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

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme Investor Call. [Operator Instructions] 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 morning, and welcome to our investor conference call. In addition to the press release issued earlier this morning, you could find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an overview of the transaction. We're also pleased to have Chase Coffman, CEO and Co-Founder of Elektrofi, joining us today, together with Nicole LaBrosse, our CFO. On today's call, we will be making forward-looking statements about future expectations, including relating to the proposed transaction with Elektrofi as outlined on Slide 2. I would also refer you to our SEC filings for a full list of risks and uncertainties. I will now turn the call over to Dr. Helen Torley.

Thank you, Tram. Good morning, everyone, and thank you for joining us this morning. Many of you listening probably know about Elektrofi, but for [indiscernible] some of you may be new. So let me start with making a few comments about the company and tell you just how excited I am to be discussing our acquisition of Elektrofi today. Elektrofi is a pioneering company founded 10 years ago to lead the technology development for Hypercon, a hyperconcentration technology applicable to biologic drugs. Today, many biologic formulations are limited by low concentrations. And this can result in large volumes greater than 2 milliliters being needed to deliver the effective dose. By applying Elektrofi's hyperconcentration approach, concentrations of 400 to 500 milligrams per mL or as much as 4 to 5 times higher can be achieved, which can make all the difference to enabling more drugs to be able to be delivered in a small volume at home via small volume auto-injector or even by Halozyme's innovative high-volume auto-injector. For areas, including inflammation and immunology, neurology, nephrology and oncology, at-home patient delivery is the holy grail that just about every pharma and biotech company we're speaking to is seeking. The Hypercon technology is a fit for this very large and growing biologic product opportunity that uniquely addresses unmet medical needs today and into the future. And this is why we are acquiring Elektrofi. We and many experts are convinced that biologic products will remain the mainstay for a growing number of medical conditions. This is exemplified by the expansion of new categories of biologics each year that are in development and the large number of biologics approved worldwide every year. Through adding the unique patent-protected Hypercon technology to hyperconcentrate biologics, we are adding an innovative breakthrough technology that will complement and expand our ENHANZE and auto-injector opportunity and revenue and deliver on our vision to make breakthrough therapies fit the patient's life. This acquisition creates for Halozyme a broad and differentiated portfolio of innovative technologies that will allow us to set new standards of convenience and accessibility by substantially expanding the scope of therapies that can be delivered subcutaneously. Importantly, the acquisition allows Halozyme to capitalize on the secular trend towards at-home and in health care practitioner office administration of biologics. Shown on Slide 3 is our agenda for today. And moving now to Slide 5. Let me begin with the strategic deal rationale. There really could not be a better fit to the deal criteria that I've been sharing with you over the last 12 to 18 months. We wanted a truly innovative breakthrough technology that Halozyme based on our expertise could accelerate the development of. There is nothing that is closer than Hypercon. It is an innovative technology that by enabling as much as 4 to 5 times higher concentration than today's industry aqueous formulation biologic concentrations can reduce the volume and can increase the number of products that are able to be delivered subcutaneously using a small volume or even a high-volume auto-injector at home or in the doctor's office. This is a perfect complement to ENHANZE, which is the gold standard for rapid high-volume subcutaneous delivery. The addition of the Hypercon technology will expand the number of partnerships, and we believe will bring additional revenue opportunities on top of the exciting opportunity already in place with existing partners. We could not have a better fit on the business model with Hypercon, which we believe will bring milestone revenue, recurring licensing royalty revenue and low capital intensity. Excitingly, the innovation of Hypercon has resulted in a broad suite of patents into the 2040s, supporting long-term revenue growth. And we are pleased to report that the acquisition, which will be all cash, is projected to result in leverage of approximately 2x net debt to EBITDA at closing. Let me move to Slide 6. Now why are we doing the transaction today? The Hypercon technology is at a true value inflection point. Three agreements have already been signed with marquee pharma and biotech companies and two products that are derisked mechanisms of actions and already blockbuster partner commercial products to date are projected to enter the clinic and begin clinical development by the end of 2026 or earlier. Yes, within the next 12 to 15 months or earlier, we project that two partner products will enter the clinic. This sets a clear pathway for significant growth with royalties beginning as early as 2030. We Halozyme have strong royalty revenues projected for many years and we are pleased that we will be diversifying our business to bring in a new royalty revenue stream as early as 2030. It is certainly exciting to onboard a new technology with such strong revenue timing. Now in addition to royalties, there are also milestones. The milestone payments for the two products projected to enter the clinic by the end of 2026 or earlier represent up to $275 million in potential, further derisking the acquisition. And by adding in Halozyme's drug delivery development and commercialization expertise, we believe that we are in a strong position to accelerate the timing to approval and expand the revenue opportunity by expanding the number of targets in development and creating the next waves of launches. Let me now turn to the terms of the transaction, which are shown on Slide 