Q4 2020 Halozyme Therapeutics Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Helios line fourth quarter 'twenty 'twenty financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Halozyme 4th Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Thank you. I would now like to turn the conference over to Al Khildani, Vice President of Investor Relations and Corporate Communications for Halozyme Therapeutics. Mr. Khildani, please begin.

As a question during the session you will need the press star one on your telephone if you require any further assistance. Please press star zero.

How about I'd like to turn the conference of which I'll kill Donnie Vice President of Investor Relations and corporate communications, where he'll assignment therapeutics. Mr. Oldani. Please begin.

Thank you good afternoon, and welcome to our fourth quarter and full year 2020 financial results Conference call.

Al Khildani: Thank you. Good afternoon, and welcome to our fourth quarter and full year 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 fourth quarter and full year 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.

In addition to our press release issued today. After the close you can find the 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, <unk>, 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 fourth quarter and full year 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.

Helen I. Torley: Thank you, Al. 2020 marked a year of tremendous growth for HaloLens, which has created strong momentum as we enter 2021. Let me begin with a brief review of our 2020 performance. Total revenues in 2020 were $267.6 million, up 37% from 2019. And our earnings per share were $0.91.

Thank you al.

2020 of Mark to your of tremendous growth for handling line, which has created strong momentum as we enter 2021.

Begin with a brief review of the 2020 performance.

Total revenues in 2020 were $267 $6 million up 37% from 2019, and our earnings per share or 91.

Helen I. Torley: Both revenue and earnings per share were within our most recent financial guidance range. Our strong financial results reflect a transformational year for Halozyme that saw a number of significant accomplishments. These included two FDA approvals and two European Commission approvals for enhanced-based products, including Janssen's subcutaneous form of Darzalex and Roche's Fezgo. A return to royalty revenue growth driven by the strong uptake of subcontainer Darzalex, which is known as Darzalex Faspro in the US and Darzalex SC in Europe.

Both revenue and earnings per share were within our most recent financial guidance range.

Our strong financial results capped a transformational year for handling line, that's all of a number of significant accomplishments Nathan.

These included the two FDA approvals and two European Commission approvals for enhance based products, including Janssen subcutaneous form of doors of legs and Roche's Vasco.

A return to royalty revenue growth driven by the strong uptake of subcutaneous doors of lakes, which is known as doors like fast grow in the U S and <unk> SC in Europe the.

Helen I. Torley: The expansion of our development pipeline, including two products moving into phase three development; the signing of a new enhanced partnership with Horizon Therapeutics to develop a subcutaneous version of TAPEZA; and continued execution of our capital return program, resulting in $150 million in share repurchases during 2020, for a total of $350 million in share repurchases since the board authorized the three-year $550 million plan in November of 2019. This remarkable progress in 2020 was a tease against the backdrop of the global COVID pandemic, a challenge we were able to navigate thanks to the hard work and dedication of our partners, suppliers, and employees.

Expansion of our development pipeline, including two products moving into phase III development.

The signing of the new enhanced partnership with Horizon Therapeutics to develop the subcutaneous version of Capella and continued execution of our capital return program, resulting in $150 million in share repurchases. During 2020 for a total of $350 million share repurchases since the board authorized the three year $550 million.

Plan in November of 2019.

This remarkable progress in 2020 of the cheese against the backdrop of the global Covid pandemic of challenge, we were able to navigate thanks of the hard work and dedication of our partners suppliers and employees.

Helen I. Torley: The progress and expansion of our Enhanced Partner Pipeline provides confidence in the potential of our long-term growth prospects as we anticipate the potential for multiple waves of product launches in the coming years. Moving now to 2021, we expect revenues of $375 to $395 million, which would represent growth of 40 to 48%, driven primarily by an expected doubling in royalty revenue. The expected gap earnings per share of $1.40 to $1.55 would represent growth of 54 to 70%. Recall that our guidance does not include any contribution from potential new enhanced deals.

The progress on expansion of our enhanced partner pipeline provide confidence in the potential of our long term growth prospects as we anticipate the potential for multiple waves of product launches in the upcoming years.

Moving now to 2021, we expect revenues of $375 million to $395 million, which would represent growth of 40% to 48%.

Driven primarily by an expected doubling and royalty revenue.

The expected GAAP earnings per share of $1 40 to $1 55 would represent growth of 54% to 17%.

Recall that our guidance does not include any contribution from potential new enhanced deals.

Helen I. Torley: Let me now turn to slide three for a discussion of our relative revenue growth. In 2021, we projected a doubling in royalty rates. This strong growth is driven by both subcutaneous Darzalex and Fez. As illustrated in the left-hand chart, in the fourth quarter, we saw revenue from royalties grow 86% year-over-year and 34% sequentially.

Let me now turn to slide three for a discussion of our royalty revenue growth.

In 2021, we project a doubling in royalty revenues.

This strong growth is driven by both subcutaneous stars alike and Fayetteville.

As illustrated on the left hand chart in the fourth quarter, we saw revenue from royalties grow in the 6% year over year and 34% sequentially.

Helen I. Torley: This growth was propelled by the launch of Darzalex Fab Pro in the US and Darzalex SC outside the US and resulted in full year 2020 royalty revenue of $88.6 million. For 2021, we project DARZLIC's BASFRO and DARZLIC's SV growth will continue, driven by ongoing adoption and penetration in the already launched markets and by additional launches around the world. For FESGO, we project robust growth in 2021, driven by increased adoption and penetration in the U.S. and also by the start of European launches following European Commission approval in December of 2020.

This growth was propelled by the launch of dark lifestyle pro in the U S and darice Liu SC outside the U S.

And resulted in full year 2020 royalty revenue of $88 $6 million.

For 2021, we project <unk> sales pro and dark like SP growth will continue driven by ongoing adoption and penetration in the already launched market and buy additional launches around the world.

For <unk>, we project the robust growth in 2021, driven by increased adoption and penetration in the U S. And also by the start of the European launches following the European Commission approval in December of 2020.

For full year 2021, with the strong 2020 launch we predict that sustaining starplex will remain the key driver of royalty revenues at the level that is substantially higher than fiscal <unk>.

Helen I. Torley: For full year 2021, with the strong 2020 launch, we predict that substantive star selects will remain the key driver of royalty revenues at a level that is substantially higher than Fesco. We're now in a position where the high-margin recurring portion of our revenues is also the fastest growing segment.

We're now in a position for the high margin recurring portion of our revenues is also the fastest growing segment.

Helen I. Torley: Let me turn now to slide four, and I'll highlight our key commercialized products. We have five products now approved in both the US and Europe utilizing our enhanced technology. Let me now provide some color on the most recent product launches representing our Wave 2 launches beginning with Subcutaneous Darzalex. During the fourth quarter, Janssen's parents, Johnson & Johnson, reported worldwide sales of Darzalex, including the IV and SC forms, of $1.25 billion, up 49% year-over-year on an operational basis.

Let me turn now to slide four and I'll highlight our key commercialized products.

We have five products now approved in both the U S and Europe utilizing our enhanced technology.

Let me now provide some color on the most recent product launches representing our wave two launches beginning the subcutaneous <unk>.

During the fourth quarter Janssens parent Johnson, and Johnson reported worldwide sales of doors of lakes, including the IV NFC forms of $1 billion to $5 billion up 49% year over year on an operational basis.

Helen I. Torley: While J&J does not provide a breakdown of sales between the IV form of the drug and the subcutaneous form used in hens, we can share, based on data from Symphony Health, that by October of 2020, just five months after the May approval, 40% of sales of overall Darzalex in the United States were the subcutaneous version. I think you'll agree this is a remarkably fast update and really speaks to the value proposition that the substantive version can bring for patients.

While G&A does not provide a breakdown of sales between the IV form of the drug and the subcutaneous form utilizing and hence we can share based on data from Symphony health that by October of 2020, just five months. After the May approval, 40% share of sales of overall third bullet in the United States was the subcutaneous version.

I think you'll agree this is remarkably fast uptake and really speaks of the value proposition that the subcutaneous version can bring for patients.

Helen I. Torley: Supporting the impressive growth expectations are also potential additional approvals and launches in new countries and indication expansion for subcutaneous Darzalex. These opportunities include the potential approval of the subcutaneous form of Darzalex in Japan for multiple myeloma patients. Potential growth from sales in the newly approved indication of newly diagnosed adults with light-chain amyloidosis following U.S. FDA-accelerated approval in January 2021 for the use of Darzalex Faspro in this indication. In this indication, it's used with bortezomib, cyclophosisphamide, and dexamethasone.

Supporting the impressive growth expectations are also potential additional approvals and launches of new countries and the indication expansion for subcutaneous <unk>.

These opportunities include the potential approval of the subcutaneous form of dark like in Japan for multiple myeloma patients potential growth from sales in the newly approved indication of newly diagnosed adults with light chain amyloidosis poll of U S. S. The accelerated approval in January of 2021 for the.

The use of doors like fast growth in this indication in the syndication seized with Bortezomib cyclophosphamide and dexamethasone.

Helen I. Torley: Consistent with this being an accelerated approval, Johnson will conduct confirmatory trials while the therapy is made available in the U.S. to the indicated patient, and there's also the potential for approval and launch in light chain amyloidosis in Europe. And additionally, there is the potential for US and European approval for subcutaneous Darzalex administered at hand in combination with pomalidomide and dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received at least one prior line of therapy.

Consistent with this being an accelerated approval Janssen will conduct the confirmatory trial, while the therapy of made available in the U S to the indicated patient.

And there's also the potential for approval and launch in light chain amyloidosis in Europe.

And Additionally, theres the potential for U S and European approval for subcutaneous Dar the lakes utilizing at hand in combination with palm of Lytham might index. The mechanism for the treatment of patients with relapsed or refractory multiple myeloma, who have received the at least one prior line of therapy.

Helen I. Torley: With the launch of Subcutaneous Darzalex after such a strong start, high growth in the overall Darzalex franchise, and the anticipation for expanding indications and geographies, you can see why we expect Subcutaneous Darzalex to be a strong driver of revenue growth for Halo. Now, let me move now to Fezgill.

