Halozyme Therapeutics Inc (HALO) 2020 Q1 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 first-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 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 first 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, and it's really a delight to welcome Elaine to her first call as our Chief Financial Officer at Halozyme.

I'd like to open this call by addressing 2 topics of greatest interest to the Halozyme investors today, 1 specific to our company and 1 affecting all companies. And those are, firstly, the recent FDA approval of Janssen's DARZALEX FASPRO utilizing our ENHANZE technology, and then the impact on our business from the COVID-19 pandemic.

This is our first call since receiving the very exciting news on the 1st of May that Janssen received U.S. FDA approval for the subcutaneous formulation of DARZALEX utilizing our ENHANZE technology, which will be commercialized with the brand name, DARZALEX FASPRO. This represents one of the most significant events in the history of our company. This approval is for a product utilizing ENHANZE that is both fast growing and a blockbuster drug in its IV form with many years of exclusivity remaining. The U.S. approval follows on the heels of Janssen's recent receipt of a positive CHMP opinion for subcutaneous DARZALEX utilizing ENHANZE from the European Medicines Agency, which also recommended approval. This event generally means that marketing clearance in Europe is also on the horizon, potentially arriving in mid-2020.

As you'll note on Slide 3, DARZALEX FASPRO utilizing ENHANZE technology was granted a broad label, covering 5 of the 7 indications for which the IV form is currently approved. We estimate that 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 to date. Importantly, this is the first time the FDA has approved a product utilizing ENHANZE for indications based on single-arm studies. We view this as the first demonstration of an approach the FDA actually alluded to at the ODAC meeting for rituximab in 2017, during which it was stated that it might not be necessary to do large, complex, comparative studies for each and every indication when evaluating ENHANZE in combination with an already approved drug.

In this case, Janssen submitted for approval based on 2 studies. The first is the COLUMBA Phase III study, which examined subcutaneous daratumumab with ENHANZE compared to IV daratumumab in about 500 patients. And the second study is a Phase II single-arm study called PLEIADES, which examined daratumumab SC in 3 earlier treatment lines in combination with different multiple myeloma treatments. We believe this is a huge win and very encouraging for the clinical development plans for all of our other ENHANZE collaboration partners.

Most importantly, we view this as a terrific advance for patients suffering from multiple myeloma, who are currently receiving treatment with IV DARZALEX. We believe the ability to reduce the administration time from what is often 4 to 6 hours down to 3 to 5 minutes will offer tremendous convenience to patients and value to the health care system. This applies every day, but obviously today the health care system is strained with the ongoing impact from COVID-19 pandemic, and perhaps it's even more valuable at this time.

This brings us to Slide 4 and the second topic of great interest to investors, and that is the COVID-19 pandemic. This has obviously created enormous challenges for so many people around the globe. Top of mind for everyone at Halozyme are those directly impacted by the disease as well as those on the front lines of treating patients. The Halozyme team is committed to doing our part to helping the community, and I could not be prouder of how our employees have joined in this effort.

Now despite the challenges posed by COVID-19, I'm pleased to say we are maintaining our overall progress in our mission of providing patients with disruptive solutions that can lead to better patient experiences and outcomes.

Let me now provide you with an update as to where the company stands today operationally and financially during the pandemic. Halozyme remains in a strong financial position today. With our 9 partnerships, 4 products now approved and multiple programs in development, we have a robust, diverse business model poised to generate solid growth and earnings. We have a strong balance sheet, and we remain confident in our long-term growth outlook.

We've taken many measures to protect the health and well-being of our workforce. During this pandemic, the health and safety of our employees, their families and our local communities is at our highest priority. As we began to see the emerging pandemic in February, we assembled a COVID-19 preparedness team to develop a plan for maintaining business continuity should the situation worsen. In mid-March, we successfully transitioned the majority of our staff to working from home and implemented a limited rotation for the small number of essential on-site employees in anticipation of a shelter-in-place mandate from the state of California. I'm pleased to report that we were able to quickly and successfully transition the majority of our staff to working from home, and we've been able to maintain a high level of productivity.

In addition to the proactive planning by our business continuity team and the hard work and commitment of our employees, we were able to do this because of the nature of our collaboration-driven business model. And as we think ahead to the time when our workforce returns to the office, our preparedness team has already developed a plan that we will continue to refine based on the national, state and local guidelines.

