Halozyme Therapeutics, Inc. Stock

Hello, everyone. My name is Mitchell Kapoor. I'm a senior biotech analyst at H.C. Wainwright. Thank you for joining us for our third day of the H.C. Wainwright Conference here in New York.

Today, I have the pleasure of welcoming the Halozyme team, and I have the Chief Executive Officer and President, Helen Torley; and Chief Financial Officer, Darren Snellgrove. Nice to have you both here.

I appreciate the invite to be here. Thanks.

Thanks for joining us.

So maybe I'd like to start off every fireside chat by just level setting for those who either may not be familiar with the story or not up to speed with the latest progress. Maybe you could just give an overview of Halozyme.

Yes. Halozyme is transforming how biologics are delivered subcutaneously, and we're entering just a terrific period of value creation as a result of that. How do we do this? We today have 4 technologies that enable subcutaneous delivery.

ENHANZE, which is our flagship product, but we acquired recently 2 hyperconcentration technologies that will be entering the clinic and will offer a brand-new value proposition for patients to be able to deliver biologics in volumes as low as 2 mls via small volume auto-injectors, and we also have our own auto-injector line. ENHANZE has really been a terrific. We describe it as a compounding platform engine for Halozyme because it's resulting in multiple royalty streams that are contributing meaningful revenue to Halozyme. We're just coming off a record second quarter. Our total revenue grew 48% year-over-year to $481 million, and this was really driven by our royalty revenues, which grew 50% year-over-year to $308 million.

Now the top drivers of our royalties were our products that were launched in 2020 and 2023, that's DARZALEX subcutaneous and VYVGART Hytrulo. And these are products that are going to continue to grow for many years to come because the companies are investing in new indications. There is deeper penetration into patient populations because of the great convenience that's being offered by the subcu either as a push injection or as a prefilled syringe. And what was very exciting in the quarter was also on top of this to see products that we launched more recently and specifically RYBREVANT subcutaneous, Opdivo subcutaneous and Ocrevus subcutaneous grow 80% quarter-on-quarter.

Now that's a terrific growth to see, which means that we now have multiple diversified royalty streams that are contributing to the tremendous growth we see today, but that's going to continue for many years to come. But that's not all because we expect by the end of the year to have 13 products with ENHANZE in clinical development. And again, we plan to continue to add more and more to that pipeline with products that can launch in the late 2020s and early 2030s, resulting from that particular pipeline of drug products, which will grow with additional new deals and current partners moving more products into the clinic. And then we have our new technology, Hypercon, which will -- it enables high concentration biologics. We expect our first 2 products there to enter the clinic in the first half of 2027. So you can see we have a very diversified, exciting, growing set of royalty revenues that is going to deliver very strong value for our shareholders.

Excellent overview. And I think Halozyme is one of the most unique companies that I cover because of the value proposition that you offer the space and the uniqueness of your product. So maybe you can help us understand the ENHANZE business and how that is a driver for Halozyme's revenue? How do you create deals?

Obviously, that's been a focus for investors of how that pace of deals has changed. And you've had a lot in the past year. So maybe you can start there, like how do you structure these deals? And is it quite consistent across partner and partner? Just give us a flavor of how that variability is between this.

Yes. As you point out, in the last 9 months or so, we've had 6 new ENHANZE deals. And that comes after a period where we hadn't had as many deals. And people are saying, is this true demand? Or is this a pull forward? It really is true demand because of the secular trend that we're seeing with companies, particularly those in inflammation and immunology, nephrology, gastroenterology, CNS, recognizing that the standard of care and what patients are looking for is delivery at home as simply as possible. And so -- or in the doctor's office, given in a simple subcutaneous injection, so the patient does not have to be in the infusion suite all the time.

And so our structure has really been pretty standard for the last 15 years. We received an upfront payment. We receive milestones as the partners are making progress in clinical progress as well as achieving certain sales thresholds. And then we receive royalties, which today are at the, on average, mid-single-digit royalty rate in terms of the royalties that we're delivering today. Now importantly, for Halozyme, the model we have is we do not invest in any of the clinical development. We do not invest in the commercialization. So it's a very high-margin business as a result. We do provide advisory services, but you can see how this is a business we can scale rapidly and grow without us having to add a lot of operating expense to be able to run this business. And we do expect to continue to sign more ENHANZE deals. Everybody is recognizing subcu is the way to go. And so look for more announcements. We've said we expect one additional deal this year, and I believe it will be an ENHANZE one. But I also want to mention Hypercon, where we signed 2 deals this year as well, taking the Hypercon business to 5 deals. It's terrific companies, Eli Lilly, argenx, J&J, Vertex and Oruka, same structure as the ENHANZE agreement, same mid-single-digit royalty and same operating model where we're not investing in the high expense areas of getting these products developed and launched. So 2 compounding platform engines that are going to be driving durable long-term royalty revenues for Halozyme.

Wonderful. And you touched on what's driving 2Q growth a bit. And for a while, it's been DARZALEX and VYVGART. But you mentioned something interesting, Opdivo and the new launches, Ocrevus are really contributing now. Can you help us understand what drove the guidance increase recently, but also which of the newer launches are gaining the most momentum? And where do you see kind of the future growth coming from?

Yes. Let me ask Darren to take that one.

Yes, absolutely. So 10 royalty-bearing products is meaningfully different than 1 or 2. And so that's what you're seeing in terms of our guidance beats and our raises. And you think about DARZALEX is a $4 billion in the quarter, growing at 18%. VYVGART, $1.5 billion, 60% growth rate. And then as you mentioned, the newer indications collectively growing 80% quarter-over-quarter. So that's driving meaningful growth for us going forward.

Each one is performing incredibly well. RYBREVANT, for example, just got the J-code. So we're going to see a real ramp-up with that product and each of them contributing, getting new indications and expanding in terms of conversion and also market growth as well. So we expect that to continue. That's what's driving the results that you saw in the quarter. We're very proud of 48% revenue growth and a record-breaking quarter for us across the board. And that's what drove the guidance raise that we had. So we took up guidance at the midpoint by $110 million and are expecting to be in that $1.835 billion to $1.91 billion for the top line revenue and EPS could be as high as $9 a share. So the other thing I'd point out is our margins. So adjusted EBIT margin, 67% with really strong cash flow conversion. So we're in a great position.

Yes, absolutely. Another thing that we used to get questions about, so I think it's a good opportunity for education is the royalty step-downs and how you're expecting those to trend, like which ones should we be watching? And what's kind of replacing that? I think the questions on our end have settled out in a little bit because of the cadence of BD and replacing kind of the growth engines. But maybe help us understand the step down, how you can directionally quantify that? I know you can't give us the exact numbers, but just set the stage for royalty step downs.

Yes. I would say all of our contracts are negotiated separately. And so we have different types of contracts. I would say in the majority of our contracts, we have a structure where we receive royalties for a minimum of 10 years, and that can be extended if we get co-formulation patents, which are generated by new inventions being found by co-formulating ENHANZE with the partner product.

And that's important because in most of those contracts, the effect of the co-formulation patent is to maintain the royalty rate at the original starting. So we will state the mid-single royalty for a period that's often 13 to 17 years after launch. We do have some other contracts where there will be a step down, and that happens when the ENHANZE core IP expires, which is 2029. We do have some products that will have a step down. DARZALEX will have a step down in 2029 in Europe as an example. And VYVGART will have a step down in 2029 as well.

As you said, the very important point, and this is something we have recognized and we have been working on for many years is the importance of having additional products that are newer launches where we're still in the high mid-single digit, and it's the revenue from those that are a backfill for that step down. And so that's why it's so exciting to see the growth of OCREVUS, RYBREVANT and also Opdivo in addition to the continued growth of DARZALEX and VYVGART because it's probably not lost on the audience that as the product continues to grow, even if there's a step down, the revenues are increasing.

So we have a terrific dynamic, and that's exactly what we plan to do with that. And we work with every partner to get co-form patents. We've had 6 co-form patents issued. We expect to see more being issued. And a very important message that, that most of our contracts maintains the royalty rate at the original starting mid-single-digit rate.

Excellent. Another thing that has been topical is the CMS IPAY news recently. I think it's behind us now, but maybe for those who haven't caught up in the last couple of months, you can refresh us on where we stand with that.

Yes. So I think 2029 is the first year some of our partner products might have been eligible. But we're very happy to say that based on the draft that was published earlier this year, we have assessed by reading this very detailed document as well as looking at each of our partnered products that we expect no to minimal impact from the IRA all the way through 2035. This is because of how the document is drafted, but also other policies in place like the orphan drug exclusion as well as the expected launch of biosimilar products.

So as you say, Mitchell, we never had any positive upside from the IRA because people use our products for competitive differentiation. Nobody ever wanted it for a few extra years. So -- but the great news is there's no harm to it, and we're just continuing with the business. And hopefully, when the final document comes out this fall, we can all just put it behind us and never discuss the IRA again for Halozyme.

Excellent. Okay. And then another point of discussion that's ongoing for us is Alteogen and the emerging hyaluronidase out of Korea. And maybe you can help us understand how you see the competitive dynamics now, especially that Merck is using it. How you've had discussions with partners who may have opted for ENHANZE versus Alteogen's hyaluronidase or what prevents some partners from licensing ENHANZE and they have to go with another partner. And then where the litigation stands?

Just help us understand the field there. And then thinking about how that affects any new deals? And is there a competition that now your mid-single-digit rate is in flux because of that partners are saying, "Hey, we've got an option." Is that just -- we can't see behind those doors. So maybe you can help us understand what.

A lot in there. I'll maybe take the first part with regard to Alteogen and ask Darren to talk about the status of the MDASE litigation. And so I think the first thing that's very important to us, we have multiple structural advantages versus any of the emerging hyaluronidases. And that comes from being the innovator in the past, having launched our first product in 2013 and launched 10 products in total, we have got the largest clinical safety database and also over 1 million patients postmarketing data.

Now that is important because when a partner is thinking of taking a product subcu, they want to look at the technology. But as importantly, they want to know what development risk am I taking? What is my chance of success? Am I going to get a surprise immunologic event? Am I going to get a surprise safety signal? And so we are in just the leading position and frankly, an unassailable position that we can answer those questions in a database manner. And so we've signed 6 deals, Mitchell, we've talked about earlier. In each of those cases, the companies evaluated Alteogen specifically and said, we want to come for Halozyme for your experience and because of your track record of success and safety.

So we know that's the case. I think the second thing that is a big structural advantage is we also have the broadest portfolio of subcutaneous delivery solutions now with the addition of Hypercon, Surf Bio and the auto-injectors. And so ENHANZE is seen as the gold standard. We are seen as the leader in subcutaneous delivery. We are the one-stop shop for biopharma. And so we are very comfortable we're going to continue to be the leader in signing new deals.

Now because of structure of some of our earlier contracts where we signed exclusive contracts, Alteogen has had some deals. The majority of those where it's public, it's very clear we can say that the partner came to us first, and we had to say no because we are working with somebody else. Merck is a great example. That's a PD-1 target. We licensed that to Bristol in 2017 when Merck wasn't interested in subcu. They had no choice but to go to Alteogen. And that's been the case for multiple of the announcements. So we're very comfortable in our leading position there.

Darren, would you turn to the difference between ENHANZE and MDASE and then...

Absolutely. Yes. And what I would start by saying is that the ENHANZE patent estate is completely distinct from the MDASE patent estate. So the royalties that you see Halozyme getting today on all the products are based on the ENHANZE patent portfolio. And obviously, we'll get many more royalties going forward. as we strike new deals and expand. So that's the first thing to say.

The second thing is just the MDASE litigation is all upside for us, right? So we're suing Merck and pursuing cases in the U.S. and then in a number of markets in Europe. And just to give you an update on the status there. We're in the PTAB process in the U.S., so that's delaying the district court case a little bit. That's likely to ongo for a while now. But in Europe, we're awaiting -- we're already blocked -- they're blocked in Germany. We're awaiting the results in the Netherlands, and that's actually the license holder for a number of markets in Europe. So that's going to be an important case that reads out early in October.

So stay tuned for that. And then there's another -- a number of other markets that we're looking at as well where we're taking action. So -- more to come there. Importantly, this is all upside, as I said, completely separate patent estates. And so anything that comes out of the MDASE litigation, there's no read-through to ENHANZE and it's little upside for Halozyme.

Excellent. Okay. And a lot of nominations recently from partners who have had slots that were kind of pending and they could opt for nominations. Can you help us understand how many remain to be determined if nominations occur? Like what could we potentially see? And then you have 13 programs by year-end that you're expecting to be in development. Can you help us understand how many of those could be commercial within the next few years?

Yes. With regard to the new partner nominations, Mitchell, I'm glad you talk about that because that's sometimes under-recognized as another powerful driver of royalty revenue. So every time we sign a new deal, we're obviously getting 1 or 2 nominations, but many of the partners take extra slots. And so we need to track how many new deals there are, how quickly those partners moving into the clinic and then how quickly the additional signed nominations are moving forward.

And so I would say today, on ENHANZE, there are at least 20 our Hypercon are between 15 and 20. So each new deal usually is 3 to 4 deals. So there's 10 deals value just sitting there waiting to be untapped. And as you see, we're very excited to see products moving into the clinic. And also, what I'm delighted to see is the new deals also moving rapidly into the clinic. So GSK, we just signed with them in the second quarter. Their trial is already posted on clinicaltrials.gov that they're going to be testing ENHANZE with belantamab.

Now that is a notable start for us because it's the first ADC where the premise is that by reducing the Cmax, we can help reduce Cmax-related toxicity of ADCs. And that would be a new market opportunity for us. We haven't tapped into that we estimate is at least 50 ADCs. But it's the speed I also want you to know as to which partners are moving. Pfizer, who's a long-standing partner, has also posted a clinical trial design to evaluate ENHANZE with its trispecific that is being used for atopic dermatitis and other dermatological diseases. We're working today with antibodies and bispecifics that is a trispecific, and we also have this new ADC. And I'll just throw in that we've also got our first partner evaluating nucleic acids.

Again, a brand-new market opportunity for us. So it's remarkable after all this time with ENHANZE through great science that our Chief Scientific Officer invested in and created, we've opened up 2 new market segments that's going to allow us to continue to grow and sign more deals.

Wonderful. Okay. And then with Hypercon in Vertex and Oruka, maybe you can help us understand the path to revenue there, but also kind of what steps will start to validate that more and more, like getting the ball rolling, how does that affect the split of different BD activities that you guys expect in terms of ENHANZE versus Hypercon versus [ inNBase? ] Like how do we expect BD deals to happen?

Yes. Let me start with that because it's been very clear pharma is really focused on subcutaneous delivery. And so what we've seen is a step change in how they approach us now. They approach us more frequently than us reaching out to them, but they're also very clear they are a product that's going to be delivered in the physician's office where volume is less important, that is an ENHANZE and they'll say, we want you to talk to us about ENHANZE.

Even if something where they want to get the small volume and an auto-injector for the patient's help, they come and talk to us about Hypercon and sometimes the Surf Bio, which is an earlier asset for us. And so pharma knows what they want. They're very laser-focused now on the competitive profile of their drug, and that really is how they are coming to us. So we can't talk specifically about Vertex and Oruka, but what we can say is that companies with Hypercon, it can take products that today can't be concentrated beyond 100 to 150 milligrams per ml up to 500 milligrams per ml, and that's how it gets into the smaller volume easier to be delivered by the patient. And that you can assume that is the goal of all of our Hypercon partners.

Our first 2 partner starts are going to occur in the first half of 2027. That's very exciting for us. And I can say we've got multiple other products that are in feasibility testing that we'll move forward into hopefully CLA soon. That's what we call it the contract, the collaboration and licensing agreement, and those will be future launches as well. So it really is already showing very nice progress and strong progress at this stage of development. Hypercon has signed more deals and has more progress than we had with ENHANZE, which shouldn't be surprising because when we launched ENHANZE, we were creating subcu delivery of biologics. Now the market, patients, doctors have absolutely embraced it and things are going to move faster, which is why we're so confident in Hypercon.

Yes, it's wonderful. And one of the companies there, Oruka is a key company for us. We cover Oruka as well. And so we're very familiar with that and how transformative that could be for psoriasis, but also for you guys. They're going after a $22 billion established market of Skyrizi with their lead product. Every percentage point of mid-single digits that you guys get is huge. So I guess like with that backdrop, anything you want to say about that deal that would help investors, but more importantly, when it gives us a sense of what you're looking for in the next deals that you do, are you looking for those potential home runs, but they're not commercial yet? Like how do you think about the future of your hyaluronidases in the hands of different partners?

Yes. We look forward to Oruka saying more about their specific plans. We're not in a position to say anything just yet, but I can say we're delighted to be working with them on what promises to be a transformative therapy for patients with very strong data. I think in terms of the second part to the question, we are very happy when partners come to us. I think you never know what product is going to turn into a blockbuster. And so I can say that in terms of the current partnerships we're working on products that are already established blockbusters, and we're also working on earlier products.

We always like to use argenx as VYVGART as a product that was totally underrecognized when we first signed the deal with them. We saw the potential. And obviously, argenx did a marvelous job developing that drug, and it's not done yet because we've got so many new indications coming. So you will see a mix of marketed products. You will see companies wanting to introduce subcu from the start in the most competitive profile because perhaps they're coming into an already established market where they need to transform early into the most convenient, longest dose duration, whatever is their goal. That is what Hypercon because we can deliver higher doses, as you can imagine, in that 2 mL volume if you need to do that. So that -- it's a very exciting area for us. And pharma is absolutely in a way that hasn't happened in the 12 years I've been at Halozyme embracing subcu as the path forward.

Wonderful. So we've talked about a lot today. So to close the discussion, I always like to just recap and give you a platform to touch on anything critical that we didn't get to say and/or discuss maybe the next 12 months forward ahead for Halozyme.

Yes. Darren, anything you want to add?

I think you did a really good job covering everything. We're very excited. I think the model is very strong, high margin, long duration of royalties. As I mentioned, the financials are really strong to have a record quarter. It was great for me coming in as a new CFO to have such a strong start. We're excited about the future. The layering effect and the compounding effect that Helen talked about with our royalties is something that I think is really compelling and exciting.

We've got ENHANZE, we've got the 10 deals that we have or 10 products in the market already. We have the 13 new ones coming. Then we have Hypercon coming, then we have Surf Bio. So we have this layering effect. Each one has new targets, new nominations and expansion opportunities. So we're very excited.

Excellent. Thank you, Helen. Thank you, Darren. Really appreciate it. Thank you to the Halozyme team, and thanks to all the investors that joined us for the fireside discussion.

Good morning, everyone. I'm Sean Laaman, Head of U.S. Mid-cap Biotech Equity Research here at Morgan Stanley, and welcome to Morgan Stanley's Global Healthcare Conference. Before we commence, I'll make you aware of some important disclosures. For those disclosures, please go to the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative.

For this session, we have from Halozyme Therapeutics, Helen Torley and Darren Snellgrove. Welcome to both of you, and thanks for your time.

Appreciate it.

Maybe just to help me out here and start with some macro questions.

And I guess, how is the China-origin innovation story changing your competitive positioning, if at all? And is it influencing your R&D and BD playbook?

Yes. So for Halozyme, I think where China is impacting us is obviously, a lot of our large partners and partner targets are highly engaged with China in seeking to expand their pipeline. So that simply expands the opportunity for us. Very recently, we had signed our first deal for ADCs, and I really look at China as having a lot of innovation in ADCs. And so we look at that as a pretty important market expansion opportunity for us. So in terms of Halozyme, China is really all upside.

Wonderful. And are you implementing AI adoption across your business? And if so, can you point to a specific area where it's saved the cost, increased the POS, changed the timeline?

Yes. Darren is going to address that. He has recently joined the company as our new CFO just a few months ago and has really brought a lot of knowledge and expertise, particularly in that area from J&J. So I'll ask him to comment.

Absolutely. So AI is definitely very much in action at Halozyme. Maybe I can give a few specific examples. First of all, we're using it for our scientific publications. We've been able to save about $50,000 per publication, do them about 2 to 3x faster.

In manufacturing, we have a system that basically allows for more uptime and prevents downtime in terms of the manufacturing side of things. And then in our business development, we're able to do landscape analysis about 30% faster than we have in the past.

So we're definitely seeing the pull-through. You can tell that it's really taking root at Halozyme. We had an off-site meeting a few months ago, 70 new ideas brought forward by the employees. So it's amazing to see how much it's taken root. And we're tracking the financial impact as well. So it's something we're paying close attention to, how much we're investing, what kind of returns we're getting from the AI projects.

Most importantly, we're tracking the efficiency and the effectiveness of the programs, which I think at the end of the day is what's most important.

Darren, if I can just give an example that just blew my mind last week. One of the things we're doing is pairing operational effectiveness and AI together because that's really where the value creation is added. And so we were wanting to map some of our processes that relate to early development of one of our technologies. Rather than the week-long people sitting in rooms doing Post-it notes, our team brought in videotaping of people doing the process, then paired it with one of the AI process maps.

And what normally would have taken weeks to do spat out in days, a very comprehensive set of process maps that can be used for training, for continuous improvement. It just is -- who would -- I would never have thought that you could bring those 2 together. It is amazing what AI can do, and we really are expecting and seeing adoption across the entire company, but always with a human in the loop and always appropriate controls.

Sure. Thank you, Helen. And which policy variable, is it like FDA, Medicare negotiations, MFN, tariffs or global pricing matters most to your economics? And what have you changed, if anything, because of it?

Yes. Obviously, in that list, there isn't clarity on final policies on all of them, Sean. So I'll comment on the ones where we do have a lot more clarity. And I would say for Medicare price negotiations, particularly as it relates to the IRA 2029, we have little to no impact, which is terrific that draft policy has come out and brought, I think, very strong clarity to that topic. I'd also say for tariffs because of the way our contracts are done and the way our products are distributed in the U.S., we have no tariff impact either.

Obviously, on the global pricing, MFN, there just isn't clarity yet to be able to comment on those areas. I was listening yesterday, though, to Karl, the CFO for argenx. And I think we absolutely believe and are pursuing the same thing they are: innovation even in a challenging payer world will always be recognized. And we certainly demonstrated with our subcutaneous therapy significant savings to the healthcare system, patient out of pocket, all of that. And so we will continue to pursue innovation, and that will result in longevity and durable royalty revenues for Halozyme.

Sure. Thank you. Maybe really to drill in on the business. So very strong Q2 performance. You raised guidance across all 4 metrics. What are the biggest swing factors in the second half?

Yes. We were delighted by the second quarter performance, which, as you point out, was very strong. It was actually record revenue, 50% up year-over-year to $308 million. What we have seen is that the key value drivers and inflection points for new growth have actually occurred in the first half of the year, Sean. So we're going to really be relying on the commercial execution by our partners to be driving royalty revenues in the second half. Let me give a couple of examples of those drivers.

In March, we were very excited to see that Johnson & Johnson added another new indication for DARZALEX FASPRO, this time with TECVAYLI, setting a new standard of care for second-line patients. They already have more than 10 indications. This is yet another earlier-line treatment, and that's going to be a continued growth through the second half.

And also in the second quarter, VYVGART Hytrulo got its label expansion for seronegative. That increases the addressable market by another 20%. So these value-creating events have already occurred. It's really just going to be the commercial execution. And we've obviously taken that into account and have strong confidence in our second half and full year 2026 guidance as a result.

Thank you. How would you classify the concentration of the royalty base today? And how do you see that evolving as we move towards 2028?

Yes. Well, we just talked about VYVGART Hytrulo. The launch of VYVGART Hytrulo and its amazing commercial success where it grew 60% as a total brand year-over-year with that really largely driven by subcutaneous to $1.5 billion in the quarter, total sales has really been an important diversification. So we already are highly diversified.

One of the other highlights of the second quarter was our newer launch products, which includes OCREVUS subcutaneous, Opdivo subcutaneous and RYBREVANT grew 80% quarter-on-quarter. And so we always talk about ENHANZE as a compounding platform engine. And it's these multiple launches and these multiple additional diversification of the revenue streams that's resulting in such an attractive, durable long-term royalty revenue story for us, Sean.

Wonderful. Maybe looking a little bit forward. So with respect to the royalty streams, which ones begin stepping down first? And how should investors think about the shape of the royalty streams beyond 2030?

Yes. If we think about -- and just coming back to what's unique about the ENHANZE technologies, and I talked about ENHANZE being a compounding platform engine. But behind that, we have Hypercon that we intend to make into a similar attractive compounding platform engine and then Surf Bio.

And so we really think about the right way to think about our business is that we're going to be just creating layer upon layer of royalty revenue that even if there were some steps down, these new royalty streams and the growth of these products is going to be able to fill that in and continue a durable long-term royalty revenue story for Halozyme.

So the way we think about the shape of the curve, if you like, that we're asked about, you've got to think about our current 10 launch products where there is still strong growth of many of those products to come. You layer on top of that the -- we've got 13 ENHANZE products in development today, but that's just the beginning. We're going to be layering on top of those ones that ultimately launch and give royalties.

And then there's Hypercon, where I'm sure we'll talk about also is going to layer on royalties. So it is our goal with this pattern of layer upon layer of royalties, compounding the growth of the platforms, Sean, that is allowing us to have a goal, which is to bend the curve in terms of what the shape of our curve is going to be.

Sure. Thank you. And with respect to your long-term guidance out to 2028, do you or do not include future product launches in that guidance?

Our current guidance, as you note, goes out to 2028, and there are -- it's just the 10 currently approved products that are in there and only the approved indications that are in that long-term guidance. You maybe ask Darren to comment. We have provided an update to our 2026 guidance, but there's more to come in terms of updates there.

Yes. I think we're really looking to see how the new launches take off. We obviously have RYBREVANT, OCREVUS, Opdivo in the early uptake of those launch curves. So we want to see more data points on those. And they've grown 80% quarter-over-quarter in Q2.

So they're on a really strong trajectory. And so we're waiting to have enough information to be able to update long-term guidance.

Sure, sure. Thank you. And what's your timing around that? I think it used to be, correct me if I'm wrong, under Nicole, was something like you typically updated it in the new year. So you just wanted to deliver the full year and then you typically update it in the new year. Is that still the kind of thinking?

Yes. Assuming we have the information we need, I think that's reasonable.

Got you. And you do have a number of products, I believe, to launch next year. And maybe characterize some of the growth that we could expect if we can.

Yes. I think in terms of new indications, certainly, that's the exciting thing about the products that we work on. But in terms of new launches, there may be 1 next year with others carrying in '29, '30, '31, '32 for ENHANZE. And we're very -- there'll be multiple launches in that period of time because we've currently got 13 products that are expected to be in development by the end of this year.

But we're also very excited to be at the beginning of 2027, entering the clinic for our first Hypercon clinical studies, which are projected to launch in the 2030, '31 time period. And we talk about 13, just to be very clear, that number is going to constantly change and increase just because of the dynamics of our business with some partners and new partners all looking to advance products to get the commercial benefits to them and the patient benefits for going subQ with one of our technologies.

Sure. And maybe on the business development and the deal engine, you have 5 agreements year-to-date against a full year goal of 3 with Vertex, Oruka, GSK, Incyte and an undisclosed nucleic acid partner. Was that pull forward or genuinely high run rate?

Yes. We're very excited to have 5 new deals signed this year. And we continue to expect at least 1 additional deal this year. I will say, Sean, the metric I more focus on is the actual progress into the clinic. How many products are getting into the clinic because as a company, it's really the royalties that matter for us. And so we look at new deals as a metric because those -- the current ones can result in new partners entering the clinic and new royalty streams.

We will constantly work hard to get new deals. And the interest in subQ delivery of biologics, particularly in inflammation and immunology, nephrology, gastroenterology, CNS is at an all-time high. I've never seen as much incoming interest. And so that's what gives me confidence we're going to expand even more in terms of new deals.

But then people will often forget and maybe even underestimate the power we have by having such a large installed base of great partners because all the time we have these partners adding new products that are nominated and moving into the clinic.

Let me just give you 2 examples, I think, to illustrate that. We signed a deal with GSK this year. That's our first deal with an antibody-drug conjugate. That is a market that is largely untapped for subQ delivery, and we are leading there because of the great data we generated that's already resulted in IP. And so we are expecting GSK to be moving into the clinic this year to be testing the premise that with ENHANZE, you can lower the Cmax versus the IV, maintain the overall exposure and still get an improved risk-benefit profile. And that data, we believe, will help further expand that opportunity.

Pfizer, a long-standing partner for Halozyme, has just recently posted on ClinicalTrials.gov, they've moved forward for their trispecific antibody, [ Tilrekimig ], to -- which is in skin disease to be able to evaluate ENHANZE in that setting. And we haven't got a product that's a trispecific yet, so that's nice to see. We have a bispecific, obviously, with RYBREVANT. This is a trispecific.

And again, the power of this engine of having so many great partners, you named just some of them, is the power of why we've got this compounding platform engine.

I think going back to the quarter, I think it's about $35.5 million was contributed by upfront. How much of that revenue beat was deal timing rather than royalty performance?

Yes. It was undoubtedly the royalty performance that really drove this record second quarter performance. We mentioned earlier, 50% increase year-over-year. And what's exciting about that is it's contributed to by our earlier launch products, DARZALEX and VYVGART, as I talked about earlier, dimensionalizing how despite them being more mature products, launching subQ in 2020 and 2023, they're having phenomenal growth. And it's because of the broad adoption of subQ because of the benefits that are happening. But we also layered on that the 80% quarter-on-quarter growth that was delivered by OCREVUS, Opdivo and RYBREVANT subQ.

So all of this leading to this very robust royalty growth in the quarter, and it's going to continue based on the dynamics of these products. The $35.5 million was, I'll just say, a nice balance between the new deals on ENHANZE and the new deals on Hypercon. So really kind of illustrating how the power of having these multiple royalty compounding platform engines is going to be so important for the great value creation phase for Halozyme at the moment.

Sure. Thank you, Helen. And you estimate, I think it's 50 ADCs and 50 nucleic acid programs could benefit from ENHANZE. What is technically different about those modalities? And does the royalty structure differ for them?

Yes. We have worked mostly on monoclonal antibodies. And it's fair to say that with the ADCs and the nucleic acids, they are more complex products. So we had to spend a bit of time generating data to illustrate and bring to partners to engage them in a conversation about being able to deliver these drugs subcutaneously and the potential benefit because obviously, there has to be a potential benefit. GSK is the first company that has signed on, but we do anticipate seeing additional companies sign on.

On nucleic acids, it was the same story. I mentioned the value proposition of ADCs is a better overall risk benefit. For nucleic acids, there was a belief out there they simply couldn't be delivered and absorbed subcutaneously and that inflammatory response could dampen the response to it. So we're very excited to have an unnamed partner who is advancing to generate data there. All of this data garnered interest from other companies and partners, and that's why we're very excited about this large brand-new addressable opportunity where because we're the leader, we are filing for and gaining important intellectual property that I think will create a great competitive moat for us there as well.

Thank you.

I didn't mention the structure. The structure is very similar to what we've always had where we have upfront payments. We have milestones for development and commercial and then durable royalties of at least 10 years, but with the opportunity for co-form patents that can extend the royalty term many years beyond that.

Sure. Thank you, Helen. Series of questions here on the IRA and the 2029 rule. So you've reviewed the documents and you've guided to 0 to minimal royalty impact after 2035. What's the load-bearing assumption there in your view?

Yes. It's a comprehensive document that came out. We spent a good amount of time reviewing all of the aspects that could impact Halozyme. And then importantly, looking at each and every product in our portfolio to see could there be any impact at all. And it really was that detailed thorough assessment, Sean, that resulted in the clarity that there is certainly no headwinds from the IRA.

And so that's why we're very comfortable putting out the comments on no to minimal impact. And then on our website, there is an assessment of that, that just gives a summary of why we believe that there is not going to be an impact.

Sure, sure. And just to ask on Hypercon. So it adds no new ingredient. So it's a new formulation as opposed to a fixed combination. But is that distinction settled in the proposed rule? Or is it your interpretation?

Yes. Just on Hypercon, we haven't spent much time on that. It's another way to facilitate subcutaneous delivery where Hypercon is able to hyperconcentrate other companies' products. So normally, the maximum concentration you can get from monoclonal antibody is about 120, 150 milligrams per mL. What companies want with Hypercon is to be able to create something that is very meaningful in the market, and that is the ability to reduce the volume by having a higher concentration so it can fit into a small volume auto-injector, which in certain conditions like inflammation and immunology, nephrology, gastroenterology is the competitive profile that people are going to need.

So it's a formulation to answer your question, Sean. And this value proposition is what has resulted in 5 agreements to date, including the 2 that Sean mentioned, there's more than 20 targets that are under these agreements, and we have 2 partners who are expected to start clinical testing next year. And so this really is transforming and we're pioneering just how biologics can be given subcutaneously, and that's what's leading to this great period of value creation for Halozyme.

Thank you. Maybe we can move on to the MDASE litigation and the competitive position. So what are the specific decision points to watch with the litigation with Merck?

Yes. One thing I always like to start by saying in MDASE, which is modified hyaluronidase and doing work for using our IP is all upside for Halozyme. There is absolutely no read-through, no crossover into anything that can affect ENHANZE. It's a totally different patent estate, just to be exclusively clear on that. I think key areas to be looking at, at the moment, and I'll start outside the U.S.

We already have a preliminary injunction in Germany that has stopped Merck from being able to launch [ QLEX ] in Germany. In early October, we expect the results of the court case that we have been going through in the Netherlands that not only could have the potential to stop the launch in Netherlands, it could also prohibit the launch in multiple other European countries because it is a license holder. And there are proceedings continuing in Denmark, Sweden and also Italy at this period of time. So I definitely would be looking to those events.

Turning to the U.S. That is an area where we're undergoing some challenges and back and forth with Merck with regard to the validity of the patent. I would say that is something that is going to continue for a pretty long period of time because no matter the outcome of the decisions of the first ruling of the PTAB, these will be appealed.

Now the timing of the District Court case, which is a very important one because that is the one that will determine whether Merck is infringing us, where we're seeking a permanent injunction and damages will be influenced by clarity on what's happening in the PTAB. So that will -- U.S. will progress, I think, along and timing determined by the ultimate outcome of the initial and final decisions on the validity of the patents. No near-term answer in the U.S.

Sure. And you argue that companies signing with Alteogen are pursuing targets that are already exclusively licensed to you. Is that a durable structural advantage or one that's just timing?

Now Sean, we have multiple durable structural advantages over anyone in this market. And let me just highlight 2.

The first one I'll talk about is the fact that we have 10 launch products. And because we get 10 launch products, we've been able to establish a large comprehensive database of information. Now anybody wanting to use a subQ technology wants to evaluate the technology, but they also want to understand the development risk. And we are just in a unique position with this large database, which has had thousands of patients in clinical studies, more than 1 million patients in post-marketing experience, we can give data-driven answers. And that is something that is unassailable and it's unachievable by anyone to be able to catch up to us to do that. And we signed 3 deals on ENHANZE this year. Every company comes to us and says, you're the expert. You have the data. That is why we're coming to you.

I'd say the second structural advantage is that we have the broadest set of subQ delivery technologies now. And if ENHANZE is not the right fit for the target profile for a company, if they come to Halozyme, we can help them identify, is there another option for them. And again, there is nobody with as broad a set of options. And ENHANZE is seen as the gold standard. These hyperconcentration technologies we have, Hypercon and Surf Bio are the most advanced, the best defined. And that's why companies look at it as now the one-stop shop for subQ delivery.

Sure. Thank you, Helen. And on Hypercon, so a couple of questions here. So you've guided to $1 billion in royalties by mid-2030s. I think the first clinical start is next year. I think you said in the past that maybe the first product will be launched in 2030 . So maybe just to double down on some of those assumptions and...

Yes, happy to. So I think there's a few things that underpin our excitement about Hypercon. So I would say, first of all, the attractiveness of the subcutaneous market has increased tremendously with ENHANZE. So I think we expect rapid uptake of Hypercon when it comes to market. As Helen mentioned, it's really a transformational product.

Second thing I would point to is the commercial success of ENHANZE and the patient expectations that are out there now for subcutaneous delivery. Patients don't want to have an IV infusion for 3 to 6 or even 6 to 8 hours when they can have a subcutaneous injection that's only a matter of minutes.

And increasingly, there's an expectation for delivery in the community setting and also at-home delivery. And so I think Hypercon fits perfectly into that. Helen mentioned some of the indications. It used to be oncology.

Subcutaneous was the expectation, now I&I, gastroenterology, nephrology. So those are huge markets with huge potential that Hypercon can play in. And lastly, I'd point to the fact that we've already signed 5 deals. We have 20 targets. So the potential for Hypercon is tremendous. I would also say that I think Helen pointed to $1 billion of sales for ENHANZE a number of years ago, and we're going to beat that by a year. So we have a track record of delivering.

Sure, sure. That's good characterization. I just got thematically about your stock, there's always been this concern that the ENHANZE royalty step down and then you're in a challenged position in -- through the next decade. But you've always been on the front foot saying those royalties will be enduring, albeit maybe at a lower rate.

But I guess one of the offsets, which probably doesn't get a whole lot of credit in my view, is the strategy around Hypercon as the ballast beyond that. So how would you characterize the investor perception around Hypercon and its ability to offset whatever step down in royalty rates you might get from ENHANZE?

And what proof points can we look to as investors to say that we're actually on track? Is it a matter of just unfurling those proof points over the coming years?

Yes. No, we definitely have had a lot of very positive feedback about the strategic fit of adding Hypercon and the recognition that Halozyme is a great position and the best position and best owner for that asset to be able to repeat the success that we saw with ENHANZE. There's no doubt about that. We see this as opening a brand-new market to Halozyme. And just to say, I think some -- most investors understand this now, but perhaps not everybody does.

Today, there are products where to be competitive and to have that additional value creation for the companies, you need to have the most patient-friendly way of being delivered in inflammation and immunology, where there may already be products on the market that are subQ, the goal is to have the easiest to deliver 2 mL or less small volume auto-injector to deliver product with low frequency. And that's where Hypercon fits. It's additional to where we were with ENHANZE. It's an expansion of our TAM.

And it is, I think, pretty remarkable that already 5 companies have signed up and important companies like J&J, argenx, Lilly, Vertex and Oruka this year to be able to get to that ultimate excellent competitive target profile for patients for expansion of that adoption.

Now I would say many partners -- many investors expressed a lot of excitement about that. They are intrigued as to what the first products are going to be. Due to confidentiality, we are unable to see what those products are going to be, but it will become clearer in 2027 and beyond exactly what those are. And I will say, in addition to those 2, we have additional feasibility testing going on from other partners that is not public yet.

And so it really does show this is the right time. There's a secular trend for subQ delivery. We're at the right place with the right technology. I think there's going to be more recognition of the value that will come when we enter the clinic, when it becomes clear the products that we're working on.

But certainly, in the company, we are incredibly excited with the addition of Hypercon. It's not going to be a transition from ENHANZE. It is going to be additional because as we've demonstrated with 3 new ENHANZE deals this year, ENHANZE is a great fit for large volume delivery. And we're going to have new products and new royalty streams coming from that later this decade and well into the 2030s. But think about Hypercon that layer on top of that and just opportunity we wouldn't necessarily have gotten for ENHANZE. So there definitely is going to be, I think, a story in '27.

Sure. Thank you. We haven't talked about Surf Bio. So maybe remind investors what it is and how that fits into your strategy.

Yes. Surf Bio is a second hyperconcentration technology. It's -- the Hypercon works by dehydration. The Surf Bio achieves the same goal of concentration of 500 milligrams per mL tested with multiple different modalities such as antibodies, even small molecules in the case of Surf Bio that will further offer another option for partners as to how they can take their products and make it into these small 2 mL or less auto-injectors for the growth areas of inflammation and immunology, nephrology and gastroenterology just as several examples. Now it's a little earlier in development. It's about 18 months behind Hypercon. So we expect it to enter the clinic in 2028.

And some people do ask us why do we have 2 technologies? Sean, you may recognize over the years that we have occasionally good partners who want us to do exclusive deals for targets. You can imagine that, that makes sense because they see this as a major part of their competitive moat.

And by having 2 technologies, that expands our opportunity to work with more partners on the same target. And that really was the strategic rationale for that approach. And so different ways to do it, but really tapping into the secular trend where subQ delivery is table stakes now in multiple therapeutic areas, and we are the company with the broadest range of technologies to fit their needs.

Sure. Thank you, Helen. And I believe last year, you saw a real uptick in the cadence of deals and inbound. And what do you think is driving that? And sort of our view generally on AI might not ultimately solve the biology problem in the near term. It will over the long term. But what we think it does is fattens pipelines gets more deals to the table, gets you to failure faster, if anything. But how do you characterize the cadence of deals going forward?

Yes. We are delighted with the deals that we have been able to sign this year. And I think it really does play to what is a secular trend that in many of these therapeutic areas, you have to have a subQ delivery. And we are seen as the leader, not just in terms of the technology, I'll just add also in terms of our internal expertise to help partners get into the clinic fast, design more innovative studies that can result in faster, less expensive path to approval.

And we hear time and time again in the conversations we've had that resulted in the 3 deals this year and the 3 deals at the end of last year, people are really coming to us because we are the one-stop shop. We have the gold standard technologies, and we just have the broadest experience. And that's -- it's going to continue. I've been in this role quite a number of years now. We've never had as much incoming interest.

It's really terrific, and we're able to, with our lean business model, support multiple partners at the same time without dramatic increases in our expense base. So it's a terrific business model we have.

Sure. Thank you. Just conscious of time, I want to squeeze in some questions on the balance sheet. So you bought back about 333 million of stock at $69 a share, which is good. And think you've got just over $2.15 billion in debt. How do you balance buyback versus delevering?

Yes, Sean, it's a good question. We actually don't view that as those as competing priorities. I think if you think about this year, by the end of the year, we'll be down to about 1.2x leverage, maybe even a bit less. And we were able to buy back over $300 million of stock in Q2. So the great thing about Halozyme and the strength of our free cash flow is that we can achieve a lot of our capital allocation objectives simultaneously. We're investing in our organic portfolio, obviously. There's still more that we can get out of ENHANZE. We're investing in Hypercon and Surf. We're also obviously doing the buybacks and also considering M&A, and those are things that we can do in parallel.

Right. So M&A is, I think you said that might be off the table this year or not a focus. Is that correct?

Yes. So I mean, I think what we're doing is carefully evaluating opportunities. We have to find an opportunity that meets a specific set of criteria that we think we could transact on. So we don't expect to do anything in 2026, but we continue to look for opportunities.

Wonderful. Thank you. And now we're close to time, but is there anything I didn't ask that I should have or a message you'd like to leave the investor audience with?

Yes. Hopefully, the message you have taken from this conversation is that we are transforming the delivery of biologics subcutaneously and through that, creating just an entered into an amazing time of value creation for our partners, for patients and our shareholders.

I think we've been very strategic in continuing to focus on ENHANZE. We're going to be investing to maximize Hypercon, as Darren mentioned, including the manufacturing approach to that because we believe that we can create the greatest value for our partners by being able to deliver from them from drug substance all the way through fill/finish. And we're evaluating exactly the timing and cost of that.

But a really important reason for doing that is also that it is allowing us to do process improvements to continue to innovate, to generate new IP and all of this to further expand Halozyme's competitive moat. And so I think that is another very important part of our story.

So this year, look for us to be working hard to continue to expand beyond that 13 target in 2026 products in the clinic, adding more ENHANZE products that are going to generate future royalty streams to layer on the current exciting story, but also Hypercon as well and a couple of years from now, Surf Bio as well.

Sure. Wonderful. We'll finish the conversation there, but thank you both for your time.

Great. Thank you, Sean.

Thank you. Thank you.

Awesome. Thank you very much for joining us for this afternoon session today. My name is Mohit Bansal. I'm one of the biotech and pharma analysts at Wells Fargo. And I'm joined by once again with Helen Torley, the CEO of Halozyme with us. Thank you very much for your continued support. I have been hosting you for 5 years in a row. Thank you very much for joining us today.

It's great. Very excited to be here in Boston.

Thank you. And I was looking at the stock chart. Stock is up 40% in last 1 year, 50% year-to-date, and much of it is in the last 3 months. So you have done an amazing job in last 1 year, doing all those deals and building the platform. Can you talk a little bit about the journey with these deals and all? And how do you see the future of Halozyme beyond the ENHANZE platform at this point?

That's great. Well, for those less familiar with Halozyme, we focus on subcutaneous drug delivery, and we have 4 subcutaneous delivery technologies now. The first and the largest to date is ENHANZE, and we also have an auto-injector platform as well. At the end of last year, we acquired 2 hyperconcentration technologies, Hypercon and Surf Bio. And what we are hoping to do is to create each of these into a compounding platform engine for Halozyme.