7. Under the terms of the agreement, Halozyme will make a $750 million upfront payment and future payments will be tied to successful marketing approvals of the first 3 Hypercon products. Upon each of the first 3 approvals, there will be a $50 million payment up to a total of $150 million. The acquisition will be financed through Halozyme's strong cash position and with our credit facility. Following the close, we expect leverage to increase to approximately 2x net debt to EBITDA. And our goal is to delever in the subsequent quarters, supported by our robust free cash flow. The transaction has been unanimously approved by the Boards of Directors of both companies, and it is expected to close in the fourth quarter of 2025, subject to regulatory review and other customary closing conditions. And from a financial perspective, the transaction is expected to be less than 5% dilutive to EPS over the medium term, noting that this excludes potential milestone payments related to the programs that are in development, which could offset dilution prior to the projected royalty revenue in 2030 and beyond. We expect full year 2026 incremental operating expenses will be in the range of $55 million. Let me move now to Slide 9. Our vision at Halozyme is very clear. Our goal is to transform the way important medicines are delivered so that treatment fits the patient's lives rather than the patient having to organize their lives around treatment. The acquisition of Elektrofi clearly reinforces this vision, adding new subcutaneous drug delivery opportunities. Moving to Slide 10. The addition of the Hypercon technology broadens Halozyme's portfolio of drug delivery technologies, creating three differentiated solutions: ENHANZE, Hypercon and our auto-injectors. Starting with ENHANZE. Today, our proprietary rHuPH20 enzyme is enabling biologic drugs with biologic concentrations of between 40 and 180 milligrams per mL, which for the needed dose has resulted in injection volumes of between 5 and 23 milliliters. ENHANZE transforms treatment by reducing administration times from hours for the IV treatment to just minutes for the subcutaneous, saving time, money and allowing more therapies to move from the infusion suite to the community and health care practitioner office settings and to the patient's home. With the addition of Hypercon, we project we will extend subcutaneous delivery to an even broader range of biologics. Hypercon enables ultra-high concentrations of biologic products of between 400 to 500 milligrams per mL, enabling lower volume requirements for the effective dose. This lower volume creates new opportunities for at-home self-administration and for efficient delivery in the health care practitioner setting while also expanding the range of molecules that can be delivered subcutaneously. Our auto-injectors have significant commercial synergy. Our high-volume auto-injector remains the first and most advanced device capable of delivering 10 milliliters of a biologic in just 28 seconds. This represents a compelling opportunity to combine the device with ENHANZE and also with the Hypercon-enabled formulations. In addition, pairing Hypercon with our best-in-class small volume auto-injectors represents another attractive avenue for commercialization, particularly in immunology, neurology and other chronic diseases where at-home administration is the future of care. Bringing together these 3 innovative technology solutions creates new commercial opportunity for our partners and strengthens Halozyme's mission in advancing patient-centered drug delivery solutions. Turning now to Slide 11. Today, we have 10 approved ENHANZE products. On this slide is an illustration of how the availability of ENHANZE and Hypercon, together with our auto-injectors will continue to enable subcutaneous delivery of products by health care practitioners, which is shown in the lower dotted line. Importantly, as shown by the top dotted line, we project the potential for strong growth in at-home biologic delivery in addition, capitalizing on this important secular trend for patients delivering their own medication at their convenience at home. In essence, we see a path using the expertise that we developed from the success of ENHANZE to create a whole new wave of opportunity with Hypercon. I'll move now to Slide 12. What makes this acquisition especially compelling and is a key derisker are the efficiencies from combining Halozyme's and Elektrofi's business models. Similarly to ENHANZE, Hypercon is structured around a licensing royalty-based partnership approach, supported by strong intellectual property and designed to deliver long-term growth. Both technologies create value by enabling our pharma partners to expand patient access and enhance product differentiation while generating recurring revenues. In addition, similarly to Halozyme, Elektrofi operates a lean business model with leverageable partner support. For both technologies, we serve as advisers to our partners on the regulatory and clinical development. As a result of this advisory role, we do not have to bear the high costs related to clinical development and commercialization. The deep experience we have gained in development of subcutaneous delivery technologies and product approvals over the last 12 years will serve as an accelerator for Hypercon partners. We also do not own the manufacturing plant and thus require very low capital intensity. This capital-efficient approach will allow us to continue to concentrate resources on innovation and on partner success. This shared foundation ensures that Hypercon integrates seamlessly into our portfolio, reinforcing our strategy of building a diversified, sustainable business model anchored in innovative drug delivery technologies. Moving now to Slide 13. Elektrofi has 3 current global partnership agreements with leading companies that validate the potential of Hypercon and underscores the confidence that leading biopharma companies have placed in the technology. Importantly, I'll point out that the licensing agreements are structured around milestone payments and have attractive mid-single-digit royalty rates. Additionally, existing collaborations are anchored in two established blockbuster therapies that are advancing to the clinic by the end of 2026 or earlier, providing the opportunity for up to $275 million in development and