Halozyme Therapeutics, Inc. ($HALO)

So thank you, everybody, for joining us again this morning at the Citizens Life Science Conference. Really excited to be joined next by Halozyme and CEO, Helen Torley. Helen, thank you for being with us this morning. You gave guidance and reported earnings a few weeks ago. So maybe just start there at a high level, what drives success in 2026?

Yes, we're very excited with our growth story, which has been going on for many years and will continue for many years to come. Just as a refresher, in terms of our revenues this year, we're expecting $1.7 billion to $1.8 billion in total revenue, which is 22% to 30% growth year-over-year. Now that is driven by our royalties, which come from our partnered products and ENHANZE, and that is expected to be about $1.1 billion to $1.2 billion, again, growing at the 30% to 35% rate. And obviously, because we have a royalty business, we have very strong profitability. As an example of that, our adjusted EBITDA is going to be in that $1.1 billion to $1.2 billion range as well. The growth is predominantly the royalties, as you just heard, Jason. We're very excited to have 3 products that are driving the majority of that growth today. DARZALEX FASPRO, which is the subcutaneous version with ENHANZE is our leading product. argenx's VYVGART Hytrulo is becoming a bigger and bigger dollar contributor with the strong adoption and growth they're seeing, particularly of the prefilled syringe that includes our ENHANZE product. And then Roche's Phesgo used in breast cancer. But behind that, we've got 4 more recently launched products, which actually represent a TAM or an opportunity just as big as the first 3 that really is just in the infancy of the launches. Companies have been working hard to be getting all the reimbursement in place, and I'm sure we'll talk about Opdivo subcutaneous, Ocrevus subcutaneous, Rybrevant subcutaneous and Tecentriq subcutaneous are beginning to contribute more in 2026, and that is driving that additional growth as well. But that's not it for Halozyme. Very proud that we signed 3 new deals at the end of 2025 for ENHANZE, and we expect more new deals this year. And that really is the lifeblood. These will result in new products launching on and before the '29, '30 time frame and some of them after that. But think about these as each representing attractive new royalty streams that are going to add on top and continue that robust growth. So that's the Halozyme in a summary.

So let's talk about the 3 products that are driving most of the growth today. And I'm going to do it and probably the one you asked at least Phesgo. It took a while to get going, but now it really feels like in 2025, this -- the conversion to Phesgo has accelerated. What have you seen in the market? And what are your expectations for that asset in the coming years?

Yes. So Phesgo is a combination of 2 biologics. It actually contains Herceptin and Perjeta given in a single injection over about 5 minutes. That is very different from patients who get the IV version, which is sequential therapy, which can take up to 2.5 hours. So a transformative experience for patients. We did see outside the U.S., robust adoption. And that's pretty traditional where Europe, in particular, really does embrace subcutaneous delivery. And that's because, obviously, the patient experience is better, but the overall cost of care is less as well with the subcu because you've got all of the savings associated with less time in the chair, less physician oversight. In the U.S., it's been more of a gradual uptake, but we're delighted that it's now at 52% share of Perjeta is already converted. And Roche actually put out a new target of 60% conversion by 2028. So this is just going to continue that quarter-over-quarter growth. All of the sales of Phesgo are subcu for us, and we receive a mid-single-digit royalty. So that's why that is becoming such an important contributor to us as well.

So moving on to VYVGART, and I kind of view VYVGART as the poster child for where I think the future of infusions is going, that's more and more at-home use, right? So the prefilled syringe has been a real driver for argenx in the second half of '25. Just how do you think about what VYVGART can do and how much of the product will be used at home versus in the physicians or health care provider office?

