefit profile earlier this year. Separately, Johnson & Johnson reported encouraging top-line results from the Phase III MajesTEC-3 study, which further substantiated the role of DARZALEX FASPRO in later lines of multiple myeloma treatment. The combination of TECVAYLI and DARZALEX FASPRO in relapsed/refractory multiple myeloma demonstrated a statistically significant improvement in progression-free survival and overall survival compared to the standard of care for patients who had undergone one to three prior treatments, confirming the clinical value of DARZALEX FASPRO with ENHANZE. These milestones contribute to a growing list of approvals and clinical successes that expand DARZALEX subcutaneous’s reach and support analyst projections for the brand to exceed $18 billion by 2028. Halozyme will continue to earn royalties on the subcutaneous formulation of DARZALEX through 2032. Next, I will discuss Phesgo on Slide 9. Phesgo continues to be Roche's number one growth driver, generating nine-month revenue of CHF 1.8 billion or about $2.3 billion, reflecting a 54% year-over-year increase. In the third quarter, the conversion from intravenous Perjeta and Herceptin reached 51% across 78 launch countries, up five points from the previous quarter. The conversion of Perjeta to Phesgo is projected to reach 60%, up from the previous peak of 50%, driven by its strong value proposition. We are encouraged by Phesgo's increasing adoption with royalties secured at the mid-single-digit rate through 2030. Turning to VYVGART on Slide 10, it continues to be a crucial driver of the VYVGART franchise's exceptional growth, with total sales increasing 96% year-over-year in the third quarter to $1.13 billion. The subcutaneous formulation enabled by ENHANZE has played a key role in expanding access to new prescribers and patients for both of its approved indications: generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. Supporting these indications, the pre-filled syringe with ENHANZE, which launched in April 2025, is now approved in most major markets. By facilitating self-injection in just 20 to 30 seconds—whether at home, in a clinic, or while traveling—this innovation has expanded access to new patient populations, simplified treatment logistics, and accelerated adoption in early lines of treatment for both gMG and CIDP. The pre-filled syringe has increased the number of prescribers by 260 physicians, opening new patient pockets in gMG and CIDP. With around 50% of patients using the pre-filled syringe new to VYVGART, Argenx believes this is just the beginning of the growth curve for both indications. They project VYVGART's total addressable market for gMG could approach approximately 60,000 patients globally, up from about 17,000 at launch, as the biologic opportunity broadens with potential future indications for ocular and seronegative patients. Regarding the CIDP indication, Argenx has noted continual growth in patient starts and prescriber engagement, fueled by physician confidence in VYVGART Hytrulo's safety profile and its ability to provide meaningful functional improvements. The pre-filled syringe is driving additional demand, offering the convenience of self-injection and flexible administration. Notably, 85% of CIDP patients are switching from IVIG, with early adoption also seen among treatment-naive patients. Argenx believes they are at the outset of the growth curve for CIDP and will continue to see the prescriber base expand. VYVGART Hytrulo's robust commercial success, growing approval rates, launches in both gMG and CIDP, and plans to expand its footprint in autoimmune disease indications present a compelling royalty growth opportunity for Halozyme. We expect VYVGART Hytrulo to be a lasting contributor to our long-term financial performance, with analysts expecting total sales of $7.7 billion in myasthenia gravis and CIDP by 2028, allowing Halozyme to earn royalties through the early 2040s. It's noteworthy how these three products—DARZALEX subcutaneous, Phesgo, and VYVGART Hytrulo—are propelling our 52% year-over-year growth in royalty revenue this quarter, with continued growth opportunities for years to come. Moving to Slide 11, I'll review the progress of our recently launched products, which are expected to contribute meaningfully by 2026. Starting with OCREVUS, Roche has reported sustained momentum with sales of CHF 5.2 billion or about $6.5 billion, marking a 7% increase for the first nine months of 2025. The company reaffirmed expectations for high single-digit growth this year. OCREVUS ZUNOVO, utilizing our ENHANZE technology, was approved in 2024 and offers a rapid 10-minute subcutaneous injection, a significant improvement over the lengthy intravenous administration and monitoring process. The subcutaneous formulation serves as a key growth driver for Roche's neurology franchise, making it accessible in community neurology practices and rural areas with limited IV infusion capacity, thus improving access to previously underserved patient populations. More than 12,500 patients are now receiving the subcutaneous formulation globally, a 75% increase from the 7,000 patients reported last quarter. Adoption is also growing in the United States following the permanent J-Code granted on April 1, which simplifies reimbursement and facilitates wider adoption. Currently, around 800 healthcare providers are prescribing OCREVUS ZUNOVO with ENHANZE, with 60% of the subcutaneous volume originating from community practices, indicating strong traction outside traditional academic centers. Additionally, 50% of OCREVUS ZUNOVO patients are new to the brand, demonstrating market expansion beyond IV conversions. In early launch countries like Germany, similar trends are observed, reinforcing the ENHANZE formulation's potential to grow the overall OCREVUS patient base. Roche anticipates the subcutaneous formulation will represent an incremental $2 billion opportunity, while analysts predict