Q3 2023 Halozyme Therapeutics Inc Earnings Call
Hello, and welcome to the Halo Seim third quarter 2023 financial results Conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad.
I'll now turn the conference over to tram Bui, Vice President of Investor Relations and corporate Communications. Please go ahead.
Thank you operator, good afternoon, and welcome to our third quarter 2023 financial and operating results Conference call. In addition to the press release issued today. After the market 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 <unk>.
President and Chief Executive Officer, who will provide an update on our business and Nicole <unk>, Our Chief Financial Officer, who will review our financial results for third quarter 2023.
On today's call, we will be making forward looking statements as outlined on slide two I would also refer you to our SEC filings for a full list of risks and uncertainties during the call both GAAP and non-GAAP financial measures will be discussed certain non-GAAP or <unk>.
Adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release, and slide presentation, I'll now turn the call over to Dr. Helen Torley.
Thank you Tom and good afternoon, everyone. We're very pleased with our third quarter and year to date 2023 financial and operating results, which reflect the continued strength and durability of our business. We remain focused on supporting our growth trajectory and are well positioned for another record year.
We are on track to meet our recently updated revenue guidance and delivered greater than 25% revenue growth for the year, including greater than 23% royalty revenue growth.
I'm also pleased to announce that as a result of our operational performance and close attention to expenses, we are raising EBITDA and non-GAAP EPS guidance.
EBITDA guidance has increased from $420 million to $414 million to $430 million to $445 million and non-GAAP EPS guidance from $2 65 to $2 75 to.
The $2 70 to $2 <unk> I'm pleased to forecast that strong performance on both top and bottom line growth this year.
Moving to slide three.
In addition, today, we announced an acceleration of the $250 million share repurchase remaining under the approved $750 million share repurchase plan that we announced in 2021.
$250 million share repurchase will be executed through an accelerated share repurchase with a financial institution. This week subject to market conditions.
We have a disciplined and balanced capital allocation strategy hinges on investing to grow the business return capital to shareholders through share repurchases and seek new growth opportunities through M&A.
Our investments to grow the business in 2023 have resulted in substantial accomplishments, including our high volume auto injector.
Plan to invest at similar levels to grow the business in 202004.
Our balance sheet is strong with continued projected EBITDA growth and cash generation throughout 2023.
We have reduced our net leverage substantially and consistently each quarter from three two times at the end of 2022 to two four times at the end of the third quarter of this year.
Given our strong balance sheet decreasing leverage and continued EBITDA and cash generation, we decided to implement the announced $250 million ASR using cash on hand, as we believe <unk> is trading at a significant discount to our valuation making share repurchase a high return on investment opportunity.
We will continue to seek growth opportunities through M&A and have increased our technical search and evaluation and due diligence capabilities with the addition of Manuel Sanchez, who.
Who is a renowned leader in drug delivery technology and our prior senior fellow of novel drug delivery technology at the Novartis Institute for Biomedical research.
At this time, we do not project any near term M&A transactions that would add to our leverage.
Okay.
I'll move now to highlights from the third quarter, which are shown on slide four.
We reported total revenue of $216 million, which gives us confidence to achieve our full year revenue guidance of $825 million to $845 million.
Representing greater than 25% year over year growth.
With operating expense management, a strong focus in 2023, and with EBITDA and non-GAAP EPS trending above the low end of our recently updated guidance today, we increased guidance on these key measures of profitability.
Moving now to slide five.
And industry, leading drug delivery platform company <unk> has built a diversified and robust portfolio.
<unk> technology combined with an innovative high volume onto injector provides new and potentially improved therapeutic solutions for patients our partners and health care providers.
Throughout the year, our enhanced partners have made significant progress with their commercialization and development objectives, which are expected to result in strong and durable long term revenue growth for handle that.
Before I provide additional details on each product, let me summarize our strong performance and momentum in the quarter, which is delivering strong results today, while also advancing new waves of growth for human line in the coming years.
Our wave two product dark links back really does go remained strong revenue drivers.
Proven up organically five <unk>.
In the United States and to centric subcutaneous in Great Britain increased the total number of commercial products to seven and importantly signal could start in 2023 of two new royalty revenue streams.
The positive phase III data for <unk>, <unk> and <unk> will upon approval expand the commercial opportunity in a condition, where there is significant.
Need to date.
And the recent positive data announcements from two additional waste stream product <unk> Q <unk> support near term regulatory filings and commercial launch is in the 24% to 25 timeframe.
I'll leave you with two key takeaways.
Firstly, the multiple positive phase III data readout from our waste III product in the last 19 months support a high tax rate in the translation of phase one to enhance subcutaneous pharmacokinetic data into positive phase III results.