commercial milestone payments, which will further support revenue growth as the programs advance. And we see this as just the beginning for Hypercon. We will apply the same approach as we did for ENHANZE, expanding the number of partners and products in development with many of the world's leading biopharma companies, creating a trusted model for developing, commercializing and scaling innovative technologies. Our learnings on what it takes to gain regulatory approval for our drug delivery technology and our insights gained on development and CMC requirements give us confidence in the expansion and acceleration of Hypercon future launch waves. Let me now move to Slide 15. Since its founding 10 years ago, Elektrofi's mission has been to transform how biologics are administered by making treatment faster, more convenient and more accessible for patients, helping patients get the medicines they need when they need them. Based in Boston, the 80-person strong team, including more than 60 R&D specialists have pioneered this breakthrough technology under the leadership of CEO and Co-Founder, Chase Coffman. The success they have achieved thus far is a reflection of the strength, dedication and innovation of their team and of the leadership of Chase. And we look forward to bringing on board their technical depth, collaborative mindset and the proven execution as an innovator in subcutaneous drug delivery. And I'm very pleased to announce that following the close of the acquisition, Chase Coffman will become President of Hypercon and will become a member of Halozyme's leadership team reporting to me. I'm truly delighted to welcome Chase to Halozyme, and I'm very excited to be working together and post close. Let me move now to Slide 16. The Hypercon technology is an innovative microparticle approach that sets a new standard in the field, enabling ultra-high protein concentrations while maintaining syringability, meaning it can be injected smoothly and easily. Let me walk you through how it works. Through a gentle dehydration step, water is removed from the standard biologic aqueous solution, resulting in the formation of uniform spherical microparticles that encapsulate and protect the protein. These microparticles are then suspended in a lipid-based medium that's been optimized for subcutaneous injection. Upon subcutaneous administration, the microparticles rapidly and naturally rehydrate in the subcutaneous space, which enables controlled release of the therapeutic while maintaining the protein structure and function. The process is highly innovative, and this has been recognized with multiple patents and pending patents across 15 patent families. Moving now to Slide 17. Hypercon's operating model is lean, capital efficient and supported by partnerships. This approach enables Elektrofi to focus on technical expertise and advising rather than a large-scale infrastructure needed for clinical trials, commercial scale, manufacturing or commercial execution. As shown on the right in green, commercial scale manufacturing or commercial execution are the partners' responsibilities. And similarly to ENHANZE, the low fixed cost base and limited capital intensity creates an efficient model generating robust cash flow. Moving now to Slide 18. Elektrofi has built a formidable intellectual property state to protect the Hypercon technology, securing 9 issued U.S. patents across 6 distinct parent families and filing worldwide applications spanning 15 unique patent families, which are currently pending. Together, these create the potential for patent protection extending into the mid-2040s. Let's move now to Slide 20, and I want to share with you why we are confident in the long-term growth opportunity this acquisition creates for Halozyme, our partners and our shareholders. The Hypercon technology is poised for a major value inflection. By year-end 2026 or earlier, we expect two partners to initiate clinical development, each with a derisked and each with an established approved blockbuster product. Excitingly, an additional product has also been nominated by a partner and several other products are in feasibility testing. Let me share with you now how I will be measuring success and suggest that these would be good metrics for you also to track. I will be tracking the start of the clinical development for two products within the next 12 to 15 months or earlier. We will be defining a registration paradigm for Hypercon that makes clinical development streamlined. And it will be our plan to sign and advance new targets into development for Elektrofi partners, Halozyme partners and for new partners within the next 12 months. Let me turn now to Slide 21. I want to close by reiterating my incredible excitement to add the Hypercon technology and the entire Elektrofi team. This is truly a breakthrough technology that is at a value inflection point. Importantly, licensing agreements are structured around milestone payments and attractive mid-single-digit royalty rates. And the opportunity to expand and accelerate subcutaneous delivery, especially at home, is large and growing. And very importantly, this acquisition uniquely creates a series of unmatched synergies. By adding in Halozyme's drug delivery technology development and commercialization expertise, we are in a strong position to accelerate the timing to approval and expand the revenue opportunity by expanding the number of targets in development and creating the next waves of launches. The opportunity to offer our complementary technologies across current and new partners is obvious, but worth emphasizing. And with Halozyme's backing and support, the Hypercon team can be fully focused on advancing the technology as rapidly as possible and expanding drugs in development and not worrying about fundraising and building infrastructure as examples. I want to extend a very warm welcome to the entire Elektrofi team as they joined Halozyme post closing. We deeply value the expertise, innovation and dedication that you will bring, which has been so central to Elektrofi's success and reputation in the industry. And we're very excited to combine our differentiated strengths to advance subcutaneous drug delivery solutions, expand the opportunities available for patients and build on the momentum of both of our organizations. And now I'd like to open the call for your questions. Operator?