With regard to our business programs, I'll now describe what we know today, what we don't yet know as the global community works to fight COVID-19. To date, based on latest partner feedback, we continue to project that the majority of our clinical study starts that we expected in 2020 will still occur in 2020 with delays of between 1 to 2 quarters from the original planned date. We know of 1 non-milestone-bearing clinical trial start that has been delayed as a result of COVID-19, where we do not yet have information on the new target start date; and also of 2 Phase I trials where enrollment has been impacted, resulting in an expected longer time to study completion.

Moving to the new ENHANZE deals, we have one of the broadest slates of ongoing discussions with both biotech and pharma companies that we've ever had. We did see some slowing in the pace of discussions in March and April. Based on company feedback, we expect this will revert to the usual pace of conversations in the second quarter.

Let me now move to an update on our supply chain. We're working closely with our contract manufacturers to ensure the safety and reliability of our supply. We're in frequent contact with our CMOs to hear updates and to ensure the integrity of our API supply. Based on this feedback, we currently do not expect an interruption in our ability to supply our API or Hylenex as a result of COVID-19. Our contract manufacturers continue to operate as an essential business during the pandemic and have communicated that they have not identified any significant risk, delay or concern resulting from COVID-19 that may have a substantial effect on delivery of any product. We'll obviously continue to monitor the operations of our contract manufacturers and their ability to continue to provide us with our products.

Turning now to regulatory, while regulators have curtailed some activities during the pandemic, we're pleased to report that our major initiatives with regulatory agencies around the globe appear to be proceeding at a normal pace. As an example, earlier this month, Janssen received U.S. FDA approval for DARZALEX FASPRO utilizing ENHANZE after submission of its BLA in July of 2019. Janssen also received a positive CHMP opinion for DARZALEX SC utilizing ENHANZE in late April following their July 2019 submission in Europe, demonstrating things are on track. And we're also pleased to note that Janssen submitted their NDA in Japan for DARZALEX SC utilizing ENHANZE in late April.

And looking ahead, after submitting the BLA with the FDA for the subcutaneous fixed-dose combination of Perjeta/Herceptin utilizing ENHANZE in December of 2019, an action date of over -- of October 18, 2020, was assigned. We're certainly encouraged that the FDA and the EMA remain highly engaged with our partners during the pandemic.

So in summary, based on all of the latest updates from our partners and suppliers as well as our planned expenditures, we feel confident maintaining our guidance for 2020 at this time. It's obviously difficult to predict how the pandemic recovery will unfold in the coming quarters. Therefore, we will continually monitor the situation, and we'll provide updates if new information emerges.

In summary, despite the challenges posed by COVID-19 pandemic, we've continued to execute very well on our strategy and remain in a strong position to drive future growth for Halozyme.

I'll move now to a deeper update on our key partner programs beginning on Slide 5 with DARZALEX. In its current IV form, DARZALEX generated approximately $3 billion in sales in 2019 and grew approximately 50% globally in the first quarter of 2020 compared to the first quarter of 2019. Analysts currently project sales for DARZALEX franchise of $3.9 billion in 2020 and $7.8 billion in 2024. Janssen has stated that the subcutaneous formulation of DARZALEX utilizing ENHANZE is a core part of this future growth strategy, supporting their goals of expansion into the front-line setting, in addition to treatment in the community setting.

The potential value proposition of daratumumab SC with ENHANZE is strong. With the U.S. approval just granted and EU approval potentially in mid-2020, we're extremely excited about the launch of DARZALEX FASPRO utilizing ENHANZE and what this means for our ENHANZE franchise. We believe DARZALEX FASPRO will provide the strongest validation to date of the commercial potential of our ENHANZE drug delivery technology. And after an initial period post-launch, during which formulary approvals, EMR orders and reimbursement are established, we expect the uptake of DARZALEX FASPRO with ENHANZE will be robust, resulting in strong growth in royalty revenues for Halozyme.

Turning now to Slide 6 and the next product we expect our partners to launch, the subcutaneous fixed-dose combination of Perjeta and Herceptin utilizing ENHANZE technology, which is indicated for patients with early and metastatic HER2-positive breast cancer. The subcutaneous fixed-dose combination of Perjeta and Herceptin is an important first, combining 2 therapeutic antibodies in a single fixed-dose formulation utilizing ENHANZE, enabling a 5- to 8-minute subcutaneous injection compared with a 1.5- to 2.5-hour injection for the sequential IV administration of Herceptin and then Perjeta. According to Roche's first-quarter financial results, Perjeta IV sales experienced 22% global growth, driven by continued uptake in the early breast cancer space. Analysts currently project $4.1 billion in global sales in 2020 for Perjeta, growing to more than $5.4 billion in 2024.

