Halozyme Therapeutics Inc (HALO) 2020 Q2 法說會逐字稿

Good afternoon, everyone. I would now like to turn the conference over to Al Kildani, Vice President of Investor Relations and Corporate Communications for Halozyme Therapeutics. Mr. Kildani, please go ahead.

Good afternoon, and welcome to our second quarter 2020 financial results conference call. In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced on today's call in the Investor Relations section of our website.

Leading the call today will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business; and Elaine Sun, our Chief Financial Officer, who will review our financial results for the second quarter 2020.

During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties.

I'll now turn the call over to Helen.

Thank you, Al. I'm delighted to report our second quarter results and provide you with an update on the recent exciting developments at Halozyme that are positing the company for sustained growth in revenues, earnings and cash flow in the coming years. These developments included 3 major market regulatory approvals for blockbuster oncology drugs utilizing our ENHANZE drug delivery technology and our first quarter of what we expect to be sustained profitability going forward.

And before we get to some of these exciting second quarter developments, I'd like to provide a brief update on the impact of COVID-19 on our business. As an organization, we continue to operate effectively with the majority of our employees working from home. We expect this will continue for the foreseeable future. Importantly, our suppliers also continue to operate without interruptions related to COVID-19.

On our first quarter call, we indicated that based on partner feedback, we anticipate that some partner development program starts would be delayed by 1 to 2 quarters and that some trial enrollment had been impacted. Any potential for impact on FDA and EMA review times was unknown at that time.

I'm very pleased to update today that progress has been made on multiple programs during the second quarter. And based on latest partner feedback provided just in the last few weeks, we project a total of 9 new clinical trial start in 2020 with one additional new trial start date still uncertain.

From a regulatory standpoint, we were obviously pleased by the speed with which the FDA was able to approve Janssen's DARZALEX FASPRO and also Roche's Phesgo. The Phesgo approval was 4 months ahead of the October PDUFA date, and the FDA cited that this was due to a desire to expedite oncology product development. In Europe, the EMA time line for DARZALEX SC approval also tracked ahead of expectations.

Now these current expectations for 2020 reflect the latest feedback we've received from our partners about their plans for their enhanced based products in 2020. Given the inherent uncertainty of the COVID-19 pandemic, our partners may update or change their plans or outlook in the future. We're monitoring this closely and would provide updates if there were to be any changes impacting the business.

Now let me turn to the great news in the quarter, beginning with Slide 3. Our partners received 2 FDA approvals and 1 EMA approval during the second quarter, bringing the total number of the FDA-approved drugs utilizing our ENHANZE technology to 5. Most recently, Roche ENHANZE tech received FDA approval for Phesgo, a fixed-dose combination of 2 Roche drugs that are the backbone of treatment for HER2-positive breast cancer patients, Perjeta and Herceptin.

In terms of demonstrating the power of our enhanced technology and its ability to provide competitive differentiation, Phesgo is the first combination of 2 monoclonal antibodies in a single subcutaneous injection utilizing the enhanced technology. This fixed-dose combination can now be administered in approximately 8 minutes for the initial loading dose and approximately 5 minutes for each subsequent dose. This compares to approximately 2.5 hours for the initial infusion loading dose because of the sequential injection of Perjeta then Herceptin IV, and between 1 to 2.5 hours for the subsequent infusions all of these 2 medicines.

The FDA granted approval of Phesgo in neoadjuvant, adjuvant and the metastatic treatment settings based on the FeDeriCa study, which was an open-label, multicenter randomized study conducted in 500 patients with HER2 overexpressing early breast cancer in the neoadjuvant and adjuvant settings. This once again supports the FDA comments made at the Rituxan Hycela ODAC that a separate controlled clinical study may not be needed for each and every indication.

In addition to the FDA acting swiftly on this application, the agency highlighted the potential for this product to be administered in the home by q health care professional, which adds an important outpatient option for patients. Now this is especially true in the current circumstances, who reports suggest some patients do not wish to visit hospitals to receive their treatment due to COVID-19.

Highlighting further the potential appeal to patients, Roche also conducted a Phase II (inaudible), which evaluated patient preferences and found that 85% of patients preferred the subcutaneous fixed-dose combination of Perjeta and Herceptin over the IV.