[Operator Instructions] Your first question today comes from the line of Sean Laaman from Morgan Stanley.

This is Morgan on for Sean. I have two. First, just if you could go a bit deeper into how Hypercon complements ENHANZE versus substitutes it? And in which use cases would partners choose Hypercon instead of ENHANZE? And then finally, for the two partners projected to begin the Hypercon formulated clinical development by year-end '26, can you disclose anything about the therapeutic areas or molecule types and -- any more information there would be super helpful.

Thanks, Morgan. With regard to the targets entering the -- or the products entering the clinic, unfortunately, due to confidentiality, we're not able to talk in any more detail other than what we said in the prepared remarks. Excitingly, these are both derisked mechanisms of action and are established blockbusters today. So that's really all we can say about that. With regard to the positioning, when a company is developing a biologic, it's thinking about which patient population it's going to be used in. It's thinking about what the setting they want it to be used in, and they're also thinking about the competitive profile. And so when we think about ENHANZE, ENHANZE is a great fit for those products that are going to be high-volume subcutaneous injections that can be given in the physician's office, in the infusion suite, which sometimes happens just as a good location and also if the volume is relatively small in the patient's home as we've seen with VYVGART. Now what the Elektrofi Hypercon technology immediately opens up because it can achieve 4 to 5 times the concentration of today's average biologic, its volumes are subsequently reduced by four to fivefold. And so this enables many more products to be able to be developed, to be delivered in 2 mL or less in the patient's home, potentially even with a small volume auto-injector. And so this is why they are complementary. The pharma companies will have a different goal for each of their technologies based on the factors I mentioned. And we see a lot of opportunity for ENHANZE to be selected for certain patient populations and settings and for the Hypercon to be selected for different patient populations and settings. And this is why it so broadens Halozyme's opportunity and Hypercon will have its own wave of launches and growth just as we've demonstrated with ENHANZE and just as ENHANZE is going to continue to grow with additional launches for many years to come.

Very helpful. Congratulations.