the overall OCREVUS brand opportunity will reach $10 billion by 2028. We are pleased with how OCREVUS ZUNOVO, powered by our ENHANZE technology, is transforming the multiple sclerosis treatment landscape with its rapid 10-minute subcutaneous delivery, unlocking new patient access, accelerating adoption in community practices, and driving significant franchise growth. Halozyme will earn royalties on the subcutaneous formulation at the full mid-single-digit royalty rate through 2030 and at a step-down rate until at least 2034. Now, I'll discuss Roche's Tecentriq Hybreza with ENHANZE. Tecentriq Hybreza received approval in the United States and Europe in 2024 for all IV indications, enabling a more convenient 7-minute subcutaneous injection for patients and providers. Roche’s strategy aims to promote conversion from IV to subcutaneous use. Tecentriq generated CHF 2.6 billion in revenue during the first nine months of 2025, approximately $3.3 billion, with analysts projecting revenue of about $4.5 billion by 2028. Halozyme earns royalties on net sales of the subcutaneous formulation at the mid-single-digit rate through the 2040s, highlighting the long-term value of this partnership. I will now move to Bristol-Myers Squibb's OPDIVO. In the third quarter, global OPDIVO sales reached approximately $2.5 billion, a 6% year-over-year increase primarily driven by robust demand. The U.S. launch of OPDIVO Qvantig with ENHANZE is progressing well, with growth fueled by ongoing use across all indicated tumor types, alongside the permanent J-Code received in the quarter. Third quarter sales hit $67 million, a significant increase from $30 million in the second quarter. OPDIVO Qvantig provides a convenient 3- to 5-minute subcutaneous administration and flexible outpatient infusion options, contributing to its growing adoption among both patients and providers across all indicated tumor types. Given OPDIVO and OPDIVO Qvantig's strong year-to-date performance, BMS anticipates stronger growth than previously guided, with predicted sales in the high single-digit to low double-digit range for the full year. Analyst projections suggest total brand sales could reach $9.5 billion by 2028. Now, let’s turn to RYBREVANT. RYBREVANT continues to show strong growth, with Johnson & Johnson reporting total IV and SC revenue of $198 million in the third quarter, reflecting triple-digit year-over-year growth. The April approval of RYBREVANT subcutaneous with ENHANZE marks Halozyme's 10th commercialized partner product and represents a pivotal milestone in our global expansion. ENHANZE facilitates strong efficacy outcomes equivalent to IV RYBREVANT while dramatically reducing administration time from multiple hours to just minutes, also resulting in a fivefold decrease in the serious adverse event of infusion-related reactions compared to the IV formulation. Johnson & Johnson's strategy to simplify treatment and increase patient convenience with ENHANZE is well received by physicians for use in combination with lazertinib for the first-line treatment of advanced EGFR-mutated non-small cell lung cancer, as well as for the same population after the failure of a platinum-based regimen. RYBREVANT is crucial for Johnson & Johnson, who are continuing to invest in clinical studies to fully realize its potential. Recently published results in the New England Journal of Medicine from the Phase III MARIPOSA study indicated that RYBREVANT combined with lazertinib significantly reduced the risk of death compared to osimertinib, the current standard of care for this type of lung cancer. It's worth noting that osimertinib, marketed as Tagrisso by AstraZeneca, generated $6.6 billion in 2024, underscoring the commercial potential for RYBREVANT. At ESMO 2025, Johnson & Johnson also presented data from the OrigAMI-4 study, showing that subcutaneous amivantamab enabled by ENHANZE achieved a 45% overall response rate in patients with recurrent or metastatic head and neck cancer. These results could shift the treatment paradigm and support Johnson & Johnson's assertion that RYBREVANT will reach $5 billion in sales. To summarize Halozyme's opportunity, our three flagship products driving strong growth—DARZALEX, Phesgo, and VYVGART—represent a total addressable market opportunity of around $30 billion by 2028. Additionally, the newer launches I’ve highlighted also represent another approximately $30 billion opportunity in 2028. With the recent approvals, our total opportunity has doubled, positioning us for strong continued royalty revenue performance. Our portfolio of 10 launch products is strategically positioned to deliver $1 billion in annual revenue in 2027. This achievement reflects the robustness of our long-term strategy and partnerships. Importantly, we expect sustained royalty contributions from all products through at least 2030, with some extending into the 2040s, ensuring a durable revenue stream. Now, I will turn to Slide 12 to discuss development opportunities not yet reflected in our royalty revenue projections. We currently have eight programs in various stages of clinical development, with two more expected. Among our most advanced opportunities are Bristol-Myers Squibb's subcutaneous nivolumab with relatlimab and Takeda's TAK-881, both of which are in Phase III development. These programs present potential new royalty growth avenues beyond our existing forecast through 2028. I would also like to update you on progress with new deals. I have stated previously that we aim to secure a new ENHANZE agreement this year, and I'm confident in our prospects based on the current stage of discussions and their advancement toward finalization. There is strong interest in ENHANZE as more companies seek meaningful competitive differentiation. On our two development auto-injector agreements, we are making progress and expect to complete planned human factor studies by mid-2026. With that, let me turn the call over to Nicole.