The constant fast rate from early clinical data to positive phase III data to approval is not always fully appreciate it the likelihood of success for our partners utilizing enhanced technology when bridging from an IV approval to sub Q is very high once the early clinical data is generated.
And secondly, as a result of the multiple positive phase III data readout, we are confident to project nine royalty revenue generating products by 2025, a significant increase from July that we had as we entered 2023.
And moving now to slide six these approvals at the key drivers of our projects and have the potential to achieve approximately $1 billion in royalty revenues in 202007.
Let me now move to slide seven.
We set a goal for 2023 to delivery of new enhanced deal a new high volume auto injector deal and a new small volume auto injector deal.
We've made strong progress against these goals.
We were very pleased to announce a new enhanced partnership with acumen pharmaceuticals, which reinforces the growing recognition of the value of subcutaneous drug delivery.
Acumen his focus on the development of targeted therapies for Alzheimer's disease and is leveraging their deep understanding of the amyloid beta oligomer to usher in a medical breakthrough.
The Alzheimer's disease market is at a key inflection point with recent unexpected approval paving a new path for treatment.
We are delighted to work with acumen with the goal of creating a best in class subcutaneous delivery options that may ease the treatment burden for patients caregivers and the health care system.
Under the terms of our non exclusive agreement for their proprietary therapy <unk> received an upfront payment and will be entitled to milestones. In addition to a single digit royalty on net sales, reflecting the non exclusive nature of this agreement.
For high volume water injector, we have also made strong progress.
We presented the full data from our clinical study, which demonstrated the delivery of <unk>.
<unk> are a representative biologic in 30 seconds with our auto injector was well tolerated by patients and one which of the patients would have again.
The companies, we presented the data to have been impressed and used our high volume auto injector platform as a breakthrough in the area of rapid auto injection of large volume biologic.
What's any breakthrough contact center.
So to something new.
Collected one of our partners has agreed to test our current high volume auto injector device any clinical tests in 2024.
This is a step prior to the potential development of a customized high volume auto injector for the patient population. This partner is considering.
At least one other current partner is also considering proceeding with the development of a customized high volume auto injector for their patient population, we have not yet completed this agreement and our main focus to seek to get this completed in 2023, recognizing that may now occur in 2024.
As an established leader and rapid subcutaneous drug delivery with inherent in our differentiated auto injector technology, we remain the partner of choice across the industry.
We're also seeing strong interest from pharma and biotech companies, who are interested in understanding the potential implications of the final CMS guidance on drug price negotiations for part D drug in.
These guideline CMS affirmed at guidance that a fixed combination which included two or more active ingredient will be distinct drugs for the purposes of applying the IRB price negotiation provision.
Notably <unk> recombinant human Hyaluronidase technology.
Has been recognized as an active ingredient by the SBA.
With those highlights I'll now turn to slide eight for an overview of our royalty revenue and a more detailed review of the key product drivers of growth.
Royalty revenue for the third quarter of 2023 increased 15% year over year to approximately $114 million and.
And continues to be the key driver of our revenue growth.
For the full year, we are reiterating our royalty revenue guidance of 445 $455 million.
Representing greater than 23% growth over 2022.
Our wave two products <unk> and <unk> of the current royalty revenue growth drivers and will be illustrated on the next two slides.
<unk> is the global established once a physician using <unk> for multiple myeloma patients with 91% share in the United States and an estimated greater than 80% sure outside the United States.
With the overall brand performance driven by the use of subcutaneous formulation total dark lakes brand growth is another key metric, we use to measure <unk> subcutaneous growth and potential.
In the third quarter of 2023, Dark light continued to drive strong sales growth for Johnson and Johnson with an increase of approximately 21% year over year on an operational basis to approximately $2 5 billion in the quarter.
This increase was driven by share gains in all regions and continued growth in the first line setting.
Analysts predict annual doors like sales will continue to grow and we will be 17 billion by 2028.
Yeah.
Turning now to <unk>, which is shown on slide 10.
<unk> is a combination of <unk> and herceptin delivered in a single five to eight minute subcutaneous injection for patients with early unmet Hershey positive breast cancer.
Our focus firstly on projected to help dimensionalize the opportunity for physical.
For the nine months of 2023 Roche reported projector revenue of 3 billion Swiss francs.
Moving now deferred until fiscal sales grew an impressive 66% to more than 800 million Swiss francs contributing positively to the continued growth approaches impressive breast cancer treatment franchise.
The global conversion rate from projected to Fayetteville continues to increase even as the number of launch countries increases.
Vasco is now launched in 44 countries up from 38 last quarter and the conversion rate increased to 37% in the third quarter.
We anticipate approximately 50% share over time.