Looking ahead, Roche completed regulatory submissions for the fixed-dose combination of Perjeta and Herceptin in Europe, and a decision by the EMA is expected in 2021, assuming a standard review time.

In terms of understanding the potential opportunity of Phesgo for Halozyme, one needs to consider the Perjeta sales, plus the associated Herceptin sales as Phesgo can replace the individual use of both of these drugs in the breast cancer indications. Analyst consensus projects global sales of Perjeta of $4.1 billion in 2020, growing to $5.6 billion in 2024. Breaking this down some more, in the U.S., Perjeta alone was $1.6 billion in sales in 2019. One would then add the associated Herceptin sales in breast cancer to understand the total opportunity.

For Europe, where our regulatory decision is expected in 2021, European sales of Perjeta in 2019 represented about 70% of the sales of the U.S. International sales made up the remainder of the approximately $3.8 billion in total sales in 2019 with international representing about 60% of U.S. sales.

Let me move now to Slide 4 and DARZALEX SC. As discussed on our last call, Janssen received FDA approval for DARZALEX FASPRO on May 1 with a broad label covering 5 of the 7 indications for which the IV form is currently approved. We estimate this label allows DARZALEX FASPRO utilizing ENHANZE to address the majority of multiple myeloma patients based on our assessment of analyst estimates for how DARZALEX IV is used today.

One of the indications where data was awaited, was for use in combination with pomalidomide and dexamethasone. Just days ago, on July 31, Janssen's development partner, Genmab, announced positive top line results from the Phase III APOLLO study, which was evaluating subcutaneous daratumumab in combination with pomalidomide and dexamethasone versus pomalidomide and dexamethasone alone in patients with relapsed or refractory multiple myeloma. The study met the primary endpoint of improving progression-free survival and the safety profile of daratumumab SC in combination with pomalidomide and dexamethasone, which reported to be consistent with the safety profile for each therapy separately. We look forward to this data being presented at a future medical meeting.

On June 4, we announced that the European Commission granted Janssen European marketing authorization for the subcutaneous form of DARZALEX. The authorization included all currently approved DARZALEX IV formulation indications in frontline and the relapsed and refractory multiple myeloma settings. Shortly after these approvals, the subcutaneous form of DARZALEX was launched in each market, and the first commercial sales resulted in milestone payments to Halozyme of $15 million for the U.S. and $10 million for Europe.

Continuing with approvals, just last week on August 4, Janssen announced that Health Canada approved DARZALEX SC in 4 regimens across 5 indications in patients with multiple myeloma, including a newly diagnosed transplant ineligible patients and also relapsed and refractory.

Now let me move to the launch progress. It's clearly obviously still very early days, and there's little detailed information I can share at this time. What we can say is that on the second quarter 2020 financial results call, J&J commented that it was pleased with the uptick it was seen for subcutaneous DARZALEX and the benefits it provides to patients and the health care providers.

The value proposition offered by subcutaneous form of DARZALEX is strong. It provides the ability to reduce the administration time from what is often 4 to 6 hours for the IV form of daratumumab to just 3 to 5 minutes for the subcu. This can reduce treatment burden for patients and caregivers as well as provide value to the health care system, where we hear time and time again all the constraints on the infusion center capacity and the challenges for providing nursing oversight for long infusions.

Turning now to the market opportunity for the subcutaneous form of DARZALEX. Analysts currently project sales of -- for DARZALEX of $3.9 billion in 2020, growing to $6.8 billion in 2024. And this growth is projected to come from increasing penetration into the frontline settings. Janssen has stated the subcutaneous formulation of DARZALEX utilizing ENHANZE is a core part of their future growth strategy, supporting their goals for this expansion into the front-line setting in addition to increasing treatment in the community setting.

Now just to close on DARZALEX, I also want to highlight on the positive Phase III data from the ANDROMEDA study, which was in light-chain Amyloidosis. This data was reported in June and was presented at the European Hematology Association meeting on June 14. There were approximately between 30,000 and 45,000 patients in the United States and the European Union, who have light-chain amyloidosis and treatment options are limited today.

