Halozyme Therapeutics, Inc. (HALO) Earnings Call Transcript & Summary

Good evening, everyone, and thank you for joining us. So today, we're delighted to be hosting Helen from Halozyme.

And just wanted to go ahead and kick off with the first question. For an opportunity for Helen to speak at a high level about the business operations and driving growth through pipeline candidates that you've laid out and through portfolio diversification, through business development, I would love if you could talk about the business and give us a broad overview.

Yes. Thanks for this opportunity. So Halozyme is a profitable biotech company. We are focused on bringing forward disruptive solutions that can improve the treatment experience and potentially also improve outcomes. We do this through 2 drug delivery technologies that's focused on subcutaneous delivery, and we also have a specialty pharmaceutical business as well. When we think about our drug delivery business, the 2 subcus, the first one is called ENHANZE and the second one are through our proprietary differentiated auto-injectors. ENHANZE is the largest revenue driver for us today. This is a technology that when combined with leading companies' IV products enables them to be given in rapid subcutaneous injections. We make money through royalties, which are on average mid-single digit, milestones and also through product sales. Today, we have 5 approved products. And what's very exciting about our pipeline is that in the next 2 years, by 2025, we anticipate 4 additional approvals, bringing us from 5 to 9 products with royalty revenue streams for ENHANZE, and these are very exciting products. All of them are approved as an IV already. The TAM that analysts project for these products by 2028 is 35 billion. And so clearly, what's going to matter for Halozyme is how much is going to be in the subcu, but you can imagine that is a tremendous growth driver for us for ENHANZE for the future. And behind that, we actually have another 10 products that are in development, 2 in Phase III and another 8 in Phase I. So robust pipeline, and I will say we plan to sign additional deals to expand that pipeline even further this year. Our auto-injectors are differentiated in that they are highly reliable and can work for very viscous product. We've got approved products today, the largest of which is Teva's EpiPen that's generating royalties as well as products sales. And we have an exciting product in development from Idorsia, which is called selatogrel that is for prevention of secondary MI. And so nice volume of revenue coming from our small volume auto-injectors. These are for volumes up to 2.25 ml. But what excited us about acquiring the auto-injector platform is actually the ability to combine ENHANZE with the know-how on auto-injectors to create a novel auto-injector for the market, and that would be one that can deliver up to 10 ml in under 1 minute. And so we've been making very nice progress with that and hope to sign deals this year. We've got clinical data by middle of this year, demonstrating feasibility. So that's another very nice opportunity to grow and drive the growth of the company. So this will be an incredible year, expanding our pipeline, advancing the candidates that are in development and signing additional deals.

Great. And I want to shift to one of the important products in your portfolio, DARZALEX FASPRO. And this quarter, you increased share of total DARZALEX sales, as a percentage of total DARZALEX sales from 86% to 88%. Is there still room to grow? Or do you think it's going to be a pretty steady state from here? And you've also pointed out that consensus estimates expect total DARZALEX sales to double from $8 billion in 2022 to $16 billion by 2028. Can you describe some of the downside risks to getting there?

Yes. Let's think about that 88%, and that's 88% share of sales in the United States is subcutaneous DARZALEX today. And I will say, outside the U.S., it's over 80%. So 9 out of 10 patients in the United States today when they get DARZALEX, get a subcu. That's within 3 years of the launch. So that's remarkable. But now I'll translate that to the analyst projections, which is going from $8 billion in revenues last year to $16 billion in revenues by 2028. That is driven by the subcu, and that's where the growth is going to come. And what is driving that is the assumption that the use of subcu is really helping aid the penetration into the frontline patients. Frontline patients, there are more of them, that's the largest population, but those patients also stay on therapy longer. And this is why there's going to be a doubling of DARZALEX revenue between now and 2028, driven by the subcu. And so we do see a lot of excitement and growth there. In terms of downside, I really have to give a lot of credit to Janssen. They have done an amazing job generating the clinical data to establish DARZALEX as a backbone of therapy with multiple different regimens at every line of therapy. And so I -- my projection is they're going to remain the mainstay of therapy, particularly in these early lines of therapy because of the strength of the data. We do get asked questions about the evolution of CAR-Ts. I think all of those are advancements for patients. They tend to be today relegated to be used in later-line patients and will also, I think, because of the production challenges not be able to expand into the very large populations in frontline. So I don't see a lot of downsides there. It's a remarkable drug doing a lot of good for a lot of patients.

