Q4 2024 Halozyme Therapeutics Inc Earnings Call
Good afternoon. My name is Karen and I will be your conference operator today.
Speaker Change: At this time, I would like to welcome everyone to the Halozyme fourth quarter and full year 2024 Financial and Operating Results conference call. Please note, this event is being recorded.
Speaker Change: I will now turn the call over to Tram Bui, Halozymes Vice President of Investor Relations and Corporate Communications. Please go ahead.
Tram Bui: Thank you, operator. Good afternoon and welcome to our fourth quarter in full year 2024 Financial and Operating Results conference call.
Speaker Change: 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.
Speaker Change: On today's call, we will be making forward-looking statements as outlined on slide 2. I would also refer you to our SEC filings for a full list of risks and uncertainties.
Speaker Change: 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: Total revenue exceeded $1 billion for the first time, growing 22% over prior year. We also raised our financial guidance twice during the year, and I am pleased to report that full-year results exceeded our raised guidance for royalty revenue, adjusted EBITDA, and non-GAAP EPS.
Helen Torley: We estimate that 1 million patients have now received drugs delivered subcutaneously within hands. Establish an unsurpassed and we believe unsurpassable safety database to inform regulators and new partners.
Helen Torley: Importantly, multiple impressive milestones were achieved in 2024 that will accelerate our near-term and long-term growth and extend the durability of the royalty revenue streams.
Helen Torley: Four major products or new indications with Enhance received approval in a major region, adding future growth.
Helen Torley: Current partners nominated five new targets to advance into the clinic for subcutaneous development expanding opportunity.
Helen Torley: We extended the patent protection of Enhance in Europe out to 2029 with issuance of a new patent with the effect of maintaining our royalty rate for Darzalec subcutaneas and Amivantamab subcutaneas unchanged at the mid-single digit rate for the next five years until March of 2029.
Helen Torley: And we also remain confident in the opportunity for the U.S. patent reissue, which will have the same effect of extending full royalty rate in this case from September of 2027 to March of 2029, noting that this is currently not reflected in our five-year financial outlook.
Helen Torley: This remarkable financial and operational performance, plus our continued business expansion, will deliver strong revenue and earnings growth for many years to come.
Helen Torley: Moving now to slide four, I'll just call out a few financial highlights before I provide more details on the key business drivers.
Helen Torley: Our strong fourth quarter performance resulted in record Fool Year 2024 results.
Helen Torley: I'm pleased to reiterate our 2025 guidance, including for total revenue, where we project $1.15 billion to $1.225 billion, representing growth of 13% to 21% year-over-year.
Helen Torley: This continued strong growth will be primarily driven by three products, stars like Subcutaneous, Fezgo, and 5-gard Hytrulis.
Let me begin with Darla's Legs on slide 5.
Helen Torley: For the fourth quarter of 2024, Johnson & Johnson reported worldwide sales of Darzalex grew almost 24% on an operational basis to $3.1 billion, with full-year revenue reaching $11.7 billion.
Speaker Change: We are delighted that Darzalec's growth and total revenue was driven by demand for Darzalec subcutaneas within hands, which represents 95% share of total Darzalec sales in the United States, and has a similar high share of sales outside the United States too.
Speaker Change: DarzLex now represents J&J's largest product with strong continued growth projected for many years.
Speaker Change: This growth is a result of investments Johnson & Johnson has made in new studies to increase access to Darzalex subcutaneous within hands for more early stage and frontline patients, further expanding the commercial opportunity.
Speaker Change: As examples, in 2024, darthalic subcutaneous within hens gained US and European regulatory approval for newly diagnosed patients who are eligible for autologous stem cell transplant in a combination regimen.
Speaker Change: A supplemental BLA has also been submitted for FDA approval for Darzalex subcutaneous within-hands as part of a quadruplet regimen for newly diagnosed multiple myeloma patients for whom autologous stem cell transplant is deferred or they are ineligible.
Speaker Change: And we're also anticipating U.S. and European approval for smoldering multiple myeloma.
Speaker Change: Each of these represent a compelling growth opportunity for DARS-like subcutaneous.
Speaker Change: These advancements support endless projections of more than $17 billion in total revenue for Darzalex in 2028, with virtually all of this coming from Darzalex Subcutaneous within hands. And recall, we predict earning royalties in Darzalex Subcutaneous until 2032.
Speaker Change: I'll now move to our second key driver which is Roche's Fezgo shown on slide 6.