As Mohit says, we're just coming off a record quarter in the second quarter. Revenues of $481 million, up 48%. Royalties important, up 50% to over $300 million. And the drivers of that today is ENHANZE. We've got 2 key drivers within our ENHANZE platform, our products that launched in 2020 and 2023. That's DARZALEX subcutaneous and VYVGART Hytrulo.

Now even although those launched several years ago, they are showing phenomenal growth. They are terrific products, where the companies have got new indications. They're expanding to new prescribers, and we're getting the benefit of longer duration of therapy in some of these indications as well. So that is going to be a continued growth driver for Halozyme.

But what we reported in the second quarter, and I think what got people very excited was that the next set of launches, which occurred more recently, which includes Ocrevus subcutaneous, plus Opdivo and Rybrevant subcutaneous, those grew 80% sequentially. And those are becoming more important royalty revenue drivers for Halozyme driving that record performance.

And we're not done there. Talking about where we're going. We have 13 products that we project will be in the clinic with ENHANZE by the end of this year. We will have 2 Hypercon products in clinical testing at the beginning of next year.

And as Mohit mentioned, this year, we've signed 5 new deals to date, 3 ENHANZE, 2 with Hypercon, which are expanding us into new areas, including ADCs and nucleic acids. That is what is leading to this continuous engine of new products in the clinic that will be our future royalty revenue streams layering on top of the 2 drivers I already talked about. So an incredibly exciting time, and our future will be multiple ones of these compounding platform engines just driving durable long-term royalty revenue growth for Halozyme.

Got it. Very helpful. And then talk a little bit about these deals. Like, I mean, these deals happen quite in a cluster where like 3 of those ENHANZE deals and 2 Hypercon deals -- was there a trigger there? Or this is always in the making and then it's just that it got executed during -- in the last 6 months or so?

Yes. And I'll add we did 5 this year, but we actually signed 3 ENHANZE deals in December as well. So it's been an amazing month. I mean it's a record performance in the history of Halozyme. What I think has happened, Mohit, is that this is the time for subcu therapy. There is a recognition that we find broadly across pharma and biotech that to be competitive to deliver against the patient expectations, you need to have subcu delivery ideally in the patient's home, ideally in some indications in a small volume auto-injector.

And when we look at the types of products that are in development to date, there is a high concentration of immunology and inflammation -- nephrology, GI, neurology. And these are disease areas where the goal of pharma companies, but also of the patient is "I want to be able to treat myself at home. I don't want to have to visit the doctor's office. I don't want to sit in an infusion suite." And so we happen to be at a marvelous time where subcu therapy is the expectation, and Halozyme has the leading technologies.

With ENHANZE, we have the best-proven, best-validated subcu technology. But our Hypercon and Surf Bio technologies are delivering against this desire to have small volume in an auto-injector at home. That's a value proposition, and that's what we've seen just a total change in before Halozyme having to go out and talk to people about subcu delivery, have you considered it to companies calling us and saying, we want ENHANZE because we want to do X. We want Hypercon because we want to do X.

And so it is this recognition that subcu delivery is, frankly, a commercial mandate in these additional disease areas. There's still an interest in oncology, but what we've done is expand into multiple different areas and multiple different modalities. We're not just working with antibodies today. We're beginning to work with ADCs. We're working with nucleic acids. All of this is beginning to expand our TAM, and that's all what's driving this flurry of deals, and it's going to continue. We've said we're going to sign at least one additional deal this year.

This is interesting. So basically, if I understand correctly, and correct me if I'm wrong. So basically, what you're saying is that earlier, like at least for the initial launches for pharma companies, it was more of a defensive strategy to launch a subcu, but it seems like now it is an offensive strategy or maybe expansion strategy that we are not just protecting the business. We are like with a subcu delivery in those immunology or nephrology indication, the product could be much bigger than it would be without a -- without subcu delivery.

You hit on great points, and I'll just use 2 examples that I think have opened up people's recognition that the subcu therapy grows the market. So DARZALEX is a terrific example. When we started working with J&J, it was a 4- to 6-hour IV infusion. Sarclisa was being developed, and that was a 2-hour IV infusion. So J&J wanted to have a more convenient therapy for patients. and went with our delivery, which is a 3-minute subcu versus these hours in the infusion suite, a massive difference for patients. But what that also did was allow them to penetrate more rapidly and more deeply into frontline patients.

Now why is that important? The frontline population is the biggest population in multiple myeloma, but it's also the population who stay on therapy for the longest. And so that's why we're seeing this amazing growth. It's a large population, but it's also compounding because year after year, patients are repeating their prescriptions.

VYVGART is another example. So VYVGART Hytrulo, I'm sure many of you know VYVGART launched in myasthenia gravis as an IV. It then launched a subcu in a vial that the patient had to pull up. It was a great advance for patients, but it took a lot of steps, and it took a number of minutes for the patients to do. In the middle of last year, they launched the prefilled syringe, 5-mL prefilled syringe that the patient self-administer at home in just 20 seconds. That has led to exponential growth. VYVGART delivering $1.5 billion in the quarter, 60% year-over-year growth and that growth really driven by the prefilled syringe.

What argenx has talked about is new prescribers are able to prescribers are able to prescribe because not all immunologists or rheumatologists have IV infusion capacity. Patients are starting therapy much earlier in the disease because it's easier for the physician to do.

So exactly to your point, Mohit, this is just -- people recognize that, yes, it's the best offering for patients, but for the companies that obviously gives them competitive moat. But the addition to grow the product into new treatment settings out, such as the community hospitals or the physician office or home as well as expand into new populations is all what we're hearing from partners what they want to capture. They want what J&J has with DARZALEX. They want what argenx has with VYVGART.

Clearly makes sense. So to that extent, so the 3 ENHANZE deals this year and a couple of them last year, is this a mix of defensive plus offensive? Like how would you correct it? Because you cannot -- you have not disclosed the assets, but again, can you talk a little bit about that?

I think a common theme is the best competitive profile to get the best market share possible and the best growth. So that all kind of delivers for the company. The patient is a winner in all of this by having a more convenient therapy, but the companies are winning. So if you want to launch into a market today like asthma or inflammatory skin disease, you want to have a less frequent auto-injector at home as an example, that would be the Hypercon.

But for the ENHANZE ones, one of the most exciting deals, I think, is with GSK. It's interesting. That is where they're going to be using ENHANZE to see if with their ADCs, they can reduce the Cmax, so the peak concentration in the blood versus the IV. Why is that important? Well, there can be some toxicities associated with a high Cmax. And so with ENHANZE subcu because it's absorbed more slowly, you get the same exposure.

So the same efficacy is the theory, but less of the peaks, so less toxicity. So that could enhance the competitive profile of their ADCs so they can get greater market share. So that is the common theme here. It's a win-win, and that competitiveness can allow greater expansion into the new populations, et cetera. So we are not simply a convenience play, we are a market growth driver for these companies.

Clearly. Like VYVGART is probably the best example of that. I mean like the product wouldn't have been as big without this kind of offering there. Super helpful. And to what extent clarity on IRA has played a role here?

Yes, the IRA has been a little bit of a question for our investors. I will say pharma and biotech have paid no attention to the question as to whether a co-formulated product with ENHANZE would or would not be bundled with the lead product because they're coming to us for competitive differentiation. So it was never an accelerator of business for us.

And so we actually are just pleased that with the last guidance, it seems like -- it's still draft guidance, but it will be finalized. It's clarify for people to say, all right, there's no upside, but we also can say because of the IRA and the One Big Beautiful Bill, there's also minimal to no impact of the IRA to Halozyme's revenue. So it's in the rearview mirror. We're not talking about it anymore. And I'm really thrilled about that because it just -- it got undue prominence for its potential impact at any point in time. But I think that's clear now, and we seldom get questions on it.

No, definitely.

Investors. Never from pharma or biotech.

No, we are a nervous group of people. Super helpful. So you have had many new launches in the last couple of years, Ocrevus, Rybrevant, Opdivo, Tecentriq. How would you characterize how well your partners have performed on the execution of those products, especially Ocrevus. I mean Roche was talking about this being like a defensive product, but they are doing really well actually there as well, trying to protect the market from the competition, but now they are actually growing this business. So talk a little bit about that. And I mean that has been the upside surprise for last couple of quarters. So can you talk a little bit about that?

Yes. I mean, obviously, our partners have all performed very well. And just the 3 products you were talking about there, Mohit, for Opdivo, Ocrevus and Rybrevant subcu, that's the group that grew 80% quarter-over-quarter. Each product is a little bit different in terms of what drove that. So if you will, I'll just spend a moment on them.

So for Ocrevus, subcu, the value proposition there is the patient can have a multi-hour IV infusion or they can have a 10-minute subcu. So enormously positive. Now what Roche had said at the time of launch is that the availability of the subcu because of the time and because you don't need IV infrastructure, it would expand access. It would allow more patients to be treated because you could be treated in a community hospital as opposed to an academic hospital, the doctor's office and there'll be higher patient throughput.

And so they put a number in that and said that the total potential of Ocrevus IV and subcu would increase to CHF 9 billion, with CHF 2 billion being just due to the subcu expansion. I think some people thought that meant that they weren't going to expand and convert the IV, and that's not what's happened. After the launch, about 50% of patients who are on the subcu Ocrevus are coming from IV switches, but 50% are new. And so they're getting the double benefit of expanding the market while giving the patient a better treatment experience.

And so we believe that entire CHF 9 billion is the addressable market for Ocrevus subcu. They grew from 17,500 patients in the fourth quarter to 44,000 patients on therapy in the second quarter. So phenomenal growth. We're going to continue to see that very nicely. So great launch. And I would just think differently about what the whole TAM is for Ocrevus subcu to include those IV patients as well.

If we turn to Rybrevant subcu, that is a product. The IV is 6 to 7 hours. It has a high rate of infusion-related reactions that limited its uptake. The conversion to subcu is a 5-minute injection and it has a fivefold lesser rate of infusion-related reactions. It is a game changer for the adoption of our Rybrevant subcu. And so J&J did talk in the quarter about the growth was up 60%, driven by the availability of Rybrevant subcu. That is a product that just got its J-code on July 1. So we're going to see improved uptake in the U.S. in the next quarters, now that the reimbursement is in place.

They got priority review for head and neck cancer, so a new indication coming forward and potentially data in the future in colorectal cancer. So we're very excited about that launch. And I think you're going to see with J&J them doing exactly what they've done with DARZALEX, just keep investing in great new indications because it's fabulous science, and we're going to benefit from that.

And a word on Opdivo. Opdivo is converting. They were about 15% conversion. They feel they'll get to 30% to 40% conversion. I think they might beat that just based on the pace that they're on, but very nice conversion there. So it speaks to our partners, the subcu is a part of their future. It's part of how they're driving revenue for the company. We're integral not just an afterthought. So we're finding the execution is aligning to their strategic intent, which is to drive more revenues for the company.

Very helpful. Thank you for that. I think the other aspect is that -- so you have talked about 13 additional ENHANZE launches starting 2029. That's a lot. So are the economics with the newer deals any different from the previous one? Because at least like the mechanism always had built-in mechanism for like if there's no patent, there's a lower royalty. So probably not, but would love to understand that.

Yes, happy to talk about that. And what we have talked about is based on the number of products we expect to be in development for ENHANZE by the end of this year. It would be up to 13...

Up to 13...

Up to 13 launches, beginning in '29 and running through about 2032, '33. I'll just highlight that in addition to that, we're going to have Hypercon launches with the first 2 Hypercon launches potentially in the early 2030s as well. So -- and we're going to keep adding to that with the new deals that we're signing. We've got new partners moving into the clinic this year and next year that is going to further expand that.

In signing the new deals, historically, we signed a lot of exclusive deals. We now have more of a mix on ENHANZE of exclusive and nonexclusive deals. And what's very exciting is that we've continued to be able to get included in those deals, very attractive long-term durable royalties. A minimum of 10 years, potentially longer with co-form patents.

And in almost every case, there is a potential in these contracts to earn the mid-single-digit royalties towards the lower end of our range, but still mid-single-digit royalties. And we've been changing the structure of these, Mohit, that there isn't necessarily always a 50% step down. It could be a smaller step-down because we're starting low and going up. So very attractive economics on ENHANZE.

If I turn to Hypercon, that's where we are very excited to have signed 5 Hypercon deals so far. You'll recognize the companies we're working with. They're terrific companies, J&J, Lilly, argenx, Vertex and Oruka. In that instance, it's the same structure overall where we get milestones. And in that instance, all of these are mid-single-digit royalty deals. They start and stay in the mid-single digits and so very attractive royalties in that as well.

And each of these is going to expand. Each of these will be separate royalty streams, and this is why we love the phrase of the compounding platform engine. Years ago, people -- a few years ago, we're very focused on DARZALEX, what's happening. This growth that we're seeing now is really driven by the fact that on ENHANZE, we have 6 royalty streams that are -- have got significant growth already and will continue to grow. Same is going to happen on Hypercon.

Diversification. Perfect. I had last one DARZALEX question, sorry. I won't to talk about everything else as well. So is there any update on the U.S. patent reissue for DARZALEX here? And I think the question we get a lot is that 2029 to '32 and then beyond that, how should we think about DARZALEX royalties at this point?

Yes. For the specific DARZALEX, just to say, this is a reissue pattern of a manufacturing patent that would have the effect of maintaining our royalty rate on DARZALEX at the mid-single-digit royalty rate between September 2027, which is when in our projections, we currently step down. And it would move out to a step down in March of 2029.

Right.

We applied for that several years ago. It is still undergoing the prosecution and appeal process. It did take a while for it to get assigned an examiner. But we are confident that it will complete before the September 2027 date and result in a patent for Halozyme that we believe, as we go and talk to J&J, they will agree, we'll have the effect of stopping that step down.

We've done this once before with the European reissue patent. So the strategy has proven successful, but we still have to wait to get that answer. Mohit, you asked the question of 2029. You've heard about the great growth that we're seeing with our current portfolio. You've heard about all of these products that we have in development. as well. We are very comfortable to have put out multiyear guidance to 2028. That is all based on derisked royalty streams. And we will continue as we get concrete data and can model any additional royalty streams providing updates on that.

But we feel very strongly that we want you to have confidence in the projections we put out. And so we do have a bar that is -- we want it to be very clear to you that you can model it confidently because it is derisked and the assumptions are clear. So we're working on that, but we can't give any confidence yet that when we'll be in a position to provide more details.

Awesome. So let's just talk about Hypercon for a little bit. So again, so I mean -- in terms of economics for the deals that you have done with Hypercon or done by the previous management team, is ENHANZE a reasonable framework or there are different economic models at this point?

No, very similar economic models, and there'll be very similar development paths as well. Each of them is structured with an upfront payment, milestones for progress through development and commercial accomplishments. And then in the case of Hypercon, very similar to our very early ENHANZE agreements for exclusive deals and all of the Hypercon ones today just about are exclusive in that mid-single-digit royalty space.

And so we can expect to earn milestones as the partners progress into the clinic and through commercial as well as receiving that mid-single-digit royalty. And our estimates of development time line is in the 3- to 5-year time frame depending on what kind of product we're talking about. So that would be very similar to ENHANZE as well.

Very helpful. And where are you in terms of starting those 2 trials by -- in the first half of '27? And then like some people argue that's probably the manufacturing part that you have to figure out before you move in. Like what is the bottleneck right now...

Yes. So the Hypercon technology is a novel technology. That's one of the reasons we were so excited about it. It uses a patented dehydration process to be able to create antibodies instead of having a maximum concentration, if you like, of 150 milligrams per mL, it allows up to 500 milligrams per mL while still preserving easy injectability for the product. It doesn't get so thick, you can't inject it.

So the benefit of that is obviously that the volume reduces by whatever the factor of concentration is for the product. We partnered with Thermo Fisher Patheon on the manufacturing process for clinical studies. And that is very well underway. I visited there recently, and it's a very impressive site and a very impressive process.

We expect to move into the clinical study manufacture of 2 partner products in the fourth quarter and the beginning of next year. And that is one of the last steps that we need to do to be ready to enable the Phase I study starts for 2 products in the first half of 2027. So everything going very much according to that plan and partners getting ready for these Phase I starts for 2 very exciting products.

Got it. Can you comment on like -- so there are some questions around Hypercon's scalability for the commercial supply eventually. Like can you talk a little bit about the complexity level of this manufacturing? And how comfortable do you feel within your due diligence about the scalability eventually for the commercial supply?

Yes. We felt very comfortable in the scalability. There's a great team at Hypercon who have invented and scaled this up initially in a lab here in Boston. But has now done it successfully in the Thermo Fisher site in Italy. We -- and this is clinical scale. So we -- because we've seen such interest with 5 deals signed, we actually believe, to maximize the value of this opportunity. We want to provide partners with a comprehensive solution.

And so our thinking at the moment is that we're going to invest in manufacturing scale up to be able to go from drug substance all the way through fill/finish and make it really turnkey for our partners in terms of them being able to access and use the Hypercon technology. That will take some investment. We haven't finalized yet the timing of that investment and where it is, but we do believe to truly reap the benefits of the demand we're seeing for this technology, that's going to be an accelerator.

And I will say an additional benefit of Halozyme doing it is we continue to innovate. We continue to get new ideas that we are able to -- our novel findings that we're able to patent. So we're increasing the competitive moat, both from a new IP, but also from a know-how. And so it's a very important part of our strategy as to how we're going to create Hypercon into this compounding platform engine that delivers for 20 years just as ENHANZE has done.

Got it. Very, very helpful. So in terms of partnership, the partnership for Hypercon, the framework is pretty much similar to ENHANZE in terms of like -- talk about the time line it takes for concept to clinic. Is it any different from ENHANZE?

So there's different -- still an early technology, different paths.

That was the first time that you did the ENHANZE.

Yes, exactly -- yes, exactly. That took a very long time on ENHANZE. So it's a very partner-dependent. There are partners who want to do the feasibility testing to show that the molecule can be concentrated and can be stable before they will move forward to a clinical agreement. So that takes a period of months to be able to do that. There's other partners who are very comfortable signing the deal and going straight into development.

And that's where we work with them very closely to develop the hyper-concentrated formula, put it on stability and then be ready to take it through and make the actual clinical supplies of it. So it's initially definitely going to be a bit slower than ENHANZE today. For ENHANZE today, we can determine if a product is compatible with ENHANZE in 4 weeks. And we've got lots of data.

So there's still a little bit because we have to develop the new formulation, then we need to scale up. But it's going to reduce, I think, very nicely over time as we get more and more experience with it. So it's -- we're starting off with these 2 new Phase Is. We expect actually additional Phase Is in the second half of 2027 already based on what's ongoing in the clinic. And we have a very nice pipeline of feasibility ongoing at the moment that can be our future agreement. So interest in Hypercon is incredibly, incredibly high, Mohit. So we're just -- we've already started a very exciting pipeline there.

We are also interested in learning which products are going in. So when do we learn that when they enter in the clinic? That's like contractually, you cannot disclose, right? So...

Yes. The 2 first clinics that will -- the 2 first products that will enter the clinic, if they're in patient populations, will be posted on clinicaltrials.gov. Obviously, if they are in non-patient populations like human volunteers, they don't get posted. And so we can't say at the moment exactly what's going to happen, but I would keep your eyes on clinicaltrials.gov. And in the first half of next year to be able to see what these products are. But as I mentioned, there's more products coming. So it's a very nice already early pipeline.

Got it. No, definitely, AI can help us there. So talking about Merck litigation a little bit here. So where do you stand now? And you have talked about -- I mean, PGR is not be-all and end-all, like it will be a little bit longer process than just PGR. So talk a little bit about that. I mean you have a lot of patents. You have a good patent estate. So talk a little bit about where you are.

Yes. Let me start by just contextualizing where the Merck litigation is focused is on a patent portfolio we have, that's called the MDASE, the modified hyaluronidase portfolio. That is entirely separate and independent from ENHANZE. So we do not actually license MDASE to anyone. All that we've licensed the partners is ENHANZE. And really importantly, anything that happens on MDASE can have no read-through to ENHANZE because they're so separate. I'd also say this MDASE litigation, it's all upside as a result of that. So think about it, it's a little bit of an option for a license with Merck should we prevail in the ultimate litigation.

It's a small product.

Exactly. So it's -- we look at this as a very positive potential upside with no downside. That's my most important message. There is no downside there. So we approached Merck when they had started to make progress with using the Alteogen modified hyaluronidase to take a license. We believe they're infringing. They did not take a license then. And so we moved to sue them in district court for trying to get basically damages as well as a permanent injunction ultimately.

What has happened is that Merck has challenged some of our patents in the PTAB. And that process has been ongoing throughout this year. The timing of the start of the District Court is going to be tied to the final resolution. Now all of those actions are happening in the PTAB. And so the whole infringement and settlement can only happen with the District Court, but we've got to get through this process that is happening in the -- in PTAB.

And so I'd say no matter what happens this year, I think Merck will probably appeal some of it. We will probably appeal some of it. So that's going to go on for a period of time. So resolution in the U.S. is going to take a number of years to -- because we need to get the start of the district court case and then we need to get to the end of it. So we'll keep you updated on that, but that is still a very active area.

Where I want to point your attention is outside the U.S., where we have gained a preliminary injunction that has prevented Merck from launching Qlex in Germany. In October, we will get the readout from the Netherlands where we had a similar request to prevent Merck from being able to launch in the Netherlands. But importantly, because that's a license holder for Merck in Europe, it will affect multiple European countries.

Now what we hope is if we are successful with that, that will bring Merck to the negotiation table because our -- but we will see if they are willing and open to do that. And there's other measures going on in Europe that I think will be very interesting for investors to watch. But again, all upside, no read-through on ENHANZE.

Got it. Very helpful. So the last question is for your CFO. But again, let's see if you can imitate him. So the question is like -- so I mean, ENHANZE platform has been producing a lot of cash here. So for capital allocation between share repurchases, BD, what is your priority right now at this point?

Yes. We're going to continue with the disciplined approach that we have traditionally used with our capital allocation, Mohit. We are in a great position because we have very strong free cash flow. We're able to do multiple things in parallel. First and foremost, you heard me talk for the last 30 minutes about how excited we are about the growth of our platform. We're going to continue to invest to maximize those growth platforms. That's the most important thing that we can do.

The second one is returning excess capital to our shareholders. We've demonstrated that consistently since 2009. And this year, we announced another $1 billion share buyback and committed to $400 million of share buyback this year, of which we have completed more than $300 million. So you will see us continue to do that and continue to buy when we think that, that is the right thing to do because the stock price is making it -- makes sense for us.

The third area is to continue to decrease leverage, and that will include the '27 and '28 convertible notes and taking care of those at maturity or at an appropriate time. And then the fourth one is continuing to look for M&A. Now we will continue to look for assets that are a fit for our capabilities, ideally, our high-margin royalty type business, but our technology in some form of drug delivery that benefits patients, but also that pharma needs.

And so it's a very careful matrix we look at. The bar is high. We feel very good about the growth potential of our current products. So we're not rushing into anything. We'll continue to take a very thoughtful and disciplined approach to that. But we have the possibility and the flexibility to do all of that in parallel because of the strength of the business.

Awesome. On that high note, thank you very much and all the best, Helen. Thank you.

Good afternoon. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Second Quarter 2026 Financial and Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to our Second Quarter 2026 Financial and Operating Results Conference Call. In addition to the press release issued today after the market close, you could 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 Darren Snellgrove, our Chief Financial Officer, will review our financial results as well as our outlook.

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. 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, and we will start on Slide 3.

Thank you, Tram, and good afternoon, everyone. I am pleased to report our results from an exceptionally strong second quarter, led by ENHANZE royalty revenue growth and new deal momentum that resulted in meaningful upfront milestones. You've heard me say before that ENHANZE is a unique compounding platform engine. On this call, we will share multiple proof points demonstrating how ENHANZE is delivering on all of the attractive features of a compounding platform engine.

I'm talking about the repeatability of success, the scalability and diversification and the durability of revenues that flow from this. The ENHANZE value proposition is attracting new partners and additional products from our current partners at a cracking pace. On top of this, Hypercon is already off and running as a second future compounding platform engine for Halozyme, showing the same features and, in fact, doing so even earlier in the life cycle than ENHANZE, as we apply the knowledge and learnings of the last decade.

Let's look now at what's new in the quarter. I will start with the broadening diversification and record growth of our royalty revenue streams. We are reporting increasing contributions of our newer launch products, Opdivo SC, Ocrevus SC and Rybrevant SC to our royalty revenues, with 80% growth quarter-on-quarter.

This is repeating and building on top of the success and continued growth and performance of DARZALEX SC, VYVGART Hytrulo and Phesgo. What I love about this is that over the last years, we have moved from all focus being on DARZALEX SC performance to then expanding to Phesgo and then to VYVGART Hytrulo as it was recognized just how much opportunity these products represented. Now we're expanding to six products to focus on. This is exactly what I meant by the compounding platform engine, multiple winners, creating revenue diversification and durability.

This broadened launch portfolio resulted in record total royalty revenue growth of 50% year-over-year to $308 million, providing strong support to and conviction for the 2026 to 2028 financial guidance and for the revenues in 2029 and beyond. Let me now move to the second highlight, the significant expansion in new partnerships for ENHANZE and Hypercon in the quarter. In the second quarter, we signed four new collaboration and licensing agreements, and we signed a fifth agreement in July.

We have never had this pace of new collaboration agreements in the history of Halozyme. And for those of you who asked, can they sign great new deals for ENHANZE? The answer is a resounding, emphatic and demonstrated yes, with three of these five agreements being for ENHANZE. This year, we have added new ENHANZE agreements with GSK, Incyte and a third confidential partner. And we added two new Hypercon agreements with Vertex and with Oruka.

And I will add, not only did we broadly expand the number of partners, we also expand in use areas to beyond monoclonal antibodies into two new expanding and leading-edge modality areas, ADCs and nucleic acids. This means brand-new growth opportunity for ENHANZE.

The new CLAs contributed $35.5 million in upfront collaboration revenue in the quarter, approximately evenly split across ENHANZE and Hypercon. This was also an important contributor to record total revenue in the quarter. This is how we said we would and how we are bending the curve in the 2029 plus period.

The third area I want to highlight is development portfolio expansion and progress. In the second quarter, we advanced our pipeline of future potential royalty streams with two new Phase I study starts. It is our goal to have 13 ENHANZE development programs in 2026, which is also bending the curve in the 2029 plus period. Moving now to Slide 4. I'll highlight the second quarter financial results. For the second quarter, total revenue increased 48% year-over-year to $481 million. This was largely driven by robust royalty revenues of $308 million, a strong 50% year-over-year growth.

The robust revenue performance resulted in adjusted EBITDA of $329 million, adjusted EBITDA margin of more than 65% and non-GAAP earnings per share of $2.28, highlighting the strength of our diversified royalty portfolio and the operating leverage that's inherent in our differentiated business model.

Moving now to Slide 5. Based on the strong second quarter and, in particular, the robust royalty revenue growth, we are pleased to raise full year 2026 guidance. What I will highlight is the increase in total revenue guidance of $110 million (sic) [ $112.5 million ] at the midpoint.

This is driven by the increased projected royalty revenues from established products and the new launch products that I discussed earlier and also by the upfront milestones resulting from what has already been a record year for new collaboration and licensing agreements. Let me move now to Slide 6, and I'll provide additional detail on the key business drivers in the quarter, beginning with the current ENHANZE portfolio. In the second quarter, the contribution from the more recently launched subcutaneous products with ENHANZE including OCREVUS ZUNOVO, OPDIVO Qvantig and RYBREVANT subcutaneous increased by approximately 80% quarter-on-quarter.

OCREVUS ZUNOVO is demonstrating how ENHANZE-enabled subcutaneous delivery can compound the value for our partners' products by expanding the accessible patient population. On their second quarter call, Roche reported that the number of patients receiving the subcutaneous formulation increased to 44,000.

Contrast that with the 17,500 patients at the end of the fourth quarter of 2025, and you can see just how many new patients have been added for this every 6-month subcutaneous treatment. ZUNOVO is now the fastest-growing anti-CD20 multiple sclerosis brand in the United States. Roche noted that approximately 60% of the U.S. OCREVUS ZUNOVO starts are coming from community practices, demonstrating how ENHANZE-enabled delivery can reach new sites of care, enabling access to Ocrevus for new patients.

Bristol's OPDIVO Qvantig continued its strong launch trajectory with subcutaneous conversion reported to have increased to 15%, well on track for BMS' targeted 30% to 40% conversion rate. Moving now to Bristol Myers Squibb. Bristol's OPDIVO Qvantige continued its strong launch trajectory with subcutaneous conversion reported to have increased to 15%, well on track for BMS' targeted 30% to 40% conversion rate.

This resulted in global sales growth of more than 200% year-over-year to $261 million in the second quarter. Based on this, OPDIVO Qvantig is projected to exceed $1 billion in annualized revenue. Johnson & Johnson's RYBREVANT FASPRO is another strong example of how ENHANZE creates value for our partners and for Halozyme. For the second quarter of 2026, J&J highlighted rapid uptake of RYBREVANT FASPRO, contributing to the strong 62% year-over-year growth. Supporting growth acceleration in the upcoming quarters, the permanent J-code was awarded on July 1.

This has been a contributor to broadening adoption and growth in multiple prior subcutaneous launches. J&J also commented that they have submitted a filing to the FDA for head and neck cancer. We are pleased to note that the FDA recently granted priority review to the filing, meaning an FDA review time line of approximately 6 months. Upon approval, this new indication would expand the opportunity for RYBREVANT FASPRO beyond its existing lung cancer indications into this new area of high unmet need. It is certainly very exciting to see the growth and contribution of these three newer launch brands, where for these three brands alone, the total IV and subcutaneous opportunity based on total sales is projected to be $25 billion in 2028.

This is resulting in a diversified set of six products contributing royalty revenues where the total opportunity now exceeds $55 billion. I'll move now to DARZALEX subcutaneous, VYVGART Hytrulo and Phesgo, beginning with DARZALEX. DARZALEX continued to demonstrate robust revenue growth, increasing approximately 18% year-over-year to over $4 billion in the quarter, with virtually all global sales being for DARZALEX subcutaneous with ENHANZE.

J&J attributed the strong performance to continued market growth and share gains across all lines of therapy, including nearly 11 percentage points of share gain in the frontline setting.

It's also worth noting that following the FDA approval in March, the all subcutaneous regimen of TECVAYLI plus DARZALEX FASPRO is bringing new hope to patients with relapsed and refractory multiple myeloma. I'll move now to argenx. Total VYVGART sales grew 60% year-over-year to $1.5 billion in the second quarter, driven by continued strong adoption of the ENHANZE-enabled VYVGART Hytrulo pre-filled syringe, which I will refer to as the PFS.

The PFS is expanding the prescriber base and bringing more patients into therapy with approximately 80% of U.S. PFS patients in the quarter reported to be new to VYVGART. This demonstrates how ENHANZE, by supporting continued innovation and administration, can meaningfully broaden patient reach and support long-term product growth.

Driving continued growth, recent regulatory and clinical milestones continue to expand the long-term opportunity for VYVGART Hytrulo. VYVGART is now the first and only therapy approved across all gMG serotypes, including seronegative patients. The U.S. approval in seronegative gMG in May expands the addressable opportunity by approximately 11,000 patients.

Positive Phase 3 data in ocular myasthenia gravis further highlights the opportunity to expand the franchise and drive future growth upon approval. Moving now to Phesgo. Phesgo continues to demonstrate the value of ENHANZE-enabled subcutaneous delivery within Roche's HER2 franchise. During the first half of 2026, Phesgo delivered strong growth of 18%, with global conversion reaching 54% in the 85 launch countries. Roche reiterated its expectation for at least 60% conversion at peak and highlighted Phesgo is a key component of the franchise's long-term durability.

I'll move now to Slide 7. Looking beyond the current decade, our future launch portfolio represents a significant source of long-term value with the potential to expand and further diversify our royalty revenue streams and deliver durable revenue for many years to come. Beginning in the 2029-plus time frame, we have three revenue engines. The first is our 10 currently approved ENHANZE products. The second are the multiple launches that are arising from our growing and robust ENHANZE development portfolio. And the third is Hypercon partner products.

We project that by year-end of 2026, we will have up to 13 ENHANZE partner products in development with potential approvals beginning in the 2029-plus time frame. These programs represent the next generation of royalty-producing assets and extend our future opportunity beyond the currently approved portfolio. During the second quarter, two new ENHANZE targets initiated Phase 1 testing. This is resulting in nine development products and keeps us well on track for the 13 development products by year-end.

This broad and growing portfolio of future potential launches clearly demonstrates why we're so confident that ENHANZE will be a significant long-term revenue driver for Halozyme. I will now move to Hypercon, which we intend to make into a second compounding platform engine and recreate the amazing success of ENHANZE.

Hypercon is designed to address growing demand for lower volume subcutaneous administration, enabling highly concentrated formulations that can potentially support at-home and physician office administration. We made strong progress in the quarter, advancing preparations to provide clinical supply to support the first Hypercon clinical starts in the first half of 2027.

Our projected first launch timing for these two new products is in the 2030, 2031 time frame, and we continue to expect Hypercon to launch multiple products and achieve approximately $1 billion in royalty revenue in the mid-2030s. Let me now turn to the new collaboration and licensing agreements, which are summarized on Slide 8. I mentioned at the start that this has been our most successful year ever with record performance for ENHANZE and for Hypercon. The pace of recent collaboration activity reflects the growing importance of subcutaneous delivery across the biopharmaceutical industry.

Pharma and biotech companies are increasingly focused on improving the patient treatment experience, reducing treatment burden, expanding access across sites of care and differentiating their products. In the second quarter, we announced the new ENHANZE agreement with GSK, which included the opportunity to use ENHANZE in a new use area with antibody drug conjugates.

In July, we announced a second agreement with Incyte, working with Incyte on a subcutaneous formulation of its first-in-class mutant calreticulin monoclonal antibody. Today, we are pleased to announce a third new agreement signed in the second quarter with an undisclosed partner to explore the use of ENHANZE with a nucleic acid therapeutic.

This is the first of what we hope will be several collaborations in this emerging area where ENHANZE brings the potential to enable subcutaneous delivery of large volume nucleic acid conjugate formulations and LNPs while mitigating the inflammatory and immune response that can be otherwise generated from subcutaneous administration. We are excited to expand into these two new areas of ADCs and nucleic acids that represent brand-new growth market segments for ENHANZE and where we estimate that there are at least 100 commercial and development products that may benefit.

Also in the second quarter, we signed two new Hypercon collaboration agreements, one with Vertex and one with Oruka. These agreements establish strategic platform relationships that have the potential to expand over time through additional targets and future development programs.

When we combine the up to 13 ENHANZE development programs by year-end and this expanding opportunity that's created by the current and new ENHANZE, Hypercon agreements, we have created a substantial portfolio of new potential royalty opportunities extending well into the next decade.

What you've heard me describe is the power of having an established compounding platform engine with ENHANZE, and we're creating just the same for Hypercon. We have demonstrated time and again the repeatability and diversification with now six separate and growing royalty streams delivering record revenue. We've demonstrated scalability with multiple waves of new launches now extending well into the 2030s. The durability is clear with 50% royalty revenue growth more than 12 years after our first launch.

And we're very proud that our partner products are clinical breakthroughs that we have helped create into multiple blockbuster subcutaneous products. Our priority in 2026 remains executing on these significant organic growth opportunities. We are also continuing to evaluate selective M&A opportunities that can expand our drug delivery technology offering and royalty duration. But any external opportunity must meet our criteria of a strong strategic fit, durable value creation and attractive returns. With that, I'm pleased to turn the call over to Darren.

Thank you, Helen. I am thrilled to be joining Halozyme at such an exciting point in the company's evolution. Over the past few months, I've had the opportunity to dive deeper into the business, and what has stood out to me is the strength of Halozyme's business model. It's rare to find a company that offers such outstanding current performance and future potential.

Halozyme's combination of strong growth, exceptional profitability and robust free cash flow, coupled with disciplined capital allocation, positions the company well as we continue to accelerate innovation and provide significant returns to shareholders.

Having spent nearly three decades in the industry, I was familiar with the value Halozyme creates for partners, patients and the health care system. After joining the company, I have an even greater appreciation for the opportunities ahead.

One of the unique characteristics of the business is what I would call the halo effect. Every successful ENHANZE-enabled product does more than generate high-margin, scalable royalty revenue. We enable our partners and improve products for patients.

Our platforms reinforce the clinical and commercial value of subcutaneous delivery and create additional opportunities for target nominations, platform expansions and new collaborations. This cycle continues to broaden our opportunities and increase the durability of our long-term diversified model. The strong second quarter results reinforce that view as the company delivered another record quarter, exceeding expectations for royalty revenue, driving strong EBITDA growth and, at the same time, investing in our future growth platforms.

Let me start on Slide 9. Total revenue increased 48% to $481 million compared to $325.7 million in the prior year period. This performance was driven by robust royalty revenue growth and higher collaboration revenue, reflecting new deals signed during the quarter. Royalty revenue of $307.7 million increased 50% from $205.6 million in the prior year period and exceeded our expectations.

These results reflect increasing contributions from more recently launched ENHANZE products as well as the continued commercial success of DARZALEX subcu and VYVGART Hytrulo. DARZALEX generated $4 billion in global sales for J&J in the second quarter, representing close to 18% operational growth, further demonstrating the strength, durability and continued momentum of the franchise. These strong sales translated into $152.2 million of royalty revenue to Halozyme, representing an increase of 27% year-over-year.

Halozyme's royalties from VYVGART Hytrulo increased 143% to $72.6 million in the second quarter. Total VYVGART brand sales for the second quarter reached $1.5 billion, up 60% versus prior year, reflecting strong demand for the ENHANZE-enabled pre-filled syringe, which continues to broaden the prescriber base and support adoption across gMG and CIDP.

Other royalty revenues grew 85% to $54.4 million, driven by increasing partner product sales of recently launched products, OCREVUS subcu, Opdivo Qvantig, RYBREVANT subcu and Tecentriq subcu. We are pleased with the early momentum and see a significant opportunity ahead given that estimates for the total brand growth of these four products is approximately $30 billion in 2028.

Moving to Slide 10 for more detail on the quarterly results. Research and development expenses were $27.7 million compared to $17.5 million in the prior year period, reflecting the addition of Hypercon and SurfBio and our continued investment in advancing these technologies. Selling, general and administrative expenses were $57 million in the quarter compared to $41.6 million in the prior year period. Net income increased 39% to $229.9 million from $165.2 million in the prior year period.

Adjusted EBITDA increased 46% to $328.8 million from $225.5 million in the prior year period, driven by continued strong royalty growth. GAAP diluted earnings per share was $1.90 compared to $1.33 in the prior year period, and non-GAAP diluted earnings per share was $2.28 compared to $1.54 in the second quarter of 2025.

Moving to Slide 11. We generate substantial free cash flow from our asset-light model, and our strong financial position gives us the flexibility to execute a disciplined capital allocation strategy. Our priorities are straightforward: fund the highest return organic opportunities, maintain a strong balance sheet and return excess capital to shareholders through a disciplined buyback program.

We view share repurchases as an attractive use of capital when we believe the stock does not fully reflect the durability and growth of our royalty streams. That is why we purchased $332.8 million worth of shares in the second quarter against our target of $400 million for the full year, while also investing in long-term growth and expanding the ENHANZE platform as more products launch and gain share.

Turning now to Slide 12 and our updated 2026 outlook. As Helen mentioned earlier, we are pleased to raise the guidance for the remainder of the year. We now expect total revenue of $1.835 billion to $1.91 billion, representing year-over-year growth of 31% to 37%, driven by an increase in royalty revenue projections and product sales from API.

Royalty revenues of $1.22 billion to $1.245 billion, representing year-over-year growth of 41% to 43%. We expect growing contributions from the recently launched ENHANZE products, while DARZALEX subcu, VYVGART Hytrulo and Phesgo remain the largest revenue contributors. We expect adjusted EBITDA of between $1.225 billion and $1.28 billion, which includes approximately $60 million of planned investment in Hypercon and SurfBio, and non-GAAP diluted EPS of $8.65 to $9. I will now turn the call back over to Helen.

Thank you, Darren. In closing, let me highlight that our record second quarter results reinforce our confidence in both the strength of our business today and in the opportunities ahead. The growing contributions of our recently launched ENHANZE products and the continued strong performance of DARZALEX subcutaneous and VYVGART give us confidence in the 2026 to '28 financial guidance and beyond.

In the quarter, we demonstrated meaningful progress to add to this and will bend the curve, including through multiple new ENHANZE and Hypercon collaboration and licensing agreements and multiple new clinical study starts. Thank you for your attention today. And operator, you can now open the line for questions.

[Operator Instructions] Our first question is from Sean Laaman with Morgan Stanley.

This is Natasha on for Sean. So you raised royalty guide of $1.22 billion to $1.245 billion against the $548 million in the first half royalties, implies around $336 million to $348 million per quarter in the back half, which is a step-up from 2Q's $308 million. I just wanted to ask what's driving that implied acceleration from here? Is it primarily the newer launch cohort or the established products?

Thanks, Natasha. I'll turn that over to Darren.

Yes. Thanks for the question. And as you noted, royalties were an important component of the beat in the first half. And I would say that we do expect royalty revenue to grow sequentially through the second half, probably won't have quite the same amount of royalty step-ups that were part of the Q1 to Q2 growth. But we do expect that to continue to ramp up in the second half. And a lot of it is driven by some of the new product launches that you've seen. So things like RYBREVANT subcu, which has started to pick up a little bit, and some of the other new products.

Your next question is from Michael DiFiore with Evercore ISI.

Speaker 5

This is [ Jaya ] on for Mike. Congrats on the strong quarter. I'd like to ask a question on target exclusivity. So you've talked about partners who work with other providers and often approach Halozyme first, where target was already exclusively licensed. So as we look forward to 2029, how should we think about the way target exclusivity works as the base patents flow out? And then does that open up targets you couldn't take on before?

Yes. Thanks for the question. In terms of the exclusivity, it's often very much driven by the partner company. And if they request exclusivity and they are willing to pay the enhanced economics that are associated with that, historically, in the past, we have agreed to that, and we also would still agree to that today.

I will note, however, that as you've probably seen in the latest series of agreements that we've done, there are now a lot of companies who are very comfortable with gaining a nonexclusive license.

And so you're going to see a mix of the two as you go forward. And I will also say, if you think about exclusivity, exclusivity is also done in different ways. It can be exclusivity to an entire target, as an example, like we did with PD-1.

But in other cases, there can be exclusivity to a specific molecule uses a target or perhaps a target that is part of a combination.

And so we are being able to be a lot more, if you like, creative and broad in what we're able to license both on an exclusive and a nonexclusive basis as we go forward. And that really is reflected in the five recent deals across those and the additional deals we anticipate signing this year and next.

Your next question is from Brendan Smith with TD Cowen.

Congrats on the great quarter. Maybe first, actually on Hypercon. I know we'll get confirmation of the first two assets by early next year. Just wondering if you can give us a little bit more of a sense of timing for, kind of, subsequent assets in that pipeline and just roughly when the next wave might be, if there are others that could reach Phase 1 next year? Is that more of a '28 event?

And I guess, kind of related, I wanted to ask actually about that $1 billion in incremental Hypercon royalties by 2035 you've spoken to. I guess, how many different assets are you assuming would contribute to that by 2035? And I guess, are your assumptions largely just based on the current partnerships? Or are you assuming any additional ones?

Yes. Thanks. With regard to Hypercon and timing, there absolutely could be additional study starts in the second half of 2027, Brendan, based on the progress we're seeing with companies advancing through the preparatory stages before they're ready to advance to the clinic. And if you recall, while we've got five agreements, those partners have taken up to 20 targets. And so some of the companies are advancing more than one target at this point in time, and that is already creating a very nice pipeline of future clinical studies for 2027 and for 2028.

So that's the great thing about the model we have with this ability to access multiple targets in one agreement. As we projected the $1 billion in the mid-2030s, we had assumed between five and seven launches by that time period.

And I think a number of those will come from the already signed agreements, but it is also possible that agreements in the next 1 to 2 years could also be contributing to that based on what we estimate the development time line to be.

So I commented on the call about -- it's very exciting to see Hypercon turning into another compounding platform engine for us, but able to do so faster and quicker in part because the market is just more receptive to subcu delivery, but we're also able to bring a lot of our learnings from how we've been able to commercialize and grow ENHANZE.

Your next question is from Mitchell Kapoor with H.C. Wainwright.

This is Amit on for Mitchell. Congrats on a strong quarter. I guess, for both or all platform cadence, I guess, how are you thinking about the mix of new partner wins and follow-on nominations from existing partners?

And how would that shape the future deal cadence? And on the ADC and nucleic acid therapeutics, there's a lot of excitement about that. And I was just wondering how are you thinking about the broader opportunity? And how are you prioritizing these modalities as you pursue additional deals?

