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

Excellent. Okay. 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 ENHANZE versus Alteogen's hyaluronidase or what prevents some partners from licensing ENHANZE 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 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 just -- we can't see behind those doors. So maybe you can help us understand what.

A lot in there. I'll maybe take the first part with regard to Alteogen and ask Darren to talk about the status of the MDASE litigation. And 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 product in 2013 and launched 10 products in total, we have got the largest clinical safety database and also over 1 million patients postmarketing data. Now that is important because when a partner is thinking of taking a product subcu, 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 6 deals, Mitchell, we've talked about earlier. In each of those cases, the companies evaluated Alteogen specifically and said, we want to come for Halozyme for your experience and because of your track record of success and safety. 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, Surf Bio and the auto-injectors. And so ENHANZE is seen as the gold standard. We are seen as the 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 structure of some of our earlier contracts where we signed exclusive contracts, Alteogen has had some deals. The majority of those where it's public, it's very clear we can say that the partner 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 PD-1 target. We licensed that to Bristol in 2017 when Merck wasn't interested in subcu. They had no choice but to go to Alteogen. 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 ENHANZE and MDASE and then...

Absolutely. Yes. And what I would start by saying is that the ENHANZE patent estate is completely distinct from the MDASE patent estate. So the royalties that you see Halozyme getting today on all the products are based on the ENHANZE 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 MDASE litigation is all upside for us, right? So we're suing Merck and pursuing cases in the U.S. 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 U.S., so that's delaying the district court case a little bit. That's likely to ongo for a while now. But in Europe, we're awaiting -- we're already blocked -- they're blocked in Germany. We're awaiting 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 MDASE litigation, there's no read-through to ENHANZE and it's little upside for Halozyme.

Excellent. Okay. And a lot of nominations recently from partners who have had slots that were kind of pending and they could opt for nominations. Can you help us understand how many remain to be determined if nominations occur? Like what could we potentially see? And then you have 13 programs by year-end that you're expecting to be in development. Can you help us understand how many of those could be commercial within the next few years?

Yes. With regard to the new partner nominations, Mitchell, I'm glad you talk about that because that's sometimes under-recognized as another powerful driver of royalty revenue. So every time we sign a new deal, we're obviously getting 1 or 2 nominations, but many of the partners take extra slots. And so we need to track how many new deals there 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 ENHANZE, there are at least 20 our Hypercon are between 15 and 20. So each new deal usually is 3 to 4 deals. So there's 10 deals value just sitting there waiting to be untapped. And as you see, we're very excited to see products moving into the clinic. And also, 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 ENHANZE with belantamab. 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 the speed I also want you to know as to which partners are moving. Pfizer, who's a long-standing partner, has also posted a clinical trial design to evaluate ENHANZE with its trispecific that is being used for atopic dermatitis and other dermatological diseases. We're working today with antibodies and bispecifics that is a trispecific, 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 with ENHANZE through great science that our Chief Scientific Officer invested in and created, we've opened up 2 new market segments that's going to allow us to continue to grow and sign more deals.

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

Yes. Let me start with that because it's been very clear pharma 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 where volume is less important, that is an ENHANZE and they'll say, we want you to talk to us about ENHANZE. Even if something where they want to get the small volume and an auto-injector for the patient's help, 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 are coming to us. So we can't talk specifically about Vertex and Oruka, but what we can say 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 2 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 we'll move forward into hopefully CLA soon. That's what we call it the contract, the collaboration and licensing agreement, 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 ENHANZE, which shouldn't be surprising because when we launched ENHANZE, we were creating subcu 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.

Yes, it's wonderful. And one of the companies there, Oruka is a key company for us. We cover Oruka 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 Skyrizi with their lead product. Every percentage point of mid-single digits that you guys get is huge. So I guess like 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 do you think about the future of your hyaluronidases in the hands of different partners?

Yes. We look forward to Oruka saying more about their specific plans. We're not in a position to say anything just yet, but I can say we're delighted to be working with them on what promises to be a transformative therapy for patients with very strong data. I think in terms of the second part to the question, 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 argenx as VYVGART as a product that was totally underrecognized when we first signed the deal with them. We saw the potential. And obviously, argenx 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 companies wanting to introduce subcu from the start in the most competitive profile because perhaps they're coming into an already established market where they need to transform early into the most convenient, longest dose duration, whatever is their goal. That is what Hypercon because we can deliver higher doses, as you can imagine, in that 2 mL volume if you need to do that. So that -- it's a very exciting area for us. And pharma is absolutely in a way that hasn't happened in the 12 years I've been at Halozyme embracing subcu as the path forward.

Wonderful. So we've talked about a lot today. So to close the discussion, I always like to just recap and give you a platform to touch on anything critical that we didn't get to say and/or discuss maybe the next 12 months forward ahead for Halozyme.

Yes. 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, long duration of royalties. 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. 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 ENHANZE, we've got the 10 deals that we have or 10 products 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 Halozyme team, and thanks to all the investors that joined us for the fireside discussion.