Halozyme Therapeutics, Inc. Q1 FY2026 Earnings Call

At this time, I would like to welcome everyone to Halozyme's First Quarter 2026 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 first quarter 2026 financial and operating results conference call. In addition to the press release issued today after the market closed, 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 Dave Ramsay, our Interim 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, and we will start on Slide 3.

Thank you, Tram, and good afternoon, everyone. We started 2026 with exceptional momentum. The continued strong performance of our currently approved products gives us strong conviction in the 2026 to 2028 financial guidance. Our recent new deal momentum and new nominations by partners, accompanied by the expanding number of new Phase I starts, is bending the curve in the 2029-plus period. And the business momentum is resulting in strong free cash flow. We have clear priorities for capital allocation: reinvesting at compelling returns to create new value and returning value to our shareholders. Today, my presentation will address how our strategy will deliver durable value for investors during our current guidance period of 2026 to 2028, continue to combine value in the 2029-plus time frame and deploy robust free cash flow judiciously over the short and the long term. I'll begin with our 2026 to 2028 time frame, which is shown on Slide 4. The key drivers of revenue in the 2026 to 2028 time frame are our first 10 ENHANZE launch products, which includes DARZALEX subcutaneous, VYVGART Hytrulo and PHESGO. Our strong first quarter financial results reflect continued adoption of subcutaneous drug delivery enabled by ENHANZE, with royalty revenues driven by our commercial enhanced portfolio increasing 43% year-over-year to $241 million. Total revenue for the quarter increased 42% year-over-year to $377 million, reflecting the strength of our commercial royalty portfolio. This revenue growth translated into adjusted EBITDA of $230 million and non-GAAP earnings per share of $1.60, representing a greater than 40% increase year-over-year. I'll move now to Slide 5. Based on these results, I am pleased to reaffirm our full year 2026 financial guidance and the 2026 to 2028 financial guidance. Two highlights I'll point out: for 2026, we continue to project ENHANZE royalties to exceed $1 billion for the first time, representing 30% to 35% growth over 2025. And during the 2026 to 2028 time frame, we project our adjusted EBITDA margin will be greater than 65%, moving to approximately 70%. Moving now to Slide 6. As you know, our business converts revenue to free cash flow very efficiently, which provides us with the capital to deliver durable long-term value for our shareholders. During 2026 to 2028, we plan to deploy our capital predominantly in four key areas. Firstly, we will invest to maximize the value of our organic investments, predominantly to support partner success with investments in ENHANZE, Hypercon and Surf Bio. Secondly, we are pleased to announce a new $1 billion share buyback authorization, with an expectation of buying back at least $400 million of our shares in 2026. Over the next years, we project we will achieve a 3% annual share buyback yield. Our own equity is an asset we know best, and we're comfortable reinvesting against a compelling return plan. Thirdly, we plan to deleverage further by retiring the remaining 2027 and 2028 notes at their maturity. And fourthly, we will continue to evaluate drug delivery M&A opportunities with a continued focus on identifying high-demand, large TAM drug delivery licensing technologies. I will say that based on our high bar and our assessment year-to-date, it is unlikely that we will identify a drug delivery opportunity that meets the criteria to transact on in 2026. And we do not foresee M&A outside of drug delivery. I move now to our second time frame, which is 2029-plus. Let me be very clear: we intend to bend the trend far more favorably beginning in 2029 than our skeptics expect. Let me explain why I believe this to be the case on Slide 7. Our revenue in and post 2029 will come from four key sources. The first driver is the continued performance and contribution from our 10 current ENHANZE launch products. The second driver is up to 13 new launches in the 2029-plus time frame, arising from the current enhanced pipeline of 13 products that are projected to be in clinical development by the end of 2026. The third driver is the two Hypercon product launches in the 2030–2031 time frame. And the fourth driver is the next wave of launches that will result from partners progressing additional targets under already-signed Hypercon and ENHANZE agreements and from new Hypercon and ENHANZE collaboration and licensing agreements. Turning now to Slide 8. I'll say a few words on each of these significant revenue opportunities, beginning with the first driver, the current 10 ENHANZE products. As a reminder, all of our signed contracts have long durations. What you may not know is that the majority of the royalty revenue from these 10 products is still to come. Yes, let me repeat that: the majority of the royalty revenue is still to come. Let me dimensionalize that comment. By the end of 2025, we estimate that our 10 approved products generated about 25% of their projected potential royalties. We estimate that we have about 66% of the additional projected royalty revenue still to come in the next six years between 2026 and 2032, with the remaining 9% in the years beyond that. In some industries, they call our 66% royalty revenue still to come in the next six years, with more after that, our contracted revenue backlog, which I'm sure sounds familiar to many of our shareholders. I'll move now to the second driver, the current ENHANZE pipeline products with first launches projected in the 2029-plus time frame. We project to have up to 13 additional ENHANZE partner products potentially approved in the 2029-plus time frame. These have arisen from new collaboration and licensing agreements and from current partners nominating and adding additional targets. The new revenue from these projected launches will add to our revenues. In the first quarter, I'm pleased to report that two ENHANZE partners initiated Phase I studies of new targets in alignment with our expectations for six new ENHANZE targets to initiate Phase I testing in 2026. This adds to the seven