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

Really big congrats on the deal, guys. Great to see. Can you maybe first just give us a sense of how we should be thinking about the economics of Elektrofi partnerships with Hypercon relative to what we know about traditional ENHANZE partnerships? I mean should we think of this kind of similar royalty rate across the Board? Or just any considerations you're able to disclose there would be helpful. And then just maybe a second one would be kind of in the context of the CMS update from last night, do you have any sense maybe where this tech might play out with CMS? Do you think any policy changes, if implemented for 2029 on hyaluronidase specifically would potentially be where to encompass some of this technology? Just any thoughts on how we should be considering that there, too?

Yes. Thanks, Brendan. With regard to the economics, and we did include a slide in our presentation deck that summarizes what's publicly available. But what I can say is that in terms of the milestone, the cadence of milestones as well as the royalties being on average in the mid-single-digit royalty, this is very similar to what you've seen with ENHANZE and the same type of value creation potential as we have with ENHANZE. So economics similar is the bottom line. In terms of the CMS update and for anyone who didn't see that yesterday, CMS basically indicated they need to do more work on their definition in the future potentially for fixed combinations or two active ingredients, recognizing it's a very complex topic and it's going to take them time if they are ever going to finalize such a policy. So -- but I would say specifically for the Hypercon technology, because it's a formulation change, it's not an active ingredient. It's not added in to become a fixed combination. The CMS guidance is totally irrelevant for the Hypercon technology. What it does is create a brand-new formulation that will get its own registration path, its own BLA and will be entirely unaffected by the CMS fixed combination guidance.

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

Congrats on the deal. Two for me. Just simply, how will the NewCo prioritize business development and dealmaking for Hypercon versus ENHANZE products? And separately, I just wanted to focus more on the NewCo's pending patent application. It's actually one of Elektrofi's pending patent applications. One of them suggests that the Hypercon formulations might be combinable with ENHANZE [indiscernible]. So if this is true, like could that in any way solve for the looming ENHANZE LOE in 2029?

Yes. Thanks, Mike, for those questions. With regard to the pending patents, it really is too soon to say. There certainly has been some early experimental work done in combining Hypercon and ENHANZE, but we want to obviously evaluate that in more detail before we provide any commentary on it. On the -- how we will position both drugs and how we promote them, that's what I must say, I'm personally very excited about. We are going to have team members under Chase leadership who are going to be focusing on the Hypercon technology and be building that business, really promoting exactly where that works to capitalize on the secular trend for more at-home subcu delivery, particularly inflammation, immunology, oncology and neurology nephrology. We will also have members of the Halozyme team who are promoting the broad portfolio. And so in promoting ENHANZE, our high-volume auto-injectors, but also talking about the Hypercon technology, there's a fantastic opportunity for them to be generating leads, if you like, for Hypercon, which we would then pass over to Chase and his team to follow up on, whereas if they profile that works for that individual pharma or biotech companies product is enhanced with a high-volume auto-injector, the Halozyme team will focus on that. And so we will have a terrific set of business development professionals with the ability to significantly broaden our reach as we fit having this broad and very strong set of offerings for subcutaneous drug delivery.

Your next question comes from the line of Corinne Johnson from GS.

Congrats on the deal. Maybe you could talk about how you think about this kind of offering changing the pace of new deal flow? Does it help to accelerate kind of the one deal per year guidance? And also, could you talk about the role that the clinical derisking could play in terms of establishing additional business development with those drugs entering the clinic next year?

Yes. Thanks, Corinne. By having a broader set of offerings, obviously, we're very pleased with our pace of ENHANZE offerings over the years, and we continue to expect an additional deal this year on ENHANZE. Chase and the team at Elektrofi have done a super job as well, generating one deal a year, I would say, on average as well. And so it certainly will be our goal that you're going to see each of these businesses operating separately to meet the goals of advancing and bringing in new partners, but not just that, the current partners advancing more products into the clinic. So we certainly will expect more than one deal a year on average with regard to that. I do think the clinical derisking with any new technology is also another inflection point. But I do think the mere fact that two leading companies are taking the technology into the clinic for the clinical development start within the next 12 to 15 months is itself a value inflection point. And then obviously, the data. Now I can say that based on the extensive preclinical data that's been generated, we're very confident in the technology and what we're going to see in the clinic. Concentrations in that 400 to 500 milligrams per mL has been demonstrated. It's been compared to aqueous solutions and performed well. And so I think about both of those, Corinne, as being value inflection points and derisking points.