With the launch of subsequent historically of such a strong start high growth in the overall Darvill X franchise and the anticipation for expanding indications and geographies you can see why we expect subcutaneous stars the likes to be a strong driver of revenue growth for Heelys line.

Let me move now to think though and this is a fixed dose combination of two of Roche's antibodies project of N Herceptin, which is administered in five to eight minutes compared to several hours needed for the IV versions.

Helen I. Torley: This is a fixed dose combination of two of Roche's antibodies, Progeta and Herceptin, which is administered in five to eight minutes compared to several hours needed for the IV version. SESGO was launched in the United States in the third quarter of 2020 and was approved in Europe in late December, with launch expected to begin during the first quarter of 2021. For the fourth quarter, Roche reported FASGO sales of approximately 16 million Swiss francs.

Facebook launched in the United States in the third quarter of 2020 and was approved in Europe in late December with loans expected to begin during the first quarter of 2021.

For the fourth quarter Roche reported physical sales of approximately 16 million Swiss francs.

With the European launch beginning in Q1, and the expectation of increase the adoption and use in the United States, We anticipate strong growth in physical sales and contribution to handle the time royalties in 2021.

Helen I. Torley: With the European launch beginning in Q1, and the expectation of increased adoption and use in the United States, we anticipate strong growth in FAERS go sales and contribution to Halozyme royalties in 2021. Let me now move to slide five and a discussion of the Enhanced Development Portfolio. Building on our portfolio of five commercialized partner products, we project the expansion of our development pipeline to now 16 products by the end of 2021, with an expected five new phase one study starts. In June of 2020, Bristol-Myers Squibb initiated a Phase I-II study of ipilimumab in combination with nivolumab, utilizing the enhanced technology. BMS recently informed us that they've made a portfolio prioritization decision to not continue the study.

Let me not moving to slide five and a discussion of the enhanced development portfolio.

Building on our portfolio of five commercialized part of products. We project the expansion of our development pipeline to net 16 products by the end of 2021 with an expected five new phase one study starts.

In June of 2020, Bristol Myer Squibb initiated the phase <unk> study of <unk> in combination with Nepal of map utilizing the enhanced technology.

BMS recently informed us that they've made of portfolio prioritization decision to not continue the study.

BMS will retain the seat daily for target for potential future study.

In addition, we anticipate two products that are currently in phase one will progress into phase III.

This would result in a total of four products being evaluated in the seven separate indication phase III studies utilizing the enhanced technology by the end of 2021.

Helen I. Torley: VMS will retain the CTLA-4 target for potential future study. In addition, we anticipate that two products that are currently in Phase 1 will progress into Phase 3. This would result in a total of four products being evaluated in seven separate indication phase three studies utilizing the enhanced technology by the end of 2021. Based on Halozyme's historical development timeline, these four Phase 3 products form our potential Wave 3 launches, with potential launches occurring in the time window of 2023 to 2025.

Based on kind of times historical development timelines. These four phase III products for our potential wave three launches with potential launches occurring in the time window of 2023 to 2000 the 25.

In addition, we project 12 products will be in the or will have completed phase one development in 2021.

Just on historical development timeline, if these development programs progress. These 12 products with form the potential waste for launches with loans in the time window of 2025 to 2027.

We believe this advancing pipeline of products utilizing the <unk> is setting up the potential for multiple waves of future product launches that will deliver long term growth in revenues cash flow and profitability.

Helen I. Torley: In addition, we project 12 products will be in or will have completed phase one development in 2021. Based on historical development timelines, if these development programs progress, these 12 products would form the potential route for launches with launches in the time window of 2025 to 2027. We believe this advancing pipeline of products utilizing hands is setting up the potential for multiple ways of future product launches that will deliver long-term growth in revenues, cash flow, and profitability.

I mean that just give a brief partner by partner discussion of key programs.

Beginning with organics, which is now conducting four phase III trials for four indications of at Cartage of mode. It's really is a remarkable feat achieved in less than two years from deal signing.

Earlier this month, our journey, sometimes that had reached the go decision for each of adhere trial evaluating subcutaneous effort to demand within hence in chronic inflammatory demyelinating polyneuropathy or see IDP.

Are there any plans to now continue enrollment after the planned efficacy and safety assessment and will include approximately 130 patients at to support potential registration of <unk> for the treatment of the IDP.

Helen I. Torley: Let me now just give a brief partner by partner discussion of key programs. Beginning with organics, which is now conducting four phase three trials for four indications of F-carotigemod. This really is a remarkable feat achieved in less than two years from deal signing.

Yeah.

During the fourth quarter of 2020, Argentic has met with the FDA to discuss the potential for a bridging study for Scf cartoon of Mod in myasthenia gravis or Mg.

Helen I. Torley: Earlier this month, Argyronix announced that it reached a GO decision for its ADHEAR trial, evaluating subcutaneous F-corticitomide within hens in chronic inflammatory demyelinating polyneuropathy, or CIDP. Ogenic plans to now continue enrollment after the planned efficacy and safety and assessment and will include approximately 130 patients to support potential registration of SCF Cartagemont for the treatment of CIDP, During the fourth quarter of 2020, Ardenyx met with the FDA to discuss the potential for a bridging study for SCF carcinoma in Myasthenia gravis or MG. Recall that earlier in 2020, Organics announced positive results from its ADAPT trial, evaluating the IV form of F-cartridomide in MG.

Recall that earlier in 2020 organic the announced positive results from the adapt trial evaluating the IV form of of Cartage of modern N G.

Following the FDA feedback organics is moving forward with the small focused trial designed to enable the fast path to registration for SC at cartridge demand.

Argentic also recently initiated the phase III of restaurant in Pemphigus, Vulgaris, and Felicia, which are too serious skin barrier diseases associated with painful blistering.

And again it also continues with its fourth potential indication with the phase III trial evaluating <unk> with enhanced immune thrombocytopenic purpura.

We are delighted to be working with organics on this exciting product, which is one of our potential wave three launches in the 2023 to 2025 timeframe and which analysts predict could have multibillion dollar potential.

Helen I. Torley: Following FDA feedback, Organics is moving forward with a small-focus trial designed to enable a fast path to registration for SCF cartridge monitoring. Argenic also recently initiated its phase 3 address trial in Pemphicus vulgaris and foliaceous, which are two serious skin barrier diseases associated with painful blistering, and Organics also continues with its fourth potential indication with a phase 3 trial evaluating SCF vertigimod with enhanced efficacy in immune thro We are delighted to be working with Ergenics on this exciting product, which is one of our potential Wave 3 launches in the 2023 to 2025 timeframe and which analysts project could have multi-billion dollar potential.

Moving to our Dennis the expected nominated target, which is <unk> 117.

This is being evaluated in a recently initiated phase one study in healthy volunteers with data expected in mid 2021.

<unk> one of them seven targets <unk> and is going to be evaluated for the treatment of multifocal motor neuropathy.

We expect to receive a milestone payment in the near term related to the subcutaneous component of this study.

As you've just heard Argentic, just making rapid progress in the clinic with subcutaneous forms of its fronts utilizing enhanced evaluating a broad range of potential indications with the goal of accommodating patient preference and to adjust to the new normal for patients may not always of easy access to all sites of care.

Helen I. Torley: Moving to the second nominated target, which is ARGX 117. This is being evaluated in a recently initiated phase one study in healthy volunteers with data expected in mid 2021. ARGX 117 targets C2 and is planned to be evaluated for the treatment of multifocal motor neuropathy.

During the fourth quarter, we were delighted to expand our collaboration and licensing agreement with organics to now include a total of up to six targets.

Helen I. Torley: We expect to receive a milestone payment in the near term related to the subcutaneous component of this study. As we've just heard, Argenix is making rapid progress in the clinic with substantive forms of its drugs utilizing enhanced, evaluating a broad range of potential indications with the goal of accommodating patient preference and to adjust to the new normal for patients may not always have easy access to all sites of care. During the fourth quarter, we were delighted to expand our collaboration and licensing agreement with Organics to now include a total of up to six targets. Now, I'll move on to Roche.

I'll move now to Roche during the fourth quarter Roche dosed, the first payment and if things III trial evaluating centric and previously treated locally advanced or metastatic non small cell lung cancer patients. This.

This is also one of our wave three potential launch product.

In addition, Roche continues with its phase one study evaluating the administration of optimism out of our awkwardness with enhance.

Moving to Janssen. In addition to the successful launch of subcutaneous form of dark legs in November 2020, Janssen initiated a phase one study of the army bank for that debt.

Helen I. Torley: During the fourth quarter, Roche will make the first payment and start a phase three trial evaluating centric and previously treated locally advanced or metastatic non-small cell lung cancer patients. This is also one of our Wave 3 potential launch products. In addition, Roche continues with its Phase 1 study, evaluating SC administration of ocrelizumab, or ocrevus, with Enhance. Moving to Janssen, in addition to the successful launch of the subcutaneous form of Darzalex, in November 2020, Janssen initiated a phase one study of amibantinam, the EGFR-met bispecific antibody was enhanced in advanced solid tumors.

The <unk> Egfr and met by specific antibody with enhanced in advanced solid tumors.

Moving now to Bristol Myers Squibb, the Bristol is continuing with an exciting set of the immuno oncology target clinical studies, having publicly of non selection of five of the available 11 targets.

The Msos for phase one studies with enhanced.

These include the Bull about Etsy into study one of the monotherapy in one in combination with FCA overlap of them up as well the studies of subcutaneous Mtc, the 73 and subcutaneous 10 through.

I'll move now to our newest partner Horizon Therapeutics in November we signed the collaboration and licensing agreement with horizon, providing exclusive access of Manhattan for SC formulations of medicines targeting IGF one of our.

Helen I. Torley: Moving now to Bristol Myers Squibb, Bristol is continuing with an exciting set of immuno-oncology target clinical studies, having publicly announced the selection of five of the available 11 targets. CMS has four phase one studies in hand. These include nivolumab SC in two studies, one is a monotherapy and one in combination with SC relaplamab, as well as studies of subcutaneous anti-CD73 and subcutaneous TEM3.

We received an upfront milestone payment of $30 million.

Horizon intends to use enhance to develop an SC formulation of Capella, which is indicated for the treatment of thyroid eye disease of serious progressive and vision threatening rare autoimmune disease.