Speaker Change: Fezgo is the combined therapy of Progetta, Herceptin, and Enhance, which is given in a single, 7-minute subcutaneous injection for the treatment of breast cancer. We believe Fezgo is an underappreciated acid that has been garnering growing adoption globally.
Speaker Change: In the fourth quarter, Roche reported that Fesco grew to 500 million Swiss francs, representing an increase of 72% year-over-year, and reached 1.7 billion Swiss francs, or approximately 2 billion US dollars, for full year 2024.
Speaker Change: Fesco had strong uptake across all regions, with conversion climbing to 46% in the 55 launched countries.
Speaker Change: Roche commented that the project conversion will continue to increase and will exceed 50% in 2025.
Speaker Change: With these strong results and expectations for continued growth, Analyst Projects' FESCO will reach $3.4 billion in revenue in 2028, all of which is subsequent issues within hands.
Speaker Change: Let me now transition to our Janneke Vybgaard and Vybgaard-Hertoulla within hands on slide 7.
Speaker Change: Vivegard-Hertoulli was enhanced as playing a key role in Vivegard growth by expanding the number of physicians using Vivegard, adding those who do not wish to or who cannot administer IV infusions.
Speaker Change: The ease of use of subcutaneous delivery is also enabling Vivegard to move earlier in the treatment paradigm, expanding the addressable population.
Speaker Change: And note that we project earning royalties in Vivecarte Hertrullo through the early 2040s.
Speaker Change: Further innovation that will expand the Vivegard-Hertruller Within Hands opportunity is projected in the United States in April of 2025, with the potential FDA approval of a pre-filled syringe treatment option for Vivegard-Hertruller Within Hands for all of the currently approved indications.
Speaker Change: Halotham co-created the pre-filled syringe with Argenix which may allow patients self-administration in just 20 seconds. Argenix is also expecting the pre-filled syringe to be approved in Europe, Japan and Canada in 2025.
Speaker Change: Helen will receive the same royalty rate on the pre-filled syringe delivery as we receive on the vial, also through the early 2040s.
Speaker Change: Let me move now to the second indication, which is Chronic Inflammatory Delamyelinating Polyneuropathy or CIDP, which is a subcutaneous 5-cart hair trailer with enhanced only indication.
Speaker Change: This is an exciting new growth driver that is really just beginning, following the mid-2020-24 approval in the United States and the end of 2024 approval in Japan.
Speaker Change: Argenix has seen strong interest in adoption, with more than 1,000 CIDP patients already receiving Vivegard Hertulo.
Speaker Change: The patient testimonials shared by Ergenics tell a powerful story of how 5GART-Hertoullo is helping CIDP patients regain their lives.
Speaker Change: Strong progress has been made in gaining that all-important coverage and access, with now 90% of covered lives having access to Vivekart Hachullo for CIDP under favorable or highly favorable policies.
Speaker Change: The brand is also benefiting from a halo effect of Argenix being able to promote CIDP next to GMG to open up new prescribers. Already 25% of prescribers for CIDP were physicians who had not previously been seen by Argenix.
Speaker Change: In 2025, Argenyx projects to continue on this powerful trajectory and also to expand the number of global approvals in CIDP.
Speaker Change: And not only are we just at the beginning in terms of these two indication launches.
Speaker Change: As you can see on slide 8, CaloTime's journey with Ergenics on their next wave of innovation for ViveGAR highlights the many exciting opportunities for many years to come, with multiple active subcutaneous programs within hands in development, including in thyroid eye disease and ocular myasthenia gravis.
Speaker Change: And as we look out even further, our journey with Argenyx was enhanced in 2024 with four new nominations with Enhance, which creates new opportunity and reinforces our leadership position as Argenyx's rapid, large-volume, subcutaneous delivery technology of choice.
I'll move now to slide nine.
Speaker Change: We had three additional significant approvals in 2024 for Ocrevus zanufo, Ticentric hybrisa, and Ticentric hybrida.
Speaker Change: and Updevo QVantage. Based on benchmarks, we assume it will take 6 to 9 months in the United States and more than 12 months in Europe to achieve robust access, coverage and reimbursement.
Speaker Change: Given the recent approvals, we have projected minimal contribution from these products in our 2025 revenues, with contributions becoming more meaningful in 2026 and beyond.
Speaker Change: Let me begin with Rota's Ocrevus Zanuvu, which received EMA and FDA approval for the treatment of multiple sclerosis in 2024.
