Q2 2024 Halozyme Therapeutics Inc Earnings Call

Prilla: Good afternoon. My name is Prilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme second quarter 2024 financial and operating results conference call.

Good afternoon. My name is pillar and that will be a conference operator today at this time I would like to welcome everyone to the heel Zions second quarter 2024 financial and operating results conference call.

Prilla: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Please note that this event is being recorded. Thank you. I'll now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Speaker Change: All lines have been placed a 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 precious star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again.

Please note this event is being recorded.

Speaker Change: <unk>.

Tram Nguyen: I'll now turn the call over to tram buoy Taylor <unk>, Vice President of Investor Relations and corporate Communications. Please go ahead.

Tram Bui: Thank you, Operator. Good afternoon, and welcome to our second quarter 2024 Financial and Operating Results Conference Call. In addition to the press release issued today after the market closed, you can find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business, and Nicole LaBrosse, our Chief Financial Officer, will review our financial results as well as our outlook.

Speaker Change: Thank you operator, good afternoon, and welcome to our second quarter 2024 financial and operating results Conference call. In addition to the press release issued today after the <unk>.

Speaker Change: 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.

Speaker Change: Leading the call will be Dr. Helen Torley, <unk>, President and Chief Executive Officer, who will provide an update on our business and Nicola broth, Our Chief Financial Officer will review, our financial results as well as our outlook.

Tram Bui: 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 adjusted financial measures are reconciled with comparable GAAP financial measures in our earnings press release and slide presentation. I will now turn the call over to Dr. Helen Torley.

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 adjusted financial measures are reconciled with the comparable GAAP financial measures in our.

Earnings press release, and slide presentation, I will now turn the call over to Dr. Helen Torley.

Helen Torley: Thank you, Tram, and good afternoon, everyone. I'm starting on slide three.

Speaker Change: Thank you Tom and good afternoon, everyone.

Speaker Change: Starting on slide three.

Helen Torley: I'm pleased to report another robust quarter that is a clear demonstration of the strong execution and continued momentum we have across our business. In the second quarter, we achieved multiple key milestones that support our strong growth projections. During the quarter, we added to and further strengthened our enhanced IP portfolio.

Speaker Change: I'm pleased to report another robust quarter that is a clear demonstration of the strong execution and continued momentum we have across our business.

Helen Torley: In addition, we announced the new partner product approval and a new indication approval for a second partner, and there were multiple additional clinical and regulatory advancements in our exciting pipeline. These achievements support and drive our growth trajectory, mark the expansion of Enhance into new treatment areas, and reinforce the predictability of the regulatory and commercial success of our Enhanced Drug Delivery Technology. The opportunity for Wave 3 remains meaningful, with analysts and companies projecting total parent product sales of approximately $35 billion in 2028.

Speaker Change: In the second quarter, we achieved multiple key milestones that support our strong growth projection.

Speaker Change: During the quarter, we added two and further strengthened our enhanced IP portfolio.

Speaker Change: In addition, we announced a new partner product approval and a new indication approval for a second partner and there were multiple additional clinical and regulatory advancement of our exciting pipeline.

Speaker Change: These achievements support and drive our growth trajectory mark the expansion of enhanced into new treatment areas and reinforced the predictability of the regulatory and commercial success of our enhanced drug delivery technology.

Speaker Change: As a result of this progress total revenue in the second quarter grew to $231 million supporting our full year growth expectations of 13% to 22%.

Speaker Change: We delivered $125 million in royalty revenue, an increase of 12% from the prior year and our 16th consecutive quarter of double digit year on year royalty growth.

Speaker Change: This supports our expectation for royalty growth of 16% to 24% for the full year.

Speaker Change: In the second quarter, our high margin royalty revenue combined with the efficient operations of our business drove EBITDA growth of 19% to $137 million and non-GAAP diluted earnings per share growth of 23% to 91 cents.

Speaker Change: Annual adjusted EBITDA and non-GAAP diluted earnings per share growth will continue to outpace our top line and support 32, 44% EBITDA growth and 32% to 46% earnings growth year over year.

Speaker Change: Moving now to slide four and I'll provide some more details on our recent progress.

Speaker Change: Let me start with the most recent success with regard to our IP portfolio.

Speaker Change: In June we were granted a new patent for enhanced by the European patent office.

Speaker Change: This patent expressly claims will be enhanced product that halos and provide students enhance licensees.

Speaker Change: Based on this new grant patent coverage in Europe is now extended to March six 202009.

Speaker Change: We have a similar pending reissue patent in the United States, which also with granted with the similar scope will extend patent coverage to March six 2029.

Speaker Change: Our strong ability to continue to protect our intellectual property portfolio has directly and positively impacted our growth profile.