Yes. So argenx is VYVGART an amazing performance. Obviously, last year reported sales of $4.2 billion, which is 100% year-over-year growth. And really fueled, as Jason is mentioning, by subcutaneous launch of the prefilled syringe. The vision that Tim, the CEO of argenx has had was he started with IV, but for autoimmune diseases, he knows the patients want to be freed from their disease. They want to be able to treat themselves when they want, including at home. And so he has evolved and invested to move to a 5 ml prefilled syringe that now the patient administers at home in just 20 seconds. It is just so freeing up patients from disease as opposed to going for an immunoglobulin infusion, which is a day or half a day in the infusion suite or an IV infusion. And so what we saw after the launch in May was increasing conversion and use of the subcu. What argenx has said is it's really helping penetrate into new physicians treating because not all doctors want to be doing IV infusions or have the infrastructure to do IV infusions. So broadened adoption that way, but it also for patients moved it earlier in the treatment paradigm, again, broadening the opportunity. So I do see that we're going to see just continued growth in the 2 approved indications, which is generalized myasthenia gravis and CIDP and sales of all of CIDP is subcutaneous with ENHANZE today. That is just going to continue as more people become aware of the ease of treatment. You can take this prefilled syringe on a cruise. You can take it to the golf course. You can take it anywhere. So it is going to be the core to all of the new indications that are even being studied. Analysts today project that the 2 currently approved indications will grow from about $4 billion to $8 billion, but argenx is investing in a pipeline and a product. So it has got additional neurology and autoimmune indications where we're just going to continue to expand and subcu delivery, including at home where appropriate, is just going to be the way of the future.

And just remind us to that point because there are a lot of opportunities for VYVGART to expand. What's included in how you think about your 2026 guidance and the longer-term outlook?

Yes. When we give guidance, we really just looked at the derisked the approved indications or any that as we did our forecast in 2025, had already very strong Phase III data. So at the moment, we just have gMG. We don't have the recent positive data on ocular as a specific breakout in there, nor do we have seronegative. So just those 2 indications at this point in time.

Okay. So you mentioned growth today is largely those 3 products, but there are a bunch of products, 4 roughly that are driving the near term and are starting to contribute. When do you think as a collective, those 4 products actually become really meaningful to guidance?

Yes. I mean, in 2026, they are beginning their contribution. And I'll just mention a couple of them that I think are particularly notable and perhaps are underrecognized because we are watching them very closely and see a huge value proposition. So Ocrevus is a terrific example. It's Roche's drug for multiple sclerosis, $8 billion drugs today predominantly as an IV. With the IV, the patient is a 4- to 6-hour infusion, and then they have to stay in the infusion suite to be monitored. With the subcu with ENHANZE it's 10 minutes. and there is a 30-minute observation. So absolutely transformative for patients. Again, autoimmune disease, patients don't necessarily want to be sitting in infusion suite. So what we've seen is a robust uptake, 17,500 patients on drug. Roche recently reported. And importantly, this is another instance where subcu is just not converting IV to subcu. What Roche has expected and they are seeing is that this will expand the market because, again, not every doctor has access to IV infrastructure. Not every patient can travel to an infusion center or get a seat in an infusion center because there are capacity constraints. And so about 50% of the patients for Ocrevus are coming from conversion from IV, but 50% are brand-new doctors, brand-new patients. So getting that market expansion, which Roche has indicated they expect a $2 billion increase in the overall sales of Ocrevus just because of the subcu. Now that $2 billion plus the $8 billion is our addressable market. We aim and we hope that all $10 billion of that will convert to our ENHANZE. But that is, I think, an incredible example. And we can talk about Rybrevant afterwards.

But just on Ocrevus, it does feel like that Roche is being really vocal about the fact that they are expanding the market, whereas in the past, a lot of the conversations from your partners has been about conversion. ocrevus seems to be the first example where there's a lot of new patients coming in the door because of the subcu.