Yes. Thank you. With regard to the -- I'll start with the ADCs and the nucleic acids, yes, very excited now to have signed a deal, one each for both of those, opening up a brand-new growth opportunity for ENHANZE. We have previously said that there's 50 ADCs we think could benefit from ENHANZE, and we said there are about 50 nucleic acid-based therapies that we think can benefit from ENHANZE.

And so this really is an exciting opportunity. And I would say our business development team are agnostic to whether it's an monoclonal antibody, an ADC or a nucleic acid. But what it has done is broaden the number of companies that we are speaking to and approaching with ideas as to how the ENHANZE technology can help improve their risk-benefit profile or their competitive profile.

And so it just has dramatically increased the number of conversations we're having, and that's exciting in terms of what that can mean for long-term growth and expansion of the ENHANZE number of agreements.

You make a good point, and it's something I think that's often underrecognized is that signing new deals is a source of growth for us. But the number of targets that we already have under license that has not yet been nominated is a second, separate source of growth.

And in the first half of this year, I will say we've had one current partner nominate a product, and I actually am expecting more in the second half. And so it's going to be a mix of both really in terms of what's going to cause the continued growth and expansion of our pipeline.

We expect to have 13 development products in the clinic camp this year. That's going to continue both from these current deals we're signing, adding more nominations and moving into the clinic, but even our existing partners who've still got slots left.

Now falling into the same mindset, I think, as many of the companies today of recognizing that subcu delivery means competitive differentiation, and they are advancing new nominations at a pace also that we've not necessarily seen in a long, long time. So it's an exciting time with both of those avenues for growth as well as growth coming from the ADCs and the nucleic acid new opportunity.

Your next question is from Mohit Bansal with Wells Fargo.

This is [ Will Zhang ] on for Mohit. Congrats on the recent deals in the quarter. But I guess, I just want to understand now that some of the smaller companies are also partnering with you on ENHANZE, like is the deal structure for these smaller companies any different from your prior deals? And I guess, like, what conversations are you currently having with new or smaller partners?

Yes. We're excited to be continuing to be discussing ENHANZE with all size ranges of companies. If you think about just the last few months, we have GSK that certainly is a very large company. We've got Incyte that is a large company, and as you point out some smaller companies as well.

I would say what is more a driver of exactly what the deal structure will be is based much more on exclusivity versus non-exclusivity. And so that is where there is some difference in the economics that's really driven by that the deal structure is shaped around exclusivity, not company size.

[Operator Instructions] The next question is from Dave Risinger with Leerink Partners.

Thanks very much and congrats on the financial upside, and Darren, congrats on your new role. So I have a few questions, please. First, could you provide an update on the Merck litigation prospects? How -- that's the first question. Second, how you see Alteogen as a competitor today? And then third, your view on the acquisition landscape?

All right. I'll take the first two, and I'll turn the acquisition landscape over to Darren. With regard to the Merck litigation, let me start outside the U.S. We are currently actively pursuing injunctions in approximately eight countries outside the U.S. with the goal of stopping the Merck infringing use of our MDASE technology.

This includes the launch in countries as well as manufacturing, distribution and supply of Qlex for worldwide use. These cases are moving forward rapidly. You may have seen we did have a preliminary injunction in Germany in December.

And we do expect important decisions broadly impacting Merck launches of sales in Qlex in Europe before the end of this year. So very active in Europe. With regard to the United States, we're working through the U.S. patent office proceedings that were brought by Merck with regard to the PGRs.

And we expect to have more clarity once that we're through all of those steps on when the U.S. District Court case is going to move forward once the final decisions are reached in those proceedings later this year.

Now I will say that it's a very active on the PGRs as well. We're going to be appealing the four initial written decisions that we received earlier this year. And we expect to hear the PTAB's decision on the remaining 10 sometime this fall.

And so a lot still happening in the U.S. case as well, David, with some clarity with regard to the PGRs at the end of this year, clarity on the timing of the district case, but certainly, our conviction and our confidence is absolutely unwavering that we will prevail in this case, and we will be appealing certainly the first four PGRs that based on our very strong conviction that the Alteogen product is infringing.

The Merck product using the Alteogen technology, as you probably see better, is infringing. With regard to Alteogen, it still continues to be the case that from what is publicly available, it would appear that the people who are assigning deals at the moment with Alteogen are for targets that Halozyme has exclusively licensed, and I can say many of those companies have directly come to us, and we've had to unfortunately say we're unable to work with them.

And so in light of that, obviously, while we're not finding that performance of Alteogen is directly competing with us.

And I will also share that when companies come to us, what they see is they want to work with Halozyme because of our track record of success because our product is being used and we've got a safety database and over 1.3 million patients with 15 years history of reliability of supply. And our team have got the expertise to support very rapidly getting the partners into the clinic, innovative trial designs and a faster path to approval.

And so the entire package that Halozyme brings is what has -- if you think about just in the last 7 or 8 months, six new ENHANZE deals, we are definitely performing incredibly well in the market, and it comes from that competitive moat that we've created from all of our years of expertise and performance.

Let me turn it to Darren for acquisition landscape.

Yes. Thanks. David, with regards to M&A, we definitely continue to see M&A as an important part of our capital allocation strategy. I would say, particularly when we can add differentiated technologies, new capabilities or create future growth platforms. But at the same time, I think you've heard the company say this before, we're very disciplined.

We indicated last quarter that for '26, we're going to really focus on organic growth and M&A is unlikely. But what I would say, the good news is given the strength of our portfolio, the growing cash flows that we have and our improving leverage profile, we really do have flexibility. But again, we remain focused on really on long-term shareholder value.

Your next question is from Mitchell Kapoor with H.C. Wainwright.

This is Amit again. But I was wondering, as you build out Hypercon manufacturing, how should we think about potential revenue beyond royalties and any incremental investment within the 2026-'28 margins?

And for -- you show that you -- or you guide to 13 ENHANZE programs in development by end of 2026 and 13 launches in 2029. I'm just wondering how are you thinking about any potential attrition? Or is that, kind of, built into your assumptions?

Yes. Let me talk about the manufacturing first, and maybe I'll begin by sharing why we think it's such an exciting opportunity for us invest in the manufacturing. As you're already hearing, we've got five deals, multiple products are advancing. And we believe that Hypercon is going to become rapidly the same type of compounding platform engine that we have from ENHANZE.

To speed that up, and to maximize the success of that, Halozyme investing to advance manufacturing is just the right thing to do. We'll be able to drive that, control that at our pace and with our expertise. We have not finalized the exact planning around that.

So I can't share any details on the investment required or the exact business model. But what I can say is that this is going to be very exciting as we contemplate just how much more quickly Hypercon is going to grow to be that $1 billion opportunity compared to ENHANZE. So more to come on that as we finalize our plans.

With regard to the additional launches, just to just clarify one thing. We anticipate having 13 products in the clinic by the end of this year. In terms of the 2029 number, what we said was we will begin in the launches in 2029, and those will be occurring between '29 and 2033 as an example.

So there is a series of -- they're occurring over a period of time. Our development time lines generally are 4 to 5 years just to help with that. So not all 13 in 2029, but after that.

In terms of the mix of products that we have in that 13 products and very exciting products in their mechanisms of action that some of the products are already commercial, which represent a very high probability of success based on our track record.

Other products are new mechanisms of action, but the majority are antibodies, and we have just got tremendous experience with antibodies, which again, from many aspects gives us confidence in the fact that ENHANZE is going to be very successful in making them into successful subcutaneous products.

So a broad range of products in there. Hard to give you specifics on them. But as a body, this ability to have up to 13 additional launches beginning in 2029 is clearly a very exciting additional growth driver that will layer on top of the already launched products.

We have reached the end of the Q&A portion, which concludes today's call. Thank you so much for attending. You may now disconnect.

At this time, I would like to welcome everyone to Halozyme's First Quarter 2026 Financial and Operating Results Conference Call. Please note, this event is being recorded.

I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good afternoon, and welcome to our first quarter 2026 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 Dave Ramsay, our Interim Chief Financial Officer, will review our financial results as well as our outlook.

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 whole 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, and we will start on Slide 3.

Thank you, Tram, and good afternoon, everyone. We started 2026 with exceptional momentum. The continued strong performance of our currently approved products gives us strong conviction in the 2026 to 2028 financial guidance. Our recent new deal momentum and new nominations by partners accompanied by the expanding number of new Phase I starts is bending the curve in the 2029 plus period. And the business momentum is resulting in strong free cash flow. We have clear priorities for capital allocation, reinvesting at compelling returns to create new value and returning value to our shareholders.

Today, my presentation will address how our strategy will deliver durable value for investors during our current guidance period of 2026 to 2028 continue to combine value in the 2029 plus time frame and deploy robust free cash flow judiciously over the short and the long term. I'll begin with our 2026 to 2028 time frame, which is shown on Slide 4.

The key drivers of revenue in the 2026 to 2028 time frame are our first 10 ENHANZE launch products, which includes DARZALEX subcutaneous, VYVGART Hytrulo and PHESGO our strong first quarter financial results reflect continued adoption of subcutaneous drug delivery enabled by ENHANZE, with royalty revenues, driven by our commercial enhanced portfolio, increasing 43% year-over-year to $241 million. Total revenue for the quarter increased 42% year-over-year to $377 million, reflecting the strength of our commercial royalty portfolio. This revenue growth translated into adjusted EBITDA of $230 million and non-GAAP earnings per share of $1.60, representing a greater than 40% increase year-over-year.

I'll move now to Slide 5. Based on these results, I am pleased to reaffirm our full year 2026 financial guidance and the 2026 to 2028 financial guidance. Two highlights I'll point out, for 2026, we continue to project ENHANZE royalties to exceed $1 billion for the first time, representing 30 to 35% gross over 2025. And during the 2026 to 2028 time frame, we project our adjusted EBITDA margin will be greater than 65% going to approximately 70%.

Moving now to Slide 6. As you know, our business converts revenue to free cash flow very efficiently, which provides us with the capital to deliver durable long-term value for our shareholders. During 2026 to 2028, we plan to deploy our capital predominantly in four key areas.

Firstly, we will invest to maximize the value of our organic investments predominantly to support partner success with investments in ENHANZE, Hypercon and Surf Bio. Secondly, we are pleased to announce a new $1 billion share buyback authorization, with an expectation of buying back at least $400 million of our shares in 2026. Over the next years, we project we will achieve a 3% annual share buyback in yield. Our own equity is an asset we know best, and we're comfortable reinvesting against a compelling return plan.

Thirdly, we plan to deleverage further by retiring the 2027 and 2028 remaining notes at their maturity. And fourthly, we will continue to evaluate drug delivery M&A opportunities with a continued focus on identifying high demand, large TAM drug delivery licensing technologies. I will say that based on our high bar and our assessment year-to-date, it is unlikely that we will identify a drug delivery opportunity that meet the criteria to transact on in 2026. And we do not foresee M&A outside of drug delivery.

I move now to our second time frame, which is 2029 plus. Let me be very clear, we intend to bend the trend far more favorably beginning in 2029 than our skeptics here. Let me explain why I believe this to be the case on Slide 7. Our revenue in and post 2029 will come from four key sources. The first driver is the continued performance and contribution from our 10 current ENHANZE launch product. The second driver is up to 13 new launches in the 2029 plus time frame, arising from the current enhanced pipeline of 13 products that are projected to be in clinical development by the end of 2026. The third driver is the 2 Hypercon product launches in the 203031 time frame. And the fourth driver is the next wave of launches that will result from partners progressing additional targets and are already signed Hypercon and ENHANZE agreements and from new Hypercon and ENHANZE collaboration and licensing agreements.

Turning now to Slide 8. I'll say a few words on each of these significant revenue opportunities beginning with the first driver, the current 10 ENHANZE products. As a reminder, all of our signed contracts have long durations. What you may not know is that the majority of the royalty revenue from these 10 products is still to come. Yes, let me repeat that, the majority of the royalty revenue is still to come. Let me dimensionalize that comment. By the end of 2025, we estimate that our 10 approved products generated about 25% of their projected potential royalties. We estimate that we have about 66% of the additional projected royalty revenue still to come in the next 6 years between 2026 and 2032. With the remaining 9% in the years beyond that. In some industries, they call our 66% royalty revenue still to come in the next 6 years, with more after that, our conducted revenue backlog, which I'm sure sounds familiar to many of our shareholders.

I'll move now to the second driver, the current ENHANZE pipeline products with first launches projected in the 2029 plus time frame. We project to have up to 13 additional enhance partner products potentially approved in the 2029 plus time frame. These have arisen from new collaboration and licensing agreements and from current partners nominating and adding additional targets. The new revenue from these projected launches will add to and our revenues.

In the first quarter, I'm pleased to report that 2 ENHANZE partners initiated Phase I studies of new targets in alignment with our expectations for 6 new ENHANZE targets to initiate Phase I testing in 2026. It adds to the 7 products that are already in development. argenx initiated a Phase I study with ARGX-124, making this the fifth product in the argenx collaboration to advance to the clinic. And the second ENHANZE partner who for competitive reasons, does not wish us to provide detailed information initiated and completed their Phase I testing in the quarter.

In parallel, we continue to build the ENHANZE pipeline by supporting our current partners to identify and advance new targets to be nominated. These actions also add to this new wave of launches in the 2029 plus period. I am pleased that in the first quarter, Pfizer nominated a new undisclosed nonexclusive target to be studied with ENHANZE, which will add to the already impressive 13 enhanced product pipeline with the potential to launch in the 2029 plus time frame.

I will now move to the third driver, Hypercon. We intend to make Hypercon the next in hands-like success story. To achieve this goal, we plan to invest in manufacturing capacity that will allow Halozyme to offer end-to-end services to our Hypercon partners. We foresee offering manufacturing from drug systems to commercial fill finish or Hypercon products. As part of this plan, we are currently finalizing the clinical supply manufacturing as we ramp up our manufacturing efforts. And we now predict that the first 2 Phase I clinic starts will occur in the first half of 2027. The launch timing for these two products continues to be 2030, 2031.

As I've said in the past, we continue to see the opportunity for Hypercon to be a very large, achieving approximately $1 billion in royalty revenues by the mid-2030s.

Turning now to Slide 9 and our fourth 2029 plus driver. The next wave of launches that will result from partners progressing additional targets and are already signed Hypercon and ENHANZE agreements. And from new Hypercon and ENHANZE collaboration and licensing agreements. Under our current ENHANZE and Hypercon agreement, there remains opportunities for partners to nominate additional targets. As an example, they are up to another 15 Hypercon targets available in all redesigned CLAs and tens of targets for ENHANZE. We're seeing heightened interest and expansion of targets, consistent with the interest in new CLAs.

Turning now to new agreements. We are delighted to have signed 3 new collaboration and licensing agreements in 2026, already meeting our goal for 2026 to execute 3 new deals this year. And we're not stopping here. Let me say that we have line of sight to additional agreements in 2026 based on the status of our ongoing discussions. We are delighted that with these agreements, we receive upfront mudstones and have the potential to earn milestones and up to mid-single-digit royalties, royalties being the most important recurring and the largest revenue stream for each product. Each of these deals include one or more targets that represent multibillion dollar total sales potential.

In May, we entered a new enhanced collaboration agreement with GSK for multiple promising oncology targets, including with antibody drug conjugates. This collaboration with GSK expands our ENHANZE footprint with another global pharmaceutical leader and marks our first ENHANZE collaboration for antibody drug conjugates, extending our ENHANZE technology into one of the fastest-growing and largest TAM areas of oncology. We believe enhances the potential to meaningfully improve the benefit risk profile of these therapies by enabling subcutaneous administration and reducing the treatment burden for patients. We look forward to the initiation of the first clinical trial under this agreement.

In early April, we announced a new Hypercon collaboration with Vertex Pharmaceuticals enabling the use of our hyperconcentration technology was up to 3 Vertex targets. Hypercon addresses real-world delivery challenges by reducing injection volume and enabling at home or office-based low-volume administration. Vertex is a recognized leader in developing transformative medicines, and this agreement demonstrates growing demand for next-generation delivery solutions that extend beyond ENHANZE.

In May, we announced a second Hypercon collaboration and licensing agreement, this time with the Oruka for the use of Hypercon with ORKA-001 in development for psoriasis and related inflammatory diseases and for up to one additional target. ORKA-001 recently presented Phase II data showing best-in-class efficacy making this an exciting future potential entrant into what is already a $20 billion to $25 billion global moderate to severe psoriasis market. These collaborations further validate Hypercon as a differentiated rearing durable revenue duration technology. That supports our expectation that Hypercon will drive a separate and additional royalty income projected to achieve an estimated $1 billion in royalty revenue in the mid-2030s.

To date, Hypercon has signed CLAs with 5 companies for a total of 17 potential targets, and we project to continue to add to this already impressive number of CLAs and potential targets for Hypercon GIST as we are building for ENHANZE and soon for Surf Bio to result in commercial product launches throughout the 2030s. I trust that you will agree that our four drivers of revenue strategy will deliver durable long-term value to our shareholders.

Let me now provide some details on product progress or reinforcing the durable growth story. Moving to Slide 10. Our 10 launch products, including DARZALEX subcutaneous, VYVGART Hytrulo and PHESGO continues to demonstrate strong revenue growth which will be further fueled by expanding indication approvals. Let me start with DARZALEX, which is the gold standard in multiple myeloma and remains Johnson & Johnson's #1 product.

In the first quarter of 2026, DARZALEX generated approximately $4 billion in global sales, representing nearly 18% operational growth. The sustained double-digit growth is remarkable and a testament to the product and to change its development and commercial strategy. This strong performance translated into $129 million in royalty revenue for Halozyme during the quarter, reflecting a 26% year-over-year increase and underscoring the strength and durability of this important product. As you noticed from the higher royalty revenue growth rate achieved in the first quarter, the royalty rate step-up was achieved faster during the first quarter of 2026 than in prior years.

For a patient with multiple myeloma, what the ENHANZE-enabled subcutaneous delivery of DARZALEX has meant easy treatment time, which is reduced from multiple hours to just minutes and a threefold lower terms of experiencing a potentially life-threatening side effect called infusion-related reactions. Think of what the time back can mean to a patient who is fighting cancer. Additional growth is projected to come from new indications. In the first quarter, the FDA approved DARZALEX FASPRO in its fifth frontline approval and also approved TECVAYLI plus DARZALEX FASPRO for as early as second line treatment for patients with relapsed or refractory multiple myeloma.

I'll turn now to argenx' VYVGART Hytrulo with ENHANZE. In the first quarter of 2026, VYVGART generated approximately $1.3 billion on global sales, representing nearly 63% growth. VYVGART Hytrulo continued to be a growing and meaningful convertor to the royalty revenue during the quarter, increasing 119% to $46.3 million resulting from growing demand and uptick. The introduction of the prefilled syringe for VYVGART Hytrulo with ENHANZE has driven an acceleration in subcutaneous update reflected by the subcutaneous growth and stripping total growth through its strong profile to reduce the administration burden and increase flexibility for patients with generalized myasthenia gravis and CIDP allowing work and travel where this may not have been possible before.

In CIDP, which remains earlier in its launch, organics continued to see steady progress, supported by increasing prescriber familiarity, expanding payer coverage and the convenience of the subcutaneous formulation. Looking ahead, in addition to continued penetration and adoption of the two currently approved subcutaneous indications, we see meaningful growth opportunities driven by label expansions in myasthenia gravis. Last Friday, argenx announced VYVGART and VYVGART Hytrulo received FDA approval as the first and only treatment approved for all serotypes of adult patients with generalized myasthenia gravis. argenx has also reported positive Phase III data in ocular myasthenia gravis, estimated by argenx to affect approximately 7,000 patients in the U.S. alone. These populations when both approved would double the potential addressable myasthenia gravis patient base from launch, doubling the Halozyme opportunity, too.

Moving on to PHESGO. Roche reported that PHESGO continues to deliver strong growth, increasing 27% year-over-year to CHF 686 million or approximately USD 877 million. This performance generated $30.2 million in royalty revenue for Halozyme, representing 25% year-over-year growth. The small difference between reported sales and Halozyme royalties was a result of currency. Roche reiterated its expectation to reach at least 60% conversion and emphasize that PHESGO is expected to maintain a strong and durable revenue tail.

I'll move now to Slide 11 and highlight how the growth of the more recently launched partner products with the continuous growth of DARZALEX FASPRO, VYVGART Hytrulo and PHESGO will deliver strong revenues in 2029 plus. We have all recently launched products, this subcutaneous formulations of OCREVUS, OPDIVO, TECENTRIQ and RYBREVANT with ENHANZE. Each of these products represent a significant blockbuster opportunity for subcutaneous use collectively addressing an estimated $30 billion total IV and subcu market opportunity in 2028 based on analyst estimates.

I'll share two recent highlights, one for OCREVUS ZUNOVO and one for RYBREVANT subcu, which have been reported by our partners, which underscore the continued momentum across this portfolio. Or OCREVUS ZUNOVO, Roche highlighted strong and accelerating uptake of the ENHANZE-enabled subcutaneous formulation, which continues to meaningfully expand access to OCREVUS across multiple sclerosis care settings. Roche reported that there are now approximately 24,000 patients globally receiving subcutaneous OCREVUS, representing an increase of roughly [ 7,000 ] patients versus the prior quarter and acceleration relative to the fourth quarter trend.

Of note, Roche emphasize that approximately 60% of U.S. OCREVUS ZUNOVO starts are now coming from community practices and around half of the new subcutaneous OCREVUS patients are naive to brand. This underscores ZUNOVO's ability to expand the addressable market by reducing infusion burden and enabling treatment outside of the traditional infusion centers. Roche reiterated its peak brand sales expectation of CHF 9 billion by 2029, which includes a brand expense and of approximately CHF 2 billion of sales as a result of additional new opportunity created by the easier-to-use subcutaneous formulation.

Let me now highlight the new momentum with RYBREVANT, which has been driven by the launch of the ENHANZE SC formulation. In the first quarter, Johnson & Johnson reported sales of $257 million for RYBREVANT plus [ Lecluse ], representing an 80% year-over-year growth, which has been driven by launch uptake and share gains across regions. Increasing contribution from RYBREVANT FASPRO, the subcutaneous formulation of ENHANZE is supporting adoption and helping reinforce RYBREVANT's positioning as a new standard of care in EGFR-mutated non-small cell lung cancer. Looking ahead, J&J has identified RYBREVANT as an important longer-term growth driver with their projections that this will be a $5 billion brand.

I'll move now to Slide 12. In closing my section, I want to make several important comments. Firstly, today, we announced a new $1 billion share repurchase program, signaling our confidence and conviction in our business. Secondly, we're pleased to reaffirm our full year 2026 guidance and reiterate our 2026 to 2028 financial guidance.

And thirdly, we have four drivers for revenue growth in the 2029 plus time period. The continued performance of our 10 approved ENHANZE product a pipeline by the end of 2026 of 13 additional ENHANZE products with potential for launches beginning in 2029, 2 Hypercon launches predicted in the 2030, 2031 time frame and multiple additional loss that will arise from new nominations that are currently signed contracts and from new collaboration and licensing agreements.

By owning a share of Halozyme, you're owning a broad swath of the biopharma industry. Let me now introduce you to David Ramsey and welcome him back as our Interim Chief Financial Officer. David's deep knowledge of Halozyme, strong capital markets and investor expertise has enabled a seamless transition and immediate impact. David?

Thank you, Helen. Let me start by saying how excited I am to be back at Halozyme and to step into this role at such a strong point in the company's evolution. I was pleasantly surprised to learn about our deal pipeline and how we are still in the early stages of realizing the full potential of our enhanced royalties. Halozyme is operating from a position of strength, and my focus is on maintaining the disciplined framework and execution already in place, supporting our partners, investing in our core business and working to ensure the long-term growth and durability of our royalty businesses.

We delivered a strong start to the year with results consistent with expectations and robust year-over-year royalty growth. Adjusted EBITDA grew meaningfully even as we continue to invest in Hypercon and Surf Bio, which is a clear demonstration of the opportunity we have to invest in our core businesses while maintaining the operating leverage inherent in our high-margin royalty driven business model.

Let me now turn to our detailed first quarter results on Slide 13. The revenue increased approximately 42% to $376.7 million compared to $264.9 million in the prior year period. This performance was driven by broad-based strength across the business, including strong growth in royalty revenue and higher product sales to partners. Royalty revenue of $240.7 million increased approximately 43% from $168.2 million in the prior year period, reflecting the continued commercial success of key enhanced partnered products including subcutaneous DARZALEX, VYVGART Hytrulo and PHESGO as well as the continued ramp from recently launched FC therapies, OCREVUS, OPDIVO, TECENTRIQ and VYVGART brand.

Research and development expenses were $25.6 million compared to $14.8 million in the prior year period as we integrate our Hypercon and Surf Bio acquisitions. Selling, general and administrative expenses were $57.9 million in the quarter compared to $42.4 million in the prior year period. Adjusted EBITDA increased 42% to $229.5 million from $162 million in the prior year period, driven by continued strong royalty growth.

GAAP diluted earnings per share was $1.22 compared to $0.93 in the prior year period, and non-GAAP diluted earnings per share was $1.60 compared to $1.11 in the first quarter of 2025. We ended the quarter with net leverage of approximately 2.5x, reflecting the acquisitions of Hypercon and Surf Bio. Following our announced plan to buy back at least $400 million in shares this year, we project our net leverage will be approximately 1.2x by the end of 2026, supported by our strong cash generation.

Turning to our 2026 outlook. As Helen briefly touched upon, we are reiterating the strong financial items the company provided earlier this year. As shown on Slide 14, we continue to expect total revenue of $1.71 billion to $1.81 billion, representing year-over-year growth of 22% to 30% driven by royalty revenues and product sales from API. Royalty revenues of $1.13 billion to $1.17 billion, representing year-over-year growth of 30% to 35%. We continue to expect DARZALEX SC, VYVGART Hytrulo and PHESGO to drive these strong expectations, with a growing contribution from recently launched ENHANZE products.

We expect adjusted EBITDA of between $1.125 billion and $1.205 billion, which includes approximately $6 million of planned investment in Hypercon and Surf Bio. And non-GAAP diluted EPS of $7.75 to $8.25, which does not assume the impact of any potential future share repurchases. I am pleased with the continued strength of our business as reflected in our strong first quarter performance and the team's execution. We are still in the early stages of realizing the value from our enhanced business, and we are investing in Hypercon and Surf Bio to drive the next blockbuster royalty business. Our business model positions us well to sustain long-term value creation, and I look forward to contributing to that progress.

With that, I'll turn the call back to Helen.

Thank you, David. In conclusion, let me just close by reiterating what makes Halozyme such a compelling investment. We demonstrated our conviction today with our new $1 billion share repurchase program. The continued strong performance of our currently approved products and the increasing number of indications gives us strong confidence in the 2026 to 2028 financial guidance. And we plan to stand skeptics and bend the curve in the 2029 plus period, building on top of the durable substantial revenue of our 10 approved product, where we have realized only 25% of the revenue to date and project to receive 66% of the total projected royalties between 2026 and 2032. That's 2.5x still to come.

On top of this strong base of revenue, our four drivers of revenue: the continued contribution of our currently launched 10 products, the potential launches of up to 13 additional ENHANZE beginning in 2029, the 2 projected Hypercon launches in 2030 and 2031, and the additional launches arising from currently signed agreement new nominations and new CLAs for ENHANZE, Hypercon and Surf Bio, all add long-term durable revenue streams. The business momentum is resulting in strong free cash flow. I shared that we have clear priorities for disciplined capital allocations, and we're deploying this great new value and return value to our shareholders. Thank you very much for your attention today. And operator, you can now open the line for questions.

[Operator Instructions] Your first question comes from the line of Jason Butler with Citizens JMP.

Congrats on the quarter. First one, He, when you think about the 2029 and after ENHANZE product profile, what do you expect to be the biggest products in that portfolio? And then -- and when are they coming to essentially peak in your model? And then secondly, the Hypercon transactions or discussions that are ongoing today, including the transactions you announced. How many of those conversations were ongoing before you acquired the company? And how many new conversations are you having or relationships that you're bringing to the conversation?

Yes. Thanks so much, Jason. Yes, we're very excited today to share additional color. What gives us so much conviction on the trajectory we're going to have post-2029. I think what we shared was, and I think it was probably a surprise to many of our investors that we still have 66% of the revenue from our current launch products coming between 2026 and 2032. There are multiple large contributors within that, Jason. We haven't broken it down on an individual basis.

But when you think about products like OCREVUS, like RYBREVANT, like VYVGART. I mean really, I can name multiple ones like DARZALEX, of course, we are continuing to expect to see substantial revenues from each and every one of those contributing. And that's not talk about the additional launches we're going to start seeing from the current ENHANZE pipeline. So a very bright future for sure.

Turning now to Hypercon. In terms of the discussions, I would say, one was ongoing beforehand. One was new and the company does continue in with multiple other groups, including some early feasibility testing, which is a step before the companies will then make a decision to move to a CLA. It doesn't always work that. Some go straight to CLA. But also there's some additional targets that are now in development testing. So to find the formulation before going into clinical. And so I can say there's been really a remarkable progress the acquisition, both from targets and collaborations that are already underway as well as this broadening of interest, which is just part of a secular trend I've talked a lot about SC and SC delivery at home is really the target product profile now for so many disease conditions.

Your next call comes from the line of Brendan Smith with Cowen.

Congrats on the quarter. Maybe just first for the two Phase I clinical starts with Hypercon assets, I think, now going to be in the first half of next year. Can you help us understand, I guess, what's left to finish up there on Halozyme's side from just a manufacturing standpoint, get those ready to go? And can you just maybe confirm that timing to hear what those two programs are will still be whenever they start that Phase I?

Yes. Thank you, Brandon. Yes, I would say that, that is most likely from a partner perspective that they will be comfortable revealing what those targets are when they have to post them on clinical trials at do. So very close to when the Phase I clinical study starts. With regard to what's still to be done, we are really working on the clinical manufacturing at this point in time.

As you heard in my prepared remarks, we are investing in the manufacturing capacity that's going to be able to allow Halozyme to provide the end-to-end service to Hypercon partners and become an invaluable partner for everybody just as we do today. And so you will see us continuing with that investment, finishing off the clinical supply manufacturing, and that is exactly what will enable Phase I starts in the first half of 2027.

Great. And then just maybe quickly, I wanted to make sure I didn't miss it. But the conversation about 13 additional launches in 2029 plus. I guess, can you give us a sense over what time frame you might expect those to kind of launch it fully appreciate subject to change, but is it like 13 between 2029 and 2032 or 2035 or just kind of helping -- help us kind of contextualize that 13 number, if you can.

Yes. I think it gives -- Brandon, is that it has taken between 4 and 5 years. for ENHANZE products to get to approval or when they entered Phase I clinical testing. And so as we're looking towards the end of the full 13 to be in development, I'd be looking towards the 2031, '32 for the latest of these with it beginning in '29 and occur over that '29 to '32 time frame.

Your next question comes from the line of Mohit Bansal with Wells Fargo.

Congrats on all the deal making progress here. So Helen, one question I have is, I mean, there is a question we get a lot from investors is that how comfortable are we with the scalability of the Hypercon technology given that such a unique technology and Elektrofi. Elektrofi did not enter into the clinics with that technology, you are taking it forward. So wondering how -- what work you have done to help understand the side and what your know-how with enhanced capabilities could actually be useful in terms of making it more scalable for the clinical as well as commercial use.

Yes. Thanks, Mohit. And thanks for the comments on the deal making. As you're seeing, our organic opportunities really are attractive, and we can deliver such value to our shareholders that we are very focused on resourcing them fully. And that does include our plan to invest in manufacturing capacity. So we offer an end-to-end service from the making of the drug substance to commercial fill and finish. Hypercon got off to a very good start of this collaborating with a strong CDMO called Thermo Fisher Patheon. And they are the ones who do the engineering batches and are working to be able to complete the clinical batches in the first half of 2027. And so we are obviously very engaged working with the Hypercon experts on the full plan not to take this into clinical and then into commercial manufacturing.

So feeling good about the progress that we're making, Mohit, but we are at the clinical stage now. And that's why we're excited to invest and select the CDO which we are going to take us to the next level, expanding now into commercial manufacturing tool.

Your next question comes from the line of Dave Risinger with Leerink Partners.

Yes. And congrats, Helen you and your team on all the great fundamental momentum in the business and new contract signings. So I have a few questions. First, could you just help us understand a few of the financial items for 2026. So what milestones are in guidance for the year? And what milestones are not in guidance because you signed some recent deals, but you didn't update your revenue guidance. And then next, a similar question for EPS guidance. When you gave the EPS guidance in February, what amount of buyback was reflected in that guidance, and how much of the $400 million that you disclosed today for 2026 is in the unchanged EPS guidance for the year. So I guess those are the financial questions.

And then with respect to Hypercon versus Surf Bio, I think it would be helpful if you just compare and contrast the manufacturing scale up for both. Obviously, you're getting questions on the Hypercon scale-up. But if you could compare and contrast them, I think that would be helpful.

All right, David, thank you so much. If we begin with how much the milestone revenue was included in this year's guidance. We always based on partner communications will put whatever Phase I, Phase II or any commercial milestones that are projected for the year. So all of those that we anticipated were included. If you recall at last year, I also said that based on the 3 deals we signed in December, I was very confident in signing multiple additional new deals in 2026. And so we do have a very nice number in our 2026 guidance. for new milestones coming from new collaborations. And so we put that in because we obviously wanted our guidance to reflect our true view of how the year was going to perform. So we have included all of the predictable milestones for the year, including a certain amount of money for new deal milestones at this time.

Let me ask David just to summarize the buyback impact on our EPS guidance.

Yes, David. So in our earlier guidance this year, obviously, we did not make any assumptions for levels of buyback and also today in the guidance that we are reiterating does not include any potential impact from the share repurchases that we will do this year. So we'll update that as the year progresses, obviously.

Yes. And then the third question just is on what are the differences in the manufacturing between Hypercon and Surf Bio. First difference would be Surf Bio is 18 to 24 months earlier development than Hypercon. So we are working very hard at the moment in advancing our nonclinical existing qualification beginning to prefer our GMP manufacturing and our spray dry readiness.

Now in terms of the types of manufacturing, both are novel processes. Surf Bio relies on spread drying, which is actually a very commonly used type of manufacturing. And for Hypercon, it is a novel process that relies on dehydration to result in innovative microparticles that can then be injected with help of being in a solvent. And so different processes, different stages of development, but we're very excited, particularly the degree of interest we're getting from potential partners for the hyperconcentration technologies, to have made substantial progress as well as Hypercon in the quarter, and we look forward to providing further updates throughout the year as we are advancing both of these innovative hyperconcentration technologies.

Your next question comes from the line of Sean Laaman with Morgan Stanley.

Helen, on the 13 ENHANZE products due for launch a bit later, what royalty rates can you -- can we expect and or even just a ballpark and just to walk us through the IP position at that point would be super helpful. And then any comment that you can provide us on competing hyaluronidase technologies out there, Sanofi and Dupixent.

Okay. Let me start with the 13 products that have the potential to be launching in 2029 plus. If you recall with our contracts, we have historically been in the mid-single-digit range. And I'm very pleased to say that for the current contract, we also are in that potential for a mid-single-digit royalty with some of the newer contracts starting at a single-digit royalty, but escalating with increasing sales into that mid-single-digit royalties. So we still feel very great about the strength of the royalties for these multiple new royalty streams, all of which have the potential to be getting into that mid-single-digit royalty place.

With regard to IP at that point, for all of these products, they will retain the potential to be able to get co-formulation IP. The base composition of matter patents will expire in 2029 in the U.S. and in Europe. However, the power of our business model that is sometimes underestimated is the part of getting co-formulation patents. And the reason that is so important is in the majority of our content track, that will extend our royalty term from what is comment on all of our contracts to be a minimum of 10 years. Two, additional years up to and including for the full royalty term of the co-form patent, which is 20 years from filing.

So think of these co-form patents as keeping our royalties progressing for many years after that, initial 10 years in a number of cases and accompanying that in a number of these cases, the royalties can also be maintained at the original royalty rate. And so the IP position in summary, Sean, is strong. it's strong because of our unique co-formulation patent business model, leading to that revenue durability and, in many cases, maintaining the royalty rate at the original level.

With regard to complementary hyaluronidase and specifically asking about Sanofi. We really can't comment, we're not 100% aware of exactly what Sanofi is doing with regard to complementary. I can say, in general, that for all of the partners who are companies who have chosen to work with [ Altigen ] as an example, they have come to us first. We have got an exclusive license already in place, unfortunately, that precludes us from being able to work with them. And you might say, why do all these companies still come to Halozyme first? It is because of our -- we are the gold standard. ENHANZE has got now more than 1.3 million patients treated. And very importantly, our expertise is so acknowledged now in the community in terms of our understanding how to get partners into the clinic quickly. through development quickly because of all the expertise that we have gained.

And so we continue to expect to, as we've demonstrated, so ably in the last 5 months or so with the of four new ENHANZE deals continue to expect more ENHANZE deals this year just based on the strong interest and our leadership position in this space.

Your next question comes from the line of Corinne Johnson with Goldman Sachs.

Maybe you could just kind of spend some time walking us through the development time lines. after you get into Phase I with Hypercon,I guess, early next year now? And sort of how do you kind of get to the potential approval in a 3- to 4-year time line from there.

Yes. Thanks, Corinne. It's our expectation that because many of our partners are considering an already subcu drop moving to a lower volume subcu drug that the pathway will be based on comparability over the PK between the two subcu formulations. And I'll start with that as that is a very common approach partners are using. We are seeing that with our ENHANZE experience with recent examples, the FDA expectations for the endpoints of those studies as well as the duration and size of those studies is shrinking. And that, I think, is in part largely due to the comfort level with the great safety database that now is available for ENHANZE. And it is really that a direct experience we have from ENHANZE as to how studies are being done now to may go faster and have less patient exposure Corinne is what gives us a lot of confidence in the 3 to 4 years. And that's further informed with some early conversations that partners that are having with the FDA who to be very much in support that type of thinking.

Great thing. And it does seem like you've had a lot of early success in terms of getting new partnerships for Hypercon. Maybe you could just kind of talk about where your -- or what's resonating as you bring that profile to potential partners.

Yes. We talked about this when we did the acquisition. Companies have an idea in their head of what they think is going to be the most competitive target product profile for their product. If they are coming into an area, as an example, like psoriasis, they recognize that extended dosing is just the norm now. And to be competitive, they're going to have to get extended dosing. Now there might be -- and I will also add that extended dosing ideally should be able to be delivered by the patient themselves because that's where the standard of care is.

And so because companies have that mindset and know what is going to be the most competitive profile, that is what is bringing them to us. And I've always said it's areas like inflammation and immunology, nephrology cardiovascular, the area where there is a lot of patient freedom, a lot of desire by the patients to be able to treat themselves, we are a terrific fit for that, because we're able to hyper concentrate many antibodies down into these 2 mls, allowing it to be given by a simple off-the-shelf auto-injector. And so we're just a great fit a perfect fit, actually, with Hypercon and Surf Bio for where the market is going for those types of conditions so that the products can be competitive and so that the companies can meet the patient expectations for care.

Your next question comes from the line of Jessica Fye with JPMorgan.

I had a few more on Hypercon. So you mentioned that some companies conduct early feasibility testing prior to signing Hypercon deals. Can you say whether Vertex or Oruka, who you recently signed deals with, did they conduct any early feasibility testing? Second, as Hypercon deals roll in, how should we think about the time line from when a Hypercon deal is announced to when the product with that partner could enter the clinic? And then last one, just curious on how you think about like how big a deal or like how big a derisking event would you view IND clearance for a Hypercon product relative to, say, Phase I data.

Thanks, Jess, for that. We aren't able to go into more detail on individual collaborations and whether or not the visibility testing that would be considered are confidential, so I can't talk about that. I would say though, the trend we have now is the partners are going straight into the agreement based on the data that they are seeing and their confidence in moving forward. So as you might expect with the maturing of the technology, that's a very nice trend that we are certainly seeing.

In terms of the timing from when a Hypercon deal is announced to be in the clinic, that is something that is going to get shorter and shorter as we, again, have been evolving the technology, developing the technology. And so it's a little premature for me to give a specific number of months at the moment, but I know that, that is something that is going to be a big focus for us to be able to rapidly support partners in getting into the clinic in a matter of months based on just the process that is evolving from even the time when we did the acquisition, just a couple of quarters ago.

I would say the -- I'm looking forward to the Phase I data. We've got some of the preclinical data that obviously gave us a lot conviction in the acquisition. But I would say that the Phase I data is what I'm excited to see for each of these new partners.

[Operator Instructions] Your next question comes from the line of [ Ahmed Mahmud ] with H.C. Wainright.

This is Ahmed on Mitchell Kapoor at H.C. I was wondering, as continues to have partnerships and accumulate additional approvals, validating the ENHANZE platform. how the economics of the new licensing deals evolved? Are you seeing more leverage? Should we expect to tend towards the higher end of the single-digit range?

Yes. Ahmed, let me talk about the Hypercon types of deals, which obviously is an exciting new technology. The deal terms have been very consistent across what are now agreements, which cover up to 17 targets. Those are upfront milestones, milestones for progress in development and with sales and mid-single-digit royalties. And that has been very consistent, it's very reminiscent of ENHANZE as we were establishing that technology. And obviously, what is resulting in the very attractive performance we have today at Halozyme.

For ENHANZE, we see a trend -- a different trend with exclusive and nonexclusive agreements just as a little bit of a range as it relates to that, that gives different numbers for the peak milestones and also the royalty rates. But as I mentioned earlier, in all of our enhanced agreements as well we see the potential based on escalating sales to get to the mid-single-digit royalty in each of those as well.

[Operator Instructions] Your next question comes from the line of Michael DiFiore with Evercore ICI -- ISI.

Congrats on all the continued progress. Two questions for me. Regarding your antibody drug conjugate, your ADC IP names a broad set of specific drug that seems from across pharma pipelines. Is that package itself driving partner engagement? Or are the discussions still largely target specific? And my follow-up is regarding nucleic acids. I mean you mentioned ADCs in detail, but in terms of nucleic acids, is partner interest there at a similar stage -- or is just ADC the more advanced near-term modality?

Yes. Thanks, Mike. With regard to the EDCs, I would say that we are engaged with pharma biotech companies, and it is based on a specific set of products have in development or have commercialized. So it's very much on a company-by-company brand-by-brand basis. What's driving the interest is the potential to optimize the target product profile to get an improved benefit risk profile. And obviously, we have filed for a number of patents, which, of course, is covered in the discussions with the partners as well. But it really is this idea to get the optimal profile that is driving this on a product-by-product basis.

The nucleic acid discussions are actually occurring in parallel. Again, we have generated a compelling nonclinical data that is being discussed across several companies at this point in time. And I look forward to those progressing and sometime in the next months and quarters being able to announce the deal there as well. ADCs got out of the gate faster, but that doesn't mean to say that nucleic acids aren't coming at some time in the next quarter too.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

So thank you, everybody, for joining us again this morning at the Citizens Life Science Conference. Really excited to be joined next by Halozyme and CEO, Helen Torley. Helen, thank you for being with us this morning. You gave guidance and reported earnings a few weeks ago. So maybe just start there at a high level, what drives success in 2026?

Yes, we're very excited with our growth story, which has been going on for many years and will continue for many years to come. Just as a refresher, in terms of our revenues this year, we're expecting $1.7 billion to $1.8 billion in total revenue, which is 22% to 30% growth year-over-year.

Now that is driven by our royalties, which come from our partnered products and ENHANZE, and that is expected to be about $1.1 billion to $1.2 billion, again, growing at the 30% to 35% rate. And obviously, because we have a royalty business, we have very strong profitability. As an example of that, our adjusted EBITDA is going to be in that $1.1 billion to $1.2 billion range as well. The growth is predominantly the royalties, as you just heard, Jason. We're very excited to have 3 products that are driving the majority of that growth today. DARZALEX FASPRO, which is the subcutaneous version with ENHANZE is our leading product. argenx's VYVGART Hytrulo is becoming a bigger and bigger dollar contributor with the strong adoption and growth they're seeing, particularly of the prefilled syringe that includes our ENHANZE product. And then Roche's Phesgo used in breast cancer.

But behind that, we've got 4 more recently launched products, which actually represent a TAM or an opportunity just as big as the first 3 that really is just in the infancy of the launches. Companies have been working hard to be getting all the reimbursement in place, and I'm sure we'll talk about Opdivo subcutaneous, Ocrevus subcutaneous, Rybrevant subcutaneous and Tecentriq subcutaneous are beginning to contribute more in 2026, and that is driving that additional growth as well. But that's not it for Halozyme. Very proud that we signed 3 new deals at the end of 2025 for ENHANZE, and we expect more new deals this year. And that really is the lifeblood. These will result in new products launching on and before the '29, '30 time frame and some of them after that. But think about these as each representing attractive new royalty streams that are going to add on top and continue that robust growth. So that's the Halozyme in a summary.