Speaker Change: Ocrevus Zanuba within hands allows for an approximately 10 minute subcutaneous injection which compares with multiple hour infusions that is typically required for the IV administration time
Speaker Change: Roche has been very consistent with their comments that they believe the subcutaneous formulation within hands would expand the addressable market and grow the brand, adding prescribers and patients who did not have access to an infusion suite.
Speaker Change: In its most recent earnings call, Roche commented that the launch is progressing very much as planned, with more than 2,500 patients on Ocrevus de Nouveau globally.
Speaker Change: In the United States, they are seeing positive signals with 50% share of new orcrevus subcutaneous patients being naive to orcrevus.
Speaker Change: This is great news for two reasons. Firstly, it demonstrates market expansion and growth for ocropus, which is being driven by subcutaneous de novo. Secondly, the remaining 50% is coming from early conversion to subcutaneous ocropus from the very large patient pool who are on intravenous ocropus.
Speaker Change: Focusing on market expansion and growth, Roche commented that they are seeing accounts that have not used Ocrevus IV in the past who are now prescribing subcutaneous Ocrevus.
Speaker Change: With the permanent J-code expected in April and projected to accelerate uptake, Roche further commented that they are confident that Ocrevis-Renewable represents an incremental 2 billion Swiss francs or more than $2 billion opportunity for the brand.
Speaker Change: With full year 2024 sales reaching 6.7 billion Swiss francs or approximately 7.7 billion US dollars, this represents a very attractive growth opportunity for Halozyme.
Speaker Change: We project receiving mid-single-digit royalties on Ocravis Renewal until 2030 and at a step-down rate until at least 2034.
Speaker Change: We are also excited that Roses to Centre Kybrisa with Enhance gained FDA approval in September of 2024. The approval was for all of the IV indications and offers patients and providers with a more convenient treatment option with an approximately 7 minute subcutaneous injection.
Speaker Change: Walsh plans to drive IV to subcutaneous conversion and believes that subcutaneous formulation will be protective of the brand.
Speaker Change: And recall that we project receiving royalties onto Centre Cabrisa until 2040.
Speaker Change: Moving now to Bristol-Myers Squibbs of Vivo Q-Vantage which was approved by the FDA in December of 2024 and represents our 9th approved product within hands.
Speaker Change: Bristol Myers Squibb commented recently that they are excited for the launch and what it could mean for patients, physicians, and the durability of their immuno-oncology business, with the new subcutaneous formulation helping to extend the reach and impact of their immuno-oncology franchise into the next decade.
Speaker Change: With their sales team out in the field relaying the benefits of Optivo Q-Vantage, Bristol shared that the early feedback has been positive for the shorter injection time compared to IV nivolumab.
Speaker Change: Initial positive feedback they highlighted is in use in the adjuvant patients and in patients who are treated in combination with the urovites such as in first-line metastatic melanoma and renal cell carcinoma.
Speaker Change: Bristol expects that 30-40% of Obdiva IV could be converted to subcutaneous.
Speaker Change: Similar to any launch, reimbursement dynamics are going to take time, and BMS Project's conversion will accelerate in the second half of 2025 after they transition to a permanent J-code in July.
Speaker Change: Obdivo Q-Vantage represents another very attractive conversion opportunity for Halosan. Obdivo, which is the brand name for IV Nivolumab, grew 7% excluding FX in the fourth quarter to $2.5 billion and reached $9.3 billion in annual sales in 2024.
Speaker Change: Now, I may also take this opportunity to comment on Amibantumab Subcutaneous, which would represent our TENS approved partner product.
Speaker Change: Recall Amivantimab is included in our longer term projections as we consider it de-risked following its strong phase 3 data.
Speaker Change: Recently, Johnson & Johnson announced that they had received a positive opinion from the Committee for Medicinal Products of Human Use of the European Medicines Agency, recommending an extension of marketing authorization for the subcutaneous formulation of amivantamib within hens.
Speaker Change: in combination with the lethetranib in the first-line treatment of adult patients with advanced non-small cell lung cancer.
Speaker Change: The European Commission approval is typically granted 67 days after the recommendation, which would support approval in the April 2025 timeframe.
Speaker Change: We're excited for the amivantamab SubQ potential approval and what this could mean for patients.
Speaker Change: The subcutaneous formulation of amivantamab offers an improved treatment experience for patients, reducing administration time to approximately five minutes compared to anything from two to four hours for the IV.
Importantly, there is also a five-fold reduction in infusion-related reactions.
Moving now to the U.S. timeline.
