Q1 2025 Halozyme Therapeutics Inc Earnings Call
Bailey: Good afternoon. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's first quarter 2025 Financial and Operating Results conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: <unk> reported initial strong demand from patients and physicians, highlighting the unmet need for safe and effective treatment alternatives.
Speaker Change: As reported in February of 2025 more than 1000 <unk> patients were on therapy.
Foresee IDP: Foresee IDP organic stated that they have obtained favorable are highly favorable coverage for 90% of U S lives.
Foresee IDP: The further commented that their recent sales force expansion has contributed to deeper community reach noting that 25% of prescribers for CIB P are new to <unk>.
Speaker Change: In Europe <unk> was approved for generalized myasthenia gravis in November of 2023, <unk> total sales reached $2 $2 billion in 2024 with continued strong growth, especially of Viper ayatullah projected in 2025.
Turning now to slide eight I'll comment on the growth catalyst number five six and seven.
Speaker Change: In April of 2025, the FDA approved the new option for patients to self inject <unk> pre filled syringe, which contains the same <unk>, which is co formulated with our hands as it is in the vial and where <unk> received the same mid single digit royalty on net sales.
Speaker Change: This FDA approval all of the pre filled syringe as our fifth new growth catalyst.
Speaker Change: The adviser head tool a pre filled syringe is approved as a 20 to 30 seconds subcutaneous injection, which is administered by a patient a caregiver or a health care professional.
Speaker Change: And will contribute to <unk> strong growth trajectory for 2025 and beyond.
Speaker Change: The pre filled syringe also received a positive recommendation in Europe for use in generalized myasthenia gravis patients in February of this year. This is projected to result in approval in the second quarter of 2025, and as our sixth growth catalyst.
Speaker Change: In April of 2025, <unk> received a positive opinion for <unk> in Europe, or the indication of chronic inflammatory demyelinating polyneuropathy.
Speaker Change: With approval expected to occur mid year 2025, following the see HMP opinion, this new indication, which we expect to be for the vial and for the pre filled syringe will significantly expand the opportunity and add new growth and this is our seventh new growth catalysts in 2025.
Speaker Change: <unk> is just starting this journey of innovation and as you will see on slide nine <unk> has multiple active subcutaneous programs in development within hands, including for ocular myasthenia gravis and for thyroid eye disease, which will further fuel the revenue growth.
Speaker Change: With Halo that earning royalties through the early 2045, Gartner chiller represents one of the most significant and durable contributors to our long term financial performance.
Speaker Change: Continuing to expand in the new growth catalyst I'll now move to slide 10, and the four additional recently launched products that are just warming up and are at the start of our promise to be exciting launches.
Speaker Change: Let me begin with OCA vis the nouvel with enhance which was approved last year for multiple sclerosis as in approximately 10 minutes subcutaneous injection.
Speaker Change: This compares with multiple ours that is typically required for the intravenous administration.
Speaker Change: Importantly, and the eighth new growth catalyst Roche recently reported the OCA versus the Nouveau received a permanent J code in the U S. On April 1st, which they stated will help accelerate uptake in the second half of 2025.
Speaker Change: Outside the United States, where it continues to gain that all important reimbursement in each country.
Speaker Change: Roche reported that 50% of patients who started on <unk> were naive to the brand providing roche with confidence that <unk> will open up new patient populations to awkwardness and not simply cannibalize existing share.
Speaker Change: Roche believes that <unk> could represent an incremental approximately 2 billion dollar opportunity for the brand through this expansion, resulting in an approximately 10 billion analysts' projections for IV and subcutaneous oak reverse in 2028.
Speaker Change: <unk> is projected to earn hillesheim royalties at its full mid single digit rate until 2030 and at a step down rate until at least 2034.
Speaker Change: I'll move now to roche's to centric, hi, Brito with enhanced which gained FDA and EMA approval in 2024.
Speaker Change: <unk> for all of the intravenous indications offering patients the convenience of an approximately seven minute subcutaneous injection.
Speaker Change: With a permanent J code in place and where it continues to gain reimbursement in all countries. The strategy is to convert IV to centric patients two to centric high freezer.
Speaker Change: Hey, listen, we'll earn royalties onto centric hi, Bruce at the Bull mid single digit rate until the 2014.
Speaker Change: Moving now to Bristol Myers Squibb, Opdivo commanded the subcutaneous formulation of <unk> with enhanced which was granted FDA approval at the end of 2024 in the United States.