So let's talk about the 3 products that are driving most of the growth today. And I'm going to do it and probably the one you asked at least Phesgo. It took a while to get going, but now it really feels like in 2025, this -- the conversion to Phesgo has accelerated. What have you seen in the market? And what are your expectations for that asset in the coming years?

Yes. So Phesgo is a combination of 2 biologics. It actually contains Herceptin and Perjeta given in a single injection over about 5 minutes. That is very different from patients who get the IV version, which is sequential therapy, which can take up to 2.5 hours. So a transformative experience for patients. We did see outside the U.S., robust adoption. And that's pretty traditional where Europe, in particular, really does embrace subcutaneous delivery. And that's because, obviously, the patient experience is better, but the overall cost of care is less as well with the subcu because you've got all of the savings associated with less time in the chair, less physician oversight.

In the U.S., it's been more of a gradual uptake, but we're delighted that it's now at 52% share of Perjeta is already converted. And Roche actually put out a new target of 60% conversion by 2028. So this is just going to continue that quarter-over-quarter growth. All of the sales of Phesgo are subcu for us, and we receive a mid-single-digit royalty. So that's why that is becoming such an important contributor to us as well.

So moving on to VYVGART, and I kind of view VYVGART as the poster child for where I think the future of infusions is going, that's more and more at-home use, right? So the prefilled syringe has been a real driver for argenx in the second half of '25. Just how do you think about what VYVGART can do and how much of the product will be used at home versus in the physicians or health care provider office?

Yes. So argenx is VYVGART an amazing performance. Obviously, last year reported sales of $4.2 billion, which is 100% year-over-year growth. And really fueled, as Jason is mentioning, by subcutaneous launch of the prefilled syringe. The vision that Tim, the CEO of argenx has had was he started with IV, but for autoimmune diseases, he knows the patients want to be freed from their disease. They want to be able to treat themselves when they want, including at home. And so he has evolved and invested to move to a 5 ml prefilled syringe that now the patient administers at home in just 20 seconds.

It is just so freeing up patients from disease as opposed to going for an immunoglobulin infusion, which is a day or half a day in the infusion suite or an IV infusion. And so what we saw after the launch in May was increasing conversion and use of the subcu. What argenx has said is it's really helping penetrate into new physicians treating because not all doctors want to be doing IV infusions or have the infrastructure to do IV infusions. So broadened adoption that way, but it also for patients moved it earlier in the treatment paradigm, again, broadening the opportunity.

So I do see that we're going to see just continued growth in the 2 approved indications, which is generalized myasthenia gravis and CIDP and sales of all of CIDP is subcutaneous with ENHANZE today. That is just going to continue as more people become aware of the ease of treatment. You can take this prefilled syringe on a cruise. You can take it to the golf course. You can take it anywhere. So it is going to be the core to all of the new indications that are even being studied. Analysts today project that the 2 currently approved indications will grow from about $4 billion to $8 billion, but argenx is investing in a pipeline and a product. So it has got additional neurology and autoimmune indications where we're just going to continue to expand and subcu delivery, including at home where appropriate, is just going to be the way of the future.

And just remind us to that point because there are a lot of opportunities for VYVGART to expand. What's included in how you think about your 2026 guidance and the longer-term outlook?

Yes. When we give guidance, we really just looked at the derisked the approved indications or any that as we did our forecast in 2025, had already very strong Phase III data. So at the moment, we just have gMG. We don't have the recent positive data on ocular as a specific breakout in there, nor do we have seronegative. So just those 2 indications at this point in time.

Okay. So you mentioned growth today is largely those 3 products, but there are a bunch of products, 4 roughly that are driving the near term and are starting to contribute. When do you think as a collective, those 4 products actually become really meaningful to guidance?

Yes. I mean, in 2026, they are beginning their contribution. And I'll just mention a couple of them that I think are particularly notable and perhaps are underrecognized because we are watching them very closely and see a huge value proposition. So Ocrevus is a terrific example. It's Roche's drug for multiple sclerosis, $8 billion drugs today predominantly as an IV. With the IV, the patient is a 4- to 6-hour infusion, and then they have to stay in the infusion suite to be monitored. With the subcu with ENHANZE it's 10 minutes. and there is a 30-minute observation. So absolutely transformative for patients.

Again, autoimmune disease, patients don't necessarily want to be sitting in infusion suite. So what we've seen is a robust uptake, 17,500 patients on drug. Roche recently reported. And importantly, this is another instance where subcu is just not converting IV to subcu. What Roche has expected and they are seeing is that this will expand the market because, again, not every doctor has access to IV infrastructure. Not every patient can travel to an infusion center or get a seat in an infusion center because there are capacity constraints. And so about 50% of the patients for Ocrevus are coming from conversion from IV, but 50% are brand-new doctors, brand-new patients.

So getting that market expansion, which Roche has indicated they expect a $2 billion increase in the overall sales of Ocrevus just because of the subcu. Now that $2 billion plus the $8 billion is our addressable market. We aim and we hope that all $10 billion of that will convert to our ENHANZE. But that is, I think, an incredible example. And we can talk about Rybrevant afterwards.

But just on Ocrevus, it does feel like that Roche is being really vocal about the fact that they are expanding the market, whereas in the past, a lot of the conversations from your partners has been about conversion. ocrevus seems to be the first example where there's a lot of new patients coming in the door because of the subcu.

I would argue that it has actually happened with DARZALEX. It's perhaps not as much discussed. But the subcu, again, DARZALEX, 4- to 6-hour IV infusion, the subcu is 3 minutes. And what we heard from Janssen at the time of the launch was this will allow faster, more rapid expansion into the frontline population. Frontline population are the patients who live the longest and can continue on therapy for many, many years, especially as they may move on to a regimen in second line that still has DARZALEX as the backbone. And so I would argue that phenomenal growth with $14 billion in sales of DARZALEX last year, 95% plus of which is subcu with ENHANZE, where we're getting mid-single-digit royalty is really -- that was a market expansion as well. But not described as such. I don't think it would have been as possible to go as fast if everybody was getting a 4- to 6-hour infusion.

So that's one. I do agree with -- we talked about VYVGART and now we've got Ocrevus as another example. And the one I was going to talk about with Rybrevant, you may know that, that's Johnson & Johnson's drug for a specific population of lung cancer patients. a terrific drug in terms of its efficacy. Think about it being very much on a par with Tagrisso, if not even better than Tagrisso. But its uptake as an IV has been limited by a 5-hour IV infusion and 67% incidence of infusion-related reactions. Now if you have an infusion-related reaction, you are going to feel lightheaded, headache, sweaty, very low blood pressure, and you can even go into anaphylactic shock. And that really is a worry of oncologists. And so I think J&J would agree that has limited the uptake. The subcu study takes that 5-hour infusion to make it 5 minutes, and it reduced infusion-related reactions by a factor of fivefold. So it's only a 13%, 14% incidence now.

So that has transformed this therapy where it's got the great efficacy and now because of the better safety profile, a fabulous risk benefit. And it is J&J's ambition to create a $5 billion brand from Rybrevant, to less than $1 billion today to go to $5 billion. And early indicators I was hearing from investors yesterday are that the IQVIA data is showing a very strong uptake of the subcu, not surprisingly because what a great proposition. So that's another market building opportunity for subcu.

And I didn't say this at the start, Jason, but we are seeing a new interest, a new wave of interest from pharma and biotech in subcu. And I think it is that product differentiation. It's a recognition it can grow and expand markets. And then obviously, the recognition that Halozyme has got deep expertise that we can apply to help partners their development and get through that regulatory process all the quicker. So all of these are terrific examples. And the world is watching and saying, I would like to do that, too.

And that's sort of a good point because you mentioned 3 deals at the end of last year. So as much as ENHANZE has been around and has driven a lot of success, it's still -- there are still new partners coming to the table. So what's your expectation for the potential for -- I guess, 2 questions. One, your current partners to continue to expand their use with other drugs, but also new partners coming on board?

The great answer is yes to both of those. We are seeing our current partners moving more nominations into the clinic. Often when our partners take a deal, they have 1 or 2 drugs in mind, but they reserve some slots. So we announced last year, one of our partners Roche advanced another slot in. You're going to hear more about that this year from the current partners just growing and expanding. But new partners as well, those 3 deals that happened at the end of last year happened after a period where pharma had slowed down a little bit its decision-making, I think, related to IRA, perhaps MFN, but it's as though that everybody has got their head around that and is now moving forward to invest for growth, which is where we play such an important role in our partners' portfolio.

So we ended the year with that terrific momentum with the 3 deals, Takeda, Sky Pharmaceuticals and Merus. So very exciting targets, all 3 of them. But importantly, that momentum is continuing into 2026. And we've given a projection of at least 3 new deals this year. There'll be 1 to 3 with ENHANZE, but we also, at the end of last year, acquired a new technology for subcu delivery called Hypercon, and we expect to have 1 to 2 new deals from Hypercon this year as well, just continuing that enormous momentum that is terrific, this new wave of interest.

Before maybe jumping into the acquisitions, just one the earlier stage pipeline, development stage pipeline for ENHANZE now is still robust. Just kind of give us the overview and what are we expecting to see both from a clinical readout, but also new -- new programs going into the clinic in 2026?

Yes. We have currently about 7 products that are in development with ENHANZE. These cover some of the argenx products such as empasiprubart. There's Takeda's 881, which is a 20% immunoglobulin. We have a couple of targets that are being developed by ViiV for HIV disease. And so a diverse portfolio of products that are in or have completed Phase I development and are progressing, some of which can launch in that '27, '28 time frame, adding new important royalty streams at that period of time.

Now as we look forward today with 10 approved products and these 7 in development, we expect 6 new ENHANZE Phase I starts this year, 2 new Hypercon starts this year and playing that forward a little bit, even with a little bit of a conservative lens, we expect to be having 40 either approved or in development drugs by 2028. That is this new renewed energy and momentum. And there's some very exciting products that we expect to be in the clinic this year and next year based on the conversations that we're having today.

I know there's not going to be a lot that you're going to say new here, but can we talk about the Merck litigation a little bit? And we've seen Alteogen take on a couple of new partners over the last 6 months. Our assumption is it's likely that there -- companies are looking at targets that they can't get through ENHANZE. But just what's the update and what's the potential new learnings we could get from that process this year and next?

Yes. I'll start with your correct comment that for -- as far as we're aware for all of the companies that have approached Alteogen and are working with them, it's a limited number. All of them approached us first, but the target was taken. We've done exclusive licenses on targets like PD-1 and HER2. So we can't work with other companies on that. So the good news is we're continuing to be viewed and we will always be continue to be viewed as the leader in the space.

ENHANZE has now got 13 million patients that have been treated. That just creates an enormous moat of safety data, expertise, et cetera, for why we will always remain the first choice there. With regard to the litigation, just a little context there. We have sued Merck for infringing what we call our MDAs patents. That stands for modified hyaluronidase patents. Now it's very important to say these are very different family and not related at all to ENHANZE. So anything that happens in the litigation on MDAs has no read-through or any impact on any of our ENHANZE agreements or ENHANZE royalties.

But we believe that Merck through licensing the Alteogen drug and using it to launch the subcu version of Keytruda is infringing. And we have asked in District Court that we receive damages because of will fill infringement and also create a what's called a permanent injunction, which would stop them from being able to continue the commercialization unless they pay as a royalty. And so where we are with that is that we're expecting to meet with the judge in the U.S. in June to hear about the scheduling order. So this will be the time line of the court case. Now this is not going to be over fast. These litigations, unfortunately, can be rather drawn out, can take several years, but we feel very confident in the fact that we will prevail as we do believe and have a lot of good evidence that they are infringing inventions that were created by Halozyme many years ago.

Outside the U.S., it's also very active. I'll just mention that in Germany, we actually, in the fourth quarter, received a very positive outcome in a court case where we got a preliminary injunction that has stopped Merck being able to launch KEYTRUDA in Germany. And so there are several other countries where we're pursuing that course as well. And so stay tuned on this. We'll provide updates. Most important thing is all upside, no downside whatsoever from the litigation. But as an inventor of this entire space of hyaluronidases, we absolutely feel it's -- we must defend our IP and stop infringers.

To that point, you are -- I think it's fairly straightforward to say that you are the leader in innovating in subcutaneous drug delivery, and you're continuing to do that through acquisitions now with Surf Bio and Elektrofi. Can you just walk us through your rationale for those transactions and what you think those platforms bring to Halozyme?

Yes. In mid-November, we closed on the acquisition of Elektrofi. Some of you may have heard of it. They have a hyperconcentration technology that takes biologic drugs that generally are at a concentration of 100 or 120 milligrams per ml and can increase that concentration to 500 milligrams per ml while still preserving the activity and stability of the drug.

So if you can imagine if you can increase the concentration by our to fivefold, you're reducing the volume. And the reason we did this acquisition while ENHANZE has obviously got a terrific opportunity for certain disease conditions, companies want to have small volume delivery by the patient at home in a simple auto-injector. And ENHANZE is great at delivering larger volumes. But if you can concentrate more biologics down to that 2 mls or below, they fit into a standard auto-injector. And again, the patient can do that at home. So that was a bit of the market we weren't participating in today. And so that's why we brought the Hypercon technology. Now importantly, that, in our view, is the most advanced hyperconcentration technology with impressive IP. The IP goes out in several families until the mid-2040s.

And so it's our goal to continue the terrific development that Chas Kaufman, who is the CEO and his team have been doing, and we expect products to enter the clinic this year, which was a nice derisking value inflection in terms of the timing. And this expands our opportunity, as I've just described to you, in terms of subcutaneous delivery. So very complementary, but an opportunity where we weren't playing before. In December, we also closed on another acquisition of a company called Surf Bio. That one is out of [ Stanford ]. It has a different approach to hyperconcentration, but the same value proposition, able to concentrate molecules, maintaining stability and syringeability up to 500 milligrams per ml, and it does it through a spray drying process. Now some people say, why did you need 2? We believe that with our expertise, we're going to be able to accelerate the development of Surf Bio. And each partner is going to come to us and may have a different type of point of view as to a preferred approach to how you get that hyper concentration or we could find out that there are different molecules that fit better to the dehydration process versus the spray drying process.

So that's the first reason. It's a technical reason that I think makes a lot of sense. We're expanding our opportunity by having 2 of these. We also have the potential that I mentioned earlier, we've done exclusive agreements. Once we do that, we can't participate again. But if we have 2 hyperconcentration technologies, it is possible that in certain circumstances, we'll be able to work with 2 partners exclusively. So again, this gets to the expanded opportunity or expect higher fees for the technology if they want to have access to both of them. So it just seemed like a no-brainer in terms of expanding our TAM, our opportunity and the combined expertise of Hypercon and Halozyme is going to accelerate the development of the Surf Bio technology. So that's our plan.

So Hypercon is a little further down the line than Surf Bio. What gives you comfort that the program -- the platform is derisked not just from a -- can it deliver a low volume, but is it a tolerable administration?

Yes. At this point in time, neither of the technologies has been in human. So we'll just say that. But we were able to look at the toxicology data that has been generated to date, understand exactly what are the constituents of each of the solutions that are going in. And all of that suggests a very, very strong path to good tolerability as well as retaining the efficacy of the reformulated molecules.

So specifically for Hypercon, you've now given guidance that you think this can be generating $1 billion of royalties. You were very good at predicting what ENHANZE could do when you gave the long-term guidance, many years before it actually happened. What drives your confidence that it can happen again with Hypercon?

Yes. For everybody, in 2018, we said ENHANZE would be $1 billion in royalty revenues, and it was well below $100 million at that period of time. And really, what I have the benefit of, which you don't all have the benefit of is understanding the partner plans and the opportunities that are sitting ahead of us. Now I can not share that because a lot of that is confidential information. So that's what happened on ENHANZE and we actually are achieving the $1 billion this year, a whole year earlier than we had predicted because we said it would be in 2027. As we closed the acquisition, we took a look at the Hypercon Elektrofi opportunity.

Similarly, we have got information from partners. We've got our own plans as to what we think can happen. And I can't, once again, due to confidentiality, give you the play by play, but several things to comment. The market is now much more accepting of subcu delivery, embracing of it even. And so you're going to see a much faster uptake. We've got partners already engaged. There's already Lilly, J&J and argenx are already partners of Hypercon. And just based on what we expect to proceed with those partners and new partnerships that are under discussion, we expect between 5 and 7 launches by the mid-2030s, and that is what gives me that confidence in that $1 billion in royalty revenues in the mid-2030s.

So I know you've been asked about the long-term guidance and whether you'll extend it. Just what are your thoughts here about first of all, I think we have to recognize, like I just said, the fact that you were definitely an outlier in giving that longer-term guidance and even more of an outlier in being right, right? So what are your -- the pushes and pulls about extending that guidance out into the 2030s?

Yes. We actually, in 2023, put out a 5-year, very detailed guidance that I think we understand is very unusual, but also very helpful to our investors. We did it at that time because we had 10 products that were derisked and we could forecast the royalties. And so our philosophy is that our guidance should be based on derisked assets. So as we sit here today, we don't have any more of the products that are derisked. And so we're still going to continue. We've got guidance out until 2028, Jason. We've got lots of levers that we are pulling at this point in time.

We talked about the current ENHANZE product. We have royalties for many of those products that go out to the mid-2030s and even into the early 2040s. They're going to continue to grow. We've got new ENHANZE deals happening. Those products will launch in '29, '30. That's going to be another source of growth. We talked about Hypercon coming in, in about 2030, '31. That's another source of growth. Surf Bio will follow about 18 months behind that, we estimate. That's another source of growth. And because of the very strong cash generation we have, we also will continue on this path of M&A, adding where we can, assets that have recurring royalty-like revenue that results in high profitability.

So what a lot of levers we have to pull and a lot can happen any time now. So take it to say that we have got incredible growth ambitions for our product portfolio. Our guidance will be based on the derisked assets. So you can have confidence in the numbers we put out there as opposed to having to -- well, I'll derisk that one by that, I'll derisk that one by that. That just causes confusion and actually dilutes the power of us putting out guidance based on fully derisked assets. And as you say, Jason, beating those numbers.

Great. Helen, really appreciate you being with us this morning, and we're looking forward to watching more success this year.

That's great. Thank you very much.

All ready. So we can get started. So thank you, everybody, for joining us today. It's very much my pleasure to welcome Halozyme to Leerink's Global Healthcare Conference. My name is Dave Risinger. And I'll be having the conversation today with Helen Torley, the company's CEO. Congrats on all the progress in recent years. You've been quite active with executing in the business and also executing on M&A to bring in new long-term growth drivers.

So I thought that we could just start off with asking you to provide some comments, including, in particular, on those 2 recent acquisitions of Elektrofi and Surf Bio, and then we'll take it from there.

Yes. Thank you, David. And 2025 was certainly a very exciting year for Halozyme, particularly towards the end of it, where, as David mentioned, we expanded the number of ENHANZE collaborations we had, and we consummated 2 acquisitions, further broadening and adding to and diversifying our offerings for subcutaneous drug delivery for our potential partners and current partners.

This has been really a story that has evolved over time where we established ourselves as a leader in creating a market for large volume subcutaneous delivery of biologics. But as we work with partners, they frequently talk to us about the opportunity they saw in the future in certain diseases like autoimmune disease, neurology, cardiovascular disease even for at-home delivery by the patient and really wanted to be able to get the therapies down into 2 mLs or less, so they could be injected by an auto-injector and really allow the patient the freedom to treat themselves wherever they want it.

I would say that in 2025, the success that argenx saw with the prefilled syringe for VYVGART Hytrulo that allows for the patient to treat themselves at-home in a 20-second injection really galvanized me to reach back out to Chase Coffman, who is the CEO of Elektrofi and continue a dialogue that had happened over 5 years. But we felt together, Chase and I, that it was time to bring together Halozyme's expertise with commercializing new technologies and broadening their adoption by pharma as well as their hyperconcentration expertise. And that really was why we did the Hypercon acquisition.

Having done that, we took a step back and I included Chase in the conversation to say what if we had another hyperconcentration technology, if we bring your expertise in hyperconcentration and our commercialization expertise, we'd be able to advance a new offering and a different offering for partners as well. And that's what led to the Surf Bio acquisition.

In both cases for Hypercon and Surf Bio, it allows biologics to be concentrated by a factor of 3 to 4x to approximately 500 milligrams per mL, reducing the volume by 3 to 4x. And that's why you can get to this vision of enabling volumes that are 2 mLs or less that could fit into a standard off-the-shelf auto-injector as an example.

And so we're very excited to be now engaged in multiple conversations across all of our technologies, David, being able to satisfy the needs of people who are -- want high volume perhaps delivered in the doctor's office by a health care professional or by small volume at-home by the patient. And this allows us to meet the needs of a much broader range of partners. It allows us to work on the same targets, potentially with more partners as well. And you can see why this is a great fit strategically, but also significantly expands our opportunity because we were not playing in that small volume area at all.

Excellent. Excellent. So it'd be helpful for you to add a little bit more color on each of the 2 technologies and how they're distinct from one another. I know that they're complex technologies, but I think that would be helpful.

Yes. And again, I'll start with ENHANZE because there's always a base of what we have. So that's an enzyme that we co-formulate with partner products. And it acts to rapidly degrade the hyaluronan that's underneath the skin and allows you to inject a large volume, often up to 5, 15 mLs over just minutes and for that to be absorbed through the lymphatics. And that has resulted in 10 approved products so far with multiple products currently in development and expected to expand significantly this year with 6 new projected ENHANZE clinical study starts.

For the Hypercon technology, that takes -- and most of the work to date has been done with monoclonal antibodies, a bit of work with antibody drug conjugates. That is a dehydration technology where it takes the partner's products, and it allows it to be dehydrated and concentrated down into particles. These particles are of different sizes. And then these particles are resuspended in an oil-based solution.

And that solution, surprisingly, even though it's got this concentration of 500 milligrams per mL retains great stability, but also is highly syringable. And by syringeability, we mean it is easily injected without having to have a lot of force. So it feels like you're just injecting water. And it's because of the fluid dynamics that has been created because of the interaction of the particles and the different particle sizes.

So that very simply, when you inject that oil-based substance or solution into the subcutaneous space, subcutaneous space is filled with water. And so it rehydrates the product and it simply acts like any other product would under the skin and be absorbed subcutaneously. So pretty straightforward. And again, antibodies, antibody drug conjugates, it's been tested within preclinical models and feasibility has been demonstrated with that.

I'll move to Surf Bio now. It's a different approach. It's going to be a polymer-based approach, which is added to the product, the antibody, and they've actually done a little bit more work with small molecules in this instance. And then that is taken through a sterile spray dry process to dehydrate it also to great particles.

These particles are then also put into an oil-based solution generally. And that is also injected subcutaneously, interacts with the water in the subcutaneous space and the products rehydrate the particles are released and it is absorbed. So that's a difference between the 2.

Again, at this stage, Hypercon is expected to enter the clinic this year. So it's a bit more advanced than Surf Bio, where we're estimating end of 2027, possibly the first half of 2028. So one is a bit more advanced than the other. But by bringing the Hypercon team's expertise and our expertise together, we're going to do everything we can to even further accelerate that time line for Surf.

Excellent. Excellent. Yes, that has a lot of exciting potential long-term. So with respect to Hypercon, maybe you could just go into a little bit more detail on what to expect over the next year or 2 and also comment on the manufacturing scale-up as you look forward with that technology.

Yes. We're making excellent progress with the Hypercon readiness to get into the clinic. Key this year is the clinical scale batches, which we're expecting to occur this year. The partner in that case is Thermo Fisher Patheon, and we're working very closely with them to support partners entering the clinic this year. We expect 2 partners to be able to enter the clinic this year for the first Phase I testing of the Hypercon technology.

Plans are already being discussed with regard to the commercial scale up, which would be the next stage. That is likely to be in collaboration with partners because this is going to be a situation where we're reformulating their products. And we're feeling very good about the conversations that are going on and the options that are available and the status of the plans to support the launches, which we predict could occur in 2030 and 2031 in that time frame.

With Surf Bio, it's much earlier. And so we're leveraging all of the learnings Hypercon has had over the last 5 years as well as our expertise in putting in place a manufacturing plan and also the manufacturing network. So an earlier scale, but making some excellent progress since the acquisition closed in December.

Excellent. Very, very helpful. So then turning to ENHANZE. Could you talk about what gives you confidence in the ability to sign, I think you've targeted 1 to 3 new ENHANZE deals in 2026?

Yes. So ENHANZE is a ready now solution for partners. And I think that's a very important thing with the 10 products that are approved, 1.3 million patients treated, partners know they can be considering adopting it and adding it to their products with a great deal of history and experience around it.

What we're seeing, and I think it's similar perhaps to what's been seeing in the financial markets is as of the end of last year, we are seeing pharma really and biotech really beginning to move forward with new energy. And we're seeing an absolutely new wave of interest in subcutaneous delivery.

And why do I think that is? I think there's 3 core reasons. The first is there's a recognition that for competitive differentiation, subcutaneous delivery can offer an amazing competitive edge and competitive moat for a partner.

The second one is with ENHANZE, we've demonstrated on multiple occasions now that it's an opportunity to broaden your opportunity and grow your market. I'm going to give 3 examples just to illustrate that, each of which is a little bit different. But in each case, subcutaneous has made the product larger for the partner.

DARZALEX is the obvious one. That's one of our -- is our largest product today. The advent of the subcutaneous launch in 2020 allowed even greater expansion of DARZALEX into the frontline patient population, which, as you know, is the largest population, but it's also the population who lives the longest.

And so by expanding into that, and that's because instead of a 4- to 6-hour infusion, which many patients do not like or they live too far away for an infusion suite. The ENHANZE is given in a 3-minute subcu injection. It just enabled that ease of treatment and for patients to stay on therapy longer. And that durability is one of the reasons DARZALEX is surprising people growing still more than 20% year-over-year after 5 years. So that's one.

VYVGART Hytrulo, I talked about earlier. VYVGART prefilled syringe has accelerated the uptake of VYVGART, which delivered $4.2 billion this year. A lot of those sales and that growth this year is the prefilled syringe because the prefilled syringe has enabled more physicians to want to prescribe it because they might not have the IV infrastructure, more patients to adopt it because it's a simpler injection than either going to an IV suite or pulling it up from a vial. And equally as importantly, it is also moving the treatment paradigm -- the access to patients much earlier in the treatment paradigm. And so an amazing growth there.

And then the final example is OCREVUS, which is Roche's drug for multiple sclerosis. 4 to 6 hours as an IV infusion, 10 minutes as a subcu. Roche predicts that their overall market is going to grow by $2 billion. So $8 billion plus $2 billion, so now becoming a $10 billion brand. And that's because not all doctors want to give long IV infusions. Not all patients can get access to infusion sites.

So the second reason is that market growth, that is definitely attracting people. And the third reason is the recognition that the experience we have, we can help support and enable partners to get to the clinic faster, to get to approval faster with our track record of experience and success. That's just going to make it a less -- a more comfortable and less risky endeavor for them.

So for all of those reasons, we're just in a new wave of interest, and that's what gives me the confidence in the 1 to 3. We obviously signed 3 at the end of last year. That momentum and breadth of conversations continues with pharma, with biotech, across monoclonal antibodies, antibody drug conjugates. It just is -- it's like a governor has been lifted in terms of people being interested in subcu delivery.

Excellent. So let's pivot to M&A. So obviously, you've executed M&A, but you still have a phenomenal balance sheet. So what should we watch for going forward?

Yes. So we're a growth company, and we would like to deploy our capital for additional M&A. Now we have been very disciplined. If you know the company, we do select very carefully. And we are looking for opportunities that are recurring, royalty-like or royalty revenues, which can result in high profitability. And so that's our business model. And so that's ideal in terms of where we're going to add additional M&A.

And so today, we look in areas like drug delivery. Obviously, there are businesses there like that, but also other areas because it's that business model that we are looking to add. And I'll say we're going to continue with our discipline. If we lever up, we will be always sure there's a path to rapid delevering for whatever next acquisitions we do. As an example, at the moment, we -- using the traditional way of looking at it, the net debt-to-EBITDA is about 3x. We'll be back down to 1x by the end of this year if we don't do another acquisition.

Yes, that's a great position to be in. And what about that acquisition landscape? You're operating in fields that are very niche. There are no sizable companies to pursue. But how do you think about the landscape out there for potential future M&A? I mean you obviously just took out 2 compelling companies. So that subtracts 2, but would love to hear your thoughts.

Yes. I think as we worked and looked in this landscape, I think, Dave, since about 2019, it's been interesting to watch companies mature. So we're very patient like with Elektrofi. We talked to them for many years, but they weren't at the right stage of derisking as an example.

And so there are companies we're watching who are going through that. There are other companies who have perhaps taken their first step into the broader stage of licensing, but we want to see how it's adopted. So there certainly are a number of opportunities out there that we are evaluating.

But as I mentioned, we're going to be patient. We have a great growth story with ENHANZE, Hypercon and Surf Bio. We think it's a good use of capital if it's got the right growth story for us and it's got the right business model. So we'll watch the space. We'll -- if we find something, we'll transact. If not, we'll continue to be sure and we'll do this anyway, maximizing our current opportunities. There is a ton of growth we are still unlocking there.

Excellent. And just going back to Hypercon, it would be helpful for you to add some context on your long-term vision for how big that can be in 2035 and what gives you confidence in that. I think the target is $1 billion by 2035.

Yes. For people in the audience, you may remember in 2018, I put out a prediction that ENHANZE would grow to $1 billion by 2027 in terms of the royalty revenues. And that was based on the plan we had internally, not all of which we can share externally because some of it is partner confidential information.

Where we sit today is we're going to achieve the $1 billion in royalty revenue this year, a full year earlier. And so as we finish the acquisition with Elektrofi, I did, as David said, state that I see a path and project that we will achieve $1 billion in royalty revenue for Hypercon by the mid-2035 -- in that area, mid-2030s.

It's a similar story where we have a plan. I have certain assumptions. And we can see a very clear path to being able to achieve that $1 billion by that period of time. Once again, I'm not able to give you the play-by-play. But as we achieve events and partners permit disclosures on them, you'll see that story evolve just as it did for ENHANZE as to how we're going to be able to achieve that.

And we're launching Hypercon into a market that is so much more accepting, understanding, demanding of subcu delivery because if you remember for ENHANZE where it probably took us twice as much time, we were creating the market. There was no subcu delivery of large volume biologics.

And so there was a certain adoption curve. That is in part also what excites me about the Hypercon. We just have taught the market about this is a way you can deliver therapy. And we just see a great path to adoption and achieving that $1 billion in a shorter period of time.

Excellent. Excellent. So then just turning to IRA. There are a couple of questions outstanding. What might the draft guidance for IPAY '29 look like, which is likely to come in May? Will that differ from the final guidance that they issued last fall?

And then also when Opdivo is negotiated, what are the potential implications? And really actually more importantly, what are the implications for IV adoption relative to subcu, which obviously, that's up to Bristol-Myers to manage and navigate. But would love to get your latest thoughts on those 2 topics.

Yes. A lot in there. So...

Yes.

So with regard to the IRA, what David is referring to is there's a section in there that refers to how combination products with 2 active ingredients will be treated. And there's been initial language and changed language. I'm just going to take a little bit of a step back and remind people what we've done in this space.

So we studied this very carefully, both from a patient perspective, a payer perspective, but also from will there be any implications for Halozyme. We summarize our view all the latest draft guidance in a comment letter that is posted on our website that comprehensively reviews for CMS all of the clinical benefits that we've delivered for patients with ENHANZE-enabled products and importantly, the economic benefits that have accrued to the Medicare system, which are substantial in terms of the savings because it takes less time and it takes less physician care, et cetera.

We also, in that physician paper, have a deck that outlines the one big, beautiful bill and how it interrelates to the IRA, particularly by bringing clarity to if you're a product that has all orphan drug indications, you will not be eligible for IPAY, which affects DARZALEX and VYVGART as an example today. Those are all orphan indications, so no inclusion in IPAY.

And also talks about the impact of biosimilars on eligibility for IPAY. And this gets to a little bit of the Opdivo conversation because if there's a biosimilar that is launched or is soon to launch, you will be excluded from the IRA IPAY as well.

So the bottom line before I get into any more detail is that for Halozyme, we expect no impact in the next years or any changes that could be made to the definition in the IRA guidance and very minimal to little exposure for all of the years up till -- until at least 2035.

The reasons for are I just mentioned, DARZALEX and VYVGART are excluded. Opdivo could be our first drug that's eligible. However, its first indication is an orphan, which means it isn't eligible until IPAY 2029. Biosimilars, IV biosimilars to Opdivo are expected in 2028. So we do not expect it to be included in IPAY.

The next thing is our next product could be eligible would be OCREVUS. OCREVUS is Roche's multiple sclerosis drug, and it actually skews to a much younger population. So it has very low sales in Medicare because it's a commercially covered product.

So you can see how I'm taking out every product that we have that could be eligible is just not going to be impacted by IPAY or if it is, it's going to be extremely modest in terms of its impact. We have 20% of our total sales are Medicare, and I've just taken out all the drugs where that could be important. So we're staying engaged on that topic, Dave. However, we are very clear we're not seeing any impact to Halozyme because of all of this clarification that has come over the last couple of years on that. So it won't matter to us what that language is.

Okay. Excellent. Maybe we could just touch on the fourth quarter. There was some noise simply because the reported EPS were below consensus, but that was due to a onetime charge. If you could just clarify that.

Yes. We had a very strong 2025, as you're mentioning, including the fourth quarter, our revenue grew 38% to $1.4 billion. Royalties were 52% growth. But in the fourth quarter, we mentioned that we did the Surf Bio acquisition. If you do an acquisition that is at a certain earlier stage of development, the accounting standards are that you take a onetime expense for that in the quarter of the acquisition for all or the vast majority of that. And so what you saw in the fourth quarter was we took that charge, onetime event, that's behind us now. and we're moving on.

So just -- it's one of those things that we think most people understood. It's clear or not everybody quite understood it, but we do have some very strong growth this year as a result of it in terms of the percent numbers, but that's behind us now.

Yes.

And the good thing is it's not being reflected in an amortization over the life of the product. So it's kind of clean. It's clean. It's behind us, and now we can go forward.

Excellent. If you could touch on the Merck litigation and just provide some comments on what we should be watching going forward, please?

Yes. Again, just making sure everybody is -- got the context here. We have sued Merck for infringing our MDASE's patents. And MDASE stands for modified hyaluronidase. These are different from our ENHANZE patents. ENHANZE is a truncated human hyaluronidase, but when we were inventing this whole space of using hyaluronidases for subcu delivery, we developed, if you like, 2 families. ENHANZE which is what we licensed to partners today and MDASE, which was another patent portfolio that is distinct.

I make this comment because no matter what happens in the Merck litigation, there is no read-through or impact on ENHANZE for anything that happens to MDASE. MDASE is all upside to us. It's not in our current projections. And what we have done is we have sued Merck for infringing in the District Court. The next step there will be we expect to meet with the judge in mid-June to get a scheduling order as to when the court case is going to start.

These court cases can take several years, just to say. But that's where we are asking the judge for 2 things. One is for damages for infringement, which can be up to triple damages as decided by the judge, but also we're asking for injunctive relief. And the injunctive relief means that Merck won't be able to continue to sell the subcu KEYTRUDA if they do not take a license from us.

And so we expect that to play out over the next several years. We would be very open and happy to move into a licensing agreement with Merck at any time, just to say we do not need to go through this whole court case. It will really be up to Merck to decide the time is right to take a license.

Separately from that outside the U.S. and Germany, we, in the fourth quarter, did get a preliminary injunction that prevented Merck from being able to launch KEYTRUDA subcutaneous in Germany. Now we expect them to appeal that, and we expect that to be a continued dialogue. But we also are pursuing similar preliminary injunctions in other European markets.

And again, this is -- it's just a slightly different legal strategy than we took in the U.S. They have launched. We didn't try and stop them launching, but we do want to obviously get that injunctive relief decision. Outside the U.S., we will be, where appropriate, seeking to get them to not be able to launch in those markets, again, in the hopes that we can come to an agreement ultimately and a license.

Excellent. And when do you think you'll get clarity on the injunctive relief request?

It's going to be several years. Just looking historically at these cases, some of you may be aware there was a litigation between BMS and Merck over the PD-1 patents. That took several years. It's got to a settlement, which included a license several years into the actual court case.

Got it.

That's the benchmark that we have to just consider very reasonable for this circumstance as well.

Excellent. So we're almost out of time. Maybe just wrap up on the ramp over the course of this year, just to summarize for people how you see that playing out for the company in 2026.

Yes. That terrific fourth quarter momentum is continuing. It's translating into an expectation for, as an example, 6 new ENHANZE Phase I starts, 2 new Hypercon Phase I starts. And as we talked about earlier, we're expecting 3 new deals this year, which will be a mixture of ENHANZE and Hypercon, each of which could result in additional products coming into the clinic.

And I just want you to think about that in terms of creating this pipeline. With this momentum, we actually are projecting between where we sit today and 2028 as an example, we will double the number of commercialized and development products from about 20 to about 40. And that's -- I'm talking about the great receptivity we're seeing at the moment to subcutaneous delivery. So that's in terms of the -- just expanding the pipeline.

For our current products and projections, we put out our guidance. We have very strong guidance in place for this year, driven continually by our royalty revenues. DARZALEX is going to continue to grow, VYVGART, Phesgo. And now that the initial reimbursement is largely in place for the next 4 launches, you're going to see a bigger contribution from them.

And we haven't talked about those, but those include blockbusters like Opdivo, which already was $133 million total sales of the subcu version in the fourth quarter. We've got TECENTRIQ in there. There's also OCREVUS, which is growing phenomenally, added another 5,000 patients in the fourth quarter, so up to 17,500 patients, and that is a very strong growth driver for us.

And then finally, RYBREVANT. RYBREVANT is worth a pause just as a product that J&J has a vision that will be a $5 billion brand. Analysts haven't quite caught up to it. And part of the reason was because as an IV, it had 67% infusion-related reactions. That is when you're given an IV drug and you start to get shivers, low blood pressure, sweating, headache. It's like a minor allergic reaction to the drug. And it really does alarm the patients, and it alarms the health care practitioners.

With the subcu version -- and that was a 5-hour infusion, I will say. With the subcu version, it's given in 1/5 of the time and the -- in about less than 1/5 of the time, it's given in just minutes and the infusion reactions are reduced by a factor of fivefold. That is transformative. The uptake of IV was quite slow. With subcu, we're already hearing that it is dramatically increasing the pace of uptake of that. So RYBREVANT is going to be a much bigger contribution as well. So all -- with so many drivers of opportunity, Dave, and also the potential for additional M&A, but only if it fits our business model.

Excellent. That's a great way to finish it up. Thank you again for being here with us. Really appreciate it.

Thanks for the opportunity. Thank you.

All right. I think we're going to get started. Welcome back to another session within TD Cowen's 46th Annual Healthcare Conference. It's a pleasure to see you all here. Thank you for joining. I'm joined on stage today by the CEO of Halozyme, Helen Torley. I'm Brendan Smith, one of the Tools/Dx analysts here at Cowen. So I think we're going to dive right in, but just also kind of a note to everybody in the audience. If you have any questions by any means throughout, kind of just flag me or you can send me an e-mail at [email protected]. I'll be checking my phone to kind of keep an eye on anything that you guys want to pitch over to Helen as well.

So maybe just to get us started, Helen. It's been a busy time at Halozyme in the past few months, 3 new ENHANZE deals, 2 acquisitions, long-term guidance update, Q4 earnings last week. So maybe just let's -- just to kind of start the conversation, take a minute to lay out the next couple of years of Halozyme, this is like next era of growth for you all. And what are some of the more important kind of benchmarks in the growth cycle of Halozyme, let's just say, between here and 2028? How we should think about the value inflection points for there?

No, that's great and pleasure to be here. I'm going to start by going a little bit back into the end of 2025, which you referenced there to say that we're able to, through a number of actions we took reinforce our leadership as the partner of choice for subcutaneous drug delivery, but the company with the most expansive and exciting platform and set of solutions for Pharma and for Biotech. And so we're very excited at the end of the year to sign 3 new deals for ENHANZE, just demonstrating across oncology, inflammatory bowel disease and obesity, the opportunities people see for more subcu convenient delivery for patients. And that's for large volume drugs. And what was very exciting, as Brendan mentioned, was we did 2 acquisitions. We acquired a company called Elektrofi for the HYPERCON technology, and we also acquired Surf Bio. Now both of those are hyperconcentration technologies.

That means who can take biologics that are perhaps at a concentration of 100 milligrams per ml and through this technology, make them 500 milligrams per ml, reducing the injection volume by fivefold in that instance. And so where this expands dramatically Halozyme's opportunity is into areas where companies are wanting to have small-volume, patient-administered or in-office administered auto-injector therapies, which is really the way the marketplace and Pharma is going for Inflammation and Immunology, Cardiovascular, Nephrology, all these types of areas.

And so we're very excited to do that, Brendan. So the future of Halozyme is going to be one where you're going to see innovation, you're going to see durability of revenues, particularly with the HYPERCON technologies having durable IP into the mid-2040s. And so growth and excitement with all of the subcu delivery where the market trends and the secular trend is definitely a world that's moving away from IV infusion suite therapy to at-home subcu or in-office subcu treatment.

All right. So a lot to unpack within here. So maybe before we get into kind of expectations for additional partnerships into this year, which you have spoken about across the different platforms, I do just want to kind of check the box on the conversation about the ENHANZE patent just kind of in the U.S. versus the EU, right? So you've mentioned in the past, you had kind of an extension of the EU patent through 2029. You filed for a similar extension in the U.S. Current guidance through 2028 does not assume any extension of the U.S. patent, which would effectively kind of move it from '27 to '29 as well if that does go through. But what's kind of the status of this now? And when high level do you think we could potentially see an update on that front?

Yes. Thanks for asking that question, Brendan, and for some of the details. Let me just reinforce a couple of them because it's important. We got the EU patent, which had the effect of maintaining the DARZALEX royalty for -- from 2024 to 2029 at the mid-single-digit royalty rate. So that was important. As you also point out, in our U.S. guidance, and we do -- in our current long-term guidance, we do not assume we're going to get a similar patent in the U.S. So that's very important. What I'm about to talk about is all upside to the current long-term guidance that we have.

We have filed for a U.S. patent, and that is still progressing through the formal prosecution and appeal process. So hard to know when that final decision is going to be rendered, Brendan. But if it should be rendered positively, this will be upside and only upside to our forecast, it would have the effect for both DARZALEX and for RYBREVANT maintaining the royalty rate at the mid-single-digit rate between September of 2027 and March of 2029 before there would then be a step down in the royalty rate. So if you can imagine, DARZALEX obviously, is a large drug. Majority of the sales are in the U.S. that is a meaningful contribution for those extra 18 months. But again, not currently baked in, all potential upside.

So maybe now let's talk a little bit more about the combined platform with Elektrofi, Surf Bio and ENHANZE now all on board. So maybe walk us through kind of hypothetical conversation you have now with new customers and new potential partners moving forward with all 3 of these options, who gravitates towards one versus the other and what that calculus ultimately looks like now?

Yes. Since we've announced the deals, we've actually had a lot of companies come to us, which is great. So there's a lot of interest and a lot of recognition of the subcu technologies and what they can do. And what we tend to find is companies make their own selection. And their own selection as to what they want to talk to us about first tends to be based on do they want the product delivered in the physician office? Or is it going to be a target at home? Would they like it to be in an auto-injector? Or is a simple delivery via a prefilled syringe as an example, or from the patient pulling up our health care practitioner pulling up from a vial going to be enough.

And so if they're still gravitating towards large volume delivery in the doctor's office, say, 5 to 23 ml like our current ENHANZE platform, they'll talk to us about ENHANZE. If they want the auto-injector at home to see, is it feasible, they can take their drug, as I talked about, to be able to increase the concentration fivefold to get it into that small-volume. They'll usually today come and talk to us about HYPERCON. HYPERCON is the more advanced of our hyperconcentration technologies. It is getting ready to get into the clinic this year. And so they will talk to us about that.

And so it's actually quite simple, and it's working exactly as we predicted that the Target Product Profiles is what's going to drive the company to pick where they want to talk about with us. Now sometimes because I mentioned that we are the leader in subcu delivery, we can sometimes see opportunities that our partners can't. And so I was very recently in a conversation where we were able to go back to them and said, actually, here's another option for you. If you did this one, it would be a little bit faster. And so this is where we really bring value to the partners that they recognize as we can help them achieve their target profile and their timeline for patients.

