Halozyme Therapeutics Inc (HALO) 2021 Q4 法說會逐字稿

Good afternoon, everyone. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme Fourth Quarter and Full Year 2021 Financial Results Conference Call. (Operator Instructions)

At this time, I would like to hand things over to Mr. Al Kildani. Please go ahead, sir.

Good afternoon, and welcome to our fourth quarter and full year 2021 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 during today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business; and Nicole LaBrosse, our new Chief Financial Officer, who will review our financial results for the fourth quarter.

On today's call, both GAAP and non-GAAP financial measures will be discussed. The non-GAAP or adjusted financial measures are reconciled with comparable GAAP financial measures in our earnings press release and slide presentation. 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 our CEO, Helen Torley.

Thank you, Al. I'm very pleased to welcome Nicole to the call and to have her assume her new role as our Chief Financial Officer after doing such a terrific job as our VP of Finance and as our Controller.

I'm going to begin today with a brief review of our record 2021 financial performance, which has created strong momentum entering 2022. Total revenues in 2021 grew 66% year over year to $443 million. Operating income grew 91% to $276 million. And non-GAAP earnings per share for the year was $2. All of these measures are within the range of our final 2021 guidance.

The strong 66% revenue growth was driven by royalty revenue growth of 130% year over year, a $40 million upfront milestone payment for the signing of our 11th ENHANZE collaboration agreement with ViiV Healthcare, and additional development and commercial milestones associated with launch progress and the strong momentum in our development portfolio where we achieved our goal of 10 new partner study starts in 2021.

This strong progress and resulting revenue growth allowed us to continue to demonstrate our strong commitment to capital return through completion of our $550 million share buyback plan ahead of schedule in October of 2021 and announcement of a new 3-year $750 million share repurchase program, inclusive of a $150 million accelerated share repurchase program which was initiated in December 2021. These achievements and the resultant momentum have positioned as well for continued revenue and operating income growth in 2022 and beyond.

In January, we provided our 2022 guidance. For full year 2022, we expect revenues of $530 million to $560 million, which represents growth of 20% to 26%, driven primarily by projected royalty revenue growth of, approximately, 50%. Also contributing to our revenue projection, this year we have included a new deal milestone payment in our guidance based on our expectations for a new agreement to be signed in 2022.

Operating income is projected to be $350 million to $380 million, showing robust growth of 27% to 38%. We expect non-GAAP earnings per share of $2.05 to $2.20 recalling that in 2022 we're seeing the impact of our first year of tax expense which is projected in $0.55 to $0.60 per share.

With that overview, let me now provide some additional details, beginning with the royalty revenue growth, starting with a summary of 2021 results shown on Slide 3. Royalties during the fourth quarter were $62.6 million. This represented 96% growth year-over-year and 7% sequential growth. This resulted in full year 2021 revenues from royalties of $204 million, representing, approximately, 130% year-over-year growth from $89 million in 2020.

Royalty revenue growth continues to be driven primarily by the successful ongoing global launches of Janssen's subcutaneous forms of DARZALEX, which utilizes our ENHANZE technology. Based on the strong momentum of this high-margin, recurring revenue stream, we project continued royalty revenue growth in 2022 with growth of approximately 50% to approximately $300 million.

Moving now to Slide 4. We have 5 commercialized products utilizing ENHANZE that are contributing to our royalty revenues. It's estimated that these products have been used to treat more than 600,000 patients globally. Our Wave 2 products, Janssen's DARZALEX subcu and Roche's Phesgo are the current royalty revenue growth drivers and have substantial growth opportunities ahead for each of them.

Turning to Slide 5, I'll review DARZALEX. During its fourth quarter call, Janssen's parent Johnson & Johnson reported that following strong fourth quarter sales, total DARZALEX sales in 2021, including both IV and subcu were $6 billion for a remarkable 42.3% on an operational basis over 2020. J&J further stated that the fourth quarter growth was driven by a combination of share gains, increased penetration of the subcutaneous formulation in the U.S. and Europe and continuing launches globally. Notably, DARZALEX share increased across all lines of therapy with nearly 8 points of share growth in the United States.