This was the first ever study evaluating DARZALEX in this indication, and we're delighted that only the subcu version of DARZALEX with ENHANZE was selected to be studied. Importantly, when DARZALEX SC was enhanced was given in combination with cyclophosphamide, bortezomib and dexamethasone or CyBorD as compared to CyBorD alone, the response rate was 53% compared with 18%, a very strong result. Janssen had stated that it's looking forward to pursuing regulatory submissions with the health authorities.

We're certainly very excited by these 3 approvals by global regulatory authorities and that they were granted in such a timely manner. And now offer patients suffering from breast cancer and multiple myeloma new treatment options that can reduce the treatment burden. And we look forward to providing further updates on the progress of these launches and also as we gain additional approvals in additional regions and indications.

Let me move now to Slide 5 into our currently commercialized products in the U.S. and Europe. Roche continues with its global commercialization of MabThera or Rituxan Hycela and subcutaneous Herceptin or Herceptin Hylecta. Royalty revenues from these more mature products are anticipated to decline modestly this year, primarily as a result of the ongoing impact from biosimilars, with Roche also reporting some impact from the COVID-19 pandemic. Now adding to these revenues will be Phesgo and DARZALEX FASPRO in the U.S. and DARZALEX SC in Europe.

As we've noticed in the past, we expect 2020 to be a year where Janssen and Roche will focus on gaining access and reimbursement for these new products. In the U.S., this is typically a multi-month period required for full access to be established as new products gain formulary approvals and inclusion into the prescribing orders in the electronic medical records.

In Europe, gaining reimbursement approval is the key next step, and this can take between 6 to 9 months in several of the key European markets. As a results, we expect DARZALEX and Phesgo to contribute modestly to royalties this year with an expectation that everything will be in place for robust uptick in 2021.

Completing our update on royalties, I'm also pleased to report that one of our earliest approved products, HYQVIA, now commercialized by Takeda, received a positive opinion by the CHMP last month to expand the HYQVIA label in Europe to include the indication of secondary immunodeficiencies. Upon EMA approval, Takeda will be able to target a segment of the market, which Takeda has reported is estimated to represent about 15% of the immunoglobulin use in the U.S. and Europe.

As we look at our expectations for the year, balancing the anticipated declines in the more mature products with the new product launches, we now anticipate royalties in 2020 will be roughly flat with last year.

Let me move now to our development products, which are shown on Slide 6, where you can see a summary all of the pipeline products that are being developed utilizing ENHANZE. As I mentioned earlier, we expect a total of 9 new trial starts in 2020. And we continue to expect 3 new Phase III trial starts. These will come from the list that's shown here on the left of the completed or ongoing Phase I study. For competitive reasons, recall our partners do not announce their plans and until the trials are ready to start.

We've already achieved our goal of one new Phase II trial start for the year with argenx initiating a study with efgartigimod in CIDP. And we continue to expect a total of 5 new Phase I trial starts with one additional Phase I trial start date currently uncertain due to COVID-19. As you'll hear in a moment, 2 of these 5 Phase I starts has already begun since our last call.

Let me now provide a bit of color by partner. As we announced last quarter, argenx has initiated a Phase II study with efgartigimod and CIDP. On its most recent quarterly call, argenx provided an update that its go no-go decision regarding potential advancement to Phase III after the enrollment of 30 patients in Part A of this trial is expected to occur in 2021.

In May, argenx announced that its Phase III ADAPT study, evaluating the intravenous form of efgartigimod in myasthenia gravis patients met its primary endpoint. Based on these positive results, argenx has stated that it plans to discuss a bridging strategy for efgartigimod SC with ENHANZE in myasthenia gravis with the FDA in the fourth quarter of this year.

And lastly, for argenx, we are pleased to report that the first patient has been dosed in the Phase I study of ARGX-117 utilizing ENHANZE. ARGX-117 is an antibody that binds to C2 with the potential to reduce tissue inflammation and the adaptive immune response.

