Q2 2021 Halozyme Therapeutics Inc Earnings Call

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Operator: All lines will be in listen-only mode until the question-and-answer session of today's conference. To ask a question over the phone, at that time, you may press the star key followed by the number one.

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Please also note that today's call is being recorded.

Operator: Please also note that today's call is being recorded. I'll now turn the call over to your host, Al Khaldani. Sir, you may now begin. Thank you. Good afternoon, and welcome to our second quarter 2021 financial results conference call.

I'll now turn the call over to your host Alco Donnie Sir you may now begin.

Thank you.

Good afternoon, and welcome to our second quarter 2021 financial results Conference call.

In addition to our press release issued today. After the close you can find a supplementary slide presentation that will be referenced during today's call from the Investor Relations section of our website.

Operator: In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update.

Leading the call will be Dr. Helen Torley, Taylor's arms, President and Chief Executive Officer, who will provide an update on our business and delaying some our chief Financial Officer, who will review our financial results for the second quarter.

Operator: who will provide an update on our business, and Elaine Sun, our Chief Financial Officer, who will review our financial results for the second.

On today's call, both GAAP and non-GAAP financial measures will be discussed.

Operator: On today's call, both GAAP and non-GAAP financial measures will be discussed. The non-GAAP or adjusted financial measures are reconciled.

On a non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation.

Operator: Comparable Debt Financial Measures in our Earnings Press Release and Slide Presentation. During the call, we'll 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 Dr. Helen Torley. Thank you all.

During the call, we'll 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 Dr. Helen Torley.

Thank you al.

Helen I. Torley: I'm pleased to report that our strong second quarter financial results and outlook have resulted in an increase in our 2021 financial guidance. We now expect to achieve $425 to $445 million in total revenue, an increase from our initial guidance of $375 to $395 million, with commensurate increases also in our GAAP and non-GAAP earnings per share guidance. This substantial increase in our outlook is supported by our recent new enhanced collaboration with Veve Healthcare and higher than previously anticipated revenues from royalties.

I'm pleased to report on our strong second quarter financial results and outlook have resulted in an increase to our 2021 financial guidance. We now expect to achieve $425 million to $445 million in total revenue an increase from our initial guidance of $375 million to $395 million with commensurate.

<unk> is also in our GAAP and non-GAAP earnings per share guidance.

This substantial increase in our outlook is supported by our recent new enhanced collaboration with Bayer healthcare and higher than previously anticipated revenues from royalties.

We reported second quarter revenues of $136.5 million. This was driven by record quarterly royalties of $45.8 million and $60 million in collaboration revenues.

Helen I. Torley: We reported second quarter revenues of $136.5 million. This was driven by record quarterly royalties of $45.8 million and $60 million in collaboration revenues. For the second quarter, GAAP diluted earnings per share was $0.62, and non-GAAP diluted earnings per share was $0.66.

Second quarter GAAP diluted earnings per share was <unk> 62 cents and non-GAAP diluted earnings per share was <unk> 66.

Once again, we achieved these strong results against the backdrop of the ongoing global Covid pandemic.

Helen I. Torley: Once again, we achieve these strong results against the backdrop of the ongoing global COVID pandemic. These results have been accomplished through the strong performance and hard work of our partners, our contract manufacturers and suppliers, and the entire Halozyme team. Beginning now on slide three of our earnings presentation, I'm excited to discuss our 11th enhanced collaboration, which we entered into with Veve Healthcare in June. Veeb is a global specialist HIV company that is majority owned by GlaxoSmithKline and is dedicated to delivering advances in therapies for HIV treatment and prevention.

These results have been accomplished through the strong performance on hard work of our partners our contract manufacturers and suppliers and the entire heelys on team.

Beginning on slide 3 of our earnings presentation I'm excited to discuss our 11th enhanced collaboration which we entered into with <unk> healthcare in June.

<unk> is a global specialist HIV company that is majority owned by Glaxosmithkline and is dedicated to delivering advances on therapies for <unk> HIV treatment and prevention.

With our enhanced technology veeva seeking to enable development of ultra long acting medicine for HIV to meet the evolving needs of patients.

Helen I. Torley: With our enhanced technology, VIVA is seeking to enable the development of ultra-long-acting medicines for HIV to meet the evolving needs of patients. Under the terms of the agreement, VEVE exclusively licensed four HIV small and large molecule targets, which resulted in a $40 million upfront payment to Halozyme. In addition, Veeam is obligated to make potential future payments of up to $175 million in development and commercial milestones for each target and to pay a single-digit royalty to Halozyme on net sales of any commercialized medicines using Enhance.

Under the terms of the agreement <unk> exclusively licensed for HIV small and large molecule targets, which resulted in a $40 million upfront payment to handle them.

In addition, veeva is obligated to make potential future payments of up to $175 million in development and commercial milestones for each target and to pay on mid single digit royalty to <unk> on net sales of any commercialized medicines using enhanced.

The first plants utilize the enhanced technology to evaluate on ultra long acting form of <unk> with the potential for dosing every 3 to 6 months for the prevention of HIV.

Helen I. Torley: These first plans utilize the enhanced technology to evaluate an ultra-long acting form of cabotegravir with the potential for dosing every three to six months for the prevention of HIV. Kapotech Revere is currently approved for the once-monthly treatment of HIV, and the Every Two Month Oathing Regimen is currently under review by the FDA. During GSK's Investor Day in June, representatives of VEVE commented that they would like to use enhanced to expand the opportunities for ultra-long acting regimens, combining cabotegravir with the VEVE pipeline products for treatment and for pre-exposure prophylaxis, with the goal of offering the first self-administered long-acting treatment regimen, which could potentially result in fewer clinic visits for patients.

<unk> is currently approved for the once monthly treatment of HIV.

And every 2 months dosing regimen is currently under review by the FDA.

During Gsk's Investor Day in June Representatives of the commented that they would like to use and hence to expand the opportunities for ultra long acting regimen, combining cabo CAGR bear with a deep pipeline products for treatment and for pre exposure prophylaxis with the goal of offering the first self administered long acting treatment.

<unk>, which could potentially result in fewer clinic visits for patients.

Our collaboration with visa is significant as it highlights the versatility of enhance an expense they enhance technology opportunity in multiple ways.

Helen I. Torley: Our collaboration with VEVE is significant as it highlights the versatility of ENHANCE and expands the ENHANCE technology opportunity in multiple ways. It's the first enhanced collaboration with a focus on infectious disease. It includes both small molecule and large molecule drugs, highlighting the often under-recognized versatility of ENHANCE. And it explores the potential to replace current daily oral therapies with long-acting injectable therapies. I'm pleased to say that collaborative work is already well underway, with the DEEP and Halozyme team working together on the first cabotegravir study, with a projected Phase 1 study start by the end of this year. Now this is our second new Enhanced Collaboration signed within the last eight months, and we're working hard to continue this new-deal memento and are actively engaged in discussions with a range of biotech and pharma companies.

First enhance collaboration with a focus on infectious disease.

It includes both small molecule and large molecule drugs, highlighting the often under recognized versatility of enhance and it explores the potential to replace current daily oral therapies with long acting injectable therapies.

I am pleased to say that collaborative work is already well underway with the deep and Halo time team working together on the first <unk> study with a projected phase 1 study start by the end of this year.

Now this is our second new enhanced collaboration signed within the last 8 months and we're working hard to continue this new deal momentum and are actively engaged in discussions with a range of biotech and pharma companies.

Let me turn now to slide 4 and we'll discuss our strong royalty revenue growth in the second quarter and the outlook for the year.

Helen I. Torley: Let me turn now to slide four, and we'll discuss our strong royalty revenue growth in the second quarter and the outlook for the year. Royalties during the second quarter were $45.8 million. This represents 189% growth year over year and 24% sequential growth, following what had previously been our record quarterly royalties. Strong royalty growth continues to be driven primarily by the successful, ongoing global launches of Janssen's subcutaneous forms of Darzalex, which utilize our enhanced technology. Rocio Sperco is also beginning to contribute in a more meaningful way as global launches continue.

Royalties during the second quarter were $45.8 million.

This represents 189% growth year over year on 24% sequential growth following what had previously been a record quarterly royalties.

Strong royalty growth continues to be driven primarily by the successful ongoing global launches again from subcutaneous forms of <unk>, which utilize our enhanced technology.

Roche is Fayetteville is also beginning to contribute in a more meaningful way of global launches continue.

For the full year 2021 day, no project, a more than doubling and royalty revenues over 'twenty 'twenty based on the anticipation of continued growth primarily driven by <unk>.

Helen I. Torley: For the full year 2021, we now project a more than doubling in royalty revenues over 2020 based on the anticipation of continued growth primarily driven by Darzell XSV. We're delighted to see robust growth in this high-margin, recurring revenue stream. I'll now provide highlights of our key commercialized products. This is on slide five, and I'll begin with the discussion of Darzale.