I would argue that it has actually happened with DARZALEX. It's perhaps not as much discussed. But the subcu, again, DARZALEX, 4- to 6-hour IV infusion, the subcu is 3 minutes. And what we heard from Janssen at the time of the launch was this will allow faster, more rapid expansion into the frontline population. Frontline population are the patients who live the longest and can continue on therapy for many, many years, especially as they may move on to a regimen in second line that still has DARZALEX as the backbone. And so I would argue that phenomenal growth with $14 billion in sales of DARZALEX last year, 95% plus of which is subcu with ENHANZE, where we're getting mid-single-digit royalty is really -- that was a market expansion as well. But not described as such. I don't think it would have been as possible to go as fast if everybody was getting a 4- to 6-hour infusion. So that's one. I do agree with -- we talked about VYVGART and now we've got Ocrevus as another example. And the one I was going to talk about with Rybrevant, you may know that, that's Johnson & Johnson's drug for a specific population of lung cancer patients. a terrific drug in terms of its efficacy. Think about it being very much on a par with Tagrisso, if not even better than Tagrisso. But its uptake as an IV has been limited by a 5-hour IV infusion and 67% incidence of infusion-related reactions. Now if you have an infusion-related reaction, you are going to feel lightheaded, headache, sweaty, very low blood pressure, and you can even go into anaphylactic shock. And that really is a worry of oncologists. And so I think J&J would agree that has limited the uptake. The subcu study takes that 5-hour infusion to make it 5 minutes, and it reduced infusion-related reactions by a factor of fivefold. So it's only a 13%, 14% incidence now. So that has transformed this therapy where it's got the great efficacy and now because of the better safety profile, a fabulous risk benefit. And it is J&J's ambition to create a $5 billion brand from Rybrevant, to less than $1 billion today to go to $5 billion. And early indicators I was hearing from investors yesterday are that the IQVIA data is showing a very strong uptake of the subcu, not surprisingly because what a great proposition. So that's another market building opportunity for subcu. And I didn't say this at the start, Jason, but we are seeing a new interest, a new wave of interest from pharma and biotech in subcu. And I think it is that product differentiation. It's a recognition it can grow and expand markets. And then obviously, the recognition that Halozyme has got deep expertise that we can apply to help partners their development and get through that regulatory process all the quicker. So all of these are terrific examples. And the world is watching and saying, I would like to do that, too.

And that's sort of a good point because you mentioned 3 deals at the end of last year. So as much as ENHANZE has been around and has driven a lot of success, it's still -- there are still new partners coming to the table. So what's your expectation for the potential for -- I guess, 2 questions. One, your current partners to continue to expand their use with other drugs, but also new partners coming on board?

The great answer is yes to both of those. We are seeing our current partners moving more nominations into the clinic. Often when our partners take a deal, they have 1 or 2 drugs in mind, but they reserve some slots. So we announced last year, one of our partners Roche advanced another slot in. You're going to hear more about that this year from the current partners just growing and expanding. But new partners as well, those 3 deals that happened at the end of last year happened after a period where pharma had slowed down a little bit its decision-making, I think, related to IRA, perhaps MFN, but it's as though that everybody has got their head around that and is now moving forward to invest for growth, which is where we play such an important role in our partners' portfolio. So we ended the year with that terrific momentum with the 3 deals, Takeda, Sky Pharmaceuticals and Merus. So very exciting targets, all 3 of them. But importantly, that momentum is continuing into 2026. And we've given a projection of at least 3 new deals this year. There'll be 1 to 3 with ENHANZE, but we also, at the end of last year, acquired a new technology for subcu delivery called Hypercon, and we expect to have 1 to 2 new deals from Hypercon this year as well, just continuing that enormous momentum that is terrific, this new wave of interest.

Before maybe jumping into the acquisitions, just one the earlier stage pipeline, development stage pipeline for ENHANZE now is still robust. Just kind of give us the overview and what are we expecting to see both from a clinical readout, but also new -- new programs going into the clinic in 2026?

Yes. We have currently about 7 products that are in development with ENHANZE. These cover some of the argenx products such as empasiprubart. There's Takeda's 881, which is a 20% immunoglobulin. We have a couple of targets that are being developed by ViiV for HIV disease. And so a diverse portfolio of products that are in or have completed Phase I development and are progressing, some of which can launch in that '27, '28 time frame, adding new important royalty streams at that period of time. Now as we look forward today with 10 approved products and these 7 in development, we expect 6 new ENHANZE Phase I starts this year, 2 new Hypercon starts this year and playing that forward a little bit, even with a little bit of a conservative lens, we expect to be having 40 either approved or in development drugs by 2028. That is this new renewed energy and momentum. And there's some very exciting products that we expect to be in the clinic this year and next year based on the conversations that we're having today.

I know there's not going to be a lot that you're going to say new here, but can we talk about the Merck litigation a little bit? And we've seen Alteogen take on a couple of new partners over the last 6 months. Our assumption is it's likely that there -- companies are looking at targets that they can't get through ENHANZE. But just what's the update and what's the potential new learnings we could get from that process this year and next?