products that are already in development. argenx initiated a Phase I study with ARGX-124, making this the fifth product in the argenx collaboration to advance to the clinic. And the second ENHANZE partner, who for competitive reasons does not wish us to provide detailed information, initiated and completed their Phase I testing in the quarter. In parallel, we continue to build the ENHANZE pipeline by supporting our current partners to identify and advance new targets to be nominated. These actions also add to this new wave of launches in the 2029-plus period. I am pleased that in the first quarter, Pfizer nominated a new undisclosed nonexclusive target to be studied with ENHANZE, which will add to the already impressive ENHANZE product pipeline with the potential to launch in the 2029-plus time frame. I will now move to the third driver, Hypercon. We intend to make Hypercon the next ENHANZE-like success story. To achieve this goal, we plan to invest in manufacturing capacity that will allow Halozyme to offer end-to-end services to our Hypercon partners. We foresee offering manufacturing from drug substance to commercial fill-finish for Hypercon products. As part of this plan, we are currently finalizing the clinical supply manufacturing as we ramp up our manufacturing efforts. We now predict that the first two Phase I clinical starts will occur in the first half of 2027. The launch timing for these two products continues to be 2030 and 2031. As I've said in the past, we continue to see the opportunity for Hypercon to be very large, achieving approximately $1 billion in royalty revenues by the mid-2030s. Turning now to Slide 9 and our fourth 2029-plus driver: the next wave of launches that will result from partners progressing additional targets under already-signed Hypercon and ENHANZE agreements and from new Hypercon and ENHANZE collaboration and licensing agreements. Under our current ENHANZE and Hypercon agreements, there remain opportunities for partners to nominate additional targets. As an example, there are up to another 15 Hypercon targets available in all redesigned CLAs and tens of targets for ENHANZE. We're seeing heightened interest and expansion of targets, consistent with the interest in new CLAs. Turning now to new agreements. We are delighted to have signed three new collaboration and licensing agreements in 2026, already meeting our goal for 2026 to execute three new deals this year. And we're not stopping here. Let me say that we have line of sight to additional agreements in 2026 based on the status of our ongoing discussions. We are delighted that with these agreements, we receive upfront payments and milestones and have the potential to earn milestones and up to mid-single-digit royalties, royalties being the most important recurring and the largest revenue stream for each product. Each of these deals includes one or more targets that represent multibillion-dollar total sales potential. In May, we entered a new ENHANZE collaboration agreement with GSK for multiple promising oncology targets, including antibody-drug conjugates. This collaboration with GSK expands our ENHANZE footprint with another global pharmaceutical leader and marks our first ENHANZE collaboration for antibody-drug conjugates, extending our ENHANZE technology into one of the fastest-growing and largest TAM areas of oncology. We believe ENHANZE has the potential to meaningfully improve the benefit-risk profile of these therapies by enabling subcutaneous administration and reducing the treatment burden for patients. We look forward to the initiation of the first clinical trial under this agreement. In early April, we announced a new Hypercon collaboration with Vertex Pharmaceuticals enabling the use of our hyperconcentration technology for up to three Vertex targets. Hypercon addresses real-world delivery challenges by reducing injection volume and enabling at-home or office-based low-volume administration. Vertex is a recognized leader in developing transformative medicines, and this agreement demonstrates growing demand for next-generation delivery solutions that extend beyond ENHANZE. In May, we announced a second Hypercon collaboration and licensing agreement with Oruka for the use of Hypercon with ORKA-001 in development for psoriasis and related inflammatory diseases and for up to one additional target. ORKA-001 recently presented Phase II data showing best-in-class efficacy, making this an exciting future potential entrant into what is already a $20 billion to $25 billion global moderate-to-severe psoriasis market. These collaborations further validate Hypercon as a differentiated, durable revenue-duration technology that supports our expectation that Hypercon will drive a separate and additional royalty income projected to achieve an estimated $1 billion in royalty revenue in the mid-2030s. To date, Hypercon has signed CLAs with five companies for a total of 17 potential targets, and we project to continue to add to this already impressive number of CLAs and potential targets for Hypercon. We see this as we are building for ENHANZE and soon for Surf Bio to result in commercial product launches throughout the 2030s. I trust that you will agree that our four drivers of revenue strategy will deliver durable long-term value to our shareholders. Let me now provide some details on product progress, reinforcing the durable growth story. Moving to Slide 10. Our 10 launch products, including DARZALEX subcutaneous, VYVGART Hytrulo and PHESGO, continue to demonstrate strong revenue growth which will be further fueled by expanding indication approvals. Let me start with DARZALEX, which is the gold standard in multiple myeloma and remains Johnson & Johnson's #1 product. In the first quarter of 2026, DARZALEX generated approximately $4 billion in global sales, representing nearly 18% operational growth. The sustained double-digit growth is remarkable and a testament to the product and to Janssen's development and commercial strategy. This strong performance translated into $129 million in royalty revenue for Halozyme during the quarter, reflecting a 26% year-over-year increase and underscoring the strength and durability of this important product. As you noticed from the higher royalty revenue growth rate achieved in the first quarter, the royalty rate step-up was achieved faster during the first quarter of 2026 than in prior years. For a patient with multiple myeloma, what