So I know we've got now 10 approved ENHANZE products on the market, launches at various stages now. And you just mentioned 2 -- the first 2 HYPERCON assets are looking to start clinical development this year. What can you tell us about those first assets, what you're kind of watching for? And how we should think about the cadence potentially of HYPERCON kind of contributing over the next 3 to 5 years just from a royalty revenue stream?

Yes. HYPERCON, what excited us when we saw it, and we followed the Elektrofi development for 5, 6 years, and it reached a stage of maturity where we felt it was a great time to come in and own it and further accelerate it for the additional stages. We think of it as another ENHANZE. By the mid-2030s, we expect it to have a similar royalty profile to what ENHANZE has today. So literally doing it in half the time. But that's because of the pioneering work that ENHANZE has done in this market to have people recognize, embrace and adopt subcu therapy across multiple therapeutic areas.

So it's going to be a great repeat ENHANZE in a very short period of time. 2 products expected to enter the clinic today. What we can say about that is that they are derisked mechanisms of action. We do have additional work going on with feasibility with other partners and see line of sight to another 3 to 5 launches between now and 2035. And it's that group of 5 to 7 products that we are projecting has the potential for this $1 billion in royalty revenue in 2035.

Great. And just to kind of confirm, so the 2 clinical trials starts within HYPERCON this year are essentially kind of a subcu formulation of existing IV drugs or -- and this is within -- sorry, just also to check the box here. HYPERCON Elektrofi does have partnerships with argenx, with Lilly and J&J that have been publicly confirmed. So presumably, it's within that kind of universe. And these should kind of be, you say derisked, so kind of subcu formulations of existing IV drugs.

Bio de-risked, we mean that they already have an approved product. We really can't say any more than that due to the confidential nature of the contracts.

And I know last night at the dinner and in recent conversations you've spoken that to this idea that 2 acquisitions doesn't mean that you're done, right? When it comes to M&A. So help us kind of unpack really what you mean by that and what kind of the -- when you look at the platform now and frankly, over the next few years and as it's kind of evolved into this kind of 3 options of subcutaneous drug delivery, where would your appetite kind of be in and around this universe? Is it kind of very similar to this kind of core competency? Is there like an additional add-on that maybe we're unaware of? Like what would additional M&A even look like?

Yes. Well, first and foremost, this year, we obviously are going to be working on maximizing the value of all of our current platforms. So we have never been busier with incoming calls across ENHANZE and HYPERCON. And so that remains the primary focus, and we just see tremendous opportunity there. So we will not take our eye off that. In parallel, however, as we continue to look for additional M&A, if we were to find an additional acquisition target that would add royalties and strong margin, that's certainly something we would contemplate. We're in no rush to do it. We're very pleased with our revenue growth profile.

But we do believe with the strong cash flow we have that the best way to be able to increase value and return value to our shareholders is if we can find additional M&A that would complement the already strong growth story that we have. And so we will continue to look in drug delivery. That's our area of expertise. And so -- and we're looking for business models that are similar to ENHANZE where we have these high-margin royalty businesses or high-margin subscription models.

Revenue models where there is strong margin and long royalty or long revenue tails is really where we are focused and primarily. So we do look a little bit outside of drug delivery to see if we can find those business models as well. But again, the message is we will transact only if we find something that meets our very high standards. And the focus this year is predominantly on maximizing the recently acquired assets.

And just to kind of re-up the commentary from the Q4 call. In terms of additional partnerships that you're expecting in 2026, can you just kind of walk us through the different platforms and what you've kind of guided to this year?

Yes. In 2026, based on the strong momentum we have with ENHANZE, we've continued conversations from last year and actually already started new conversations. We're projecting between 1 and 3 new ENHANZE agreements this year. Separate from that, we may have current partners move nominations in, so there could be more, but 1 to 3 new ENHANZE partnerships this year is the goal. For HYPERCON, we're projecting between 1 and 2 new partnerships. And so the goal is a total of 3. For Surf Bio, we're going to spend the first months of this year really working on generating additional data. So we're in a great position to answer potential partner questions. The Surf Bio platform is perhaps 2 years behind the HYPERCON platform. So we are at the stage of getting it into readiness for the clinic by the end of 2027, early 2028. So a bit more data generation, I think agreements more likely in '27. So focus on new agreements on ENHANZE and HYPERCON.

And so just when we think about monetization of the Surf Bio and the HYPERCON platforms moving forward relative to what we know about ENHANZE as it's kind of been on the commercial markets for years now. Is it fair to kind of assume that API-related revenues will continue to grow as some of these assets move through clinical development in addition to kind of once you have commercial revenues, from any of these assets moving forward, it would kind of be a similar structure to what we've seen with ENHANZE. Is that kind of fair to assume?

So ENHANZE with 3 ways we make money, right? The API, milestone payments and royalties. For Surf and for HYPERCON, it's going to be more the milestones and the royalties. It's not really us delivering the API because actually the -- with the HYPERCON and Surf Bio, it actually becomes the new formulation of the drug. And so the partners are doing that. So it's a technology that allows them to formulate their drug. So it's going to be different, but still a similar structure in terms of mid-single-digit royalties for exclusive deals and meaningful milestones as the partner makes progress in development and hits certain sales thresholds.

All right. So now maybe let's kind of pivot a bit to logistics of the Q4 earnings print, right? So we noticed, as I'm sure a few folks in the room also noticed that in the filings now you broke down specific royalties from VYVGART Hytrulo, DARZALEX and PHESGO. I think admittedly, royalties from VYVGART Hytrulo were even bigger contributor to quarterly revenues. And I think that at least we have been modeling, but from what we hear a lot of other folks. So naturally, I think that likely stems from either a higher royalty rate or proportion of total VYVGART sales coming from subcu are likely higher than what some of us have been projecting.

But maybe what can you kind of tell us about kind of the ongoing launch dynamics of VYVGART Hytrulo and how we realistically should think of the ramp from here, just given the fact that it's approved in 2, maybe 3-ish indications today. Obviously, argenx has been speaking to a number of already ongoing pivotal studies. So from where kind of peak sales estimates for VYVGART are today, where do you think they can realistically go, let's say, over the next 3 to 5 years?

Yes. It's been a very exciting launch. If you've been watching it already, $4.2 billion in total revenues, which is the IV and the subcu. Just a few facts to set the stage before I talk about where subcu is going. The initial launch in gMG was with IV. And then about a year after that launch, subcu came in. Subcu came in initially as a format where the patient would be pulling it up from a vial and injecting it. And then in May of last year, they move towards a prefilled syringe that was approved for an injection in as little as 20 seconds.

That was very fast innovation, and that was very important innovation because in gMG, argenx has commented specifically that the availability of the prefilled syringe has really spurred what was already good uptake of the subcu version. So instead of the patient spending an hour in the doctor's office getting the infusion and then having 30 minutes of observation with the different formats of prefilled syringe, we're now down to 20 seconds. And so the prefilled syringe is allowing new doctors to adopt the drug, the ones who couldn't do IV infusions. Patients who didn't want to go through the complexity of pulling it up from the vial are now able to do it.

And importantly, it's allowing movement of the treatment into earlier treatment paradigms. So I think it's fair to say a lot of the growth you've seen with VYVGART in the second, third and fourth quarter last year is myasthenia gravis, subcu use of the prefilled syringe. Now that is also being supplemented by the CIDP indication, which was approved, is subcu only. So there's no IV indication. So every sale in subcu is with our technology. And it's a mid-single-digit royalty. So that has been a very attractive source of revenue as well.

Importantly, for the patients in CIDP, there's been strong uptake there as well. And argenx said they're expanding now beyond the patients who have been failing or not doing well on immunoglobulin to earlier treatment lines as well. And this makes sense. We saw that with DARZALEX as well, having the easiest subcu treatment allows you to go earlier in the disease. We're very excited on the new indications that are coming up, expanding the myasthenia gravis. If you saw last week, positive data in ocular myasthenia gravis expands the opportunity significantly as does a PDUFA date, which is coming up in May for seronegative, where they also had positive data.

And so to your question at the start, absolutely, the VYVGART numbers are going to more than double. It's going to be driven by subcu, where Tim has really integrated -- the argenx CEO has really integrated the subcu technology with ENHANZE into current and future indications, and we're very proud of this partnership and what it's doing for patients.

I mean it seems like on our side of the conversation, right? We're always trying to figure out how to model proportion of total drug sales to come from subcu, right? -- we're talking about DARZALEX, which is north of 95-plus percent of total sales relative to maybe some of the more recent launches that are kind of inching up into the double digits these days now. But when you kind of look longer term, I mean, it feels like VYVGART Hytrulo could -- or I should say VYVGART sales realistically could be closer to like a DARZALEX type proportion. Is that kind of fair to assume over the long-term.

I think it is. I mean you're quite right? DARZALEX is at the peak there with the over 95%. I'll mention PHESGO though, which is 2 breast cancer agents is now at 54%. And VYVGART Hytrulo, we can't give the number as the company hasn't talked about it. But if you extrapolate from what I'm saying and some of Brendan's math there, you can see that if a patient is given a choice between an hour-long infusion in the infusion suite or 20-second subcu at home, we are expecting the vast majority of patients to be selecting the simpler, I'm in charge of my care, I can do it at home option.

So then maybe kind of looking at some of the other maybe more recent launches within ENHANZE, right? So we've got OCREVUS ZUNOVO up and running now. We've got Opdivo Qvantig. When we kind of think about maybe the next couple of years, right? Because they've both been on the market for over a year at this point. But Roche has spoken to kind of the expansion of the MS opportunity with Opdivo subcu. So what -- maybe just give us kind of level set what your internal assumptions are for some of these more recent launches in the same context of total proportion of drug sales potentially coming from the subcu?

Yes. I think for OCREVUS, there's been a little bit of confusion. I can help clarify in terms of the opportunity there. What Roche said at the time of launch was the availability of the subcu is going to expand the market by $2 billion. Now that is because there are a lot of doctors' offices who don't want to give IV OCREVUS or can't or don't have the setup for it. A patient getting IV OCREVUS takes multiple hours and then there's supervision too. And so it simply isn't feasible. Number one, that all offices want to do that or the patients live close enough to an infusion center to be able to travel for that. And so what Roche was wanting to communicate, and I think happily, we're seeing it play out in the market is the subcu allows more doctors and patients to access it.

So it's a market growth opportunity, not simply a conversion opportunity. So that was number one. So if we think about that $2 billion is going to be the growth in the market. But today, already about $8 billion is the revenue number for IV OCREVUS. Now what Roche has said is that for the new starts on OCREVUS subcu, 50% are coming from new patients who've never seen OCREVUS before and 50% is coming from conversion. And so that $8 billion opportunity is also available for patients to be moving from the IV to the subcu.

And again, value proposition here is going from a 4-hour plus infusion plus sitting in the infusion suite all day to a 10-minute simple subcu injection. Again, majority of patients are going to choose that subcu option. And so it is a very large TAM as you're hearing there, $8 billion plus $2 billion, so $10 billion. And over time, I do believe the majority of patients will be moving towards that subcu option as well. Already it's 17,500 patients. So -- and it's growing at a clip of more than 5,000 patients a quarter. So it's having very strong adoption in the market.

And then maybe kind of similar contextualization for OPDIVO now how we should think about uptake of the OPDIVO subcu option relative to the IV?

Yes. So for OPDIVO, that's obviously the flagship product for Bristol-Myers Squibb, big milestone achieved just in July this year. So we're just a couple of quarters after them getting their J-code in the U.S., which is very important in U.S. oncology adoption. And what we're seeing from that and what the commentary has been from BMS is that, that has led to increased physicians adopting, particularly in the community and also use across all lines of therapy and all combinations. And so commentary from BMS is very pleased. They expect to convert 30% to 40% of the Opdivo opportunity, again, a $10-plus billion brand to subcu over time and feel they're nicely on track, spurred by that recent on J-code.

So I think that kind of level sets where some of the kind of existing ENHANZE drugs are likely to go over the next few years. But let me also kind of touch on, which I'm sure is everybody's favorite topic, but as we get closer and closer to May, CMS. So help us understand why CMS will put out draft guidance because they've got a lot of other things to address in general, whether that's April, May time frame, exact timing is still a little bit TBD. But why is whatever comes into that draft guidance this year materially just a different context than what we saw last year? And kind of help us understand what it could ultimately mean longer term for the royalty growth.

Yes. So for -- Brendan is talking about the IRA as it specifically relates to the guidance that came out on fixed combinations of 2 active ingredients. And would that fixed combination be considered a different drug from the innovator drug on its own. It's long been our contention, and we saw this in Part D guidance that they are 2 separate drugs. So why that is important is they get a separate clock for when they will be considered to be included in the IP scheme. Last year, IRA came out with a slight change to that guidance and brought in a concept that you need to also, in addition to being a fixed combination of 2 active ingredients, have a clinically-meaningful effect.

They did not define what that was and left it very confusing enough for the industry and others to comment on that. We, as a company and many others wrote letters to say, particularly in defense of the ENHANZE product to say, look at all the clinically meaningful benefits we bring. We reduce infusion reaction rates, a serious adverse event. We reduce overall serious adverse events. We are able to improve overall survival with RYBREVANT. We reduced significantly the cost of care for patients, et cetera.

So partly, we think in response to this letter and other, I think, recognition, CMS kick the can down the road for you saying, we understand the complexity of this topic now. And we're going to take another year to look at it, and we will let you know if such a policy is going to be put in place. We think nothing has changed on the complexity and difficulty of trying to make these adjudications. We think it's a very low probability that they will put it in place. But what's really, really important as you're thinking about it as affects Halozyme, the impact of the IRA has always been overestimated on Halozyme.

We have had very limited exposure. Approximately 20% of our sales only are exposed to Medicare. And as we have projected forward, specifically understanding the sales of all of our products in Medicare versus Commercial, we see no impact in 2028, minimal to no impact in 2029 and similarly from 2030 to 2035. We simply don't have a lot of exposure to the IRA. And so we will watch as this IRA notice is published, but we will know it's not having an impact on Halozyme.

And we hope that's better understood by the investor community now. And if we put a position paper, if you like, on our website, if you'd like to read our letter to the FDA, the assessment of our exposure and the impact of the one big beautiful bill, which excludes products like DARZALEX and VYVGART from even being included in IP 2028, it's on our website, and I think it's a great resource.

And I think just on that last point, right? I think part of what we got in the final guidance last year was really kind of confirmation that if you have an approval for an orphan label included in orphan designation, right? You're also effectively exempt from this. In addition to this conversation that if you have biosimilars coming, I think, within 18 months or something like that of the patent expiry, you are also exempt from this. So realistically, now when we actually look at the commercial pipeline, that takes DARZALEX off the table, that takes Opdivo off the table, that takes VYVGART Hytrulo off the table. So even through that lens of 20% potentially exposure to -- we're talking maybe 1, 2 drugs potentially through the lens of like OCREVUS and any others kind of worth flagging there?

So OCREVUS is predominantly a commercial drug because of the age of the patient. So it does depend when the selection criteria gets down to the very low sale products in Medicare. So it's an unknown at what time that might be included. But it's a low exposure to Medicare, too.

Yes. [Technical Difficulty].

It's a great question. And for those who maybe couldn't hear, just a question on the trends we're seeing in the market with more monoclonal antibodies, ADCs coming to the market because they're better managed in terms of the toxicity and a question as to how that impacts our business. We always have played predominantly in the area of monoclonal antibodies, where we know with our new technologies, are going to be able to hyperconcentrate them down into any volume for anything from the 2 ml people want for the small-volume auto-injector or maintain at the current volumes we have for ENHANZE, anything from 5 to 25 ml.

So we're very excited that, that continues to be new innovations for patients that we can make much more accessible for the patients so they have a better treatment experience, potentially even staying on therapy longer. We're playing right into where the ADCs are going in terms of -- if you heard me talk on the earnings call, we talked about the fact subcu delivery with ENHANZE will lower the Cmax of an ADC versus the IV, allow you to increase the dose modestly while still maintaining the overall exposure. So we can, based on our animal models, predict an improved benefit risk profile for ADCs. Many of which have serious adverse events that are associated with the Cmax. So that is a new opportunity for us as well.

And then finally, I would just say our new technologies for the hyperconcentration also just going exactly where the puck is going, where we're seeing more and more drugs in inflammation and immunology, hot therapeutic areas like that, they do not want patients in infusion suites. They want patients at home receiving their care there. So we're at a perfect time where the industry is recognizing how care needs to be delivered, and we have the technologies to partner with them.

Maybe just one last very, very quick question just because I know it is topical in the coming months. Just on the Merck conversation now, help us kind of just benchmark what we'll get and when and what kind of the status of those 2 updates that we should be watching for in the spring?

And this relates to our MDASE patent portfolio. And I'll just say from the start, totally different portfolio from ENHANZE. So everything I'm saying on MDASE is only upside. There is 0 downside to ENHANZE. We expect the District Court where we are suing Merck for infringement of our patents. We expect a scheduling order conversation with the judge that will happen in mid-June. So it will become clear what the timeline for that District Court case in the U.S. will be. Outside the U.S., we have gained a preliminary injunction to stop Merck launching in Germany specifically, and there's cases going on in several other European countries as well.

Our goal here is to have Merck to take a license. That would be a great resolution for us in this, but we are going to go to the District Court case in pursuit of them taking a license. and where we've asked the judge if they will not do that to provide triple damages for infringement, but also a permanent injunction to stop them launching if they do -- or to stop the ongoing launch, I'm sorry, if they do not take a license and pay the appropriate royalties to us.

Got it. All right. And I think with that, we are out of time. I know there's always a lot to cover here. So thank you all for paying attention. Thanks for being here. Always great to see you, Helen.

That's great. Thank you.

Good afternoon. My name is Alexandra, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] Please note this event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications.

Thank you, operator. Good afternoon, and welcome to our fourth quarter and full year 2025 financial and operating results conference call. In addition to the press release issued today after the market close, you can find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website.

Leading the call will be Dr. Helen Torley, 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. 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.

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.

Thank you, Tram, and good afternoon, everyone. As I look back in the past year, it is clear that 2025 was one of the most significant and value-creating years in Halozyme's history. We showcased our ability to execute across every dimension, strategically, operationally and financially. This level of execution has created a clear value inflection for Halozyme, unlocking multiple drivers of long-term durable and profitable revenue.

I'm incredibly energized by the pace of progress and excited with the opportunities that are ahead of us. And today, I'm pleased to welcome Chris Wahl, our Chief Scientific Officer, to the call. Chris will be reviewing the new potential opportunity that is emerging on the uses of ENHANZE with antibody drug conjugates. Let me begin with the corporate highlights from the fourth quarter, beginning on Slide 3. As you can see, it was a busy and successful fourth quarter.

We expanded our portfolio from 2 to 4 subcutaneous drug delivery technologies with 2 acquisitions. The first being Elektrofi's Hypercon technology and the second being Surf Bio's hyperconcentration technology, both with long-duration IP into the mid-2040s. These acquisitions significantly broaden our drug delivery capabilities and meaningfully expand our opportunities to collaborate across a wide range of targets, modalities and therapeutic areas, both exclusively and nonexclusively.

Together, ENHANZE our auto-injectors, Hypercon and Surf Bio position Halozyme as the one-stop shop for the biopharma industry for subcutaneous drug delivery. In the fourth quarter and more recently, our partners also continue to add and advance their ENHANZE subcutaneous new approvals, expanding our near- and long-term royalty opportunity. DARZALEX FASPRO was approved in the United States for smoldering multiple myeloma.

In addition, Johnson & Johnson recently announced another approval for newly diagnosed multiple myeloma patients, marking the fifth indication for newly diagnosed patients and the 12th indication overall. Johnson & Johnson's RYBREVANT subcutaneous with ENHANZE achieved regulatory approvals in the U.S., Japan and China. This resulted in there now being 10 ENHANZE-enabled global blockbuster opportunities.

Roche nominated 1 new ENHANZE target, which sustains a steady cadence of target additions from our current partners, argenx expanded its ARGX-121 Phase I study with ENHANZE, representing another example of partners moving earlier-stage assets into subcutaneous development. And importantly, in the final month of the year, we signed 3 new ENHANZE collaboration and licensing agreements, further expanding our reach beyond oncology into obesity and inflammatory bowel disease with clinical planning already underway for all 3 products.

We were also pleased to have signed a commercial licensing and supply agreement with Viatris for our small volume auto-injector. And we continue to make progress with the 2 auto-injector development agreements we signed in 2025 with current partners. Our achievements throughout 2025 supported another year of strong financial performance as we delivered total revenue growth of 38%, reaching a record $1.4 billion, including royalty revenue increasing 52% to $868 million for the full year 2025.

The increase in our royalty revenue reflects the continued strength of our ENHANZE-enabled products and in particular, DARZALEX subcutaneous, PHESGO and VYVGART Hytrulo. Moving to Slide 4, I'll provide some performance details for these products. Let me begin with DARZALEX subcutaneous, which continues to be a standout example of how ENHANZE enables sustained blockbuster performance. Johnson & Johnson reported total DARZALEX sales grew 22% operationally in 2025, reaching $14.4 billion for the year.

This makes DARZALEX not only the largest medicine in their pharmaceutical portfolio but also reinforces its role as a foundational gold standard therapy in multiple myeloma. This performance resulted in $483 million in royalty revenues to Halozyme, representing 29% year-over-year growth. And looking ahead, DARZALEX is expected to continue this strong trajectory with sales projected to exceed $18 billion in 2028.

This continued strong growth will be driven by DARZALEX subcutaneous with ENHANZE, which today represents 97% share of sales in the United States. I'll move now to PHESGO. PHESGO also delivered meaningful growth for Roche in 2025, increasing 48% year-over-year to CHF 2.4 billion or approximately USD 3 billion, reflecting its position as a durable global blockbuster. This resulted in $105.6 million in royalty revenue to Halozyme, representing 51% year-over-year growth.

Analysts project that PHESGO will reach $3.6 billion in 2028. As Roche's #1 growth driver for the fourth quarter in a row, PHESGO conversion from IV Perjeta increased to 54% in the quarter, and Roche increased its global conversion goal to 60% after surpassing their initial 50% target. Key milestones in 2025 included continued geographic expansion and important reimbursement progress, most notably in large international markets, driving further conversion to subcutaneous PHESGO with ENHANZE.

Moving now to VYVGART. VYVGART and VYVGART Hytrulo with ENHANZE grew 90% year-over-year to $4.15 billion. This performance resulted in royalty revenues of $157.2 million for Halozyme, representing 444% year-over-year growth. Throughout the year, adoption and use of VYVGART Hytrulo with ENHANZE for gMG and CIDP patients continued to expand.

The launch and uptake of the prefilled syringe for both indications with ENHANZE represented a major milestone, enabling both at-home and in-clinic administration, argenx has commented that the prefilled syringe has expanded the prescriber base, increased patient reach and accelerated adoption earlier in the treatment paradigm. And this is really just the beginning for VYVGART Hytrulo with multiple studies exploring expanded and new indications supporting the long-term growth of this important blockbuster product.

Let me now move to our most recently launched products, which include subcutaneous formulations of OCREVUS, OPDIVO, RYBREVANT and TECENTRIQ with ENHANZE. Each of these products represents blockbuster opportunity for subcutaneous use, collectively representing an approximately $30 billion total IV and subcu opportunity in 2028 based on analyst estimates.

Some recent exciting highlights that have been reported by our partners include Roche reporting that there are now 17,500 patients on OCREVUS ZUNOVO, the subcutaneous formulation with ENHANZE, a 5,000 patient increase from the third quarter. Importantly, 50% of patients in the U.S. and many other early launch countries are naive to OCREVUS, emphasizing that ZUNOVO is expanding the addressable market through enabling use in community practices.

This is demonstrating that ZUNOVO can help overcome intravenous infusion capacity constraints, allowing more access to treatment. Roche recently increased sales expectations for the OCREVUS franchise to CHF 9 billion or approximately USD 11.5 billion. Moving now to OPDIVO Qvantig. BMS reported $133 million in sales of the subcutaneous product with ENHANZE in the fourth quarter, noting continued growth and accounts adopting Qvantig following issuance of the permanent J-code in July of 2025.

BMS noted that uses across tumor types and in both monotherapy and combination settings, further adding that they are on track to achieve their target 30% to 40% conversion by their loss of exclusivity, which many project will be in 2028. And during the fourth quarter of 2025, Johnson & Johnson's RYBREVANT subcutaneous with ENHANZE achieved regulatory approvals in the U.S., Japan and China.

RYBREVANT subcutaneous offers a strong value proposition with meaningfully shorter administration time and a significantly lower rate of infusion-related reactions. Johnson & Johnson has commented that this subcutaneous is key to achieving their multibillion-dollar opportunity they project that RYBREVANT will become. All of these products are benefiting from the same ENHANZE-driven advantages that patients, health care providers and our partners have come to expect from our pioneering technology.

This includes shorter administration times, reduced treatment burden and improved site of care flexibility. It is these factors that are driving and forces for continued strong adoption and conversion over time. With those 2025 operational highlights, let me now hand the call over to Nicole, who will review our strong 2025 financial performance, following which we will discuss the key drivers of 2026 and beyond revenue and our 2026 guidance. Nicole?

Thank you, Helen. Let me start on Slide 5. 2025 marked a year of disciplined execution and financial strength for Halozyme, highlighted by robust top line growth, solid profitability and a strengthened balance sheet that positions us firmly to advance our long-term strategy. I'll begin with the full year 2025 results. Total revenue grew 38% to $1.4 billion, reflecting sustained ENHANZE momentum. The principal growth drivers continue to be our royalty stream.

Total royalty revenue increased 52% to $867.8 million, driven by continued uptake of ENHANZE-enabled products, most notably DARZALEX SC, VYVGART Hytrulo and PHESGO. Product sales also contributed to the year-over-year total revenue growth. Cost of sales was $228.8 million compared to $159.4 million in 2024, primarily reflecting higher product volumes. Amortization of intangibles was $76.7 million, up from $71 million in 2024 due to the Elektrofi acquisition completed in November.

R&D expense was $81.5 million compared to $79 million in 2024, reflecting the stub portion related to the Elektrofi acquisition, partially offset by lower compensation from resource optimization and the timing of planned enhanced investments, especially as we advanced our high yield rHuPH20 manufacturing process. SG&A was $207.1 million compared to $154.3 million in 2024. with the increase driven by litigation expenses, consulting and professional services and transaction-related costs for Elektrofi and Surf Bio as well as higher compensation due to annual merit increases.

Net income for the full year was $316.9 million, which includes $285 million of acquired IPR&D expense related to the Surf Bio acquisition recognized in the fourth quarter. This compares with $444.1 million reported in 2024. Adjusted EBITDA was $657.6 million, also including the impact of $285 million for acquired IPR&D expense. This compares with $632.2 million in 2024. GAAP diluted EPS was $2.50 (sic) [ $2.56 ] compared with $3.43 in 2024, and non-GAAP diluted EPS was $4.15 compared with $4.23 in 2024.

Both 2025 GAAP and non-GAAP diluted EPS included the unfavorable impact of approximately $2.30 per share from the Surf Bio acquired IPR&D expense. Absent the IPR&D charge, our business continued to strengthen in the year, yielding a $2.22 non-GAAP EPS improvement over 2024, representing 52% growth, exceeding our revenue growth of 38%. I'll just briefly highlight our strong fourth quarter results.

Total revenue increased 52% to $451.8 million, with royalty revenue contributing $258 million, representing a 51% year-over-year increase. Also seen here are the fourth quarter bottom line results, which were also impacted by the acquired IPR&D charge of $285 million. Moving to our balance sheet. In 2025, we meaningfully enhanced our capital structure.

We issued $750 million of 2031 and $750 million of 2032 convertible notes used a portion of proceeds to repurchase portions of our 2027 and 2028 notes and upsized our revolving credit facility to $750 million. Actions that extended maturities, reduced near-term refinancing risk, increased liquidity and improved strategic flexibility.

Our asset-light model continues to generate significant cash, and we ended the year at 2.1x net debt to EBITDA as calculated per our credit agreement, which excludes acquired IPR&D, even after acquiring 2 long-duration IP subcutaneous delivery technologies. We expect to de-lever to below 1x by the end of 2026. I'll now turn the call back over to Helen to walk through how we are converting this financial strength into durable long-term revenue.

Thank you, Nicole. Let's move now to Slide 6. As we look ahead, I could not be more energized by the momentum we have built and more confident in the long-term trajectory of the company. We have multiple levers and drivers of revenue that will position Halozyme for royalty revenue durability and exceptional value creation well into the 2040s. At the foundation of this growth engine is ENHANZE with now 10 global approvals.

Our 3 blockbuster franchises, DARZALEX subcutaneous, PHESGO and VYVGART Hytrulo, all launched between 2020 and 2023 are delivering extraordinary performance today and for years to come. Building upon these 3 blockbusters are 4 additional blockbuster products that were launched in 2024 and 2025 as subcutaneous products with ENHANZE. The subcutaneous versions of OCREVUS, OPDIVO, RYBREVANT and TECENTRIQ are still early in their SC growth trajectories with a lot of revenue growth and contributions to come.

And adding on top of this, we have an exciting and expanding ENHANZE pipeline. In 2026, we project 6 new ENHANZE programs will enter Phase I, bringing our development portfolio to 15 products, 13 of which are with ENHANZE. And with development time lines that could shorten to 3 to 4 years in select cases, we have line of sight to accelerating royalty contributions from this pipeline portfolio beginning in 2029. Now let me answer a question I get occasionally, what is next for ENHANZE?

After signing 3 new licensing agreements last year, we expect to add between 1 and 3 more ENHANZE agreements in 2026. Interest for ENHANZE has never been higher from pharma and biotech for the use of ENHANZE with monoclonal antibodies where ENHANZE is clearly recognized as the gold standard.

And in addition, and a potential new growth opportunity, in response to data we've generated to demonstrate the potential value SC delivery with ENHANZE can bring for companies developing antibody drug conjugates and nucleic acids, we are also engaged in multiple discussions on the use of ENHANZE with these 2 modalities. Chris Wahl, our Chief Scientific Officer, will provide more details on this in just a moment. Let me move now to our second powerful growth engine, Hypercon.

Hypercon is a natural evolution of our strategy designed to meet the growing demand for lower volume auto-injector-ready at-home or in HCP office therapies. With 3 partnerships with leading biopharma companies today, we expect to advance 2 exciting programs into Phase I testing by the end of 2026, with first approvals projected in the 2030-to-2031-time frame. Recall that these 2 assets are mechanisms of action that are already blockbusters today.

Furthermore, we project that as a result of current agreements and the potential of between 1 and 2 new agreements in 2026 that there will be 3 to 5 additional Hypercon launches by the mid-2030s. We are projecting that taken together, these launches will result in approximately $1 billion in Hypercon royalty revenue within 5 years of the first launches for this new technology in the mid-2030s.

Hypercon also creates a compelling strategic path for our ENHANZE partners, offering them the ability to evolve towards smaller volume injections, which is another way that will extend our royalty streams into the 2040s. We were also excited in the fourth quarter to complete the acquisition of Surf Bio, obtaining a second differentiated hyperconcentration technology with long IP to the mid-2040s. Our focus here is to advance the development and enable clinical readiness in late 2027 or 2028.

Importantly, by 2028, we expect our combined commercial and development portfolio with ENHANZE, Hypercon and Surf Bio to nearly double from 19 products today to 36, unlocking a powerful new wave of royalty revenue. And we're not stopping there. We will continue to deploy our strong cash flow towards strategic M&A. We're continuing to evaluate additional drug delivery technologies that can expand our offering and opportunity.

And we're also evaluating assets with strong revenue and margin opportunity that will drive near-term and long-term growth. As we continue to make acquisitions, we will maintain financial discipline while investing in long-term value creation. With that, let me now turn the call over to Chris to highlight the exciting new expanded opportunity that we have with ENHANZE.

Thank you, Helen. I will begin on Slide 7. We recognize the potential for ENHANZE to improve the clinical profile and deliver convenience of 2 emerging and rapidly growing classes of drugs, antibody drug conjugates and nucleic acids. We initiated a series of internal experiments and collaborations with leading companies to generate data to evaluate and demonstrate the benefits of ENHANZE.

Today, I will focus on the use of ENHANZE with antibody drug conjugates and share some of the data that is creating strong interest from potential partners. As you may know, ADCs comprise an antibody, a linker and a cytotoxic payload. As demonstrated with our ENHANZE-enabled products, subcutaneous delivery can improve the patient experience, but conversion of ADCs to subcu has been limited by concerns over injection site toxicity.

In addition, given the toxic nature of delivered payloads, there are also significant adverse events that can be dose limiting, some of which are associated with peak blood concentration or Cmax, such as interstitial lung disease and cardiac toxicities. Hypotheses we tested in our experiments were: firstly, would subcutaneous delivery of ADCs with ENHANZE result in good local injection site tolerability.

Secondly, as we have demonstrated with monoclonal antibodies, would subcutaneous delivery of ADCs with ENHANZE result in a lower Cmax or peak concentration than IV. And thirdly, could subcutaneous delivery of ADCs with ENHANZE result in a similar or higher overall exposure compared to IV. Achievement of all 3 would suggest the potential for improved benefit risk profile with subcutaneous delivery with ENHANZE. To answer these questions, we tested 2 approved ADCs in separate preclinical studies.

We compared equivalent doses of the ADC, either IV subcu with ENHANZE or subcu without ENHANZE, measuring key PK parameters at the injection site and in serum. On Slide 8, I'm showing the injection site data for each of the 2 ADCs comparing subcu delivery with ENHANZE to subcu delivery without. Our data supports that subcutaneous delivery with ENHANZE can result in more rapid absorption and uptake, resulting in low levels of ADC and payload at the injection site within hours.

This is a situation where lower is better. In fact, at 24 hours, the reduction was 87% for ADC1 and over 50% for ADC2 with ENHANZE compared to subcu alone. I will add that in these and additional experiments, skin biopsies reviewed by experienced pathologists were reported to be normal, supporting strong subcutaneous tolerability of the ADCs we tested. Let me now move on to the serum PK data on Slide 9.

I'm showing the data for each of the 2 ADCs comparing IV to subcu delivery with ENHANZE and subcu delivery without. Our data shows that as we see with antibodies, Cmax or peak blood concentration has significantly decreased with subcutaneous administration compared to IV. Cmax was 75% lower for ADC1 and 61% lower for ADC2.

Moving now to Slide 10. Using PK modeling, we can predict that a higher dose of the ADCs we tested could be administered subcutaneously with ENHANZE, and that would result in equivalent or higher overall exposure with a still lower peak concentration than IV. Moving to Slide 11. In summary, the preclinical data supports that subcutaneous delivery with ENHANZE could improve the benefit risk profile for ADCs.

Good local injection site tolerability was demonstrated for the ADCs tested and the same or higher overall exposure could be achieved supporting efficacy with lower peak blood concentration supporting the potential for fewer related adverse events.

Throughout the second half of 2025 and into this year, I've had the opportunity to present and discuss this data with multiple pharma and biotech companies advancing antibody drug conjugates. The feedback I get consistently is the data supports not only the ability to deliver ADC subcutaneously, but the potential for improvements in the benefit/risk profile. With that, let me now hand the call back over to Helen.

Thank you, Chris. Let's move now to Slide 12 and review our goals for 2026. We project supporting 6 new ENHANZE programs and 2 new Hypercon programs entering Phase I clinical studies, bringing our total development portfolio to 15 products. Building on this momentum, our existing partners expect to deliver multiple Phase II and Phase III data readouts, further expanding the commercial opportunity for ENHANZE.

In 2026, we plan to deliver at least 3 new licensing agreements, including between 1 and 3 new ENHANZE collaborations and between 1 and 2 new Hypercon collaborations. And we will pursue strategic acquisitions that further strengthen our drug delivery portfolio and focus also on adding assets with strong revenue and margin opportunity that will drive near-term and long-term growth. Let me now turn the call back to Nicole.

As we look ahead, we are pleased to reiterate our 2026 financial guidance shown here on Slide 13. We continue to expect total revenue of $1.71 billion to $1.81 billion, representing year-over-year growth of 22% to 30%, driven by royalty revenue and product sales from API. Royalty revenues of $1.13 billion to $1.17 billion, representing year-over-year growth of 30% to 35%.

We continue to expect DARZALEX SC, PHESGO and VYVGART Hytrulo to drive the strong expectations. We expect adjusted EBITDA of between $1.125 billion and $1.205 billion, including new Hypercon and Surf Bio investment of approximately $60 million and non-GAAP diluted EPS of $7.75 to $8.25, which also reflects the new Hypercon and Surf Bio investment and does not consider the impact of potential future share repurchases.

Let me also take the opportunity to highlight how to think about the quarterly cadence for your modeling. We expect first quarter royalty revenues to be less than the fourth quarter of 2025 by approximately 5% to 10% due to annual contractual rate resets with quarterly sequential growth thereafter. We project total revenue to decrease sequentially from the fourth quarter of 2025 to the first quarter of 2026 as no milestones are planned in the first quarter, with milestones expected to be weighted in the second half of the year. I'll now turn the call back over to Helen.

Thank you, Nicole. Let me conclude with these final remarks. Across ENHANZE, our auto-injectors, Hypercon and now Surf Bio, our strategy is clear, our priorities are aligned, and our execution is disciplined. We are building a future that's defined by innovation, durability and high-margin royalty that extends throughout the next 2 decades.

These priorities position Halozyme not just for another strong year, but for a new era of durable long-term revenue. We have the portfolio, we have the technologies, and we have the strong cash generation. And most importantly, we have a clear, confident and compelling path forward. Operator, you can now open the call for questions.

[Operator Instructions] Your first question comes from the line of Mohit Bansal with Wells Fargo.

Royalties for the first time. Really appreciate it. I have a question regarding the mechanics of DARZALEX collaboration with J&J. I know you -- last time in late January, you talked about potential to expand the deal with J&J on DARZALEX. Can you just elaborate this further?

Is this related to ENHANZE? Or do you think that there is a potential expansion with Hypercon here? And the related question is that what happens after the expiry of ENHANZE collaboration with J&J? Would J&J has to manufacture hyaluronidase on their own and then sell DARZALEX FASPRO on their own? I mean how does the mechanics work?

Thanks, Mohit. Yes, we're very proud to partner with Johnson & Johnson on creating such an important brand for patients with multiple myeloma with $14.4 billion with the majority of that being powered by subcu with ENHANZE because as you know, it really is enabling a lot of that early frontline durable patient treatment. Now our terms of our licensing agreement end with J&J in 2032.

But given the importance of this brand to J&J, given how we are the core to helping get into this frontline session, we absolutely expect to enter into discussions with Johnson & Johnson closer to the time because we're obviously many years out from that today to extend our agreement and our supply of them of API. So we do not expect J&J to take the risk of going to get another source of API.

We expect them to want to continue to work with us with the strong reliability and the great safety track record that we have generated together on the use of DARZALEX as subcu. So Mohit, my comments were specifically about continuing to work with J&J on ENHANZE when we made them on the last call.

Your next question comes from the line of Jason Butler with Citizens.

I had 2 questions on the ADC strategy. I guess the first one is one thing that is really increasing clarity and confidence is regulatory path with ENHANZE. Can you give any thoughts on if you're going to be essentially improving product profiles of approved therapies, how you think about regulatory path there versus regulatory path for not yet approved molecules?

And then just secondly, on the kind of improvements that you're seeing -- can you give us -- sorry, just give us some context on the kind of treatment paradigms today for the approved ADCs. And obviously, there's the preference for not IV infusion, but what are these patients doing anyway? Are they in the IV center anyway? Or can they truly free up time by not having to go to the IV center?

Yes. Let me ask Chris to address both of those. And Chris, the first one was what we believe the regulatory pathway would be. Obviously, today, we are basing on PK non-inferiority. Will that be the path? And the second one was with regard to the treatment paradigm. Is this going to be one where it might be a short injection in the infusion suite as opposed to subcu? Or can it be given at home?

And thank you for the question, Jason. So regarding the regulatory path, as per those companies that wish to convert from IV to subcu, as we've seen with our traditional monoclonal antibody products, we'd expect a traditional approach that we've seen with PK non-inferiority studies.

To your point, to the extent that those partners are developing products that aren't approved are seeking additional benefits related to efficacy and safety, those benefits would need to be proven through appropriate phase trials beyond PK non-inferiority that include both efficacy and safety endpoints. In terms of the approved ADCs and the benefit that we can provide, as you likely know, a lot of ADCs were developed not as monotherapy, but as combo therapy.

So there is the benefit there to reduce the infusion center time that those patients spend in those infusion centers. But we are seeing more movement of ADCs to first-line therapy. So to the extent that they aren't administered in combination therapy, there would be the potential for IV-free regimens.

And also note that many of the ADCs are being used in combination with products that are subcu or going subcu in large part enabled by ENHANZE in Halozyme. So you will see a spectrum of treatment modalities. But I think as more and more drugs go subcu, you will see a significant reduction in those patients needing to go to infusion centers.

Your next question comes from the line of Michael DiFiore with Evercore ISI.

Congrats on all the continued progress. Two questions for me. One regarding the IPR filed against Alteogen back in December. How might the outcome of this influence the outcome of the Merck District Court litigation? And then separately, with regards to Merus' petosemtamab, a new trial was listed on ct.gov back in January.

It was a first-line non-small cell lung cancer study. I guess my question is, as development extends beyond head and neck, how should we think about the potential incremental ENHANZE royalty opportunity from additional indications here? Like does the long-term commercial strategy for petosemtamab hinge primarily on the IV or the subcu ENHANZE formulation?

All right. Thank you. Mike, with regard to the IPR filed against Alteogen, I would think about it very separately from our infringement case that is being brought against Merck, where we have identified that Merck is infringing multiple of Halozyme's already filed patent. So it's a very different part of our IP strategy. Now with regard to the district court case, we're still awaiting a scheduling order from the judge for that.

The judge has allowed for certain discovery for Halozyme, including access to the Merck Alteogen agreement and also access to KEYTRUDA SC to continue testing of that. And we do expect that both parties will appear before the District Court in June following the output of the PTAB to receive further information and instructions. But the PGR and Alteogen, very separate and distinct from the District Court case.

With regard to Merus' terrific drug, as we looked at that and we looked at the potential, obviously, I think it's just at the beginning of its potential utility based on its mechanism of action. It's currently used in regimens including KEYTRUDA. And I do believe that it is possible that there are going to be an extensive number of indications explored over time where this mechanism is going to be relevant.

For patients, and I think this is where we really enjoyed working with the Merus team with regard to the fact that they're recognizing that the PD-1s go subcutaneously, the benefit of having an all subcu regimen is going to be terrific for patients. And so I think that's where the puck is going and in terms of how treatment is going to be delivered. And we're excited to see additional work being done to expand the indications over time for the subcu version.

Your next question comes from the line of Corinne Johnson with Goldman Sachs.

Maybe you could provide just a quick update on the progress you're making towards the clinic with the Hypercon products and kind of what remains to be done before you can start testing that technology in patients? And on a related note, what should we anticipate with respect to any update on the products and the progress they're making in terms of Phase I study, et cetera?

I'm sorry, Corinne, I caught most of that. But towards the end, you just -- unfortunately, I couldn't hear you. I got the progress for the Hypercon clinical testing and the second part to the question?

Is that better?

That's much better.

Okay. The second part was just what should we anticipate with respect to updates through the year as you kind of get those drugs into the clinic? And should we anticipate getting a better understanding of what the products are and the development strategy once they're in Phase I?

Yes. Thank you. So we are continuing with the Hypercon team to support 2 partners in advancing to Phase I clinical testing in 2026. And as a reminder, these are already approved blockbuster MOAs. The additional steps that are happening include completion of the clinical scale-up batches as an example. And then the companies will also be moving forward to file their IND packages, or protocols with the regulatory authorities, et cetera.

But everything as of today is very much on track for these 2 clinical starts in the fourth quarter and before the end of the year. This is partner confidential information, Corinne, in terms of what updates will be available. So it will be very much driven by the partners. I will say if these clinical studies are being done in patient populations, it is very likely that they will be posted on clinicaltrials.gov as the studies are about to start.

And I think that might be the first indication publicly of what the partners are and certainly a visibility into the design of the Phase I studies. I don't believe there'll be a lot of information available at that time with regard to the full development pathway. But I will say that from our perspective, the development pathway will be very familiar to you if you're familiar with ENHANZE. We anticipate Phase I studies to identify a dose and then Phase III studies on non-inferiority in this instance.

Your next question comes from the line of Sean Laaman with Morgan Stanley.