The key drivers of uptake include limited nurse and share capacity, even in the United States and patient preference for <unk>.
Turning now to our wave three products shown on slide 11, I'll touch on recent event highlight and also upcoming value driving events to watch for.
Always street product are now highly de risked with one major market approval and positive phase III data announced for the remaining three products.
Beginning with our <unk> five guard or at parties demand. This is our genetics as flagship pipeline product and is being developed with enhance and a total of six autoimmune disease indications to date with four of these indications being developed a subcutaneous only delivery.
Analysts project that <unk> will be a multibillion dollar annual revenue brand in 2028.
The launch of <unk>, and <unk> hietala with enhanced for patients with generalized myasthenia gravis is progressing well with growth of 22% quarter over quarter to 329 million in the.
Third quarter of this year.
With the approval of the subsidy and his first in <unk> in June of 2023.
The goal is to expand the use of <unk> by offering myasthenia gravis patients a new treatment delivery option as we move into earlier lines of treatment driving brand loyalty with their current prescribers.
It is exciting that <unk>.
Is helping <unk> achieve their goal.
<unk> recently reported but initial feedback from doctors on <unk> with broadly positive and they recognize the benefit of the simple 30 to 92nd subcutaneous injections, which is enabled by our enhanced technology.
Actual lowest contributing to organic expansion of the market with new prescribers with the majority of patients to be <unk> naive.
Our journey is also making progress reaching more myasthenia gravis patients globally in September <unk> received a positive opinion from the <unk> chicken linear path for European approval for generalized myasthenia gravis with a self administration link later this quarter.
Expanding the potential opportunity organics announced positive top line data from this year study evaluating <unk> with enhanced for CIBC.
With a 61% reduction in risk of relapse versus placebo, the safety and Tolerability profile were reported to be consistent with the confirmed safety profile of <unk> when used in other indications.
There is a significant unmet need in CIB and we're excited that organic will be finally with their priority review voucher and are busy preparing for 2024 launch.
And further expanding the opportunity <unk> recently confirmed two additional study readouts for bypass a true within the.
First in idiopathic thrombocytopenic, purpura, which is expected in the fourth quarter and the second in pemphigus, which is expected around the end of the year.
I'll move now to our additional products with Roche.
The Great Britain approval approaches to centric subcutaneous within hands in August marked our seventh enhanced commercial product approval.
Based on the pivotal study conducted in non small cell lung cancer to centric subcutaneous with approved in Great Britain for all current IV indications, including certain types of lung bladder breast and liver cancer.
Hello.
Enhanced drug delivery technology allows for an approximate seven minutes subcutaneous delivery, which compares with 30 to 60 minutes for the IV infusion.
It was commented on their recent quarterly call that they project the potential for <unk> adoption and resource constrained market to mirror, the rapid conversion and high share attainment effect.
Okay.
With regard to upcoming regulatory actions gross project, we see HMP opinion in the fourth quarter of 2023 and U S approval decisions in 2024.
We're also pleased to note that doesn't on IV treatment to centric continues to demonstrate strong growth year.
Year to date 2023, Roche reported IV to centric revenues of $2 8 billion Swiss francs, an increase of 11% year over year.
I'll move now to Alkermes Roche.
<unk> phase III Ocarina, two trial evaluating <unk> subcutaneous with <unk> met its primary and secondary endpoints.
Turning off the potential for people living with multiple sclerosis to receive their treatment in just 10 minutes twice a year and creating the possibility to administer <unk> in additional multiple sclerosis centers that do not have IV infrastructure or is it about the capacity constraints, which had been new growth opportunity.
In October Roche announced additional data showing subcutaneous injection was non inferior to intravenous infusion based on bulk purchase levels in the blood over 12 weeks.
Of note <unk> subcutaneous injection with comparable to IV infusion and providing rapid and sustained depletion of b cells and near complete suppression of MRI and activity in the brain over 24 weeks.
The safety profile of OCA vis subcutaneous was reported to be consistent with the well established safety profile of the ultra both IV and <unk>.
Fusion.
Ill Carina two data will be submitted to health authorities around the world with U S and European launches expected in 2024.
Okay, and the IV formulation continues its impressive growth trajectory.
For the nine months year to date Roche reported <unk> revenues of $4 8 billion Swiss franc, which represents an increase of 14% year over year.
And moving to our fourth wave III product with positive phase III data.
Bristol Myers Squibb subcutaneous nimble on that.
BMS recently reported positive top line data from the Phase III Checkmate 60, 70 study, which was evaluating opdivo subcutaneous.
Advanced or metastatic renal cell carcinoma.
Study met its co primary pharmacokinetic endpoint any key.
Secondary endpoints, demonstrating non inferiority of objective response rate versus IV pneumonia map.