the ENHANZE-enabled subcutaneous delivery of DARZALEX has meant is easy treatment time, which is reduced from multiple hours to just minutes, and a threefold lower chance of experiencing a potentially life-threatening side effect called infusion-related reactions. Think of what the time back can mean to a patient who is fighting cancer. Additional growth is projected to come from new indications. In the first quarter, the FDA approved DARZALEX FASPRO in its fifth frontline approval and also approved TECVAYLI plus DARZALEX FASPRO for as early as second-line treatment for patients with relapsed or refractory multiple myeloma. I'll turn now to argenx's VYVGART Hytrulo with ENHANZE. In the first quarter of 2026, VYVGART generated approximately $1.3 billion in global sales, representing nearly 63% growth. VYVGART Hytrulo continued to be a growing and meaningful contributor to royalty revenue during the quarter, increasing 119% to $46.3 million, resulting from growing demand and uptake. The introduction of the prefilled syringe for VYVGART Hytrulo with ENHANZE has driven an acceleration in subcutaneous uptake, reflected by the subcutaneous growth and strong profile to reduce the administration burden and increase flexibility for patients with generalized myasthenia gravis and CIDP, allowing work and travel where this may not have been possible before. In CIDP, which remains earlier in its launch, VYVGART Hytrulo continued to see steady progress, supported by increasing prescriber familiarity, expanding payer coverage and the convenience of the subcutaneous formulation. Looking ahead, in addition to continued penetration and adoption of the two currently approved subcutaneous indications, we see meaningful growth opportunities driven by label expansions in myasthenia gravis. Last Friday, argenx announced VYVGART and VYVGART Hytrulo received FDA approval as the first and only treatment approved for all serotypes of adult patients with generalized myasthenia gravis. argenx has also reported positive Phase III data in ocular myasthenia gravis, estimated by argenx to affect approximately 7,000 patients in the U.S. alone. These populations, when both approved, would double the potential addressable myasthenia gravis patient base from launch, doubling the Halozyme opportunity as well. Moving on to PHESGO. Roche reported that PHESGO continues to deliver strong growth, increasing 27% year-over-year to CHF 686 million, or approximately USD 877 million. This performance generated $30.2 million in royalty revenue for Halozyme, representing 25% year-over-year growth. The small difference between reported sales and Halozyme royalties was a result of currency. Roche reiterated its expectation to reach at least 60% conversion and emphasized that PHESGO is expected to maintain a strong and durable revenue tail. I'll move now to Slide 11 and highlight how the growth of the more recently launched partner products, combined with the continuous growth of DARZALEX FASPRO, VYVGART Hytrulo and PHESGO, will deliver strong revenues in 2029-plus. Our recently launched subcutaneous formulations include OCREVUS ZUNOVO, OPDIVO, TECENTRIQ and RYBREVANT with ENHANZE. Each of these products represents a significant blockbuster opportunity for subcutaneous use, collectively addressing an estimated $30 billion total IV and subcutaneous market opportunity in 2028 based on analyst estimates. I'll share two recent highlights, one for OCREVUS ZUNOVO and one for RYBREVANT SC, which have been reported by our partners and underscore the continued momentum across this portfolio. For OCREVUS ZUNOVO, Roche highlighted strong and accelerating uptake of the ENHANZE-enabled subcutaneous formulation, which continues to meaningfully expand access to OCREVUS across multiple sclerosis care settings. Roche reported that there are now approximately 24,000 patients globally receiving subcutaneous OCREVUS, representing an increase of roughly 7,000 patients versus the prior quarter and acceleration relative to the fourth quarter trend. Of note, Roche emphasized that approximately 60% of U.S. OCREVUS ZUNOVO starts are now coming from community practices and around half of the new subcutaneous OCREVUS patients are naive to brand. This underscores ZUNOVO's ability to expand the addressable market by reducing infusion burden and enabling treatment outside of the traditional infusion centers. Roche reiterated its peak brand sales expectation of CHF 9 billion by 2029, which includes approximately CHF 2 billion of sales as a result of additional new opportunity created by the easier-to-use subcutaneous formulation. Let me now highlight the new momentum with RYBREVANT, which has been driven by the launch of the ENHANZE subcutaneous formulation. In the first quarter, Johnson & Johnson reported sales of $257 million for RYBREVANT plus related products, representing an 80% year-over-year growth, which has been driven by launch uptake and share gains across regions. Increasing contribution from RYBREVANT FASPRO, the subcutaneous formulation with ENHANZE, is supporting adoption and helping reinforce RYBREVANT's positioning as a new standard of care in EGFR-mutated non-small cell lung cancer. Looking ahead, Johnson & Johnson has identified RYBREVANT as an important longer-term growth driver with projections that this will be a $5 billion brand. I'll move now to Slide 12. In closing my section, I want to make several important comments. Firstly, today, we announced a new $1 billion share repurchase program, signaling our confidence and conviction in our business. Secondly, we're pleased to reaffirm our full year 2026 guidance and reiterate our 2026 to 2028 financial guidance. And thirdly, we have four drivers for revenue growth in the 2029-plus time period: the continued performance of our 10 approved ENHANZE products; a pipeline by the end of 2026 of 13 additional ENHANZE products with potential for launches beginning in 2029; two projected Hypercon launches in 2030 and 2031; and additional launches arising from currently signed agreements, new nominations and new CLAs for ENHANZE, Hypercon and Surf Bio. By owning a share of Halozyme, you're owning a broad swath of the biopharma industry. Let me now introduce you to David Ramsay and welcome him back as our Interim Chief Financial Officer. David's deep knowledge of Halozyme, strong capital markets and investor expertise has enabled a seamless transition and immediate impact. David?