Helen, just to double-click on the last question, just to clarify, the 2 Phase I starts with Hypercon, are they existing ENHANZE products? That's the first question. The second is how many of the ENHANZE products do you envisage could be transitioned across to Hypercon over time? And then while we well understand the move from IV to subcut and the clinical benefits there, what are you hoping to show in the clinical benefits when you can compare existing products on Hypercon compared to existing products with ENHANZE.

Thanks, Sean. We -- because the targets are confidential for the partners, we really can't make any further comments other than to say that these are established blockbuster drugs with the approved mechanisms of action. So I'm afraid we're limited to talk about that.

If we think about our ENHANZE portfolio, we are seeing very much with our partners, both in biotech and pharma, there is a real push towards getting treatment moved in a simple, short, small injection in the doctor's office or in the patient's home for certain conditions, including autoimmune diseases, neurology, nephrology.

And so as you think in our portfolio about anything that has the potential to be moved into a smaller volume and drugs that perhaps today are given in the doctor's office, moving them into the patient's home or in the doctor's office to allow for higher throughput of patients, those are the types of opportunities you'd be thinking about with the potential for a 3 to 4x increase in concentration in most of our drugs, so a 3 to 4x reduction in volume.

And so you can see from what I'm saying that the value proposition here is very much the patient getting more charge of their disease, being able to do it at home or be able to do it in a very short trip to their doctor's office and really putting the power back into the patient in terms of when and how and where they're getting their treatment.

That is what is exciting, companies as they are thinking about how best to meet the needs of patients with certain conditions where the patients really are overall quite well, want to get back to work, want to be able to go on trips, all of those conditions. So it's, I think, a very logical evolution of subcu treatment and putting the patient at the center and the next evolution for certain conditions.

[Operator Instructions] Your next question comes from the line of Brendan Smith with TD Cowen.

Congrats on all the great progress. I actually wanted to ask about the auto-injector part of the business a bit. I'm wondering what your expectations for new partnerships there look like and if we should expect maybe any overlap in the new ENHANZE and Hypercon deals you plan to announce this year with some of those auto-injectors?

And maybe on a related note, can you just remind us how you plan to report sales on auto-injectors? Is it going to be -- should we think about it similarly to ENHANZE like with product sales to partners during development and then adding royalties on top for commercial sales? Or are there any kind of notable differences there?

All right. Thanks for that question. Yes. For everybody, we -- I'll start with the high-volume auto-injector, which we've continued to advance readiness for clinical testing for our partners. As you know, we've got a development agreement that is advancing with one of our current partners. And our high-volume auto-injector, which is able to inject between 3 and 10 mL with 10 mL going in, in just 30 seconds.

We are seeing interest in it from current partners. We're seeing interest in it from new potential partners who are coming to evaluate the opportunity of ENHANZE and Hypercon and even to a degree, Surf Bio, even although that is earlier. So Brendan, I do anticipate we're going to see some progress with the high-volume auto-injector this year.

And again, it's a beautiful part of the story towards imagine for the patient being able to do their own delivery of a 3 mL, a 5 mL, a 6 mL, a 10 mL injection at home, putting the power into the patient's hands for when, how and where they have their treatment. So look for updates on that as the year progresses. I'll have Nicole talk about how we'll report the sales.

Yes, Brendan. So from a revenue perspective, we do recognize product sales from selling the devices. So you can think about that as similar to the way we recognize revenue from the sale of API. And when there are associated royalties, then we would recognize those as royalty revenues. So think about a situation where we having a high-volume auto-injector that is licensed with our ENHANZE technology, that would -- our expectation is that would drive royalties, and you would see royalties recognized with that product.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Good morning. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Investor Conference Call. [Operator Instructions] Please note, this event is being recorded.

I'll now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good morning, and welcome to Halozyme's investor conference call. In addition to the press release issued earlier this morning, 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 provide preliminary 2025 revenue estimates in addition to an update to our 2026 to 2028 financial guidance.

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. 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 the press release and slide presentation.

I will now turn the call over to Dr. Helen Torley.

Thank you, Tram, and thank you all for joining us this morning. The fourth quarter and specifically the month of December was a standout period for Halozyme. Never before have we executed on such a broad series of value-creating events in such a brief time. This execution is creating a value inflection for Halozyme, unlocking multiple drivers of long-term, durable and profitable revenue growth. I'm incredibly energized by the pace of progress, and I'm very confident in the path ahead.

Let me turn now to Slide 3. Here is our agenda for today. I will begin with the 2025 highlights, which are summarized on Slide 4. In 2025, we acquired two innovative long-duration IP subcutaneous delivery enabling technologies. In November of 2025, we closed on the acquisition of Elektrofi, acquiring Hypercon, a novel clinic-ready in 2026 biologic hyperconcentration technology with IP to the mid-2040s. And I am pleased to announce that in late December 2025, we acquired Surf Bio, adding a second innovative biologic and small molecule hyperconcentration technology, also with long-duration IP to the mid-2040s.

These acquisitions broaden our opportunity to collaborate exclusively and nonexclusively across a full range of leading and emerging targets and mechanisms of action. We are creating the next waves of major SC innovation following ENHANZE, which will last over a very long-term time horizon. In parallel, in 2025, we continue to demonstrate strong ENHANZE momentum. Highlights include the global regulatory approvals for ENHANZE co-formulated with Johnson & Johnson's blockbuster product, Rybrevant. This resulted in 10 globally approved blockbuster products now being commercialized with ENHANZE.

And I am delighted to say that in late November and December, we signed three new ENHANZE collaboration agreements, signaling the recognition by biopharma that ENHANZE is the gold standard for large volume, rapid subcutaneous drug delivery. These three new agreements are a strong representation of the broad range of ENHANZE opportunities in discussion today with participation by established large pharma and smaller biotechs and with target profiles, including IV to subcutaneous conversion and subcutaneous extended dosing. You will note the continued broadening of therapeutic areas, too, now including obesity and inflammatory bowel disease in addition to oncology.

And I'm delighted to say that clinical planning has already kicked off for all three new collaboration Phase I study starts. Collectively, the 2025 events shown here create additional visibility and new revenue opportunity extending into the 2040s. Let me turn now to Slide 5. Our growth from one to three subcutaneous delivery technologies, each of which is royalty bearing, capitalizes on and will help fuel the growing demand and trend for more subcutaneous delivery of drugs administered in the physician clinic and also in the patient's home. Moving to Slide 6, let me review how our technologies address the challenges pharma faces to date in creating biologics that can be given subcutaneously.

This will allow you to appreciate how our broadened portfolio by providing tailored solutions to address each partner and product-specific needs so dramatically increases our opportunity. Beginning on the left, many biologics require high volumes of injection to deliver the therapeutic dose due to the concentration and formulation limitations. As an example, the approved ENHANZE co-formulated partner products range from 5 milliliters to 23 milliliters volume of injection based on concentrations of 40 to 180 milligrams per ml.

Now it's important to just mention here that only about 2 milliliters can comfortably be injected subcutaneously in a single injection due to the structure of the subcutaneous space, which is filled with hyaluronan. ENHANZE is the perfect solution for this, enabling rapid large volume subcutaneous delivery by temporarily degrading the hyaluronan in the subcutaneous space, which results in volumes of 5 mls being able to be given in as little as 30 seconds as we see with VYVGART Hytrulo with ENHANZE or 15 milliliters in 3 minutes as we see with DARZALEX FASPRO with ENHANZE.

ENHANZE has demonstrated an unmatched track record of regulatory and commercial success when combined with antibodies and bispecifics, where it has enabled drugs previously given intravenously to be given subcutaneously and extended the dosing interval of an already approved subcutaneous drug HYQVIA by allowing larger single doses to be administered. And let me just take a moment to also highlight two new growth trends to watch for that are related to ENHANZE that I am very excited about and where we are very busy in conversations with potential partners.

The first is for use with nucleic acids, where there is strong interest in whether ENHANZE can enable the subcutaneous delivery of lipid nanoparticle and large volume nucleic acid conjugate formulations while mitigating the inflammatory and immune responses usually seen with subcutaneous delivery. And the second is for use of ENHANZE with certain antibody drug conjugates, where there is interest in whether the change in the PK profile and specifically the lower Cmax with an equivalent or greater AUC can result in an improved risk-benefit profile. Now for some disease conditions such as autoimmune, neurology, nephrology and cardiovascular diseases, patients and their physicians are seeking more rapid delivery options, including options that the patient can deliver at home.

And this is where Hypercon and the Surf Bio hyperconcentration technology come in. Each technology through a different novel patented approach can allow hyper concentration of the biologic up to 500 milligrams per ml or 3 to 4x higher on average than is possible today. This can result in much smaller volumes for injection, potentially less than 2 mls or between 2 ml and 10 ml. Importantly, feasibility of approximately 500 milligrams per ml has been demonstrated for both of the technologies, including with monoclonal antibodies, peptides and even small molecules, supporting the broad opportunity. Volumes in the range of up to 2 mls will fit into a small volume auto-injector or 3 to 10 mls into Halozyme's proprietary high-volume auto-injector, enabling quick, simple delivery in seconds given by the patient or a health care practitioner.

Halozyme has become the one-stop shop for biopharma for subcutaneous delivery. Now you may be asking why do you need and why do you want two hyperconcentrating technologies. Let me address that on Slide 7. Strategically, two technologies that work differently to hyper-concentrate therapeutics expand our opportunity. And this is because we can offer partners tailored options to fit their needs and meet their target product profiles, allowing them to select the approach that will be the best fit for their drug. It also allows us to work with more companies on leading and emerging top targets or mechanisms of action. As shown on the slide, the Hypercon technology achieves concentrations of approximately 500 milligrams per ml through a novel patented dehydration process.

This is an advanced technology with feasibility demonstrated in tens of tests with different monoclonal antibodies and other treatment modalities. Based on the strong progress made in advancing manufacturing and clinical testing readiness, we are projecting that two current partners will initiate Phase I studies with Hypercon by the end of 2026 or before. The Surf Bio hyperconcentration technology also achieves concentrations of approximately 500 milligrams per ml. It achieves this through a combination of the use of a novel proprietary excipient that enables stable, dense, low-friction particles and spray drying. Multiple experiments have demonstrated feasibility of achieving stable formulations at approximately 500 milligrams per ml, including with monoclonal antibodies and small molecules.

With long-duration intellectual properties in the mid-2040s for each technology and opportunities for patent life extension based on novel findings, each technology excitingly adds to Halozyme's long-term and durable royalty revenue opportunity. With those 2025 business highlights, let me now review the 2025 projected financial results, which are shown on Slide 8. I'm delighted to say that based on our preliminary revenue estimates, we expect to exceed our 2025 total revenue guidance and to achieve our 2025 royalty revenue guidance compared with the guidance estimates that were last updated in November of 2025. We now expect total revenue of $1.385 billion (sic) [ $1,385 million ] to $1.4 billion (sic) [ $1,400 million ], 36% to 38% growth over 2024. This is an impressive increase of $370 million to $385 million year-over-year.

This strong projected performance is predominantly driven by royalty revenue, which is projected at $865 million to $870 million, a 51% to 52% increase and an almost $300 million higher than prior year. A truly outstanding performance, I think you will agree. And let me just mention that we are not providing the EBITDA and non-GAAP EPS update at this time as we're still pending the accounting determination and conclusion of the impact of the recent M&A transactions that I just discussed. This information will be reported with the Q4 results. Let me move now to the 2026 guidance, which is shown on Slide 9. I am very pleased to communicate that in 2026, a full one year earlier than the original projection, we project we will exceed $1 billion in royalty revenues. Recall, I first provided this projection in January of 2018, projecting achievement of the $1 billion in royalty revenues in 2027. Many were skeptical at that time, wondering if we would navigate the then outsized concerns regarding patent cliffs in 2024 and 2027.

You can see we came through this period very successfully, an important point to remember when I talk about our future growth drivers. I'm delighted to announce that based on the ongoing strength of our business, we are raising our 2026 guidance. We project total revenue in 2026 of $1.71 billion to $1.81 billion, a 23% to 30% increase over our 2025 estimate, reflecting a $318 million to $418 million year-over-year increase. This strong performance is driven by increased expectations for royalty revenue and product sales. Royalty revenue guidance is increased to $1.13 billion to $1.17 billion, a 30% to 35% increase year-over-year and reflecting an additional $263 million to $303 million versus prior year.

Adjusted EBITDA and non-GAAP diluted EPS guidance are also increased from prior guidance ranges. I will highlight that non-GAAP diluted earnings per share is projected to be $7.75 to $8.25, a meaningful increase of $1.25 above our prior guidance. And I'll just note that the 2026 guidance does include approximately $60 million of new operating expense for advancement of the two new hyperconcentration technologies, Hypercon and Surf Bio, which were not included in our prior 2026 guidance. Let me turn now to Slide 10. We're also very pleased to provide our updated and raised longer-term guidance for the period 2026 to 2028. I will focus you on total and royalty revenue and then on non-GAAP diluted earnings per share.

In 2028, we project total revenue to exceed $2 billion, a remarkable projected growth from the $1 billion in total revenue that was achieved in 2024. This is largely driven by continued robust royalty revenue growth, which is projected at $1.46 billion to $1.51 billion in 2028, a 26% to 28% CAGR for the period 2024 to 2028. I will note that the 2028 royalty revenue projection does not include the potential U.S. manufacturing IP extension for ENHANZE, which would we project have the impact of maintaining the royalties for DARZALEX FASPRO and RYBREVANT Faspro at the original mid-single-digit royalty rate in the United States from September of 2027 to March of 2029. And non-GAAP earnings per share is projected to more than double from 2024 to 2028, projected at $10.50 to $11.10 in 2028, demonstrating the strength of our royalty business model and our strong fiscal discipline.

I'll move now to Slide 11 and just take a moment to highlight what truly differentiates our business. In two words, it is durability and profitability. We have expanded from one to three subcutaneous delivery licensing technologies, ENHANZE, Hypercon and Surf Bio that each bring recurrent long-duration royalties. Importantly, each of these businesses is also asset-light with the partners responsible for development and commercialization costs. As a result of the asset-light model and our strong operational efficiency and excellence, we project for the 2026 to 2028 period that our gross margin will exceed 80%. Our free cash flow will exceed 70% of our EBITDA and operating margin will be greater than 60%.

I will now turn to what excites me the most and what gives me such confidence in our future, our growth road map, beginning on Slide 13. This road map provides the multiple growth drivers in 2029 and beyond that give me incredible confidence just as I had in 2018, that we have the strategy, the levers, the opportunities and the financial strength to create an incredible growth performance for Halozyme for many years to come. I will begin with ENHANZE. The updated revenue and royalty guidance for 2026 to 2028 is driven by our 10 approved products. Our approved products include DARZALEX, which is in its 11th year post initial launch and is still delivering a magnificent greater than 20% year-over-year revenue growth with sales of $14.3 billion in 2025.

DARZALEX Faspro with ENHANZE today commands more than 90% share of total DARZALEX sales and has been the key to this robust growth, enabling and expanding use of DARZALEX in the large front and second-line multiple myeloma patient populations. DARZALEX is a cornerstone to J&J's ambition to exceed $50 billion in oncology sales in 2030, and they have invested smartly in developing DARZALEX Faspro to demonstrate its unassailable risk-benefit profile in so many multiple myeloma indications that I and many believe it will continue its remarkable growth trajectory, delivering robust royalty revenue to Halozyme for multiple years to come.

A second blockbuster SC product with ENHANZE I will highlight is argenx's VYVGART Hytrulo. Approved in two subcutaneous indications today, 2025 total sales were $4.15 billion, a 90% growth year-over-year. The mid-2025 launch of the prefilled syringe, which includes ENHANZE formulated VYVGART Hytrulo and which enables at-home and in-clinic subcutaneous delivery in as little as 30 seconds was a key driver of this strong revenue performance and of the robust growth. With high opportunities still available in the currently approved subcutaneous indications and multiple future SC indications in development, we are excited for the continued growth of VYVGART Hytrulo.

Now there are 8 additional approved subcutaneous products with ENHANZE, including 6 more recently launched and growing subcu with ENHANZE products. These launch products represent substantial new royalty revenue opportunity for many years to come. And adding on top of this will be our development portfolio. For ENHANZE, we anticipate 6 new products will enter into Phase I clinical testing in 2026, resulting in a total of 13 ENHANZE development products. The development products have the potential to launch in the 2028 to 2031 time frame based on a number of factors, including when they entered Phase I testing and considering our historical time line of approximately 5 years.

Now I will note that excitingly, recent company innovations and FDA changes may support a 3- to 4-year development time line in some cases, meaning an even shorter time to royalty revenues. And this is just a view from where we sit today. Following our strong 2025 performance with three new ENHANZE licensing agreements, interest from biopharma has never been higher. As the gold standard for SC delivery of monoclonal antibodies, we continue to be approached by many companies. In addition to this, in response to data we have generated on the use of ENHANZE with nucleic acids and antibody drug conjugates, we are fielding multiple incoming calls and gaining multiple meetings through our outreach to discuss how ENHANZE can improve the profiles of these newer treatment modalities.

Based on this interest, I expect to sign between one to three new licensing agreements on ENHANZE this year, including with pharma and biotech companies. Importantly, with these new agreements, the ENHANZE royalty durability will extend into the 2040s. Moving now to Slide 14. Let me now turn to Hypercon. We acquired Hypercon through the acquisition of Elektrofi in November of 2025. Elektrofi has three signed licensing agreements to date with argenx, Johnson & Johnson and Lilly. We expect two partners to initiate Phase I clinical studies for already approved blockbuster drugs incorporating the Hypercon technology by the end of 2026 or earlier. Based on development time frames, we project potential approvals in the 2030, 2031 time frame.

Excitingly, additional feasibility testing with additional drugs is ongoing and planned. And based on this, we see the potential for an additional three to five launches by the mid-2030s. Strategically, I also want to highlight that Hypercon also provides Halozyme with the opportunity to transition current partners from ENHANZE to Hypercon. I mentioned earlier the increasing interest from patients and the health care practitioners for at-home smaller volume rapid subcu delivery. By applying a Halozyme hyperconcentration technology, current ENHANZE partners have the potential to significantly lower the volume of injection and enable delivery by auto-injector, further strengthening their competitive differentiation by meeting the patient and health care practitioner needs.

For Halozyme, this could extend royalties at a mid-single-digit rate into the 2040s. With the opportunities I just outlined and Halozyme's subcutaneous development expertise, we see a path to Hypercon delivering approximately $1 billion in royalty revenues in the mid-2030s or approximately 5 years after the first launches. As shown on Slide 15 is a summary of our expanded commercial and development portfolio. There will be an almost doubling of the number of commercial and development products, increasing from 19 total commercial and development products by the end of 2026 to 36 in 2028. Recalling my comments on a conservative approximately 5-year development time line, this crystallizes the multiple new royalty revenue streams projected over the upcoming years.

Now the final and a very important growth driver is additional M&A, as is shown on Slide 16. It is our goal to continue to evaluate drug delivery technology opportunities where we can leverage our strong expertise. And we will also seek to utilize and deploy our strong cash flow to add growing revenue businesses, adding assets and companies where Halozyme can add to and accelerate the value creation. We project that our future acquisitions will add revenue extending into the 2040s and importantly, could begin to add growing revenue in the nearer term. Let me move to our 2026 goals. 2026 will be another incredible year of execution. We project supporting 6 new ENHANZE products and 2 new Hypercon products to begin Phase I clinical studies, bringing our total products in development to 15.

Further supporting momentum and success, current partners have multiple Phase II and Phase III data readouts, further expanding the commercial opportunity. And it is our plan to deliver three or more new licensing agreements in 2026 with a projection of between one and three new ENHANZE deals and one to two Hypercon new deals. And we will also seek to complete additional acquisitions, targeting strong revenue and margin growth opportunities. Let me close with a few reflections. I've been the CEO of Halozyme now for 12 years. In this time, Halozyme has successfully navigated multiple challenges and despite popular wisdom delivering strong repeated year-over-year growth. We have created a unique [indiscernible] business. I know this can make it more challenging to model, but the results are very evident. We cannot, due to contract obligations, always tell you the play by play. But what I want to leave you with today is that I know the play by play. I have a team that's delivered and will deliver again. And finally, that I have never been as confident or more excited in Halozyme's future.

With that, operator, we will open the call for questions, and I'll be joined by Nicole for the Q&A session.

Your first question comes from the line of Sean Laaman with Morgan Stanley.

Congratulations on such strong financial performance and strategic outlook. Helen, just you mentioned a couple of things that are interesting. So the nucleic acid and ADC opportunities. I wonder if you could even ballpark that and give us your sense of what the opportunity might mean in terms of size and how that compares to your current business? And the other question is the transition potentially of ENHANZE products onto Hypercon. Could you give us a ballpark of what you think the opportunity there is, like how many products might be open to transition and how that might extend the IP runway?

Yes. Thanks, Sean, for the questions. With regard to nucleic acids and ADCs, I can talk about that in terms of the numbers of products because as you can well imagine, some -- it's a growing and emerging field where if we try to look for analyst projections or evaluate pharma, the numbers are pretty incomplete. But if you just think about all the announcements you see for -- throughout 2025 of companies acquiring and companies advancing different types of ADCs and nucleic acids. I can say this is a very strongly growing class of product that is expected to be the predominant wave in years to come, diminishing over time the dominance of the antibodies. And so that's why we're so excited to be able to play in this new and emerging field.

Our Chief Scientific Officer, Chris Wahl has been generating data, engaging with tens of companies on this potential to see whether the profile of the products can be changed into basically an improved risk-benefit or efficacy profile depending on which modality we're talking about. And so bottom line, Sean, it's an exciting area that is very rapidly growing, and we are delighted to be seeing the strong interest we have with so many incoming inquiries on it. With regard to Hypercon, it's still pretty early in our days in our conversations. But what we wanted to highlight and make sure was visible to all of our investors is that the field of subcu delivery is evolving, and ENHANZE was a major, major innovation in terms of being able to allow patients to get rapid high-volume subcu delivery. But the market is moving and the demand of the physicians and the patients and the pharma companies is really trying to get to more at-home therapy.

And so we don't believe our partners will be static even with their exciting blockbuster drugs. They want to be able to have the best offering for patients. They want to be able to have the most competitive profile. And so it's not going to be a static field in our view. So it's a space for our investors to watch, and we're very excited about this potential evolution, which will just, as I mentioned in the call, add to the durability of our revenue potentially at the mid-single-digit rate.

Wonderful. If I can just squeeze one more in. So you've given, I think, $1 billion royalty aspiration for Hypercon, I believe it was into the 2030s, which is quite substantial. And then you've announced the acquisition of Surf Bio, and you're implying that there's a fairly fertile ground there for further M&A. So fair to assume that maybe -- all these acquisitions are going to contribute more materially to what ENHANZE will, sorry, into the 2030s. So ENHANZE might not be the dominant portion of your business.

It's still very much our aspiration to continue to grow ENHANZE. And Sean, what I will say is as you look at that 15 total products that we're projecting in development at the end of 2026, 13 of those will be ENHANZE. And so ENHANZE is definitely with the three deals we signed at the end of last year, the ongoing conversations we're having this year and my expectation of between one to three new ENHANZE deals this year and the potential for partners to be moving more products into the clinic even as we speak, ENHANZE is still going to be a robust contributor. So that is absolutely our goal and will remain a very important platform for Halozyme for many years to come.

Adding to that, as you say, we've got Hypercon now where we are projecting up to the $1 billion by the mid-2030s. And then M&A will be layered on top of that. And I think you're absolutely getting our message from today, which is Halozyme has multiple growth drivers. And we have the financial wherewithal and the execution abilities to be able to pull all of these levers in parallel. And that's what's got me so excited about the future and the future growth trajectory for Halozyme.

Congrats again, Helen.

Thank you.

Your next question comes from the line of Brendan Smith with TD Cowen.

Congrats on all the updates here. Really great to see. Maybe just quickly I wanted to first ask about a little bit more on the kind of relative strategy for implementing Elektrofi versus Surf Bio technology. I guess how should we really think about which areas, drugs or types of partnerships are more likely to use each once they really kind of get their feet here? And then I just wanted to ask also about your commentary regarding FDA changes potentially expediting the development time line for ENHANZE. Can you expound on that just a little bit more? And if you see any read-through from some of those kind of helping the path for Elektrofi or Surf Bio?

Yes. Thanks for the question, Brendan. And yes, we're very excited to have the two hyperconcentration technologies, which are working differently. And I think that's very important to remember because that means that they may be more suitable for one type of modality versus another. Each of them has demonstrated feasibility across a range of monoclonal antibodies and different protein and protein conjugates. And I will say Surf Bio has also demonstrated feasibility in the small molecules.

And what we believe will happen and is already beginning to happen is partners will come to us and discuss their target product profile. Is this going to be delivered in the physician's office? Is it going to be delivered by a physician at home? Is it going to be delivered by the patient themselves? Then look at the actual formulation of the product and identify which of our technologies is going to be the best match to that profile. And by having the three technologies now, we'll be able to work with a broader range of companies. We'll be able to work across exclusive and nonexclusive targets. And I think you can see exactly how this so excitingly broadens the partners and the number of products that we'll be able to work on in the future.

So hopefully, that addressed your question with regards to that. And each of the technologies, it's our goal to continue this exciting model we have, which is asset-light with the milestone and royalty collaboration style agreements. We have those for ENHANZE. You know that for Elektrofi, they're able to command very similar types of structure and royalties as to what we have done with ENHANZE, and we are projecting exactly the same with Surf Bio. So it really will be based on a profile that partners can choose which one best fits their goals.

The FDA changes, this has been in conversation over time, Sean, with regard to the technologies as we've now got over 1.3 million patients treated with ENHANZE globally, there's a lot more comfort in the safety profile. And we saw, as an example, the innovator argenx being able to have a Phase III study in myasthenia gravis that was just approximately 100 patients large. And each of our partners now goes to the FDA and is introducing more and more innovative styles of studies. There's opportunities to not do large controlled Phase III studies, perhaps doing more of an internal control, which can reduce the sample size.

I think these designs will become public over the next months and years as current partners advance. And as we can talk about that in more detail, we'd be delighted to do so. But I think it's a nice reflection of the fact that ENHANZE has been and is the gold standard, and that's why the studies are getting more and more streamlined and creative and innovative. Translating that to Elektrofi and Surf Bio, I think we'll go through the same profile where there might initially be some of the larger, more standard studies, a single large Phase III study, for example, for approval of Surf Bio or the Hypercon technology. But over time, I think there's going to be the same type of recognition that these studies can be more and more streamlined, especially if you're comparing it to an already approved drug. So we're delighted to partner and see some of the great ideas that are coming from our partners and supported by the excellent clinical team we have here at Halozyme.

Your next question comes from the line of Michael DiFiore with Evercore ISI.

Congrats on all the progress. Two for me. Just Hypercon and Surf Bio, could you maybe walk us through the key differences between the two technologies a little more? Like I noticed that both technology platforms are able to formulate monoclonal antibodies. Why would one be -- why would using one tech platform for a monoclonal antibody be more suitable than the other? And at this stage of the game, is one technology more scalable than the other? And I have a follow-up.

All right. Thanks, Mike. Yes, just getting down to the basics of how each of them works. They work quite differently with the Surf Bio being a polymer technology that lowers surface tension during the processing, which results in higher protein stability and the potential to obviously create these hyper-concentrated formulations up to 500 milligrams per ml. Hypercon does exactly the same, achieving up to 500 milligrams, sorry, per ml through a dehydration process. So each of them takes a different approach. And as I was mentioning earlier, what we see and expect and certainly seems to be confirmed in early conversations is depending on the particular molecule, and that would include monoclonal antibodies that are partners are wanting to hyperconcentrate, there may be one approach that is deemed to be more suitable from the get-go than the other one.

And so the partners will be selecting based on their formulation and their goals, exactly which of these technologies is going to be the best fit. We're very excited about the progress of these technologies. Obviously, Hypercon is the more advanced one. We're expecting two Phase I studies to start in 2026. And we can say that Chase and the team have been doing an excellent job in getting everything ready, including the manufacturing to be supportive of that. The Surf Bio technology is earlier. We're projecting being able to be in the clinic by the end of 2027, early 2028. And so we're going to be working on advancing the nonclinical recipient qualification, the GMP manufacturing. So probably a little bit early to be able to comment on relative scalability of one versus the other, but both of them offering a differentiated approach for partners to meet their target profiles.

Excellent. If I could just squeeze one follow-up that kind of just piggyback on the previous question regarding potential accelerated time lines for FDA approval. If we assume that a biosimilar ENHANZE were to come on the market after 2029, given the fact that you said the FDA is very comfortable with ENHANZE, given its long historical safety profile, does that view from the agency still hold true with biosimilar versions of ENHANZE? Or could the FDA make biosimilar versions of ENHANZE not have an accelerated time line to approval?

Yes. Let me just make a couple of comments about the likelihood of biosimilars coming, first of all, Mike. And we have co-formulation patents for the majority or expect co-formulation patents to be issued for the majority of our products. And the actual co-formulation patents, which relate to the combination of partner molecules with our rHuPH20, we believe will be sufficient to preclude the ability for the biosimilars making an identical rHuPH20 to launch.

Now that means then that a biosimilar company can't follow the exact same path we have, which does bring our expectation that a biosimilar company for an individual product would need to do a pretty full clinical development program, which would enable them to demonstrate to the FDA no risk of immunogenicity as well as comparability. And so for the biosimilar companies, it's not going to be a straightforward pathway because of the patent status of most of our partner products as well as the FDA still wanting for biologics that demonstration, we believe, of no immunogenicity, which was a very important question, if you recall, for us to demonstrate over the years.

Your next question comes from the line of Mohit Bansal with Wells Fargo.

Congrats on all the progress. So I have one detailed question. I mean, so excuse my naivety, but is there a potential for ENHANZE platform or any of these Hypercon technologies to actually help out with the longer-acting or making the drugs longer acting? Because from my read, it looks like ENHANZE actually increases the absorption and that could be -- that could make it faster acting rather than longer acting. Wondering like that -- like could you be in the GLP space, making them longer acting or things like that? That's the part I want to understand. And then the second one is, is there any FTC risk with the Surf Bio deal given that there is -- there are some similarities here with Elektrofi?

Yes. Thanks, Mohit. With regard to the longer acting, we are actually engaged with partners on being able to -- and I'll call it extending the dosing interval, which is, I think, a similar concept, but it really comes down to with ENHANZE, you can deliver a larger dose and that larger dose, depending on what happens to the PK profile, can extend that time where it's delivering the efficacious levels in the blood. And so you can go from, as an example, a drug that's delivered every two weeks at a certain dose by being able to increase the dose in a single injection, extend that dosing interval as an example, to four weeks.

The best example we have of that in our portfolio is actually HYQVIA, where we are able to, with the ability to deliver up to more than 600 milligrams of immunoglobulin have the patient treated every four weeks, whereas the IV is every three weeks. And if the patient was to have a subcu without ENHANZE, they would have to have multiple smaller injections because they -- obviously, you can't put in as large a volume. And so the concept is commercially available as HYQVIA, and we do have certainly partners talking with us about that today, being able to get from that two weeks to four weeks as an example or even four weeks to eight weeks. So it doesn't make it longer acting, but it does extend the dosing interval.

With regard to the FTC, the Elektrofi acquisition did undergo a standard HSR review period and that time expired, and we were able to move forward and close the transaction. And for the Surf Bio, it isn't subject to FTC review because of the size of the entity.

Your next question comes from the line of David Risinger with Leerink Partners.

Yes. So congrats on the financial updates, Helen. I had two questions, please. First, you had set initially the 2028 targets back in 2024. So can you comment on why you're not rolling annual targets out to 2030 today? And then second, I believe there was an additional DARZALEX formulation patent, the hyaluronidase patent issued late last year. Could you -- so considering that, could you remind us about what you are expecting for the timing of the conclusion of DARZALEX U.S. royalties in the 2030s and DARZALEX ex U.S. royalties in the 2030s. So what is the timing for each of those to go to 0 in the 2030s? I'm curious -- and I'm just curious if that's changed at all.

All right. Well, let me ask Nicole to address the guidance. And I think, David, you'll agree there's not a lot of companies gave 5-year guidance. There's not a lot of companies give 3-year guidance even. But Nicole, talk about the future.

Yes. As Helen mentioned, we are pleased that we're able to give this multiyear view that, again, many companies don't do. And this is because we really focus on the 10 products that are globally approved today. But when we look at beyond 2028 and as we outlined, a lot of those growth potentials today is because we see so many drivers beyond 2028. So we know we have the expectation of 15 products that are in development with ENHANZE, the potential we talked about with the Hypercon technology to achieve $1 billion in royalty revenue in that time horizon. And again, adding on the opportunity we have with our strong cash flow projections to continue to grow with additional royalties and our revenue, high-growth revenue, high-margin businesses with the addition of M&A are all the growth drivers that we see beyond 2028.

Thanks, Nicole. And with regard to the duration of the royalty term with J&J for DARZALEX, just to be very clear on that, our current royalty term is projected to end in 2032 for both U.S. and the EU; however, it's really important to consider this will be at that time, an $18 billion, $19 billion brand for J&J, which is almost all subcu at that time. We do expect in the upcoming years to be entering into additional conversations with J&J to continue to our relationship with them. When you think about the importance of that product and especially it's a cornerstone to their $50 billion ambition, it's going to be very important that they do not have any discontinuity or risk to that.

And so I wouldn't think about their revenue disappearing, David, as you suggested there, I think they will be in our mutual interest to come forward with another type of agreement. It won't be exactly the same, I don't think, as the one we have today, but that certainly is in our ambitions and plans that we continue durable revenue with DARZALEX for years to come after the current expiry of the current licensing term. And put yourself in their shoes, I think, and you'll see that, that's in their very good interest as well.

Your next question comes from the line of Jason Butler with Citizens JMP.

Congrats on the results today and the acquisition. Two for me. Can you maybe Helen talk about to what extent the more recently approved products like OCREVUS ZUNOVO and TECENTRIQ HYBREZA contribute to guidance in '26 and beyond? And just how you think about the biggest royalty growth drivers over the next couple of years? And then second for me, obviously, you've now acquired two companies that are a clear strategic fit. How do you think about prioritizing future potential acquisitions, both in terms of timing and business strategy?

That's great. Well, I'll ask Nicole to talk about the color of the royalties and the contributions moving forward.

Yes. The near term and especially in 2026, the biggest drivers will continue to be the three largest drivers that we see currently, which is really focused on DARZALEX, Phesgo and [ VYVGART ]. But as you mentioned, the 4 more recently launched products are growing in contribution in 2026 and then certainly in future years as well are contributing to that growth that you see year-over-year.

Yes. And when we have our Q4 call, I think we'll be able to talk a little bit more about that as our partners do make more comments. There were some comments made at JPMorgan, but we do expect to be able to provide more color, particularly on OCREVUS and Opdivo, where the presenters at JPMorgan were certainly speaking very enthusiastically as to the pattern of growth that we're seeing there. On M&A, Jason, absolutely, these were a very strong strategic fit for us being focused on the ability to expand our drug delivery offerings.

As I mentioned in my prepared remarks, we also are expanding to also look at opportunities where there is a business that is growing and where Halozyme can see a path to us delivering more value. Now what's important as you think about that is that could bring potential near-term revenues for it that grow into the future and further add to what's already a very exciting growth story over the next 5, 7, 10 years. And so we think about that having our eyes very much on the ball in both of those areas. But very much -- I think the new news today is just an excitement about potential opportunities to add growing revenue and margin businesses.

Your next question comes from the line of Corinne Johnson with Goldman Sachs.

Maybe you could talk a little bit given the Surf technology is preclinical, what they've shared in terms of immunogenicity and also what they shared that got you comfortable stepping in to make this acquisition at this time? I know with Elektrofi was that they were entering the clinic. So curious what you saw with the Surf technology here.

Yes. Thanks, Corinne. Yes, very excitingly, when we think about this, the Surf technology is a couple of years behind the Hypercon technology, but have followed a very similar path of engaging with multiple pharma companies to demonstrate the feasibility of being able to create these stable 500-milligram per ml high syringability formulations. And so that was obviously the very first thing. There is an early and initial but absolutely appropriate for the stage of development, toxicology work that's been completed extremely well.

And in terms of the manufacturing, that also has been set up in a way that impressed us and gives us confidence as to this being able to be progressed to be clinic ready by the end of 2027 or in 2028. So very nice overall package, recognizing it was earlier. And obviously, the difference in the acquisition price, I think, very nicely highlights the opportunity we have here to create value with Surf Bio over the next couple of years as we advance it to the clinic.

Great. And I think you mentioned $1 billion in Hypercon royalties by 2035 or mid-2030s. I guess does that include partnerships beyond the three they've already established? And how do you think about kind of quantifying that guide?

Yes. So obviously, we have very clear line of sight as to how we will get there. We can't provide details on the play-by-play just due to partner confidentiality. But I'll point you back to some of the comments I made in the prepared remarks, Corinne, to say that we're expecting two products to enter the clinic this year. And based on ongoing feasibility testing, there's a possibility of an additional 3 to 5 launches by -- over the next several years after that. And it really is that pattern of engagement and progress that gives us that line of sight.

Your last question comes from the line of Michael Obodai with HCW.

Congrats on a strong year. Mike, on for Mitchell Kapoor. I have a 2-part question. First, you raised the 2026 guidance by 20% at the midpoint and signed 3 new ENHANZE agreements. Is this raise capturing those contributions? Or does this still reflect the conservative floor that you've previously guided to? And also now that you have two hyper concentration platforms, is there a specific viscosity or volume threshold that dictates when a partner would choose Surf Bio over Hypercon? And how do these economics compare to the standard ENHANZE royalty?

All right. I'll tackle the second one, and then I'll ask Nicole to talk about the guidance raise. We still are, I think, Mike, at the experimental stage with the Surf Bio. So I can't really talk about any limits to the viscosity or volume. What I can say that has been remarkable and was very striking to our teams as we were doing our diligence is that up to this 500 milligram per ml concentration I talked about, the viscosity is incredibly low. The syringeability is like, as my team described it, like injecting water. So I think that's the important thing to think we're not trying to reach the limits of viscosity. We're trying to create highly concentrated molecules that don't have viscosity and both of these technologies in the nonclinical area have demonstrated that very beautifully.

Based on what's publicly available with regard to the Elektrofi, Hypercon contract terms, those are very similar to ENHANZE. And it certainly will be our expectation. There are no collaboration and licensing agreements yet for the Surf Bio technology. But I can say that we would expect it to be in a similar range to what has been publicly announced with ENHANZE and also with the Hypercon technology. Nicole, can you address that question?

Yes. So with respect to 2026, the raise from our previous guidance really is driven by royalties and the strong trajectory we've seen with the top three drivers from DARZALEX, Phesgo, and VYVGART Hytrulo. And then also, you'll see that we increased our expectations for product sales, which is driven by increased expectations for our sale of API to our partners.

And you mentioned the new collaborations that really had an impact in 2025. As you see, we did increase our expected range for 2025 collaboration revenue. That's driven by upfront revenues received. And then the go-forward contribution will be more modest compared to our current products as those products continue to move through development.

Nicole, there was one other question that came in as a write-in question that maybe I'll ask you to just address. Could you say more as to why you haven't reported exactly what accounting treatment is going to be addressing Surf Bio? And what are the ranges and choices there? And any implications we should know about?

Yes. And you'll all have seen that in our 2025 preliminary results, we did say that EBITDA and non-GAAP EPS will be reported in February when we report our final results for the quarter. And that is because we're working through the accounting treatment. We're working with our advisers on that as part of closing our year-end financials.

And the different treatments really come down to whether they are accounted for as a business combination or an asset acquisition and a business combination being what you've seen us do in the past, where really the acquisition and the assets are on your balance sheet. But in the event that there is an asset acquisition of IPR&D, you may have seen other companies where that is recorded as a onetime P&L charge. And that could be the impact of the Surf Bio technology being in the preclinical development stage. And so if that is the case, you will see a onetime charge in the fourth quarter of 2025, and that will be reflected in our EBITDA and non-GAAP EPS results in 2025.

There are no further questions at this time. Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.

Okay. Let's get started. Welcome, everybody. Welcome to our conference in Miami. I had the pleasure of having Dr. Helen Torley, CEO of Halozyme Therapeutics. Helen, welcome. Thanks so much for making time for us.

Before we delve into Q&A, I'd love to get your overview of the business and maybe key things to look forward to in the next 12 months or so.

That's great. Well, thanks for the invitation, Mike. Pleased to be here. This really is an incredibly exciting time at Halozyme. When you think about the amazing adoption that we're seeing for argenx's VYVGART Hytrulo prefilled syringe, being used by patients at home. On the back of the phenomenal success of DARZALEX subcu, where 96% of patients in the U.S. get the subcu version, this is just an amazing time for us.

And it's that adoption of subcu, which really feels as though its time has come that led us to the recent acquisition of Elektorfi for its Hypercon technology, which promises the opportunity for more patients to be able to receive their biologic therapy at home in a simple auto-injector.

And so by adding the Hypercon to our portfolio, we now have 3 leading technologies that are driving the success of Halozyme. ENHANZE is the tried and tested large volume rapid subcu delivery, which is now approved for 10 products and is responsible for the strong royalty revenue growth you see. It can be used alone or in combination with our high-volume auto-injector, which is another one of our core technologies.

For Elektorfi's Hypercon technology, as I mentioned, we expect this to be used at home via auto-injector, small volume auto-injector because it promises to be able to get drugs down to 2 mls or less, but it also could be used with our high-volume auto-injector. And so we have an unsurpassed set of technologies now for meeting the partner target product profiles of how they want to deliver their drugs to be competitive.

And particularly in areas like inflammation and immunology, neurology, nephrology, cardiovascular and even oncology, there is more and more interest and excitement about treating the patients at home on demand by the patient. And so that really is our goal.

I mentioned with ENHANZE with 10 products approved, that is leading to very strong revenues. Our revenues, we upped our guidance recently to $1.3 billion to $1.375 billion. That is driven by about 50% growth in our royalties year-over-year, which we expect this year to be $850 million to $880 million.

And because we have a largely royalty business, our EBITDA is growing almost at 50% to be at least $880 million this year, up to $930 million. So an incredible profile and importantly, coming from being able to deliver on partner goals for subcutaneous delivery. I'll come back to Hypercon again, this represents a great opportunity to expand our TAM into a space we haven't really been before, which is this small volume delivery at home.

Got it. A lot to unpack there. That's excellent. So just concentrating on the base ENHANZE business just for now. You've raised guidance 3 times this year, which for the most part, was driven by your bread-and-butter DARZALEX Faspro, Phesgo and VYVGART. But as we think about 2026 and beyond, it's those newer products that launch that will really start to meaningfully contribute like subcu Ocrevus, Opdivo, Tecentriq and Rybrevant -- and Rybrevant. So for each of these newer products, maybe perhaps catch us up on the royalty duration of each product and when the rates step down?

Yes. You called out our 3 blockbusters that are driving revenue today, our bread and butter. I like that. I just go beyond it to say that it's going to continue to feed us for many years to come, Mike, because they really are remarkable products.

And if I take a step back and say, there's really 3 drivers of our revenue mid- to long term. The first are those 3 blockbusters, so DARZALEX, Phesgo and VYVGART Hytrulo. Second to that are the ones you just mentioned, the 4 products that recently launched, so Ocrevus, Tecentriq, Opdivo and Rybrevant. And then the third one will be new deals. And an example of that would be the Merus deal that we just signed that will be in the next years delivering royalties as well, we believe.

And starting with the blockbusters, it really has been a remarkable story for DARZALEX, launched in 2020 with our technology, annualizing out at about $14 billion to $15 billion this year and expected to grow to $18 billion by 2028. Globally, more than 90% of the use is subcu with ENHANZE. So that growth between $14 billion and $18 billion is all Halozyme growth. So there's a lot more still to come, and that's driven by J&J investing in new indications, but also the compounding effect of so much use in the frontline settings. So very attractive there.

Phesgo will continue to grow from $3 billion to $3.5 billion. That's very nice. That's all subcu sales for us at a mid-single-digit royalty. And then VYVGART Hytrulo, what a story that really has been, as I know you follow closely. The recent launch of the prefilled syringe is helping to fuel growth, annualizing looking at the last quarter growth to $4 billion at the moment, analysts project that to $8 billion just on the current 2 approved indications. Again, mid-single-digit royalty for Halozyme. So you can see why we can't forget about them. Those are the core. They are still growing.

Now on top of that, we will add the next set of products, all of which have just recently launched and beginning to contribute, as you see, in 2026 and will hit their stride in '27 and '28. And then new deals like Merus, but we have other deals in waiting the wings as well. And so multiple drivers. And when we think about the durability of those revenues for these products because of the opportunity to get co-formulation patents, all of the products will go to at least 2030 in revenue. Almost everyone will go to the mid-2030s and then several will go into the early 2040s in terms of the duration of time we get royalties. And so it's an incredible story, and our goal is to continue to add new products and new royalty streams to keep feeding this phenomenal growth that we see.