The compares are franchise has been anticipated peak sales potential of $3 5 billion according to horizon.

Helen I. Torley: I'll move now to our newest partner, Horizon Therapeutics. In November, we signed a collaboration and licensing agreement with Horizon, providing exclusive access to enhanced SC formulations of medicines targeting IGF-1R. Horizon intends to use ENHANCE to develop an SE formulation of CAPEZA, which is indicated for the treatment of thyroid eye disease, a serious, progressive, and vision-threatening rare autoimmune disease.

We're pleased with our collaboration with Horizon and look forward to future clinical milestones.

Our expanding of maturing pipeline is setting up multiple waves of potential future approvals and launches that can drive long term revenue growth.

Furthermore, we continue to see additional future potential growth from two sources. The first isn't even haynesville, where we continue to have a broad strength of discussions with both biotech and pharma companies.

As the timing, while I'm confident we will find additional deals as ever the timing is difficult to predict.

Helen I. Torley: The Tepeza franchise has an anticipated peak sales potential of $3.5 billion, according to Horizon. We're pleased with our collaboration with Horizon and look forward to future clinical models. Our expanding and maturing pipeline is setting up multiple waves of potential future approvals and launches that can drive long-term revenue growth. Furthermore, we continue to see additional potential growth from two sources. The first is new in Hensfield, where we continue to have a broad slate of discussions with both biotech and pharma companies. As for timing, while I'm confident we will sign additional deals, as we always do, the timing is difficult to predict.

And the second source of growth is through our current partners nominating new targets and advancing them into the clinic with more than 20 open slots available. We're excited for the growth opportunity that exists here too.

Now the growth and then the progress all of our enhanced portfolio is projected to drive strong growth in milestone revenues in the coming years.

Illustrated on slide six in the Blue bars is our projected milestone at the or.

Over the next three years from 2021 to 2023 as well as comparable three year outlook that we presented in each of the prior two years.

As shown in the Green bars were performing well against these projections.

For two.

2021 through 2023, we project $400 million to $450 million of milestones showing a continued progression in the growth of our milestone revenue.

Helen I. Torley: And the second source of growth is through our current partners, nominating new targets and advancing them into the clinic. With more than 20 open slots available, we're excited about the growth opportunity that exists here, too. Now, the growth in and progress of our enhanced portfolio is projected to drive strong growth in milestone revenues in the coming years. Illustrated on slide six, in the blue bars, is our projected milestone outlook for the next three years from 2021 to 2023, as well as the comparable three-year outlook that we presented in each of the prior two years. Ice Stone and the Green Bars, you're performing well against these projections.

Now this near term milestone revenue is an important and strong indicator for future revenue our royalty revenues.

Royalty revenue potential of approximately $1 billion in 2027.

Based on our non risk adjusted revenue projections for programs. We currently have the line of sight to I'm, assuming global sales and all indications.

I'll turn now to slide seven to discuss our approach to value creation and capital return.

We have three capital allocation priorities, maintaining a strong cash balance sheet.

Share repurchases and internal and external growth.

We anticipate the strong projected free cash flow driven buying of hand will support both our ongoing commitment to capital return as well as our longer term M&A strategy.

Helen I. Torley: For 2021 through 2023, we project $400 to $450 million in milestones, showing a continued progression in the growth of our milestone revenue. Now, this near-term milestone revenue is an important and strong indicator for future revenue, royalty revenues. We project royalty revenue potential of approximately $1 billion in 2027. Based on our non-risk-adjusted revenue projections for programs we currently have the line of sight to and assuming global sales in all indications.

As mentioned earlier, we have made strong progress with our three year $550 million share repurchase program with $350 million completed to date.

We will target repurchasing up to $125 million worth of common shares in 2021 pending market conditions and other factors.

In addition, we continue to evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating and extending long term revenue growth.

Helen I. Torley: I'll turn now to slide seven to discuss our approach to value creation and capital return. We have three capital allocation priorities, maintaining a strong cash balance, the balance sheet, share repurchases, and internal and external growth. We anticipate the strong projected free cash flow driven by enhanced will support both our ongoing commitment to capital return, as well as our longer-term M&A strategy. As mentioned earlier, we have made strong progress with our three-year, $550 million share repurchase program, with $350 million completed to date.

We see opportunity to create incremental value for other platform technologies, applying halo times proven partnering and commercialization capabilities.

With enhanced still in the early in its growth cycle, we have the opportunity to be highly selective.

And with that update I'll now turn the call over the lane for a discussion of the fourth quarter and full year 2020 financial results.

Thanks, very much Helen let me turn to slide eight for a review of our fourth quarter revenues.

As Ellen indicated we again saw strong growth in the quarter as our partners continue to execute on our commercial and development plans to establish subcutaneously delivered biologics in the U S and globally.

Helen I. Torley: We will target repurchasing up to $125 million worth of common shares in 2021, pending market conditions and other factors. In addition, we continue to evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating and extending long-term revenue growth. We see opportunity to create incremental value for other platform technologies applying Halozyme's proven partnering and commercialization capabilities. Furthermore, with Enhance still early in its growth cycle, we have the opportunity to be highly selective. And with that update, I'll now turn the call over to Elaine for a discussion of the fourth quarter and full year 2020 financial results.

Total revenue for the fourth quarter was $121 $7 million, an increase of 127% compared to $53 7 million in the prior year period.

Let me now take a moment to discuss some of the key drivers of growth.

Revenue from royalties for the quarter was $32 million and 86 per cent increase over the prior year period.

This was driven primarily by the continued strong uptake of subcutaneous stars elect utilizing in hand by our partner Janssen.

Growth in royalties from newly launched partner products subcutaneous stars the legs and Roche's FESCO drove overall royalty revenue growth offsetting the impact of the more mature legacy partner products.

Product sales were $32 $5 million in the quarter up 43% from the prior year period product sales of $22 7 million.

Growth in product sales was driven by additional manufacturing releases of API in support of our partners products and programs in the fourth quarter.

Na Sun: Thanks very much, Helen. Let me turn to slide 8 for a review of our fourth quarter revenues. As Helen indicated, we again saw strong growth in the quarter as our partners continue to execute on their commercial and development plans to establish subcutaneously delivered biologics in the U.S. and globally. Total revenue for the fourth quarter was $121.7 million, an increase of 127% compared to $53.7 million in the prior year period. Let me now take a moment to discuss some of the key drivers of growth. Revenue from royalties for the quarter was $32 million, an 86% increase over the prior year period. This was driven primarily by the continued strong uptake of subcutaneous Darzalex in the hands by our partner GANS.

And collaboration revenue in the quarter totaled $57 3 million up from $13 7 million in the prior year period, primarily as a result of the $30 million upfront payment for the signing of our collaboration and license agreement with our newest partner Horizon Therapeutics in November to develop a subject.

It's the peso.

Let me turn to slide nine for a more detailed breakdown of our fourth quarter P&L.

So I'll start with total operating expenses, which were $44 $1 million in the fourth quarter down 49% from $85 $7 million in the prior year period.

That overall decrease in total operating expenses resulted from our shift in strategic focus to enhance the only business model in November of 2019 and related restructuring, which has now been completed.

Cost of product sales were $26 $3 million compared with $16 $7 million in the prior year period with the increase attributable to the markedly higher level of API sales versus the prior year in support of our partners products and programs in the fourth quarter.

Na Sun: Growth in royalties from newly-launched partner products, Subcutaneous Darzalex and Roche's Fesco, drove overall royalty revenue growth, offsetting the impact of the more mature legacy partner products. Product sales were $32.5 million in the quarter, up 43% from the prior period. Growth in product sales was driven by additional manufacturing releases of API in support of our partners' products and programs in the fourth quarter.

Research and development expenses of $7 $4 million decreased 84% from $45 $1 million in the prior year period.

As a result of halting our peg ph 20 oncology drug development activities in November of 2019.

And SG&A expenses were $10 $4 million down 56% from $23 9 million in the prior year, primarily due to the reduction in force and discontinuation of Peg page 20 related launch readiness expenses following our restructuring.

Na Sun: And collaboration revenue in the quarter totaled $57.3 million, up from $13.7 million in the prior year period, primarily as a result of the $30 million upfront payment for the signing of our collaboration and license agreement with our newest partner, Horizon Therapeutics, in November to develop a subcutaneous tepeza. Let me turn to slide nine for a more detailed breakdown of our fourth quarter P&L. So I'll start with total operating expenses, which were $44.1 million in the fourth quarter, down 49% from $85.7 million in the prior year period.

Total operating expenses, excluding Cogs were $17 8 million for the fourth quarter compared with $69 million in the prior year period.

With our leverage of the business model fourth quarter operating expenses, excluding Cogs were just below the estimated range of $18 million to $19 million.

And that led to operating income for the quarter of $77 6 million compared to an operating loss of $32 1 million in the prior year period.

And net income for the quarter was $73 2 million or <unk> 50 per share compared to a net loss of $34 4 million or a loss of 24 cents per share in the fourth quarter of 2019.

And with that let me turn to slide 10, the four a snapshot of the full year 2020 results.

Na Sun: That overall decrease in total operating expenses resulted from our shift in strategic focus to an enhanced only business model in November of 2019 and related restructuring, which has now been completed. Cost of product sales was $26.3 million compared with $16.7 million in the prior year period, with the increase attributable to a markedly higher level of API sales versus the prior year in support of our partners' products and programs in the fourth quarter.

Total revenues grew 37% to $267 $6 million in 2020 off of an already substantial revenue base.

The biggest contributors of this increase was higher collaborative revenues driven by our partners pipeline progress and the collaboration with horizon, which drove a 105% increase in collaboration revenues for the year.

And as Helen described our royalties grew significantly to $88 $6 million per the year, 27% over and above 2019.

Product sales of $56 million declined slightly given the significant API sales in 2019 in support of upcoming partner product launches.

Na Sun: Research and development expenses of $7.4 million decreased 84% from $45.1 million in the prior year period as a result of halting our PEG-PH20 oncology drug development activities in November of 2019. And SG&A expenses were $10.4 million, down 56% from $23.9 million in the prior year, primarily due to the reduction in force and discontinuation of PEG-PH20-related launch readiness expenses following our restructuring. Total operating expenses, excluding COGS, were $17.8 million for the fourth quarter, compared with $69 million in the prior year period.