Turning now to the performance of DARZALEX SC using ENHANZE, which is shown on the right of the slide. DARZALEX Faspro in the United States grew again during the quarter and achieved 76% share of total DARZALEX sales in the month of December, an increase from 72% share of total sales at the end of September. We estimate that DARZALEX SC achieved an annualized year of, approximately, 58% of total DARZALEX sales in 2021.

And we project continued strong DARZALEX SC growth and resulting growth in our royalty revenues, driven by continued growth in the worldwide total DARZALEX sales, which are projected by analysts to increase to, approximately, $10 billion in 2025, and continued growth in the annualized subcutaneous share to be notably higher than the current 58%.

Beyond this strong commercialization and financial performance, key developments for the subcutaneous DARZALEX franchise with Janssen in the quarter included an FDA approval for DARZALEX Faspro in combination with Kyprolis and dexamethasone, which is for patients with relapsed or refractory multiple myeloma who have received 1 to 3 prior lines of therapy. This represented the ninth indication for which DARZALEX Faspro has been approved in the United States. An approval was also received from the China National Medical Products Administration for the use of DARZALEX Faspro for the treatment of newly diagnosed primary light chain amyloidosis.

I'll move now to our second of our Wave 2 products and driver of royalty revenue growth, and that's Phesgo. In the fourth quarter, Roche reported fourth quarter Phesgo sales of CHF127 million, up from CHF117 million in the third quarter. Phesgo sales for the year were CHF340 million. We continue to expect strong quarter-over-quarter growth of Phesgo as a result of the ongoing launches in Europe and Rest of World following attainment of reimbursement and continued penetration in the oncology accounts in the United States.

Let me move now to Slide 6 and a discussion of the ENHANZE development portfolio. It is our goal to continuously expand the number of products that are in development and to advance products to later stages of development and launch as in many cases, this is associated with milestone revenue payments to Halozyme.

I'll begin with an overview of the ENHANZE partner product pipeline as of February 2022. I'm pleased to report that our ENHANZE partners initiated 4 new Phase I trials in the fourth quarter, each for a new product that resulted in an expansion of our development portfolio. Specifically, in December, ViiV initiated enrollment of a Phase I study to evaluate cabotegravir administered subcutaneously with ENHANZE, and Janssen also initiated a Phase I clinical trial evaluating their small molecule Rilpivirine with ENHANZE.

In November, Roche initiated a Phase I study combining an undisclosed therapy and target with ENHANZE and in October, Takeda initiated a Phase I study to assess the tolerability and safety of immunoglobulin subcutaneous 20% solution with ENHANZE.

These new programs are reflected in the updated pipeline chart on Slide 6. With these 4 Phase I study initiation, we exceeded our goal of 5 new Phase I trial starts in 2021, achieving a total of 6. We also achieved our goal to have 3 products in Phase III development and to expand the total number of programs in development. Looking ahead for 2022, we expect further pipeline progress and expansion with at least 5 new Phase II or III trial starts for existing ENHANZE partner programs and for new products utilizing ENHANZE to enter Phase I development by the end of 2022.

Staying on Slide 6, let me now provide a brief update on the next set of potential launches, which we call our Wave 3 launches. All of our Wave 3 potential launch products are currently approved as IV drugs and are in Phase III development as a subcutaneous drug with ENHANZE. Based on historical development timelines, these represent potential launches in the 2023 to 2025 timeframe and include Bristol-Myers Squibb's nivolumab, Roche's atezolizumab, and argenx's efgartigimod. Analysts project that the total revenue potential for both the IV and subcu formulations for this mix set of our potential launches will exceed $20 billion in 2025. What will be key for Halozyme is the pace of conversion from IV to subcu and the peak conversion share attained.

Let me move to organic efgartigimod, which now has the brand name Vyvgart. Vyvgart was approved in its IV form by the FDA in December of last year for the treatment of patients with myasthenia gravis. It is currently leading the race to become the first of our Wave 3 product launches with the potential for approval in 2023. Moving to the subcutaneous development, argenx has integrated ENHANZE broadly in its strategy and vision for efgartigimod with 5 Phase III studies for 5 distinct indications now ongoing. The most advanced SC study is for myasthenia gravis. Excitingly, argenx now expects top line data from its ADAPT SC study of efgartigimod with ENHANZE for myasthenia gravis in the first quarter of this year.