Thank you, Helen. Let me start by saying how excited I am to be back at Halozyme and to step into this role at such a strong point in the company's evolution. I was pleasantly surprised to learn about our deal pipeline and how we are still in the early stages of realizing the full potential of our enhanced royalties. Halozyme is operating from a position of strength, and my focus is on maintaining the disciplined framework and execution already in place, supporting our partners, investing in our core business and working to ensure the long-term growth and durability of our royalty businesses. We delivered a strong start to the year with results consistent with expectations and robust year-over-year royalty growth. Adjusted EBITDA grew meaningfully even as we continue to invest in Hypercon and Surf Bio, which is a clear demonstration of the opportunity we have to invest in our core businesses while maintaining the operating leverage inherent in our high-margin, royalty-driven business model. Let me now turn to our detailed first quarter results on Slide 13. Revenue increased approximately 42% to $376.7 million compared to $264.9 million in the prior year period. This performance was driven by broad-based strength across the business, including strong growth in royalty revenue and higher product sales to partners. Royalty revenue of $240.7 million increased approximately 43% from $168.2 million in the prior year period, reflecting the continued commercial success of key enhanced partnered products including subcutaneous DARZALEX, VYVGART Hytrulo and PHESGO as well as the continued ramp from recently launched ENHANZE therapies OCREVUS, OPDIVO, TECENTRIQ and RYBREVANT. Research and development expenses were $25.6 million compared to $14.8 million in the prior year period as we integrate our Hypercon and Surf Bio acquisitions. Selling, general and administrative expenses were $57.9 million in the quarter compared to $42.4 million in the prior year period. Adjusted EBITDA increased 42% to $229.5 million from $162 million in the prior year period, driven by continued strong royalty growth. GAAP diluted earnings per share was $1.22 compared to $0.93 in the prior year period, and non-GAAP diluted earnings per share was $1.60 compared to $1.11 in the first quarter of 2025. We ended the quarter with net leverage of approximately 2.5x, reflecting the acquisitions of Hypercon and Surf Bio. Following our announced plan to buy back at least $400 million in shares this year, we project our net leverage will be approximately 1.2x by the end of 2026, supported by our strong cash generation. Turning to our 2026 outlook. As Helen briefly touched upon, we are reiterating the strong financial items the company provided earlier this year. As shown on Slide 14, we continue to expect total revenue of $1.71 billion to $1.81 billion, representing year-over-year growth of 22% to 30% driven by royalty revenues and product sales from API. Royalty revenues of $1.13 billion to $1.17 billion represent year-over-year growth of 30% to 35%. We continue to expect DARZALEX SC, VYVGART Hytrulo and PHESGO to drive these strong expectations, with a growing contribution from recently launched ENHANZE products. We expect adjusted EBITDA of between $1.125 billion and $1.205 billion, which includes approximately $6 million of planned investment in Hypercon and Surf Bio. And non-GAAP diluted EPS of $7.75 to $8.25, which does not assume the impact of any potential future share repurchases. I am pleased with the continued strength of our business as reflected in our strong first quarter performance and the team's execution. We are still in the early stages of realizing the value from our enhanced business, and we are investing in Hypercon and Surf Bio to drive the next blockbuster royalty businesses. Our business model positions us well to sustain long-term value creation, and I look forward to contributing to that progress. With that, I'll turn the call back to Helen.