The safety profile of subcutaneous Opdivo with described by BMS as consistent with that of the IV Opdivo.
Yes.
On their recent quarterly call BMS management indicated that of Devo subcutaneous has the potential to open up our regulatory approvals and indications that constitute 65% to 75% of the opdivo business today.
Importantly, the further commented that subcutaneous has the potential to extend franchise durability issues by 2030.
BMS reported IV sales of Opdivo of $2 $3 billion in the third quarter of 2023, an increase of 11% year over year.
In total these wave three products represent substantial near term new royalty revenue opportunity to defer halo that with analyst projections for total product sales of approximately $35 billion by 2028.
What is exciting and something that I think very important to highlight is that this $35 billion project opportunities is significantly higher than the $20 billion opportunity, which is projected for our wave two products. Those that are driving the strong royalty revenue growth we see today.
I'll move now to slide 12, where I'll touch on some highlights from our wave four partner product development pipeline with enhanced.
Our longer term growth trajectory supported by these wave for a product with potential launches in the 2025 to 2000 2007 timeframe and the potential to add multiple sustainable new royalty revenue stream.
Wafer is comprised of 10 partner products two of which are progressing in phase III study in one recent advancement into a phase <unk> study.
The remaining products are an ongoing phase one clinical testing or has completed phase one study.
The two most advanced wake forest products are approved IV product.
Phase III subcutaneous study.
These are Johnson <unk> Johnson subcutaneous formulation, I mean, thats map and Bms's fixed dose combination of nimble about plus or latter map with enhanced.
Notably jumping into auto presented strong data at ESMO from the marrow posted study demonstrating that the regimen of Ami a bunch of math and looked at the.
The same regimen that being studied in the sub Q versus IV study reduce the risk of progression in that by 30% compared to the metro nib or to Bristow.
Overall survival data is now of wages.
Yeah.
Continuing the progress we've recently initiated enrollment of a phase <unk> study, which is comparing the efficacy safety PK and tolerability of <unk> <unk> with enhanced which was given in combination with <unk> and comparing that to the standard of care in adults with HIV.
Turning now to slide 13.
We recently presented the positive clinical data result of our high volume Auto injector study at the 13th annual <unk> Conference.
There was strong interest in the data, which demonstrated feasibility of administering a subcutaneous injection of <unk> of a represented biologic immune globulin, 10%, but that hunt.
In approximately 30 seconds, using our high volume auto injector.
We're pleased by the acknowledgment by partners and potential partners that this is a breakthrough in terms of rapid large volume subcutaneous drug delivery via auto injector.
Also delighted with the progress we've been making in advancing with two current partners.
I'll turn now to our commercial portfolio.
As I've said, it's a weekly virtually painless subcutaneous testosterone replacement treatment purchased delivered by our proprietary auto injector.
Our strategy is to convert patients according not achieving their treatment goals with intramuscular injections of testosterone replacement therapy.
So I said demand in the third quarter continued to grow contributing to a 32% increase in year to date demand growth this year compared to 2022.
We're on a positive trajectory to achieve approximately $100 million.
And as I said.
Sales in 2020 through.
Representing a 22% increase from the run rate following the acquisition.
And then a further update we recently made the decision to terminate the Telander licensing agreement and return the license July 15 effective January 31 2024.
This decision was made due to the inability to obtain economically acceptable coverage with pharmacy benefit managers.
Well now focus all of our promotional sales and marketing activity on driving <unk> growth.
With that I'll turn the call over to Nicole who will discuss our financial results for the third quarter of 2023 Nicole.
Thank you Helen.
Performance in the third quarter sets us up well for another record year, we achieved top and bottom line growth in line with our plan and supporting our financial performance expectations for the full year.
Our balance sheet remains strong with continued projected EBITDA growth and cash generation in 2023 and beyond.
Our cash cash equivalents in marketable securities were $483 3 million.
September 32023.
$348 3 million as of June 32023.
Our net leverage ratio to four times as of September 32023, compared to two nine times as of June 32023.
Expect to continue to decrease net leverage with EBITDA growth.
Turning to slide 14, and as Helen mentioned today, we announced an acceleration of the $250 million of share repurchases remaining under the approved $750 million share repurchase plan announced in 2021.
$250 million share repurchase will be conducted under an ASR.
This brings our total share buyback since the inception of the first program in 2019 to $1 3 billion.
Which has benefited the current quarter non-GAAP EPS by <unk> 15.
Given our strong balance sheet decreasing leverage and continued EBITDA and cash generation, we decided to implement the $250 million ASR now take advantage of the buying opportunity.
We will continue to have a disciplined and balanced focus on our capital allocation efforts with a focus on driving value for shareholders through investing to grow the business.