Speaker Change: <unk> is focused on continuing to increase breadth of prescribing in both the community and academic settings.
Speaker Change: And the permanent J code, our ninth new growth catalysts is expected on July one.
Speaker Change: The J code is expected to drive adoption of the subcutaneous formulation in the second half of the year.
Speaker Change: BMS recently commented that they are receiving promising early feedback from practices and patients on the subcutaneous formulation, which is a three to five minute subcutaneous injection.
This is predominantly happening in the community setting and is occurring across multiple tumor types.
Speaker Change: In April of 2025, BMS announced the positive <unk> opinion for Opdivo subcutaneous with enhanced representing our 10th new growth catalyst, we anticipate European approval in mid 2025.
Speaker Change: I'll move now to subcutaneous <unk>, which is Johnson <unk> Johnson's innovative Egfr C met inhibitor.
Speaker Change: Johnson <unk> Johnson gained European approval of subcutaneous <unk> co formulated with enhanced in April of 2025.
Speaker Change: For use in combination with less accurate in the first line treatment of adult patients with advanced Egfr mutated non small cell lung cancer.
Speaker Change: Subcutaneous <unk> prevent represents a more convenient patient friendly formulation, reducing administration time for multiple hours required for the IV to just five minutes for the subcutaneous.
Speaker Change: Importantly, there was a fivefold reduction in infusion related reactions compared to the IV formulation.
Speaker Change: Work is now underway to get reimbursement for subcutaneous <unk> in each country.
Speaker Change: And our 11th New growth catalyst is the potential U S approval of Rev. Rec subcutaneous J&J.
Speaker Change: <unk> continued to work on gaining this approval in 2025.
Speaker Change: I wanted to also highlight recent data on Rye prevent very excitingly. The results of the phase III Mariposa trial were presented at the European lung cancer Congress in March of 2025.
Speaker Change: The combination of Rai prevent unless acronym significantly reduced the risk of death by 25% versus two crystal which is considered by many to be the current standard of care in patients with newly diagnosed egfr mutated non small cell lung cancer with a projected improvement projected up more than 12 months survival benefit over this.
Speaker Change: Current standard of care. This is certainly a potentially important advance for patients with this type of cancer, where only 20% of patients survive beyond five years today.
Speaker Change: With our no 10 launch products, which are shown on slide 11, we remain on track to deliver over $1 billion in royalty revenue in 2027 with all products continue to generate royalties to at least 2030 and many expect it to continue to the 2040.
Speaker Change: I'll move now to slide 12 and to some highlights on our pipeline that represent potential new growth drivers. The royalty revenues of which are not included in our multiyear guidance.
Speaker Change: During the first quarter acumen reported topline results for Super and attack subcutaneous with enhance for Alzheimer's disease, which support further clinical development for the subcutaneous formulation with enhanced.
Speaker Change: We've also reported positive phase two data forensics that subcutaneous within hands in combination with <unk>.
Speaker Change: The study demonstrated the promise of an every four month treatment in combination with <unk>. This is another terrific example of how it hands can support a more extended dosing interval, reducing the treatment burden for patients.
Speaker Change: And if we were also very hard at work during the quarter continuing discussions with several companies and entering into discussions with multiple new companies with regard to new deals.
Speaker Change: I am pleased to announce that we have signed our first development agreement with the current enhanced partner for development of our high volume auto injector.
Speaker Change: The majority of the ongoing discussions continue to focus on enhanced alone and their hands with the high volume auto injector. If the volume is between two to 10 in ALS.
Speaker Change: I can update that we are progressing through the Multistate review and decision, making committees and several of these discussions.
Speaker Change: And turning to our small volume auto injector business I'm pleased to say that one of our current partners is progressing now to test the small volume alternate actor in a phase one study.
Speaker Change: There has not been a time in <unk> history, when we have been in such a strong position in terms of having 10 Derisk proven approved subcutaneous product with 11 recent are soon to happen events that are catalysts to expand opportunity adoption and growth.
Speaker Change: The underlying continued strength of darice like subcutaneous sales growing boxcar her trillo plus these new growth catalysts have resulted in the increased 2025 guidance, which Nicole will review in a moment. After she discusses our first quarter results in more detail.
Speaker Change: <unk>.
Speaker Change: Thank you Helen.
Speaker Change: The first quarter of 2025 represented a strong start to the year and we're excited to raise our full year expectations based on these strong results.