Delighted to see robust growth in this high margin recurring revenue stream.

I will now provide highlights of our key commercialized products. This is on slide 5 and I'll begin with a discussion of Dar the legs.

During the second quarter Johnson, <unk>, Johnson, and Johnson reported worldwide sales of <unk>, including both the IV MSC forms of 1.4 billion.

Helen I. Torley: During the second quarter, Janssen's parent Johnson & Johnson reported worldwide sales of Darzalex, including both the IV and SC forms, of $1.4 billion, up 53.8% year-over-year on an operational basis. During the call, J&J management stated that 60% of Darzell XL's worldwide are now the subcutaneous form, which utilizes our enhanced technology, and that the 60% share is in the US and also outside the According to data from Symphony Health, Darzlik's Fast Probe reached 66% of sales in June in the United States.

Up 53, 8% year over year on an operational basis.

During the call J&J management stated that 60% of <unk> sales worldwide I know, the subcutaneous form which utilizes our enhanced technology.

And the 60% share is in the U S and also outside the United States.

According to data from Symphony Health <unk> fast growth reached 66% share of sales in June in the United States.

On the right side of this slide is the percentage of total doors on sales that <unk> fast per are represented in the U S. Looking at the last month of the last 4 quarters.

Helen I. Torley: On the right side of the slide is the percentage of total Darzalex sales that Darzalex Faspro represented in the U.S., looking at the last month of the last four quarters. I think you will agree this was a very impressive trend.

I think you will agree this was a very impressive trend.

Based on James's comments of a robust adoption of ASC and expansion into additional patient populations as well as the most recent share data we've seen from symphony in the U S. We predict the conversion will continue increasing from current levels.

Helen I. Torley: Based on J&J's comments about robust adoption of SC and expansion into additional patient populations, as well as the most recent shared data we have seen from Symfony in the U.S., we project that conversion will continue to increase from current levels. Supporting the future growth of Darzell XSC, Janssen announced a number of significant regulatory achievements during the second quarter. Last month, Jensen received FDA approval for Darzalex Fats Pro in combination with pomalidomide and dexamethasone for patients with multiple myeloma after a first or subsequent relapse.

Supporting the future growth of dark like Betsey, Johnson, <unk> and number of significant regulatory achievements during the second quarter.

Last month Janssen received FDA approval for <unk> in combination with <unk> and dexamethasone for patients with multiple myeloma after first or subsequent relapse.

This marked the sixth indication for doors like fast growth in the treatment of multiple myeloma in the United States.

Helen I. Torley: This marks the sixth indication for Darzlik's Fast Probe in the treatment of multiple myeloma in the United States. And in June, Camson was granted two marketing authorizations in Europe for DARs like FSC in two new indications. The first authorization was for use in combination with glycoslosamide, bortezomib, and dexamethasone in newly diagnosed adult patients with systemic light chain amyloidosis, making Darzalex SC the first approved therapy for AL amyloidosis in Europe.

And then June Janssen was granted 2 marketing authorizations in Europe for doors like <unk> into new indications.

The first authorization was for use in combination with cyclophosphamide bortezomib and dexamethasone in newly diagnosed adult patients with systemic light chain amyloidosis, making darko its etsy. The first approved therapy for al Amyloidosis in Europe.

The second authorization was for use in combination with <unk> and dexamethasone in adult patients with relapsed or refractory multiple myeloma.

Helen I. Torley: The second authorization was for use in combination with pomalidomide and dexamethasone in adult patients with relapsed or refractory multiple myeloma. With strong sales and regulatory momentum, we continue to expect that Darzalex will be a driver of royalty revenue growth for Halozyme for a long time. Moving now to slide six, in addition to Darzalex, there are four other products now approved in most major global markets using our enhanced technology. Globally, more than 500,000 patients have received commercial products utilizing NHANES.

With strong sales and regulatory momentum we continue to expect that <unk> will be a driver of royalty revenue growth for heelys on for much time to come.

Moving now to slide 6 in addition to darice will exit or for other products now approved in most global at major global markets using our enhanced technology.

Globally more than 500000 patients have received commercial product utilizing enhanced.

Yeah.

I'll begin with <unk>, which like dark like fast growth is 1 of our recently launched wave 2 products.

Helen I. Torley: I'll begin with Fezgo, which, like Darzlik's Faspro, is one of our recently launched Wave 2 products. PESGO is a fixed-dose combination of cureviruses, therapeutic antibodies, Progeta, and Herceptin. As a reminder, PESDUA is administered in 5-8 minutes compared to an administration time of several hours for the IV. It was launched in the US in the third quarter of 2020 and in initial European launch markets during the first quarter of 2021. Now that Roche is several quarters into the launch, we're beginning to see a more noticeable increase in sales of Vesgo. In the second quarter, Roche reported Fasco sales of 67 million Swiss francs, up from 29 million Swiss francs in the first quarter.

Sales go which is a fixed dose combination of 2 of roche's therapeutic antibodies per data and herceptin.

As a reminder, <unk> is administered in 5 to 8 minutes compared to an administration time of several hours for the IV.

But it was launched in the U S Inc. Third quarter of 2020, and an initial European launch markets during the first quarter of 2021.

Now that Roche is several quarters into the launch we're beginning to see a more noticeable increase in sales of <unk>.

In the second quarter growth reported <unk> sales of 67 million Swiss francs up from 29 million Swiss francs in the first quarter.

This strong sequential growth is driven by continued U S adoption and use and by uptake in Europe, following reimbursement and launches and a growing number of countries.

On its recent half year results call Roche noted that as we would anticipate Fayetteville is cannibalizing sales of the IV form of <unk>.

Helen I. Torley: This strong sequential growth is driven by continued U.S. adoption and use and by uptake in Europe following reimbursement and launches in a growing number of countries. On its recent half-year results call, Walsh noted, as we would anticipate, Fezgo is cannibalizing sales of the IV form of Progetta. Interestingly, Progetta is now Roche's largest oncology drug, with sales of 2 billion Swiss francs in the first half of 2021. And notably, FESCO is continuing to launch a new market, as evidenced by the recently announced approval in Canada.

Interestingly project is neurosis largest oncology drugs with sales of 2 billion Swiss franc in the first half of 2021.

And notably <unk>, continuing to launch in new markets as evidenced by the recently announced approval in Canada.

I'll move now to our wave 1 launch product sales.

Solve roche's Mabthera SC, which is also called Rituxan high filler and subcutaneous herceptin or Herceptin <unk> continued to experience modestly declining sales due to the ongoing impact of Biosimilars.

Meanwhile, continued Takeda continues with its commercialization of the immunoglobulin therapy <unk>.

Let me now move to slide sentiment on the discussing of the enhanced development portfolio and I'll begin with an overview and then move into a brief review by partner.

Helen I. Torley: I'll move now to our Wave 1 launch products. Salve Rosis, Madthera SC, which is also called Rituxan Hycella, and subcutaneous Herceptin and Herceptin Hylecta continue to experience modestly declining sales due to the ongoing impact of biosimilarity.

Let's begin with the next wave of potential launches. These are called wave 3 launch products.

These are products that are to day in phase III development.

And they include Bristol nibble on mab versus per centric and organic sales at Carter Tomorrow.

But based on historical development timelines products today are in phase III development represent potential launches into 2023 to 2025 timeframe.

Helen I. Torley: Meanwhile, Takeda continues with its commercialization of the immunoglobulin therapy, HiQV. Let me now move to slide 7 and a discussion of the Enhanced Development Portfolio, and I'll begin with an overview and then move into a brief review by partner. Let's begin with the next wave of potential launches. These are called the Wave 3 launch products.

We had expected the fourth product to initiate a phase III study this year.

Recently, the partner for that program informed us that they now expect to initiate the phase III study in 2022.

Moving to the earlier pipeline, we expect 5 new products will enter clinical development during 2021.

Helen I. Torley: These are products that are today in Phase 3 development, and they include Bristol's Nivolumab, Rose's Ticentric, and Organics' F-cartridomide. Based on historical development timelines, products that are today in phase three development represent potential launches in the 2023 to 2025 time frame. We had expected a fourth product to initiate a phase three study this year. Recently, the partner for that program informed us that they now expect to initiate the Phase 3 study in 2020.

We've made good progress here already with 2 new clinical development starts during the first quarter.

With the ongoing programs and these projected starts we project a total of 16 products will be in clinical development with enhanced by the end of 2021.

The products that are today in phase 1 development represent our wave for potential launches in the 2025 to 2027 time frame.

This advancing pipeline of products utilizing enhanced is setting up as you've heard the potential for multiple waves of future product launches that we believe will deliver long term growth in revenue profitability and cash flow.