Speaker Change: In December, Johnson & Johnson announced that they had received a complete response letter for amibantumab subcutaneous, which was related to observations as part of a standard pre-approval inspection at a manufacturing facility.
Speaker Change: J&J highlighted that the CRL is unrelated to the product formulation or the efficacy and safety data submitted in the regulatory application and that the FDA is not requesting any additional clinical studies.
Speaker Change: They are working closely with the FDA to bring subcutaneous amivantamab to patients as quickly as possible and are confident in a path to resolution.
Speaker Change: J&J has publicly commented that they believe Amibantmap has a $5 billion revenue potential.
Speaker Change: Moving now to slide 10. We are confident in reaching our $1 billion royalty revenue projection in 2027, and indeed we project we will exceed that.
Speaker Change: This confidence is driven by the expectation for the continued strong growth of our two lead assets, Darzalex and Fezco, which represent a $20 billion total opportunity.
Speaker Change: and the layering of the four recent launches of Weidgart-Hautrullo, Ticentra-Caipirisa, Ocrobis-Zanuvo and Opdivo Q-Vantage.
Speaker Change: plus the upcoming potential launch of Amivantimab Subcutaneous. Analysts project these five products represent an even greater opportunity in 2028 of $35 billion.
Speaker Change: I know that you agree that the near-term revenue growth to 2028 is very strong.
And I often get the question, what's next?
Speaker Change: The good news is that the launched and launching products that we've just reviewed continue to provide very strong revenue post-2028, and we predict several current pipeline products will contribute additional meaningful revenue post-2028 too.
Speaker Change: Let me walk you through some of the specifics which are shown on slide 11.
Speaker Change: FESCO is projected to continue to grow post-2028 and earn Halozem Royalties at its full unchanged mid-single-digit rate until 2030.
Speaker Change: Darthlyx Faspro and Subcutaneous is projected to remain our largest revenue driver until 2032, in Europe earning Halosam Royalties at its full unchanged mid-single rate until March of 2029 and to continue to earn as royalties at half that rate until 2032.
Speaker Change: In the United States, we are confident that the pending new manufacturing IP will be issued, which would also result in Halozyme earning royalties at the unchanged mid-single-digit rate until March of 2029 and continue to earn us royalties at half that rate until 2032.
This is not currently reflected in our long-term guidance.
Speaker Change: Vipart-Hartullo is projected to earn Halos M royalties for all of its indications sold either in the vial or through the pre-filled syringe at its full unchanged current mid single-digit royalty rate until March of 2029 and then to continue to earn royalties until 2033 at a mid single-digit rate even after a step down in the royalty rate.
Speaker Change: Royalties will continue until the 2040s after further step-down in rates.
Speaker Change: Moving to Okavissa Nouveau, this is projected to earn Halo Zam Royalties at the full mid-singles digit rate until 2030 and at a step-down rate until at least 2034.
Speaker Change: and Obdivo Q-Vantage projected to earn HALE Assign Royalties until at least 2034. You can see why we project continued strong revenue from the current launch products beyond 2028.
Speaker Change: In addition, we are confident that the more advanced de-risk products from our pipeline will contribute revenue post-2028.
Speaker Change: For example, Updevo Fixed Dose Combination with Relatlamab and Taq881 are two additional de-risked revenue growth drivers post-2028.
Speaker Change: And we also anticipate additional products from our current Phase 1 pipeline. New nominations from existing partners and from new deals will add additional royalty revenue streams.
Speaker Change: Now let me turn to the very important topic of new deals and new nominations.
Speaker Change: Our discussions continue with multiple companies regarding Enhance New Nominations, Enhance New Deals, our High Volume Auto Injector, and our Small Volume Auto Injector.
Speaker Change: I'm going to start with some very exciting news on our Small Volume Auto Injector. I'm pleased to announce that yesterday we signed a development agreement for our Small Volume Auto Injector with one of our current partners for a commercial product.
Speaker Change: Beginning with the new nominations. In 2024, we made excellent progress with current partners, selecting five new targets for Enhance.
Speaker Change: In 2025, we will continue to work closely with partners to identify opportunities to select new nominations from their currently available open slots.
Speaker Change: Recall, these additional new nominations, together with our current expanded pipeline, drive durability of revenue post-2029.
Speaker Change: And moving to the new enhanced deals, we are in active discussions with multiple companies. In 2025, our goal is to advance the collaboration and licensing agreements with at least one.
Speaker Change: And moving to our high-volume auto-injector, our goal is to advance to a development agreement this year.