Speaker Change: In June we raised our five year outlook based on the new patent and its impact to maintain the Dar select subcutaneous and M event by subcutaneous a royalty rate at the original starting royalty rate until March six 2029 in Europe.

Speaker Change: Importantly, this results in five additional years of full royalty rates in Europe for <unk> select subcutaneous.

Speaker Change: This in turn resulted in an increase in our projected five year CAGR for royalty revenue to 20% increase in adjusted EBITDA growth to 25% and an increase in non-GAAP diluted earnings per share growth to 23%.

Speaker Change: We look forward to providing a financial update if the reissue patent which is pending in the United States is granted with similar claims to this new European patent.

Speaker Change: I'll move now to slide five and review the strong development and regulatory progress that was made in the quarter all of which support our robust royalty revenue growth outlook.

Speaker Change: Starting with product approval.

Speaker Change: We were delighted to announce two new enhance approvals in the quarter.

Speaker Change: These approvals extended enhance each in urology and expanded our reach in autoimmune diseases, adding to our existing strength in oncology.

Roche: Roche received EU and UK approval for OCA, the subcutaneous co formulated with <unk>.

Speaker Change: <unk> subcutaneous allows multiple sclerosis patients in those regions to receive their treatment in just 10 minutes twice a year.

Speaker Change: For many patients <unk> subcutaneous will allow patient treatment outside the IV infusion facility potentially allowing new patients to access this important medicine, and also allowing treatment closer to home.

Speaker Change: Oh for the subcutaneous represents payments on eight partner product.

Speaker Change: The second approval was for <unk>, which received FDA approval for the treatment of chronic inflammatory demyelinating polyneuropathy or <unk> and this marks the second FDA approved indication for the subcutaneous version of <unk> start with enhanced.

Speaker Change: Alaska Hertzler represent the first novel mechanism of action to treat <unk> in 30 years and offers patients a transformational new treatment option with a 30 to 92nd weekly subcutaneous injection.

Speaker Change: Moving now to regulatory Advancement, Bristol Myers Squibb received regulatory filing acceptance for nomad subcutaneous in the United States.

Speaker Change: Allowed us to recognize a $15 million milestone payment in the second quarter for this product.

Speaker Change: In addition, the <unk> subcutaneous submission in Europe was accepted by the European Medicines agency in the quarter, resulting in a $7 million milestone payment to hail event.

Speaker Change: Sure.

Speaker Change: Bristol Newbold map subcutaneous has a <unk> action date of December 2009 of 2024.

Speaker Change: We're also looking forward to potential approvals for <unk> centric subcutaneous and ultra boost subcutaneous <unk> in the United States in September based on their September 2024 for <unk> action date.

Speaker Change: We're set up for three new U S approvals this year for the wave three products, which adds to the 2023 <unk> first approval in generalized myasthenia gravis and this supports our exciting revenue growth projections.

Speaker Change: Another important achievement in the quarter was the result of Johnson <unk> Johnson's phase III Paloma three trial for Ami vent about subcutaneous <unk>.

Speaker Change: The Paloma three data was presented at Astro in May.

Speaker Change: Notably the data demonstrated that the subcutaneous delivery of <unk> with enhanced resulted in significant potential benefits for lung cancer patients compared to those receiving IV treatment.

Speaker Change: Firstly treatment time was reduced to less than five minutes compared to five <unk> for the first infusion of the IV treatment and to ours for subsequent IV treatments.

Speaker Change: Secondly, there was a five fold reduction in infusion related reactions from 66% with the IV to 13% with the subcutaneous formulation with enhanced.

Speaker Change: Remember that infusion related reactions are potentially serious adverse event that can lead to treatment interruption or even discontinuation.

Speaker Change: And thirdly, and exploratory analysis also showed an intriguing improved overall survival rate for the subcutaneous treated patients it.

Speaker Change: It was reported that 65% of patients receiving subcutaneous were still alive at 12 months compared to 51% who received IV treatment with anti <unk>.

Speaker Change: These compelling results are another clear demonstration of the high predictability of our technology and the benefits it could provide to patients and to health care providers.

Speaker Change: Following on the strong data Johnson and Johnson announced so that we have submitted subcutaneous arm event for regulatory approvals in both the United States and in Europe.

Speaker Change: We were also excited to have acumen dosed their first patient in a phase one study of subcutaneous <unk>, which is our novel therapeutic that targets soluble amyloid beta oligomers for the treatment of Alzheimer's disease.

Speaker Change: Very pleased to be supporting this opportunity for a more convenient and accessible option using enhanced for patient suffering from this challenging disease.

Speaker Change: Moving now to slide six we remain confident in and are on target to achieve $1 billion in royalty revenue in 2027.

Speaker Change: This will be driven by the continued strong performance of our wave two products plus. The addition of five new royalty revenue streams. Following the approval and launch of all five of our wave three products.