Thank you, David. In conclusion, let me just close by reiterating what makes Halozyme such a compelling investment. We demonstrated our conviction today with our new $1 billion share repurchase program. The continued strong performance of our currently approved products and the increasing number of indications gives us strong confidence in the 2026 to 2028 financial guidance. And we plan to confound skeptics and bend the curve in the 2029-plus period, building on top of the durable substantial revenue of our 10 approved products, where we have realized only about 25% of the revenue to date and project to receive 66% of the total projected royalties between 2026 and 2032. That's 2.5x still to come. On top of this strong base of revenue, our four drivers of revenue — the continued contribution of our currently launched 10 products; the potential launches of up to 13 additional ENHANZE beginning in 2029; the two projected Hypercon launches in 2030 and 2031; and the additional launches arising from currently signed agreements, new nominations and new CLAs for ENHANZE, Hypercon and Surf Bio — all add long-term durable revenue streams. The business momentum is resulting in strong free cash flow. I shared that we have clear priorities for disciplined capital allocations, and we're deploying this capital to create new value and return value to our shareholders. Thank you very much for your attention today. Operator, you can now open the line for questions.

Operator Instructions: The line is now open for questions. Your first question comes from the line of Jason Butler with Citizens JMP.

Congrats on the quarter. First one, when you think about the 2029-and-after ENHANZE product profile, what do you expect to be the biggest products in that portfolio? And when are they coming to essentially peak in your model? And then secondly, the Hypercon transactions or discussions that are ongoing today, including the transactions you announced: how many of those conversations were ongoing before you acquired the company? And how many new conversations are you having or relationships that you're bringing to the conversation?