Speaker Change: I'm often asked why we've not yet signed a deal with the high-volume auto-injector. What's the hold-up?
Speaker Change: Our high-volume autoinjector is a real innovation, which means some components are not available off the shelf. Some parts needed to be invented and designed.
Speaker Change: In 2024, we made progress with this, securing an exclusive supply for a high-volume primary container.
Speaker Change: This accomplishment has significantly de-risked the high-volume after-injector for partners, and we are actively engaged in discussions with several parties.
Speaker Change: With that, let me now turn the call over to Nicole, who will discuss our financial results in more detail. Thank you, Helen. Our strong fourth quarter results mark the end to another record year for the company, with the achievement of more than $1 billion in total revenue for the year.
Speaker Change: With our bottom line growth outpacing the top line due to our high margin royalty revenue, we converted 74% of our adjusted EBITDA into free cash flow representing 468 million dollars.
Speaker Change: Free cash flow is expected to increase over the next few years to 80% of adjusted EBITDA in 2026.
Speaker Change: As we look ahead, we remain firmly on track to hit another milestone in 2027 with projections of more than $1 billion in royalty revenue with our achievements to date.
Speaker Change: Let me now turn to our detailed fourth quarter results on slide 12.
Speaker Change: Revenue grew 30% to $298 million compared to $230 million in the prior year period.
Speaker Change: Growth was primarily driven by royalty revenue, up 40% to $170 million, and higher revenues under collaborative agreements, up 70% to $48 million, mainly due to more milestones achieved for enhanced sales-based milestones.
Speaker Change: The continued commercial success of subcutaneous Darzalex and Fezgo, and early growth of Vivgart Hytrulo for GMG, which launched in 2023, were the main drivers for our royalty revenue growth for the quarter.
Speaker Change: Adjusted EBITDA increased 61% to $196 million in the fourth quarter from $122 million in the prior year period, driven by high growth margins 86% coupled with modest operating expense growth of 5%.
Speaker Change: We also maintained a strong balance sheet, with cash, cash equivalents, and marketable securities at $596 million on December 31st, 2024, compared to $336 million on December 31st, 2023.
Speaker Change: Our net debt position was $929 million with a net leverage ratio of 1.3 times.
Speaker Change: The increase in cash was primarily a result of cash generated from operations, offset by $250 million deployed for share repurchases.
Speaker Change: Turning now to slide 13 for our detailed financial results for the full year 2024. I will briefly touch on some highlights here with more details available in our press release and 10-K filed with the SEC today.
Speaker Change: Total revenues grew 22% year-over-year to $1,015,000,000 in 2024, off an already substantial revenue base in 2023 of $829,000,000.
Speaker Change: Robust growth was primarily driven by 27% growth in royalty revenue, totaling 571 million dollars.
Speaker Change: as well as higher revenues under collaborative agreements and higher sales of proprietary products.
Speaker Change: Research and development expenses were $79 million compared to $76 million in 2023, primarily due to planned investments in Enhance related to the development of our new high-yield RUPH20 manufacturing process.
Speaker Change: Selling, general, and administrative expenses were $154 million, compared to $149 million in 2023, primarily due to increased compensation expense and professional service fees.
Partially offset by planned reductions in commercial marketing expenses.
Speaker Change: Gap diluted earnings per share was $3.43 and non-gap diluted earnings per share with $4.23
Speaker Change: In January, we reused our previous 2025 Financial Guidance for Total Revenue, our High Margin Royalty Revenue, Adjusted EBITDA, and Non-GAAP EPS.
Speaker Change: As you can see on slide 14, we continue to expect total revenue of $1,150,000,000 to $1,225,000,000, representing year-over-year growth of 13% to 21%.
Speaker Change: Royalty revenues of 725 to 750 million dollars, representing year-over-year growth of 27 to 31 percent.
Helen Torley: As Helen touched on, we project Darzalek SubQ and Fezgo will continue to grow substantially in 2025, and for the first time, VisGuard Hytrulo with Enhance is expected to be the largest royalty dollar growth driver.
Helen Torley: When you couple our high-margin royalty growth with flat operating expenses from our continued focus on operational efficiencies.
Helen Torley: We expect adjusted EBITDA of between $755 and $805 million, representing year-over-year growth of 19 to 27 percent.
Helen Torley: Let me also take the opportunity to highlight how to think about the quarterly cadence for modeling.
Helen Torley: We expect first quarter royalty revenue to be less than the fourth quarter of 2024 by approximately 10% due to annual contractual rate resets, with quarterly sequential growth thereafter.