Helen I. Torley: Moving to the earlier pipeline, we expect five new products will enter clinical development during 2021. We've made good progress here already with two new clinical development starts during the first quarter. With the ongoing programs and these projected starts, we predict a total of 16 products will be in clinical development with enhanced by the end of 2021. The products that are today in Phase 1 development represent our Wave 4 potential launches in the 2025 to 2027 timeframe.

Let me now provide that brief discussion of select partners.

Beginning with Bristol Myers Squibb.

After indicating to start with imminent on our first quarter results call. We're pleased to confirm Bristol dosed. The first patient in the phase III study and the volume apps using enhanced technology for patients with advanced or metastatic clear cell renal cell carcinoma during the second quarter.

In addition to nimble on a map Bristol has initiated 3 phase 1 studies with enhanced.

These include studies of anti CD seventy-three, Tim 3 and the fixed dose combination of Navona mab and relax on that.

Helen I. Torley: This advancing pipeline of products utilizing Enhance is setting up, as you've heard, the potential for multiple ways of future product launches that we believe will deliver long-term growth in revenues, profitability, and cash flow. Let me now provide that brief discussion of select partners.

Moving to Horizon Therapeutics now.

Horizon continues to advance a subcutaneous form of deposit with enhanced as.

As we announced on last quarter's call Horizon has completed dosing of their phase 1 study.

Horizon recently provided an update that the next plans to have initial discussions with the FDA later this year, but moving the subcutaneous version forwards.

Helen I. Torley: Beginning with Bristol Myers Squibb. After indicating the start was imminent on our first quarter results call, we're pleased to confirm Bristol will enroll the first patient in the phase 3 study of nivolumab using enhanced technology for patients with advanced ametastatic clear cell renal cell carcinoma during the second quarter. In addition to Nivolumab, Bristol has initiated three phase one studies with Enhance. These include studies of anti-CD73, TIM3, and the fixed dose combination of nivolumab and rilapilumab.

If development is successful horizon hopes to potentially shorten drug administration time reduce health care practitioner time and offer patients suffering from thyroid eye disease additional flexibility and convenience.

We look forward to further developments in this exciting program for a drug that according to horizon has on anticipated peak sales potential of $3.5 billion.

Moving next to organics, our Janus continuous development or the subcutaneous form of <unk> within hands in 4 phase III trials in 4 separate potential indications.

Helen I. Torley: Moving to Horizon Therapeutics now, Horizon continues to advance its subcutaneous form of tepeza within the hands. As we announced on last quarter's call, Horizon has completed building their Phase 1 study. Horizon recently provided an update that it plans to have initial discussions with the FDA later this year about moving the subcutaneous version forward. If development is successful, Horizon hopes to potentially shorten drug administration time, reduce healthcare practitioner time, and offer patients suffering from thyroid eye disease additional flexibility and convenience.

The 4 indications being studied or chronic inflammatory demyelinating, polyneuropathy or <unk>, which is a neurological disease, leading to impairing motor function.

The second reason immune thrombocytopenia, which is a chronic bruising and bleeding disease.

Thirdly, pemphigus, Vulgaris, which is a chronic disease characterized by severe blistering of the skin.

And finally, myasthenia gravis or Mg a chronic disease that causes muscle weakness.

On its recent half year results call <unk> indicated they expect to complete enrollment in the adapt trial, which is evaluating <unk> SC in myasthenia gravis.

Helen I. Torley: We look forward to further developments in this exciting program for a drug that, according to Horizon, has an anticipated peak sales potential of $3.5 billion. Moving next to Argenix Argenix continues development of the subtenance form of F-Cartuchumab within the hands in four Phase III trials and four separate potential indications. The four indications being studied are chronic inflammatory demyelinating polyneuropathy, or CIDT, which is a neurological disease leading to impaired motor function. The second is immune thrombocytopenia, which is a chronic bruising and bleeding disease. Thirdly, there's Pemphigus vulgaris, which is a chronic disease characterized by severe blistering of the skin.

On the end of 2021 and to have top line results in the first half of 2022.

This is consistent with the potential for approval on loans in the 2023 to 2025 timeframe.

And lastly on Ingenix development continues with its second nominated target <unk>, 7 which is being evaluated in a recently initiated phase 1 study in healthy volunteers.

I'll move now to Roche at Roche is continuing with 2 products in development utilizing enhanced to centric and openness.

To centers, which is neurosis second largest oncology drug with sales of $1.6 billion Swiss francs and the first half of 2021 is being studied in an ongoing phase III trial with enhance and stage 4 non small cell lung cancer.

And was also continues with its phase 1 study evaluating SC administration of <unk> with enhanced or services. Another approved blockbuster product and is indicated for patients with multiple sclerosis.

Helen I. Torley: And finally, Myasthenia Gravis, or MG, a chronic disease that causes muscle weakness. On its recent half-year results call, Argenix indicated they expect to complete enrollment in the ADAPT-SC trials, which are evaluating F-cortigemod SC in myosinia gravis by the end of 2021, and to have top-line results in the first half of 2022. This is consistent with the potential for approval and launch in the 2023 to 2025 time frame. And lastly, Ergenics' development continues with its second nominated target, ARJX117, which is being evaluated in a recently initiated phase one study in healthy volunteers. I'll move now to Roche.

We are pleased with this progress our partners are making in advancing therapies using the enhanced technology. This.

This progress is setting up multiple waves of potential future approvals and launches that can drive long term revenue growth for Halo zone.

And we see further growth opportunities even beyond this exciting pipeline I've just described.

In addition to new development programs arising from new potential collaboration agreements. We also have the opportunity to expand the pipeline through current partners nominating new targets and advancing them into the clinic.

With current partners, having access to more than 20 open slots were excited for the growth opportunity that exists here.

Product moving into development in the next 12 months to 18 months as a result of new collaborations are new nominations by current partners have the potential to create our fifth wave of launches in the 2027.2029 time period.

Helen I. Torley: Roche is continuing with two products in development, utilizing hands-on centric and OkraVis. Ticentric, which is Nairosh's second largest oncology drug, with sales of 1.6 billion Swiss francs in the first half of 2021, is being studied in an ongoing phase 3 trial with ENHANCE in stage 4 non-small cell lung cancer, and it also continues with its phase one study evaluating SC administration of Ocrevus Ocrevus is another approved blockbuster product and is indicated for patients with multiple sclerosis.

I'll move now to slide 8 to discuss how pipeline progress drives revenue for Amazon.

We are again reiterating our 3 year outlook for projected revenues from milestones.

You can see here that for 2021 through 2023, we continue to project $400 million to $450 million in milestone revenues.

This reflects our expectations for partner development and commercial milestones during that period and new deals.

Helen I. Torley: We're pleased with the progress our partners are making in advancing therapies using the enhanced technology. This progress is setting up multiple avenues of potential future approvals and launches that can drive long-term revenue growth for Halozyme. And we see further growth opportunities even beyond this exciting pipeline I've just described. In addition to new development programs arising from new potential collaboration agreements, we also have the opportunity to expand the pipeline through current partners, nominating new targets and advancing them into the clinic.

The blue bars represent our 3 year outlook since 2019 on the green bars represent actual annual milestone revenue demonstrating.

Demonstrating that we are performing well against these predictions.

Specifically with 6 months still remaining of our 2019 to 2021 prediction periods. We have already achieved near the top of the projected range of $225 million to $300 million with $274 million in milestone revenue through June of 2021.

And at the halfway point for our 2020 to 2022 projects in period, we're making strong progress with $214 million in milestone revenue against the prediction of $350 million to $450 million.

Helen I. Torley: With current partners having access to more than 20 open slots, we're excited for the growth opportunity that exists here; products moving into development in the next 12 to 18 months as a result of new collaborations or new nominations by current partners have the potential to create our fifth wave of launches in the 2027 to 2029 time period. I'll move now to slide 8 to discuss how pipeline progress drives revenues for Halozyme.

This near term milestone revenue progress is an important and strong indicator for future royalty revenue.

We predict royalty revenue potential of approximately $1 billion in 2020, selling based on non risk adjusted revenue projections for programs that we currently have line of sight to and assuming global launches in all indications.

Helen I. Torley: We're again reiterating our three-year outlook for projected revenues from Milestone. You can see here that for 2021 through 2023, we continue to project $400 to $450 million in milestone revenues. This reflects our expectations for partner development and commercial milestones during that period and new deals. The blue bars represent our three-year outlook since 2019, and the green bars represent actual annual milestone revenues, demonstrating that we're performing well against these predictions.

We're certainly excited by this ongoing momentum growth on the growth potential for an enhanced technology in the franchise.

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

We see the opportunity to create incremental value for other platform technologies, applying <unk> pro and partnering and commercialization capabilities.

And as we've said before enhance its still early in its growth cycle. So we have the opportunity here to be highly selective in what we choose.