Speaker Change: We grew revenue by 35% with EBITDA growth of 40% as we continued to drive leverage on our high margin royalty revenue contributing $153 million in free cash flow in the quarter.
Speaker Change: Let me start on slide 13 in the first quarter, we completed the $250 million ASR announced in December of 2024.
Speaker Change: Since 2019, we have repurchased 1.55 billion of shares which is on average $250 million each year.
Speaker Change: At an average price of $33.72.
Speaker Change: Due to the strong performance to date, we are announcing an additional $250 million of share repurchases to be executed during the remainder of the year.
Speaker Change: As Helen mentioned, we continue to evaluate M&A opportunities to complement our organic growth expectations.
Speaker Change: Let me now turn to our detailed first quarter results on slide 14.
Speaker Change: Revenue grew 35% to $264 9 million compared to $195 9 million in the prior year period.
Speaker Change: This includes higher than expected revenue in all categories.
Speaker Change: Royalty revenue of $168 $2 million increased by 39% from $126 million in the prior year and.
Speaker Change: And was higher than our original expectations.
Speaker Change: The continued commercial success of subcutaneous <unk> in Feds go.
Speaker Change: And the robust growth of <unk> exceeded our expectations for the quarter.
Speaker Change: Driving an increase in our full year guidance.
Speaker Change: Product sales of $78 million increased by 33% from $58 $6 million in the prior year period.
Speaker Change: Mainly driven by higher API sales than originally estimated due to an increase in partner orders.
Speaker Change: We have an increase in partner orders in later quarters of 2025, which is also a driver of the increase in our full year guidance.
Speaker Change: Collaboration revenue of $18 6 million, an increase of 12% from $16 $7 million in the prior year period was also higher than expected due to the achievement of our <unk> sales milestone one quarter earlier than originally projected.
Speaker Change: Research and development expenses were $14 8 million compared to $19 $1 million in the prior year period.
Speaker Change: The decrease was primarily due to lower compensation expense driven by resource optimization and improved labor allocations to Cogs.
Speaker Change: And at the timing of planned investments in enhanced related to the development of our new high yield our <unk> manufacturing process.
Speaker Change: Selling general and administrative expenses were $42 $4 million in the quarter up from $35 $1 million in the prior year period, primarily due to increased compensation expense and consulting and professional service fee.
Speaker Change: Adjusted EBITDA increased 40% to $162 million from $115 $7 million last year.
Speaker Change: GAAP diluted earnings per share was <unk> 93.
non-GAAP diluted earnings per share was $1 11.
Speaker Change: This is compared with GAAP diluted earnings per share of <unk> 60 cents and non-GAAP diluted earnings per share of 79 in the first quarter of 2024.
Speaker Change: We continue to maintain a strong balance sheet with cash cash equivalents and marketable securities of $747 9 million on March 31 2025.
Speaker Change: Compared to $596 1 million on December 31, 2024.
Speaker Change: The increase was primarily a result of cash generated from operations.
Speaker Change: Our net debt position was $777 million with a net leverage ratio of one time.
Speaker Change: As a result of our strong first quarter performance, we are raising our guidance as you can see on slide 15, we now expect total revenues of one two to $1, two 8 billion representing year over year growth of 18% to 26% driven.
Speaker Change: Driven by increased projections in all three revenue categories royalties product sales and collaboration revenue.
Royalty revenues of $750 million to $785 million, representing year over year growth of 31% to 37%. We continue to expect this Bart <unk> with enhanced to be the largest loyalty dollar growth driver.
Speaker Change: Product sales of $340 million to $365 million driven by higher partner demand for our <unk> 20 in the year.
Speaker Change: Collaboration revenue of $110 million to $130 million driven by the EU approval of <unk> SC in April for which a milestone will be recognized in the second quarter.
Speaker Change: Adjusted EBITDA of between 790 $840 million, representing year over year growth of 25% to 33%, reflecting high margin royalty growth coupled with flat operating expenses from our continued focus on operational efficiency and non-GAAP diluted EPS of <unk>.
Speaker Change: $5 30 to $5 70.
Speaker Change: Representing year over year growth of 25% to 35%.
Speaker Change: Does not include the impact of future share repurchases, including the $250 million announced today.
Speaker Change: As you refine your models I'd like to reiterate the following.
