Halozyme Therapeutics, Inc. (HALO) September 2026 Conference Transcript

Hello, everyone. My name is Mitchell Kapoor. I'm a senior biotech analyst at H.C. Wainwright. Thank you for joining us for our third day of the H.C. Wainwright conference here in New York. Today, I have the pleasure of welcoming the Halozyme team, and I have the chief executive officer and president, Helen Torley, and chief financial officer, Darren Snellgrove. Nice to have you both here.

We appreciate the invite to be here. Thanks.

Thanks for joining us. So maybe, you know, I like to start off every fireside chat by just level setting for those who either may not be familiar with the story or not up to speed with the latest progress, maybe you could just give an overview of Halozyme.

Yeah, Halozyme is transforming how biologics are delivered subcutaneously, and we're entering just a terrific period of value creation as a result of that. How do we do this? We today have four technologies that enable subcutaneous delivery. Enhance, which is our flagship product, but we acquired recently two hyperconcentration technologies that will be entering the clinic and will offer a brand new value proposition for patients of being able to deliver biologics and volumes as low as two mls via some small volume auto injectors. And we also have our own auto injector line. Enhams is really been a terrific. We describe it as a confounding platform engine for Halozyme because it's resulting in multiple royalty streams that are contributing meaningful revenue to Halozyme. We're just coming off a record second quarter. Our total revenue grew 48% year over year to $481 million. And this was really driven by our royalty revenues, which grew 50% year over year to $308 million. Now the top drivers of our royalties were our products that were launched in 2020 and 2023. That's Darzolex Subcutaneous, and Vivgart Hytrulo. And these are products that are going to continue to grow for many years to come, because the companies are investing in new indications. There's deeper penetration into patient populations because of the great convenience that's being offered by the sub-Q, either as a push injection or as a pre-filled syringe. And what was very exciting in the quarter was also on top of this, to see products that will be launched more recently, and specifically Ribrovance subcutaneous, Obdevo subcutaneous, and Ocrevus subcutaneous grow 80% quarter on quarter. Now, that's a terrific growth to see, which means that we now have multiple diversified royalty streams that are contributing to the tremendous growth we see today, but that's going to continue for many years to come. But that's not all, because we expect by the end of the year to have 13 products within hands in clinical development and again we plan to continue to add more and more to that pipeline with products that can launch in the late 2020s and early 2030s resulting from that particular pipeline of products which will grow with additional new deals and current partners moving more products into the clinic and then we have our new technology hypercon which will it enables high concentration biologics we expect our first two products there into the clinic in the first half of 2027. So you can see we have a very diversified, exciting, growing set of royalty revenues that is going to deliver very strong value for our shareholders.

Excellent overview. And I think Halozyme is one of the most unique companies that I cover because of the value proposition that you offer the space and the uniqueness of your product. So maybe you can help us understand that enhance business and, you know, how that is a driver for Halozyme's revenue. How do you, you know, create deals? Obviously, that's been a focus for investors of how that pace of deals has changed. And you've had a lot in the past year. So maybe you can start there. Like, how do you structure these deals? And, you know, is it quite consistent across partner to partner? Just give us a flavor of, you know, how that variability is between.

Yes. As you point out, in the last nine months or so, we've had six new enhanced deals. And that comes after a period where we hadn't had as many deals. And people are saying, is this true demand or is this a pull forward? It really is true demand because of the secular trend that we're seeing with companies, particularly those in inflammation and immunology, nephrology, gastroenterology, CNS, recognizing that the standard of care of what patients are looking for is delivery at home as simply as possible. And so, or in the doctor's office, given in a simple subcudaneous injection, so the patient does not have to be in the infusion suites all the time. And so our structure has really been pretty standard for the last 15 years. We receive an upfront payment. We receive milestones as the partners are making progress and clinical progress as well as achieving certain sales thresholds and then we receive royalties which are today are at the on average mid single digit royalty rate in terms of the royalties that we're delivering today now importantly for halozyme the model we have is we do not invest in any of the clinical development we do not invest in the commercialization so it's a very high margin business as a result we do provide advisory services. But you can see how this is a business we can scale rapidly and grow without us having to add a lot of operating expense to be able to run this business. And we do expect to continue to sign more enhanced deals. Everybody is recognizing SubQ is the way to go. And so look for more announcements. We've said we expect one additional deal this year, and I believe it will be an enhanced one. But I also want to mention Hypercon, where we signed two deals this year as well, taking the Hypercon business to five deals. It's terrific companies, Eli Lilly, Argenix, J&J, Vertex, and Aruca. Same structure as the enhanced agreement, same mid-single-digit royalty, and same operating model where we're not investing in the high-expense areas of getting these products develop them and launch. So two compounding platform engines that are going to be driving durable, long-term royalty revenues for Halosign.