Helen I. Torley: Specifically, with six months still remaining of our 2019 to 2021 projection period, we have already achieved near the top of the projected range of $225 to $300 million, with $274 million in milestone revenue through June of 2021. And at the halfway point for our 2020 to 2022 projection period, we're making strong progress with $214 million in milestone revenue against a projection of $350 to $450 million. This near-term milestone revenue progress is an important and strong indicator of future royalty revenues.

Now with that update I will turn the call over to Elaine for a discussion on the second quarter financial results.

Thank you Helen.

Before I begin I'd like to again note that last quarter, we began and we'll continue reporting key measures on a non-GAAP adjusted basis. In addition to a GAAP basis, and we will also provide financial guidance on a non-GAAP basis.

We consider these non-GAAP financial measures to be important because they provide useful measures of our operating performance exclusive the factors that do not directly affect what we consider to be our core operating performance such as stock based compensation amortization as well as unusual events and their related tax effects.

Helen I. Torley: We project royalty revenue potential of approximately $1 billion in 2027, based on non-risk-adjusted revenue projections for programs that we currently have line-of-sight to, and assuming global launches in all indications. We're certainly excited by this ongoing momentum, growth, and the growth potential for enhanced technology in the franchise. At the same time, we continue to evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating and extending our long-term revenue growth.

You can refer to our press release and filings for a reconciliation of GAAP to non-GAAP net income and earnings per share.

With that I'll now turn to slide 9 for a review of our second quarter revenue highly.

Highlighting our strong financial results total revenue for the second quarter was $136.5 million more than double our revenue for the prior year period of $55.2 million we.

We against on growth from all 3 sources of revenue on the second quarter.

Revenue from royalties for the quarter was $45.8 million.

A 189% increase over the prior year period. This was driven primarily by the continued strong uptake of subcutaneous <unk> utilizing enhanced by our partner Janssen and to a lesser extent by roche's ongoing global launches of VESCO.

Helen I. Torley: We see the opportunity to create incremental value for other platform technologies, applying Halozyme's proven partnering and commercialization capabilities. As we've said before, Enhance is still early in its growth cycle, so we have the opportunity here to be highly selective in what we substitute. Now, Helen, I'll turn the call over to Elaine for our discussion of the second quarter financial results. Thank you.

Product sales were $34 million on the quarter up from the prior year period product sales of $6.3 million. This.

<unk> growth in product sales was primarily driven by higher API sales to our partner Janssen and Roche in support of their ongoing commercial activity.

Elaine: Before I begin, I'd like to again note that last quarter we began and will continue reporting key measures on a non-gap adjusted basis, in addition to a gap basis, and we will also provide financial guidance on a non-gap basis. We consider these non-GAAP financial measures to be important because they provide useful measures of our operating performance exclusive of factors that do not directly affect what we consider to be our core operating performance, such as stock-based compensation, amortization, as well as unusual events and their related tax effects.

Moving to collaboration revenue in the quarter totaled $63 million up 83% from $33 million from the prior year period in.

In addition to the $40 million upfront license fee from V. We recognized $20 million in collaborative revenue from Janssen related to a commercial milestone that was earned in the quarter.

Highlighting the continued momentum of subcutaneous starplex.

Let me now turn to slide 10 for a more detailed breakdown of our second quarter P&L.

Total operating expenses of $43.4 million in the second quarter up from $25.7 million from the prior year period.

Elaine: I'd ask you to refer to our press release and filings for a reconciliation of GAAP to non-GAAP net income and earnings per share. With that, I'll now turn to slide nine for a review of our second quarter revenue. Highlighting our strong financial results, total revenue for the second quarter was $136.5 million, more than double our revenue for the prior year period of $55.2 million. We again saw growth from all three sources of revenue in the second quarter.

The overall increase in total operating expenses resulted from higher cost of product sales, which were $23 million.

Compared with $5.7 million in the prior year period.

This increase in cost of goods in the second quarter was attributable to the markedly higher level of API sales versus the prior year period in support of our enhanced partners products and programs.

Research and development expenses of $8.1 million decreased 10% from $9 million in the prior year period.

G&A expenses were $12.3 million compared to $11 million from the prior year period.

Elaine: Revenue from royalties for the quarter was $45.8 million, a 189% increase over the prior year period. This was driven primarily by the continued strong uptake of subcutaneous Darzalex in hand by our partner Janssen and to a lesser extent by Roche's ongoing global launches of Vesco.

Total operating expenses, excluding cost of goods were $24 million for the second quarter compared with $20 million from the prior year period and consistent with the guidance we provided at the outset of the year on spend.

As a result, GAAP operating income for the quarter was $93 million compared to GAAP operating income of $29.6 million in the prior year period.

Elaine: Product sales were $30.4 million in the quarter, up from the prior year period of $6.3 million. This significant growth in product sales was primarily driven by higher API sales to our partners Janssen and Roche in support of their ongoing commercial activities. Moving to collaboration revenue, in the quarter totaled $60.3 million, up 83% from $33 million in the prior period. In addition to the $40 million upfront license fee from VE, we recognized $20 million in collaborative revenue from Janssen related to a commercial milestone that was achieved in the quarter, highlighting the continued momentum of Subcutaneous Darcella.

Reflecting our strong topline growth and leverage of our business model.

And in terms of our bottom line on a GAAP basis, we achieved net income for the quarter of $91.5 million or <unk> 62 per diluted share.

And this compared with $25.8 million 19 per diluted share respectively in the prior year period.

On a non-GAAP or adjusted basis, net income was $97.8 million or <unk> 66 per diluted share compared to net income of $33.6 million or 24 cents per diluted share respectively in the prior year period.

I'll now turn to slide 11 for a discussion of our 2021 financial guidance.

We are pleased to be raising guidance for 2021 based on our latest collaboration with beef and the strong results. So far in the first half of the year.

Elaine: Let me now turn to slide 10 for a more detailed breakdown of our second quarter P&L. Total operating expenses were $43.4 million in the second quarter, up from $25.7 million in the prior year period. The overall increase in total operating expenses resulted from higher costs of product sales, which were $23 million, compared with $5.7 million in the prior year period. This increase in cost of goods in the second quarter was attributable to a markedly higher level of API sales versus the prior year period in support of our Enhanced Partners products and programs. Research and development expenses of $8.1 million decreased 10% from $9 million in the prior period.

We now expect total revenues of 425 million to $445 million, which would represent year over year growth of 59% to 66% over our already substantial revenue in 2020.

This is up from our prior guidance for the year of 375 million to $395 million.

Moving to the components of revenue as we continue to expect revenues from royalties more than doubled from 2020 level and product sales to increased 70% to 80% from 2020 levels driven primarily by bulk API sales to our enhanced partners.

Given our new collaboration with need and again from commercial milestone, we expect revenue under collaborations to be higher than already meaningful collaborative revenue we achieved in 2020.

Elaine: SG&A expenses were $12.3 million compared to $11 million in the prior year period. Total operating expenses excluding cost of goods were $20.4 million for the second quarter compared with $20 million in the prior year period and consistent with the guidance we provided at the outset of the year on spend. As a result, GAAP operating income for the quarter was $93 million, compared to GAAP operating income of $29.6 million in the prior year period, reflecting our strong top line growth and leverageable business model.

And we now expect GAAP operating income for 2021 to be in the range of 260 million to $280 million, which would represent 80% to 94% growth over 2020, any greater than 60% operating margin.

And this translates to strong bottom line growth with respect to net income we announced the GAAP net income of $235 million to $255 million.

Non-GAAP net income of $280 million with $300 million.

Moving to earnings per share, we now expect GAAP diluted EPS between $1.55, and $1.70 per share representing growth of 70% to 86% over 2020. This is up from our prior GAAP EPS guidance of $1.25 to $1.40 per share.

Elaine: And in terms of our bottom line, on a gap basis, we achieved net income for the quarter of $91.5 million, or $0.62 per diluted share, and this compared with $25.8 million and $0.19 per diluted share, respectively, in the prior year period. On a non-GAAP or adjusted basis, net income was $97.8 million, or $0.66 per diluted share, compared to net income of $33.6 million, or $0.24 per diluted share, respectively, in the prior year period.

And lastly, we now expect non-GAAP diluted EPS of $1.85 to $2 per share representing growth of 65% from 78% growth over 2020.

With that let me turn to slide 12 for a summary of our approach to value creation and capital return.

We've been consistent regarding our balance capital allocation priority.

These include maintaining a strong balance sheet capital returned via share repurchases and commitment to driving both internal and external growth.

We have a strong balance sheet with cash and cash equivalents of $755 million as of June 30.

And we anticipate the strong projected free cash flow driven by enhanced will support both our ongoing commitment to capital return as well as funding both internal and external external growth via our longer term M&A strategy.