Three additional top line data readouts of SC pertuzumab studies are expected in the next 12 months or so, with data from the pemphigus study in the fourth quarter of this year and from ITP and the CIDP studies in the first quarter of 2023. We're also pleased to add that in December, argenx initiated a trial of subcutaneous efgartigimod in bullous pemphigoid, the fifth indication to be evaluated. The projected size of the addressable population and the large unmet need that exists in each of these indications are resulting in analysts projecting a multibillion-dollar opportunity for efcartizumod. Moving now to the additional Wave 3 product Roche's ocrelizumab and BMS's OPDIVO continue to progress in their Phase III studies, evaluating SC deliveries with ENHANZE. And these also have the potential for launch in the '23 to '25 timeframe.

Now I'll move to the top of this slide for the products that are in or have completed Phase I development. We call these our Wave 4 potential launch products and they have the potential to launch in the 2025 to 2027 timeframe. Clearly, this pipeline represents a broad, diverse, and exciting set of opportunities. Today, I'll focus on highlighting a series of new studies in HIV where ENHANZE is being studied in both small and large molecules.

We're delighted that ViiV initiated a Phase I study of the HIV therapy cabotegravir in combination with ENHANZE. ViiV has previously indicated that it expects Phase I data from this study and from another study with ENHANZE, which will include their broadly-neutralizing N6LS, in 2022. ViiV is clearly moving at a rapid pace, and we're delighted to be supporting them in their mission for HIV patients.

In addition, Janssen initiated a Phase I study of their small molecule product Rilpivirine with ENHANZE. This is the third target Janssen is now studying with ENHANZE. And finally, Janssen and ViiV together have indicated they plan to explore the possibility of an ultra-long acting version of CABENUVA using ENHANZE. CABENUVA is a co-packaged antiretroviral medication for the treatment of HIV containing both cabotegravir and rilpivirine.

Let me move now to Slide 7 and our pipeline progress to date really has been able to drive collaborative revenues for Halozyme, which are a key contributor to our cash flow and have enabled our commitment to capital return through share buyback. Over the last several years, we've provided a 3-year guidance on milestone revenue, which is sold in the green bars. Represented in the blue bars is our performance against that. I'll just make some key points here.

Firstly, our 3-year milestone revenue predictions have increased over time with the maturing and the expansion of our portfolio. Secondly, we have met or are tracking our guidance in each of the period. Please note that last month we updated our outlook for the 3-year period of 2022 to 2024, during which we expect to increase milestones again to $450 million to $500 million in total milestones, resulting from a mix of development, commercial, and new agreement milestones.

Let me move now to Slide 8 and the long-term outlook for ENHANZE franchise. As we project forward to 2027, we continue to see the potential to achieve, approximately, $1 billion in royalty revenues based on Wave 1 through 4 products, which are the currently approved products and the products that are projected to be in clinical development with ENHANZE by the end of 2022. And though this is a non-risk-adjusted projection and does assume global launches in all indications.

Looking even beyond 2027 to 2031, we see a clear path to and the potential for royalty revenues to exceed $1 billion. We're providing this projection today to help our investors better understand the drivers of revenue durability based on our knowledge of our programs, our plans, and also the confidential terms spelled out in our collaboration agreements. The continued growth potential post 2027 is driven by 4 factors: firstly, the ongoing growth of the products that are creating the $1 billion potential, some of which we'll be launching in the 2027 timeframe and will be early in their growth cycle.

Secondly, we project and expect that there will be new product launches that are not reflected in the current financial projections and would represent our Wave 5 launches. These new products will result from our current partners, but also new partners advancing additional subcutaneous products into development in late 2022 and beyond.

The third factor is the potential to be granted more co-formulation patents which have the effect of extending the duration of time we receive royalties. As a reminder, we typically receive royalties for a minimum of 10 years after the first commercial sale. In addition, the co-formulation patents can also potentially allow the base royalty rate to remain unchanged for an extended period following expiry of the rHuPH20 based composition of matter patents. I'm pleased to report that several partners recently filed new co-formulation patent applications related to products in the ENHANZE development pipeline, and we look forward to being able to provide further updates on these applications as this information becomes public.