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

I had a few, so maybe a little bit following up on one of Corinne's questions, I think. So Helen, I remember the lack of clinical derisking in humans had historically been a reason that Halo didn't pull the trigger on this asset sooner. So can you talk about the specific preclinical derisking data that Elektrofi has generated that ultimately got you comfortable? Second question to confirm that up to $275 million of milestones associated with those two partner products Elektrofi has entering clinical development in '26, does that say you could earn up to $275 million from those products in '26? Or if not, over what time horizon could that $275 million be realized? Are those all development milestones? Does that include regulatory and commercial milestones? And then lastly, putting the fixed-dose combo guidance from CMS aside because it doesn't appear this technology that would apply here. Were you suggesting earlier that you think the Hypercon formulations of existing antibodies would not be aggregated with prior versions of those antibodies for purposes of determining eligibility for price negotiation, i.e., like the time to negotiation? Just wanted to clarify that.

All right. Thanks, Jess, for those questions. Let me start with the milestones. The milestones are very similar to what you've been experiencing over the years with ENHANZE. They up to $275 million is for two products. And for these, about 40% to 60% are development milestones, which takes you from that first in human all the way up to the approval. And then the remaining milestones are spread over time as certain sales thresholds are established. So exactly how you would model for ENHANZE and the similar types of time frames, Jess, I think would be very reasonable for you to model for these milestones, too. With regard to the Hypercon technology, what's really been very, very impressive to us is the significant progress that has been made over the last several years. And I think the derisking events [indiscernible] that so impressive were the signing of deals with 3 marquee pharma companies, so Lilly, Argenx and J&J, but also this readiness to be advancing into clinical testing in just 12 to 15 months. And so we consider that. And obviously, we've taken a look at that, and we're very confident in that projection based on the wealth of clinical data and all of the steps that -- sorry, preclinical data and the wealth of information that you need to be ready for that first-in-human filing. So we've had a great chance to evaluate that. And for the two products, everything is progressing very nicely. And that's what gives us the confidence with regard to that. For the question with regard to this being a fixed-dose combination, it's not a fixed-dose combination. I think we're going to have to take a little bit of a look at the final guidance, Jess, to know whether this would or would not be included and bundled into it. I think it's certainly my expectation that it isn't, but I think we've got to see the final guidance before we are going to be able to make a final determination on that.

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

Congrats on the acquisition. Two for me as well. I was just thinking back over the history of ENHANZE, there was an initial number of deals, and then it took a while really until you've got initial regulatory approvals until the technology was more broadly considered by partners. Do you expect something similar with Elektrofi? Or could it happen faster than that? What do you think the awareness is of the technology now amongst, for example, your current large pharma partners? And then secondly, just how do we think about patent strategy here in terms of co-formulation patents? Have partners already started to pursue co-formulation patents with the technology?

Yes. I think with regard to the cadence of partners, it's great to go back and think about ENHANZE where we really were the pioneer in this whole concept of subcutaneous drug delivery. It wasn't the dumb thing for biologics at the time. And so there was a little bit of that inertia you described for being able to -- after getting the first couple of partners, get that broader group of partners on Board. The Hypercon technology is going to benefit from a much greater acceptance and indeed a desire by pharma and biotech to be taking more products directly to subcutaneous especially in areas like inflammation and immunology, neurology, nephrology, where they want the patient to be able to deliver a small volume at home by themselves. And so I do think just the fact that there is now -- it's so well established, it's so desired, it's so seen as a competitive differentiator. We're going to see a different pattern of being able to bring on new partners and new products than we saw with ENHANZE because the market has been very successfully created, I will say, by Halozyme's pioneering work in this space. With regard to the patent opportunity, there is an opportunity to get new patents related to innovations found in new product. It's not quite a co-formulation. It's -- I would describe it, but there certainly is an opportunity to be able to generate new patents based on the innovations that will be found by being able to take products from perhaps a concentration of 80 to 100 milligrams per mL all the way up to 400 or 500 milligrams per mL. So absolutely an opportunity there for new IP for the products being tested.

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

Congratulations. I have two questions.

Mohit, I must apologize. Mohit, we're not unfortunately able to hear your question. I don't know if you're able to. That's much better.