Elaine: I'll now turn to slide 11 for a discussion of our 2021 financial guidance. We are pleased to be raising guidance for 2021 based on our latest collaboration with VE and the strong results so far in the first half of the year. We now expect total revenues of $425 million to $445 million, which would represent year-over-year growth of 59% to 66% over our already substantial revenues in 2020. This is up from our prior guidance for the year of $375 million to $395 million.

We've made substantial progress to date with our 3 year $550 million share repurchase program, which we initiated in November 2019.

We began the year with a goal of repurchasing up to $125 million in our common shares during 2021 and I'm pleased to report that with the purchase of an additional $49 million of our shares during the second quarter.

<unk> now completed our goal of $125 million in share repurchases this year in.

In total at an average price of $44.43.

Elaine: Moving to the components of revenues, we continue to expect revenue to more than double from 2020 levels and product sales to increase 70% to 80% from 2020 levels, driven primarily by bulk API sales to our enhanced partners. Given our new collaboration with VEED and the Ganson Commercial Milestone, we expect revenue under the collaboration to be higher than the already meaningful collaborative revenue we achieved in 2020. And we now expect GAAP operating income for 2021 to be in the range of $260 million to $280 million, which would represent 80 to 94% growth over 2020 and a greater than 60% operating margin. This translates to strong bottom-line growth. With respect to net income, we now have a gap net income of $235 to $255 million and a non-gap net income of $280 million to $300 million.

As a reminder to date since the initiation of our program, we have repurchased $475 million on our common shares on an average price of $23 from 27 per share.

And you have up to $75 million remaining under our current 3 year $550 million share buyback authorization.

So with that I'll now turn the call back to Helen.

Thank you Elaine our revenue growth on the robust development pipeline of partner products placed in the hat and <unk> in a strong position for continued strong growth in our revenues, our profitability and cash flow in the coming quarters, and indeed years at which will allow us to deliver on our commitment to return capital to shareholders maintain long term sustainable growth.

And maximize shareholder value.

As we've summarized on slide 13, we continue to expect multiple important value driving event in 2021.

We expect the launch momentum for <unk> SC in sales go to continue with broadening adoption and use it in the already launched market and from additional global launches.

We project 3 phase 1 testing volume.

And if development proceeds are weighted.

For potential launches in the time.

Elaine: Moving to earnings per share, we now expect GAAP diluted EPS between $1.55 and $1.70 per share, representing growth of 70% to 86% over 2020. This is up from our prior GAAP EPS guidance of $1.25 to $1.40 per share. And lastly, we now expect non-GAP-deleted UPS of $1.85 to $2 per share, representing growth of 65% to 78% over 2020. With that, let me turn to slide 12 for a summary of our approach to value creation and capital return. We've been consistent regarding our balanced capital allocation priorities.

27.

In addition, we will work to create new revenue growth opportunities by seeking to find new collateral.

Into development and finally.

From technology that can add to.

None of the terrific results you just heard and later on I discussed would've been possible without the terrific team here at <unk> and I'd like to pass on our sincere. Thanks to each of you for these terrific results.

Thank you everyone for your attention today at we're now delighted to take your questions. Operator would you. Please open the call for the question.

Okay.

Thank you Dr. Poorly participants we will now begin the question and answer session again to ask a question over the phone you May press star 1 from <unk>.

Yes.

To withdraw your rig.

You May press the pound key again Thats star 1 to ask a question or the pound key to withdraw your request.

Elaine: These include maintaining a strong balance sheet, capital return via share repurchases, and commitment to driving both internal and external growth. We have a strong balance sheet with cash and cash equivalents of $755 million as of June 30, and we anticipate the strong projected free cash flow driven by Enhance will support both our ongoing commitment to capital return, as well as fund both internal and external growth via our longer-term M&A strategy.

Speakers. Our first question is from the line of Charles Duncan of Cantor Fitzgerald. Your line is now open.

Yes, Tony.

Congratulations on a on a great quarter, Helen and lane.

Had a question on the feed.

Collaboration.

I believe that's also the first pre exposure prophylaxis candidate that you're you're looking at I'm wondering if you could.

Elaine: We've made substantial progress to date with our three-year $550 million share repurchase program, which we initiated in November 2019. We began the year with a goal of repurchasing up to $125 million of our common shares during 2021. And I'm pleased to report that with the purchase of an additional $49 million of our shares during the second quarter, we've now completed our goal of $125 million in share repurchases this year, in total at an average price of $44.43.

Could you anticipate.

Tier and as your potential.

So for IP around co formulation with the debt candidates.

<unk>, yes, we do have it.

As you are aware 2 phase.

1 studies going on in HIV with <unk> and the NIH, but you're right. This will be the first move into pre exposure prophylaxis with Cabot's Bank Revere. So we're very excited to be working with them on that.

With regard to phase 2.

Elaine: As a reminder, to date, since the initiation of our program, we have repurchased $475 million of our common shares at an average price of $23.27 per share, and we have up to $75 million remaining under our current three-year, $550 million share buyback authorization.

Has not share it flattens beyond publicly on this phase 1 start so chaz I can't.

Haynesville for novel.

Findings that could result in intellectual property gains for co formulated product so those conversations to have.

Helen I. Torley: So with that, I'll now turn the call back to Helen. Thank you, Elaine. Our revenue growth and the robust development pipeline of partner products place Halozyme in a strong position for continued strong growth in our revenues, our profitability, and cash flow in the coming quarters and indeed years, which will allow us to deliver on our commitment to return capital to shareholders, maintain long-term sustainable growth, and maximize shareholder value. As we've summarized on slide 13, we continue to expect multiple important value-deriving events in 2021.

I have begun a fee or if they havent will begin very shortly and we believe there's still a lot of opportunity to find novelties that were.

In new co formulation patents, but stay.

Stay tuned for updates on that.

Okay and then 1 last question Helen regarding Thursday of SaaS Pro I guess, I'm thinking about conversion and what would be could you even imagine.

And then the 80% conversion and then with the broadening use from the new new indications for <unk>.

Helen I. Torley: We expect launch momentum for Darzalex SC and Fezgo to continue with broadening adoption and use in the already launched markets and through additional global launches. Would reject three phase one testing by, Development proceeds are waived, for Potential Lawn Tooth.

The <unk> advance pro would you anticipate new growth in terms of royalties to come from conversion or broadening gifts.

Yeah, I think it's a great question and I was going to start with a broadening use yes. We certainly are seeing with the momentum that Janssen reported in the total <unk> product with the first half sales of $2.8 billion consensus estimates have increased from $7.3 billion to $8.5 billion in 2024.

Helen I. Torley: In the time... 27. 27. 27.

Helen I. Torley: In addition, we will work to create new revenue growth opportunities by seeking to find new collaborators. [inaudible] And finally... Copyright Australian Broadcasting Corporation. None of the terrific results you've just heard Elaine and I discuss would have been possible without the terrific team here at Halozyme, and I'd like to pass on our sincere thanks to each of you for these terrific results. Thank you everyone for your attention today. We're now delighted to take your questions. Operator, would you please open the call for the question?

And so the size of the pie. If you like is definitely getting bigger we believe that's because of increased penetration into the frontline therapy, where especially except 2 is going to be we believe a particularly helpful. So bigger pie for sure.

These new indications and then.

A lot of conversion, we haven't put a number out there test where obviously after you have basically a year at 66% it's pretty impressive in the trend line shows it's not stopping them and we believe that it'll it'll go a good bit higher than that but we're not going to put a number on it but we recently talked to some physicians and.

Operator: Thank you, Dr. Torley. Participants will now begin the question-and-answer session. Again, to ask a question over the phone, you may press star 1 from... You may press the pound key. Again, that's star one to ask a question or the pound key to withdraw your request. Speakers, our first question is from the line of Charles Duncan of Cantor Fitzgerald. Your line is now open. Yes.

It is definitely fulfilling an important need in the marketplace and physicians are very enthusiastically converting their patients.

Charles Duncan: Uh, yes, honey. Um, congratulations on a great quarter, Helen and Elaine.

Next question is from the line of Matthew Luchini of BMO.

Lines are now open.

Charles Duncan: Um, I had a question on the VEVE, uh... Collaboration. I believe that's also the first pre-exposure prophylaxis candidate that you're looking at. I'm wondering if you can.

Hi, good afternoon, thanks for taking the questions and congrats on a very nice quarter.

So first on <unk>, just wanted to get a little.

Little bit more youre on.

Latest thinking latest color that you can share.

Helen I. Torley: Could you anticipate... And is there a potential for? around a co-formulation with that candidate? As you're aware, two phases.

From a ramp perspective continues to lag a little bit there is admittedly impressions.

Ramp you talked about differences in payer mix and patient types in the past, but just wanted your latest thinking there.