Now the fourth factor is the potential for our current and new partners to utilize our new more extended room temperature stable rHuPH20, which has the potential to launch post 2027 and has IP coverage to 2032 in Europe and 2034 in the United States. Now let me just address a question that comes up and that's the potential for biosimilar impact and specifically let me address what we see are several unique dynamics around the loss of rHuPH20 exclusivity.

As a reminder, the base composition of matter patents for rHuPH20 last until 2024 in Europe and 2027 in the United States. Often with biotech products, with exclusivity loss, there can be a sharp drop in revenue, sometimes referred to as a patent cliff. This is a result of biosimilar company launching and taking a substantial share of the innovative product and also price erosion. We do not believe this will be the case with our ENHANZE portfolio, considering the product composition and the projected IP coverage we have.

Distinctly from the usual dynamics, our $1 billion royalty revenue potential is not based on a single product. It's based on more than 20 products. We also project and expect that multiple subcu products with ENHANZE will be protected with co-formulation patents. And for a biosimilar company contemplating ENHANZE for only a portion of the $1 billion may be addressable, this represents high cost and complexity for a more limited reward.

Further adding to our conviction regarding the durability of our royalty revenues, many of our partner products are patent protected beyond 2027. In addition, our partners have a strong focus on safe and reliable rHuPH20 drug product, also known as our API. With more than 600,000 patients now treated with ENHANZE, we have a well-characterized and established safety track record, including strong data on immunogenicity, a key question new and current partners focus on.

We are continuously improving our API, and we're now investing to create a next-generation, higher-yield, low-cost API. We believe our winning combination of our high-quality API plus low cost will result in continued strong collaboration with our partners and strong durability of our revenues. Now we're excited by the ongoing momentum and growth potential of our ENHANZE technology franchise. At the same time, we are continuing to evaluate the potential for new technology platform expansion through acquisition. Our goal with M&A is to identify a platform where we see a clear path to operationalize that platform, just as we've done with ENHANZE and deliver incremental value over and above the acquisition price.

With that, I'm now going to turn the call over to Nicole for a discussion of our fourth quarter and full year financial results. Nicole?

Thank you, Helen. Before I begin, I would like to again note that we now report key measures on a non-GAAP basis in addition to the GAAP basis and also provide financial guidance on a non-GAAP basis. We consider these non-GAAP financial measures to be important because they provide useful measures of our operating performance, exclusive of factors that do not directly affect what we consider to be our core operating performance, such as stock-based compensation and amortization as well as unusual events and their related tax effect. Please refer to our press release and filings for a reconciliation of GAAP to non-GAAP net income and earnings per share.

With that, let me turn to Slide 9, where I'll focus on some highlights from our fourth quarter results. Royalty revenue for the quarter was $62.6 million, a 96% increase over the prior year period of $32 million. This was driven primarily by the continued strong uptake of Janssen's subcutaneous DARZALEX utilizing ENHANZE. Collaboration revenue for the fourth quarter was $12.3 million as compared to $57.3 million in the prior year period. In Q4 2021, there were no new upfront license payments as compared to a $30 million upfront license payment from Horizon in Q4 2020. Lastly, GAAP EPS was $0.46 and non-GAAP EDA was $0.42 per diluted share.

And now let me turn to Slide 10 for a review of the full year 2021 results. I'll briefly touch on some highlights here with more details available in our press release and 10-K filed with the SEC today. Total revenues grew 66% to $443.3 million in 2021, off of an already substantial revenue base in 2020. The biggest contributor by far to this increase was higher revenues from royalties of $203.9 million, up 130% from 2020. Product sales of $104.2 million were up sharply from $56 million, mainly due to higher sales of rHuPH20 to our partners Janssen and Roche.

Collaborative revenues driven by our partners' pipeline progress were $135.2 million, up from $123 million in the prior year, benefiting from substantial sales milestones from Janssen related to DARZALEX SC and our new ENHANZE collaboration agreement with ViiV. Operating income for the full year was $275.9 million, up 91% from $144.3 million in 2020. Earnings per share for 2021 reached the highest level in the company's history. GAAP EPS was $2.74, up from $0.91 in the prior year. As a reminder, GAAP EPS included a onetime tax benefit from the reversal of our tax valuation allowance representing, approximately, $1.05 per share. Non-GAAP EPS for the year was $2.00 per share, up from $1.12 in the prior year.