As we announced in February, Roche's BLA filing in the U.S. was accepted by the FDA and assigned an action date of October 18, 2020. Roche expects to launch this drug in the U.S. this year. Regulatory submissions have also been completed in the EU, and we expect that following a positive CHMP opinion, approval would occur in 2021.

On its most recent quarterly call, Roche indicated that it sees the SC Perjeta/Herceptin combination utilizing ENHANZE technology as offering an advance and an advantage for the strained health care system, and, in the past, has also alluded to the fact that the combined product may offer some interesting pricing flexibility in the very competitive breast cancer segment.

I'll turn now to Slide 7. Illustrated on this slide are the currently commercialized products that are approved or in development with ENHANZE. These are 8 very successful products. We now have multiple examples to support that these carry a low risk of development with ENHANZE. When a product is already approved, the pathway to approval with ENHANZE has been a non-inferiority PK study to identify the dose and then usually a Phase III study that focuses on demonstrating non-inferiority of the selected PK and efficacy endpoints. To date, all approved products that have had a successful Phase I and moved to Phase III have been approved.

Now, excitingly, based on FDA feedback, many of our current partners are discussing leaner development programs designed to gain a full set of labeled indications for the IV without the need to do a separate controlled clinical trial for each indication. This faster development time allows earlier access for more patients to an SC formulation potentially, and the breadth of label that was just granted to DARZALEX FASPRO utilizing ENHANZE certainly provides encouraging evidence of this development strategy.

I'll move now to Slide 8 and to our currently commercialized products. Roche continues with its global commercialization of products utilizing our ENHANZE technology, including MabThera, RITUXAN HYCELA and subcutaneous Herceptin with ENHANZE. Although royalty revenues from these products are anticipated to decline modestly this year as a result of the ongoing impact from biosimilars, Roche recently commented that it has seen an increased level of interest from physicians in subcutaneous Herceptin. While it's too early to call this a trend, it is certainly worth noting. In the current environment, we're reducing the amount of time, and the presence of others is desired.

Moving now to our development products, on Slide 9, you can see a summary of the pipeline products that are being developed utilizing ENHANZE. Based on the most current information we have from our partners, our target for 9 new trial starts in 2020 is unchanged. The Phase II trial we projected has been accomplished, and I'll detail this in a moment, and we continue to project 3 Phase III trial starts and 5 new Phase I starts in 2020.

Let me just provide 2 program updates. With regard to the Phase II start just mentioned, argenx recently initiated their Phase II study of efgartigimod utilizing our ENHANZE technology in CIDP patients that they had announced in December of 2019. This study has an innovative design intended to result in a faster time to a go, no-go decision for advancement to a potential Phase III study. In addition, argenx is evaluating a bridging strategy for efgartigimod with ENHANZE in myasthenia gravis.

Moving now to Alexion, they recently informed us that they no longer plan to evaluate ALXN1810 in the renal basket study, as they had announced in January of this year. There was no milestone associated with this study.

And moving now to Slide 10. The progress of our ENHANZE portfolio is projected to drive the strong growth in milestone revenues between now and the end of 2022. Based on the latest information we have from partners, we continue to project cumulative milestone revenues in the next 3 years of $350 million to $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 larger milestones. And this near-term milestone revenue precedes the royalty revenues, and is an important and strong indicator of future royalty revenue potential, which we project to be approximately $1 billion in 2027, based on a non risk-adjusted revenue projection for programs currently in or planning to be in development.

Let me turn now to Slide 11 and an overview of our approach to capital return. As a reminder, our first priority is to drive the growth of our ENHANZE business by maximizing the value of our current collaborations and working to sign new collaboration partners. With the strong free cash flow, our next priority is returning capital to investors via share repurchases. Elaine will discuss the details of our recent share repurchase activities in just a moment. And in addition to our commitment to capital return, we will evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating our long-term revenue growth. In evaluating this, we are seeking an approach at whether it's high growth and high margin similar to our ENHANZE business.

Now with that update, I'm very pleased now to turn the call over to Elaine for a discussion of the first-quarter financial results.

Thank you, Helen, and I could not be more excited to join Halozyme during such a thrilling time for the company.