Okay. Awesome. So I have two questions. One is, do you anticipate any FDC issues here given that there are different technologies, but they both like ENHANZE and Elektrofi are trying to achieve the similar goal of making things convenient for the patients? That's number one. And number two, I would love to understand, so like I think it does seem like the royalty rates are higher, like higher end of the mid-single-digit range. So I think probably it is a question for Chase as well. So I mean, what -- like when you due diligence, like how is the value proposition different from the ENHANZE technology that makes pharma pay a little bit higher royalty rate for this technology?

Yes. Thanks for those questions, Mohit. So I'll say that we are confident that this transaction will clear any regulatory review. Obviously, that is going to play out over usually a 30-day period from when we file our documents for that. But based on our assessment, Mohit, it will clear. With regard to the value, I would think about the value, particularly as it relates to the royalties as being very much in the same ballpark across both of the technologies. And so that, on average, mid-single digit is very aligned to what you've been used to seeing with ENHANZE and what's created the very strong value for Halozyme from the adoption of the ENHANZEtechnology.

[Operator Instructions] Your next question comes from the line of Mitchell Kapoor from H.C. Wainwright.

This is [ Katie ] on for Mitchell. I'm kind of wondering a little bit about how you're going to seek out partners for this technology? And if you're going to apply any selectivity into what products or applications you're going to pursue most actively. So if there's any particular attributes or applications that you're looking at in partners.

All right. Thanks, Katie. I really do -- when you think about when pharma partners are developing a new drug, they are very much thinking about how it's going to perform in the market. And so they think about what's the patient population and what's going to be best for them. They think about what is going to be the right setting for care. Is it something that would be given in a hospital, in a doctor's office or in the patient's home ideally for the patient. And they think about the competitive profile. What else is there and can they create something that is going to be the most desired to be used from a point of convenience or even the risk-benefit profile. And so I do think we'll be presenting our offerings to them. We now have three platforms -- sorry, technologies for the patients or companies thinking about using this. We've got ENHANZE, which will be for the high-volume rapid subcu delivery. We've got Hypercon, which allows you to get to those smaller volumes, enabling more at-home use, which, as I mentioned a moment ago, is very much a secular trend and an absolute desire, if not the holy grail for companies who are developing in inflammation, immunology, neurology, nephrology as an example. And then enabling all of that would be our small volume auto-injector for volumes under 2.25 mLs and our high-volume auto-injector for anything between 3 and 10 mLs. And so this broadening of our offerings, each company for a different product will have one that fits best for meeting their specific target product profile. And so we do think this is going to expand the number of opportunities for Halozyme to engage with these partners, and they will select which one is best. We don't need to do the positioning.

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

So I wanted to add my congratulations to you, Helen and Chase and also your teams on the transaction. I have two questions, please. First, regarding the timing of this announcement, it obviously coincides with yesterday's CMS announcement. So could you just provide some color on the timing in conjunction with that CMS disclosure yesterday? And then second, regarding the manufacturing scale-up for Elektrofi and what needs to happen for the 2 Phase I programs to be initiated next year. Could you provide some details on that, please?

Yes. Thanks, David. The timing is utter coincidence. Obviously, for the CMS IRA guidance, we knew it would be sometime September, October. Totally independent from that many months ago, Chase and I initiated a discussion with regard to what the power could be of bringing our two great technologies and companies together. And obviously, any deal transaction takes several months to actually make happen. But our teams worked very diligently, and thank you for recognizing the team for that because we had a super team of Halozyme technical working with the Elektrofi team to evaluate the technology. And just as it turns out, we signed our merger agreement yesterday. And shortly after that, the CMS guidance came out. So pure coincidence, David. And obviously, we are delighted to be able to announce this broadening of our portfolio and more options for patients for subcu delivery. With regard to the manufacturing scale up, that's certainly something that we have dug into, and we actually just have a team who are back from spending time specifically evaluating the manufacturing scale up. And what I can say is we are very confident that the scale-up will be ready for the initiation of the clinical development, which will be in that 12- to 15-month time frame. Everything is very nicely on track for that and just terrific work done by the Elektrofi team under Chase's leadership to be really doing a super job on that.

[Operator Instructions] And that concludes today's conference call. We thank you for your participation, and you may now disconnect.