Now let me turn to Slide 11 for a review of our 2022 financial guidance. I am pleased to review our strong guidance for 2022, which was first introduced earlier this year on January 10th. We expect total revenues of $530 million to $560 million, representing growth of 20% to 26% over 2021 total revenue. In terms of the components of our revenue, we expect revenue from royalties to increase, approximately, 50% over revenues from royalties in 2021 to, approximately, $300 million.

Product sales and collaborative revenues in total for 2022 are expected to be at similar levels to what we achieved in 2021. We expect GAAP operating income of $350 million to $380 million, representing growth of 27% to 38% over 2021 GAAP operating income. This includes an incremental $20 million operating expense investments to maximize ENHANZE and extend royalty revenue durability. Even with this important investment, we expect operating margins greater than 65%.

We expect GAAP diluted earnings per share of $1.90 to $2.05. Again, in 2021, we recorded a onetime noncash income tax benefit of, approximately, $1.05 per share. When comparing with the prior year, it's important to note that 2022 will be the first fiscal year in which we will report income tax expense as part of our income statement. We expect non-GAAP diluted earnings per share of $2.05 to $2.20. Income tax expense is projected to be $0.55 to $0.60 per share. The company's earnings per share guidance does not consider the impact of potential future share repurchases beyond the accelerated share repurchase initiated in December of 2021.

Let me now turn to Slide 12 for a summary of our approach to value creation and capital return and our strong progress to date. We have been consistent regarding our balanced capital allocation priorities. These include maintaining a strong balance sheet, capital return via share repurchases, and commitment to driving both internal and external growth via M&A. We have a strong balance sheet with cash, cash equivalents, and marketable securities as of the end of the fourth quarter of $740.9 million. We continue to expect our strong projected free cash flow, driven by our ENHANZE franchise, will support both our commitment to capital return as well as fund both internal and external growth via M&A.

Demonstrating our continued commitment to capital return, in the fourth quarter of 2021, we concluded our initial 3-year $550 million share buyback program 1 year early. Under the program, which began in November 2019, we repurchased a total of 22.3 million shares for $550 million at an average price per share of $24.72. Further demonstrating our commitment to capital return, in December 2021, we announced a new 3-year $750 million share repurchase program that was authorized by our Board and immediately initiated a $150 million accelerated share repurchase program.

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

Thank you, Nicole. I'd like to thank the Halozyme team, our partners, and all of our collaborators for the hard work that resulted in the strong 2021 performance. In 2022, we'll continue to deliver growing revenues, growing operating income, and expanding our pipeline, resulting in both strong near-term and long-term growth. I thank you for joining us today. And with that, we'd now be delighted to take your questions. Operator, would you please open the call for questions?

(Operator Instructions) We'll go first to Charles Duncan, Cantor Fitzgerald.

Congratulations on a great year, Helen and team. A quick question in terms of royalty growth. You mentioned the roughly 50% royalty growth this year. And I guess I'm wondering if you could provide a little color on what the puts and pulls to that royalty growth could be. Is that primarily driven by additional Faspro growth or does Phesgo come into the picture? And then I guess as a follow-up to that, when you think about the 76% or so adoption rate for Faspro versus Darza IV, I guess I'm wondering where do you think that can go.

Yes. Thanks, Chaz. So in terms of the royalty growth, the growth is driven by both Faspro and by Phesgo. As we mentioned in the prepared remarks, we see growth for each of them. Because Faspro is a bigger brand, it is going to be a larger contribution, but we're excited about the contribution we're going to see from Phesgo as well, which is going to come from additional launches outside the U.S. and more adoption outside the U.S. which lags the U.S. a bit but also continued penetration into accounts in the U.S. as well. So those are our 2 key royalty growth drivers.

Specific to DARZALEX, while the exit as you saw was 76%, our average share in the year, Chaz, was just 58%. And so if you just think about the key drivers of our royalty revenue growth, first of all, we've got a very fast-growing brand in DARZALEX, at $6 billion in 2021 that analysts are projecting it's going to be $10 billion by 2025. So, if you like, the whole pie is going to get bigger and then our share will grow from the average share of 58% considerably above that.