I'll start by turning to Slide 12 for a review of our first-quarter revenues. Total revenue for the first quarter was $25.4 million compared to $56.9 million in the prior-year period. As a reminder, the first quarter of 2019 reflected the signing of a new collaboration agreement with argenx that resulted in a $30 million upfront payment.

Royalty revenue for the quarter was $16.8 million, a decrease of 6%, which is consistent with our stated expectations coming into the year, driven by ongoing pricing pressures in the face of biosimilars. Product sales of $8.1 million in the quarter compared to $8.4 million in the prior year period. We continue to expect that product sales of API will fluctuate in future periods based on the needs of our collaboration partners. Collaboration revenue in the quarter totaled $0.4 million compared with $30.6 million a year ago, with the difference attributable to the signing of the argenx deal that I mentioned a moment ago.

On Slide 13, you'll find a more detailed breakdown of our first-quarter P&L. I'll begin with total operating expenses, which were $28.6 million in the first quarter, down from $54 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 the related restructuring, which has largely been completed.

Cost of product sales were $5.8 million, up from $4.6 million, and research and development expenses of $10.2 million decreased from $31.3 million in the prior year period, decreasing 67% as a result of the fact that we halted our PEGPH20 oncology drug development activities in November of last year.

SG&A expenses were $12.6 million, down from $18 million in the prior year, primarily due to the reduction in force and discontinuation of our PEGPH20-related launch expenses that were part of the restructuring initiated in November last year.

Net loss for the quarter was $6.1 million or $0.04 per share compared to net income of $1.8 million or $0.01 per share in the first quarter of 2019. Cash, cash equivalents and marketable securities were $368.2 million at March 31, 2020, compared to $421.3 million at December 31, 2019. And the decrease reflects the impacts from our operating loss and share repurchase activities during the first quarter of 2020.

Now I'll turn to Slide 14 for a discussion of our 2020 financial guidance. We continue to monitor the impact of the COVID-19 pandemic on our business and receive updates from our partners and suppliers as to their plans and timelines. And based on that latest information and our planned expenditures for the year, our guidance for 2020 remains unchanged from the guidance that we first provided for the year on January 14.

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. In addition, we continue to forecast our first quarter of sustainable profitability will occur in the second quarter of this year. With respect to our expense structure, we'll continue to watch operating expenses closely, and we expect to achieve annualized operating expenses, excluding cost of goods sold, in the range of $65 million to $75 million by the fourth quarter with the expectation that will lead towards the higher end of the range.

I'll now detail our recent share repurchase activity. So in summary, we've completed $251.6 million of share repurchases to date, leaving $298.4 million available under the $550 million 3-year share repurchase program that was authorized by our Board of Directors in November 2019. In January 2020, we announced our plan to repurchase up to $150 million worth of shares in the year. And of this, we repurchased 3.2 million shares during the first quarter at a weighted average price of $16.15 per share worth approximately $51.6 million. We plan to repurchase up to an additional $98 million worth of shares during 2020 pending market conditions and other factors.

And with that, I'll turn the call back to Helen.

Thanks very much, Elaine.

In these uncertain times, I'm very pleased to say Halozyme remains in a strong financial position as a company focused solely on ENHANZE, with profitability on the horizon and a demonstrated commitment to maximize value for our shareholders by returning capital to our investors. The recent announcement of FDA approval for DARZALEX FASPRO was a momentous event for the company, and there are many additional exciting events anticipated in the remainder of 2020, as is shown on Slide 15. Firstly, of course, is the expected U.S. launch of DARZALEX FASPRO, which will result in a milestone payment to Halozyme. This event is a key driver of our expectation that we will report our first quarter of sustainable profitability for the second quarter of 2020, the current quarter.

With Janssen's receipt of a positive CHMP opinion, we anticipate marketing approval in Europe for subcutaneous DARZALEX utilizing ENHANZE around midyear. And with an FDA action date of October 18, 2020, we anticipate approval and launch of the fixed-dose combination of Perjeta and Herceptin in the U.S. later this year. And we can expect continued momentum in the clinic, as I detailed, for our partner programs utilizing ENHANZE, leading to 3 new Phase III trial starts and 5 new Phase I trial starts.

With key milestones on the horizon and a clear path towards sustainable growth in revenues, earnings and cash flow, Halozyme is in a strong position to deliver additional value to our shareholders. And none of this would be possible without the strong talent of the Halozyme team. And as ever, I'd like to end by thanking everyone on the team for your tremendous efforts and the strong results for the first quarter.