Helen I. Torley: One study is going on in HIV with CAPRISA and the NIH. But you're right; this would be the first move into pre-exposure prophylaxis with Cabotegravir. So we're very excited to be working with Veeve on that. With regard to phase two, Veeve has not shared plans beyond, publicly beyond this phase one start. So Chas, I can't, that could result in intellectual property gains for co-formulated products, or if they haven't already, they'll begin very shortly. Transcription by https://otter.ai Okay, and then one last question, Helen, regarding DARSA FASTPRO.

And then secondarily.

You finished out your share repurchase for.

For the year.

So how do we think about the capital allocation for the remainder of there or is there a reason why you wouldn't pull from some of the remaining share repurchase program forward or something else. What's on your minds is how do we think about cash.

Capital allocation from here given the Max that.

Your stated repurchase from here. Thank you.

That's great I'll take things going on and I'll turn the share repurchase question over to Ilene.

If you recall when they were launching.

Helen I. Torley: I guess I'm thinking about conversion and what would be, could you even imagine? 80% conversion. And then with the broadening use and the new new indications for GarzaFansPro, would you anticipate new growth in terms of royalties to come from conversion or broadening use? Yeah, I think it's a great question, Chas.

We had anticipated that would take a period of time in the U S for that it's going to get all of its reimbursement in place and that they would start to see sequential quarter on quarter growth. We also had expected debt for Europe, we'd start to see after the initial markets got the reimbursement will start to see.

Quarter on quarter growth. So I think we're very pleased with them obviously the growth in Q2 over Q1, and we see that type of pace continuing as more completed some qualitative.

Helen I. Torley: And I was going to start with broadening use. You know, we certainly are seeing the momentum that Janssen reported for the total Darzalex product, with the first half sales of $2.8 billion. Consensus estimates have now increased from $7.3 billion to $8.5 billion in 2024. And so the size of the pie, if you like, is definitely getting bigger. We believe that this is because of increased penetration into frontline therapy, where Sub-Q is going to be, we believe, particularly helpful.

Primary market research with a group of oncologists and Hematologists.

And I can tell you that based on the potential patient practice on health care system benefits of this short term overall treatment time that the sub Q Facebook the results.

And this was definitely well understood and valued by many of the people we interviewed and so as a result, we see the adoption continuing albeit at a slower pace than we've seen for <unk>.

Helen I. Torley: So a bigger pie for sure, with these new indications. And then the amount of conversion, we haven't put a number out there, Chas. We're obviously after, you know, basically a year at 66%. It's pretty impressive. And the trend line shows that it's not stopping, and we believe that it'll go a good bit higher than that, but we're not going to put a number on it. But we recently talked to some physicians, and it is definitely fulfilling an important need in the marketplace, and physicians are very enthusiastically converting their patients.

Cash flow.

And with that let me turn it over to Ilene to address the question on share repurchase.

Sure happy to.

So we've been consistent in our commitment to a balanced capital allocation strategy and that's really supported by both the strong growth profile and profitability driven by our partner driven enhanced business model.

Supporting our ongoing commitment to capital return and also funding growth, both internal and external via M&A.

As you noted we've already made a substantial commitment to capital return, we're still working through our existing 3 year $550 million buyback plan in fact, we're 85% or over 85% of the way through that total authorization and we still have $75 million remaining.

Matthew Lucchini: The next question is from the line of Matthew Lucchini of BMO. Your line is now open.

Matthew Lucchini: Hi, good afternoon. Thanks for taking the questions and congrats on a very nice quarter. So first on SESGO, just wanted to get a little bit more, your latest thinking, and any color that you can share. From a RAMP perspective, it continues to lag a little bit, although there is admittedly impressive RAMP.

We did complete the $125 million that we had planned for the year and while we always evaluate them.

Helen I. Torley: I think you've talked about differences in payer mix and patient types in the past, but just your latest thinking there. And then, secondarily, you finished out your share repurchase for the year. So how do we think about any capital allocation for the remainder of the year? Is there a reason why you wouldn't pull from some of the remaining share repurchase program forward? Is there something else that's on your mind?

The opportunity to.

To maximize value for shareholders to maintain our ongoing commitment to capital return and maintain our long term sustainable growth I think it'd be premature to discuss specifics beyond that but certainly an ongoing commodity allergan.

Great. Thank you Lynne.

Next question speakers is from the line of Richard Smith of SDB Leerink. Your line is now open.

Elaine: Just how do we think about Capital Allocation from here giving you your stated repurchase for the year? Thank you. I'll take Fasco, and then I'll turn the share repurchase question over to Elaine. We had anticipated that it would take a period of time in the US for Fesco to get all of its reimbursement in place, and then we'd start to see sequential quarter-on-quarter growth. We also expected that for Europe, we'd start to see after the initial markets got their reimbursement. We'll start to see that quarter-on-quarter growth.

Yeah.

Yeah.

Again Bridget Smith.

From SBB Leerink. Your line is now open.

Hi, This is Derek ferber, we'd be learned.

Thanks for taking my question.

Sure.

Solutions on terrific results.

Just on <unk> could you give us a sense of the durability or the royalties from <unk> from <unk> is there a step down.

Between now and the mid Twenty's or between 'twenty to 'twenty as we enter.

Elaine: So I think we're very pleased with, obviously, the growth in Q2 over Q1 and we see that type of pace continuing as more are completed, some qualitative. Primary Market Research with a group of oncologists and hematologists, and I can tell you that based on the potential patient practice and healthcare system benefits of the shorter overall treatment time that the sub-Q-FEZ book can result in, this was definitely well understood and valued by many of the people we interviewed.

<unk> reported.

Is there are independent.

On yesterday.

3 formulation.

But we'll extend even beyond central composition matter patent for buzzwords.

That would be helpful. And then if there's any indication you can give us about whether there's a step down also in Pittsburgh that would be useful as world per inch.

Yeah. Thanks, Jeff.

I think many people know the individual contracts that we have are confidential. So we can't talk in specifics for any what we generally do have is a minimum of a 10 year royalty revenue term.

Elaine: And as a result, we see the adoption continuing, albeit at a slower pace than we've seen for fast programs. And with that, let me turn it over to Aline to address the question and share her report. Sure, happy to do so.

Where if there are no valid patents there would be indeed, Jeff a step down when we lose our composition of matter patent, which is in 2024 and <unk> is a valid patent on it can in many but not all cases extend the duration of step zone, but.

Elaine: So we've been consistent in our commitment to a balanced capital allocation strategy, and that's really supported by both the strong growth profile and profitability driven by our partner-driven enhanced business model, supporting our ongoing commitment to capital return and also funding growth, both internal and external via M&A. And as you noted, we've already made a substantial commitment to capital return; we're still working through our existing sustainable growth. I think it'd be premature to discuss, you know, specifics beyond that, but certainly an ongoing commitment to capital. Thank you, Elaine. The next question, speakers, is from the line of

We've always talked about is.

In the absence of being able to.

Our our investors model the base case, which is I assume that there are no additional patents on its this 10 year, where there was a step down.

And in 2024 are in Europe in 2027 in the in the U S and make investment decisions based on that because we are unable to provide any details beyond that.

Can I just follow up on.

Just wanted to ask about.

<unk> our.

Partnership and specifically do you see many other opportunities for small molecule.

Operator: Next question, speakers, is from the line of Bridget Smith of SBB Lyric. Your line is now open. Again, Bridget Smith. From SBB Lyric, your line is now open. Hi, this is Jack from FCB Larynx. Thanks for taking the question.

Options with on homes, because this was as far as I know.

First rich and Rick.

Oh, we're cheering.

Jack: Thanks for taking the question. Helen, congratulations on your terrific results, and just on Darzalex SC. Could you give us a sense of the durability of the royalties from Darzalex?

There might be other instances, where you can partner with to develop Aloha and sub Q formulation.

That's true.

Yeah, Jeff.

Helen I. Torley: Is there a step down between now and the mid 2020s or between the mid 2020s and the end of 2030? formulation that will extend even beyond the potential composition of the patent for Dosilek. That would be helpful, and then if there's any indication you can give us about whether there's a step down also in PESCO, that would be useful as well. Thanks, But we've always talked about, in the absence of the... Our investors modeled the case, which assumed that there were no additional patents and it's this 10-year where there's a step down, and in 2024 in Europe and 2027 in the US and make investment decisions based on that because we're unable to provide any details beyond that. Can I just follow up, Helen?

It's something we've always looked at from actually I don't know if you recall back when Pfizer was studying where the pencil that that was 1 of the small molecule approaches. So we've always recognized that there is the utility of enhance both with large and with small molecules. So we definitely are looking at a few small molecule areas.

We have mostly though synbiotics most of those happen to be monoclonal antibodies on large molecules, but we see opportunity here in small molecules as well and so we're always looking at company portfolios not putting any filter on the size of the molecule really looking at what the commercial goal is in terms of.