Wonderful. And you touched on what's driving 2Q growth a bit. And for a while, it's been, you know, Darzalex and VivGuard, but you mentioned something interesting, you know, Optivo and the new launches, Okravis are really contributing now. Can you help us understand what, you know, drove the guidance increase recently, but also which of the newer launches are gaining the most momentum and where do you see kind of the future growth coming from?

Let me ask Darren to take that one.

Yeah, absolutely. So 10 royalty bearing products is meaningfully different than one or two. And so that's what you're seeing in terms of our guidance beats and our raises. And you think about Darzalex is $4 billion in the quarter growing at 18%, VivGuard $1.5 billion, 60% growth rate. And then as you mentioned, the newer indications collectively growing 80% quarter over quarter. So that's driving meaningful growth for us going forward. Each one is performing incredibly well. Ribovan, for example, just got the J code. So we're going to see a real ramp up with that product. And each of them contributing, getting new indications and expanding in terms of conversion and also market market growth as well so we expect that to continue that's what's driving the results that you saw in the quarter we're very proud of 48% revenue growth and record-breaking quarter for us across the board and that's what drove the guidance raise that we had so we took up guidance at the midpoint by 110 million are expecting to be in that $1.835 to $1.91 billion for the top-line revenue, and EPS could be as high as $9 a share. So the other thing I'd point out is our margins, so adjusted EBIT margin, 67% with really strong cash flow conversion. So we're in a great position.

Yeah, absolutely. Another thing that we used to get questions about, so I think it's a good opportunity for education, is the royalty step-downs. and how you're expecting those to trend, like which ones should we be watching and what's kind of replacing that. I think the questions on our end have settled that in a little bit because of the cadence of BD and replacing kind of the growth engines, but maybe help us understand the step down, how you can directionally quantify that. I know you can't give us the exact numbers, but just set the stage for royalty set downs, please.

Yeah, I would say all of our contracts are negotiated separately. And so we have different types of contracts. I would say in the majority of our contracts, we have a structure where we receive royalties for a minimum of 10 years. And that can be extended if we get co-formulation patents, which are generated by new inventions being found by co-formulating a hand with the partner product. And that's important because in most of those contracts, the effect of the co-formulation patent is to maintain the royalty rate at the original starting. So we will stay at the mid-single royalty for a period that's often 13 to 17 years after launch. We do have some other contracts where there will be a step down. And that happens when the enhanced core IP expires, which is 2029. So we do have some products that will have a step down. Darzell X will have a step down in 2029 in Europe, as an example, and ViveGuard will have a step down in 2029 as well. As you said, the very important point, and this is something we have recognized and we have been working on for many years, is the importance of having additional products that are newer launches where we're still in the high mid-single digit. And it's the revenue from those that are a backfill for that step down. And so that's why it's so exciting to see the growth of Okravis, Rybrovent, and also of Devo, in addition to the continued growth of Darslex and ViveGuard, because it's probably not lost on the audience that as the product continues to grow, even if there's a step down, the revenues are increasing. So, you know, we have a terrific dynamic, and that's exactly what we plan to do with that. And we work with every partner to get co-form patents. We've had six co-form patents issued. We expect to see more being issued and a very important message that that in most of our contracts maintains the royalty rate at the original starting with single digit rate.

Excellent. Another thing that has been topical is the CMS IPAY news recently. I think it's behind us now, but maybe, you know, for those who haven't caught up in the last couple of months, you can refresh us on where that where we sit with that.

Yes. So IPAY 2029 is the first year some of our partner products might have been eligible. but we're very happy to say that based on the draft that was published earlier this year we have assessed by reading this very detailed document as well as looking at each of our partnered products that we expect no to minimal impact from the IRA all the way through 2035. This is because of how the document is drafted but also other policies in place like the orphan and drug exclusion, as well as the expected launch of buy a similar product. So as you say, Mitchell, we never had any positive upside from the IRA because people use our products for competitive differentiation. Nobody ever wanted it for a few extra years. So, but the great news is there's no harm to it. And we're just continuing with the business and hopefully when the final document comes out this fall, we can all just put it behind us and never discuss the IRA again for a little time.

Excellent. And then another point of discussion that's ongoing for us is Alteogen and the emerging hyaluronidase out of Korea. And maybe you can help us understand how you see the competitive dynamics now, especially that Merck is using it, how you've had discussions with partners who may have opted for in-hands versus alteogens, hyaluronidase, or what prevents, you know, some partners from licensing in-hands and they have to go with another partner. And then where the litigation stands, just help us understand the field there. And then thinking about how that affects any new deals and, you know, is there a competition that now your mid-single-digit rate is in flux because of that? Partners are saying, hey, we've got an option. Is that, you know, just, we can't see behind those doors. So maybe you can help us understand what.