Speaker Change: I will now provide additional details on our second quarter performance beginning with the continued momentum from our wave two products <unk> and <unk>.

Speaker Change: For Johnson and Johnson <unk> sales in the second quarter were $2 9 billion, an increase of 21, 3% year over year on an operational basis.

Speaker Change: This was primarily driven by share gains of $4 six points across all lines of therapy and continued strong growth in the frontline setting with share gains of nine four points John.

Speaker Change: Johnson <unk> Johnson also commented that there continues to be market growth.

Speaker Change: With subcutaneous penetration in excess of 90% in the United States, an estimated to exceed 80% outside the United States <unk> with enhanced is driving the strong total brand growth.

Speaker Change: According to analyst estimates Darko its annual sales are projected to exceed $17 billion in 2028.

Speaker Change: This growth from $9 $7 billion in 2023 will be driven by continued growth in the frontline setting.

Speaker Change: In addition, with Johnson and Johnson, commenting on four positive phase III readouts in the quarter gross is projected to also be fueled by potential new indications.

Speaker Change: We are pleased to note the FDA approval on July 30th for Darfur pass broke with enhanced in newly diagnosed transplant eligible patients with multiple myeloma further expanding the frontline indications.

Speaker Change: I'll move now to <unk> on slide seven.

Speaker Change: Sales of <unk>, which is a fixed dose combination of projected intercepting increased 60% to almost 800 million Swiss francs in the first six months of this year.

Speaker Change: With strong growth momentum in the number of launch countries increased to 51 countries and conversion of projector was 41% in the quarter.

Speaker Change: Roche expects global conversion to reach 50% by 2026.

Speaker Change: Notably there remains substantial opportunity with project revenue of $1 9 billion Swiss francs, and the first half of this year.

Speaker Change: Let me now turn to our OE three products and product candidates, which are shown on slide eight.

Speaker Change: The opportunity for wave three remains meaningful with analysts and constantly projections of total parent product sales of approximately $35 billion in 2028.

Speaker Change: With two of our wave three products already on the market today and at least one major region. We expect launches to continue throughout this year and remain on track to 10 partner products within hand on the market in 2025.

Speaker Change: Let me start with <unk>, which is the subcutaneous version of five cart with enhanced.

Speaker Change: I will begin with the exciting news of the CIP indication approval.

Speaker Change: In June the FDA approval for <unk> added a second indication for <unk> in the United States CIB.

Speaker Change: <unk> as a subcutaneous only indications.

Speaker Change: <unk> also announced that the European regulatory filing for <unk> was submitted to the EMA in June and a decision is anticipated in 2025.

Speaker Change: <unk> is the first and only neonatal FC receptor blocker approved for the treatment of CDP and represents a promising new treatment option that may provide patients with the ability to treat their disease beyond just managing symptoms.

Speaker Change: The broad label granted by the FDA support to use across the treatment paradigm.

Speaker Change: <unk> has stated if aspiration for <unk> to become the standard of care for <unk> patients.

Speaker Change: There are more than 40000 <unk> patients stay in the United States.

Speaker Change: It has been highlighted that only 24000 patients are estimated to be receiving some form of treatment for civ P of these 50% of treated patients are not responding well to the current treatment or are experiencing negative side of it all of this supports a high unmet need.

Speaker Change: Our <unk> has been preparing for this launch and has a strong commercial playbook in place.

Speaker Change: Similarly to generalized myasthenia gravis, they will initially focus on gaining coverage and access by getting payer policies in place.

Speaker Change: Their commercial strategy will focus on an audience of approximately 10000, neurologists of whom about 72% treat both see ADP and myasthenia gravis.

Speaker Change: Based on the treatment regimen. The annual net revenue per patient is estimated to be $450000, which is higher than estimated by analysts further supporting the brand's growth prospects.

Speaker Change: I'll move now to the continued momentum on the generalized myasthenia gravis launch.

Speaker Change: Our <unk> brand is already a global blockbuster, having generated more than $1 billion in its second year of launch for its first indication in generalized myasthenia gravis and it remains on a strong growth trajectory.

Speaker Change: In the second quarter of 2024, <unk> reported $478 million in global product sales of <unk>, a robust 20% quarter over quarter growth.

Speaker Change: <unk> is in its first full year of launch for <unk>, and we're very pleased with the growing adoption and use.

Speaker Change: With the number of patients and prescribing physicians, expanding and use increasing in earlier lines of treatment for this indication.

Helen Torley: We also expect continued ease of access following the granting of the J-Code for HITRULO in January of this year. The opportunity increased 3.5 times from approximately 17,000 patients at launch for the anti-acetylcholine-receptor-antibody-positive patients to now up to 60,000 patients, including the expectation of new indications for seronegative and ocular myosinergavis, as well as growth driven by the availability of biologics. Roche commented that they expect the majority of the substantive use will come from patients switching from geocentric intravenous.