Speaker Change: While we achieved a bid for a true milestone one quarter earlier than expected in the first quarter. We continue to expect collaboration revenues for the year to be more weighted in the second half of 2025.
Speaker Change: We continue to expect product sales to be weighted in the second half of the year with the second quarter flat with the first quarter.
Speaker Change: For royalties, we continue to expect quarterly sequential growth for the remaining quarters in the year.
Helen Thank: With that I'll now turn the call back over to Helen Thank.
Helen Thank: Thank you Nicole.
Our strong first quarter performance, particularly our <unk> subcutaneous Tesco and <unk>, plus our 11, new growth catalyst gave us the confidence to raise the full year 2025 financial guidance ranges.
Helen Thank: With 10 products now approved and launched in at least one major region. We have durable revenue streams that will continue to support our conviction and the future success of halos I'm, a robust pipeline along with our ability to defend our intellectual property further strengthens our confidence in delivering sustainable growth and profitability well into the future.
Helen Thank: Sure.
Helen Thank: This is an incredibly exciting time of growth for <unk> and this would not have impossible without our terrific partners and our dedicated and expert halos I'm team and I'd like to say a sincere. Thank you to everybody who has contributed.
Speaker Change: Operator with that we're now ready to open the call for questions. Thank you.
Helen Thank: Yeah.
Helen Thank: Yes.
Speaker Change: At this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad. Your first question comes from the line of Mohit Bansal with Wells Fargo. Your line is open.
Mohit Bansal: Hi, sorry about that I was on mute hi.
Speaker Change: Hi, This is Saudi aren't mine on through Mohit. Thanks for taking the questions. So on the IP case with Mark.
Speaker Change: I had a question about that can you comment on the expected timelines for the <unk> decision.
Speaker Change: And what.
Speaker Change: Action you could take if the P. J R goes and Mark Shaver.
Speaker Change: Okay.
Tom: Yeah, Thanks for that Tom with regard to the the PDR.
Tom: The first decision by the patent office on institution will be in early June.
Tom: And if there is institution that will mean that the case will be reviewed about 12 months from them.
Tom: They also can decide not to pick up pick up the case.
Tom: Which case it would not proceed.
Speaker Change: Got it and just related but is there a possibility that bought P. J arcade and your patent infringement lawsuit could be tied together or is that not possible due to all of them.
Tom: Nicola reasons.
Speaker Change: Yes.
Speaker Change: Difficult, but two very different approaches.
Speaker Change: Going on there obviously.
Speaker Change: The PG or we consider to be frankly, a little bit of a sideshow PGE ours tend to be filed when companies are concerned that they are infringing and they seek to invalidate the patents and we feel very confident in our ability to prevail.
Speaker Change: In those that PGE ours, and even if they were to win one or two of the <unk> because there are several in place. We do not believe that that will have any impact at all on our infringement at case.
Speaker Change: Where we have multiple additional claims that are not subject to the PTR that are the basis of that infringement case. So two very separate things. The most important one is actually the.
Speaker Change: Actual lawsuit that we filed.
Speaker Change: Keep your attention on that one.
Speaker Change: Got it thanks, so much.
Speaker Change: Your next question comes from the line of Sean Lehmann with Morgan Stanley. Your line is open.
Sean Lehmann: Thank you operator, Hello, Hello, hope, you're well and congratulation on a nice set of numbers.
Speaker Change: What's there.
Speaker Change: Hey, Dan number today and you've upgraded guidance.
Speaker Change: One particular area of strength that surprised you during the quarter and robbing the upgrade or was it more broad based.
Speaker Change: Yeah, I will say, it's our three blockbuster products that have been performing for us for the last several years and frankly I expect it to continue to have this excellent performance. So it's across the board with our select some subcutaneous phase go and also with <unk> and <unk>.
Speaker Change: So one of the other things we mentioned not just the royalties, but we achieved a milestone on <unk> one quarter earlier than we had anticipated as well and that was a commercial sales attainment milestones. So they are just.
Speaker Change: Continuing to perform very very well, Sean behind them and we're obviously excited about the other four launched products that are really just at the very beginning.
Speaker Change: But just based on the performance comments from the partners and our estimates we're going to continue to see strong growth from all of those products for many years to come.
Speaker Change: Great. Thank you and we'll move small volume auto injector when might you be in a position to tell us who the partners and how do the economics of that deal compared to the high volume modal injected partnerships.
When do you ultimately see commercialization might be a reality.
Speaker Change: Yes.