And with our highly leverage of our business model, we generated $144 3 million in operating income for the year compared with an operating loss of $67 $6 million in 2019.

Furthermore, net income for the year was a record for Halo zone at $129 $1 million compared with the net loss of $72 $2 million in 2019.

EPS for the year was 91 within our most recent guidance range and compared with the loss of <unk> 50 per share in 2019.

With respect to our cash position cash cash equivalents and marketable securities were $368 million at the end of the year compared to $421 3 million at December 31, 2019 of this decrease reflects the substantial share repurchases that we have completed today.

Na Sun: With our leverageable business model, fourth-quarter operating expenses, excluding COGS, were just below the estimated range of $18 to $19 million. And that led to operating income for the quarter of $77.6 million compared to an operating loss of $32.1 million in the prior year period. And net income for the quarter was $73.2 million, or $0.50 per share, compared to a net loss of $34.4 million, or a loss of $0.24 per share, in the fourth quarter of 2019. And with that, let me turn to slide 10 for a snapshot of the full year 2020 results.

Right.

Now I'll turn to slide 11 for a discussion of our 2021 financial guidance, which is based on GAAP financials.

We plan in future quarters to report, both GAAP and non-GAAP financial results.

Our guidance is based on the latest information from our partners and our planned expenditures for the year.

We expect total revenues of $375 million to $395 million, which would represent year over year growth of 40% to 48%.

Let me speak to the components of revenues, we expect revenues from royalties to double from 2020 levels, we expect product sales to increase between 50% and 60% from 2020 levels driven primarily by bulk API sales to our partners.

Na Sun: Total revenues grew 37% to $267.6 million in 2020 off of an already substantial revenue base. The biggest contributor to this increase was higher collaborative revenues driven by our partners, Pipeline Progress and Horizon, which drove a 105% increase in collaboration revenues for the year. And as Helen described, our royalties grew significantly to $88.6 million for the year, 27% over and above 2019. Product sales of $56 million declined slightly, given significant API sales in 2019 in support of upcoming partner product launches.

We further expect revenue under collaborations to be in a similar range as the 2020 total driven by new clinical trial starts and commercial milestones.

And with regard to operating expenses I would just note for modeling purposes that the substantially higher product sales. We expect will result in a commensurately higher cost of goods, which will be an important factor in your EPS calculation.

Total opex, excluding Cogs is expected in the range of $80 million to $83 million and this modest increase from 2020 levels illustrates that strong leverage of our business model.

We expect operating income for 2021 to be in the range of $215 million to $235 million, which would represent 49% to 63% growth over 2020.

Na Sun: And with our highly leverageable business model, we generated $144.3 million in operating income for the year compared with an operating loss of $67.6 million in 2019. Furthermore, net income for the year was a record for Halozyme at $129.1 million, compared with a net loss of $72.2 million in 2019.

And moving to earnings per share, we are projecting GAAP EPS of between $1 40 in the dollar 55, which would represent 54% to 70% growth over 2020.

Na Sun: EPS for the year was $0.91, within our most recent guidance range and compared with a loss of $0.50 per share in 2019. With respect to our cash position, cash, cash equivalents, and marketable securities were $368 million at the end of the year, compared to $421.3 million at December 31, 2019. This decrease reflects the substantial share repurchases that we have completed to date.

As Helen reviewed we remain committed to returning capital to shareholders. We continue to expect that we will repurchase up to $125 million in our common stock this year pending market conditions, and other factors, which would be $75 million worth of shares available for share repurchases remaining under our current offer.

<unk>.

Before closing I would like to note that we also announced today that we of launch subject to market conditions and offering of $500 million of aggregate principal amount of convertible senior notes due 2027, our intended use of proceeds is to repurchase a portion of our outstanding one in the quarter percent convertible.

Na Sun: Now I'll turn to slide 11 for a discussion of our 2021 financial guidance, which is based on GAAP financials. We plan in future quarters to report both GAAP and non-GAAP financial results. Our guidance is based on the latest information from our partners and our planned expenditures for the year. We expect total revenues of $375 to $395 million, which would represent year-over-year growth of 40 to 48 percent. Let me speak to the components of revenues.

Notes due 2024 and.

Of the remainder of the proceeds for share buybacks, a corporate general corporate purposes, and I would encourage everyone to review the press release.

That we put out this afternoon.

Please note that the current guidance from this earnings call does not contemplate the offering or exchange in the press release I just referenced.

And with that let me now turn the call back to Helen.

Thank you Ali as you just heard our developing pipeline coupled with the financial outlook, placing all of them in the strongest position ever as a company. We look forward to strong growth in revenues profitability and cash flow in the coming quarters and years, which will allow us to deliver on our commitment to return capital to shareholders maintained long term sustainable.

Na Sun: We expect revenues from royalties to double from 2020 levels. We expect product sales to increase between 50% and 60% from 2020 levels, driven primarily by bulk API sales to our partners. We further expect revenue under collaborations to be in a similar range as the 2020 total, driven by new clinical trial starts and commercial milestones. And with regard to operating expenses, I would just note for modeling purposes that the substantially higher product sales we expect will result in a commensurately higher cost of goods, which will be an important factor in your EPS calculation.

<unk> and maximize shareholder value.

I'll close on slide 12, while 2020 was clearly a transformative year for our handlers on 2021 is expected to be similarly, impactful with several important and value creating events that are listed on slide 12.

We expect the wave two launch momentum to continue with doors like fast Perrot endures. The SC continued to grow in U S and Europe and potentially also in Japan based on the potential for the approval. There in 2000 of 'twenty, one and we also expect favorable momentum tech salary following the European Commission approval in December of 2012.

Na Sun: Total OPEX excluding COGS is expected in the range of $80 to $83 million, and this modest increase from 2020 levels illustrates the strong leverage of our business model. We expect operating income for 2021 to be in the range of $215 million to $235 million, which would represent 49 to 63 percent growth over 2020. Moving to earnings per share, we are projecting GAAP EPS of between $1.40 and $1.55, which would represent 54% to 70% growth over 2020.

<unk>.

We expect two new products, the inter phase III, resulting in four ongoing phase III program of course, seven separate indications and recall these will form the next potential launches in wave three.

We project five new phase one starts resulting in 12 phase one product.

And we will continue to work to find new collaboration agreements and advanced new targets into development and.

Na Sun: As Helen reviewed, we remain committed to returning capital to shareholders. We continue to expect that we will repurchase up to $125 million of our common stock this year, pending market conditions and other factors, which would leave $75 million worth of shares available for share repurchases remaining under our current authorization. Before closing, I would like to note that we also announced today that we have launched, subject to market conditions, an offering of $500 million of aggregate principal amount of convertible senior notes due 2027.

And as a result of all of this of strong progress we're in a position to return cash to our shareholders through the $125 million share repurchase program and we will continue to seek to acquire a platform that can add to our long term revenue growth.

None of this progress to date and the future would be possible without the amazing team at Halo line and I'd just like the send my sincere thanks to everyone for these terrific results.

Thank you everybody for your attention today and we'd be delighted to take your questions. Operator. Please would you open the call.

Yeah.

Na Sun: Our intended use of the proceeds is to repurchase a portion of our outstanding 1.25% convertible notes due 2024, and the remainder of the proceeds for share buybacks and general corporate purposes. I would encourage everyone to review the press release that we put out this afternoon. Please note that the current guidance from this earnings call does not contemplate the offering or exchange in the press release I just referenced. And with that, let me now turn the call back to Helen.

As a reminder to ask a question you will need the press star one on your telephone keypad to withdraw your question press the pound key.

Then Thats star one to ask the question.

Your first question comes from the line of Charles Duncan from Panther since child, Sir Your line is open.

Hi, Helen.

<unk> and team congratulations on a very good quarter and thank you for taking our questions.

Thank you.

Helen I. Torley: Thank you, Elaine. As you just heard, our developing pipeline coupled with the financial outlook places Halozyme in the strongest position ever as a company. We look forward to strong growth in revenues, profitability, and cash flow in the coming quarters and years, which will allow us to deliver on our commitment to return capital to shareholders, maintain long-term sustainable growth, and maximize shareholder value. I'll close on slide 12.

So first question is not on theirs.

Theres the works.

On our Gen X.

F card to the Mod and I'm just kind of wondering it seems like this is this going to become an increasingly.

A large part of the story at least for wave three.

And I'm wondering if you could remind us of call of the IP strategy on sub Q as Curtis man and how long that May last and I also wanted to ask about the new targets that were selected by origin.

Helen I. Torley: While 2020 was clearly a transformative year for Halozyme, 2021 is expected to be similarly impactful, with several important and value-creating events that are listed on slide 12. We expect the Wave 2 launch momentum to continue, with Darzalex FastPro and Darzalex SC continuing to grow in the US and Europe, and potentially also in Japan, based on the potential for approval there in 2021. We also expect FESGO momentum to accelerate following European Commission approval in December 2020. We expect two new products to enter Phase 3, resulting in four ongoing Phase 3 programs across seven separate indications. And recall, these will form the next potential launches in Wave 3.

Yes.

Thanks for that question. So the we agree FERC. The Mod is definitely one of the most exciting product.

Our in our portfolio certainly based on the the range of indications of working in today.

With regard to the IP relinquishing the royalty revenues per him design.

We will continue to receive royalties for tenure.

10 years after the first commercial sales or if there is of co formulation patents that ever issued for it that could have the effect of pushing out the royalty of duration even longer than that so.

Helen I. Torley: We project five new Phase 1 starts resulting in 12 Phase 1 products, and we will continue to work to find new collaboration agreements and advance new targets into development. And as a result of all of this strong progress, we are in a position to return capital to our shareholders through the $125 million share repurchase program. And we will continue to seek to acquire a platform that can add to our long-term revenue growth.

So were the two.

Seem to talk about co formulation patents Forest Park at the mall.

Our cash, but I'm just as a reminder is based on our contracted 10 years. After the first commercial sale and if there are no remaining.

Patents in place, we would get a step down in the royalty to half of the original rate for the timeframe from the last remaining patent to the end of that 10 year term, but certainly a very exciting story of head for F cartage of mud.