And I think a good benchmark is it's already at 76% at the end of last year. We're going to see more area under the curve of sales as we continue to see growth even catch up to that average of 76%. And frankly, there are very few barriers I think to why a patient wouldn't use subcu over IV given the potential for reduced treatment time and also reduced infusion-related reactions. So we see a lot of growth to come.

Okay. Very good. One quick pipeline question and that is on efgartigimod. You mentioned possible data here in the near term as guided by your partner. And I guess I'm wondering if you could lay out -- provide a little bit of an outline on the work that you're doing to prepare for regulatory approval as that would be a new partner that you'd support in those efforts.

Yes. Great question. So as you were mentioning, the data readout is sometime in the first quarter. The study that's going to readout is their Phase III study which is measuring reduction in IgG levels at day 29. And argenx has also stated that they're awaiting additional data that comes from longer-term studies to complete their package. So we're following our normal process, Chaz. We will be ready with all of the sections that are needed related specifically to our drug product. And all of that, with our 5 approvals to date, we've become very proficient and quick at doing that. So everything is very nicely on track to support argenx when they are ready to submit their BLA.

Next, we'll take a question from Michael DiFiore, Evercore ISI.

Hi, guys. Congrats on the great quarter and a phenomenal year. Just 2 for me, if I may. Number one, just regarding your next-gen, higher-yield, low-cost API. I know you said you just started investing behind that. When can we expect this to become available? And the second part to that is that does this have any unique IP that may push out the 2024/2027 dates?

And as a follow-up, on slide 6 I'm not sure if I'm missing something, but I noticed that Alexion-1720 and Bristol CD73 are no longer on that chart. Any color as to what happened there would be great.

Yes. So let me begin with the next-generation, high-yield, low-cost API. We have just very recently begun investing in that, Mike. And so we're still in the process of development and optimization. So we don't have a specific timeline yet of when it will be introduced, but we are working as fast as we can to have that ready. But think in terms of several years in terms of having that fully scaled up, tested, stability, and all the other things that we need to do. So several years for that to come.

It does not have unique IP because it is ENHANZE. Now you will recall that in January, we also announced the development of a new rHuPH20 which is not ENHANZE. That one does have unique IP associated with it out to 2032 in Europe in 2034 in the United States. So let me move then to the question on the pipeline. Yes, you're absolutely correct. Let me start with CD73. Very recently BMS, based on the overall data that they have been seeing on the drugs that are addressing that target with IV, indicated to us that they wouldn't be proceeding with development of that product as a subcu, and so we did remove it from our pipeline chart. And again, very, very recently, Alexion also indicated to us that they would not be proceeding with the C5 target, and they actually returned that target to us. So always some puts and takes in the pipeline. We're obviously excited to see the 6 new products starting in 2021, but we did see these programs for different reasons to not proceed in the case of CD73. Just doesn't seem to be that attractive a target in immuno-oncology.

Next we'll hear from Corinne Jenkins, Goldman Sachs.

Maybe first just one. You announced obviously this new rHuPH20 back in January, and I'm curious if the news of that product has shaped if at all your conversations with potential partners or even existing partners thinking about new product targets and partnerships.

Yes. Thanks, Corinne. Absolutely. We're still in the process of rolling it out and getting into deeper conversations with all of our current partners. But I can say that we're seeing some interest in that and that concept. And the 2 areas that we've talked about where it might be interesting is exactly where we're seeing some interest, partners who are considering developing small molecules, where more extended room temperature stability may be attractive to them. And also, current partners who are developing drugs where they are more interested in a longer IP perhaps because their own product does not have as extended IP. So very much the current partner is very interested in it, and we're beginning to introduce it in our new partner discussions as well because we have seen certainly since the announcement of the ViiV deal, more interest by companies who are pursuing small molecules. And so it's a great additional offering to discuss with them talking about when that might be possible to integrate into their clinical program, but obviously, ENHANZE available now to do that.

That's helpful. And then maybe I'm not sure if you have this visibility, but in terms of what percentage of total DARZALEX sales are Faspro ex U.S. I'm curious if you have any color on that trending.