Shareholder return and seeking new growth opportunities through M&A with no near term plans to add to our leverage.
Turning now to slide 15 for our detailed financial results for the third quarter of 2023.
Revenue for the third quarter with $216 million compared with $209 million in the prior year period.
The revenue increase was primarily driven by higher enhanced product sales royalty growth in <unk> sales.
Set by the timing of milestones recognized in the prior year period.
Recall that the timing of the milestones for two centers SP in the U S with plans for the third quarter and is now expected in 2024.
Royalty revenue for the quarter was $114 4 million.
An increase of 15% compared to $99 $6 million in the prior year period, driven by continued strong uptake of J&J is subcutaneous starplex as both Roche and Tesco.
Research and development expenses for the third quarter was $17 3 million.
Third to $16 7 million in the prior year period.
SG&A expenses were $35 million compared to $34 5 million in the prior year period.
The increases are primarily due to an increase in compensation expense.
EBITDA in the quarter was $124 6 million.
Compared to $109 9 million in the prior year period.
Putting the right off of a contingent liability related to <unk>.
GAAP diluted earnings per share in the quarter was <unk> 61, and non-GAAP diluted earnings per share was <unk> 75.
Turning now to slide 16, we are reiterating our top line guidance and raising our EBITDA and non-GAAP EPS guidance for the full year 2023.
We expect total revenues of $825 million to $845 million.
Presenting growth between 25 and 28% over prior year total revenue.
We expect royalty revenue of $445 million to $455 million.
An increase of 23% to 26% year over year, driven by continued strength in our enhanced suite key products.
<unk>, <unk>, <unk> and <unk> as well as our full year auto injector royalty contribution.
We now expect EBITDA of $430 million to $445 million, an increase from $420 million to $440 million representing growth of 37% to 41% over 2022, EBITDA due to strong expense management and the release of the <unk> related contingent.
Liability.
We now expect non-GAAP diluted earnings per share of $2 70 to $2 80.
An increase from $2 65 to $2 75, representing.
Representing annual growth of 22% to 27%, which reflects our strong year to date results and expense management.
With that I'll now turn the call back over to Helen.
Thank you Nicole.
Another strong quarter of execution significantly advancing our royalty revenue generating portfolio and growth opportunity.
Excited to further expand current our new partner opportunities for enhanced and the high volume of auto injector and we continue to see additional opportunity for growth.
I want to thank everyone on the heel design team and our partners and collaborators for the strong progress year to date with that we'd now be delighted to take your questions. Operator. Please open the call for question and answer.
Thank you if you have a question. Please press star one on your telephone keypad to withdraw your question simply press Star one again.
Your first question comes from the line of Mohit Bansal with Wells Fargo. Your line is open.
Great. Thank you very much for taking my question and congrats on all the progress.
I have a two part question regarding the auto injector. So the part that you mentioned.
Who is looking at auto injector could you help us understand is it related to like someone who is it is it is it wallet product, which already using and cause.
<unk> and <unk>.
Could be could be converted into an auto injector or something like that.
And then the other part of the question is could you help us understand how much time does it take.
Paul and auto injector.
Claude you like when someone conceptualize that to actually converting it to do.
What is the process that how much time does take thank you.
Thanks, Mohit and thanks for those two questions with regard to the two updates we gave on high volume auto injector progress one partner moving into a clinical study as a first step before moving forward to the development of a custom auto injector for one of their patient populations.
Second one which is also a current partner who is evaluating moving forward into a development agreement.
Those have not advanced sufficiently for us to sign the deal I'm unable to provide any additional information, but they are both partners who are very experienced with our in hand that technology.
With regard to the auto injector timeline the high volume one it is all going to depend actually on what the product is being used is it already a sub Q. As an example is a very important driver of the timeline and the second one is what primary container.
Partner wants to you and is that immediately available.
If it's already a subcutaneous product using in hands and it's the primary container that's available we estimate the timeline in around the two year timeframe.
To be a comparative study done stability work needs to be done human factor studies need to be done, but we estimate that can be done in about two years and that as you say starts to.
<unk> revenues for <unk>.
If it's the case of a product that is currently in IV and this is going to be something that is adding in hand and going into an auto injector think of that more like the timeline, we see for an enhanced product because that which is approximately five years four five to five years from first in human to approval.
That really would have to go through the comparability to the sub Q dose is the statements I'd and while that's happening all of the device development and the device the ability and the human factor studies can happen in parallel so two years to five years I think is a reasonable timeframe, depending on the type of product.
Thank you very much appreciate it.
Okay.
Your next question comes from the line of Michael <unk> with Evercore ISI. Your line is open.
Hi, guys. Thanks, so much for taking my question and congrats on all the progress, especially congrats on today's newly announced deal with acumen.