Yes. I'll start with your correct comment that for -- as far as we're aware for all of the companies that have approached Alteogen and are working with them, it's a limited number. All of them approached us first, but the target was taken. We've done exclusive licenses on targets like PD-1 and HER2. So we can't work with other companies on that. So the good news is we're continuing to be viewed and we will always be continue to be viewed as the leader in the space. ENHANZE has now got 13 million patients that have been treated. That just creates an enormous moat of safety data, expertise, et cetera, for why we will always remain the first choice there. With regard to the litigation, just a little context there. We have sued Merck for infringing what we call our MDAs patents. That stands for modified hyaluronidase patents. Now it's very important to say these are very different family and not related at all to ENHANZE. So anything that happens in the litigation on MDAs has no read-through or any impact on any of our ENHANZE agreements or ENHANZE royalties. But we believe that Merck through licensing the Alteogen drug and using it to launch the subcu version of Keytruda is infringing. And we have asked in District Court that we receive damages because of will fill infringement and also create a what's called a permanent injunction, which would stop them from being able to continue the commercialization unless they pay as a royalty. And so where we are with that is that we're expecting to meet with the judge in the U.S. in June to hear about the scheduling order. So this will be the time line of the court case. Now this is not going to be over fast. These litigations, unfortunately, can be rather drawn out, can take several years, but we feel very confident in the fact that we will prevail as we do believe and have a lot of good evidence that they are infringing inventions that were created by Halozyme many years ago. Outside the U.S., it's also very active. I'll just mention that in Germany, we actually, in the fourth quarter, received a very positive outcome in a court case where we got a preliminary injunction that has stopped Merck being able to launch KEYTRUDA in Germany. And so there are several other countries where we're pursuing that course as well. And so stay tuned on this. We'll provide updates. Most important thing is all upside, no downside whatsoever from the litigation. But as an inventor of this entire space of hyaluronidases, we absolutely feel it's -- we must defend our IP and stop infringers.

To that point, you are -- I think it's fairly straightforward to say that you are the leader in innovating in subcutaneous drug delivery, and you're continuing to do that through acquisitions now with Surf Bio and Elektrofi. Can you just walk us through your rationale for those transactions and what you think those platforms bring to Halozyme?

Yes. In mid-November, we closed on the acquisition of Elektrofi. Some of you may have heard of it. They have a hyperconcentration technology that takes biologic drugs that generally are at a concentration of 100 or 120 milligrams per ml and can increase that concentration to 500 milligrams per ml while still preserving the activity and stability of the drug. So if you can imagine if you can increase the concentration by our to fivefold, you're reducing the volume. And the reason we did this acquisition while ENHANZE has obviously got a terrific opportunity for certain disease conditions, companies want to have small volume delivery by the patient at home in a simple auto-injector. And ENHANZE is great at delivering larger volumes. But if you can concentrate more biologics down to that 2 mls or below, they fit into a standard auto-injector. And again, the patient can do that at home. So that was a bit of the market we weren't participating in today. And so that's why we brought the Hypercon technology. Now importantly, that, in our view, is the most advanced hyperconcentration technology with impressive IP. The IP goes out in several families until the mid-2040s. And so it's our goal to continue the terrific development that Chas Kaufman, who is the CEO and his team have been doing, and we expect products to enter the clinic this year, which was a nice derisking value inflection in terms of the timing. And this expands our opportunity, as I've just described to you, in terms of subcutaneous delivery. So very complementary, but an opportunity where we weren't playing before. In December, we also closed on another acquisition of a company called Surf Bio. That one is out of [ Stanford ]. It has a different approach to hyperconcentration, but the same value proposition, able to concentrate molecules, maintaining stability and syringeability up to 500 milligrams per ml, and it does it through a spray drying process. Now some people say, why did you need 2? We believe that with our expertise, we're going to be able to accelerate the development of Surf Bio. And each partner is going to come to us and may have a different type of point of view as to a preferred approach to how you get that hyper concentration or we could find out that there are different molecules that fit better to the dehydration process versus the spray drying process. So that's the first reason. It's a technical reason that I think makes a lot of sense. We're expanding our opportunity by having 2 of these. We also have the potential that I mentioned earlier, we've done exclusive agreements. Once we do that, we can't participate again. But if we have 2 hyperconcentration technologies, it is possible that in certain circumstances, we'll be able to work with 2 partners exclusively. So again, this gets to the expanded opportunity or expect higher fees for the technology if they want to have access to both of them. So it just seemed like a no-brainer in terms of expanding our TAM, our opportunity and the combined expertise of Hypercon and Halozyme is going to accelerate the development of the Surf Bio technology. So that's our plan.