And Corinne, I missed that. That was for the subcutaneous portion of the sales?

Yes, for Faspro versus the IV.

Yes. Unfortunately, Janssen doesn't provide that level of detail. So we're not in a position to be able to share that. I can say, though, and we can go back to comments that Janssen themselves made in the -- in about June or July of last year. At that point in time, they were saying ex U.S. the Faspro conversion was 60%. So we do expect that based on the growing Faspro sales in the U.S. and outside the U.S. they've seen conversion rise considerably from that 60% reported at that time, but we can't give specifics.

Okay, helpful.

Next up is Jessica Fye, JPMorgan.

Just following up on some of the prior questions. For the rHuPH20 with extended room temperature stability and potential for patient self-administration, when should we expect that to enter the clinic? And can you just talk about the type of product that would most benefit from those characteristics?

Yes. so with the new rHuPH20, we are still in the process obviously of developing it and optimizing it. So we I expect that to be available to partners to integrate into their clinical programs in a couple of years. Now from there, Jess, they need to do Phase I and Phase III studies just like with ENHANZE. So we're estimating this will be available and first potential launch will be post 2027 with the same expedited development pathway we see with ENHANZE with just a couple of years, so this is ready, and we have the right stability and information for partners to integrate it into their clinical development program.

As you're thinking about the types of products that it might be useful, I don't want to name a specific product. But if you can think about disease conditions where the patient may be more convenient for them to be carrying around a self-injector, as an example, or a pre-filled syringe that has the drug on their person because it's for a chronic use but where they might want to have it with them and not have their life impacted by having to be tied at home. That's the type of situation where we're seeing partners be very interested in the extended room temperature stability.

Okay, got it. And maybe just one more for me. For the long-term royalty revenue potential where you're now providing an indication of what that could look like in 2031, going out beyond the 2027 figure that you've been giving for a while, how did you select 2031 as the out-year to provide there?

Yes, Jess, we elected to show what would happen because there was so much focus, I will say, on 2027, we just selected something to show pretty close to that, but several years out what the dynamic would be. Yes, obviously, we could have picked 1 year before, 1 year after, but it just was picked to answer that question that there is a strong growth potential for several years after 2027.

Our next question comes from Jason Butler, JMP Securities.

Just a couple on the pipeline. Just 1 on Takeda 881. Can you maybe just speak to how that product could fit into the overall IVIG franchise for Takeda and specifically how a 20% subcu formulation could -- potentially how the market dynamics could play out there for a subcu conversion versus how they played out with HYQVIA? And then just real quick, could you remind us on the Phase III timelines to the extent we know on novolumab and your thoughts on how that product can impact the PD-1 market.

All right. I'm going to say, Jason, with regard to the IVIG market and exactly what Takeda is planning. They have not shared their specific plans and positioning for this new agent publicly. So I'm not in a position to go into any details on that. I do see this though as an additional offering for them in what is a very strong franchise and a franchise that they have commented as one of their key growth drivers moving forward. But I can't comment on any specific positioning there.

For the nivolumab Phase III study, that continues being executed by Bristol. They haven't provided any specific timeline. I can comment that on clinicaltrials.gov they have a primary completion date of December of 2023, which is sometimes a useful indicator as to a rough timeline as to when they expect perhaps the first analysis to be done. But clearly, it doesn't always do that. And I think that's where Bristol is going with the subcu therapy, and this is really based on comments that they have made is they do see the opportunity for patients not to be tied infusion suites, which are often in hospitals a bit further from the patient's home, and I think the vision for subcu is that it's going to allow patients to be treated more in the community and with more ease. And obviously, in Bristol's case, a combination therapy of different checkpoint inhibitors to reduce the burden for the patient and also for the caregiver. So we're very excited to see the progress they're making. And recall, they also have a Phase I study ongoing with OPDIVO and relatlimab which I think is going to be a very interesting combination as well.

And next up from Berenberg Capital Markets is Anita Dushyanth.

All right. I had a quick question on the Slide 6, the comment about the expected candidates to enter the pipeline. You say 4 new products. Now did you -- would that mean that they have an IV version that's already in the market or would those be brand-new like new molecules and the things that the partner is testing in a subcu formulation. And the follow-up also is the comment says 5 new Phase II/III studies. Would you be able to give us some specifics on which of those Phase I might progress in the development?