Thank you, Helen. Our strong third quarter performance continues to reflect the momentum of our core ENHANZE technology. Total quarterly revenues grew by approximately 22% to $354 million, with royalty revenue increasing 52% to $236 million. Adjusted EBITDA grew 35%, outpacing top line growth and showcasing the exceptional leverage of our high-margin royalty-driven model. Let me start on Slide 13. We continue to generate robust cash flow, which supports our balanced capital allocation priorities. Year-to-date, we repurchased $342 million of shares with $158 million remaining under the current authorized plan. Since 2019, we have returned approximately $1.9 billion to shareholders through repurchases, representing greater than 100% of cumulative free cash flow over that period. We have a strong balance sheet with cash, cash equivalents, and marketable securities of $702 million on September 30, 2025, compared to $596.1 million on December 31, 2024. The increase was driven by an increase in cash generated from operations, primarily offset by share repurchases. Our net debt-to-EBITDA ratio was 0.9x at the end of the third quarter. As Helen mentioned, we announced our acquisition of Elektrofi in the third quarter, a transaction that strengthens our leadership in drug delivery and complements our strong organic growth opportunities. We are pleased that the acquisition is expected to have a minimal increase in our net leverage, estimated to be at approximately 2x net debt-to-EBITDA at closing. Our goal is to delever in the subsequent quarters, supported by our robust free cash flows. Let me now turn to our detailed third quarter results on Slide 14. Total revenue grew 22% to $354.3 million compared to $290.1 million in the prior year period. Royalty revenue of $236 million increased by 52% from $155.1 million in the prior year period. The commercial success of subcutaneous DARZALEX, Phesgo, and VYVGART Hytrulo continues to drive robust royalty revenue growth. Product sales of $94.2 million increased by 9% from $86.7 million in the prior year period, mainly driven by the contribution from proprietary product sales. Collaboration revenues of $24 million compared to $48.4 million in the prior year period. The difference was primarily due to the timing of milestones achieved. Research and development expenses were $17.3 million compared to $18.5 million in the prior year period. The decrease was primarily due to lower compensation expense driven by resource optimization and labor allocation initiatives, offset by the timing of planned investments in ENHANZE related to the development of our new high-yield rHuPH20 manufacturing process. Selling, general, and administrative expenses were $46.1 million, up from $41.2 million in the prior year period, primarily due to increased consulting and professional service fees, partially offset by compensation expense. Adjusted EBITDA increased by 35% to $248.2 million from $183.6 million in the prior year. GAAP diluted earnings per share was $1.43 and non-GAAP diluted earnings per share was $1.72. This is compared with GAAP diluted earnings per share of $1.05 and non-GAAP diluted earnings per share of $1.27 in the third quarter of 2024. Turning now to Slide 15. Based on our strong performance year-to-date, we are raising our guidance ranges for the full year. As a reminder, our expectations exclude the impact of the accounting treatment of the Elektrofi transaction. The final determination of whether this transaction will be accounted for as a business combination or an asset acquisition will be determined at the close. We now expect total revenues of $1.3 billion to $1.375 billion, representing year-over-year growth of 28% to 35%, driven by an increase in projections for royalty revenues. Royalty revenues of $850 million to $880 million, representing year-over-year growth of 49% to 54%. We continue to expect DARZALEX SC, Phesgo, and VYVGART Hytrulo to drive the strong expectations, with VYVGART Hytrulo being the largest royalty dollar growth driver. Product sales of $340 million to $365 million, representing year-over-year growth of 12% to 20%; collaboration revenues of $110 million to $130 million. Adjusted EBITDA of between $885 million and $935 million, representing year-over-year growth of 40% to 48%. And non-GAAP diluted EPS of $6.10 to $6.50, representing year-over-year growth of 44% to 54%. Regarding the future financial expectations of our acquisition of Elektrofi, we continue to expect the transaction to be less than 5% dilutive to non-GAAP diluted EPS over the medium term, excluding potential milestone payments related to the programs in development, which could offset dilution prior to the projected royalty revenues in 2030 and beyond. We also expect full year 2026 incremental operating expense of approximately $55 million. With that, I'll now turn the call back over to Helen.