Speaker Change: You know gravis was recently submitted.

Speaker Change: The pre filled syringe is expected to continue to expand and reinforce their momentum as the biologic market continues to grow.

Speaker Change: Our Jamie also recently initiated two Registrational studies evaluating Viper truly with enhanced administered by pre filled syringe for thyroid eye disease, representing another attractive future opportunity.

Speaker Change: Let me move now to centric subcutaneous within him.

Speaker Change: With approvals already granted in Europe, and Great Britain for all approved indications of <unk> IV Roche recently commented on good uptake following the European approval.

Speaker Change: They highlighted as an example that 32% conversion has already been achieved and the United Kingdom. Following the late 2023 launch.

Speaker Change: We're excited for the U S approval, which is projected by September 15th 2024 based on the <unk> action date.

Speaker Change: Annual sales are to centric IV remained stable and generated $1 8 billion Swiss francs year to date.

Speaker Change: Roche has commented that they expect the majority of the subcutaneous use will come from patients switching from to centric intravenous.

Helen Torley: Moving on to Ocrevus subcutaneous with Enhance, as I mentioned earlier, in June, Roche received approval for Ocrevus subcutaneous in Europe for relapsing and primary progressive multiple sclerosis. In the United States, Ocrevus subcutaneous has a producer action date of September 13, 2024. These phase three studies are continuing to progress. Now, let me move to New Deal Progress.

Speaker Change: Moving now to okra subcutaneous with enhanced as I mentioned earlier in June Roche received approval of OCA for subcutaneous in Europe for relapsing and primary progressive multiple sclerosis.

Speaker Change: In the United States Okra vis subcutaneous have to produce the action date of September 13th 2024.

Speaker Change: It's using tivo by utilizing a single injection in just three to five minutes supporting bms's expectation that at least 30% 40% of U S patients will convert from IV to subcutaneous with an expectation that the subcutaneous label will cover up to 75% old the IV indications.

Speaker Change: I'll move now to Amin fan to map subcutaneous with enhanced.

Speaker Change: Event about subcutaneous is on track for potential launch in 2025. This could represent our 10th approved product.

Speaker Change: Johnson <unk> Johnson has commented that this is another blockbuster product opportunity and the Ami Vantiv map will have a significant place in frontline non small cell lung cancer, given the high unmet need and the strength of the Paloma three data.

Speaker Change: They recently highlighted the reduced treatment administration time, and reduce infusion related reaction as key to supporting this multibillion dollar opportunity.

Speaker Change: I will now move to slide nine for a quick highlight of our way forward pipeline, which is expected to contribute to our future growth trajectory with potential launches for wave four in the 2026 to 2027 time frame.

Speaker Change: We have six products currently in development, reflecting a range of therapeutic areas, including oncology neurology immune disease and HIV.

Hans: And Hans is clearly recognized as a highly de risked product with a strong safety track record and an unmatched history of global regulatory approvals and commercial success.

Speaker Change: We were also pleased to note changes recent comments that they believed ours like bass pro within hands will fall under a separate timeline for drug price negotiation with regard to the inflation reduction Act.

Hans: As we await the part B guidance this fully aligns with our expectations and reinforces another potential benefit for in hands and the recognition of the clinical benefit it can bring for patients.

Speaker Change: Let me now comment on our commercial portfolio, which continues to demonstrate positive momentum against the backdrop of a very large and growing market opportunity and testosterone replacement treatment <unk>.

Speaker Change: <unk> growth remained strong we continued to see a clear path for our proprietary products to contribute meaningfully to EBITDA in 2028 with greater than $150 million.

Speaker Change: Let me now hand, the call over to Nicole to discuss our financial results in more detail.

Nicole: Thank you Helen second quarter results are on track with our plans and support our strong financial performance expectations for the full year from the continued momentum in the business.

Helen Torley: Importantly, adjusted EBITDA and diluted earnings per share growth once again outpaced the top line, reflecting the strength of our business model as we generated significant leverage from continued growth in royalty revenue. In the quarter, we completed the $250 million ASR announced last November.

Helen Torley: Royalty revenues for the quarter were $124.9 million, an increase of 12% compared to $111.7 million in the prior year period. However, growth in the second quarter was partially offset by a temporary royalty rate reduction for Darzalex SC in Europe in March, with the full royalty rate reinstated in June. Primarily due to planned reductions in commercial marketing expenses, Adjusted EBITDA increased 19% to $137 million from $115.1 million last year. As you refine your model, I would also like to reiterate the following. Non-gap diluted EPS growth of 32 to 46% reflects gross margin expansion from revenue mix and the full year impact of share repurchase activity in 2023.