Yes. Thanks so much, Jason. We're very excited today to share additional color. What gives us so much conviction on the trajectory we're going to have post-2029 is that, as I shared, we still have 66% of the revenue from our current launch products coming between 2026 and 2032. There are multiple large contributors within that, Jason. We haven't broken it down on an individual basis, but when you think about products like OCREVUS, like RYBREVANT, like VYVGART and DARZALEX, we continue to expect substantial revenues from each of those contributors. That's not even talking about the additional launches we're going to start seeing from the current ENHANZE pipeline. So a very bright future for sure. Turning now to Hypercon: in terms of the discussions, I would say one was ongoing beforehand and one was new, and the company continues to engage with multiple other groups, including some early feasibility testing, which is a step before companies will then decide to move to a CLA. It doesn't always work that way; some go straight to a CLA. But there are additional targets that are now in development and testing to find the right formulation before going into clinical. So I can say there's been remarkable progress since the acquisition, both in terms of targets and collaborations that are already underway as well as a broadening of interest. This is just part of a secular trend: subcutaneous delivery at home is really the target product profile now for many disease conditions.

Your next question comes from the line of Brendan Smith with Cowen.

Congrats on the quarter. Maybe just first for the two Phase I clinical starts with Hypercon assets now expected to be in the first half of next year: can you help us understand what's left to finish up on Halozyme's side from just a manufacturing standpoint to get those ready to go? And can you confirm that timing to hear what those two programs are will still be whenever they start that Phase I?

Thank you, Brendan. Yes, I would say that it is most likely from a partner perspective that they will be comfortable revealing what those targets are when they have to post them on clinicaltrials.gov or equivalent, so very close to when the Phase I clinical studies start. With regard to what's still to be done, we are really working on the clinical manufacturing at this point in time. As you heard in my prepared remarks, we are investing in the manufacturing capacity that's going to allow Halozyme to provide end-to-end service to Hypercon partners and become an invaluable partner just as we do today. You will see us continue that investment, finishing off the clinical supply manufacturing, and that is exactly what will enable Phase I starts in the first half of 2027.

Great. And then just maybe quickly, I wanted to make sure I didn't miss it: the conversation about 13 additional launches in 2029-plus — can you give us a sense over what time frame you might expect those to launch? I fully appreciate it's subject to change, but is it like 13 between 2029 and 2032 or 2035? Just helping us contextualize that 13 number.

Yes. I would expect it to take between four and five years from the time ENHANZE products enter Phase I clinical testing to approval. So as we're looking towards the end of the full 13 to be in development, I'd be looking towards 2031–2032 for the latest of these, with launches beginning in 2029 and occurring over that 2029 to 2032 time frame.

Your next question comes from the line of Mohit Bansal with Wells Fargo.

Congrats on all the deal-making progress here. So Helen, one question I have is we get a lot of investor questions about how comfortable we should be with the scalability of the Hypercon technology given that it's unique and Elektrofi did not enter clinics with that technology — you are taking it forward. So wondering what work you have done to understand scale and what know-how with ENHANZE capabilities could be useful in making it more scalable for clinical as well as commercial use.

Thanks, Mohit. And thanks for the comments on the deal making. Our organic opportunities are attractive, and we can deliver value to our shareholders that we are focused on resourcing fully. That includes our plan to invest in manufacturing capacity so we can offer an end-to-end service from the making of the drug substance to commercial fill and finish. Hypercon got off to a very good start by collaborating with a strong CDMO, Thermo Fisher Patheon. They are the ones who do the engineering batches and are working to complete the clinical batches in the first half of 2027. We are obviously very engaged working with the Hypercon experts on the full plan to take this into clinical and then into commercial manufacturing. So we're feeling good about the progress we're making, but we are at the clinical stage now. That's why we're excited to invest and select the CDMO(s) that will take us to the next level, expanding now into commercial manufacturing.

Your next question comes from the line of David Risinger with Leerink Partners.