Helen Torley: We project total revenues to decrease sequentially from the fourth quarter of 2024 to the first quarter of 2025, as no milestones are planned in the first quarter, and milestones are expected to be weighted in the second half of the year.
Helen Torley: And our product sales are also expected to be weighted in the second half of 2025.
Helen Torley: Let me now turn to slide 15 and highlight the remarkable growth we project over the next four years.
Helen Torley: From 2024 to 2028, we expect royalty revenue, adjusted EBITDA, and non-GAAP earnings per share will more than double, while total revenue comes close to doubling.
Helen Torley: increasing from our record greater than 1 billion dollars we just achieved to 1.7 to 1.9 billion dollars in 2028.
Helen Torley: Let me conclude on slide 16 and provide an update on our share repurchases.
Helen Torley: In December of 2024, we entered into a $250 million ASR under the $750 million approved program from February of 2024.
Helen Torley: This will complete by the end of the first quarter of 2025. Since the inception of the FIRST program in 2019, we have returned $1.55 billion in share repurchases, an average of approximately $250 million a year.
Helen Torley: The average repurchase price from 2019 to 2023 was $31.46 per share.
Helen Torley: The impact of share repurchases has allowed us to reduce our diluted share count by 10 percent.
Helen Torley: As disciplined stewards of free cash flow, we will continue to evaluate share repurchase opportunities that offer a compelling return versus other capital deployment initiatives.
Helen Torley: Our strong EBITDA growth significantly de-risks our capital position, as we have capacity to cover our debt obligations without overextending our resources, as evidenced by our low net leverage profile 1.3 times at year-end.
Helen Torley: Coupled with our impressive interest rate coverage of 30 times, we are in an excellent capital position to execute on both share repurchases and growth opportunities via M&A.
Helen Torley: With that, I'll now turn the call back over to Helen.
Helen Torley: Thank you, Nicole. We've truly had a remarkable time in HaloZam history, with nine products now approved, but one launched in multiple regions.
Helen Torley: Our high 2025 revenue and royalty growth is driven by just three of these products, Darzlik Subcutaneous, Fezgo, and 5-Gart Hertulo.
Helen Torley: each of which bring durable revenues until at least 2030 and in the case of Vivek Gajartullo, into the 2040s. Our confidence and conviction in our multi-year guidance was further reinforced with the 2024 approvals of Ticenter Kybrisa, Okavar's Zenuvo and Optivo QVantage.
Helen Torley: Next up will be Amifantamab SubQ following the successful completion of the regulatory reviews.
Helen Torley: This adds four additional durable royalty streams, which will begin to contribute meaningfully in 2026 and continue to at least in the 2030s and in several cases to the 2040s.
Helen Torley: Our progress and performance would not have occurred without the dedication and hard work of the exceptional HALOZAN team and our partners. And I'd like to take just a moment to thank everybody who contributed.
Speaker Change: Operator, we are now ready to open the call for questions.
Speaker Change: At this time, I would like to remind everyone in order to ask a question. Press star then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Operator: The first question comes from Sean Laman from Morgan Stanley. Your line is open.
Sean Laman: Hi Helen, Nicole and Tram, hope you're all well and a nice set of results, congratulations. I guess over the last week, and it's not lost on me that you've provided 28 guidance, which not many companies look at that far, but I guess a lot of the inbound that I get is, you know, what's beyond that and what sort of terminal value should you think about with
Sean Laman: and some of the issues that are going on there. What's your confidence around some of the new uses, for example, with VivGuard that you've detailed today, and maybe even some of the further argenics-related programs that might come on board to mitigate any reduction in earnings beyond that 28-period, 20-30 period?
Speaker Change: Welcome to Lincoln Lab well end-of-term reviews. A lot of western countries are planning to record their clinical advancements as weather adjustments can transform them for the future. This meeting today offered 3 of the five questions on the Mel and inequality rise across health angles and behavioral health relating to medicine and living health and health before us.
Speaker Change: Now, on top of that, though, don't forget that we have a pipeline, which is in the deck as well. And if we look at some of the pipeline products, like Rilatima Bobdivo and TAC881, those are highly de-risked, as they already are approved as an IV and other formats. And so those will layer on top.
Speaker Change: Other products in that pipeline that are currently in phase one, new nominations that we expect from current partners, and new deals all start to potentially contribute in that 28-29 timeframe as well. And so on top of that strong base, we've got multiple opportunities to layer and add in it, and that's what makes us so excited about the durability and the strength of our royalty revenues for many years to come.