My first question is why is this deal non exclusive.
Target is still up for grabs from any other manufacturer and if so would this as potential future manufacturer have the option of securing an exclusive deal with outside of acumen of course.
And my second question is regarding sub Q1 purpose.
Should we think about the maximum IV to subcutaneous version right in the U S.
Assuming that launches next year I mean, if we think back to Rituxan <unk> launched in the EU Roche adopted a much more proactive biosimilar defense strategy compared to the U S and launched high seller roughly four years prior to Biosimilar entry and as a result of the Max.
The subs conversion rate in Europe was 60% and I guess my Ultimate question is can we expect a similar 60% conversion here.
The U S. Thank you.
Alright, Thank you for that question Michael.
We actually do have another partner that is confidential who has the non exclusive access to the amyloid beta and in light of that the opportunity with acumen.
Non exclusive given that we already had somebody who has the target non exclusively.
I think that's a nice example, as to how when we're able to do nonexclusive deals we can license to multiple different different partners.
So.
I think that answered that question.
We're excited to be working with acumen on their novel approach to this very dreaded disease, where we're seeing a significant advances and support all fee amyloid beta hypothesis as a key mechanism, where we may be able to see real benefits for patients.
With regard to subcutaneous <unk>.
We're hearing from Roche, if you've been listening to the prepared remarks is Roche has felt that they are growth of.
<unk> has been a little limited by the lack of infusion.
<unk> capacity, both outside the U S and in the U S and also sites, who are able to have IV infrastructure in.
In light of that Theres, a lot of commentary from Roche is to think about this a little bit like fast pro became after the conversion was done which is they're going to be trying to grow the overall market as a primary goal.
And also have some tweaks, but it's going to be a little bit of a different dynamic than the one you mentioned for Rituxan Hi, Sally was switch before Biosimilars I think we're going to see both dynamics happening.
And we're very excited by that because it means that patients who are living far away and of course access such as patients in rural communities or countries, where there isn't good access to IV therapies are going to be able to start on <unk>, which is the leading therapy for multiple sclerosis.
The U S and EU five so.
We will see a market growth strategy and the conversion strategy, because we havent seen exactly this dynamic happen before it's hard to peg exactly how much conversion will happen, but we certainly are seeing for fast proof I can turn your attention to that but the availability of fast Bruce what's been fueling the dramatic.
Growth, we're seeing of Dar the legs in the last couple of years and it's what's projected to be taking dark Lex from an $8 billion brand last year to $16 billion Brent next year.
So new way to think about it but I think equally exciting in terms of the opportunity we're going to see here for OCA. This where it'll be 10 minutes sub Q2 times a year instead of three five to six hours.
IV twice, a year and very likely closer to the patient's home.
Super helpful. Thanks, so much.
Our next question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is open.
Great maybe a couple from US first could you just talk to us about some of the drivers of <unk> growth. This quarter is I think pretty meaningful are you seeing an inflection.
What pockets are driving that.
Yes with them Thanks, Karen.
I said, we've had a focus on two drivers first what is driving that conversion in the physicians office to get the patients identified who are not doing well on their <unk> and getting them on to.
Sorry, there I am testosterone therapy, I'm getting them on <unk> and the second one is very careful attention in the office to make sure. The office is filling in any prior operations of authorizations that might be required, but also making sure when the patient gets a prescription filled there being more successfully connected with.
With the copay assistance and other programs we've put in place. So it's that some pull through of all of the programs at a higher rate of identification of patients, but really is driving the growth that we're seeing are we do predict yes, we're still under 5% share of this overall market, which is dominated by the iam sick.
<unk>, which is our conversion target that's what we're trying to switch patients from so a lot of growth still to come.
With that the strategy that is beginning to really pay dividends yes.
Helpful. Thank you and then maybe one last one from us.
It sounds like Theres, a number of partners that are kind of circling around the auto injector. What's your sense of some of the gating factors are things they'd like to better understand before actually signing on the deal and and what would they be exploring with the studies next year.
Yeah as I mentioned in her prepared remarks.
When we've been presenting it we've had some comments like fantastic.
Breakthrough never felt this was possible and I think it is the degree of innovation. That's represented here Karen that like.
With any new innovation, there was always a period of <unk> and I will say is exactly what we saw within Hans if I go back to when I was in the company, where we've just done a couple of the deals that took a couple of companies to come in and do it and then the waves happened.
After that so I think we're just seeing that.
Traditional innovation adoption curve.
And people.
People moving into the clinic now to test it is going to help generate additional data and.
And just because it was so remarkable we show them a video of patients receiving the therapy and it's invisible to see that the patients had received 10 ml into the abdomen I think gap in just 30 seconds. So.