We're reducing the volume getting getting the drug delivered sub Q or extending the dosing interval. So you may see more in the future.

Terrific. Thanks Bill.

Uh huh.

Next question is from the line of mass on SBB Leerink. Your line is now open.

Helen I. Torley: I just wanted to ask about the VEVE partnership and specifically, do you see many other opportunities for small molecule, long-acting sub-tube formulations? Yes, it's something we've always looked at. And actually, I don't know if you recall back when Pfizer was studying rivipansil, that was one of the small molecule approaches. So we've always recognized that there is the utility of enhanced activity both with large and with small molecules.

Yes.

Hey, guys my questions are answered my.

Got it thank you.

Great. Thanks.

<unk>.

Next question is from the line of Jessica Fye of Jpmorgan. Your line is now open.

Hey, there good afternoon, thanks for taking my question.

So following up.

Sort of a longer term version on the earlier capital allocation question with $75 million left on the repo authorization.

Think about the period after that's complete and when it might make sense to build free cash on the balance sheet.

Helen I. Torley: So we definitely are looking at a few small molecule areas. We mostly have those in the audits; most of those happen to be monoclonal antibodies and large molecules. But we see opportunity here in small molecules as well. And so we're always looking at company portfolios, not putting any filter on the size of the molecule, really looking at what the commercial goal is in terms of reducing the volume, getting the drug delivered sub Q, or extending the dosing interval.

<unk> of potentially acquiring a future technology to kind of fill in in the kind of posted hands patent expiration period.

Yeah, Thanks for that James I'll turn that over to lane.

Thanks for that.

So as we've noted.

With the enhanced business model and strong growth profile and cash flow generation, we see other potential too.

Helen I. Torley: So you may see more in the future. Terrific. Thanks, Bill.

Continue to strengthen our balance sheet with our strong operating performance we also.

Operator: The next question is from the line of Na Sun of SBB Lear, Inc. Your line is now open.

Na Sun: Hey guys, my questions are answered by Jeff. I'm just going to sign off now. Thank you. That's great.

Jake.

At advantage or opportunity to strengthen our balance sheet certainly did so on the first quarter of this year with the leveraging of our historically strong convertible market to add cash to the balance sheet and repurchased 80% of.

Jessica Macomber Fye: The next question is from the line of Jessica Fye of J.P. Morgan. Your line is now open. Hey there, good afternoon. Thanks for taking my question.

Jessica Macomber Fye: Hey there, good afternoon. Thanks for taking my question. I'm following up with sort of a longer-term version of the earlier capital allocation question. With $75 million left on the repo authorization, how do you think about the period after that's complete and when it might make sense to build some cash on the balance sheet in anticipation of potentially acquiring future technology to kind of fill in during the kind of post-enhanced patent expiration period? Yeah, thanks for that, Jess.

Our then outstanding 2024 notes from managing an outstanding liability.

Pushing out our maturities and lowering our cost of capital. So we look opportunistically.

Q2.

To strengthen our balance sheet and to optimize our capital structure on we think this in combination with our strong operating performance from the cash flow generation from our hand enhanced business model.

Puts us in a great financial position and have the wherewithal to be able to take advantage of opportunity not only to continue our commitment to capital return, but to also on potential acquisitions of a new platform technology that we can leverage our our existing expertise to be able to drive additional value for shareholders.

Elaine: I'll turn that over to Elaine. Generation, we see the potential to continue to strengthen our balance sheet with our strong operating performance. We also take advantage of opportunities to strengthen our balance sheet. We certainly did so in the first quarter of this year with the leveraging of a historically strong convertible market to add cash to the balance sheet and repurchase 80% of our then outstanding 2024 notes, so managing an outstanding liability, pushing out our maturities and lowering our cost of capital.

Yeah.

Okay.

Thanks Helane.

Next question is from the line of Anita Dushyanth of Baron Capital. Your line is now open.

Hi, Helen congrats on the quarter.

I wanted to quickly ask you as well.

Hum.

How many total early versus late sales candidates are among undisclosed targets with them.

On.

All right.

Elaine: So we look opportunistically to strengthen our balance sheet and optimize our capital structure. And we think this, in combination with our strong operating performance and the cash flow generation from our enhanced business model, puts us in a great financial position, and we have the wherewithal to be able to take advantage of opportunities, not only to continue our commitment to capital return but also to fund potential acquisitions of new platform technologies that we can leverage our existing expertise to be able to drive additional value for shareholders.

You broke up a little bit on either just to be share how many on early versus late stage products are amongst the.

The undisclosed so people probably say, we'd get on our corporate debt. There's 2 products that are.

Named on disclose both of them, but 1 of them.

Both of those are in.

Let me just correct myself 1 of those is in phase 1 clinical testing.

And the other 1 is an approved product as the IV.

Where we are studying the sub Q.

Hello, Paul.

And then as far as sort of the.

Operator: The next question is from the line of Anita Duchant of Baird-Murr Capital. Your line is now open.

Your.

From the landscape.

Potential opportunity.

Anita Duchant: Hi Helen, congrats on the quarter. I just want to quickly ask you how many total early versus late-stage candidates are among the undisclosed targets you can All right, you broke up a little bit, Anita, just to be sure. How many early versus late stage products are among the undisclosed? So people probably see on our corporate deck that we've got two products that are named undisclosed.

Looking at Florida already proven technology.

And so that's kind of what timeframe are you likely to make this move.

Yeah.

As I mentioned in the prepared remarks on speak closer and hands on experience the strong growth and we project continued growth we don't feel that the time pressures. So we havent given ourselves the time window to achieve this and I think that's important because in order to make sure we pick the right thing.

Helen I. Torley: Both of them, both of those are in phase one clinical testing, and the other one is an approved product called the IV, where we are studying the subcubes. Okay, that's very helpful.

We probably use more the language. It is derisked any debt. It is something where we have high confidence. It will it will work and that generally is that it's already approved which maybe your proven technology or it could be something that felt compelling data that has been presented and that has been reviewed.

Helen I. Torley: And then as far as sort of the, you're scanning the landscape for potential opportunities. Are you looking at sort of already proven technology? And if so, in what timeframe are you likely to make this move?

In part by the FDA. So we definitely are looking because we think that's a very important part of our strength, but it's going to add to the growth profile of our enhanced in the in the right timeframe.

Helen I. Torley: Yeah, as I mentioned in the prepared remarks, because Enhance has experienced this strong growth and we project continued growth, we don't feel there's a time pressure, so we haven't given ourselves a time window to achieve this. And I think that's important because we want to make sure we pick the right thing. We probably use the language more that it is de-risked, it is something where we have high confidence it will work.

Okay. Thank you and just 1 more on me.

It's on par.

You know candidates that are being develop with them.

Especially those that are.

Early stage versus late sales.

Are you sort of seeing any.

But the strength in the way.

On <unk>.

Helen I. Torley: And that generally means that it's already approved, which may be your proven technology, or it could be something that's got compelling data that has been presented and has been reviewed in part by the FDA. So we definitely are looking because we think that's a very important part of our students and that it's going to add to the growth profile of Enhance in the right time frame. Okay, thank you. And just one more from me.

Looking into the process and the phones debt Dubai.

Dubai.

Some of the programs I knock on I know look on programs.

So the indication, but still having so much safety data out there.

You can see something going forward.

Yes.

So we probably 2 development paths 1 is the bridging study where the product is developed where its bridge to a larger IV database IV database.

Helen I. Torley: And then in terms of, you know, candidates that are being developed with NHANES, especially those that are early stage versus late stage, are you sort of seeing any difference in the way FDA is looking at the process, like in the sense that does it expedite some of the programs? I know some, I know, different programs are kind of specific to the indication, but still have so much safety data out there.

So they can be products that are currently approved or as we're seeing with companies like <unk>. They are developing indications in parallel so the IV and the sub Q or not approved yet, but the pros are progressing in parallel.

And that's where you were able to bridge to the what is generally the larger IV database.

Helen I. Torley: Are we likely to see something going forward? Yeah, so we've probably got two development paths. One is a bridging study, where the product is developed and it's bridged to a larger ID database, which can be products that are currently approved, or, as we're seeing with companies like Argenics, they're developing indications in parallel. So the ID and the sub-Q are not approved yet, but they're progressing in parallel. And that's where you're able to bridge to what is generally the larger in order to complete, to fill in the expectations for the robustness of the safety database. We're not seeing a big difference in expectations. Okay, thank you. That's helpful.

Where we are seeing slightly higher requirements would be if you were just being sub 2 right from the start.

And there isn't on IV database to have the broader patient safety database.

For partners to do that they have to go through what's more of a traditional phase 1 phase 2 phase 3 or phase 1 with a 2.3 study and the key thing is just generating on a safety data to meet the FDA requirements, but other than the amount of data that is required to.