Yes. And then you also pointed out earlier, the 5 to 10-milliliter capacity that you have. Can you sort of lay out in your different waves? You've laid out like Wave 2, Wave 3, Wave 4. Of those waves and the different product candidates within each one of those, what proportion falls into that sort of bucket?

Yes. So we can talk about the commercialized products. For a lot of our products in development, the partners have not disclosed the volume as yet. But I would say, as an example, Herceptin is more in the 5 ml range. Phesgo, which is Roche's fixed-dose combination of progestin Herceptin, is at 10 ml. So that will give you some example that there are certainly are products in our portfolio today that are of those ranges. What is amazing about ENHANZE is we can inject volumes of up to 300 to 600 ml in one setting. So ENHANZE on its own is going to be able to continue to be driving larger volumes. And we see the high-volume auto-injector working with the patients or the products where it's 5 to 10 ml. And then we also have our small volume auto-injectors as well. So we're covering a very wide range of patient needs in terms of being able to deliver subcutaneously. Tend to be much shorter injections, tend to be associated with lower patient burden and also less cost for the health care system. So very, very nice offerings across the board.

Yes. And I think on your last couple of earnings calls, you've talked about some new deals that you'd like to explore and sign. Maybe if you can give an overview of what those are and why you're looking to explore those.

Yes. We continue to look to expand our portfolio. We can grow with our current partners. I'll just say that our current ENHANZE partners tend to take exclusive rights to access use of ENHANZE with a specific target. All of our current partners, and we have 12 today, there are 20 open slots. And so we do expect 2 targets to advance into the clinic this year, more potentially next year. So we're going to grow and expand by our current partners moving more products into the clinic. But we're also in active discussions with a wide range of biotech and pharma talking about the benefits of ENHANZE alone if it's a higher-volume drug; ENHANZE with high-volume auto-injector if it's going to be that 5 to 10 ml; or the small volume auto-injector depending on what the partner needs are. We're actively in conversations. We do expect and plan to sign deals in each of those categories this year. And I will say there's a particular interest in the high-volume auto-injector because there is nothing quite like that in the market today. People frequently say to us like, "We've always wanted something like this." So we're very excited about that opportunity. We signed the deal with Antares in May of last year. We have working prototype in place by December, which we took into animal testing. And we're very excited that by the middle of this year, we expect to report out human feasibility testing for a high-volume auto-injector. The way it will work is we plan to sign an agreement with a partner, and they will then customize exactly what they want that high-volume auto-injector to be like, what is their volume, what kind of primary container do they want, what needle depth, et cetera. So look for that this year as we talk with a wide range of people with regard to moving forward with us to take this high-volume auto-injector from prototype to an actual development stage device and then to a commercial stage device.

Great. And in terms of one of the pipeline candidates, argenx' VYVGART, they have CIPD data that's now expected in July of 2023. So it got delayed a little bit from the second quarter. Can you give us an idea of next steps, assuming the data reads out positive? And I guess when could we see them achieve approval and ultimately launch?

Yes. So the CIPD data, this was an event-driven study, which is why they couldn't be absolutely exact as to when they would get to the target number of events, but they did announce some this week or last week that they have reached that. They are now going through the process of data collection and cleaning, and that really is what is causing this time line to July to make sure that is done appropriately, particularly as the study is ongoing. And there are outpatients still being treated, and they want to assure the integrity of the study. Generally, argenx hasn't given a time line, so all I'm talking about is my experience here. The data -- the time frame database lock, final lock to submission is anything usually from 3 to 6 months. So there is the potential for a submission later this year, I would say, in CIDP. And I would expect a 10-month review clock. So this could be a potential launch in 2024. But again, I'll stress argenx hasn't provided specific time lines on that.