Got it. Got it. So just in terms of a macro perspective and consideration, I know CMS plans for Part B IRA price negotiation was a white-hot topic a couple of months ago, but then it seemed to shrink die off. Maybe just catch us up on why you think this may not be as big as a worry as people originally thought?

Yes. I think there was just a bit of confusion out there with regard to a number of factors, Mike, with regard to the IRA. And this relates to when a product is co-formulated with ENHANZE, which is an active ingredient, will the subcu be bundled with the IV for price negotiations. We have, based on the Part D guidance, felt that it was very clear to say that because it's an active ingredient, it would not be bundled. The Part B guidance came out and led to a bit of confusion and CMS asking for feedback on that.

But the clarity we got more recently, I'll start with the One Big Beautiful Bill Act. The One Big Beautiful Bill Act made it very clear that if a product has got multiple orphan indications, it will not be included in IRA price negotiations. And if a product has a first indication that is an orphan and the second that is a non-orphan, it will only be subject to price negotiations at the time of the non-orphan.

Translating that into potential for Halozyme impact, it means that DARZALEX will not be in the IRA negotiation. It means that Opdivo cannot be included until 2029, at which time we can be pretty confident IV biosimilars will be available and the availability of biosimilars stops products from being included.

Right. Right.

So as we looked at our portfolio and we put a position statement, if anyone wishes to read it on our website, together with our very comprehensive letter to CMS on the IRA, we see no to minimal impact ever for the IRA on Halozyme in terms of our future revenue stream, either because the products are highly commercial or because they're orphan or because there's going to be biosimilar products available. So I think it was overinflated for a period of time with regard to that.

Now I will say what CMS said in their Part B guidance is, they're going to revisit it potentially next year. But they also said they recognize the complexity of what they proposed. They are basically challenged with trying to decide is the active ingredient having any clinical benefit.

For ENHANZE, we reduced infusion-related reactions significantly for patients that's been demonstrated. We have improved overall survival with one product. We meaningfully improved the treatment experience for patients. That we argued very strongly is clinical benefit. Is CMS going to be able to decide for or against that.

And so I will say our advice from Washington, D.C. is the statement to put in there to say should such a policy ever be affected is very telling. I think there's a good chance it's not going to because it was very, very hard to execute. Even if it is, though, my most important message today is the way the law has been structured, the way the policy is written, there is minimal impact to Halozyme.

Excellent. Excellent. I want to spend some time on the Elektrofi merger, if we can. So around the time of the Evotec announcement in late 2024, you said at the time that there really weren't any viable targets -- drug development targets had analogous businesses to you to pursue. Like why wasn't Elektrofi in play back then? Was it simply because they weren't ready to sell and then what changed now?

Yes. We, obviously, as a leader in subcu delivery, monitor the entire space, and we've been keeping a very careful eye on progress companies have been making for a period of time. What I can say is that we're now very excited at the stage that Elektrofi is at. And that's because they've been able to derisk the asset by signing 3 major deals, one with Lilly, one with argenx and one with J&J. And importantly, they're at a value inflection point with the expectation to enter the clinic with 2 products by the end of next year. And these are products that are already commercial blockbuster products. So that's very exciting to see.

So really, I think from a Halozyme perspective, the timing was just right. The company has advanced the technology. We already saw from meetings we had the week before last with the team, there are many areas that we can do knowledge transfer of things that Halozyme navigated over the years that will be able to help speed the pace of development and commercialization of Hypercon. And that, again, is what we look for in an acquisition, where are we bringing value. And you'll see us continue to do acquisitions where we can see that value. But I think kudos to the Elektrofi team, they had advanced things very nicely. Now we can add our expertise to help accelerate things.

Got it. So on the topic of Hypercon formulated products, how should we think about the IP of these products? I mean -- and how does this at least partially solve for the ENHANZE IP overhang in 2029?

Yes. Well, let me start with the ENHANZE. And just to reiterate what I said earlier is we do expect long durable revenues for ENHANZE that are really driven by these co-formulation patents that are going to take our royalties out to the -- mid-2030s for most products and then into the 2040s for many products. But for Hypercon specifically, this is an opportunity for companies to use this technology to be able to take products that are -- perhaps have a concentration of 100 milligrams per ml and be able to deliver a product at 400 to 500 milligrams per ml. So 5x higher concentration, still with amazing syringeability and that's the ease of ability to inject it.

The IP for Hypercon goes to the mid-2040s, which is obviously very exciting as well. And the deal structure is turns out to be very similar to ENHANZE in terms of mid-single-digit royalties. And I think what's also important is if a product is already available and it is reformulated to a Hypercon version, there is absolutely the potential to get new IP for that product because it is a different formulation will have different properties and impact on clinical benefit for patients. So we do see the opportunity to be getting additional patents when people reformulate the product with the Hypercon technology.

I got it. And this kind of harkens back to the CMS discussion we were just having before. So since Hypercon products don't really have any new active ingredient like hyaluronidase does with ENHANZE, would it be correct to assume that these Hypercon products will be tied to the original IV launch to [indiscernible] CMS?

So maybe I'll just take a step back. As you know, we are -- spend a lot of time talking to companies and are the leader in subcu delivery, Mike. Companies come to us to consider subcu for primarily competitive differentiation or for the ENHANZE patient benefit. It really is not a CMS play. And so I think what we will see with Hypercon is it's going to be used similarly to ENHANZE and sometimes it will be used when the product is already launched because there is a life cycle management opportunity there.

Sometimes it will be used right from the start because the company doesn't like the concentration and the product profile they're going to launch with. Sometimes it will be used in between, and it will sometimes be used with orphan and non-orphan drugs. We see this just as another great opportunity to deliver on what the pharmaceutical companies are really looking for, which is meaningfully clinically differentiated products that make a difference for patients.

I see. So with the royalty term for DARZALEX Faspro, I think ending in 2032, any initial guess as to how many patients would be able to convert to Hypercon DARZALEX at this point or?

We're not in a position to be able to talk about any of the targets that are in the agreement. What I can say is for the 2 products that are expected to enter the clinic, they are both blockbuster products today. And the Phase I starts should come if they're in patient populations with visibility on clinicaltrials.gov. And we're very excited about these products. I can't wait to be able to talk about them, but I'm going to have to wait until the companies have made them public before we are able to say anything.

But I think there will be a super demonstration as to additional clinical benefits and competitive differentiation for the companies in terms of being able to continue to evolve and improve that patient treatment experience.

Got it. Got it. I'd be remiss if I didn't cover the -- had at least one question on the Merck litigation regarding subcu KEYTRUDA. Anything new to report on this front?

Yes. I think first and foremost, just to assure everybody is understanding, we've got 2 separate patent portfolios. ENHANZE is what we license today to most of the partners we've talked about. But we also have something called an MDASE patent portfolio, which is the modified patent portfolio.

What we're in litigation with Merck with today is the MDASE patent portfolio. So anything that happens with relation to MDASE is all potential upside. There is no read-through into anything in ENHANZE, there's no risk to ENHANZE royalties or anything. This is all potential upside. So I do find it's always useful to just assure that's crystal clear.

And as we think about what's going to be next on the patent infringement case, we have initiated litigation against Merck alleging that they are infringing on 15 of our MDASE patents. These are patents that were generated as early as 2011 when Halozyme was doing almost 7,000 experiments to identify and evaluate lots of different structures of modified hyaluronidases at that period of time.

We expect to get the court order soon for what the timing is going to be for the District Court case. But I will just say we do expect it to take a number of years for it to play through and come to fruition. We are asking for a permanent injunction. We're asking for triple damages in that litigation, but we would be very willing and open to grant a license to MDASE with Merck anytime during that process or even before we get into that process. We are confident that they are infringing. We're going to pursue this to the end. But yes, we'd be very happy to come to an agreement with Merck at any time.

And just remind us regarding the PGRs versus the District Court. In the worst-case scenario, say all the PGRs are result in an adverse outcome for you. How does that read through, if anything, to the District Court?

Yes. The District Court case has got a series of patents that are absolutely independent from and cannot be challenged through the PGR process. And so just for everybody, the post-grant review process is something within 9 months of a new patent being issued, you can challenge that patent being valid. We have continued as a licensing company to get new MDASE patents.

So the ones in question through the PGR process are some of the more recently issued ones. We still have a core set of original patents that are in the District Court case that cannot be touched through the PGR process. So it really will not have any impact on our District Court case in the unlikely event we were not to prevail in the PGR review. We feel very confident we will prevail there as well.

I see. So in the final minute or 2 we have left, I want to touch upon the Merus deal and future ENHANZE deal. By the way, congratulations. I know this is a long-awaited deal in making. But just simply, I mean, are nonexclusive deals becoming the norm, Helen?

Yes. One of the things, I think, to notice for -- about this particular deal is this is for a bispecific product. And what we have recognized is in much more in our interest to do nonexclusive deals for bispecific products as opposed to being unable to work with either target with other potential partners.

And so pitasemtamab happens to be an EGFR LGR5. And so what we are now able to do because we did this nonexclusively is we can still work with people in EGFR, we can still work with people on LGR5. And that was the reason why we were very such strong proponents of an exclusive deal -- a nonexclusive deal, I'm sorry.

Historically, large pharma always wants exclusive deals, and we expect that to continue. So we will continue to see a mix of exclusive and nonexclusive deals. But when it's a bispecific, it's going to be our strong preference that these deals are nonexclusive. It does allow us that flexibility to be able to work more expansively with more partners, which obviously is to our benefit in our favor.

Okay. I didn't appreciate the whole bispecific -- have the whole bispecific aspect of it dictated the nature of the deal. Okay. So last 20 seconds, if you were to just have a lasting comment, what might the Street be underappreciating about Halozyme at this point [indiscernible]?

Yes. I think it is a strong growth trajectory that is underpinned by ENHANZE, as I just discussed, with long durable revenues and amazing blockbuster products that are just going to continue to grow for many years to come, now supplemented by the exciting opportunity for Hypercon technology, which absolutely is going to be another ENHANZE on top of that. I don't think it's quite flowed through in people's mind just how exciting the combination of those 2 is going to be.

Excellent. That's all we have time for, unfortunately. But Helen, thank you so much for being with us.

Appreciate it. Thank you.

Good afternoon. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Third Quarter 2025 Financial and Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good afternoon, and welcome to our third quarter 2025 financial and operating results conference call. In addition to the press release issued today after the market close, you could 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.

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. 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.

Good afternoon, everyone, and thank you for joining us today. I will begin on Slide 3. I am very pleased to report another quarter of record royalty revenue of $236 million, representing a remarkable 52% increase year-over-year and resulting in total revenue of $354 million, representing 22% growth year-over-year. These results were driven by the continued momentum of our 3 established blockbuster subcutaneous therapies, DARZALEX subcutaneous, Phesgo, and VYVGART Hytrulo.

Adjusted EBITDA growth exceeded top line growth, increasing 35% over prior year third quarter to $248 million, reflecting the strength inherent in our royalty-based business model. Our core ENHANZE drug delivery technology continues to drive the significant momentum in our business and reflects the powerful and growing opportunity for subcutaneous delivery to reshape the future of health care.

ENHANZE can allow treatments that once required lengthy infusions in hospitals or infusion suites to be administered in minutes, more conveniently, including in the doctor's office and in the patient's home. For patients, it means less time spent traveling, fewer invasive procedures and greater independence, all while maintaining efficacy and safety. At the same time, it is reducing the burden on the health care systems, lowering total cost of care and freeing up capacity in hospitals and infusion centers.

Turning now to Slide 4. Year-to-date, 13 of the 15 growth catalysts have been achieved, including new product approvals, expanded indications, reaching new regions and achieving key reimbursement milestones across major markets. These new growth catalysts support our near- and long-term revenue opportunity. This quarter, there were 2 notable indication approvals for our 2 leading growth drivers.

Firstly, DARZALEX subcutaneous received European Commission approval for a new indication in smoldering multiple myeloma, providing another meaningful growth catalyst for the franchise. Smoldering multiple myeloma is a precursor condition to active multiple myeloma, expanding DARZALEX subcutaneous reach into a new early disease stage patient population and potentially increasing treatment duration and the lifetime value per patient.

And the second indication was Argenx’s VYVDURA pre-filled syringe with ENHANZE approved in Japan for self-injection for generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. Delivered as a once-weekly 30- to 90-second subcutaneous injection, VYVDURA can be self-administered at home, eliminating the need for lengthy infusions in clinical settings. The pre-filled syringe with ENHANZE is a key enabler of broader adoption because it simplifies administration, reduces treatment burden and potentially ENHANZEs patient adherence. Rounding out the 15 growth catalysts, we project 2 additional meaningful U.S. approvals this year, one for DARZALEX subcutaneous in smoldering multiple myeloma and the second for RYBREVANT subcutaneous in EGFR-mutated non-small cell lung cancer.

I'll move now to Slide 5. Driven by the continued strong performance of our core ENHANZE technology, we are pleased to raise our full year 2025 guidance ranges. Driven by royalty revenues, we now project total revenue of $1.3 billion to $1.375 billion, reflecting 28% to 35% growth over 2024. Royalty revenue is now expected to grow 49% to 54% to $850 million to $880 million for the full year, primarily driven by our 3 established blockbuster subcutaneous therapies, DARZALEX subcutaneous, Phesgo and VYVGART Hytrulo with ENHANZE. We now anticipate adjusted EBITDA of between $885 million and $935 million, representing year-over-year growth of 40% to 48% -- and we expect non-GAAP diluted earnings per share of $6.10 to $6.50, representing year-over-year growth of 44% to 54%.

Moving now to Slide 6. Recently, we announced the acquisition of Elektrofi, furthering our vision to enable at-home administration of biologic therapies. This strategic move supports our ambition to expand our portfolio of drug delivery technologies. With Elektrofi's innovative technology, we aim to extend subcutaneous delivery to a broader range of biologics, reinforcing our focus on patient-centric drug delivery technology solutions.

By applying Elektrofi's Hypercon technology, concentrations of 400 to 500 milligrams per ml or as much as 4 to 5x higher than many current conventional formulations can now be achieved. This breakthrough technology will enable more drugs to be delivered at home via auto-injector, a treatment option we know is of high interest and demand for pharma and biotech companies, particularly those working in inflammation and immunology, neurology, nephrology and oncology.

By bringing together now 3 innovative drug delivery technology solutions, ENHANZE, our auto-injectors and Hypercon, we will create a new commercial opportunity for our partners and further strengthen Halozyme's role as the partner of choice in patient-centered drug delivery, expanding our long-term growth horizon.

Moving now to Slide 7. Importantly, Hypercon is at a value inflection point. The 3 partner agreements in place have resulted in 2 products projected to enter the clinic and begin clinical development of the Hypercon formulation by the end of 2026 or earlier. Each of these 2 products as a different formulation is already approved and has achieved blockbuster sales already. With Halozyme's established expertise in subcutaneous drug delivery, we are well positioned to identify opportunities to accelerate the time to approval and to unlock significant new revenue potential through advancing new nominations and signing new agreements. The addition of Elektrofi Hypercon technology further ENHANZEs our offerings, enabling us to provide best-in-class solutions and maintain strong momentum in transforming the subcutaneous delivery landscape.

Now let me move to Slide 8, where I will review our current growth drivers for the quarter. Let me begin with DARZALEX, which continued its exceptional performance this quarter. Sales for DARZALEX increased 20% on an operational basis to $3.7 billion, primarily driven by the continued strong share gains of approximately 5.7 points across all lines of therapy and nearly 9 points in the frontline setting as well as through market growth. This marks the seventh consecutive quarter of frontline growth of 5 or more points, underscoring the continued momentum of the brand.

With 96% share of sales resulting from the subcutaneous formulation with ENHANZE in the United States and more than 90% global subcutaneous share, ENHANZE is bringing value to patients earlier in treatment as they live longer on therapy. DARZALEX is and we project will remain the gold standard of treatment for multiple myeloma, holding more than 50% market share across all lines of therapy. And there are 2 additional new catalysts that are projected to continue the strength of DARZALEX subcutaneous.

These include the recent European Commission approval of DARZALEX subcutaneous for patients with high-risk smoldering multiple myeloma, which occurred in July, and it marks the first approved treatment for this early stage of the disease. We also anticipate potential U.S. approval for smoldering multiple myeloma following the FDA's favorable vote on the risk-benefit profile earlier this year.

And separately, Johnson & Johnson reported positive top line results from the Phase III MajesTEC-3 study, which further validated the role of DARZALEX FASPRO in later lines of multiple myeloma treatment. The combination with TECVAYLI and DARZALEX FASPRO in relapsed/refractory multiple myeloma demonstrated at a planned interim analysis a statistically significant improvement in both progression-free survival and overall survival when compared to standard of care for patients who had received 1 to 3 prior lines of treatment, highlighting once again the clinical value of DARZALEX FASPRO with ENHANZE.

These milestones add to the growing list of approvals and clinical successes that continues to expand the reach of DARZALEX subcutaneous and to support analyst projections for the brand to reach more than $18 billion in 2028. And Halozyme will continue to earn royalties on the subcutaneous formulation of DARZALEX through 2032.

Let me move now to Phesgo, which is shown on Slide 9. Phesgo continues to be Roche's #1 growth driver with 9-month revenue of CHF 1.8 billion or approximately $2.3 billion, reflecting a 54% year-over-year increase. In the third quarter, the increasing conversion from intravenous Perjeta and Herceptin reached 51% in 78 launch countries, up 5 points from the prior quarter.

Conversion of Perjeta to Phesgo is now projected to achieve 60%, increasing from the prior 50% peak conversion, and this is driven by the strong value proposition. We are pleased with Phesgo's growing adoption with royalties secured at the full mid-single-digit rate through 2030.

I'll turn now to VYVGART, which is shown on Slide 10. VYVGART Hytrulo continues to be a key driver of the exceptional growth of the VYVGART franchise, with total sales of VYVGART increasing 96% year-over-year in the third quarter to $1.13 billion. The subcutaneous formulation enabled by ENHANZE has been instrumental in expanding access to new prescribers and patients across both approved indications of generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. Supporting both of these indications, the pre-filled syringe with ENHANZE, which was launched in April of 2025, is now approved in most major markets.

By enabling self-injection in just 20 to 30 seconds, whether at home, in the clinic or while traveling, this innovation has expanded access to new patient populations, simplified treatment logistics and accelerated adoption in earlier lines of treatment for both gMG and CIDP. The pre-filled syringe has expanded the number of prescribers by 260 physicians, opening up new pockets of patients in gMG and CIDP.

With approximately 50% of patients using the pre-filled syringe who are new to VYVGART, argenx stated that this is still the beginning of the growth curve for both indications. Argenx also stated that they project VYVGART's total addressable gMG market could ultimately approach approximately 60,000 patients globally versus roughly 17,000 at launch as the biologic opportunity expands and with the future potential addition of ocular and seronegative patient populations.

I'll turn now to the CIDP indication. Argenx commented that they are seeing consistent growth in both patient starts and prescriber engagement, driven by physician trust in the safety profile of VYVGART Hytrulo and its ability to deliver meaningful functional improvements. The pre-filled syringe is driving additional demand, offering convenience of self-injection and enabling flexible administration. 85% of CIDP patients are switching from IVIG, and there is also early adoption amongst treatment-naive patients. Argenx believes they are at the beginning of the growth curve for CIDP and that they will see continued expansion of the prescriber base.

VYVGART Hytrulo's strong commercial success, growing approvals, launches in gMG and CIDP and plans to expand its autoimmune disease indication footprint represent a compelling royalty growth opportunity for Halozyme. We project VYVGART Hytrulo will be a durable contributor to our long-term financial performance with analysts projecting total VYVGART sales of $7.7 billion in myasthenia gravis and CIDP in 2028 and with Halozyme earning royalties through the early 2040s. It is truly remarkable how only these 3 products I've just described, DARZALEX subcutaneous, Phesgo and VYVGART Hytrulo are driving our 52% year-over-year growth in royalty revenue this quarter and will have continued growth opportunity for years to come.

Moving now to Slide 11. I'll review the progress of our recently launched products, which will begin to contribute meaningfully in 2026. Beginning with OCREVUS. Roche reported continued strong momentum for OCREVUS, which represented CHF 5.2 billion or approximately $6.5 billion, up 7% for the first 9 months of 2025. The company reaffirmed its expectation for high single-digit growth of OCREVUS this year.

OCREVUS ZUNOVO, which utilizes our ENHANZE technology, received approval in 2024 and offers a rapid 10-minute subcutaneous injection, a significant improvement over the multi-hour intravenous administration and monitoring process. The subcutaneous formulation of OCREVUS is a key growth driver for Roche's neurology franchise. It enables penetration into community neurology practices and rural areas where IV infusion capacity is limited, which unlocks access to previously underserved patient populations. More than 12,500 patients are now on the subcutaneous formulation globally, representing more than a 75% increase from the 7,000 patients receiving subcutaneous OCREVUS that we reported last quarter.

Uptake is also increasing in the United States following the permanent J-Code, which was granted on April 1, which is simplifying reimbursement and enabling broader adoption. In the United States, approximately 800 health care providers are now prescribing OCREVUS ZUNOVO with ENHANZE, and 60% of the subcutaneous volume is coming from community practices, demonstrating strong traction outside the traditional site of academic centers.

50% of OCREVUS ZUNOVO patients are new to brand, indicating market expansion beyond IV conversions. In early launch countries like Germany, similar trends are being observed, reinforcing the ENHANZE formulation's ability to grow the overall OCREVUS patient base. Roche anticipates the subcutaneous formulation to represent an incremental $2 billion opportunity, while analysts project the total OCREVUS brand opportunity will reach $10 billion by 2028.

We are pleased with how OCREVUS ZUNOVO, powered by our ENHANZE technology is transforming the multiple sclerosis treatment landscape with its rapid 10-minute subcutaneous delivery, unlocking new patient access, accelerating adoption across community practices and driving meaningful franchise growth. Halozyme will earn royalties on the subcutaneous formulation at the full mid-single-digit royalty rate through 2030 and at a step-down rate until at least 2034.

Let me turn now to Roche's Tecentriq Hybreza with ENHANZE. Tecentriq Hybreza was approved in the United States and Europe in 2024 for all of the IV indications, offering patients and providers a more convenient 7-minute subcutaneous injection. Roche has stated its strategy is to drive conversion from IV to subcutaneous use. Tecentriq generated CHF 2.6 billion in revenue for the first 9 months of 2025 or approximately $3.3 billion, and analysts project revenue of approximately $4.5 billion by 2028.

Halozyme earns royalties on net sales of the subcutaneous formulation at the full mid-single-digit rate through the 2040s, underscoring the long-term value of this partnership. Let me move now to Bristol-Myers Squibb's OPDIVO. In the third quarter, global OPDIVO sales reached approximately $2.5 billion, reflecting a 6% year-over-year increase driven primarily by strong demand. The U.S. launch of OPDIVO Qvantig with ENHANZE is progressing well with growth fueled by the continued use of OPDIVO Qvantig across all of the indicated tumor types as well as the permanent J-Code, which was received in the quarter.

Sales in the third quarter were $67 million, a doubling from $30 million in the second quarter. OPDIVO Qvantig offers the convenience of a 3- to 5-minute subcutaneous administration and the flexibility of outpatient infusion, features that are driving growing adoption among both patients and providers across all of the indicated tumor types. Based on the strong year-to-date performance of OPDIVO and OPDIVO Qvantig, BMS now expects stronger growth than previously guided, with sales expected in the high single-digit to the low double-digit range for the full year. Analyst forecasts total brand sales of $9.5 billion by 2028.

And let me move now to RYBREVANT. RYBREVANT continues to demonstrate strong growth. In the third quarter, Johnson & Johnson reported total RYBREVANT IV and SC revenue of $198 million, reflecting triple-digit year-over-year growth. The European approval of RYBREVANT subcutaneous with ENHANZE in April marks Halozyme's 10th commercialized partner product and is a key milestone in our global expansion. The subcutaneous delivery of ENHANZE provides the strong efficacy profile of IV RYBREVANT while reducing administration time from multiple hours to just minutes and results in a fivefold reduction in the potentially serious adverse event of infusion-related reactions when compared to the IV formulation.

J&J's strategy to simplify treatment and ENHANZE patient convenience is resonating with physicians for use in combination with lazertinib in the first-line treatment of adult patients with advanced EGFR-mutated non-small cell lung cancer and for the same population following failure of a platinum-based regimen. RYBREVANT is an important brand for Johnson & Johnson, who are continuing to invest in clinical studies to demonstrate the full potential.

Recently published results in the New England Journal of Medicine from the Phase III MARIPOSA study reported that RYBREVANT plus lazertinib significantly reduced the risk of death when compared to osimertinib, which is the current standard of care in EGFR-mutated non-small cell lung cancer. Recall, osimertinib is marketed as Tagrisso by AstraZeneca and generated $6.6 billion in 2024, which underscores the potential commercial opportunity for RYBREVANT.

And at ESMO 2025, Johnson & Johnson also presented new data in a different high unmet need patient population from the OrigAMI-4 study, showing that subcutaneous amivantamab enabled by ENHANZE achieved a 45% overall response rate in patients with recurrent or metastatic head and neck cancer. These results could mark a turning point in the treatment paradigm and certainly could provide further support for Johnson & Johnson's statements that RYBREVANT will be a $5 billion product.

Dimensionalizing all of the opportunity for Halozyme, our 3 blockbusters that are driving today's strong growth, DARZALEX, Phesgo and VYVGART represent an approximately $30 billion in TAM opportunity in 2028. What is very exciting is that these newer launches I've just described also represent an additional approximately $30 billion in opportunity in 2028. With the recent approvals, our total opportunity doubled, setting the stage for our strong continued royalty revenue performance.

Our portfolio of 10 launch products is well positioned to deliver $1 billion in annual revenue in 2027. And this milestone reflects the strength of our long-term strategy and our partnerships. Importantly, we anticipate sustained royalty contributions from all products through at least 2030 with several extending into the 2040s, ensuring a robust and durable revenue stream.

Let me turn now to Slide 12, and I'll review the development opportunities that are not reflected in our royalty revenue projections to date. We have 8 programs that are currently in various stages of clinical development with 2 additional programs anticipated. Among the most advanced opportunities are Bristol-Myers Squibb's subcutaneous nivolumab with relatlimab and Takeda's TAK-881, both of which are in Phase III development. These programs represent potential new royalty growth opportunities beyond what is currently reflected in our forecast through 2028.

And let me now turn to our progress in new deals. I have said before that we will sign a new ENHANZE agreement this year and remain confident that we will. This confidence is supported by the stage of the discussions we are having and the proximity to finalization. Interest in ENHANZE is strong as more companies seek meaningful competitive differentiation. And on our 2 development auto-injector agreements, I am pleased to say we are making progress and project completion of planned human factor studies by mid-2026. With that, let me now turn the call over to Nicole.

Thank you, Helen. Our strong third quarter performance continues to reflect the momentum of our core ENHANZE technology. Total quarterly revenues grew by approximately 22% to $354 million, with royalty revenue increasing 52% to $236 million. Adjusted EBITDA grew 35%, outpacing top line growth and showcasing the exceptional leverage of our high-margin royalty-driven model.

Let me start on Slide 13. We continue to generate robust cash flow, which supports our balanced capital allocation priorities. Year-to-date, we repurchased $342 million of shares with $158 million remaining under the current authorized plan. Since 2019, we have returned approximately $1.9 billion to shareholders through repurchases, representing greater than 100% of cumulative free cash flow over that period.

We have a strong balance sheet with cash, cash equivalents and marketable securities of $702 million on September 30, 2025, compared to $596.1 million on December 31, 2024. The increase was driven by an increase in cash generated from operations, primarily offset by share repurchases. Our net debt-to-EBITDA ratio was 0.9x at the end of the third quarter.

As Helen mentioned, we announced our acquisition of Elektrofi in the third quarter, a transaction that strengthens our leadership in drug delivery and complements our strong organic growth opportunities. We are pleased that the acquisition is expected to have a minimal increase in our net leverage, estimated to be at approximately 2x net debt-to-EBITDA at closing. Our goal is to delever in the subsequent quarters, supported by our robust free cash flows.

Let me now turn to our detailed third quarter results on Slide 14. Total revenue grew 22% to $354.3 million compared to $290.1 million in the prior year period. Royalty revenue of $236 million increased by 52% from $155.1 million in the prior year period. The commercial success of subcutaneous DARZALEX, Phesgo and VYVGART Hytrulo continue to drive robust royalty revenue growth. Product sales of $94.2 million increased by 9% from $86.7 million in the prior year period, mainly driven by the contribution from proprietary product sales.

Collaboration revenues of $24 million compared to $48.4 million in the prior year period. The difference was primarily due to the timing of milestones achieved. Research and development expenses were $17.3 million compared to $18.5 million in the prior year period. The decrease was primarily due to lower compensation expense driven by resource optimization and labor allocation initiatives, offset by the timing of planned investments in ENHANZE related to the development of our new high-yield rHuPH20 manufacturing process.

Selling, general and administrative expenses were $46.1 million, up from $41.2 million in the prior year period, primarily due to increased consulting and professional service fees, partially offset by compensation expense. Adjusted EBITDA increased by 35% to $248.2 million from $183.6 million in the prior year. GAAP diluted earnings per share was $1.43 and non-GAAP diluted earnings per share was $1.72. This is compared with GAAP diluted earnings per share of $1.05 and non-GAAP diluted earnings per share of $1.27 in the third quarter of 2024.

Turning now to Slide 15. Based on our strong performance year-to-date, we are raising our guidance ranges for the full year. As a reminder, our expectations exclude the impact of the accounting treatment of the Elektrofi transaction. The final determination of whether this transaction will be accounted for as a business combination or an asset acquisition will be determined at the close. We now expect total revenues of $1.3 billion to $1.375 billion, representing year-over-year growth of 28% to 35%, driven by an increase in projections for royalty revenues.

Royalty revenues of $850 million to $880 million, representing year-over-year growth of 49% to 54%. We continue to expect DARZALEX SC, Phesgo and VYVGART Hytrulo to drive the strong expectations with VYVGART Hytrulo being the largest royalty dollar growth driver. Product sales of $340 million to $365 million, representing year-over-year growth of 12% to 20%; collaboration revenues of $110 million to $130 million.

Adjusted EBITDA of between $885 million and $935 million, representing year-over-year growth of 40% to 48%. And non-GAAP diluted EPS of $6.10 to $6.50, representing year-over-year growth of 44% to 54%. Regarding the future financial expectations of our acquisition of Elektrofi, we continue to expect the transaction to be less than 5% dilutive to non-GAAP diluted EPS over the medium term, excluding potential milestone payments related to the programs in development, which could offset dilution prior to the projected royalty revenues in 2030 and beyond. We also expect full year 2026 incremental operating expense of approximately $55 million. With that, I'll now turn the call back over to Helen.

Thank you, Nicole. In closing, our third quarter results reflect the continued strength of our core ENHANZE business and the accelerating momentum across our partner portfolio. With 10 launch products, a robust pipeline of future royalty streams and the addition of the Hypercon technology, we are well positioned to deliver strong revenue and shareholder value for years to come.

And let me just close with a few words on Nicole. While Nicole will be with us on our fourth quarter call in February, I did want to take this moment to thank Nicole for her many contributions to Halozyme. These have really helped us accomplish our growth strategy to date. Throughout this time, Nicole has helped design and lead multiple financing transactions that provided the capital that enabled the strong growth that you see today. Nicole will be transitioning to a new opportunity in 2026 when a new CFO is hired or by March 30, 2026. Operator, with that, we are now ready to open the call for questions.

[Operator Instructions] Your first question comes from the line of Sean Laaman with Morgan Stanley.

Yes, on capital allocation, you're 2x levered now. How do you think about paying down debt, getting even more conservative balance sheet and weighing that up against potential buybacks for next year and what opportunities -- the Elektrofi-like opportunities there might be out there? That's the second -- first question. And then the second part would be, how are investors going to be able to monitor the performance of Elektrofi going forward?

Yes. So I'll start by just saying with regard to opportunities like Elektrofi, we are continuing to look for those opportunities, Sean, because we do believe that we're in a great position to be the partner of choice for our pharma and biotech partners as they're looking to optimize the patient treatment experience. So keeping looking. And obviously, we will transact when we do find appropriate things. Let me ask though Nicole to comment on the capital allocation and the plan to delever.

Yes. Thanks, Sean. So we do have robust cash flows and cash growth in the coming quarters. And so while we will have a modest draw on our credit facility to fund the Elektrofi acquisition, we do expect to pay that down in the coming quarters and to delever very quickly. And so what you've seen us be able to do this year is have capital to fund share repurchases. We've done $342 million within the year and be able to fund the Elektrofi acquisition, and you'll see us continue to have that balanced approach going forward.

All right. And Sean, the last part of it, how to monitor the success of Elektrofi. I'm going to give you 3 metrics there. One is we are anticipating the potential for 2 partner first-in-human starts, both with already blockbuster products in their current formulation. That will happen by the end of 2026 or before. So that will be the first metric. I do think as we work through working with Elektrofi closely, we'll be finding opportunities to develop and be able to communicate a streamlined development plan approach, which we see as another benefit of bringing our 2 expertise together.

And then the third one, we will continue to look for Elektrofi and support the advancement of Hypercon with the current partners potentially agreeing to move more products into the clinic from their open nomination slots or indeed signing new deals. And so we're very excited about the Elektrofi acquisition, still in the planning phase, obviously, at this point in time, but we see great opportunity for the business synergies that are going to come from being able to bring our 2 companies together.

Your next question comes from the line of Jason Butler with Citizens JMP.

Congrats on the quarter. Let me pass my congratulations on Nicole as well, been great work. So let me start on Elektrofi. Understanding that the deal hasn't closed yet, can you talk about what you think the awareness level of the company and the technology is with your current ENHANZE partners? And just any feedback you've gotten from partners on the company?

And then second, on OCREVUS, can you talk a little bit about where market growth is coming from? Are they taking share from other therapies? Are they getting used earlier in treatment? Just how should we think about how that market opportunity is growing?

Yes, thanks. With regard to the knowledge level of our current partners for Elektrofi, I can say we're only aware of that really by the diligence we've done because we're still at a stage of -- we're not talking about Elektrofi and they're not talking about us, obviously, given that the HSR review hasn't closed. But I would say just based on our diligence and market research we did prior to the acquisition, there is a good awareness of the Hypercon technology.

But obviously, one of the benefits of bringing our companies together is to elevate that awareness and broaden that awareness within each of the companies based on who we're each talking with. We've received small amounts of spontaneous feedback. Again, I think people are being thoughtful and cautious that the deal hasn't closed, but a number of our partners, particularly the ones who are working with both companies have provided feedback that I would say signals strong support for the additional opportunities that might exist of being able to work across both of our platforms.

So definitely a resounding support from everything that we are hearing with regard to that. On OCREVUS, yes, based on the comments that Roche made on the last call, obviously, delighted to see that they grew 5,000 patients from the 7,500 patients on therapy that was the number in the second quarter. They are saying that in U.S. and Germany, in particular, 50% of the patients are new to brand.

Jason, I didn't hear them say exactly where the -- those patients were coming from. So I don't know if it is brand new to treatment patients or it is switched from other therapies. We haven't been provided that level of granularity. But what I do obviously think is terrific to know is that this is expanding the market footprint for OCREVUS exactly as Roche had anticipated, now allowing patients to be treated in physician offices, community hospitals and opening up access that was a bit restricted before because of the capacity constraints in infusion suites. So sorry, I can't answer that specifically. If we do find out about that, we will make sure to update on the next call.

Your next question comes from the line of Michael DiFiore with Evercore ISI.

Congrats on the continued progress. Two for me. The first, I want to expand upon the M&A question that was asked before. Obviously, your press release said in no uncertain terms that the next chapter of growth will include M&A.

And I guess my question is, how high are you willing to lever up for this transaction? I know you said that we could expect for you to delever in the next few quarters. And so I guess the ultimate question is, could we possibly expect another transaction towards the end of the year? And I have a follow-up.

Yes. Thanks for that. Mike, obviously, our focus at the moment is completing the Elektrofi acquisition. And so I think I can say that it's unlikely that there will be another acquisition this year. But we are actively looking because we do want to be able to continue to add to our growth and our momentum that is so strong at this point in time. Nicole, will you comment on the approach we're taking to leverage?

Yes. As Helen noted, while we will evaluate targets, I can say from a firepower perspective, we do have the capacity. We're willing to go up to 3x net leverage. We mentioned with this transaction at close, we expect to be at about 2x, but that will quickly come down. And so there will be capacity. And again, we'll just be patient and find the right next opportunity.

Yes. And I think just to kind of emphasize what Nicole said, you've seen us demonstrate a lot of patience in terms of finding the right asset, doing the appropriate diligence and seeking to only transact and make a formal offer to the company once we have completed all of that.

So we will take that same very thoughtful approach. We are in a great growth position. We're excited about the growth that's going to come from Elektrofi. So don't think of this as something we're rushing into. We're just going to continue to execute the strategy we've had in place for the last several years. And because of our strong cash flow, we're in a position to contemplate that in 2026, but only if we find it meets our criteria and is the right next move for Halozyme.

Excellent. And my follow-up question is, again, I know it's super early regarding Elektrofi and -- but on the prior call, I think I asked about the potential to combine ENHANZE with Hypercon. And I think you had said that feasibility studies regarding the combinability still need to be done. When might we see such studies be conducted? And yes, I'll just leave it there.

Yes. Thanks, Mike. Yes, it is something, obviously, that we are interested in, and it is one of the work streams that will be one of the early conversations that we're going to have between the technical experts on both -- from both companies to determine what the path would be for that.

But I think my more important message each company has its own pipeline of ongoing conversations for a great fit for each of our technologies to different partner products. And so that is where the initial focus is going to be just based on the fact that for those people who are seeking a more high-volume rapid delivery, ENHANZE is the way to go if they are wanting a potential for an auto-injector in the patient's home, perhaps the Elektrofi technology and Hypercon is going to be a better one.

You will see the initial focus most assuredly being on pursuing those 2 successful strategies to date. We're interested to see can they come together, but we don't have to wait for that data. The strategy will be to pursue each of them separately as we know there's opportunity for them individually.

Your next question comes from the line of Jessica Fye with JPMorgan.

This is Adam on for Jess. I really just had 2. Can you share your latest thoughts on potential for new ENHANZE deals near term? I think you mentioned one in the prepared remarks, but any details around that? And second, which product or products contributed the most to the guidance upside this time around?

Yes. Let me take the first one, and then Nicole will talk about the guidance. Adam, with regard to new deals, I did say in my prepared remarks, we're very confident to have a new deal this year. That confidence comes from proximity to completion of discussions. We have several discussions that are ongoing.

And so it isn't our practice to preannounce anything, but all I can say is that we are excited with the continued interest in ENHANZE and whichever of these conversations, we cross the finish line first, we're very excited and think it represents a great opportunity for patients, but also for Halozyme. Nicole, would you talk about the guidance?

Yes. So our guidance is driven by the strength of our royalties, and we continue to see royalties being very strong in our main royalty drivers, which are VYVGART Hytrulo, Phesgo and DARZALEX. And I'll also point out, just recall that DARZALEX and VYVGART Hytrulo both had new indications launching this year. As you can are aware, first year launch estimates are notoriously hard to project exactly, and that's where we're seeing the upside and reflecting that now given that latest data trend in the full year projections.

Your next question comes from the line of Mitchell Kapoor with H.C.W.

I wanted to ask about forward guidance, of course, recognizing that you only formally update the 5-year guidance once a year, we're getting close to 2026. So wondering with the strong momentum that we have been seeing quarter-to-quarter and the subsequent guidance raises for this year, how you're thinking about maintaining that growth into the next few quarters in 2026? Does the current trajectory suggest that the previous 2026 ranges might already be tracking towards the upper end of what was outlined earlier this year?

Yes. Thanks, Mitchell. So we will be able to provide more details on that in early in 2026 when we are able to really collect all of our trends and input from our partners comes in towards the end of the year. So more details to come, but we are tracking, as you can see, to exceed 2025 original expectations, but we will be able to reflect the latest information when we give full year guidance and update in the new year.

Okay. Great. And then the second one is just on how you're doing -- conducting outreach for prospective partners between ENHANZE and Hypercon. Are these parallel tracks? Or how do you kind of discuss those with prospective partners?

Yes. Thanks, Mitch. At the moment, until the HSR view period is completed, our 2 businesses are operating separately. We can have conversations about planning as to how we're going to operate together, but we do not share any information with regard to partners each of us is talking to or anything like that. So I would expect upon completion and the close, which we do expect to happen in the fourth quarter, will be in a position to have conversations and identify who's talking to them.

But at this point in time, that's not something we are aware of or want to share. We're each pursuing our own separate conversations and targeted outreach. Again, each of the products works in a slightly different space. All of them are for subcu delivery. ENHANZE is more focused towards the larger volume, which is often in the doctor's office or occasionally at home, whereas the opportunity with Elektrofi is a bit more focused at that at-home potentially auto-injector delivery because the volumes can be potentially reduced to as low as 2 ml.

So I would expect we may have -- we're talking to the same companies, but probably not talking on exactly the same products, which is why this is such an attractive deal expanding our TAM because each of them is going to have a different best use case. And that's what I expect to see when we're able to talk in more detail.

Congrats on an impressive quarter.

Your next question comes from the line of Brendan Smith with TD Cowen.

Congrats on the quarter as well. Maybe just a couple of quick ones from us. First, actually on the auto-injector business. Can you maybe just remind us what the development path there is looking like and how we should think about the economics and timing of that over the next couple of years?

If you think that would be compatible with Hypercon or that would require something different with separate validation? And then just maybe quickly on the earlier pipeline. Can you remind us when we can expect updates from the ViiV and Acumen products? And if you disclosed anything about those economics that we should make sure that we flag as we try to think about royalties for the next wave of the [indiscernible] drugs?

Yes. Thanks, Brandan. With regard to the auto-injector business, so the small volume auto-injectors are obviously for products that are 2.25 mls or less. And there is an immediate applicability and use with the Hypercon products if a partner is developing that. So those are basically -- there's some customization that's possible. But for a partner who wants to integrate it into their development, that's pretty straightforward.

With the high-volume auto-injector, we have progressed to having very strong clinic-ready prototypes that are able to be integrated into development plans now. And so for a company who is wanting to use those, that is also going to be pretty straightforward for them to put into whatever clinical trial they're going to do to test it and start doing the development.

The actual separate development you need for a device can all happen in parallel to the clinical development. You've got to do stability studies. It's usually human factor studies, but that is usually all happening in parallel to what's the traditional clinical pathway and integrated into a single filing. So I would say we're in a great position for partners who want to use Hypercon to be using either small volume or high-volume auto-injectors and integrating them immediately as soon as they want to be able to do them.

On the economics, if you recall for the auto-injectors, this is much more of a business model where for the small volume auto-injector, it is generally a cost model where there's a certain charge per device. For the high-volume auto-injector, it will, because of the size of injection need to be used with ENHANZE. So we think of those as being associated with royalties because of the need to have ENHANZE used with them, but they will also come with a cost per device adding additional revenue there. Brendan, did that answer your question on that, and I can move to the pipeline?

It is. Yes, that would be great.

Okay. So with regards to the earlier pipeline, there haven't been any public updates from ViiV or from Acumen in the last couple of quarters. And so we're not in a position of being able to share any additional information. The last update from Acumen, as you probably are aware, was that they had finished their Phase I testing. And so that was great to see, and they reported the results actually publicly. But we're awaiting being able to provide any updates beyond that.

On the economics, in the -- when the deals were announced in the press releases insofar as what was permitted to be made public, it does include some high-level description of the milestones and royalty structure of these agreements, Brandan. So I would recommend if you could maybe just go back and look at those, you'll get a bit of color, not granular, but a bit of color that might be helpful.

[Operator Instructions] Your next question comes from the line of Corinne Johnson with Goldman Sachs.

Maybe following up on some of the BD commentary earlier. I guess, how do you think about whether you currently have the partnerships you need to drive revenue growth kind of into the next decade, particularly as some of the key products like DARZALEX contracts terminate in that early 2030 period and given there's a 5-year development time line for new partner products?

Yes. Thanks, Corinne. Let me start by saying for each of the products that are in our development, we kind of group them into 3 groups. Now we've got the current blockbusters. And I think what's the first thing to note about those is those products, and Nicole commented on it, VYVGART and DARZALEX are having new indications every year at this point in time, which is super in terms of driving their continued growth for a period of time.

We talked about DARZALEX with smoldering multiple myeloma with first line, which is why despite that being a product that's been in the market now for many, many years, it's still putting up 19%, 20% year-over-year growth. And we do are excited to see that continue to grow for years to come.