A wonderful reflection of the innovation and.
People are doing their work now to evaluate that think about it for their patient populations and in the case of one partner I mentioned moving into a clinical study next year. So we're going to see more of that over the next step amongst I believe it's.
Helpful. Thanks.
Your next question comes from the line of Jason Butler with JMP Securities. Your line is open.
Hi, Thanks for taking the question.
Just one of them.
The accelerated buyback I mean now that you are wrapping up this buyback can you just talk to us about how you're thinking about future return of shareholder capital.
And I guess put that in the context of <unk>.
Your appetite for it.
Bringing on new technologies.
Yeah, I'll ask Nicole to address that.
Yeah. Thanks, Jason So as we think about our capital allocation strategy. It really remains unchanged. We're focused on the three pillars that we've been focused on which is really continuing to invest in our current platforms continuing to return capital to shareholders and we're very excited to take advantage of this buying opportunity now in <unk>.
Salary the remaining portion on the current plan to do that starting this quarter and then also again very much continuing to look for growing that revenue growth that durability long term via M&A, we implemented the ASR this quarter because there are no near term plan.
To grow via M&A, and we wanted to deploy our capital in the best way to return value to shareholders, but that will very much continue to be a focus in the longer term as we grow the business.
Great and then just one more for me on Cisco can you just speak to how you would think about peak adoption here and how the.
Self administration.
It.
Could drive whether it could drive further adoption.
The sub Q.
Yes.
Thanks, Jason.
Youre on Roche's comments, obviously, what we're seeing every quarter.
Quarter is an increase in the overall conversion, but I'll just mention that every quarter, there's always a 4% to six countries being added which is the lifting the overall conversion. So that 37, 38% reflects a range from very recent start of conversion all the way up to I think they've maintained 92% conversion.
In Europe with a U S based on latest comments, maybe two quarters ago at 20% at that time.
Roche has commented that they expect up to to get to 50% conversion.
With that obviously continuing to be a range of recently launched markets and also high conversion in those markets, where we're seeing resource constraints.
We're seeing shortages IV capacity constraints and so we're obviously delighted with the very strong progress, we're seeing and the continued growth to come as we get to that 50% overall conversion of the market.
I wouldn't be surprised myself.
It was able to go even further than that based on the value proposition that we're seeing here and just to reiterate that.
For breast cancer patients many of them most of them as many of them working.
Stirred up having to be an infusion center for the treatment, which can take up to one and a half hours. But then there is the observation the injection of ESCO is given in just five minutes or so with a short term observation time that means among can go in before work at lunchtime after work and not be able to take half of it.
Take so much time so.
It's a strong value proposition and I am expecting more growth to come.
The focus of the on body, which does include Fayetteville, So sometimes people ask us that going hand in hand, with an intrinsic car of Fayetteville, which also included Herceptin and <unk>.
And.
Project.
The goal with that is to allow for more at home therapy, and so I haven't heard gross comment if that how much do you think that will impact.
The growth and grow the market, but based on patient population.
I've just described I think this is going to be a very nice option for a certain segment of that population, who that just fits better into their lifestyle.
Okay, great. Thank you.
Your next question comes from the line of Vikram <unk> with Morgan Stanley. Your line is open.
Hi, good evening, thanks for taking our questions. So we had two one on capital allocation one on the auto injector, so going back to some of your prepared remarks. It sounded like there is a renewed focus on business.
Business development, and M&A and so while we understand that youre not.
Dissipating into near term M&A.
Can you speak generally about the profile of the businesses.
The profile of assets that you would find additive to fold into hillesheim.
And then on the auto injector I just a clarification are the economic terms associated with these potential initial contracts would they be in line with economics and terms associated with your current enhanced contracts. Thanks.
All right with regard to BD and M&A as Nicole mentioned, we didn't find any near term.
Opportunities, but we are continuing to look at because that remains one of our three core pillars, which is to seek growth through deploying our capital for M&A.
As a leader in drug delivery, we are looking for.
Derisked broadly licensed Apple assets, where we can see a path to near term accretion. So some form of drug delivery that is something major pharma major buyer tech cannot do themselves and which they would be.
Needing to license from a company that has that specific asset there are assets out there to to anticipate that question just.
Have to fit a grid of.
Criteria for us, including that path to near term accretion so.
We will keep looking and we spent a number of years looking for the <unk> acquisition and so we will just keep focusing on that but also as Nicole mentioned the.
What we consider to be the undervaluation of the halos I'm stock meet the share repurchase the right thing, we believe to return capital to shareholders given the strong opportunity that that represented.
With regard to the high volume auto injector.
Going to see it because the high volume auto injector has to be used with enhanced strategically. This is positioned to help us expand the number of current partner assets in the clinic.