Yes. And then shifting to the VYVGART subcu for myasthenia gravis. Can you share why you might have confidence that it could get approved in the June PDUFA date? I guess this might be more important product in terms of the revenue potential.

Yes. Certainly the myasthenia gravis indication, just based on the prevalence of that particular autoimmune disease and the unmet need, represents a very attractive opportunity. Analysts are now projecting overall VYVGART, with all its indications, to get to about $7 billion in revenue by 2027, and a large proportion of that is in the generalized myasthenia gravis indication. The IV form was approved about just over a year ago. Very nice uptake in its first year, $401 million and very nice sequential growth between fourth quarter and first quarter. So I think with the IV, they're very nicely demonstrating that this mechanism of action, the anti-FcRn is offering something important for patients. The way it works with the development of the subcus, what argenx has done is to do a bridging strategy. So once the IV is approved, that the FDA has a database that gives them a lot of information about efficacy, but even more importantly the safety of the product. When our partners are developing subcu, they tend to do a Phase I study to pick the dose of subcu, where they're trying to make sure that whatever parameter they're trying to demonstrate is similar between the IV and subcu, that they've picked the right dose to achieve that. For argenx, for the program, they got agreement with the FDA to do, to show similarity between the IV and the subcu. They actually are measuring reduction in IgG levels, which is one of the markers of efficacy as you're trying to reduce the autoantibodies that are causing the myasthenia gravis. And so they've already reported the data to show that they did achieve the primary endpoint of the subcu study, which was a reduction in the IgG levels. And so because they met the primary end point and had, had discussions with the FDA with regard to the study, they obviously have gone forward to do that submission. We're not privy to the conversations that are happening, so I can't really comment beyond that. But certainly, argenx has said they feel very confident in the study design and the quality of the data that they have submitted. And on their recent call, they also commented that they're gearing up for the launch. So all of those, I take as good signs that we're going to see the approval on the PDUFA date of June 20 with subsequent launch thereafter.

So one last question on argenx before I move on to another one of your partners. The other 2 opportunities with 4Q data readouts are in idiopathic thrombocytopenia purpose and pemphigus. Can you frame these opportunities in these indications for investors?

Yes. I mentioned that generalized myasthenia gravis was the biggest indication. There's an estimated, according to argenx, 63,000 patients with the addressable disease in the United States. Interestingly, idiopathic thrombocytopenic purpura is one of the next largest indications with over 55,000 patients. So almost the same size as generalized myasthenia gravis. Pemphigus is a smaller indication. It's about 1/4 of the size. But in all of these indications, there are serious autoimmune diseases. Patients have limited choices today, often steroids immunoglobulins. They don't get persistent responses over a long period of time. So high unmet need, and so I think we're going to see some very nice response to the data in each of these indications should it be positive when it reads out. So ITP and pemphigus in the fourth quarter and a doubling of the opportunity there if those are positive compared to just the generalized myasthenia gravis. And as you probably know, it's a strategy to add even more indications. I think Tim, who is the CEO of argenx, has talked about 12 to 16 indications. There is just a huge unmet need. And this is the first-in-class anti-FcRn, and I think it's going to be expanding its uses over the next several years.

Yes. And I just wanted to go back to something you said at the beginning about Teva's EpiPen partnership with Halozyme. I'd love to hear more about that from you. Maybe it's the Teva analyst in me, but would love to get your thoughts on it.

Yes. We are the manufacturer of the EpiPen that Teva is using for -- it's for prevention of allergic reactions, and it's a very nice demonstration of one of the points of differentiation of the auto-injector platform. So you can imagine if you've got the severe allergic situations, you want to have a high confidence that you're -- what you're going to inject is going to work. And so we are very happy that we produce the highest reliability auto-injectors you can get on the marketplace. And so that is why Teva has partnered with us and why we have this high degree of reliability, is to make sure that patients can have confidence in the acute setting where they need to inject themselves that it is going to work.

And how do you see that in terms of revenue potential for Halozyme? Maybe if you could frame that opportunity.