Nicole: <unk> also benefited from higher than expected API field, reflecting a demand shift from the third quarter to the second quarter.

Nicole: Similarly collaboration revenue was higher than anticipated due to the achievement of two milestones previously expected to take place in the third quarter.

Speaker Change: Installed MAA acceptance and arguments phase one milestone.

Speaker Change: Research and development expenses were $21 million compared to $19 $7 million in the prior year period.

Speaker Change: The increase was primarily due to planned investments and enhance related to the development of our new high yield API manufacturing process.

Nicole: Selling general and administrative expenses were down to $35 $7 million in the quarter from $38 $9 million in the prior year period, primarily due to planned reductions in commercial marketing expense.

Speaker Change: Adjusted EBITDA increased 19% to $137 million from $115 $1 million last year.

Speaker Change: GAAP diluted earnings per share was <unk> 72 cents and non-GAAP diluted earnings per share was <unk> 91.

Speaker Change: To withdraw your question simply press Star one again, if you are called upon to ask your question and are listening by a loud speaker on your device. These pick up your handset and ensure that your phone is not on mute when asking your first your question. Once again, please press star one to ask the question.

Prilla: Once again, please press star 1 to ask a question.

Speaker Change: And your first question comes from the line of Jason Butler with Keith Vince JMP. Please go ahead.

Jason Butler: Hi, Thanks for taking the questions and congrats on the quarter and how how long wondering if you could just once again give us an overview of as you look at the new partnership or expanded partnership activities, whereas it weighted between and hands alone versus it hands in order.

Speaker Change: Injector and and again understand that timing can be predicted but.

Speaker Change: Again your confidence level on on seeing deals this year. Thanks.

Speaker Change: Yeah. Thanks, Jason Yes, we are confident in finding additional deals and what really gives us that confidence is the fruits of conversations that we're having I would say the deals are more weighted to enhance on its own.

Unknown Attendee: Great. And then just one follow-up question, I think probably for Nicole, just the API sales were higher than expected in 2Q. What drove that? And I guess just what gives you the line of sight that you'll be flat quarter over quarter into 3Q?

Operator: And your next question comes from the line of Serena Chen with Wells Fargo. Please go ahead.

Speaker Change: <unk> seen that come quick partners, who were feeling there in a competitive space or perhaps just because of their preference choose not to disclose the the targets and we obviously have to abide by that so.

Speaker Change: Obviously, we were excited to talk about those when we can but that's not we can't see anything at the moment.

Speaker Change: With regard to the terms discussing you know as we mentioned we are continuing in terms discussions with companies as well as additional companies that are.

Speaker Change: More in the technical evaluation stage at jazz So each company is moving at its own pace.

Speaker Change: While I would love to be able to give more granularity about what exactly is happening there is not an intermediate place really between initiating the terms discussion in signing the CLA that I can talk about and so it does make it seem like when we announced the deal. It appears all of a sudden but we do want to make sure that we're giving you.

Speaker Change: The most up to date information and so youll hear about it when the C. L. A's are actually signed.

Speaker Change: For Paloma three obviously for everybody that was exciting data we're in explorer and in addition to expected results, which was a five fold reduction in infusion related reactions and also the dramatically shorter treatment time, there was an interesting exploratory signal with regard to a and improved <unk>.

Speaker Change: For overall survival in the sub Q arm.

Speaker Change: <unk> theory circulate about that one was that perhaps it was the patients had higher overall exposure, while still hit the non inferiority margins. It was an over a higher exposure.

Operator: And your next question comes from the line of Michael DiFiore with Evercore ISI. Please go ahead.

Helen Torley: All right, I'll take the first one, then Nicole can take the second one. You know, I would say the issue of election uncertainty, rate cuts, and things isn't really coming up in any of the conversations that we're having, Mike. So I can't really say that is a focus for certainly the people we are talking with in the companies. We are continuing in discussions with around 10 companies. And so I'd say it's still that healthy pipeline of conversations that we're having.

Helen Torley: And we're constantly reaching out to other companies, and we do get inbounds. Remember, I gave a metric before to say we probably have more coming from our active outreach than inbound, but I haven't seen any difference in that overall kind of pace and trend at all. And certainly nothing I could attribute to anything like election uncertainty or price cuts. I think for us, as you're seeing, and you've heard us talk about, it really is internal reviews in companies as perhaps part of their governance, perhaps part of their budget cycle that we have gotten used to over the years because it just takes time.

Helen Torley: You know, if you look back historically, we've signed about a deal a year on average. And so we're very used to it. We're patiently working through the process with all the companies that we're talking with and remain very excited by the breadth of the conversations, and that gives us confidence in additional new deals.