Moving to Bristol-Myers Squibb now. They continue with Phase I development of nivolumab, anti-CD73, and relatlimab in combination with nivolumab. I'm delighted to announce that Bristol has now also initiated a Phase I/II study of ipilimumab in combination with nivolumab using our ENHANZE technology. This takes a number of targets and development by BMS now to 4. And Roche continues with its Phase I development of TECENTRIQ and Ocrevus. Now we also look forward to providing more updates as additional programs enter or advance in the clinic.

Let me now comment on our progress on new ENHANZE deals. As I stated last quarter, we continue to have one of the broadest slates of ongoing discussions with both biotech and pharma companies that we've ever had. We did see some impact from the COVID-19 pandemic in our pace of our discussions in Q1 and early Q2. I'm really pleased to say that the pace of these discussions has returned to normal. And based on the slate of opportunities, I remain confident that we will sign additional deals, as ever, the timing is hard to predict.

Now let me return to our anticipated growth in milestone revenues, as shown on Slide 7. The progress of our enhanced portfolio is projected to drive the strong growth in milestone revenues between now and the end of 2022. Based on the latest information from partners, we continue to project cumulative milestone revenues in the next 3 years of between $350 million and $450 million. This growth in projected milestone revenues is being driven by the larger milestone payments associated with new target approvals. And the increase in the number of products advancing to later stage development, many of which are also associated with large milestones.

Now this near-term milestone revenue precedes the royalty revenues and is also an important and strong indicator for our future royalty revenue potential, which we project to be approximately $1 billion in 2027 based on the non-risk adjusted revenue projections for the programs that are currently in or in planning for development.

Let me turn now to Slide 8 and review our approach for value creation and capital return. Our first priority remains to drive the growth in our ENHANZE business by maximizing the value of our current collaborations and working to sign new collaboration partners. With the strong projected free cash flow, our next goal is returning capital to investors via share repurchases with our 3-year $550 million repurchase plan.

In addition, we continue to evaluate the potential for new technology platform expansion through acquisition, with the goal of accelerating our long-term revenue growth. In evaluating this, we're seeking approach that has a high-growth and high margin, like our ENHANZE business.

Now with that overview and update, I'm now pleased to turn the call over to Elaine for a discussion of our second quarter financial results.

Thank you, Helen. I'll turn to Slide 9 for a review of our second quarter revenues. Total revenue for the second quarter was $55.2 million, an increase of 41% compared to $39.1 million in the prior year period, driven by the significant achievements of ENHANZE-based product approvals and launches by our partners.

Royalty revenue for the quarter was $15.8 million, a decrease of 12%, driven primarily by the ongoing impact of competition from biosimilars and the impact of COVID-19 on Roche's sales. As royalties from new partner product approvals begin to ramp, this should offset the impact from biosimilar competition affecting the more mature partner products over the balance of the year.

Product sales were $6.3 million in the quarter, representing an increase of 10% from the prior year period. We continue to expect that product sales of API will fluctuate on a quarter-to-quarter basis, depending on the needs of our collaboration partners. Collaboration revenue in the quarter totaled $33 million, more than double the prior year period, driven by the 2 Janssen milestones related to the launches of subcutaneous DARZALEX in the U.S. and the EU, which totaled $25 million in the quarter. In addition, we received $5 million related to conversion of an option from a coexclusive license to an exclusive license by our partner, BMS.

On Slide 10, you'll find a more detailed breakdown of our second quarter P&L. Let me begin with total operating expenses, which were $25.7 million in the second quarter, down 52% from $53.1 million in the prior year period. The overall decrease in total operating expenses resulted from our shift in strategic focus to the company's ENHANZE drug delivery technology in November of last year and related restructuring, which has now been completed.

Cost of product sales were $5.7 million, up from $1.9 million in the year ago period. This increase was principally driven by sales of both rHuPH20 to certain of our partners and an increase in cost to support our product platform and serve our partners supply needs.

Research and development expenses of $9 million decreased by 74% from $33.9 million in the prior year period as a result of halting our PEGPH20 oncology drug development activities in November of last year. We've been working to finalize the closeout of remaining costs associated with our prior clinical trial activities and completed our restructuring of the company's operations in the second quarter to focus solely on ENHANZE.