Yes. Congrats, Helen, you and your team on all the great fundamental momentum in the business and new contract signings. I have a few questions. First, could you help us understand a few of the financial items for 2026: what milestones are in guidance for the year and what milestones are not in guidance, because you signed some recent deals but you didn't update your revenue guidance? And second, for EPS guidance: when you gave the EPS guidance in February, what amount of buyback was reflected in that guidance, and how much of the $400 million that you disclosed today for 2026 is in the unchanged EPS guidance for the year? And then a similar question: can you compare and contrast the manufacturing scale-up for Hypercon versus Surf Bio?

All right, David, thank you. If we begin with how much milestone revenue was included in this year's guidance: we always, based on partner communications, include whatever Phase I, Phase II or any commercial milestones that are projected for the year. So all of those that we anticipated were included. If you recall, last year I also said that based on the three deals we signed in December, I was very confident in signing multiple additional new deals in 2026. We do have a very nice number in our 2026 guidance for new milestones coming from new collaborations, and so we put that in because we wanted our guidance to reflect our true view of how the year was going to perform. So we have included all of the predictable milestones for the year, including a certain amount for new deal milestones at this time. Let me ask David just to summarize the buyback impact on our EPS guidance.

Yes, David. So in our earlier guidance this year, obviously, we did not make any assumptions for levels of buyback. Also, the guidance that we are reiterating today does not include any potential impact from the share repurchases that we will do this year. We'll update that as the year progresses.

And then on the differences in manufacturing between Hypercon and Surf Bio: first, Surf Bio is 18 to 24 months earlier in development than Hypercon. We are working very hard now in advancing our nonclinical activities and qualification and preparing our GMP manufacturing and spray-dry readiness. In terms of the types of manufacturing, both are novel processes. Surf Bio relies on spray drying, which is a commonly used type of manufacturing. Hypercon is a novel process that relies on dehydration to result in microparticles that can then be injected with the help of an appropriate solvent. So different processes, different stages of development, but we're very excited — particularly given the degree of interest we're getting from potential partners for the hyperconcentration technology. We've made substantial progress with Hypercon in the quarter, and we look forward to providing further updates throughout the year as we advance both of these innovative technologies.

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

Helen, on the 13 ENHANZE products due for launch a bit later, what royalty rates can we expect, or even a ballpark? And can you walk us through the IP position at that point? Also any comment you can provide on competing hyaluronidase technologies out there, such as Sanofi's efforts.

Let me start with the 13 products that have the potential to be launching in 2029-plus. If you recall with our contracts, we have historically been in the mid-single-digit royalty range. For the current contracts, we also see the potential for mid-single-digit royalties, with some of the newer contracts starting at a single-digit royalty but escalating with increasing sales into that mid-single-digit range. So we still feel great about the strength of the royalties for these multiple new royalty streams. With regard to IP at that point: for all of these products, there will be potential to obtain co-formulation IP. The base composition-of-matter patents will expire in 2029 in the U.S. and in Europe. However, the power of our business model, which is sometimes underestimated, is the value of co-formulation patents. The reason that is so important is that in the majority of our contracts, that can extend our royalty term beyond the base expiration. In many cases the royalty term can be extended for up to the full co-formulation patent term, and in several cases the royalties can be maintained at the original royalty rate. So the IP position is strong because of our unique co-formulation patent business model, leading to revenue durability and, in many cases, maintaining the royalty rate at the original level. With regard to complementary hyaluronidase and specifically asking about Sanofi: we really can't comment in detail on what Sanofi is doing. I can say, in general, that companies who have chosen to work with Altigen, for example, have come to us first. We have exclusive licenses already in place with some parties, which preclude us from being able to work in certain areas. And you might ask, why do companies still come to Halozyme first? It is because we are the gold standard. ENHANZE has now treated more than 1.3 million patients, and our expertise is widely acknowledged in the community in terms of understanding how to get partners into the clinic and through development quickly because of the expertise we have gained. We continue to expect more ENHANZE deals this year based on the strong interest and our leadership position in this space.

Your next question comes from the line of Corinne Jenkins with Goldman Sachs.

Maybe you could spend some time walking us through the development timelines after you get into Phase I with Hypercon, which you now expect in the first half of next year. How do you get to potential approval in a three- to four-year timeline from there?