I'll maybe take the first part with with regard to Octavian and ask Darren to talk about the status of the M-Base litigation. So I think the first thing that's very important to us, we have multiple structural advantages versus any of the emerging hyaluronidases. And that comes from being the innovator in the past, having launched our first products in 2013 and launched 10 products in total, we have got the largest clinical safety database and also over a million patients post-marketing data. Now, that is important because when a partner is thinking of taking a product sub-Q, they want to look at the technology. But as importantly, they want to know what development risk am I taking? What is my chance of success? Am I going to get a surprise immunologic event? Am I going to get a surprise safety signal? And so we are in just the leading position and frankly an unassailable position that we can answer those questions in a database manner. And so we've signed six deals, Mitchell, who we've talked about earlier. In each of those cases, the companies evaluated, Alteogen specifically, and said, we want to come for Halosime for your experience and because of your track record of success and So we know that's the case. I think the second thing that is a big structural advantage is we also have the broadest portfolio of subcutaneous delivery solutions now with the addition of Hypercon, Surfbio, and the auto injectors. And so Enhance is seen as a gold standard. We're seen as a leader in subcutaneous delivery. We are the one-stop shop for Biopharma. And so we are very comfortable we're going to continue to be the leader in signing new deals. Now, because of the structure of some of our earlier contracts where we signed exclusive contracts, Alteogen has had some deals. and the majority of those where it's public it's very clear we can say that the partners came to us first and we had to say no because we are working with somebody else. Merck is a great example that's a PD1 target. We licensed that to Bristol in 2017 when Merck wasn't interested in SubQ. They had no choice but to go to Alteagen and that's been the case for multiple of the announcements. So we're very comfortable in our leading position there. Darren, would you turn to the difference between Enhanced and MDays?

Absolutely. And what I would start by saying is that the Enhanced Patent Estate is completely distinct from the MDays Patent Estate. So the royalties that you see, hail as I'm getting today on all the products are based on the Enhanced patent portfolio. And obviously, we'll get many more royalties going forward as we strike new deals and expand. So that's the first thing to say. The second thing is just the MDays litigation is all upside for us. So we're suing Mark and pursuing cases in the US and then in a number of markets in Europe and just to give you an update on the status there we're in the PTAB process in the US so that's delaying the district court case a little bit that's likely to on go you know for it for a while now but in Europe we're awaiting already blocked and they're blocked in Germany we're waiting the results in the Netherlands and that's actually the license holder for a number of markets in Europe so that's going to be an important case that reads out early in October so stay tuned for that and then there's another a number of other markets that we're looking at as well where we're taking

action so more to come there importantly this is all upside as I said completely separate patent estates and so anything that comes out of the M days litigation there's no read through to enhance and it's all upside for a halo sign excellent okay and you know a lot of nominations recently from partners who you know had slots that were kind of pending and they could you know opt for nominations can you help us understand how many remain uh to be determined if you know nominations occur like what could we potentially see um and then you know you have 13 programs uh by year-end that you're expecting you know to to to be in development can you help us understand how many

those could be commercial within the next few years yeah with regard to um the the new partner nominations uh mitchell i'm glad you talked about that because that's sometimes under recognized as another powerful um driver of royalty revenue so every time we sign a new deal we're obviously getting one or two nominations but many of the partners take extra slots um and so we need to track how many new deals that are how quickly those partners moving into the clinic and then how quickly the additional signed nominations are moving forward. And so I would say today on Enhance, there are at least 20 and on HyperCon, there are between 15 and 20. So each new deal usually is three to four deals. So there's 10 deals value just sitting there waiting to be untapped. And as you say, we're very excited to see products moving into the clinic. And also So what I'm delighted to see is the new deals also moving rapidly into the clinic. So GSK, we just signed with them in the second quarter. Their trial is already posted on clinicaltrials.gov that they're going to be testing in hands with Belentimab. Now that is a notable start for us because it's the first ADC where the premise is that by reducing the Cmax, we can help reduce Cmax-related toxicity of ADCs. And that would be a new market opportunity for us. we haven't tapped into that we estimate is at least 50 ADCs, but it's a speed I also want you to know as to which partners are moving. Pfizer, who's a longstanding partner, has also posted a clinical trial design to evaluate and enhance with this tri-specific that is being used for atopic dermatitis and other dermatological diseases. We're working today with antibodies and bispecifics. That is a tri-specific and we also have this new ADC And I'll just throw in that we've also got our first partner evaluating nucleic acids, again, a brand new market opportunity for us. So it's remarkable after all this time within hands through great science that our chief scientific officer invested in and created, we've opened up two new market segments that's going to allow us to continue to grow and sign more deals.