Helen I. Torley: None of this progress to date and the future would be possible without the amazing team at Halozyme, and I'd just like to send my sincere thanks to everyone for these terrific results. I thank you all for your attention today, and we'd now be delighted to take your questions. Operator, please would you open the call?

That's helpful and I guess, it's too too early to talk about co formulation patents.

And so we will come back to you. The second question I had regarding our genetics collaboration is the six new targets are up to six targets and I guess I'm wondering if there has been disclosed or if you could provide us any color to point as to where that might be.

Operator: As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. To withdraw your question, press the pad key again. Once again, that's star one to ask a question. Your first question comes from the line of Charles Duncan from Cantor Fitzgerald. Sir, your line is open.

Yeah. So far the just selected two of the targets Chaz, so the exterran target and the C to target so are we.

Charles Duncan: Hi Helen and Elaine and the team. Congratulations on a very good quarter and thank you for taking our questions.

We look forward to continuing to work with our Gen X and identify additional targets and the obviously we are very gratified that the already.

Helen I. Torley: Thank you.

Charles Duncan: So the first question is not about Darzalex, it's about Argenet, and F CAR TISMOD. And I'm just kind of wondering whether this can become an increasingly large part of the story, you know, at least for wave three, Helen. And I'm wondering if you could remind us of what the IP strategy on sub-Q F CAR TISMOD is called and how long that may last. And I also wanted to ask about the new targets that were selected on our agenda.

Signal strong interest in expanding the collaboration to up to six targets, but at no additional nominations as yet to announce the.

Beyond the first two <unk> in situ.

Okay last question, then I'll hop back in the queue and that is on new collaborations you've been very productive there with the November horizon deal would you in.

Helen I. Torley: Yes, thanks for that question. We agree, Escartige Mod is definitely one of the most exciting products in our portfolio, certainly based on the range of indications they're working in today. With regard to the IP related to the royalty revenues for Halozyme, we will continue to receive royalties for 10 years after the first commercial sale, or if there is a co-formulation patent that is ever issued for it, that could have the effect of pushing out the royalty duration even longer than that.

Imagine increase visibility on debt to best.

SC version.

Progress this year and then do you have the capacity to bring on new collaborations with the current team and perhaps that being one or two per year.

Yeah, so with regard to horizon. It depends the if we think back to what the CEO commented on at J P. Morgan. They certainly did indicate they're working hard to get into the clinic with that collaboration that we've certainly done our kickoff meeting in debt. We can I expect I believe of study start for that in two.

Helen I. Torley: We're too soon to talk about co-formulation patents for Escartige Mod, but just as a reminder, based on our contract, it's 10 years after the first commercial sale, and if there are no remaining patents in place, we would get a step down in the royalty to half of the original rate for the timeframe from the last remaining patent to the end of that 10 year term, but certainly a very exciting story ahead for Escartige Mod.

And in 'twenty one.

With regard to our ability to add new collaboration partners I think Ilene mentioned this in her prepared remarks, we do have a lean and leverage of our business model, where individuals' the candles I'm can support multiple partners at different stages of development and so I would we said that we only need a modest expansion.

Helen I. Torley: That's helpful, and I guess it's too early to talk about core formulation patents. And so we'll come back to you. The second question I had regarding our Gen X collaboration is the six new targets, or up to six targets. And I guess I'm wondering if those have been disclosed, or if you could provide us any color to point as to where that might be.

In people at if we were to see a significant expansion of the number of products in the clinic or a significant expansion in the number of partners. So the cash.

Operating expenses of good estimate for the next several years unless we see a big expansion in the number of our partners.

Helen I. Torley: Okay, last question, then I'll hop back in the queue. And that is on new collaborations. You've been very productive there with the November Horizon deal. Would you imagine increased visibility on that Tabeza SC version progress this year? And then do you have the capacity to bring on new collaborations with the current team, perhaps one or two per year?

Partners and targets.

Very good thanks for the color great quarter Congrats.

Thanks, Joe I appreciate that.

Yeah.

Your next question comes from the line of the Kim from BMO.

Your line is open.

Alright, thank you.

Good afternoon, and congrats on the quarter.

I first wanted to ask about the metrics you provided before the <unk> fast pro the 40% U S share. According to Symphony Health just want to understand how reliable that data is the near mine and I assume that aligns with your what youre receiving in royalties for fast growth.

Helen I. Torley: Yeah, so with regard to Horizon and Topeza, if we think back to what the CEO commented on at J.P. Morgan, they certainly did indicate they were working hard to get into the clinic with that collaboration. We've certainly done our kickoff meeting, and we can expect, I believe, a steady start for that in 2021. With regard to our ability to add new collaboration partners, I think Elaine mentioned this in her prepared remarks. We do have a lean and leverageable business model where individuals at Halozyme can support multiple partners at different stages of development.

Yeah, I can talk in general terms of bite that doing the yes. It does triangulate for us well with the overall.

Number is that we are seeing.

I do think other is always an adjustment from the any of these reported.

Shouldn't that get numbers, but the good news is and this is why we reported the what we see a correlation with the performance we're seeing in the royalty revenues were receiving.

Helen I. Torley: And so we've said that we only need a modest expansion in people if we were to see a significant expansion of the number of products in the clinic or a significant expansion in the number of partners. So the current operating expense is a good estimate for the next several years unless we see a big expansion in the number of partners and targets.

And can you comment on.

The launch dynamics for.

Says go and how that compares the <unk>.

The fast pro in the U S are you.

Seeing similar uptake.

Uptake on the conversion or are there differences that we should think about between those two therapies.

Charles Duncan: Very good. Thanks for the color.

Helen I. Torley: Great quarter. Congratulations. Thank you.

Helen I. Torley: Thank you. I appreciate that.

Yeah, I think based on what Roche has reported as to the overall revenues per sales go.

Doe Kim: Your next question comes from the line of Doe Kim from BMO. Your line is open.

Helen I. Torley: Hi, thank you. Good afternoon and congrats on the quarter. I first wanted to ask about the metrics you provided for Darzalex FastPro, the 40% U.S. share according to Symphony Health. I just want to understand how reliable that data is in your mind, and I assume it aligns with what you're receiving in royalties for FastPro?

The theyre not getting out of the gate as fast as doors like spas grown I will see the dollars of links Faas Pro has the has exceeded our expectations with the speed of adoption in the United States.

We always expected for fans go focusing there the 2020 would be the initial couple of quarters, while they get all of the key logistics in place so things like working on reimbursement getting on formularies getting uploaded to the electronic medical records and it was always our expectation that 2021 would be where are we.

Doe Kim: I can talk in general terms about that bill and say yes, it does triangulate for us well with the overall numbers that we are seeing. I do think there is always an adjustment from any of these reported syndicate numbers, but the good news is, and this is why we reported it, we see a correlation between the performance we're seeing and the royalty revenues we're receiving.

C fares go really starting that robust uptake and so we're spending I think very nicely poised for that to see greater penetration in the U S as well as more revenues coming from Europe, which is now only beginning to launch.

Helen I. Torley: And can you comment on the launch dynamics for SESGO and how that compares to Darzalex or FastPro in the U.S.? Are you seeing similar uptake and conversion, or are there differences that we should think about between those two treatments?

So things go this will be of Goodyear, we believe for strong growth there Darfur fast broke got out of the gate faster than I think any loans I've personally seen so they they are going to continue that momentum as well and will be the dominant driver of our royalty revenues, but were going to see a very nice contribution from Fayetteville as as it.

Doe Kim: Yeah, I think, based on what Roche has reported as to their overall revenues for FASGO, they're not getting out the gate as fast as Darzal X FASPro. And I will say that Darzal X FASPro has exceeded our expectations with the speed of adoption in the United States.

From the two dynamics I just mentioned, though.

Helen I. Torley: So, you know, we always expected that for FASGO to focus there, 2020 would be the initial couple of quarters while they get all of the key logistics in place. So, things like working on reimbursement, getting on formularies, getting uploaded to electronic medical records, and it was always our expectation that 2021 would be where we see FASGO really starting that robust uptake. And so, we're standing, I think, very nicely poised for that to see greater penetration in the US, as well as more revenues coming from Europe, which is now only beginning to launch.

Okay. Thank you that makes sense.

Last question on the financials.

Based on your guidance.

When you back into the operating expenses for 2021.

It seems that we should see an increase in spending for the year.

The.

When you look at fourth quarter of 2020.

Maybe a bottom of.

The reductions in operating expenses.

Where should we expect the CV growth in spending in R&D or SG&A.

Yeah, Let me, let me turn that one over to Elaine to answer.

So no.

We don't provide sort of the breakdown between opex.

In terms of the breakdown within Opex, but what I can say is.

Helen I. Torley: So, FASGO, this will be a good year, we believe, for strong growth there. Darzal X FASPro got out of the gate faster than I think any loans I've personally seen. So, they are going to continue that momentum as well and will be the dominant driver of our royalty revenues. But we're going to see a very nice contribution from FASGO from the two dynamics I just mentioned, though.

Total opex, excluding Cogs, we've talked about for 2021 being in the $80 million to $83 million range.

Generally consistent with sort of the Opex for 2020, and again reflects our ability to support multiple products and programs of our partners.

And it's obviously down significantly following the restructuring of focus on in the hands only business. So we'll continue to see.

Doe Kim: Okay, thank you, that makes sense. And last question on the financials, just based on your guidance... When you back into the operating expenses for 2021, it seems that we should see an increase in spending for the year. When you look at the fourth quarter of 2020, maybe at the bottom of the reductions in operating expenses, where should we expect to see the growth in spending, in R&D or SG&A?

Good leverage out of our.

N handle the business model and that should be able to support again multiple products and programs of course as Helen indicated should there be significant expansion of the number of new partners of programs.

<unk>.

There could be some expansion over time and some growth with inflation over time, but that's a good number for 'twenty one.

Great. Thanks for taking my questions.

Absolutely.

Yes.

Your next question comes from the line of Jim Barrett Channel from Wells Fargo. Your line is open.

Doe Kim: Yeah, let me turn that one over to Elaine to answer that.

Yeah, Hi, guys, let me add my congratulation on the quarter and the year I.