Thank you, Nicole. In closing, our third quarter results reflect the continued strength of our core ENHANZE business and the accelerating momentum across our partner portfolio. With 10 launch products, a robust pipeline of future royalty streams and the addition of the Hypercon technology, we are well positioned to deliver strong revenue and shareholder value for years to come. And let me just close with a few words on Nicole. While Nicole will be with us on our fourth quarter call in February, I did want to take this moment to thank Nicole for her many contributions to Halozyme. These have really helped us accomplish our growth strategy to date. Throughout this time, Nicole has helped design and lead multiple financing transactions that provided the capital that enabled the strong growth that you see today. Nicole will be transitioning to a new opportunity in 2026 when a new CFO is hired or by March 30, 2026. Operator, with that, we are now ready to open the call for questions.

Your first question comes from the line of Sean Laaman with Morgan Stanley.

Yes, regarding capital allocation, you are currently twice leveraged. How do you approach paying down debt to create a more conservative balance sheet, while also considering potential buybacks for next year and any Elektrofi-like opportunities that may arise? My second question is, how will investors be able to track Elektrofi's performance going forward?

Yes. So I'll start by just saying with regard to opportunities like Elektrofi, we are continuing to look for those opportunities, Sean, because we do believe that we're in a great position to be the partner of choice for our pharmaceutical and biotech partners as they're looking to optimize the patient treatment experience. So we will keep looking. Obviously, we will transact when we do find appropriate opportunities. Let me ask, though, Nicole to comment on the capital allocation and the plan to delever.

Yes. Thanks, Sean. We do have robust cash flows and cash growth in the coming quarters. While we will have a modest draw on our credit facility to fund the Elektrofi acquisition, we do expect to pay that down in the coming quarters and to delever very quickly. What you've seen us be able to do this year is have capital to fund share repurchases. We've done $342 million within the year and be able to fund the Elektrofi acquisition, and you'll see us continue to have that balanced approach going forward.