Unknown Attendee: Hey everyone, thanks for taking the questions. The first one is on the 2024 guidance since it was reiterated, but given what you're seeing in the pace of revenue categories, I was wondering if you have any updated thoughts and if you can make any comments about how the composition of the revenue line items could look in 2025, potentially.

Helen Torley: All right, I'll turn that to Nicole.

Unknown Attendee: Great, thanks. And then on product sales, you were mentioning that sometimes a partner might request product earlier than later. And I was wondering if that shift that we're seeing, if we're seeing that now, has any bearing on the level of demand that we could be seeing and how that might read in the future.

Operator: And your next question comes from the line of Brendan Smith with 2D Cohen. Please go ahead.

Brendan Smith: Hi, thanks for taking the questions. Congratulations on another good quarter.

Unknown Attendee: I just have a quick one on Increvus and then a follow-up on EmpaCiproBart. We've been assuming that the Increvus SubQ will still require a visit to the clinic and administration by a health care provider. Is that also kind of your expectations at this point, or are you thinking there might be some flexibility for at-home administration? And then just wondering about Argenix's EmpaCiproBart, do you have a sense from them how many of the four indications they've now announced will actually use the Enhanced SubQ? We know they're using it in MMM, but just wondering about DM, DGF, and CIDP. Thanks very much. Yeah, with regard to

Speaker Change: Thinking there might be any flexibility for at home administration.

Speaker Change: And then just wondering on the arginase is an emphasis for Bart do you have a sense from them how many of the four indications they've now announce who will actually use the enhanced up Q, we know they're using it in MMA, but just wondering about that.

Speaker Change: D M D. G F N C. A D P. Thanks very much.

Speaker Change: Yeah with regard to Oak service I think based on the clinical study that's been done Brandon to date.

Speaker Change: Because it was done with the setting of health care practitioner administered I think it's very likely that the original the initial labels are going to be for in the physicians office.

Speaker Change: Simple 10 minutes sub Q injection, but administered in the office and every six months I'll just point out and that is actually quite a good time point for patients to be in seeing their doctors anyway.

Speaker Change: So I.

Speaker Change: I don't know that it'll be any drive on roche's part to want to in the patient's home because the patient is going to have to see the doctor anyway, and it's a nice time for chicken.

Speaker Change: With regard Tampa vis rebar aim at Gentex has not provided any additional information with regard to that publicly so we're not in a position to provide anything at this time.

Speaker Change: Okay, great. Thank you.

Operator: And your next question comes from the line of David Risinger with Lyrinc Partners. Please go ahead.

Speaker Change: And your next question comes from the line of David Risinger with Leerink Partners. Please go ahead.

Jason: Hi everyone, congrats on a strong quarter and thank you for taking the questions. It's Jason for David.

Speaker Change: Hi, everyone. Congrats on the strong quarter and thank you for taking my questions. It's Jason for David.

Jason Butler: Two questions for me. Please first one is following the strong <unk> performance, how should we think about maintaining so full year guidance as one of the third quarter and fourth quarter sequential modeling considerations.

Jason: Two questions for me, please. First one is, following the strong 2Q performance, how should we think about maintaining full year guidance? And what are the third quarter and fourth quarter sequential modeling considerations? And second, are you still expecting to sign major new enhanced doses near term or this year for future blockbuster drugs? Thanks so much.

Jason Butler: Question is are you still expecting to sign major new enhance deals near term for this year for future blockbuster drugs. Thanks, so much.

Helen Torley: I'll ask Nicole to take the first one and maybe again talk about the maintenance of the failure guidance and just the flavor of the next two quarters.

Nicole: Yes, I'll ask Nicole to take the first one and just maybe again talk about the maintenance of the full year guidance in just a flavor of the next two quarters, yeah happy to so our second quarter performance is tracking with our full year guidance and so no change to the guidance. It is tracking as we expected and supports our full year view.

Nicole LaBrosse: Yeah, happy to. So our second quarter performance is tracking with our full year guidance. And so, no change to the guidance. It is tracking as we expected and supports our full year view. And then in particular for the cadence for the third quarter and the fourth quarter, we do expect the third quarter to be flat when we look at API sales, as we mentioned. And also, when I look at collaboration revenue, I also mentioned we saw some milestones pull in that originally were expected in the third quarter, but now we're expecting in the third quarter that those will happen in the second quarter.

Speaker Change: And then in particular for cadence for the third quarter to the fourth quarter. We do expect the third quarter to be flat. When we look at API sales as we mentioned and also when I look at collaboration revenue I'd also mentioned, we saw some milestones pull in that originally were expected in the third quarter of those happened in the second.

Nicole LaBrosse: And so that is also driving our expectation that milestones or collaboration revenue will be flat from second quarter to third quarter. But when I look at royalties, we know that we expect to see growth in the second half of the year and sequential growth in the third quarter and the fourth quarter. That's really reflecting not only the growth in the underlying brands in our royalty streams but also reflecting a full quarter of our royalty rate being at the full rate that was reinstated in June for DART. All right, and with regard to the deal.