Speaker Change: Thank you. I might save the rest of my questions for when we're due to talk later this evening, but thank you.
Thanks, Sean.
Speaker Change: The next question comes from the line of Brendan Smith of TD Cohen. Please go ahead, your line is open.
Speaker Change: Thanks for taking the questions, and congrats on another strong quarter. Really quickly on BD, can you just tell us a bit more about what does the inclusion or integration of that small volume autoinjector
Brendan Smith: And is that answer any different for the high-volume autoinjector? And then just on the enhanced conversations, maybe what is left in some of those late-stage discussions to really get partners over the finish line that gives you confidence in signing at least one new deal this year?
Speaker Change: developing the auto injector and then as that progress is made we move into discussions on the commercial agreement and for small volume injectors the traditional structure would be that there would be a certain price per device depending on volume that includes a margin or a markup for the manufacturer in the case of Halos Azeim so it will be another revenue stream for Halos Azeim that would be reflected in product sales.
Speaker Change: is driving new royalty streams for us, as it could be bringing new products into the clinic for current partners or brand new products into the clinic. And in addition to that, we would receive a certain fee, a product sales once again, on the sale of each and every device that we sell. So a nice layering on of both royalty addition and product sales in the case of the high volume auto injector.
Speaker Change: And, you know, the current agreement with the small volume auto-injector is, I think, a nice illustration of patience. We have been in that conversation for a period of time. We've continued to work through just internal reviews and approvals, and it's exactly the same as what's happening on our discussions with high-volume auto-injectors and also in hands. And so we're in conversations with large pharma, with biotech.
as well as Dylan Anderson.
Okay, great. Thanks very much.
Thanks, Bryn.
Speaker Change: The next question comes from the line of Mohit Bansal from Wells Fargo. Please go ahead, your line is open.
Mohit Bansal: Thank you very much for taking my questions and congrats on all the progress. So a couple of questions from my side. One is, Nicole, you mentioned that you're modeling negative 10% royalties for first quarter over fourth quarter.
Mohit Bansal: Hello, can you help me understand what are the dynamics there, because it has not happened in the past, and specifically WaveGuard and CIDP launch is going really well. That's the first question. And the second question is, how are you incorporating pre-field syringe transition and its uptake in the guidance? Because it seems to be going really well. Thank you.
Mohit Bansal: Michael Ries I think it's important to focus on this, too, because it can be really impactful to us. So that is the biggest driver, I would say, in the quarter-over-quarter impact that we see. With that product, I can share that the time to get to the full rate is very quick. It happens within the first few months of the year. So it is just a small portion of the quarter where we see that impact. And then also just highlight, too, we also see an impact related to our EpiPen royalties. That's just related to seasonality.
Mohit Bansal: and the other two are the drivers for that sequential quarter over quarter growth. But also highlighting the very strong sequential growth expected in 2025 for the full year, achieving full year growth from prior year of 27 to 31 percent, so very strong expectations for the full year.
Speaker Change: And the second question, Nicole. Mohit, would you, you cut out a little bit for me on the second question. Would you mind just repeating it?
Speaker Change: Sure, thank you for the first answer. So how are you incorporating pre-filled syringe transition for Vivgard and uptake in the guidance because it seems to be going really, really well here.
Speaker Change: and both GMG and CIDP in 2025. But we believe it's already reflected in the ranges we received.
Speaker Change: Great. Thank you, sir. Thank you. Thank you, Helen and Nicole. Bye.
Thank you.
Speaker Change: The next question comes from the line of Jessica Fye from JP Morgan. Your line is open.
Jessica Fye: Hey guys, good evening. Thanks for taking my questions. With the small volume auto injector deal, you signed with an existing partner for an existing commercial product.
Jessica Fye: When would you anticipate that we might discover which partner that was and on which product? And just for the avoidance of doubt, this was for a product that's not a current enhanced product, is that correct? And then second, just a quick one, can you just remind us how you define mid-single digits when you talk about the royalties you receive?
Thank you.
Jessica Fye: All right, I'll take the first one. So obviously we're excited that we just signed a small volume of Injector. Based on the partners desire to keep this confidential, we actually have not established with them yet when they would want to talk about it. And I really can't say any more about it at this period of time, but you know we obviously are interested in communicating as soon as possible and we'll provide updates as soon as we learn more with regard to
Jessica Fye: Mental health diagnosis and treatment When we talk about mid-single digit we are really, plus or minus five percent, and so in our mind
Speaker Change: The next question comes from the line of Michael Dufour from Evercore ISI. Please go ahead, your line is open.