All right. And Sean, the last part of it, how to monitor the success of Elektrofi. I'm going to give you three metrics there. One is we are anticipating the potential for two partner first-in-human starts, both with already blockbuster products in their current formulation. That will happen by the end of 2026 or before. The first metric. I do think as we work closely with Elektrofi, we'll be finding opportunities to develop and communicate a streamlined development plan approach, which we see as another benefit of bringing our two expertise together. The third one, we will continue to look for Elektrofi and support the advancement of Hypercon with the current partners potentially agreeing to move more products into the clinic from their open nomination slots or indeed signing new deals. We are very excited about the Elektrofi acquisition, still in the planning phase, obviously, at this point in time, but we see great opportunity for the business synergies that are going to come from being able to bring our two companies together.

Your next question comes from the line of Jason Butler with Citizens JMP.

Congrats on the quarter. Let me pass my congratulations on to Nicole as well, been great work. So let me start on Elektrofi. Understanding that the deal hasn't closed yet, can you talk about what you think the awareness level of the company and the technology is with your current ENHANZE partners? Just any feedback you've gotten from partners on the company? And then second, on OCREVUS, can you talk a little bit about where market growth is coming from? Are they taking share from other therapies? Are they getting used earlier in treatment? Just how should we think about how that market opportunity is growing?

Thank you. Regarding the awareness level of our current partners for Elektrofi, we primarily gauge this through our due diligence since we are not publicly discussing Elektrofi and they are not discussing us, particularly because the HSR review is still pending. However, based on our research prior to the acquisition, there seems to be a solid understanding of the Hypercon technology. One advantage of combining our companies is to enhance and expand that awareness among both teams based on our interactions. We have received some unsolicited feedback, and although people are being careful due to the deal's status, several partners, especially those collaborating with both companies, have shown strong support for potential opportunities to work across our platforms. There is definitely a strong consensus in favor of this. As for OCREVUS, we are pleased to note that Roche reported an increase of 5,000 patients from the 7,500 on therapy that was recorded in the second quarter. They indicated that in the U.S. and Germany, about half of these patients are new to the brand. However, I did not catch whether these patients are entirely new to treatment or transitioning from other therapies, as we have not been given that specific detail. Nevertheless, this growth is expanding OCREVUS's market presence as Roche predicted, enabling treatment in physician offices and community hospitals, thus improving access that was previously limited by capacity issues in infusion suites. If we receive more information on this, we will be sure to share it in our next call.

Your next question comes from the line of Michael DiFiore with Evercore ISI.

Congrats on the continued progress. Two for me. The first, I want to expand upon the M&A question that was asked before. Obviously, your press release said in no uncertain terms that the next chapter of growth will include M&A. How high are you willing to lever up for this transaction? I know you said that we could expect for you to delever in the next few quarters. The ultimate question is, could we possibly expect another transaction towards the end of the year? And I have a follow-up.

Yes. Thanks for that. Mike, obviously, our focus at the moment is completing the Elektrofi acquisition. I think I can say that it's unlikely that there will be another acquisition this year. We are actively looking because we do want to continue to add to our growth and our momentum that is strong at this point in time. Nicole, will you comment on the approach we're taking to leverage?

Yes. As Helen noted, while we will evaluate targets, I can say from a firepower perspective, we do have the capacity. We're willing to go up to 3x net leverage. We mentioned with this transaction at close, we expect to be at about 2x, but that will quickly come down. There will be capacity, and again, we'll just be patient and find the right next opportunity.

To emphasize what Nicole said, you've seen us demonstrate a lot of patience in terms of finding the right asset, doing the appropriate diligence, and seeking to only transact and make a formal offer to the company once we have completed all of that. We will take that same very thoughtful approach. We are in a great growth position. We're excited about the growth that's going to come from Elektrofi. Don't think of this as something we're rushing into. We will continue to execute the strategy we've had in place for the last several years. Because of our strong cash flow, we're in a position to contemplate that in 2026, only if we find it meets our criteria and is the right next move for Halozyme.