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

(Operator Instructions) Your first question comes from the line of Do Kim of BMO Capital Markets.

My first question, for the approval of DARZALEX FASPRO, do you know why Janssen did not pursue the combination with Pomalyst? Did they see that as not a big enough opportunity? And according to the CHMP positive opinion, it doesn't include all current DARZALEX indications. Does that mean that we should expect 7 out of 7 indications for the EU approval?

All right, thanks, Do. With regard to pomalidomide, the filing, which was based on the COLUMBA and PLEIADES Study, did not include any data looking at subcu daratumumab with pomalidomide. And so I think that is the key reason that the approval was not granted. Now if you go on to clinicaltrials.gov, you will see there is a subcu daratumumab study ongoing with pomalidomide that has a potential readout date of mid-2021. So I think it's not a question of it never getting approved. It just -- it will await that data.

With regard to the CHMP opinion, I think the key difference is that in Europe, they have a slightly different set of indications in Europe. They do have one transplant-eligible indication, which is different from the U.S., and they do not have the pomalidomide indication. So it is a full set, but it's not in a matching set to the 7 U.S. indications, but I believe it might be 6. But if you compare the labeled indications, though, you'll see the key difference is Europe has transplant-eligible, but pomalidomide is not approved in Europe for use with daratumumab from my recollection.

Okay. Great. And the -- with the broad approval of DARZALEX to include all those indications, did you consider an opportunity to revise guidance upward? Would there be a possibility in upside to the royalties instead of being slightly down to being flat or even up?

Yes. We always want to see how the launch goes. There's always the mechanics that need to be in place, though, that will take several months, as you know, to get the J code, the EMRs, et cetera. So we have not updated our guidance on it, but we will obviously watch the trend. And once those particular things are in place, including certainty of reimbursement and the ability to order, we do believe there'll be a very robust update of daratumumab.

Your next question comes from the line of Jessica Fye.

Just following up on the comments you made in prepared remarks about the slight shift in timelines as it relates to trial starts, I'm trying to think about your anticipated milestones this year. And I'm wondering if you can offer any color on the cadence of milestones over the course of 2020. I guess, at a minimum, should we have relatively low expectations for the milestones in the second quarter given COVID-19's kind of pronounced impact this quarter?

So our milestones, obviously, are made up of the potential approvals as well as the clinical study starts. And in the second quarter, with the expectation that Janssen is launching in the U.S., we already know we're going to have a nice milestone related to that. But I would say that for the clinical study starts, they are spread over the second, third and fourth quarter, but perhaps more in the third and fourth quarters. So you would see more of those clinical study starts then. For the European approval of daratumumab, we expect that midyear falling into the third quarter. So hopefully, that gives you some cadence of between the 2 that are some commercial milestones more near term with the clinical studies being a little bit more weighted towards the third and fourth quarter.

Okay. That makes sense. And then just within the kind of maintenance of your overall revenue guidance, did the mix of milestones versus royalties shift at all, i.e., are there any milestones that you're kind of nudging into 2021, possibly being offset by royalties better than you previously modeled?

No. Overall, it pretty much was in line with our original plan for the year, Jess.

Your next question comes from the line of Joe Catanzaro.

I just wanted to follow up on something you alluded to earlier. And I know you've previously spoken about the time it takes for underlying formularies to change, but for DARZALEX FASPRO, I wonder if there are any expectations of seeing formulary exceptions, especially in light of the current COVID environment?

And I guess as a follow-up to that, maybe anything you've seen with your legacy products and their use in the current environment? And any potential read-through they may provide to early DARZALEX FASPRO usage?

Yes. Thanks, Joe. I haven't seen Janssen make any comments about any expectations of different formulary expectations, but I do know that we are hearing in general that there is a desire to not have patients in infusion rooms for a long period of time. I think the most pertinent comment comes from Roche's recent earnings call, where I think it was Bill Anderson commented on seeing an increase in demand of Herceptin SC for exactly that reason, people not wanting to be in the infusion suite. So while I have no specific information to support the hypothesis, Joe, I think the environment, as you point out, is one where subcu fits a number of the needs: less time in hospital, less exposure to other patients. And hopefully, the formularies and other groups are going to pay attention to that and operate in a way that supports a faster approval. But I have no data to support that at this point in time.

Okay. Got it. And just I guess as a quick follow-up. You mentioned you expect an update to DARZALEX, I guess, internal guidance on how you're thinking about that. Is that something we should expect on your 2Q earnings call?