SG&A expenses were $11 million, down from $17.3 million in the prior year, primarily due to the reduction in force and discontinuation of PEGPH20-related launch expenses that were part of the company's restructuring. And I'm pleased to say that our net income for the quarter was $25.8 million or $0.19 per share compared to a net loss of $14.6 million or $0.10 per share in the second quarter of 2019. And we expect this will be the beginning of sustainable profitability and cash flow generation for Halozyme.

Cash, cash equivalents and marketable securities were $385.4 million at June 30, 2020, compared to $421.3 million at December 31, 2019. This decrease reflects the impacts from our operating loss and share repurchase activities during the first half of 2020.

Now I'll turn to Slide 11 for a discussion of our 2020 financial guidance. We continually monitor the impact of the COVID-19 pandemic on our business and communicate with our partners and suppliers as to their plans and time lines. And based on that latest information and our planned expenditures for the year, our guidance for 2020 remains unchanged. We continue to expect total revenues to be in the range of $230 million to $245 million, and earnings per share is expected to be in the range of $0.60 to $0.75.

Excluding nonrecurring expenses related to the wind down of our former oncology operations in the first half of 2020, we expect annualized operating expenses, excluding COGS, to be at the top end of our guidance of $65 million to $75 million in the fourth quarter of 2020 or between $18 million and $19 million for the quarter. Including those nonrecurring expenses, full year 2020 operating expenses, excluding COGS, will be above $75 million.

With regard to interest expense related to our convertible senior notes offering in November 2019, we expect to book quarterly interest expense of $5 million or $20 million total for the fiscal year. We understand that certain elements of our business impose a challenge for modeling Halozyme earnings on a quarter-to-quarter basis. And to assist with this, let me now provide some color on the anticipated quarterly progression of our top line.

Collaborative revenues related to milestone payments are inherently variable. However, based on current partner plans, we expect a higher level of collaborative revenues in the fourth quarter than in the third quarter of 2020. Product sales related to API are expected to be flat from Q2 to Q3 and then increase in the fourth quarter. Growth from royalties from new partner product launches are expected to offset pressure on royalties from more mature partner products, and that is expected to result in higher earnings per share in the fourth quarter than in the third quarter of 2020.

With strong cash flow generation anticipated to be provided by a broad portfolio of enhanced partner products over time, we expect to be able to continue our $550 million 3-year share repurchase program that was authorized by our Board of Directors in November of 2019. To date, we've completed approximately $254 million in share repurchases, of which we repurchased approximately $54 million in 2020, including $2 million worth of our common stock in the second quarter. Our average repurchase price year-to-date is $16.33.

Given our confidence in our long-term prospects and commitment to providing long-term value for our shareholders, we anticipate repurchasing up to another $296 million available under the program between now and the end of 2022, in addition to utilizing our free cash flow to support both internal and external growth initiatives. Of this amount remaining under the program, we continue to plan to repurchase up to $96 million worth of shares during 2020, pending market conditions and other factors.

With that, I'll now turn the call back to Helen.

Thanks, Elaine. This has been one of the most important quarters in Halozyme history. Not only did our partners receive 3 critical regulatory approvals for high-growth products that are expected to be important growth drivers of our royalty revenues in the coming years, we also achieved our first quarter of what we expect to be sustainable profitability.

Despite the challenging times facing all companies, we are delighted to be in a position to maintain our financial outlook for the year. With 2 new commercial products utilizing ENHANZE now available, we are more dedicated than ever to serving patients and the health care system alike with our disruptive solutions with the goal of improving patient experiences and outcomes. And we're also in the strongest financial position ever as a company.

We look forward to strong growth in our revenues, profitability and cash flow in the coming quarters and years, placing us in a strong position to deliver on our commitment to return capital to shareholders, maintain our long-term sustainable growth and maximize shareholder value.

And even though we've already achieved a number of very important milestone events thus far in 2020, as you can see outlined on Slide 12, there are many more anticipated for the remainder of the year. These include continued momentum in the clinic, which is so critical for our partner products that utilize ENHANZE, which is leading to 9 new clinical trial starts in total in 2020, of which 3 are expected to be Phase III trial starts.