Wonderful. Wonderful. Okay. And then with HyperCon and Vertex and Aruka, maybe you can help us understand the path to revenue there, but also kind of, you know, what steps will start to validate that more and more, like getting the ball rolling? You know, how does that affect the split of different BD activities that you guys expect in terms of Enhance versus HyperCon versus, you know, MDace? Like how do we expect BD deals to happen?

Yeah. Let me start with that because it's been very clear um pharma and um is is really focused on subcutaneous delivery and so what we've seen is a step change in how they approach us now they approach us more frequently than us reaching out to them but they're also very clear they are a product that's going to be delivered in the physician's office um where volume is less important that is an enhance and they'll say we want you to talk to us about enhance even if something where they want to get to small volume and an auto injector for the patient's home they come and talk to us about hypercon and sometimes the surf bio, which is an earlier asset for us. And so pharma knows what they want. They're very laser focused now on the competitive profile of their drug. And that really is how they're coming to us. So we can't talk specifically about Vertex and Uruka. But what we can see is that companies with Hypercon, it can take products that today can't be concentrated beyond 100 to 150 milligrams per ml, up to 500 milligrams per ml. And that's how it gets into the smaller volume, easier to be delivered by the patient. And that you can assume that is the goal of all of our Hypercon partners. Our first two partner starts are going to occur in the first half of 2027. That's very exciting for us. And I can say we've got multiple other products that are in feasibility testing that will move forward into hopefully CLA soon. That's what we call our contracts, the collaboration and licensing agreements. And those will be future launches as well. So it really is already showing very nice progress and strong progress. At this stage of development, Hypercon has signed more deals and has more progress than we had with Enhance, which shouldn't be surprising because when we launched Enhance, we were creating sub-Q delivery of biologics. Now the market, patients, doctors have absolutely embraced it and things are going to move faster, which is why we're so confident in HyperCon.

Yeah, it's wonderful. And one of the companies there, Aruka, is a key company for us. We cover Aruka as well. And so we're very familiar with that and how transformative that could be for psoriasis, but also for you guys. They're going after a $22 billion established market of SkyRizzy with their lead product. Every percentage point of mid-single digits that you guys get is huge. So I guess with that backdrop, anything you want to say about that deal that would help investors, but more importantly, when it gives us a sense of what you're looking for in the next deals that you do, are you looking for those potential home runs, but they're not commercial yet like how how do you think about uh the future of of your hyaluronidases in the hands of different partners yeah we look forward to a ruka saying more um about their specific plans we're not in a position to to say anything just yet but i can say we're um delighted to be working with them on what promises to be a transformative therapy for for patients with very strong um data um i i i

think in terms of the second part to the question, you know, we are very happy when partners come to us. I think you never know what product is going to turn into a blockbuster. And so I can say that in terms of the current partnerships, we're working on products that are already established blockbusters, and we're also working on earlier products. We always like to use Argenix's Vive as a product that was totally under-recognized when we first signed a deal with them. We saw the potential um and and the the obviously organics did a marvelous job developing that drug and it's not done yet because we've got so many new indications coming so you will see a mix of marketed products you will see um companies wanting to introduce subcute from the start in the most competitive profile because perhaps they're coming into an already established market where they need to um transform early into the most convenient longest dose duration whatever is their goal that is what um hypercon because we can deliver higher doses if you can imagine in that 2ml volume if you need to do that so um that that's it's a very exciting area for us and um uh pharma is absolutely in a way that hasn't happened in the 12 years i've been at halos i'm

embracing subq as um the path forward wonderful so we've talked about a lot today uh so to close the discussion i always like to just recap and give you a platform to to touch on anything critical that we didn't get to say um and or discuss maybe the next 12 months forward ahead for halos yeah darren anything you want to add i think you did a really good job covering everything we're very excited i think the model is very strong high margin you're in a long duration of royalties um as i mentioned the financials are really strong to have a record quarter it was great for me coming in as a new cfo to have such a strong start we're excited about the future uh the layering effect and the compounding effect that helen talked about with our royalties is something that i think is really compelling and exciting we've got you know enhanced we've got the 10 deals that we have or 10 products in in the market already we have the 13 new ones coming then we have hypercon coming then we have surf bio so we have this layering effect each one has new targets new nominations and expansion opportunities so we're very excited excellent thank you Helen thank you Darren really appreciate it thank you to the Halos I'm team and thanks to all the investors that joined us for the fireside discussion