Let me clarify the statement. What I said, Joe, was we will watch and see where it goes. I'm very comfortable with the current guidance. If we see a different uptake than we had modeled, that is worthy of note, that we obviously will update at this point in time. But I intended with my remarks to say we are comfortable with our trajectory, and we'll monitor and see if there's a major deviation for that, that would result in a need to change the guidance.

Your next question comes from the line of Jason Butler of JMP Securities.

Just one on the potential new partnerships. Just the FDA or regulatory environment now potentially being more expedited for ENHANZE approvals, does that, in any way, impact your outlook for ongoing partnership activities, either in terms of level of interest or the value that you think you can generate out of new deals?

Yes. Thanks, Jason. I would say that we had built a very strong slate of potential partners we were talking to even before the COVID-19 pandemic. But I do agree with you -- there is definitely a number of incoming calls looking for SC and understanding would it be another way to deliver care? So it has caused a modest increase. But overall, the dynamics we're seeing was already very nicely in place. So hopefully, that addresses your question.

Yes. And then just one on the 2027 royalty guidance. Any -- just based on the updates through the quarter, any notable changes in the different components of products that build to that number? Or is essentially everything largely in line with how you thought about it early in the year?

Yes. It's largely in line, Jason. We are reflecting differences in clinical study timelines and probably more than changes in the products in or out of the portfolio, but pretty much a very similar picture to one we showed before with that potential in 2027 really being driven by the number of products that we project having in the clinic at that point in time and approved and in that nice growth trajectory point.

Your next question comes from the line of Charles Duncan of Cantor Fitzgerald.

Helen and team, I apologize if they have been asked, I'm juggling calls today, but I guess I'm wondering, first of all, when you think about the recent approval for subcutaneous DARZALEX, what are your assumptions of -- what were your assumptions about the use of the drug? It seems like it was a broader label than what we had anticipated. And I guess as you think about having to supply API, et cetera, what are the key levers here that you're looking to pull in the near term?

Yes, thanks, Charles. As we -- we're getting ready for the potential approval. If you recall, we always talked about the expectation of approval in relapsed/refractory, but did highlight the PLEIADES Study and the fact that Janssen had filed that and linked it to the comments that had been made at the RITUXAN HYCELA ODAC to say perhaps a controlled study wouldn't be needed. And so in our scenario planning, we planned for both. We planned for this broad label based on PLEIADES being added to COLUMBA. And similarly for our API production, if you recall, 2019 was a year where we had a lot of API sales. And we highlighted that that was both Janssen and Roche buying their API in anticipation of successful regulatory pathways and launches in 2020. So we're feeling very good about both of those and delighted, obviously, to get 5 of the 7 indications in the U.S. and a CHMP opinion recommending approval of all of the indications in Europe. It really could not have turned out better in our view. So delighted with that.

Very good. And regarding that API, where is it manufactured?

Our API is manufactured in the U.S. at 2 CDMOs that we have.

Okay. Okay. 100% and no disruption to the supply that you've experienced?

No. Both of our CDMOs, we're in regular contact with them, and they're considered essential businesses. They have got the materials, and they are operating without an interruption related to COVID-19.

Super. And then I came in on the end of Jason's question, so I'm not sure if this is what he's asking, but I think he was -- perhaps he was asking about new collaborations. And I guess I'm wondering about existing collaborations, and then the potential use of Herceptin SC relative to the biosimilars. Is there any new or different feedback that you're getting from current collaborators or from the market that suggests that there's greater appreciation of subcutaneous versus IV value-add in this current environment?

Yes. I would say with regard to Herceptin SC, Roche did say on their last quarterly call that they had seen an increased interest in demand for Herceptin SC, in particular physicians wanting to order it for compassionate use, but also commercially. So to support the point that SC fits today's environment, I think that is very true.

Over existing collaboration partners, we're in constant dialogue with them about the potential to select and move new targets into the clinic. I can't say I have noticed an increase in that. There is already such an active dialogue with -- around that, Chaz, but that hasn't really changed. But I would expect, if we just think about this, there already were challenges to receiving IV therapies in these infusion suites. We know capacity is constrained. We know there aren't enough nurses, and we know that the overtime required with some of the therapies to keep the infusion centers open in the evenings and weekends is a challenge. So I think COVID-19 just adds to what was already a market environment conducive to companies and physicians and patients considering SC very seriously as an alternate.