Now none of this will be possible without our talented and dedicated team here at Halozyme. And I'd like to end by thanking everyone for your tremendous effort and these strong results.

I would now be delighted to take your questions. So operator, please would you open up the call?

(Operator Instructions) And your first question comes from the line of Jim Birchenough from Wells Fargo.

Congratulations on your first profitable quarter and all the progress over the course of the year so far. A couple of questions. I guess first, Helen, you've had the $1 billion royalty target for 2027 for some time. I don't expect you're going to update that and go beyond that today. But could you give us a sense -- there seems to be some concern that post 2027, things could be challenged, but maybe as you consider DARZALEX subcu IP and Perjeta/Herceptin IP and other products in the pipeline, what sort of growth do you see beyond 2027?

Yes. Thanks, Jim. 2027, 7 years ago -- away, and we're showing this, that tremendous projection of growth, which is really driven by the number of product launches that we're anticipating will happen. As we've said in the past, the shape of the curve post 2027 is very much going to be influenced by how many new products we launch between now and 2027 and how many new co-formulation patents we get.

The current projection of $1 billion is just based on the products we currently have line of sight to. And we already have line of sight to additional products in 2021 that are going to move into the clinic and allow us to continue to grow past 2027 in terms of them contributing revenue. Because if you recall, in terms of our royalty term, it is a minimal of 10 years. And so it's too early to be absolutely sure what's going to happen after 2027. But what we can say with certainty is, we don't have the traditional royalty cliff because of the co-formulation patents allowing for more than 10 years of royalties. Because we will have additional launches in the next years that will extend past 2027, there is a very strong possibility, we can achieve continued revenue growth past that time or a flattening of revenue. But certainly, I can be very confident there's not going to be a traditional royalty cliff.

And then, Helen, just on the potential for additional deals and maybe with the current COVID environment, it seems like infusion capabilities are challenged, particularly as states are surging with the virus. Are you seeing any of that drive increase in partner interest? Or how are you seeing the COVID environment and the impact on IV infusions impacting potential for deals?

Yes. We started the year with a good deal of interest in new deals, Jim. And I would say it's only increased as COVID has, as you say, impacted hospitals and patient willingness to go to hospitals. So we have a very broad slate of interesting opportunities ahead of us, both with biotech and with pharma. So I'm very confident we will sign additional deals. It is always just hard to peg exactly when those new deals would happen.

But to add to your point about COVID-19 driving interest, I would say that the launches and the value propositions demonstrated with DARZALEX FASPRO and with Phesgo have also generated a lot of interesting questions. When you think about the ability to take a 4- to 6-hour IV infusion down to just 3 to 5 minutes, that has many companies intrigued. And the ability to combine 2 antibodies in a single injection given in 5 minutes, is also a new demonstration of an incredible value proposition. So all of those factors are leading to a great series of discussions, and I'm very confident we will have a deal.

Your next question comes from the line of Graig Suvannavejh from Goldman Sachs.

Congrats on the progress. I just wanted to maybe touch base on the share repurchase program. And given where the stock is today, where we've seen a nice run up to current levels versus your average purchase price in the first quarter. How are you thinking about -- how to pull that trigger and at what prices? So just color on how you think about, I guess, portfolio managers, so to speak? And then I'll have a follow-up after that.

All right. Elaine, would you like to address the share repurchase?

Sure. So, Graig, with respect to the specific size and timing of repurchases, we obviously take into account a host of factors, including impending partner events, market conditions, our stock price and other factors. What I would emphasize for you is that we remain committed to our 3-year $550 million capital return program, and we're continuing to drive toward the goal of repurchasing up to $150 million of our common stock this year. Recall, we've already purchased $54 million of our common stock year-to-date. And obviously, focused on value to shareholders, consistent with what we've previously communicated to investors.

Okay. Maybe another question I have just has to do on your search for additive technologies. And wondering if there's been any considerable or new developments since the last time we checked in?

Graig, no new developments. We are actively searching and evaluating different platforms. As we've mentioned in the past, we don't feel any urgency to do that. We've got a great enhanced growth story ahead of us. But what we want to do is seek to see can we accelerate that revenue growth? So what we are doing is evaluating a whole range of technologies and platforms. And there are some interesting things out there, but we're pretty early on in our investigation of those. And we will provide the appropriate updates out when we do find the right thing if we find it.