Speaker Change: With regard to when that might become public that really will be the partner who will be in control of that.
Speaker Change: <unk> taken an estimate and guess at when it enters clinical studies that it might be public, but it's some are small volume auto injector, but for competitive reasons, we're seeing again that our partners don't want to be signaling to their competition exactly what theyre doing to continue to evolve their product offering and differentiated tons for patients.
Speaker Change: The small volume on the high volume motion injector agreements are both development agreements Sean.
Speaker Change: They really lay out exactly how we will work together to create a auto injector for use in clinical development.
Speaker Change: Have yet to move forward.
Speaker Change: Commercial licensing our supply agreement, sorry, where the actual financial terms will be there, but I would expect in both instances what youre going to see is going to be.
Speaker Change: We have a price per device that is based on the.
Speaker Change: The cost of manufacturing and the time it takes us to manufacturing.
Speaker Change: <unk>.
Speaker Change: Cost plus some benefit for <unk>, but more to come on that later, we're just incredibly excited that we're now moving forward with two of our partners to be using and testing our auto injectors in the future in their clinical studies.
Speaker Change: Great. Thank you Helen that's all I have for now.
Helen Thank: Thanks, Sean.
Speaker Change: Your next question comes from the line of Michael <unk> with Evercore.
Speaker Change: Excuse me Evercore ISI your line is open.
Speaker Change: Thanks, a lot hey, guys. Thanks for taking my question and congrats on all the continued progress two questions from me centering on the Merck.
Speaker Change: It was on.
Speaker Change: <unk> number one.
Speaker Change: Astrazeneca is our <unk> deal.
Speaker Change: Evidenced that.
Speaker Change: Large pharma companies are willing to accept patent litigation risk rather than sign deals and if so how do you counter that narrative.
Speaker Change: Second question is have any enhanced partners paused.
Speaker Change: New target add ons or renegotiations, while they watch this litigation play out.
Speaker Change: And if so how material could that be too.
Speaker Change: Long term growth. Thank you.
Speaker Change: <unk>.
Speaker Change: Yeah I'll tackle the second one first Mike and that no. We have not heard from any partner, who is a current partner or even.
Speaker Change: Conversations were having with potential future partners, where anything is being Paul is to evaluate the outcome of the Mark litigation and I don't expect that really to happen at all.
Speaker Change: It's very clear in hands is seen as the market leader here, where the most them de risks the most validated with a million patients treated them and I can say that for all of the people who are looking at <unk>, including all of the ones, who have signed deals with them all Tien tsin all of them have come to halos, I'm first and perhaps phone.
Speaker Change: The target they were and intending or wanting to use it for was not available.
Speaker Change: And I think we're going to continue to see.
Speaker Change: That pattern.
Speaker Change: With regard to your specific question on on Astrazeneca again, I don't want to speculate on what Astrazeneca.
Is that it is thinking with regards to litigation, but I'll come back to the comment I made a moment ago all of the people that.
Speaker Change: That have moved forward with the deal with LTE and have actually discuss specific targets with Halo that were taken by other of our current partners and I think against that that that is.
Speaker Change: The trend that we've seen to date.
Speaker Change: Okay very helpful. Thank you.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Jessica Fye with Jpmorgan. Your line is open.
Adam: Hello, This is Adam on for Jess.
Adam: Thank you for taking our question I just wanted to ask how are you thinking about the implications of her two frontline breast cancer data for <unk> sales and royalties. Thank you.
Adam: Yeah.
Adam: Obviously, where we're keeping a close watch on that what we're seeing with <unk> is with.
Adam: The great long term data and there's more long term data as you know that's going to be coming out on <unk>. This year as well together with the very convenient patient administration.
Adam: In just five five to seven minutes for it we believe that the first wave is going to continue to demonstrate there's very strong market adoption and uptake where there was incredibly high patient satisfaction for it so not just the clinical benefits administration benefits, but also the patient satisfaction.
Adam: <unk> so.
Adam: We're not.
Adam: Concerned with regard to the <unk>.
Adam: In her two data that that will be emerging delighted to see the strong uptake continues for <unk>.
Speaker Change: And on the call 47% share now in the 58 launch markets expected to get to more than 50%. This year and we've seen with them our products that when a patient has moved to the sub Q version of the products. They tend to be very sticky. So we are projecting continued strong growth of fares go.
Adam: For multiple years to come.
Adam: Yeah.