Thanks, Corinne. It's our expectation that because many of our partners are considering an already subcutaneous product moving to a lower-volume subcutaneous drug, the pathway will be based on comparability of PK between the two subcutaneous formulations. This is a very common approach partners are using. We are seeing, from our ENHANZE experience, that FDA expectations for the endpoints of those studies as well as the duration and size of those studies are shrinking. I think that is in part due to the comfort level with the substantial safety database now available for ENHANZE. That direct experience gives us confidence in the three- to four-year window, and it's further informed by early conversations partners are having with the FDA who have been supportive of that type of approach.

Great. And it seems like you've had a lot of early success in terms of getting new partnerships for Hypercon. Maybe you could talk about what's resonating as you bring that profile to potential partners.

Yes. We discussed this during the acquisition. Companies have a view of the most competitive target product profile for their product. If they are in areas like psoriasis, they recognize extended dosing is the norm now, and to be competitive they will need extended dosing. Extended dosing ideally should be self-administered, because that's where standards of care are heading. Companies understand this and know what will be most competitive, which is bringing them to Hypercon. Areas like inflammation and immunology, nephrology and cardiovascular disease are where there's a lot of patient demand for self-treatment; Hypercon is a perfect fit because it can hyperconcentrate many antibodies into low volumes, allowing administration with a simple off-the-shelf auto-injector. So it's a very strong match between Hypercon and market needs.

Your next question comes from the line of Jessica Fye with JPMorgan.

I had a few more on Hypercon. You mentioned some companies conduct early feasibility testing prior to signing Hypercon deals. Can you say whether Vertex or Oruka, who you recently signed deals with, did they conduct any early feasibility testing? Second, as Hypercon deals roll in, how should we think about the timeline from when a Hypercon deal is announced to when the product could enter the clinic? And last, how big a derisking event would you view IND clearance for a Hypercon product relative to, say, Phase I data?

Thanks, Jess. We aren't able to go into detail on individual collaborations or whether particular companies did feasibility testing, as those are confidential. I would say the trend now is partners are increasingly going straight into agreements based on the data they see and their confidence in moving forward. Regarding timing from deal announcement to clinic, that will get shorter as we mature and streamline the technology and processes. It's a bit early to give a specific month count, but supporting partners to get into the clinic in a matter of months is a big focus for us. On the relative derisking value: I am looking forward to seeing Phase I data. We had compelling preclinical data that gave us conviction at acquisition, but Phase I data for each partner will be an important derisking milestone that I am excited to see.

Your next question comes from the line of Ahmed Mahmud with H.C. Wainwright.

This is Ahmed on behalf of Mitchell Kapoor at H.C. Wainwright. I was wondering as you continue to have partnerships and accumulate additional approvals validating the ENHANZE platform, how have the economics of the new licensing deals evolved? Are you seeing more leverage? Should we expect to trend towards the higher end of the single-digit range?

Ahmed, let me speak first about Hypercon-type deals: the deal terms have been very consistent across the agreements we've announced, which cover up to 17 targets in total. Those include upfront payments, development and sales milestones and mid-single-digit royalties, and that has been very consistent — reminiscent of the ENHANZE deals as we were establishing that technology and ultimately leading to the attractive performance we have today. For ENHANZE, we see a range based on exclusive versus non-exclusive agreements, which gives different peak milestones and royalty rates. But as I mentioned earlier, across ENHANZE agreements we see the potential based on escalating sales to reach mid-single-digit royalties in many cases.

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

Congrats on the continued progress. Regarding your antibody-drug conjugate IP package: does that package itself drive partner engagement, or are discussions still largely target-specific? And as a follow-up, regarding nucleic acids: you mentioned ADCs in detail, but is partner interest in nucleic acids at a similar stage or are ADCs the more advanced near-term modality?

Thanks, Mike. For ADCs, engagement tends to be product-by-product and company-by-company, based on specific products in development or commercialized; the IP package is part of those discussions, but what drives interest is the potential to optimize a target product profile to improve the benefit-risk profile for that product. We have filed patents that are part of partner discussions, but it's very much about the individual product opportunity. Nucleic acid discussions are occurring in parallel. We have generated compelling preclinical data that is being discussed across several companies. I expect those discussions to progress and potentially lead to announcements in the coming months and quarters. ADCs got out of the gate faster, but that doesn't mean nucleic acids aren't coming as a modality for us in the near term.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.