Nicole: Quarter, and so that is also driving our expectation that milestones or collaboration revenue will be flat on the second quarter to third quarter, but when I look at royalties. We know that we expect to see growth in the second half of the year and sequential growth in the third quarter and the fourth quarter, that's really reflecting not only the growth.

Speaker Change: In the underlying brands and our royalty streams, but also reflecting a full full quarter of our royalty rate being at the full rate back that was reinstated in June for <unk>.

Helen Torley: All right, and with regard to the deal progress, we certainly are excited to be in a range of discussions, including terms discussions and technical discussions with other companies. And, as we talked about, predicting the exact timing of a deal is very hard because each company is different, and it's influenced very much by its governance, but also its budgeting process.

Speaker Change: Alright, and with regard to the deal progress Sam we certainly are excited to be in a range of discussions, including terms discussions and technical discussions with other companies and as we talked about E. Predicting the exact timing of the deal is very hard because each company is different and it's influenced very much by their governance.

Speaker Change: But also their budgeting process and so what I can say is that based on the breadth of discussions we're very confident in new deals absolutely could happen this year and there's a range of things to your question on will it be an established product that's already commercialized will it be a product that's being sub Q right from the store.

Helen Torley: And so, what I can say is that based on the breadth of discussions, we are very confident in new deals that absolutely could happen this year. There's a range of things to your question on: will it be an established product that's already commercialized? Will it be a product that's doing sub-Q right from the start? It certainly could possibly be one or either or both.

Speaker Change: <unk> eight certainly could possibly be one are either or both.

Operator: It really is at the stage of just working through this within companies and their systems, but we're very pleased to have this range, obviously all of the established blockbuster IV to sub-Q conversion that's worked very well for us. But we're seeing so much interest now in sub-Q extended dosing as a place people are going to and offering something very important for patients, but also competitive differentiation for the product. So all of that is entirely possible, and we were just tasked to work through the system, and obviously, we're excited to provide updates as soon as we're in a position to move past these terms discussions into the signing of the CLA. Thank you. Your next question comes from the line of Vikram Purohit with Morgan Stanley. Please go ahead.

Speaker Change: It really is.

Speaker Change: We're at the stage of just working through this within the companies and their systems, but we're very pleased to have this range.

Speaker Change: Obviously all of the established blockbuster IV to subcutaneous and that's worked very well for us, but we're seeing so much interest in I went sub Q.

Speaker Change: Extended dosing as a place people are going end up being offering something very important for patients, but also competitive differentiation for the product. So all of that is entirely possible in them. We were dispatched to work through the system and obviously, we are excited to provide updates as soon as we're in a position to move past these terms.

Speaker Change: Discussions into the signing of the CLA.

Speaker Change: Okay.

Speaker Change: Thank you. Your next question comes from the line of <unk> Heath Byrd of Morgan Stanley. Please go ahead.

Speaker Change: Hi, Good afternoon. Thank you for taking a question we had one on capital allocation and business development.

Speaker Change: So how does the potential M&A factor into your thinking.

Speaker Change: And what profile of business do you think could be a good fit for heelys I am at the company's current stage of maturity in and how much would you be willing to flex that.

Speaker Change: 1.8 X leverage ratio for professional beauty.

Speaker Change: All right I'll take the first part and then I'll ask Nicole to comment on the the final question. There on the leverage so we continue to be very actively looking and we do believe that if we can find the right M&A that is a great use of our capital and a great way to return value to our shareholders. We continue our disciplined approach and we are looking.

Helen Torley: Nicole to comment on the final question there on the leverage. So we continue to be very actively looking, and we do believe that if we can find the right M&A, that is a great use of our capital and a great way to return value to our shareholders. We continue our disciplined approach, and we are looking ideally at businesses such as drug delivery that are licensing models to be a great fit with our current business model but also our financial profile given the high margins that exist there.

Nicole: Ideally at businesses such as in drug delivery.

Nicole: Our licensing models to be a great fit with our current our business model, but also our financial profile given the high margins that exist. There importantly, we're looking for things that have got a meaningful revenue stream and durable revenues to be a fit with the financial profile of the company as well so looking at drug delivery, but we also are looking.

Helen Torley: Importantly, we are looking for things that have got a meaningful revenue stream and durable revenues to be a fit with the financial profile of the company as well. So looking in drug delivery but we also are looking, and Vikram, you can imagine there are other businesses where there are technologies that pharma and biotech need to license for them to, for example, create new drugs. These are already established businesses, and that is another great fit for our skills and for our business model, and so we are very active looking there as well.