Michael Dufour: Hey guys, thanks for taking my question and congrats on the progress this year.
Speaker Change: In light of the fact that Vivgard's overall brand sales in 4Q had a noticeable inflection,
Speaker Change: and your comments on how DivGuard Hytrula will be the biggest growth contributor in 2025.
Speaker Change: the IV cells. To the extent that you can, if you could add any color on that. I know back in November Arginix mentioned that the IV still comprises the bulk of cells, but wondering if you see any change in the mix over the course of 2025.
Speaker Change: we are very excited to when that event actually happens but I can't communicate when that's anticipated.
Speaker Change: And indications at the bottom of the table on slide 23.
Speaker Change: Could this mean that renew deals are expected to be announced this year or does that reflect current partnerships. Thank you.
Speaker Change: Yeah all of those three are coming from current partners.
Speaker Change: As an example recall that we had five new nominations from current partners last year, but we also have the opportunity for our current partners also to nominate any time with there.
Speaker Change: With their open slots and so all of them are our current partners and any new deals moving forward, we'd be over and above that.
Speaker Change: Got it thanks, so much.
Speaker Change: Yeah.
Speaker Change: The next question comes from Jason Butler from citizens JMP. Your line is open.
Speaker Change: Hi, Thanks for taking the questions. So you mentioned for the large volume auto injectors, the need and the work you did in 2024 or two and then.
Speaker Change: Build new device components, I guess to what extent is that work potentially specific to a product or a small number of products versus broadly leverages <unk> across multiple partnering conversations.
Speaker Change: And then second question for me is I guess for Nicole just any color you can give on what's remaining on the $250 million accelerated buyback. Thanks.
Speaker Change: Yes, with the high volume auto injector you Yeah, we have been engaged in multiple conversations with various companies and it has given us a perspective as to what is going to be.
Speaker Change: And attractive primary container and so that's exactly what we proceeded with we believe that what we have moved with with that particular element.
Speaker Change: Will be suitable for multiple partners that it might not be suitable for every partner someone may want a something custom developed but we decided to make the investment. So that we are ready and prepared for our partners, who are who are most likely going to want that size of primary container based on the conversations that we have had nicole on there.
Speaker Change: Yeah. Thanks, Jason on the a S. R. So I can't share specifically, how much our bank has executed through the $250 million. They did start executing on our behalf in December that will run for a number of months, but the benefit recall the benefit of this is that we did get approximately an estimate of 80% of the.
Speaker Change: Shares delivered to us in December so those who have retired at the start of the program at the final settlement date, we will then calculate with our bank with the final average purchase price was in the final.
Speaker Change: The final delivery of the shares.
Speaker Change: We have already received a good majority of the benefit from our retiring the shares perspective.
Speaker Change: And then in the coming months, we will know the final averaging date and have completed the $250 million.
Speaker Change: Great. Thank you.
Speaker Change: The next question comes from Mitchell Kapoor from HC Wainwright. Your line is open.
Speaker Change: Good afternoon. This is Dan on for Mitch Congratulations on the earnings.
Speaker Change: Thanks for taking my questions. So when you think about business development are you more focused on larger deals.
Speaker Change: Or groups of smaller deals and are there any contract obligations prohibiting partnering agreements with PD, one bgs by specific programs and if not what's the interest in partnering with one thank you.
Speaker Change: Alright, Thanks for the question Dan with regard to BD I can say that we are talking to multiple companies across large and small deals.
Speaker Change: As you hear small deals, which we could define as companies who are perhaps earlier stage can turn out to be incredibly attractive future opportunities and I'll I'll use. The example of our <unk> Gard.
Speaker Change: They were barely knowing when we kind of started working with them and so we look at each individual opportunity I'd say, it's that opportunity and base.
Speaker Change: Based on that but.
Speaker Change: We're talking about IV to subcutaneous one we're talking about sub Q extended dose, we're talking about exclusive or nonexclusive arrangement. So it's really a very nice array of opportunities that we are progressing towards consummation of deals in 2025.
Speaker Change: With regard to the specific question on the PD one by specific based on the exclusive terms of the agreement we have with Bristol, we would not be able to partner on our PD one by specific.
Speaker Change: Great. Thank you very much.
Speaker Change: Yeah.
Speaker Change: And that's turned over Q&A session.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect.
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