Okay. Great. And maybe just one last one for me, please. The Phase I/II study of ipilimumab in combination with nivo. I'm just wondering as we think about that particular clinical trial start and then some of the other clinical trial starts that are more Phase I in nature that are expected throughout the balance of the year. Just wondering what -- if there are certain milestones that we should think that would be associated with such early clinical trials or are the milestones that you're expecting really more associated and weighted towards the later the Phase III types of trials?

Yes. It is a range with regard to those. I'll ask Elaine just to give a -- just a brief overview as to the milestones for the year.

Sure. So as you can imagine, we have regular conversations with our partners. And based on that latest feedback, we continue to expect 6 milestone bearing study starts, including 3 Phase III starts this year. So we continue to have good visibility and confidence on our guidance for the year. And the other thing I'd note is that we benefit from a diversified business model with multiple blockbuster products and programs from some of the leading pharma and biotech partners that will be driving our potential milestones and royalties.

And your next question comes from the line of Ike Oji from BMO.

Congratulations on the successful quarter. I just -- we're just curious about the type of deals that you're looking at in terms of extending ENHANZE partnerships. You kind of developed a pattern of immunology, oncology, those types of indications. Are there any type of metrics that you can kind of provide us to give us a better sense of some of these deals that you're currently in discussions with different biopharma companies?

No specific metrics we can give you. And what we do -- look to assess, and we also have companies coming to us, tends to be companies who've got an IV product, either approved or in development, that has got a longer infusion time, whether we're looking to transform it into subcu or the other area, we end up in a lot of discussions of our current subcu therapies, where companies are looking to extend the dosing interval. And so there's a broad range between currently marketed products as well as products and development where people are seeking to optimize the product before they even get to the marketplace. So if you imagine, and while we have ended up, I think, having a lot of oncology drugs. With the signing of the deal with argenx, you obviously are seeing us moving more into the immunology neurology space with working in myasthenia gravis. And there are no therapeutic limitations for ENHANZE. We can work in any therapeutic area where somebody has that need where they have a high-volume infusion, where we can transform it from IV to subcu or we can allow them to deliver a higher dose of the subcu that can perhaps extend the dosing interval. So a very broad applicability, not limited by therapeutic area.

Okay. That's helpful. And just a quick follow-up to that. Is there a target in mind that you guys have in terms of how many deals you want to have executed over the course of a specific time line, maybe over the next 3 or 4 years? We want to execute maybe 3 to 4 deals that might lead to $1 billion in total revenues in 2029 or so on and so forth. Is there any type of guidance that you can provide on that?

No specific guidance or goals. We do believe there are multiple additional deals that we can have. We can never give you specific timing for the goals because that really is under the control of the company. But if you're thinking over the next several years, I definitely expect to see several additional deals consummated over the next several years. But exactly what the time frame is, it's just hard for us to predict and control.

Next question comes from the line of Shawn Egan from Citi.

This is Shawn Egan calling in for Joel. Two for me today. Maybe can you characterize what gating steps remain for -- as you think about patients converting from IV to subcu DARZALEX, what are kind of the main inflection points? And what should investors be looking at in regards to that? And I have a follow-up question as well.

As I mentioned in my prepared remarks, we're obviously delighted with the approval of DARZALEX FASPRO in the U.S. and DARZALEX SC in Europe. In each of these cases, there are always some steps just to assure full access and reimbursement. In the U.S., it is things like getting on to formularies and they're getting loaded into the writing orders on the electronic medical records. That, I'm sure, is well underway. It just takes a while for that to all be completed. And when that is completed, then, obviously, there can be free writing by all physicians. So there are always a process. And we expect DARZALEX FASPRO to mirror all of the recent injectable launches.

For Europe, the key is gaining reimbursement in each of the key markets. It's a very well-defined and well-understood process. And obviously, Janssen has got deep experience doing it. So in some of those markets, it can take between 6 and 9 months to complete that process. But that is a process. Janssen will already have started. And we'll just follow again what is a standard approach for injectable drug approvals in Europe as well.