Na Sun: So, Joe, we don't provide sort of the breakdown between OPEX, you know, in terms of the breakdown within OPEX. But what I can say is, you know, total OPEX, excluding COGS, we've talked about for 2021 being in the $80 to $83 million range. That's, you know, generally consistent with sort of the OPEX for 2020, and again, reflects our ability to support multiple products and programs of our partners and is obviously down significantly following the restructuring and focus on enhanced only business.

I guess of few questions first on the the note the convertible note offering.

Just maybe if you could comment on the timing and.

Is the suggestion that Youll exchange some portion of the one of the quarter percent notes and do you expect that to be completely.

The place and also just in terms of the mix of shares and cash in that exchange and then I've got some follow up questions.

Yeah, Let me, let me ask Elaine to address what she can in that answer Jim.

Sure.

So.

Unfortunately, Jim I can't speak too much specifically about the offering I would refer you to our press release, but you are right we did discuss the.

Na Sun: So we'll continue to see good leverage out of our, you know, enhanced only business model. And that should be able to support, again, multiple products and programs. Of course, as Helen indicated, should there be a significant expansion in the number of new partners or programs, you know, that could be some expansion over time and some growth with inflation over time. But that's a good number for 2021. Great. Thanks for taking my question.

A offering of $500 million in the new convertible notes, we've talked about and use of proceeds being to repurchase a portion of the of the outstanding convertible notes.

As well as for share buybacks under our existing board authorization.

And Tracy our balance sheet for general corporate purposes.

So I can't speak to more specifics and then I'll just refer you to our press release.

Doe Kim: Great. Thanks for taking my questions.

Okay. Thanks of the mine just.

Jim Bertineau: Your next question comes from the line of Jim Bertineau from Wells Fargo. Your line is open.

Just in terms of the guidance for royalty is doubling in 2021, if you could maybe speak telling the world way into just the assumptions underlying that and what guides that guidance of it.

Jim Bertineau: Hi guys, let me add my congratulations on the quarter and the year. Questions meet first on the note, the convertible note offering just maybe a comment on the timing, and there's the suggestion that you'll exchange some portion of the one and a quarter percent notes and do you expect that to be completely, and also just in terms of the mix of shares and cash in that exchange. And then I've got some follow-up. Yep.

Feedback you've got from your partners and if you look at a range of take the LOE range of that range of the mid point is based on consensus estimates is it based on prior experience with launches in Europe, just trying to understand what the guide that.

Doubling of royalties and how conservative.

That may be.

Oh do you want to address that.

Sure.

We take a we take all.

Na Sun: Yep, let me let me ask Elaine to address what she can in that answer, Jim.

All of those factors into account Jim as you as you mentioned, we have a very close relationship with our partners.

Jim Bertineau: So, unfortunately, Jim, I can't speak too much specifically about the offering. I would refer you to our press release, but you're right. We did discuss an offering of $500 million in new convertible notes. We talked about the use of the proceeds being to repurchase a portion of the outstanding convertible notes, as well as for share buybacks under our existing board authorization and tracing our balance sheet for general corporate purposes.

Our alliance management team and frankly sort of across the organization are.

Meet regularly and discuss regularly with our partners to get alignment around the potential outlook for the.

The the and potential timing of programs and products.

We take both the royalty outlook from our partners we look at.

Market research as well we look at.

The sales statistics from the groups like Symphony.

Jim Bertineau: Okay, thanks. And then just in terms of the guidance for royalties doubling in 2021, if you could maybe speak, Helen or Elaine, about just the assumptions underlying that and what guides that guidance. Is it feedback you've gotten from your partners? And do you look at a range and take the lower end of that range or the midpoint? Is it based on consensus estimates? Or is it based on prior experience with launches in Europe? Just trying to understand what guides that doubling of royalties and how conservative or not that may be.

<unk> et cetera, and we will look at also analyst estimates so taking all of those factors into consideration, but notably obviously R. R. R close interactions with our partners.

Gives us confidence that there will be debt, we would anticipate very substantial growth in 2021, and I think we've mentioned obviously some of the recent recently launched partner products, including <unk> <unk> and Roche's FESCO are clearly drivers of that growth.

Na Sun: Elaine, do you want to address that?

Na Sun: Sure. So we take all of those factors into account, Jim, as you mentioned. We have a very close relationship with our partners; our alliance management team, and frankly, across the organization, meet regularly and discuss regularly with our partners to get alignment around the potential outlook for and potential timing of programs and products. So we take both the royalty outlook from our partners, and we look at market research, as well. We look at, you know, sales statistics from groups like Symphony, etc.

Terrific and maybe just one final question and I'll jump back in the queue. Just in terms of thinking about the different waves of launch coming up how do we think about wave three versus wave. Two if you could say anything about as you look at that way of four products across seven indications do you think it's comparable to wait two or four bigger maybe just.

Qualitatively if you can comment on that.

Yeah the the.

The first two of potential launches, obviously are ones, we know about and that we're very excited about that includes the cartridge amount, we mentioned earlier as well as to centric each of those clearly as there.

Na Sun: And we'll also look at analyst estimates. So taking all those factors into consideration, but notably, obviously, our close interactions with our partners, gives us confidence that there will be, as we would anticipate, you know, very substantial growth in 2021. And I think we've mentioned, obviously, some of the recent recently launched partner products, including Janssen, Darzalex, and Roche's Fesco, our

Projections of multibillion dollars, so very attractive large market.

And I can just say qualitatively the the additional two products that we.

I believe will enter phase three this year as well are also exciting establish some blockbuster products Jim so.

Jim Bertineau: Terrific. And maybe just one final question, I'll jump back in the queue, just in terms of thinking about the different waves of launches coming up. How do we think about wave three versus wave two? If you can say anything about, you know, as you look at that wave of four products across seven indications, whether you think it's comparable to Wave 2 or bigger, maybe just qualitatively, if you can comment on that.

It's a very exciting group that's been wave three and obviously strong focus on wave two and the execution there, but wave three is a very exciting wave of the portfolio of potential launches as well.

Okay terrific. Thanks for taking the questions.

Thank you.

Your next question comes from the line of Jessica Fye from J P. Morgan.

Helen I. Torley: Now, you know, the first two potential launches, obviously, are ones we know about and we're very excited about. That includes F Cartegiemod, as we mentioned earlier, as well as Tocentric.

Your line is open.

Hey, guys. This is Luke on for Jeff Thanks for taking my call.

Okay.

So just to start you noted that you expect 2021, our royalty revenue for SaaS grow to be substantially higher than the Transco is that driven more as the EU launch the status quo is just getting underway or would you say that's sort of the same dynamic when you look at shifts of the U S.

Helen I. Torley: Each of those, clearly, as their analyst projections are multi-billion dollars, so very attractive large markets. And I can just say qualitatively that the additional two products that we believe will enter Phase 3 this year, as well, are also exciting, established blockbuster products, Jim. So, you know, it's a very exciting group that's in Wave 3, and obviously, there is a strong focus on Wave 2 and the execution there, but Wave 3 is a very exciting wave of potential portfolio launches, as well.

And then looking at long term do you expect that dynamic the sort of persist.

Or would you expect them to be.

More of an equal level over the long term just given your comments.

Component of cash cash flow has gotten out of the gate.

Yeah, Eileen would you like to address that question.

Jim Bertineau: Okay, terrific. Thanks for taking the question. Thank you.

I would say sure.

Jessica Macomber Fye: Your next question comes from the line of Jessica Fye from J.P. Morgan. Your line is open.

We see a very meaningful growth in the dark likes of fast grow as we've talked about and sub $2 legs as.

Jessica Macomber Fye: Hey, guys, this is Luke going for Jeff. Thanks for taking my call or your questions today. So just to start, you noted that you expect 2021 royalty revs for FASPRO to be substantially higher than FESCO. Is that driven more as the EU launch for FESCO is just getting underway? Or would you say that's sort of the same dynamic when you look at just the US? And then, looking long term, do you expect that dynamic to persist? Or would you expect them to be at more of an equal level over the long term? Just given your comments on how fast FASPRO has gotten out of the gate?

As we've seen in 2020, and we expect continued growth in 2021 I think first go as we've talked about 2020 was sort of the year of staging.

With the rate of getting reimbursement and formulary access and EMR and so with the with those now in place we do anticipate meaningful growth in 2021. In addition to as you rightly point out the.

Received the approval at the end of 2020 in Europe, and so we see European Europe also being a driver of of of the.

Increasing sales and royalty growth from.

Na Sun: Yeah, Elaine. Would you like to address that question?

From Vasco.

Okay.

Jessica Macomber Fye: I would say, "sure." So we see very meaningful growth in Darzalex FastPro, as we've talked about, and SubQ Darzalex, as we saw in 2020, and we expect continued growth in 2021. I think FESCO, as we've talked about, 2020 was sort of a year of staging, with getting reimbursement, formulary access, and EMR. And so with those now in place, we do anticipate meaningful growth in 2021. In addition, as you rightly point out, they received approval at the end of 2020 in Europe. And so we see Europe also being a driver of increasing sales and royalty growth from FESCO.

And then just the number one.

Can you give.

Any more granularity on timing for the for the ongoing phase III trials.

For tenants like the Centurylink and depends up beyond just then potentially launching between 2023 and 2025.

Like maybe the earliest that they could file for these formulations.

And then is there any potential for <unk> to come earlier than that.

Given the pursuit of rapid path to registration in Mg that you guys noted the.

Yeah, I will say when we come up with the estimate of them being in the 23 through 2025 time frame for the week three launches of really is based on our standard timelines, which has been for the half the five years from first in human and so to the the point you made the with regard to partition Mod.

Helen I. Torley: Okay, and then just another one. Can you give, you know, any more granularity on timing for the ongoing Phase 3 trials for candidates like Tick-Centric and Tepeza beyond just them potentially launching between 2023 and 2025? Like, you know, maybe they're released so they could file for these SE formulations. And then is there any potential for F Cartegia Mod to come earlier than that, given the pursuit of, you know, rapid path to registration and NMG that you guys noted?

If the where for some reason able to have a much faster smaller is an example of phase III that could potentially mean in shorter time line and it could potentially mean the launch earlier I still think those are unknowns and so we plan conservatively and just link it to a benchmark, but obviously there is a potential dynamics there we can't provide any.