Completes their fill in.

Expectations on the robustness of the safety database, we're not seeing a big difference in expectations.

Okay. Thank you that's helpful.

Next question is from the line of Michael <unk> of Evercore ISI. Your line is now open.

Michael Gennaro DiFiore: Next question is from the line of Michael DiFiore of Evercore ISI. Your line is now open. Hey guys, thanks so much for taking my question, and congrats on the still a quarter. Just three for me. Number one, does Halo have any plans to develop a subcutaneous Alzheimer's therapy formulation? And if so, could this be one of the new assets to enter the clinic this year?

Hey, guys. Thanks, so much for taking my question and congrats on the quarter just free from me number 1.

Does he will have any plans to develop a subcutaneous Alzheimer's therapy formulation and if so could this be 1 of the new assets to enter the clinic this year.

And I have 2 follow ups.

Helen I. Torley: All right, well, what I can say is that we don't discuss individual targets, but what I can say is that, as an example, the amyloid beta target is still available if anyone wants to approach us to use that.

Alright, well, what I can say, we don't discuss.

Individual targets, but what I can say is that they.

As an example, the amyloid beta target is still available if anyone wanted to approach us to to use that.

Michael Gennaro DiFiore: Okay, um, the second one is, um...

Got it okay.

Second 1 is just any.

Michael Gennaro DiFiore: Any thoughts on this competitive approach?

Thoughts on the competitive profile of <unk>.

Ultra mirrors versus <unk>, especially in light of the phase III.

Helen I. Torley: UltaMirrors vs. F-Cartridgimab, especially in the light of the Phase 3 Myasthenia Gravis results announced in July. And on the heels of that, how much share do you expect F-Cartridgimab's IV formulation to take in the Myasthenia Gravis and IPP indication versus Halo Sub-Q version? Thank you.

I assume you're grabbing results announced on July.

<unk>.

On the heels of that how much share do you expect <unk> IV formulation to take.

In the myasthenia gravis, and ITT indications versus a halo. So thank you.

Yeah, well with regard to that I will say I'm not an expert in many of my from Iridium next is on reading the different opinions on perhaps organics leadership versus like sound leadership.

Helen I. Torley: Yeah, with regard to that, I will say I'm not an expert and much of my reading on this is reading the different opinions of perhaps organics leadership versus Alexan leadership. There certainly seems to be points of differentiation where organics believes they have got a stronger, more efficacious molecule, but I will say I don't have expertise in that area.

Really seems to be points of differentiation.

There are organic believes they have got a stronger more efficacious monarch molecule, but I will say I don't have expertise in that area.

Can say is that based on everything we hear from Dave.

Helen I. Torley: What I can say is that based on everything we hear from the reported patient feedback and physician feedback on their GenX product, it certainly seems to have a strong profile, but I cannot, and I'm not qualified to comment on it comparatively versus the Ultimaeris. With regard to IV versus sub-Q for the indications, we don't, as a practice, give out our projections, but I do think it was interesting to note that on their recent investor call, organics commented that they were seeing about 70% of patients moving to the sub-Q and 30% of patients wanting to still stay on the IV.

They reported patient feedback and physician feedback on the organics product. They certainly seem to have a strong profile, but I cannot I can't I'm not qualified to comment on it comparatively versus the <unk>.

With regard to.

D versus sub Q for the indication.

We don't buy them.

As a practice gave out our projections, but I do think it was interesting to note that on their recent investor call on.

<unk> commented that they're seeing about 70% of patients moving to them that the sub Q and 30% of patients wanting to still stay on the IV I'd say, that's pretty much in line with our thinking on it from informed by experiences Roche had and studies that they specifically did on patient preference with.

Helen I. Torley: I'd say that's pretty much in line with our thinking on it, informed by experiences Roche had and studies that they specifically did on patient preference with Herceptin and Mephistera, where there's always a small percentage of patients who, perhaps because of needle phobia, perhaps because of the community of being in the infusion suite, don't want to go to the sub-Q. So I thought that that was a useful benchmark that our GenX mentioned at that 70% to 80% that might prefer to stay and move to the sub-Q with the remainder staying on the IV.

Herceptin and Mabthera, where there's always a small percentage of patients who perhaps because of needle phobia, perhaps because of the community of being in the infusion suites don't want to go to the sub Q.

So I thought that that was a useful benchmark, but theyre Gen X that mentioned at that 70% to 80% that might prefer to stay.

Move to the <unk> with the remainder staying on on the IV.

Operator: My last question is from the line of Graig Suvannavejh of Goldman Sachs. Your line is now open.

Got it thank you very much.

Yes.

Last question is from the line of Greg <unk> of Goldman Sachs. Your line is now open.

Anna: Hi Karen, this is Anna. I'm for Graig Suvannavejh.

This is Anna on for Greg Silvana, Vince. Thank you for taking our questions and congrats on from quarter..1 just from a high level could you help us frame. The next waves of product launches in particular, those slated for beyond 2023, and how should we think about growth beyond 2023 and 2 just.

Anna: Thank you for taking our questions and congratulations on an excellent quarter. One, just from a high level, could you help us frame the next wave of product launches, in particular those slated for beyond 2023, and how should we think about growth beyond 2023? And two, I'm just curious if there's any room for improving or optimizing raw material production. Thank you. Yeah, and let me just clarify, Anna, the raw material question. Is that our API? Yeah, that's right. That's all right. Do you think there is any further optimization that could be done there to reduce the cost?

<unk> if.

Theres any any room for improving E improving around optimizing the.

Raw material production.

Yeah, and let me just clarify on the raw material question.

Is that right yeah yeah.

Yeah, that's right that's right any any further optimization that can be done there to reduce the cost.

Okay. Thank you.

We find it useful to talk on our waves of products and so if we're thinking about launches on the 'twenty 3 'twenty 4 time, sorry, 25 timeframe those other products are today and wave.

Helen I. Torley: testing. And by the end of this year, we estimate we'll have 13 products that will be in or have completed phase one. Now, that is a terrific portfolio. And again, if you look at those products, there are very exciting products in there. And that's 25 to 27 would be the next potential if those ones follow that approximately five years from first in human to approval. And so that that is the way for launches.

In phase III, so think about those as opdivo to centric and F cartoon Tomorrow.

All of those based on standard development timelines that we've seen with products should be launching in that time, if everything goes according to plan, obviously all of them.

Exciting drugs, either already blockbusters or with blockbuster potential as we see in the case of that particular on where analysts have it as a $4 billion of potential brand.

Following that it is the products that are in phase 1 testing and by the end of this year. We estimate 1 of 13 product that will be in our having completed phase 1 and that is a terrific portfolio on again, if you look at those products is very exciting products in there and that's 25 to 27 would be the next potential with those ones.

Helen I. Torley: And as I mentioned, wave five is even possible beyond that, based on current partners taking targets into the clinic in the next 12 to 18 months, as well as new collaboration agreements and nominations, which could bring us into another set of launches in the 27 to 29 timeframe. And so the message really is that because we can work with so many partners and have such a robust pipeline, we are projecting multiple additional launches, driving continuing sustainable revenue to 2027 and beyond.

All of that.

Approximately 5 years from first thing humans to approval.

So that is the way for at launch is and as I mentioned, we 5 is even possible beyond that based on current partners taking targets into the clinic in the next 12 months to 18 months as well as new collaboration agreements and nomination, which could bring us into another set of launches in the 27% to 29 times debt peers.

And so the message really is that the way the development it works and because we can work with so many partners and have such a robust pipeline. We are projecting multiple additional launches driving continuing sustained revenue to 2027 and beyond.

Helen I. Torley: Great. Thank you. All right. Thank you. Operator, were there any more questions?

Operator: No further questions on queue. All right, well, we appreciate it.

Great thank them right.

Thank you.

Operator are there any more questions.

Helen I. Torley: All right. Well, we appreciate everybody's attention. Obviously, a very strong quarter and first half for Halozyme as we execute our strategy, maximizing cash on hand, returning value to our shareholders, and exploring the potential to accelerate and add to our growth through M&A. Really appreciate the continued support and look forward to speaking with you next quarter. Thank you.

No further questions on queue.

Alright, well, we appreciate everybody's attention and obviously, a very strong quarter and first half for a halo time as we execute our strategy maximizing in hand, returning value to our shareholders and exploring the potential to accelerate and add to our growth through M&A really appreciate the continued support and look forward to speaking with you next quarter.

Thank you.

Okay.

Okay.

Operator: Thank you, Dr. Torley. And that concludes today's conference. Thank you all for joining us. You may now disconnect. BF-WATCH TV 2021

Thank you Dr poorly and that concludes today's conference.

You all for joining you may now disconnect.

Okay.

Right.

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