Inflection points, I think, what we're going to see as we usually see with injectable launches is as more patients and physicians get full access to the drug, you tend to see over time, just a gradual increase in the new orders that are written every week. And then when the free access comes, you see an acceleration in that growth rate. So I'd point you to recent successful injectable drug launches, and that's exactly what I would expect to see with DARZALEX.

And then just as one brief follow-up. Now that you're having multiple partnered products showing data in kind of additional indications. Can you remind us how the royalties are set up for HALO if label expansion is granted and additional IP is granted for agents? How did that work?

Yes. So we receive, on average, a mid- single-digit royalty on net sales. That will last till the last expiring specified rHuPH20 patent or for 10 years after the first commercial sale. Now if the patents expired during that 10-year period, there would be a step down in the royalty rate to about 50% of that. So that's the base plan. Now we do have this wonderful benefit that if co-formulation patents are granted, they generally have a favorable effect on the length of the royalty term. And they can, depending on which partner it is also delay time to the step down. So each case in our portfolio is going to be a little bit different. But the great news is that for all of our products, there is always a minimum of at least 10 years of the royalty term. And it's often longer than that due to the co-formulation patents that can be granted.

We have a follow-up question from Jim Birchenough from Wells Fargo.

So just on the co-formulation work that supported the approval of Herceptin/Perjeta or Phesgo. How much is that a driver potentially of additional deals? It just seems like one of the trends in oncology is immuno-oncology combinations with PD-1 as a backbone and PD-1 plus other things like CD47 antibodies. And so could you maybe talk, a, about co-formulation work you're doing for things like ipilimu other co-formulated products with Bristol? And more broadly, whether co-formulation with that recent approval could be one of the themes of your further deals?

Yes. And so, Jim, you're really talking about times where we're taking in hand with 2 monoclonal antibodies. And you're absolutely right. Perjeta/Herceptin is the first approved one. Bristol is in the clinic with ipilimumab plus nivolumab, that's a new one that started. But the already last year -- a few months ago, had started the study with relatlimab with nivolumab as well, which is their lag 3 with the PD-1. And certainly, if you recall back and when Bristol signed a deal with us, this was their vision. Their vision was that in the future, oncology therapy with the immune checkpoint inhibitors would be combination and could be delivered more simply in the community setting or even potentially in the future at home. And so it is wonderful that the enhanced technology is allowing this to begin happening. Those are the only programs we can talk about. But if you want to expand this a little bit, there's also the possibility without being 2 separate drugs, but bispecifics is another area where not quite the same, but I want you to think about that as well as another opportunity where ENHANZE has the potential to be allowing these drugs to be given in a subcu as well. So we do see this as definitely a trend that is increasing, and we certainly get a lot of interest from people in understanding how it is done? How hard it is? And what are any of the considerations with that?

And Helen, just to confirm, the combinations with Bristol, those are co-formulated? Or they -- are they separate injections?

The intent will to be co-formulated. Yes. They are co-formulated. The only product we have the receptor injection is HYQVIA.

And then just a final question relating to this topic. For Herceptin/Perjeta, the stability of the 2 antibodies in a co-formulated product, I think, is the basis of extended IP. Is that a possibility with some of these other programs, these other combos?

So the way they get -- the co-formulation patents works is if there is some novelty that is unique to that formulation. So if there was a stability that was not identical to what was the result of the patent for the Perjeta/Herceptin, yes, it could. It just has to be novel, Jim. And so with each of our partners, we sit down and we look at the data, we look at what is unexpected, what is novel, and that is the focus of the conversation for submitting the applications for co-formulation grants.

(Operator Instructions)

All right. Operator, it sounds like there may be no additional questions. So with that, it's my pleasure to close the call. And just reflect again on what an important quarter this has been for Halozyme, to see such a breadth of products in the clinic, to see 3 important regulatory approvals and to achieve what is our first quarter of expected sustainable profitability is, I think, a terrific set of accomplishments. We appreciate you for your ongoing support and look forward to providing further updates in the next quarter. Thank you so much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.