Excellent. My follow-up question is, again, I know it's super early regarding Elektrofi. On the prior call, I think I asked about the potential to combine ENHANZE with Hypercon. I think you had said that feasibility studies regarding the combinability still need to be done. When might we see such studies be conducted? And yes, I'll just leave it there.

Yes, it is something, obviously, that we are interested in, and it is one of the work streams that will be one of the early conversations that we'll have between the technical experts from both companies to determine what the path would be for that. My more important message is that each company has its own pipeline of ongoing conversations for a great fit for each of our technologies to different partner products. The initial focus will be pursuing those two successful strategies to date. We're interested to see if they can come together, but we don't have to wait for that data. The strategy will be to pursue each of them separately as we know there's opportunity for them individually.

Your next question comes from Jessica Fye with JPMorgan.

This is Adam on for Jess. I really just had two. Can you share your latest thoughts on potential for new ENHANZE deals near term? I think you mentioned one in the prepared remarks, but any details around that? And second, which product or products contributed the most to the guidance upside this time around?

Yes. Let me take the first one, and then Nicole will talk about the guidance. Adam, with regard to new deals, I did say in my prepared remarks, we're very confident to have a new deal this year. That confidence comes from the proximity to completion of discussions. We have several discussions that are ongoing. It's not our practice to pre-announce anything, but all I can say is that we are excited with the continued interest in ENHANZE and whichever of these conversations, we cross the finish line first, we're very excited and think it represents a great opportunity for patients, but also for Halozyme. Nicole, would you talk about the guidance?

Yes. Our guidance is driven by the strength of our royalties. We continue to see royalties being robust in our main royalty drivers, which are VYVGART Hytrulo, Phesgo, and DARZALEX. Also recall that DARZALEX and VYVGART Hytrulo both had new indications launching this year. First-year launch estimates are notoriously hard to project exactly, and that's where we're seeing the upside reflected in that, given the latest data trend and in the full year projections.

Your next question comes from the line of Mitchell Kapoor with H.C.W.

I wanted to ask about forward guidance, of course, recognizing that you only formally update the 5-year guidance once a year. We're getting close to 2026. So wandering with the strong momentum that we have been seeing quarter-to-quarter and the subsequent guidance raises for this year, how you're thinking about maintaining that growth into the next few quarters in 2026. Does the current trajectory suggest that the previous 2026 ranges might already be tracking towards the upper end of what was outlined earlier this year?

Yes. Thanks, Mitchell. We will be able to provide more details on that early in 2026 when we can really collect all of our trends and input from our partners towards the end of the year. More details to come, but we are tracking to exceed 2025 original expectations, and we will reflect the latest information when we give full year guidance and update in the new year.

Okay. Great. Then the second one is just how you're conducting outreach for prospective partners between ENHANZE and Hypercon. Are these parallel tracks? Or how do you kind of discuss those with prospective partners?

Yes. Thanks, Mitch. At the moment, until the HSR review period is completed, our two businesses are operating separately. We can have conversations about planning for how we're going to operate together, but we do not share any information with regard to partners each of us is talking to or anything like that. I would expect upon completion and the close, which we do expect to happen in the fourth quarter, to be in a position to have conversations and identify who's talking to them. At this point in time, that's not something we are aware of or want to share. We are each pursuing our own separate conversations and targeted outreach. Again, each of the products works in a slightly different space. All of them are for subcutaneous delivery. ENHANZE is more focused on larger volume, often in the doctor's office or occasionally at home, while the opportunity with Elektrofi is more focused on at-home potentially auto-injector delivery because the volumes can be reduced to as low as 2 ml. I expect we may be talking to the same companies but probably not on exactly the same products, which is why this is such an attractive deal expanding our total addressable market.

Ladies and gentlemen, this concludes Halozyme's Third Quarter 2025 Financial and Operating Results Conference Call. Thank you all for joining. You may now disconnect.