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

Congrats on the progress. Actually, let me send my congratulations to Elaine on joining, and congrats on the role. And I want to wish you well. And maybe I can ask you a couple of questions, if you don't mind. Maybe can you give us your perspective of what you've seen thus far since you've joined, and maybe if you can give us a sense of what your like near-term and midterm priorities are?

And maybe another question for you, if I could. In terms of BD opportunities, it's something the company has talked to as something that they would look at and maybe prioritize on a go-forward basis. Can you maybe comment on what kind of opportunities you're seeing out there, and the transactability and current valuations and your comfort with what you're seeing out there?

And then maybe my last question, Helen, for you, just in terms of the label that we saw for DARZALEX FASPRO. And I think we've got a sense of what pricing is like, but could you give us your sense of what you see as potential barriers or hurdles or challenges that might prevent a rapid adoption of FASPRO relative to the conversion from IV DARZALEX? Any color there in terms of how you're thinking about things based at least on the label and pricing would be helpful.

Great. Elaine, I'll let you answer Graig's first 2 questions first.

Great. Thanks, Graig, for that message. I think, first of all, what excites me the most about joining Halozyme is really the potential in ENHANZE. And I know that Helen's highlighted some of these, but what impresses me is that we've got a commercially validated platform technology utilizing blockbuster products for some of the leading pharma and biotech companies around the world. And we're early in the growth cycle of revenue and earnings being driven by ENHANZE. And with that strong cash flow generation that we expect from the ENHANZE business, one of my priorities is clearly -- one of our priorities is clearly prioritizing return of capital to shareholders, consistent with what we communicated to the market.

With respect to BD opportunities or M&A opportunities, of course, if we find an attractive M&A opportunity that give us -- that could give us the ability to add another platform technology with attractive growth and margin characteristics like ENHANZE, we could certainly think about that. But we're -- and there are certainly opportunities, we think, out there, but we're in no rush to do so, given the strong growth profile that we expect with ENHANZE. Hopefully that answers your question.

That's great, Elaine. And Graig, with regard to the DARZALEX label, yes, I just mentioned to Chaz that we're obviously delighted with how broad it is, 5 of the 7 indications for the U.S., which covers, we believe, the majority use of daratumumab today. And the CHMP recommendation is actually all of the indications in Europe. So broad label, great place to start.

With any launch, you always want to make sure reimbursement is going to be in place. And with the change in the U.S. now to get the J codes quarterly, we anticipate that will just take a short period of time to get in place. And that, together with the -- getting on the formularies, getting loaded in the EMR orders is all just a logistical situation that takes a period of weeks to months to get in place, but then we anticipate a robust uptake based on the value proposition of daratumumab. This 3 to 5 minutes and the lower reported rate of infusion-related reactions, when we talk to physicians we get a very positive and strong response to that value proposition.

So the only barriers are, I believe, that the reimbursement and the -- just that the -- getting these issues in place, there will be a differential in the amount of reimbursement between subcu and IV. I don't know exactly how much that will be, but, again, you've got to think about the strength of the value proposition. The desire for doctors and patients to not be in infusion suites for multiple hours, the nursing shortage and all those other factors, I really don't see many barriers to a very robust uptake for daratumumab in the U.S. and also in Europe upon approval.

Your next question comes from the line of Arlinda Lee of Canaccord.

Congrats on the progress. I had 2 questions maybe just to follow up on some of the points that you've mentioned earlier. I'm wondering what is gating on subcu dara and Perjeta/Herceptin uptake. You mentioned formulary J codes. And I'm more interested in if there is any logistical hindrances or things that might help by the current situation. And I'm also curious about whether visiting nurses can deliver the subcu treatments at home so the patients don't even have to come in?

And then secondly, I'm also wondering if there's any difference in antibody versus small molecule delivery in combination, and whether you guys are in discussions with Gilead, for example, programs that you're converting that to a subcu indication.

All right. Thank you. So with regard to the initial questions, hopefully you heard my answer to Graig. Every injectable product launch has a certain sequence of things need to happen for it to be -- doctors to be able freely write. It will be no different for daratumumab, and I expect it will go over weeks to months. It will be very nicely in place and will not be a hindrance to uptake.

The label for DARZALEX FASPRO says it must be administered by a health care professional. That -- whether Janssen plans to have that done in the infusion suite, or perhaps some support clinics who won't have visiting at nurses, I'm afraid I don't know. I don't see a preclusion for it in the label, Arlinda, but I don't know if that's going to be part of the plan of the launch. That'll be a question better asked of Janssen.