All right. Thanks for the question, Anita. If we go to that chart in the specific 4 studies that started in the fourth quarter, I can say that rilpivirine, which is Janssen's drug in HIV, is available as an oral and an IM today. It actually is a successful commercial drug including being part of the combination therapy CABENUVA that they are in collaboration with ViiV for, which recently got a new updated label to every 2-month injection. So that one is a commercialized drug. We cannot comment on the Roche and disclose that drug because obviously they have not disclosed. Don't wish to discuss that. The Takeda one, this is the 20% IgG. That is a developmental drug and then cabotegravir as a HIV drug as we've mentioned is approved.

And so then moving to your second question with regard to the pipeline, we're very pleased. You probably have noticed on the chart that we are indicating that Roche is close to initiating their Phase III study for OCREVUS. This trial design is actually published now on clinicaltrials.gov. This is one of the expected Phase II/III starts. The remaining 4 will come from products that are on this chart, but unfortunately, based on the confidentiality agreements we have, until the partner has announced it, we cannot comment on it. But the good news is, these will all be studies done in patients, and so shortly before they start, they will be posted on clinicaltrials.gov, and we'll obviously provide updates just as soon as we can as to which these products are.

That's very helpful. And just one more question if I may. You did talk about looking into some of the potential acquisitions that could happen down the years. Maybe could you provide some color on what that implies when you say you're looking at de-risked assets, whether they would be late-stage or maybe close to approval or already approved?

Yes. As we are looking at some M&A, we're specifically looking to find a business that is complementary to ENHANZE, and we're looking for something where we have confidence that we're going to be able to deliver value because we can operationalize it over and above what we would pay for it. So what is ideal is that we're going to find something that has got -- perhaps already has been licensed to partners and demonstrated some clinical or commercial success -- sorry, specifically commercial success, or where it's a pipeline that's got positive Phase III data and a clear path to regulatory approval. What we don't want to do is get into some pipeline where there is a lot of technical risks still, Anita, because that obviously doesn't fit our goal of acquiring something to continue to build and extend the durability of our revenue. So to fit our revenue and financial goals, it needs to be more advanced and that's what we mean by de-risked, that we see a clear path to revenue and revenue growth in the near term.

Our next question will come from Joe Catanzaro, Piper Sandler.

Hey, guys. Congrats on the progress. I just wanted to follow up on an earlier question. Helen, I think you noted that for CD73 maybe as a target it just didn't meet Bristol's expectations. But can you say for Alexion 1720 what was the contributing factors that led to that target being returned back to you guys? And maybe similarly, I think amivantamab was in the enhanced pipeline earlier last year and then subsequently came out. What drove that decision? those 2 questions maybe you could just speak at a high level of what your partner with ENHANZE and bispecific molecules.

Yes. But for Alexion 1720, I'm afraid I don't have any color specifically why they returned it, but we can say that, obviously, Alexion has had amazing success with ULTOMIRIS and the more extended IV dosing interval. In the previous years, Ludwig did make comments to say that the IV was a little bit to their surprise in that particular patient setting meeting many of the needs. But we don't have any more color I can provide than that. And the great news is we're now in a position to re-license that target potentially to somebody else as there are a number of companies who continue to develop exciting products in that space. So we will be obviously doing -- seeking to do that as soon as possible.

Amivantamab, we are continuing in development with -- amivantamab with Janssen. They have a specific preference as to how and where we articulate that we're proceeding with amivantanav. So you'll find more details on that in our Q which is an SEC filing. But based on Janssen's preference, it is not reflected as clearly on our Halozyme charts that we use for investor meetings. But just to put a very fine point on it, absolutely, Janssen continuing with amivantamab as a target subcu.

Okay, got it. That's really helpful.

Operator, is there any more questions?

There are no further questions at this time. Would you like to make any closing remarks?

Yes, I'd just like to thank everybody for your attention. Obviously, a great year in 2021. We're set up for continued strong progress and growth in 2022 as well, and we look forward to updating you on our next quarterly call. Thank you so much, and good night.

And once again, ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.