Yeah.
Adam: Yeah.
Adam: Yeah.
Adam: Yeah.
Speaker Change: Your next question comes from the line of Mitchell Kapoor with H C. Wainwright. Your line is open.
Mitchell Kapoor: Hey, everyone. Thanks for taking the question.
Mitchell Kapoor: I wanted to ask a little bit about your views in the future of the changing a portion of the mix of royalty revenues as your pipeline evolves just kind of trying to understand when we could get two more EBIT proportions versus the three blockbusters, serving as the heavy weights for the royalty revenues.
Mitchell Kapoor: All right Amy.
Amy: It's a so when you have such great products, Mitch, it's an embarrassment of riches and we do expect several of our products that are currently just starting.
Amy: They're they're launch trajectories to also be meaningful contributors. There was a time where people were very focused on <unk>, having a very large proportion of our sales. It will continue to be a very important contributor to us for many years to come but products like <unk> <unk> <unk>.
Amy: Others are going to be very important contributors as well.
Speaker Change: I think Nicole mentioned that this year the larger solar growth is absolutely <unk> got high trailer, which shows you how our portfolio is broadening so we're going to have multiple very high impact blockbusters.
Speaker Change: Like dark will exit and Frank frankly by the end of this year next year let.
Speaker Change: Let me see if Nicole would add anything to that yeah, and we don't break out our royalties by products, but we have shared the buckets as we think about our royalty projections we shared.
Speaker Change: <unk> and <unk> in total the contribution that they are expected to have in the long term and then the next wave of our products.
Speaker Change: So comparing it to <unk>, having a $20 billion market opportunity in 2028, and then looking at the next wave of our products in totality, having a $35 billion market opportunity in 2020, I think that gives you that good sense for how over the next few years those products will start contributing.
Speaker Change: Very meaningfully and taking up a good proportion of our royalty revenue.
Speaker Change: Thank you that's very helpful and one more for me just talking about the M&A activity and the expectations for.
Speaker Change: Future activity in that space could you talk a little bit about what youre looking for in your next BD deal there and how that contrasts with your strategy with Evo Tech.
Speaker Change: And then if you could just talk about timing on when you would like to execute on one of those transactions is there kind of a timeline for that kind of size.
Speaker Change: Larger or smaller multiple smaller ones.
Speaker Change: Any clarity around those particular aspects of the M&A strategy.
Speaker Change: Yeah, Thanks, Matt well with regard to M&A, we're very focused on seeking to find opportunities in the drug delivery space, where their platform technologies that can result in long durable revenues, including and particularly for <unk>.
Speaker Change: Royalties, obviously, we like that that model.
Speaker Change: But I will say, we are not in a hurry to do it and we're going to be carefully evaluating and being thoughtful as we have always been to identify something that we believe would be.
Speaker Change: Needed and required by multiple pharma companies and will result in a very positive contribution to hail a time long term growth. So think drug delivery think licensing business that is where we are evaluating today no specific timeline and.
Speaker Change: And as we are still evaluating Mitch it would be premature to comment on the size.
Speaker Change: But it is.
Speaker Change: I can't comment on that at this period of time.
Speaker Change: So that's where we're going to be focused in.
Speaker Change: We're excited to try to create new platforms increase just great businesses like in hands.
Speaker Change: And that we've done so successfully with that.
Speaker Change: Okay.
Speaker Change: Great. Thank you all very much for taking the questions.
Speaker Change: Yeah.
Speaker Change: As a reminder, if you would like to ask a question press star and the number one on your telephone keypad.
Speaker Change: Your next question comes from the line of Brendan Smyth with TD Cowen Your line is open.
Speaker Change: Great. Thanks for taking the questions.
Speaker Change: Congrats on all the great update maybe just another one kind of regarding the litigation of Keytruda.
Speaker Change: Just kind of an important point from can you just confirm first.
Speaker Change: Whatever the outcome for your litigation against Merck that the decision will have no impact on your actual core and Hanes business and then on.
Speaker Change: On the flip side of it kind of the same question regarding the PDR suite from Merck.
Speaker Change: Or is the one from them a little bit more targeted and hanes itself, just trying to kind of understand the relative potential impact down the line.
Speaker Change: That's great Brendan and to be very clear.
Speaker Change: What is going on in the Mds, which is a separate and distinct set of patents from enhance will have absolutely no impact whatsoever on our enhanced business.