Vikram: And Vikram you can imagine there are other businesses, where there are technologies that pharma and biotech needs to license for them to four as an example create new drugs. These are already established businesses and that is another great fit for our skills and for our business model and so we're very active looking there as well.

Helen Torley: As ever, we will be patient; we have demonstrated strong patience; we need to have something that has got the right de-risk asset with the potential to grow where we see a meaningful contribution to our revenue and durable revenue as a result of it. So hopefully, more to come in that, but very active there. Nicole, do you want to talk about leverage? Yeah, when I look at our current leverage,

Vikram: As ever we will be patient with demonstrated strong patients we need to have something that's got the right derisked asset with the potential to grow where we see a meaningful contribution to our revenue and durable revenue as a result of it so hopefully more to come on that but a very active there Nicole do you want to talk about leverage.

Nicole LaBrosse: Yeah, when I look at our current leverage, and really what I think about, and as Helen described, is what is the pro forma de-levering profile? So that would be a really important factor when I think about how high I would go from a leverage perspective. I'll give you an example. For the interiors acquisition, we levered up to 3.3 times. And, as you mentioned, we were able to de-lever, and we're now at less than two times. So that the profile where we have a line of sight to de-levering is what I'd really be focused on.

Nicole: When I look at our current leverage and in really what I think about it and that has that Alan described is what is the pro forma delevering profile. So that would be a really important factor when I think about how high would go from a leverage perspective I'll give you. The example of that for the <unk> acquisition, we Levered up to three three times and as you mentioned, we were able to.

Vikram: Delever and we're now at less than two times, so that type of profile, where we have line of sight to Delevering is what I'd really be focused on.

Vikram: Okay.

Speaker Change: Understood. Thank you.

Operator: And your next question comes from the line from Joe Catanzaro with Piper Zandler: please go ahead. Angel, you might be on mute.

Speaker Change: And your next question comes from the line of Joe Catanzaro with Piper Sandler. Please go ahead.

Speaker Change: And Joe you might be on mute.

Joe Catanzaro: Hey, sorry, can you hear me now? Yes, we can. Great, thanks. Sorry about that.

Joe Catanzaro: Sorry can you hear me now.

Joe Catanzaro: Yes, we can.

Joe Catanzaro: I appreciate you taking the question here. I just had a quick one on the recent SAS Pro label expansion to frontline. Transplant Eligible Myeloma. I think the Perseus study did include a maintenance component, but the label does not include maintenance. I was wondering if you think the exclusion of maintenance could have any impact on the longer-term outlook for the total Darzalex franchise and its sort of growth trajectory, or whether you were considering in your longer-term assumptions some maintenance usage. Any help there would be appreciated. Thanks.

Joe Catanzaro: Thanks, sorry about that I. Appreciate you taking the question here I just had a quick one on the recent SaaS pro.

Speaker Change: Label expansion in frontline.

Speaker Change: On eligible myeloma I think the Perseus study did include a maintenance component, but the label does not include maintenance. So I'm wondering if you think the exclusion of maintenance could have any impact on the longer term outlook for the total doors along towards like franchise and its sort of growth trajectory or whether you were considering in your longer term.

Speaker Change: Assumption some maintenance usage any help there would be appreciated thanks.

Speaker Change: Yeah, it's a good point.

Joe Catanzaro: Joe and and you know not one that when we are looking at <unk>. We are we're not forecasting on a specific label by label basis I think what we do is we take a look at what the analyst consensus is for for patients and so.

Helen Torley: So, we're not forecasting on a specific label by label basis. I think what we do is we take a look at what the analyst consensus is for patients. And so, the analyst consensus is for sales. And so, we really look to see that across all of the indications that they have on the front line, they're obviously making great share gains at the moment. Last quarter, and this quarter, close to 10% share gains in the front line. I look at this as incremental on a trajectory that's already established with all of the front line indications and uses that they have in place today.

Joe Catanzaro: Okay, great. That's actually really helpful. Appreciate you taking the questions. Thanks again.

Speaker Change: Or the analyst consensus is for sales and so we really look to see that across all of the indications that they have in the frontline, they're obviously, making great share gains at the moment last quarter this quarter.

Speaker Change: Those 210% share gains in the frontline so.

Speaker Change: I look at this is incremental on a trajectory of this already established with all of the frontline indications and uses that they have in place today.

Speaker Change: Okay, Great. That's actually really helpful. I appreciate you taking the questions. Thanks again.

Speaker Change: Yes.

Operator: Thank you, and we have reached the end of our Q&A session. Ladies and gentlemen, that concludes today's conference call. Thank you all for joining us. You may now disconnect.

Speaker Change: Thank you and we have reached the end of our Q&A session, Ladies and gentlemen that concludes today's conference call. Thank you all for joining you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.