So Hypercon is a little further down the line than Surf Bio. What gives you comfort that the program -- the platform is derisked not just from a -- can it deliver a low volume, but is it a tolerable administration?

Yes. At this point in time, neither of the technologies has been in human. So we'll just say that. But we were able to look at the toxicology data that has been generated to date, understand exactly what are the constituents of each of the solutions that are going in. And all of that suggests a very, very strong path to good tolerability as well as retaining the efficacy of the reformulated molecules.

So specifically for Hypercon, you've now given guidance that you think this can be generating $1 billion of royalties. You were very good at predicting what ENHANZE could do when you gave the long-term guidance, many years before it actually happened. What drives your confidence that it can happen again with Hypercon?

Yes. For everybody, in 2018, we said ENHANZE would be $1 billion in royalty revenues, and it was well below $100 million at that period of time. And really, what I have the benefit of, which you don't all have the benefit of is understanding the partner plans and the opportunities that are sitting ahead of us. Now I can not share that because a lot of that is confidential information. So that's what happened on ENHANZE and we actually are achieving the $1 billion this year, a whole year earlier than we had predicted because we said it would be in 2027. As we closed the acquisition, we took a look at the Hypercon Elektrofi opportunity. Similarly, we have got information from partners. We've got our own plans as to what we think can happen. And I can't, once again, due to confidentiality, give you the play by play, but several things to comment. The market is now much more accepting of subcu delivery, embracing of it even. And so you're going to see a much faster uptake. We've got partners already engaged. There's already Lilly, J&J and argenx are already partners of Hypercon. And just based on what we expect to proceed with those partners and new partnerships that are under discussion, we expect between 5 and 7 launches by the mid-2030s, and that is what gives me that confidence in that $1 billion in royalty revenues in the mid-2030s.

So I know you've been asked about the long-term guidance and whether you'll extend it. Just what are your thoughts here about first of all, I think we have to recognize, like I just said, the fact that you were definitely an outlier in giving that longer-term guidance and even more of an outlier in being right, right? So what are your -- the pushes and pulls about extending that guidance out into the 2030s?

Yes. We actually, in 2023, put out a 5-year, very detailed guidance that I think we understand is very unusual, but also very helpful to our investors. We did it at that time because we had 10 products that were derisked and we could forecast the royalties. And so our philosophy is that our guidance should be based on derisked assets. So as we sit here today, we don't have any more of the products that are derisked. And so we're still going to continue. We've got guidance out until 2028, Jason. We've got lots of levers that we are pulling at this point in time. We talked about the current ENHANZE product. We have royalties for many of those products that go out to the mid-2030s and even into the early 2040s. They're going to continue to grow. We've got new ENHANZE deals happening. Those products will launch in '29, '30. That's going to be another source of growth. We talked about Hypercon coming in, in about 2030, '31. That's another source of growth. Surf Bio will follow about 18 months behind that, we estimate. That's another source of growth. And because of the very strong cash generation we have, we also will continue on this path of M&A, adding where we can, assets that have recurring royalty-like revenue that results in high profitability. So what a lot of levers we have to pull and a lot can happen any time now. So take it to say that we have got incredible growth ambitions for our product portfolio. Our guidance will be based on the derisked assets. So you can have confidence in the numbers we put out there as opposed to having to -- well, I'll derisk that one by that, I'll derisk that one by that. That just causes confusion and actually dilutes the power of us putting out guidance based on fully derisked assets. And as you say, Jason, beating those numbers.

Great. Helen, really appreciate you being with us this morning, and we're looking forward to watching more success this year.

That's great. Thank you very much.