And with regard to COVID-19, we actually have initiated discussion with a number of companies with regard to the potential of ENHANZE to allow their drug to be given subcutaneously, particularly in settings of prophylaxis or early disease treatments. And all of those discussions are at an early stage, and so I'm really not in a position to say anything more about any of them at this time. But we do see, particularly in those COVID-19 settings, the benefits of SC, where you might want to have a large volume of people be able to be treated in a clinic or in a hospital in a shorter period of time. It seems like SC would be the way to go, but early discussions, and nothing I can really say more than that at this time.

Your next question comes from the line of Jim Birchenough of Wells Fargo.

It's Joe on for Jim. Congrats on the progress. 2 from us. Are there any updates you can provide on pending or planned IP filings for novel comp physicians around ENHANZE formulations for the pipeline, and maybe second, how you view the approval of DARZALEX FASPRO in the U.S. in terms of derisking other filings in the U.S. like Perjeta/Herceptin as an example?

All right. With regard to IP filings, it's an important part of our strategy, as you're aware, that we can get co-formulation patents, it provides additional exclusivity and generally has the impact on our royalty term of extending the duration and also pushing it at the time for the step down. So it's something we very actively are working on with our partners. I do see line of sight to additional IP filings. I can't say any more than that at this point in time. But given the fact that these are possible based on a novelty that is identified when ENHANZE is combined with another proprietary drug, we know there are multiple pathways to this. It could be PK data, it could be clinical data, it could be pharmacodynamic data. And so, Joe, to answer your question, yes, that there are -- we definitely see line of sight to additional co-formulation patents being filed.

On the DARZALEX FASPRO derisking, I think where we see the biggest excitement about what DARZALEX FASPRO granted was the ability to get a broad set of indications without doing large comparative clinical studies for each and every indication. And as I mentioned, this was really something the FDA spoke about at the RITUXAN HYCELA ODAC, where for HYCELA, Roche had done 3 separate 500-patient studies for the 3 indications. And what the FDA said was, in the future, that might not be -- might not be needed. And so what the DARZALEX clearly demonstrates is the one large comparative study was done in the relapsed/refractory population. But for all the other indications in the front and second line, that was granted based on the PLEIADES Study, which was a 250-patient study, single-arm.

And so I think what the extrapolation is, is the ability once you've demonstrated the non-inferiority of efficacy in PK, the FDA is going to allow for leaner development plans in circumstances where they feel as though the safety has been well demonstrated. And that is very exciting for us and, obviously, for our partners, meaning smaller need for the size of clinical programs to get the broad label.

(Operator Instructions) Your next question comes from the line of Joel Beatty of Citi.

The question is about strategy for the company. As you become cash-flow-positive this quarter, does that put any type of timeline on making a decision on next steps regarding either some type of acquisition or returning additional cash to shareholders or some other choice?

I think it's a great one for Elaine to give her perspective on. Elaine?

Sure. Thanks for the question, Joel. So we're very excited about the multiple catalysts in addition to the recent approval of DARZALEX FASPRO, the -- and expected multiple catalysts that we anticipate to drive our earnings and cash flow over the near and long term. We're anticipating continuing to prioritize the return of capital to shareholders, as you mentioned, and consistent with what we've communicated to the market. So we anticipate repurchasing up to the $150 million in share repurchases in 2020, pending market conditions and other factors. We'll continue to evaluate our capital structure to ensure that we're well positioned, but we're -- we continue to be very confident in our long-term growth prospects. And so we anticipate continuing to be in position to return capital to shareholders, again, pending market conditions and other factors.

Got it. And how much of those planned repurchases for 2020 have been done so far?

So we were able to purchase 52 -- nearly $52 million earlier this year at an average price of $16.15 per share. And that's on top of the $200 million in share repurchases that we completed through the concurrent buyback in ASR prior to that.

There are no further questions over the phone lines at this time. I turn the call back over to the presenters.

That's terrific. Well, I really appreciate the -- everybody joining us for today's call. As you've heard, despite COVID-19, we're very proud of the progress our partners are making and especially of the continued strong work of the Halozyme team, who transitioned so well to the different work environment that we have. Thank you so much for your attention. We look forward to updating you next quarter. Good-bye now.

This concludes today's conference call. You may now disconnect.