And moving into the clinic, but also to allow us to find more enhanced partnerships. So the HCI is always going to be associated with a royalty payment for the drug.
But that is primarily going to be driven by enhanced and the model. That's most likely for the high volume auto injector will be development payment as it's being created.
Created but and then product sales, where we would make money on the number of old.
Devices that were purchased in the sale of the creative product.
Got it thank you.
Ladies and gentlemen, if you have a question it is star one.
Our next question comes from the line of Matt <unk> with JP and Chase Your line is open.
Hey, guys. This is not.
Jess Fye.
Question on the <unk>.
B, a nonexclusive deal I guess.
Is there more.
Are you seeing more interest in nonexclusive deals from potential partners.
And then another one on the auto injector what is the pathway.
Toward developing the auto injector into a self administered auto injector because the first the <unk>.
<unk> auto injector phase one is still administered by <unk>.
The physician thinks.
Alright.
I will take the one on the auto injector, maybe I'll ask Nicole to comment afterwards on the non exclusive deals.
Because this was a prototype them not in the first time visits ever been done to attempt to deliver 10 miles in 30 seconds. We thought it was prudent and appropriate for patients that we had a healthcare administered approach to it.
What we will find now is that partners are going to be moving the partners that we mentioned is more likely going to move into the clinic to do a patient self administered in and frankly, there is nothing additional that has to be done other than to write the protocol that way.
It's very simple.
Injector are please the <unk>.
<unk> device on the auto injector on the abdomen and click a button and hold it there. So it's going to be very straightforward for patients to do but the only reason we didn't do in the first study was because it's never been done before having seen how well tolerated it was and how well. It worked we have no hesitation in supporting patient studies.
At this stage land so.
Simply be the patient does that themselves and while this is a larger volume than some other auto injectors batzel mechanism of doing it is tried and tested.
<unk> tried and tested by it.
It seems like hundreds of thousands of patients around the world with <unk>.
It's very similar to that it's just a larger volume longer hold time.
Nicole do you want to comment on the interest in nonexclusive deals at the moment.
Yes happy to non so I will say you know historically, we always have tried to market.
And not exclusive deal I think historically the interest has been on the exclusive side, but obviously that comes with a higher price tag as well.
We're very interested in non exclusive deals we see the benefit of reaching more partners and more patients that way. So I think both youll see coming through and we will continue to pursue both types of models.
Thank you.
Your next question comes from the line of Mitchell Kapoor with H C. Wainwright. Your line is open.
Hi, everyone. Thanks for taking the questions I wanted to ask about the evolution of the royalty revenue business and right now we have a lot of it coming from doors legs and FESCO, but obviously, we'll have safeguard high true low end to centric subcutaneous and others that will be making up a little bit more of the.
Royalty revenue business share could you just kind of comment on how soon you expect meaningful uptake to occur for some of these other agents and then also on the centric subcutaneous approval in 2024 can you just comment on when Youll have a new <unk> date, or what is kind of the gating items to getting to that timeline.
Okay.
Alright.
Two the evolution and thanks for asking that question because we're very excited that the wave three products are no all four of them largely de risked with one approval and three positive phase III study so.
Looking at very encouraging for launches of these products in the 2023 to 2025 timeframe and importantly, as I mentioned, if you look at where these project projects are projected to be in terms of size by 2028 $35 billion in sales of the product.
Which is substantially higher than the $20 million, we're seeing with ours election phase go today. So we're very excited about how attractive.
<unk> opportunity is.
Depending on how you define meaningful all four products are going to be commercialized by 2025.
With several of them launching one to two years before that so I think 2000 feet or late 'twenty four 'twenty five 'twenty six 'twenty seven is where we're really going to see these products are growing very nicely.
Boeing.
What we've seen in the past which has been maybe.
Maybe a two and a half to three year could peak conversion.
No.
Definitely going to be a very nice addition to the continued contributions from the wave one wave two product, but adding four new.
Very attractive royalty revenue streams in 'twenty three 'twenty four 'twenty, five and then onto 2007 and beyond.
Yeah.
Great. Thank you and on the to centric.
New data for potential approval is that something more narrow that.
Taiwan on as we get closer to that or do we have an assigned data at this point.
Yes, as far as we're aware Roche has not communicated any assigned date, what they did state was the filing in by year end this year.
And assuming a stat.
A standard 10 month review time, Mitch I mean that would take it into.
Let's say the September October timeframe, but Roche has not been communicated anything about that as yet.
Okay, great. Thank you all very much.
Thank you.
That is all the time, we have for the question and answer session. This will conclude today's conference call. We thank you for joining you may now disconnect your lines.
Please wait the conference will begin shortly.
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