Helen I. Torley: Yeah, I will say when we come up with the estimate of them being in the 23 to 2025 timeframe for the Wave 3 launches, it really is based on our standard timelines, which have been four and a half to five years from first appearing in humans. And so the point you made with regard to F. Carticimon, if we were for some reason able to have a much faster, smaller, as an example, Phase 3, that could potentially mean a shorter timeline, and it could potentially mean a launch earlier. I still think those are unknowns. And so we plan conservatively and just link it to our benchmark. But obviously, there is a potential dynamic there.

The more granularity on the phase III data readout from our partners haven't provided that so we're not in the position to share at the Ada.

You take a look at the clinical trials Gov, you get some estimates there of primary completion date, but as you know those aren't always the specific as we would like but unfortunately can't provide any granularity until the partners would talk about their estimated completion date.

Alright, thanks for taking my questions.

Yeah.

Okay.

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

Hi, it's Roy in for Jason Thanks for taking my questions.

Just a couple of the entire maybe of the convertible offering and the buybacks.

You guys have any thoughts on the potential dividend and then how are you kind of seeing the M&A environment right. Now what are you seeing a lot of assets out there what do you think about valuations may be the last.

Jessica Macomber Fye: We can't provide any more granularity on the Phase 3 data readouts because our partners haven't provided that. So we're not in a position to share it. But if you take a look at clinicaltrials.gov, you get some estimates there of the primary completion date. But as you know, those aren't always as specific as we would like. But unfortunately, we can't provide any granularity until the partners talk about their estimated completion dates.

Five days or so notwithstanding.

Are you thinking there.

The follow up on the lecture on have you guys had any conversations with astrazeneca.

Do you expect that maybe post closing of <unk>. Thanks.

Yeah, Let me take two of those line I will escalate to talk about the the dividend Alexia on an H E Z absolutely I think that's post the close so we are just waking up the close before we would have a conversation there right for M&A. We are still in the assessment phase looking to see what's out there there are some interesting things out there but.

Jason Nicholas Butler: All right, thanks for taking my question. Thank you.

Jason Nicholas Butler: Your next question comes from the line of Jason Butler from JMP Securities. Your line is open.

Jason Nicholas Butler: Thanks for taking our questions. I guess a couple that tie in maybe to the convertible offering and the buybacks. Do you guys have any thoughts on a potential dividend? And then how are you kind of seeing the M&A environment right now? Are you seeing a lot of assets out there? What do you think about valuations?

You know I think we're still evaluating the the the right type of platforms. The.

Where we want to play and where we can see halos times unique talent is being able to deliver over and above what the company is able to do today. So that's definitely an area of active interest for us, but but yeah. We don't feel in any hurry to do that given the strong growth. We see is that I had for enhanced but we're actively we're actively analyzing an assay.

Helen I. Torley: Maybe the last couple of years? 5 days or so notwithstanding. But what do you think in there?

Jason Nicholas Butler: Then I followed up on Alexion. Have you guys had any conversations with AstraZeneca? Or do you expect that maybe post-closing in 3Q?

And looking and helium would you address the dividend question.

Helen I. Torley: Yeah, let me take two of those and then I'll ask Elaine to talk about the dividend. Alexion and AAZ, absolutely.

Sure happy to.

Yeah.

So so Roy I would just say.

With our.

Diversified portfolio, a strong growth and profitability and cash flow generation, we remain committed to capital return I think with respect to form of capital return, we have a focused on share buybacks and as you know we're very much in the mid.

Helen I. Torley: I think that's post the close. So we are just waiting for the close before we would have a conversation there, Roy. For M&A, we're still in the assessment phase, looking to see what's out there. There are some interesting things out there, but

Of a three year buyback plan, we're about a little under two thirds of the way through that $550 million of buyback plan and we've talked about buying up to $125 million of our common stock this year.

Helen I. Torley: I think we're still evaluating the right type of platforms, where we want to play, and where we can see Halozyme's unique talents being able to deliver over and above what the company is able to do today. So, definitely an area of active interest for us, but yeah, we don't feel in any hurry to do that, given the strong growth we see ahead for Enhance, but we're actively analyzing, assessing, and And Eileen, would you address the dividend question? Sure, happy to do so.

Which would be $75 million for 2022, while we have made no decisions with respect to our going forward beyond that again I would say we remain committed to the capital return.

With respect of dividend versus share buyback I would say you know the company is the is it is a company with strong growth potential.

I would say within the hands frankly still being early in its growth cycle.

Na Sun: So Roy, I would just say, you know, with our diversified portfolio, strong growth and profitability, and cash flow generation, we remain committed to capital return. I think with respect to the form of capital return, we have focused on share buybacks. And as you know, we're very much in the midst of a three-year buyback plan. We're about a little under two-thirds of the way through that $550 million buyback plan. And we've talked about buying up to $125 million of our common stock this year, which would leave $75 million for 2022.

No.

I would say share buyback tends to be the sort of mode or method of capital return of companies with that kind of strong growth.

And so we while we've made again no decisions about.

The kind of beyond sort of the current authorization I think we continue to believe that share buyback is the is the appropriate method of capital return free for a company with the not only strong capital of cash flow generation, but also strong growth prospects.

Okay. Thank you.

Your next question comes from the line of Anita Dushyanth from Marin Bird capital. Your line is open.

Hi, good afternoon, Helene and team. Thank you for taking my questions.

Na Sun: While we have made no decisions with respect to going forward beyond that, again, I would say we remain committed to capital return. With respect to dividend versus share buyback, I would say, you know, the company is a company with strong growth potential. You know, I would say with Enhance, frankly, still being early in its growth cycle, you know, I would say, you know, share buyback tends to be the sort of mode or method of capital return of companies with that kind of strong growth.

Just a couple of more here.

The better than expected uptake of fast growth and despite the COVID-19 environment could you talk about the potential of these reformulated therapy, even Chile moving to an in home setting.

And also regarding the conversion range of going from Ivy The F D. A.

Is there a rate limiting step in this process if there is any.

Na Sun: And so we, while we've made, again, no decisions about, you know, kind of beyond sort of the current authorization, I think we continue to believe that share buyback is the appropriate method of capital return for a company with not only strong cash flow generation but also a strong growth process. Okay, thank you.

Well right with regard to the income the same thing we actually of two products that are approved today for in home setting and that would be the.

Hi, <unk>.

Is the cadence of product and also the Tesco was approved for at home.

I think the way to think about that is if the if there is a product that they.

Anita Dushyant: Your next question comes from the line of Anita Dushyant from Berenberg, Capital. Your line is open.

It has got a good safety profile, perhaps no risk all of the infusion related reactions are no hypersensitivity reactions. There was the possibility of those products could be given at home now Cuba is given at home by the patient themselves without supervision expense goes actually needs to be given with the health care professionals. So I think moving forward.

Anita Dushyant: Hi, good afternoon, Helene and team. Thank you for taking my questions. Just a couple more here. Considering the better-than-expected uptake of Faspro despite the COVID environment, could you talk about the potential of these reformulated therapies eventually moving to an in-home setting? And also, regarding the conversion rate of going from IV to SC, is there a rate-limiting step?

You're onto something I think we're definitely going to see more products being developed to be given at home.

Anita Dushyant: Transcribed by https://otter.ai

Organic because that's we talked about that with F cartage of Mod.

Anita Dushyant: Transcripts by Transcription Outsourcing, LLC. All right.

It will really depend on the safety profile, whether the patient is able to administer it themselves or perhaps with the debt the eat up the health care professional but in the home and I think it's a trend we're seeing around the world where the people want to move care to the least expensive setting. So we're very excited to be part of that wave and I think in the hands of.

Helen I. Torley: With regard to the in-home setting, we actually have two products that are approved today for the in-home setting, and that would be Hycuvia, which is Takeda's product, and also Sesgo was approved for the home. I think the way to think about that is if there is a product that has got a good safety profile, perhaps no risk of infusion-related reactions or no hypersensitivity reactions, there is a possibility those products could be given at home. Now, Hycuvia is given at home by the patient himself without supervision. Sesgo actually needs to be given by a healthcare professional.

It's going to be a key enabler of that wave.

One of the conversion rate from IV to sub Q.

There's a number of factors that we've seen over the years with that there's always a small proportion of patients who.

Who prefer unlike the community of.

Going into an infusion suites and dumped there's been data showing them that to show, that's perhaps 5% to 10% of patients.

Helen I. Torley: So I think moving forward, you're on to something. I think we're definitely going to see more products being developed to be given at home. Argenix has actually talked about that with F-Cartrigimod, and it will really depend on the safety profile, whether the patient is able to administer it themselves or perhaps with the aid of a healthcare professional but in the home. And I think it's a trend we're seeing around the world where people want to move care to the least expensive setting. So we're very excited to be part of that wave, and I think Enhance is going to be a key enabler of that wave.

Other than that it can sometimes just be positioned inertia frankly that sometimes can slow down the conversion from.

Ivy just to.

The Q.

But hopefully those are helpful and he said just as a couple of dynamics, we've seen that can impact the.

The weighted weights and the ultimate amount of which IV goes to sub Q.

Yeah.

Yes. That's helpful. Thank you and just two more from me.

Regarding the I'll say the.

Launch in the European region.

Helen I. Torley: For the conversion rate from IV to sub-Q, there's a number of factors that we've seen over the years with that. There are always a small proportion of patients who prefer and like the community of going into an infusion suite, and there's been data shown to show that's perhaps 5% to 10% of patients. Other than that, there can sometimes just be physician inertia, frankly, that sometimes can slow down the conversion from IV to sub-Q. But hopefully, those are helpful, Anita, just as a couple of dynamics we've seen that can impact the rate at which and the ultimate amount of which IV goes to sub-Q.

Should we think about like the time, Florida. The logic speaks to set up to be about a month or possibly most of Q1 and then we see the uptake of <unk>.

No.

So we we don't have any specifics on sales, but I can say based on experience with European launches over the years and different companies I E actually can take between nine to 12 months for all of the major European markets to launch and Thats because each of them has the different process for the drug to get.

Reimbursed as example.