Speaker Change: Our guidance that we have provided or our future growth often hands.
Speaker Change: I think of the Mds those future upside opportunity.
Speaker Change: Vet.
Speaker Change: Has been identified as we are finding that companies are infringing our intellectual property and we're seeking to have those companies take licenses from us.
Speaker Change: So that's the bottom line with regard to what would happen. So specifically with the outcome of the PG ours, yes, absolutely no impact on our enhanced business and same with the infringement case.
Speaker Change: No impact on the enhanced business all potential upside if we were to win either a license with with Merck.
Speaker Change: Or when compensation damages.
Speaker Change: We are seeking in the litigation so two very distinct things, where MDC is just that potential upside coming from great innovation and invention that <unk> has created over the years.
Speaker Change: Got it okay, great. Thank you and then maybe.
Speaker Change: Just a quick one on tariffs just because we do get a lot of questions. About this can you just speak really quickly to how we should be thinking about the potential impact of pharma and maybe it <unk>.
Speaker Change: If you've had any conversations with any of your partners about them I guess, particularly relevant for <unk>.
Speaker Change: Just given their global footprint. Thank you.
Yes, well I'll start with halos times manufacturing, where we've been very deliberate ourselves and establish our manufacturing in the United States and we also have been seeking to assure we can source all or virtually all of our components and materials needed in the United States too.
Speaker Change: So I can confirm that.
Speaker Change: <unk> point of view for the products, we produce in our API.
Speaker Change: There is a very very limited exposure to the currently imposed tariffs.
Speaker Change: And any small impact is already contemplated in our guidance.
With regard to the pharma tourists I can say that based on our agreement if the pharma tariffs were implemented for products being imported into the U S. <unk> will not see or should not see.
Speaker Change: Any impact on our royalty revenues.
Speaker Change: And so it's based on our agreements and based on what we're aware of with regard to the manufacturing of our partner products and importantly, also U S distribution and how that how that works. So we should not see any impact that with regard to tariffs.
Speaker Change: Alright, great. Thank you.
Speaker Change: Yeah.
Speaker Change: And your next question comes from the line of David Risinger with Leerink Partners. Your line is open.
Speaker Change: Thanks, very much and congrats Helen and team on the <unk>.
Speaker Change: Very strong financial progress.
Speaker Change: I have two questions. The first is with respect to external.
Speaker Change: Acquisitions are you also considering broadening your royalty streams by considering acquiring royalty companies.
And then with respect to potential new customer deals.
Speaker Change: Could you just talk about the gating factors for new business announcements.
For example, or some customers awaiting FDA guidance.
Speaker Change:
Speaker Change: We're sorry, CMS guidance for IRA negotiations in coming months for 2028 under the New administration, thanks very much.
Speaker Change: Alright.
Speaker Change: So with regard to external acquisitions, David I mentioned that we really are focused on creating new platform businesses that can result in durable long revenue streams, such as we've created for and in hands and so drug delivery platforms as being our primary focus in terms of where we.
Speaker Change: We are evaluating opportunities to date.
Speaker Change: On the new customer deals in specific for in hands.
Speaker Change: The <unk> talked about this before what we do see in companies is there is a multi.
Speaker Change: Step review process and then the multi step decision process and so really what we're doing at the moment is working through that process and each company, where each company has a slightly different process you do get to the end of it as we've seen very nicely by announcing our small volume Washington injector deal last quarter at the high volume <unk>.
Speaker Change: And we are in several discussions going through that process on in hands. So simply is more a question of getting through the internal decision, making processes in the pharma and biotech companies that will result in an enhanced field and I remain confident we will sign a deal on enhance this year.
Speaker Change: <unk>.
Speaker Change: It's been interesting on CMS and people are waiting the IR E.
Speaker Change: I would not say that the gate atoll.
Speaker Change: Just as a question of interest to see whether the CMS will continue to recognize that a product that has two active ingredients.
Speaker Change: Is separate drug from the single ingredients and so.
Speaker Change: If anything that might bring us some additional new opportunities, David but it hasnt been holding anyone back waiting to see that that is confirmed.
Speaker Change: Much more focus on the strong differentiation that enhance is able to bring.
Speaker Change: For their patients and their mission for improving the patient treatment experience.
Speaker Change: Got it thank you.
Speaker Change: Thanks very much.
Speaker Change: Yeah.
Speaker Change: And there are no further questions at this time. This does conclude today's conference call you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.