In Germany can happen quickly within the the first quarter of all of the following approval of countries like France can sometimes take nine to 12 months depending on the.

Anita Dushyant: Yes, that's helpful. Thank you. And just two more for me regarding Facebook's launch in the European region. Should we think about time for the logistics to set up?

The bed because of their reimbursement process. So it is a bit more of a staggered launch pattern, we expect to see in Europe with a couple of the countries going early but France, Spain being much more towards closer to the at the end of the year, but just the gradual rollout of countries all through the course of the year.

Helen I. Torley: to set up to be about a month or possibly most of Q1, and then we'd see the uptake of FSCA. So we don't have any specific concerns, but based on experience with European launches over the years in different companies, it can actually take between, you know, nine to 12 months for all of the major European markets to launch. And that's because each of them has a different process for the drug to get reimbursed.

With some of the large countries like France being in that nine to 12 month period.

Okay. Thank you and just one more regarding.

Coordination of the complementary technology.

Helen I. Torley: For example, UK and Germany can happen quickly within the first quarter following approval, but countries like France can sometimes take nine to 12 months, depending on and depending on their reimbursement process. So it is a bit more of a staggered launch pattern we expect to see in Europe with a couple of the countries going early, but France and Spain being much more towards closer to the end of the year. But we have just a gradual rollout of countries all through the course of the year with some of the large countries like France being in that nine to 12 month period. Okay.

Would it likely be in the oncology.

Collagen autoimmune neurology space to leverage our existing relationship with Clayton partners.

I E.

We are looking for a platform.

But we are going to be able to license the different companies and because where were looking for of platform. It's a little early to see ideally that platform, we'd actually have utility across multiple different disease states and indications because it would be some form of technology of the leading companies kind of add and integrate into their.

And so we're certainly not sitting out with any go to restrict ourselves to work in oncology or autoimmune disease of neurology think of it more like in hands of any technology that can be applied to all sorts of different drugs and disease areas.

Anita Dushyant: Okay, and thank you. And just one more, regarding the acquisition of a

Anita Dushyant: Technology

Helen I. Torley: Would it likely be in the oncology and autoimmune neurology space to leverage existing relationships with current partners?

Because it brings the specific so enabling capability, but it hasn't got anything specific to do with of disease are of disease area.

Helen I. Torley: We're looking for a platform that we're going to be able to license to different companies. And because we're looking for a platform, it's a little early to say. Ideally, that platform would actually have utility across multiple different disease states and indications because it would be some form of technology that leading companies can add and integrate into their portfolios. And so we're certainly not setting out with any goal to restrict ourselves to work in oncology or autoimmune disease and neurology.

Okay. That's helpful.

That'll be all for me. Thank you.

Your next question comes from the line of Joel Beatty from Citi. Your line is open.

Hello, My name is Benjamin <unk> on for Joe.

Quick question for Us.

It looks like greater than 20 targets of the 60 are still to be selected.

Curious is there a clock or a point of which our partner must select the target and then how does this impact the deal terms if the charter does not eventually selected.

Helen I. Torley: Think of it more like enhanced technology that can be applied to all sorts of different drugs and disease areas because it brings a special enabling capability, but it hasn't got anything specific to do with a disease or a disease area.

The I'd say in general terms all of our all of our contracts are a little a little different but.

The overall there is a pretty long period of time for our partners to select all of their targets within the agreement and so we are we're actively working as we mentioned in the prepared remarks with each of our current partners to look at their portfolios and identify new targets to move forward into the clinic.

Anita Dushyant: Okay, that's helpful. Thank you. That'll be all for me. Transcribed by https://otter.ai

Joel Beauty: Your next question comes from the line of Joel Beauty from Citi. Your line is open. Halozyme Therapeutics Inc.

Great. Thank you and then one last question.

It pertains to our generics so.

Benjamin Paluch: Hello, my name is Benjamin Paluch. I'm for Joel. Quick question for us: It looks like more than 20 targets of the 60 are still to be selected.

Moving forward with the bridging study all.

How important is that for a precedent for other enhanced programs. Thank you.

Benjamin Paluch: I'm curious.

I would say all of all of our partners to date who of.

Benjamin Paluch: I'm curious, is there a clock or a point at which a partner must select a target, and then how does this impact the deal terms if a target is not eventually selected?

<unk> got a commercialized products on the market. So we can look at it with them Roche and with Janssen have used a form of of bridging I think what is a different a little bit about the organics approaches they're using the pharmacodynamic endpoints, whereas our previous partners have used of farm.

Helen I. Torley: I'd say, in general terms, all of our contracts are a little different, but overall, there is a pretty long period of time for partners to select all of their targets within the agreement, and so we are actively working, as we mentioned in the prepared remarks, with each of our current partners to look at their portfolios and identify new targets to move forward with.

The cooking ethic and the efficacy endpoint.

And so it is setting up of precedent and so far as it is the reduction of the ITG level.

Benjamin Paluch: And then one last question. So this pertains to Argenics. So with Argenics moving forward with the bridging study, how important is that for precedent for other enhanced programs? Thank you.

Which is a surrogate for the efficacy. So it is precedent setting from that standpoint, the bridging approach in and of itself is is is what all of our partners have done and frankly, that's what our lives is very rapid development time of four and a half the five years to approval is because they're using bridging but it's the first one.

Helen I. Torley: I would say all of our partners to date who have got a commercialized product on the market, so we can look at it with Roche and with Janssen, have used a form of bridging. I think what is different a little bit about their GenX approach is they're using a pharmacodynamic endpoint, whereas our previous partners have used a pharmacokinetic and an efficacy endpoint. And so it is setting up a precedent insofar as it is a reduction in the IDG level, which is a surrogate for efficacy.

To be using a pharmacodynamic parameter.

Okay.

Yeah.

The last question comes from the line of Ben Shim from Canaccord Genuity. Your line is open.

Hi, everybody. Thanks for taking my question and congratulations on the very strong results I'm apologizing I apologize if I missed this can you give us a little more color of them.

Helen I. Torley: So it is precedent setting from that standpoint. The bridging approach in and of itself is what all of our partners have done. And frankly, that's what allows this very rapid development time of 4.5 to 5 years to approval, because they're using bridging. But it's the first one to be using a pharmacodynamic parameter.

Guidance for collaborative revenue in 2021, what are your assumptions for milestones and what has been earned so far.

Alright, I'll turn that one over tailing.

Sure. So we haven't provided further breakdown of the milestone payments, but what we have indicated is that we are anticipating a comparable level of milestones from collaborations as we had in 2020.

Ben Shim: Your last question comes from the line of Ben Shim from Canaccord in January. Your line is open.

Ben Shim: Hi everybody. Thanks for taking my question and congratulations on the very strong results. Apologies if I've missed this. Can you give us a little more color on Guidance for Collaborative Revenue in 2021? What are your assumptions for milestones and what has been earned so far?

And the.

So and I would just note that our guidance excludes.

The potential for any new in hands.

The deals so would exclude any potential upfront payments from the new enhanced of partnership.

Okay.

Na Sun: Alright, I'll turn that one over to Elaine.

A couple more for you the land I.

I think you previously communicated your intentions for the stern of.

Na Sun: So, we haven't provided a further breakdown of the milestone payments, but what we have indicated is that we're anticipating a comparable level of milestones from collaborations as we had in 2020, and so, and I would just note that our guidance excludes the potential for any new enhanced deals, so it would exclude any potential upfront payments from a new enhanced partnership.

<unk> convertible note issue do you have any similar guidance for the 27 notes and maybe.

Maybe can you remind us of what the accounting treatment will be for EPS going forward.

That's the language I'd like to address that.

Sure So I cannot speak to the to the current Ah.

The proposed offering I'd just refer you back to our press release.

Na Sun: Okay, a couple more for you, Elaine. I think you previously communicated your intentions for the outstanding convertible note issue. Do you have any similar guidance for the 27 notes? And maybe can you remind us what the accounting treatment will be for EPS going forward?

As you May have noted in our 10-K, we are expecting to early adopt ASU 2026.

For the convertible accounting and which are which is associated with an add back of noncash interest expense.

Na Sun: Yes, Eileen, would you like to address that?

And you may recall that of the rough.

Na Sun: Sure. I cannot speak to the proposed offering. I just refer you back to our press release. As you may have noted in our 10-K, we are expecting to early adopt ASU 2020-06 for convertible accounting, which is associated with an add-back of non-cash interest expense. And you may recall that of the roughly $20 million of annual interest expense that we have on our P&L, about $12 million of that is non-cash.

Roughly $20 million of annual interest expense that we have on our P&L of about $12 million of that is non cash.

And I think I think that's what I can say there are and the.

I think of with respect to the diluted shares I think.

I think the the the diluted shares underlying our our existing converts I would say at the they're at the analyst estimates on that I think have varied.

Na Sun: And I think that's what I can say there. And I think with respect to diluted shares, I think the diluted shares underlying our existing converts, I would say the analyst estimates on that, I think have varied. That has probably resulted in a little bit of variance also in terms of consensus estimates on EPS. And I think what you can assume is that the diluted nature of our existing converts is one of the things we're addressing with the proposed transaction. And with that, I'd just say, you know, I'd have to refer any other specifics to the outstanding press.

That has probably resulted in a little bit of variance also in terms of a consensus estimates on EPS and I think what you can assume is that of the dilutive nature of our.

Of our existing convert is one of the things we're addressing with the proposed transaction.

With that I'd, just say I'd have to refer any other specifics to the outstanding press release.

Thank you very much that's very helpful and the congrats on the quarter.

Thank you do you think of them.

Alright, well I see we're at time I just want to really thank everybody for your attention today, you've heard of story of handlers line, which was tremendous progress and performance in 2020, which has set us up for a similarly impactful 2021 zone.

Ben Shim: Thank you very much, that's very helpful, and congratulations on the quarter.

Ben Shim: Thank you. All right. Well, I see that we're at time. I just want to really thank everybody for your attention today. You heard the story of Halozyme, which made tremendous progress and performance in 2020, which has set us up for a similarly impactful 2021. So thanks very much for your attention, and we look forward to speaking next quarter. Bye-bye.

Thanks, very much true attention and we look forward to speaking next quarter. Thank you bye bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Okay.

[music].

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.