VYVGART is a very interesting one. That's very early in its life cycle. And obviously, all the growth we're seeing today are driven by gMG and CIDP. But next year, as you're aware, there's going to be readouts in thyroid eye disease, ocular myasthenia gravis, myositis and Phase II data in systemic sclerosis, so we think of VYVGART where we get royalties out to the 2040s as being an incredibly valuable growth engine for multiple years to come.

And then if we go to the second block, which are the most recently launched ones, so OCREVUS and OPDIVO and Tecentriq and amivantamab, those are also just at the beginning of their growth trajectory where we expect growth for many years to come given they are just at the start. And in many of those cases, we've got royalties going out certainly well into the 2030s and in some instances, into the 2040s. So that's another set of sustainable royalty revenue streams. And then behind that, let's look to our development pipeline.

The products that are in Phase I, II and III, so they're going to have different timings for of them potentially launching before 2028, other ones shortly after 2028. So again, another set of new royalty streams adding in, in that. And your point of the 5 years really does say that for any new deals we sign now, which we're very actively working on and have new products starting next year, those have the potential to be launching in the early 2030s, adding once again, new royalty revenue streams.

So we continue to be very excited by these not just waves, which are a very important part of it. But within each -- several of our products, they are being developed in a way that is having them grow and grow beyond probably what we all thought initially because of the value of the new indications and the investments in the companies are making to have these become truly mega blockbuster drugs. So that's the way we think about it, and that's what we work towards just a wave upon wave of new royalty revenue.

Ladies and gentlemen, this concludes Halozyme's Third Quarter 2025 Financial and Operating Results Conference Call. Thank you all for joining. You may now disconnect.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme Investor Call. [Operator Instructions] Please note, this event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good morning, and welcome to our investor conference call. In addition to the press release issued earlier this morning, you could 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 overview of the transaction. We're also pleased to have Chase Coffman, CEO and Co-Founder of Elektrofi, joining us today, together with Nicole LaBrosse, our CFO.

On today's call, we will be making forward-looking statements about future expectations, including relating to the proposed transaction with Elektrofi as outlined on Slide 2. I would also refer you to our SEC filings for a full list of risks and uncertainties.

I will now turn the call over to Dr. Helen Torley.

Thank you, Tram. Good morning, everyone, and thank you for joining us this morning. Many of you listening probably know about Elektrofi, but for [indiscernible] some of you may be new. So let me start with making a few comments about the company and tell you just how excited I am to be discussing our acquisition of Elektrofi today. Elektrofi is a pioneering company founded 10 years ago to lead the technology development for Hypercon, a hyperconcentration technology applicable to biologic drugs. Today, many biologic formulations are limited by low concentrations. And this can result in large volumes greater than 2 milliliters being needed to deliver the effective dose.

By applying Elektrofi's hyperconcentration approach, concentrations of 400 to 500 milligrams per mL or as much as 4 to 5 times higher can be achieved, which can make all the difference to enabling more drugs to be able to be delivered in a small volume at home via small volume auto-injector or even by Halozyme's innovative high-volume auto-injector. For areas, including inflammation and immunology, neurology, nephrology and oncology, at-home patient delivery is the holy grail that just about every pharma and biotech company we're speaking to is seeking.

The Hypercon technology is a fit for this very large and growing biologic product opportunity that uniquely addresses unmet medical needs today and into the future. And this is why we are acquiring Elektrofi. We and many experts are convinced that biologic products will remain the mainstay for a growing number of medical conditions. This is exemplified by the expansion of new categories of biologics each year that are in development and the large number of biologics approved worldwide every year. Through adding the unique patent-protected Hypercon technology to hyperconcentrate biologics, we are adding an innovative breakthrough technology that will complement and expand our ENHANZE and auto-injector opportunity and revenue and deliver on our vision to make breakthrough therapies fit the patient's life.

This acquisition creates for Halozyme a broad and differentiated portfolio of innovative technologies that will allow us to set new standards of convenience and accessibility by substantially expanding the scope of therapies that can be delivered subcutaneously. Importantly, the acquisition allows Halozyme to capitalize on the secular trend towards at-home and in health care practitioner office administration of biologics. Shown on Slide 3 is our agenda for today.

And moving now to Slide 5. Let me begin with the strategic deal rationale. There really could not be a better fit to the deal criteria that I've been sharing with you over the last 12 to 18 months. We wanted a truly innovative breakthrough technology that Halozyme based on our expertise could accelerate the development of. There is nothing that is closer than Hypercon. It is an innovative technology that by enabling as much as 4 to 5 times higher concentration than today's industry aqueous formulation biologic concentrations can reduce the volume and can increase the number of products that are able to be delivered subcutaneously using a small volume or even a high-volume auto-injector at home or in the doctor's office. This is a perfect complement to ENHANZE, which is the gold standard for rapid high-volume subcutaneous delivery.

The addition of the Hypercon technology will expand the number of partnerships, and we believe will bring additional revenue opportunities on top of the exciting opportunity already in place with existing partners. We could not have a better fit on the business model with Hypercon, which we believe will bring milestone revenue, recurring licensing royalty revenue and low capital intensity. Excitingly, the innovation of Hypercon has resulted in a broad suite of patents into the 2040s, supporting long-term revenue growth. And we are pleased to report that the acquisition, which will be all cash, is projected to result in leverage of approximately 2x net debt to EBITDA at closing.

Let me move to Slide 6. Now why are we doing the transaction today? The Hypercon technology is at a true value inflection point. Three agreements have already been signed with marquee pharma and biotech companies and two products that are derisked mechanisms of actions and already blockbuster partner commercial products to date are projected to enter the clinic and begin clinical development by the end of 2026 or earlier.

Yes, within the next 12 to 15 months or earlier, we project that two partner products will enter the clinic. This sets a clear pathway for significant growth with royalties beginning as early as 2030. We Halozyme have strong royalty revenues projected for many years and we are pleased that we will be diversifying our business to bring in a new royalty revenue stream as early as 2030. It is certainly exciting to onboard a new technology with such strong revenue timing.

Now in addition to royalties, there are also milestones. The milestone payments for the two products projected to enter the clinic by the end of 2026 or earlier represent up to $275 million in potential, further derisking the acquisition. And by adding in Halozyme's drug delivery development and commercialization expertise, we believe that we are in a strong position to accelerate the timing to approval and expand the revenue opportunity by expanding the number of targets in development and creating the next waves of launches.

Let me now turn to the terms of the transaction, which are shown on Slide 7. Under the terms of the agreement, Halozyme will make a $750 million upfront payment and future payments will be tied to successful marketing approvals of the first 3 Hypercon products. Upon each of the first 3 approvals, there will be a $50 million payment up to a total of $150 million. The acquisition will be financed through Halozyme's strong cash position and with our credit facility. Following the close, we expect leverage to increase to approximately 2x net debt to EBITDA. And our goal is to delever in the subsequent quarters, supported by our robust free cash flow.

The transaction has been unanimously approved by the Boards of Directors of both companies, and it is expected to close in the fourth quarter of 2025, subject to regulatory review and other customary closing conditions. And from a financial perspective, the transaction is expected to be less than 5% dilutive to EPS over the medium term, noting that this excludes potential milestone payments related to the programs that are in development, which could offset dilution prior to the projected royalty revenue in 2030 and beyond. We expect full year 2026 incremental operating expenses will be in the range of $55 million.

Let me move now to Slide 9. Our vision at Halozyme is very clear. Our goal is to transform the way important medicines are delivered so that treatment fits the patient's lives rather than the patient having to organize their lives around treatment. The acquisition of Elektrofi clearly reinforces this vision, adding new subcutaneous drug delivery opportunities.

Moving to Slide 10. The addition of the Hypercon technology broadens Halozyme's portfolio of drug delivery technologies, creating three differentiated solutions: ENHANZE, Hypercon and our auto-injectors. Starting with ENHANZE. Today, our proprietary rHuPH20 enzyme is enabling biologic drugs with biologic concentrations of between 40 and 180 milligrams per mL, which for the needed dose has resulted in injection volumes of between 5 and 23 milliliters. ENHANZE transforms treatment by reducing administration times from hours for the IV treatment to just minutes for the subcutaneous, saving time, money and allowing more therapies to move from the infusion suite to the community and health care practitioner office settings and to the patient's home.

With the addition of Hypercon, we project we will extend subcutaneous delivery to an even broader range of biologics. Hypercon enables ultra-high concentrations of biologic products of between 400 to 500 milligrams per mL, enabling lower volume requirements for the effective dose. This lower volume creates new opportunities for at-home self-administration and for efficient delivery in the health care practitioner setting while also expanding the range of molecules that can be delivered subcutaneously.

Our auto-injectors have significant commercial synergy. Our high-volume auto-injector remains the first and most advanced device capable of delivering 10 milliliters of a biologic in just 28 seconds. This represents a compelling opportunity to combine the device with ENHANZE and also with the Hypercon-enabled formulations. In addition, pairing Hypercon with our best-in-class small volume auto-injectors represents another attractive avenue for commercialization, particularly in immunology, neurology and other chronic diseases where at-home administration is the future of care.

Bringing together these 3 innovative technology solutions creates new commercial opportunity for our partners and strengthens Halozyme's mission in advancing patient-centered drug delivery solutions.

Turning now to Slide 11. Today, we have 10 approved ENHANZE products. On this slide is an illustration of how the availability of ENHANZE and Hypercon, together with our auto-injectors will continue to enable subcutaneous delivery of products by health care practitioners, which is shown in the lower dotted line. Importantly, as shown by the top dotted line, we project the potential for strong growth in at-home biologic delivery in addition, capitalizing on this important secular trend for patients delivering their own medication at their convenience at home.

In essence, we see a path using the expertise that we developed from the success of ENHANZE to create a whole new wave of opportunity with Hypercon.

I'll move now to Slide 12. What makes this acquisition especially compelling and is a key derisker are the efficiencies from combining Halozyme's and Elektrofi's business models. Similarly to ENHANZE, Hypercon is structured around a licensing royalty-based partnership approach, supported by strong intellectual property and designed to deliver long-term growth. Both technologies create value by enabling our pharma partners to expand patient access and enhance product differentiation while generating recurring revenues.

In addition, similarly to Halozyme, Elektrofi operates a lean business model with leverageable partner support. For both technologies, we serve as advisers to our partners on the regulatory and clinical development. As a result of this advisory role, we do not have to bear the high costs related to clinical development and commercialization.

The deep experience we have gained in development of subcutaneous delivery technologies and product approvals over the last 12 years will serve as an accelerator for Hypercon partners. We also do not own the manufacturing plant and thus require very low capital intensity. This capital-efficient approach will allow us to continue to concentrate resources on innovation and on partner success. This shared foundation ensures that Hypercon integrates seamlessly into our portfolio, reinforcing our strategy of building a diversified, sustainable business model anchored in innovative drug delivery technologies.

Moving now to Slide 13. Elektrofi has 3 current global partnership agreements with leading companies that validate the potential of Hypercon and underscores the confidence that leading biopharma companies have placed in the technology. Importantly, I'll point out that the licensing agreements are structured around milestone payments and have attractive mid-single-digit royalty rates.

Additionally, existing collaborations are anchored in two established blockbuster therapies that are advancing to the clinic by the end of 2026 or earlier, providing the opportunity for up to $275 million in development and commercial milestone payments, which will further support revenue growth as the programs advance. And we see this as just the beginning for Hypercon. We will apply the same approach as we did for ENHANZE, expanding the number of partners and products in development with many of the world's leading biopharma companies, creating a trusted model for developing, commercializing and scaling innovative technologies.

Our learnings on what it takes to gain regulatory approval for our drug delivery technology and our insights gained on development and CMC requirements give us confidence in the expansion and acceleration of Hypercon future launch waves.

Let me now move to Slide 15. Since its founding 10 years ago, Elektrofi's mission has been to transform how biologics are administered by making treatment faster, more convenient and more accessible for patients, helping patients get the medicines they need when they need them.

Based in Boston, the 80-person strong team, including more than 60 R&D specialists have pioneered this breakthrough technology under the leadership of CEO and Co-Founder, Chase Coffman. The success they have achieved thus far is a reflection of the strength, dedication and innovation of their team and of the leadership of Chase. And we look forward to bringing on board their technical depth, collaborative mindset and the proven execution as an innovator in subcutaneous drug delivery. And I'm very pleased to announce that following the close of the acquisition, Chase Coffman will become President of Hypercon and will become a member of Halozyme's leadership team reporting to me. I'm truly delighted to welcome Chase to Halozyme, and I'm very excited to be working together and post close.

Let me move now to Slide 16. The Hypercon technology is an innovative microparticle approach that sets a new standard in the field, enabling ultra-high protein concentrations while maintaining syringability, meaning it can be injected smoothly and easily. Let me walk you through how it works. Through a gentle dehydration step, water is removed from the standard biologic aqueous solution, resulting in the formation of uniform spherical microparticles that encapsulate and protect the protein. These microparticles are then suspended in a lipid-based medium that's been optimized for subcutaneous injection.

Upon subcutaneous administration, the microparticles rapidly and naturally rehydrate in the subcutaneous space, which enables controlled release of the therapeutic while maintaining the protein structure and function. The process is highly innovative, and this has been recognized with multiple patents and pending patents across 15 patent families.

Moving now to Slide 17. Hypercon's operating model is lean, capital efficient and supported by partnerships. This approach enables Elektrofi to focus on technical expertise and advising rather than a large-scale infrastructure needed for clinical trials, commercial scale, manufacturing or commercial execution. As shown on the right in green, commercial scale manufacturing or commercial execution are the partners' responsibilities. And similarly to ENHANZE, the low fixed cost base and limited capital intensity creates an efficient model generating robust cash flow.

Moving now to Slide 18. Elektrofi has built a formidable intellectual property state to protect the Hypercon technology, securing 9 issued U.S. patents across 6 distinct parent families and filing worldwide applications spanning 15 unique patent families, which are currently pending. Together, these create the potential for patent protection extending into the mid-2040s.

Let's move now to Slide 20, and I want to share with you why we are confident in the long-term growth opportunity this acquisition creates for Halozyme, our partners and our shareholders. The Hypercon technology is poised for a major value inflection. By year-end 2026 or earlier, we expect two partners to initiate clinical development, each with a derisked and each with an established approved blockbuster product. Excitingly, an additional product has also been nominated by a partner and several other products are in feasibility testing.

Let me share with you now how I will be measuring success and suggest that these would be good metrics for you also to track. I will be tracking the start of the clinical development for two products within the next 12 to 15 months or earlier. We will be defining a registration paradigm for Hypercon that makes clinical development streamlined. And it will be our plan to sign and advance new targets into development for Elektrofi partners, Halozyme partners and for new partners within the next 12 months.

Let me turn now to Slide 21. I want to close by reiterating my incredible excitement to add the Hypercon technology and the entire Elektrofi team. This is truly a breakthrough technology that is at a value inflection point. Importantly, licensing agreements are structured around milestone payments and attractive mid-single-digit royalty rates. And the opportunity to expand and accelerate subcutaneous delivery, especially at home, is large and growing. And very importantly, this acquisition uniquely creates a series of unmatched synergies. By adding in Halozyme's drug delivery technology development and commercialization expertise, we are in a strong position to accelerate the timing to approval and expand the revenue opportunity by expanding the number of targets in development and creating the next waves of launches.

The opportunity to offer our complementary technologies across current and new partners is obvious, but worth emphasizing. And with Halozyme's backing and support, the Hypercon team can be fully focused on advancing the technology as rapidly as possible and expanding drugs in development and not worrying about fundraising and building infrastructure as examples. I want to extend a very warm welcome to the entire Elektrofi team as they joined Halozyme post closing. We deeply value the expertise, innovation and dedication that you will bring, which has been so central to Elektrofi's success and reputation in the industry. And we're very excited to combine our differentiated strengths to advance subcutaneous drug delivery solutions, expand the opportunities available for patients and build on the momentum of both of our organizations.

And now I'd like to open the call for your questions. Operator?

[Operator Instructions]

Your first question today comes from the line of Sean Laaman from Morgan Stanley.

This is Morgan on for Sean. I have two. First, just if you could go a bit deeper into how Hypercon complements ENHANZE versus substitutes it? And in which use cases would partners choose Hypercon instead of ENHANZE? And then finally, for the two partners projected to begin the Hypercon formulated clinical development by year-end '26, can you disclose anything about the therapeutic areas or molecule types and -- any more information there would be super helpful.

Thanks, Morgan. With regard to the targets entering the -- or the products entering the clinic, unfortunately, due to confidentiality, we're not able to talk in any more detail other than what we said in the prepared remarks. Excitingly, these are both derisked mechanisms of action and are established blockbusters today. So that's really all we can say about that.

With regard to the positioning, when a company is developing a biologic, it's thinking about which patient population it's going to be used in. It's thinking about what the setting they want it to be used in, and they're also thinking about the competitive profile. And so when we think about ENHANZE, ENHANZE is a great fit for those products that are going to be high-volume subcutaneous injections that can be given in the physician's office, in the infusion suite, which sometimes happens just as a good location and also if the volume is relatively small in the patient's home as we've seen with VYVGART.

Now what the Elektrofi Hypercon technology immediately opens up because it can achieve 4 to 5 times the concentration of today's average biologic, its volumes are subsequently reduced by four to fivefold. And so this enables many more products to be able to be developed, to be delivered in 2 mL or less in the patient's home, potentially even with a small volume auto-injector. And so this is why they are complementary. The pharma companies will have a different goal for each of their technologies based on the factors I mentioned. And we see a lot of opportunity for ENHANZE to be selected for certain patient populations and settings and for the Hypercon to be selected for different patient populations and settings.

And this is why it so broadens Halozyme's opportunity and Hypercon will have its own wave of launches and growth just as we've demonstrated with ENHANZE and just as ENHANZE is going to continue to grow with additional launches for many years to come.

Very helpful. Congratulations.

Your next question comes from the line of Brendan Smith from TD Cowen.

Really big congrats on the deal, guys. Great to see. Can you maybe first just give us a sense of how we should be thinking about the economics of Elektrofi partnerships with Hypercon relative to what we know about traditional ENHANZE partnerships? I mean should we think of this kind of similar royalty rate across the Board? Or just any considerations you're able to disclose there would be helpful.

And then just maybe a second one would be kind of in the context of the CMS update from last night, do you have any sense maybe where this tech might play out with CMS? Do you think any policy changes, if implemented for 2029 on hyaluronidase specifically would potentially be where to encompass some of this technology? Just any thoughts on how we should be considering that there, too?

Yes. Thanks, Brendan. With regard to the economics, and we did include a slide in our presentation deck that summarizes what's publicly available. But what I can say is that in terms of the milestone, the cadence of milestones as well as the royalties being on average in the mid-single-digit royalty, this is very similar to what you've seen with ENHANZE and the same type of value creation potential as we have with ENHANZE. So economics similar is the bottom line.

In terms of the CMS update and for anyone who didn't see that yesterday, CMS basically indicated they need to do more work on their definition in the future potentially for fixed combinations or two active ingredients, recognizing it's a very complex topic and it's going to take them time if they are ever going to finalize such a policy. So -- but I would say specifically for the Hypercon technology, because it's a formulation change, it's not an active ingredient. It's not added in to become a fixed combination.

The CMS guidance is totally irrelevant for the Hypercon technology. What it does is create a brand-new formulation that will get its own registration path, its own BLA and will be entirely unaffected by the CMS fixed combination guidance.

Your next question comes from the line of Michael DiFiore from Evercore ISI.

Congrats on the deal. Two for me. Just simply, how will the NewCo prioritize business development and dealmaking for Hypercon versus ENHANZE products? And separately, I just wanted to focus more on the NewCo's pending patent application. It's actually one of Elektrofi's pending patent applications. One of them suggests that the Hypercon formulations might be combinable with ENHANZE [indiscernible]. So if this is true, like could that in any way solve for the looming ENHANZE LOE in 2029?

Yes. Thanks, Mike, for those questions. With regard to the pending patents, it really is too soon to say. There certainly has been some early experimental work done in combining Hypercon and ENHANZE, but we want to obviously evaluate that in more detail before we provide any commentary on it. On the -- how we will position both drugs and how we promote them, that's what I must say, I'm personally very excited about.

We are going to have team members under Chase leadership who are going to be focusing on the Hypercon technology and be building that business, really promoting exactly where that works to capitalize on the secular trend for more at-home subcu delivery, particularly inflammation, immunology, oncology and neurology nephrology. We will also have members of the Halozyme team who are promoting the broad portfolio. And so in promoting ENHANZE, our high-volume auto-injectors, but also talking about the Hypercon technology, there's a fantastic opportunity for them to be generating leads, if you like, for Hypercon, which we would then pass over to Chase and his team to follow up on, whereas if they profile that works for that individual pharma or biotech companies product is enhanced with a high-volume auto-injector, the Halozyme team will focus on that.

And so we will have a terrific set of business development professionals with the ability to significantly broaden our reach as we fit having this broad and very strong set of offerings for subcutaneous drug delivery.

Your next question comes from the line of Corinne Johnson from GS.

Congrats on the deal. Maybe you could talk about how you think about this kind of offering changing the pace of new deal flow? Does it help to accelerate kind of the one deal per year guidance? And also, could you talk about the role that the clinical derisking could play in terms of establishing additional business development with those drugs entering the clinic next year?

Yes. Thanks, Corinne. By having a broader set of offerings, obviously, we're very pleased with our pace of ENHANZE offerings over the years, and we continue to expect an additional deal this year on ENHANZE. Chase and the team at Elektrofi have done a super job as well, generating one deal a year, I would say, on average as well. And so it certainly will be our goal that you're going to see each of these businesses operating separately to meet the goals of advancing and bringing in new partners, but not just that, the current partners advancing more products into the clinic.

So we certainly will expect more than one deal a year on average with regard to that. I do think the clinical derisking with any new technology is also another inflection point. But I do think the mere fact that two leading companies are taking the technology into the clinic for the clinical development start within the next 12 to 15 months is itself a value inflection point. And then obviously, the data.

Now I can say that based on the extensive preclinical data that's been generated, we're very confident in the technology and what we're going to see in the clinic. Concentrations in that 400 to 500 milligrams per mL has been demonstrated. It's been compared to aqueous solutions and performed well. And so I think about both of those, Corinne, as being value inflection points and derisking points.

Your next question comes from the line of Jessica Fye from JPMorgan.

I had a few, so maybe a little bit following up on one of Corinne's questions, I think. So Helen, I remember the lack of clinical derisking in humans had historically been a reason that Halo didn't pull the trigger on this asset sooner. So can you talk about the specific preclinical derisking data that Elektrofi has generated that ultimately got you comfortable?

Second question to confirm that up to $275 million of milestones associated with those two partner products Elektrofi has entering clinical development in '26, does that say you could earn up to $275 million from those products in '26? Or if not, over what time horizon could that $275 million be realized? Are those all development milestones? Does that include regulatory and commercial milestones?

And then lastly, putting the fixed-dose combo guidance from CMS aside because it doesn't appear this technology that would apply here. Were you suggesting earlier that you think the Hypercon formulations of existing antibodies would not be aggregated with prior versions of those antibodies for purposes of determining eligibility for price negotiation, i.e., like the time to negotiation? Just wanted to clarify that.

All right. Thanks, Jess, for those questions. Let me start with the milestones. The milestones are very similar to what you've been experiencing over the years with ENHANZE. They up to $275 million is for two products. And for these, about 40% to 60% are development milestones, which takes you from that first in human all the way up to the approval. And then the remaining milestones are spread over time as certain sales thresholds are established. So exactly how you would model for ENHANZE and the similar types of time frames, Jess, I think would be very reasonable for you to model for these milestones, too.

With regard to the Hypercon technology, what's really been very, very impressive to us is the significant progress that has been made over the last several years. And I think the derisking events [indiscernible] that so impressive were the signing of deals with 3 marquee pharma companies, so Lilly, Argenx and J&J, but also this readiness to be advancing into clinical testing in just 12 to 15 months. And so we consider that. And obviously, we've taken a look at that, and we're very confident in that projection based on the wealth of clinical data and all of the steps that -- sorry, preclinical data and the wealth of information that you need to be ready for that first-in-human filing.

So we've had a great chance to evaluate that. And for the two products, everything is progressing very nicely. And that's what gives us the confidence with regard to that. For the question with regard to this being a fixed-dose combination, it's not a fixed-dose combination. I think we're going to have to take a little bit of a look at the final guidance, Jess, to know whether this would or would not be included and bundled into it. I think it's certainly my expectation that it isn't, but I think we've got to see the final guidance before we are going to be able to make a final determination on that.

Your next question comes from the line of Jason Butler from Citizens.

Congrats on the acquisition. Two for me as well. I was just thinking back over the history of ENHANZE, there was an initial number of deals, and then it took a while really until you've got initial regulatory approvals until the technology was more broadly considered by partners. Do you expect something similar with Elektrofi? Or could it happen faster than that? What do you think the awareness is of the technology now amongst, for example, your current large pharma partners?

And then secondly, just how do we think about patent strategy here in terms of co-formulation patents? Have partners already started to pursue co-formulation patents with the technology?

Yes. I think with regard to the cadence of partners, it's great to go back and think about ENHANZE where we really were the pioneer in this whole concept of subcutaneous drug delivery. It wasn't the dumb thing for biologics at the time. And so there was a little bit of that inertia you described for being able to -- after getting the first couple of partners, get that broader group of partners on Board. The Hypercon technology is going to benefit from a much greater acceptance and indeed a desire by pharma and biotech to be taking more products directly to subcutaneous especially in areas like inflammation and immunology, neurology, nephrology, where they want the patient to be able to deliver a small volume at home by themselves.

And so I do think just the fact that there is now -- it's so well established, it's so desired, it's so seen as a competitive differentiator. We're going to see a different pattern of being able to bring on new partners and new products than we saw with ENHANZE because the market has been very successfully created, I will say, by Halozyme's pioneering work in this space.

With regard to the patent opportunity, there is an opportunity to get new patents related to innovations found in new product. It's not quite a co-formulation. It's -- I would describe it, but there certainly is an opportunity to be able to generate new patents based on the innovations that will be found by being able to take products from perhaps a concentration of 80 to 100 milligrams per mL all the way up to 400 or 500 milligrams per mL. So absolutely an opportunity there for new IP for the products being tested.

Your next question comes from the line of Mohit Bansal from Wells Fargo.

Congratulations. I have two questions.

Mohit, I must apologize. Mohit, we're not unfortunately able to hear your question. I don't know if you're able to. That's much better.

Okay. Awesome. So I have two questions. One is, do you anticipate any FDC issues here given that there are different technologies, but they both like ENHANZE and Elektrofi are trying to achieve the similar goal of making things convenient for the patients? That's number one.

And number two, I would love to understand, so like I think it does seem like the royalty rates are higher, like higher end of the mid-single-digit range. So I think probably it is a question for Chase as well. So I mean, what -- like when you due diligence, like how is the value proposition different from the ENHANZE technology that makes pharma pay a little bit higher royalty rate for this technology?

Yes. Thanks for those questions, Mohit. So I'll say that we are confident that this transaction will clear any regulatory review. Obviously, that is going to play out over usually a 30-day period from when we file our documents for that. But based on our assessment, Mohit, it will clear. With regard to the value, I would think about the value, particularly as it relates to the royalties as being very much in the same ballpark across both of the technologies. And so that, on average, mid-single digit is very aligned to what you've been used to seeing with ENHANZE and what's created the very strong value for Halozyme from the adoption of the ENHANZEtechnology.

[Operator Instructions]

Your next question comes from the line of Mitchell Kapoor from H.C. Wainwright.

This is [ Katie ] on for Mitchell. I'm kind of wondering a little bit about how you're going to seek out partners for this technology? And if you're going to apply any selectivity into what products or applications you're going to pursue most actively. So if there's any particular attributes or applications that you're looking at in partners.

All right. Thanks, Katie. I really do -- when you think about when pharma partners are developing a new drug, they are very much thinking about how it's going to perform in the market. And so they think about what's the patient population and what's going to be best for them. They think about what is going to be the right setting for care. Is it something that would be given in a hospital, in a doctor's office or in the patient's home ideally for the patient. And they think about the competitive profile. What else is there and can they create something that is going to be the most desired to be used from a point of convenience or even the risk-benefit profile.

And so I do think we'll be presenting our offerings to them. We now have three platforms -- sorry, technologies for the patients or companies thinking about using this. We've got ENHANZE, which will be for the high-volume rapid subcu delivery. We've got Hypercon, which allows you to get to those smaller volumes, enabling more at-home use, which, as I mentioned a moment ago, is very much a secular trend and an absolute desire, if not the holy grail for companies who are developing in inflammation, immunology, neurology, nephrology as an example. And then enabling all of that would be our small volume auto-injector for volumes under 2.25 mLs and our high-volume auto-injector for anything between 3 and 10 mLs.

And so this broadening of our offerings, each company for a different product will have one that fits best for meeting their specific target product profile. And so we do think this is going to expand the number of opportunities for Halozyme to engage with these partners, and they will select which one is best. We don't need to do the positioning.

Your next question comes from the line of David Risinger from Leerink Partners.

So I wanted to add my congratulations to you, Helen and Chase and also your teams on the transaction. I have two questions, please. First, regarding the timing of this announcement, it obviously coincides with yesterday's CMS announcement. So could you just provide some color on the timing in conjunction with that CMS disclosure yesterday?

And then second, regarding the manufacturing scale-up for Elektrofi and what needs to happen for the 2 Phase I programs to be initiated next year. Could you provide some details on that, please?

Yes. Thanks, David. The timing is utter coincidence. Obviously, for the CMS IRA guidance, we knew it would be sometime September, October. Totally independent from that many months ago, Chase and I initiated a discussion with regard to what the power could be of bringing our two great technologies and companies together. And obviously, any deal transaction takes several months to actually make happen. But our teams worked very diligently, and thank you for recognizing the team for that because we had a super team of Halozyme technical working with the Elektrofi team to evaluate the technology. And just as it turns out, we signed our merger agreement yesterday. And shortly after that, the CMS guidance came out. So pure coincidence, David. And obviously, we are delighted to be able to announce this broadening of our portfolio and more options for patients for subcu delivery.

With regard to the manufacturing scale up, that's certainly something that we have dug into, and we actually just have a team who are back from spending time specifically evaluating the manufacturing scale up. And what I can say is we are very confident that the scale-up will be ready for the initiation of the clinical development, which will be in that 12- to 15-month time frame. Everything is very nicely on track for that and just terrific work done by the Elektrofi team under Chase's leadership to be really doing a super job on that.

[Operator Instructions]

And that concludes today's conference call. We thank you for your participation, and you may now disconnect.

Good morning, everyone. Welcome to Morgan Stanley's Global Healthcare Conference. I'm Sean Laaman, the Head of the SMid-Cap Biotech Equity Research team here at the firm. For important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative.

For this session, we have the Halozyme President and CEO, Helen Torley. Thank you for your time today. Greatly appreciate you being here. And maybe just to set the scene a little bit, if you'd like to make some opening remarks, Helen, that would be amazing.

Yes. So Halozyme is a biotech company, and we have a mission to help important therapies fit into the patient's life rather than the recovery be impacted by some restrictive schedule of having to travel for treatment. We do that with 2 drug delivery platforms. The first is our ENHANZE platform, which is based on hyaluronidase enzyme, which facilitate large volume delivery of biologics, delivering up to 15 mls in as little as 3 minutes or 5 mls in just 20 seconds as is the case with VYVGART Hytrulo and the prefilled syringe that you may just have heard about.

We also have auto-injectors, a small volume auto-injector, which delivers up to 2.25 mls in just seconds. And we have by bringing together the amazing technology of ENHANZE plus our auto-injector technology created the first ever high-volume auto-injector that has been demonstrated to be able to deliver up to 10 mls of biologic in just 30 seconds.

This is a very profitable business for Halozyme in terms of the fact that we earn milestones and royalties. And that has resulted in Halozyme having not just a very high top line revenue growth this year, where we're projecting $1.27 billion to $1.335 billion, strong growth, primarily driven by our royalties, which we project this year at $825 million to $860 million, which is a growth of 44% to 51% year-over-year, really being driven by 3 products that have been run fairly recently: the first one is DARZALEX FASPRO, the second one is PHESGO and the third one is VYVGART Hytrulo from argenx. And so these 3 products still making a remarkable difference in patients' lives and leading to a lot of excellent growth at Halozyme.

And in terms of capital allocation, always an important decision when you've got a high cash flow business like we have. First and foremost, we invest in our business. Secondly, we've been returning capital to our investors through share repurchases. And the third one, we have an ambition to add additional drug delivery platform to continue to build on the excellent growth we're seeing today with ENHANZE and our auto-injectors and deliver that long-term durable high profitability growth.

Wonderful. Just some macro considerations that I'd like to start with, but just China's biotech innovation, it's really going hot. And how do you think about Halozyme's competitive positioning here? Are there opportunities there? How does it influence, if at all, your R&D and business development strategy?

Yes. I mentioned we're focused on subcutaneous drug delivery, and that is something that is actually gaining traction globally. You can imagine that instead of lengthy hours long intravenous infusions, we're facilitating simple, short subcutaneous injections in seconds to minutes. And certainly, in China, we're seeing that trend of people wanting subcu therapy, which can perhaps be done in a doctor's office instead of an expensive hospital infusion suite or even in the patient's home. That's a trend that is very much present in China.

Just earlier this year, PHESGO, which is actually Roche's product for breast cancer, it's a combination of PERJETA and Herceptin, got national reimbursement. And that actually led to very strong growth of PHESGO in the first and second quarter as China adoption increased.

Other products that we have that have very recently been approved in China that we expect to grow in the same way once all of the reimbursement is in place would be argenx for generalized myasthenia gravis and also for CIDP. So China, very much another market that is seeing the benefit of for the patient, for the health care system and for the health care professionals of the short simple subcu injection.

And a question on AI. How do you currently leverage AI or think about leveraging AI in your business? And how do you see it about as a potential future disruptor?

Yes, we've certainly been embracing the innovation that comes with AI, and it's very much in our operations. Areas I can highlight that we're seeing benefits already in terms of efficiency would be in improving document flow in regulatory, signal detection in terms of safety, but also in our operations and manufacturing. And the third one, we're using it to accelerate our decision-making as well in areas like business development screening. And so certainly a huge benefit in terms of efficiency, and we're just planning to keep expanding that with that focus on improving our operations.

Wonderful. And a bit more -- a lot more debate in the market around this next question, though it is on the macro side, how much or how impactful -- what's been most impactful on Halozyme from the regulatory side? Would it be FDA MFN or tariffs?

I'm going to mention FDA, and it's actually coming from a very positive place where we've seen a lot of very positive impact over the last years in the Food and Drug Administration and changes they've made. I'll begin with when thinking about the ease and simplicity of getting a product approved with subcu with ENHANZE.

Now for our partners, and I'll use Opdivo, Bristol's Opdivo as an example, with a single study in renal cell carcinoma, the FDA granted them a very broad set of indications in multiple other solid tumors. And we think that recognition as to how to streamline the development of important medicines has been a very positive and welcomed change in terms of FDA mindset.

And I think it's really just the beginning if we think about Commissioner Makary's comments also about making drug development flexible and common sense. And so we plan to continue to engage with the FDA and further streamlining those efforts on. I think also, I'll just comment that certainly for us and our partners, we're finding everything proceeding according to the usual time line. So nothing delayed, everything very much according to plan. And so we deeply appreciate that with some of the changes, no impact in how the regulators are interacting with us.

Sure. I have to get more Halo specific, but how confident are you that the ENHANZE will be treated favorably under CMS IRA? And the guidance? And sort of how should we think about the steps unfolding to kind of clear that in investment thesis over the next 3 to 6 months?

Yes. Just a little bit of background context there. Under the IRA, there's an area of it that focuses on treating fixed combination drugs that are made up of 2 active ingredients as a separate drug from the individual ingredients. And when the Part D guidance first came out, that was the language that was used there. Importantly, ENHANZE is an active ingredient. It's designated as such by the FDA. If you look at the labels of our products, it's listed there as an active ingredient. And yet, we have a separate BLA for Hylenex, which is the rHuPH20 enzyme.

The area that's under comment at the moment was when the Part B guidance came out a few months ago. While it continued to preserve the recognition of a product with 2 active ingredients as a fixed combination, it brought some questions for the community to comment on does the active ingredient need to have a direct impact on the disease or does it have to have clinical benefit. So we and many of our partners have actually commented to CMS with regard to the fact that the Part B guidance should be kept the same as Part D. There are a number of policy and legal reasons why that makes sense. But very importantly, if you think about the clinical benefit that is and the IRA is looking to see clinically meaningful benefit, which the FDA describes as how a patient feels, functions and survives. We've wrote many, many examples of how ENHANZE subcutaneous delivery has done that.

And just to give a few examples, you often hear about infusion-related reactions with drugs. That sounds like, well, that's just a side effect. But it's a side effect that makes the patient feel very unwell. It causes low blood pressure, headache, breathlessness, and it can lead to anaphylaxis and death. When we think about some of the drugs we work with like J&J's terrific drug for lung cancer called amivantamab or RYBREVANT, with the IV, the rate of infusion-related reactions was 67%. It was reduced by a factor of 5% down to just 13% with subcu. Now I think you'll all agree that's a clinically meaningful benefit for patients.

Importantly, with RYBREVANT also, there was an overall survival benefit in an analysis and exploratory analysis that was done, another clinically meaningful benefit. And it's been pretty common throughout all of our partner filings that the rate of serious and serious adverse events is also a lot lower with the subcutaneous. So when we think about all of the clinically meaningful benefits, we feel very strongly that the language should be unchanged between D and B. So we've written a comment letter. We have visited with the OMB to present those arguments. We've had conversations with CMS also about those arguments also highlighting the reduced cost of care.

We did an analysis in Medicare. And for subcu therapy versus the IV, the average cost savings per year are between $12,000 and $56,000 per patient per year. So if the clinical argument doesn't get you for CNS and for people who are worried about the cost of care, the clinical -- the benefits in terms of cost of care are remarkable as well. So lots of arguments, Sean. We very much hope that we do prevail on that.

I'll just mention one thing that's also come out since then, though that has the potential to impact Halozyme that was causing questions. And that relates to what will happen with the orphan drug designation. And if anybody was watching the one big beautiful bill, it actually did make it clear that if a drug has 2 orphan indications, it will be excluded from the IRA. Now that's relevant to Halozyme because DARZALEX was one of the first drugs that we're involved in that could be up for inclusion in the IRA price negotiations. Both of the indications are orphan. So under the big beautiful bill, that will no longer be included in the IRA for consideration. And also Opdivo, actually the first indication for Opdivo was an orphan as well. So that pushes out the time line for Opdivo. So obviously, an area we're watching carefully, Sean, and we're very hopeful that our arguments will prevail. But even beyond that for Halozyme, the clarity of orphan drug has also made the IRA a lot less relevant and impactful to Halozyme.

Sure. That was a wonderfully full answer. But if I can -- I might have missed it, it was so full, but just can I push you on timing. Do you have a view on when this might get resolved?

Yes, there's no official timing comes out with a clock for this. But based on prior precedent of the time between the draft guidance and final, we would expect it in September or October. So in the upcoming weeks will be the final guidance there.

Wonderful. And I guess on guidance, so the company has raised guidance multiple times. And just remind us sort of what have been the key factors behind driving such a big uplift in earnings expectations?

Yes. I mentioned in my introductory remarks, what our updated guidance for the year is. But just to reiterate for total revenue, $1.27 billion to $1.325 billion. And the key driver of that is the royalty revenue, which is growing remarkably to $825 million to $860 million this year. The key drivers of that are the 3 products that were launched in 2020 and 2023. And these are products that we expect to continue to grow for multiple years to come.

The first is DARZALEX FASPRO, which is obviously Johnson & Johnson's terrific drug primarily for multiple myeloma patients. The subcu version is now 96% of the use of that. So all of this growth is subcutaneous. And you may say, well, it's already at 96%. Is this going to keep growing? Analysts project that DARZALEX will grow from $13 billion today to $18 billion in 2028. And it's doing that by continuing to increase its penetration into the frontline population.

Now the frontline population is the largest population. So there's obviously a lot of growth to come from that. But the compounding effect of the fact that the frontline patients stay on therapy for many years is really, I think, what's causing that accelerated growth over and above, frankly, what we had predicted for this year in terms of a very nice story there that's going to continue to grow for years to come.

PHESGO, I mentioned, accelerating this year because of China reimbursement, but also launched in 20 additional countries in the second quarter, growing from 58 launch countries to 78. That's going to continue to grow. And the third one is VYVGART Hytrulo, launched in gMG, more recently launched in CIDP, but we're very excited about the April launch of the prefilled syringe, which has got the formulation of VYVGART Hytrulo with ENHANZE, so delivered subcu in just 20 seconds because of the ENHANZE technology. That, based on argenx's comments, is causing new physicians to come into the market to start using VYVGART and more patients able to access the important therapy being able to receive VYVGART. That's another driver of the growth. So all 3 of those products exceeding our initial expectations for this year, and that's what drove the increase in guidance.

Yes. Wonderful. And we still have long-term guidance out there, 26% to 28%, which hasn't moved yet. But I believe you'll revisit that early in the new year and maybe sort of give us some comments on how to think about that.

Yes. It was actually 2017, where we gave a prediction of being able to achieve $1 billion in royalty revenue by 2027. I think based on my comments I've made, you realized probably that we're probably going to achieve that a bit earlier, and that does bode very well.

In addition to these 3 products that we have, there's also 4 additional products that we just launched in 2024 and 2025. Those are going to be beginning to contribute in 2026 and beyond and further fuel the strong growth. So as you say, Sean, what we tended to do is update the guidance during the year for any new insights. And at the beginning of the following year, that's where you'll see us update the guidance. So that will reflect the continued strength of DARZALEX, PHESGO and VYVGART and our expectations for these 4 new launch products.

Sure. And I guess this is one of the hot debates and maybe get tired of talking about it. But just sort of the long-term revenue projections going beyond 2030? And how should investors sort of think about that?

Yes. I think there's 2 key trends that underpin our strong confidence in the durability of our revenues. And the first is that secular trend that I've mentioned a couple of times, which is the increasing interest by pharma companies, but also health care systems and patients for subcutaneous drug delivery. We obviously are in a licensing business. We get many companies now coming to us saying, "Can you help us bring our product subcu? Can you help us extend the dosing interval, so it's easier for patients to do this." And there's a real push for more and more therapies being able to be delivered at home. And so that secular trend is going to continue to have adoption of our current products, but allow us to expand our portfolio and add new royalty streams.

The second one is by combining our product with ENHANZE, you can get new inventions, some new benefit that was unexpected for patients. I talked about RYBREVANT a moment ago. That fivefold reduction in infusion-related reactions that increased overall survival, both unexpected and unpredicted if you're delivering a similar amount of the drug as with the IV. That results in new intellectual property for our partners. And for Halozyme, it also results in a longer duration of our royalty and very often can keep the royalty rate maintained at a mid-single-digit level. Those 2 combinations of the increasing trend of subcu use and continued growth of the current products and new products and that durability of revenue, Sean, is what gives us a confidence in very robust revenues continuing in 2030 and well beyond that.

Sure. And I sort of have this question later in my question list, but I think it's kind of relevant now. So when I look at modeling your business, and maybe I'm not the best modeler, but when I think about your -- I'm not -- but when you think about I guess, sort of the gross margin, it seems sort of pretty stable. You don't see too many changes there versus a traditional -- I'll call it, traditional biotech company that's heavily involved in drug development, then your R&D expenditure is probably light on versus a more drug development type company. And you could argue on the SG&A front as well, like it's your partners that really support the OpEx in some senses. And what might get missed about the business, therefore, is the cash flow that's being generated.

So even if you took this very pessimistic long-term view that maybe you apply a negative 100% terminal growth rate to Halozyme's business, you look at the cash generation at that period of time, which is on my math, is much bigger than what the current market cap of the company is. So if you stuck at the bank and let it earn an interest rate, you still got like long-term value. So are we thinking about the cash flow generating nature of your business in the right way? Is that the right way to think about it that the cash that is coming out is going to present potentially the ongoing capital return story, the business development opportunities, potentially numerous. Maybe talk us through those big strategic picture.

Yes. I think it's a great observation, Sean, that we have an unusual business model and a very highly leverageable business model because our role with our partners is very much advisory. We don't have the R&D costs. We don't have the commercialization costs, but we do participate in the upside of our partners' commercial success with our royalties.

And as an example, our projected adjusted EBITDA margin in 2028 is 73% to 75%, almost all of which is free cash flow to the company. And so it is a very cash flow positive company. So in terms of how we plan to use that cash, we do invest in the business, as I mentioned earlier. We do use it to return capital to our shareholders, and we do want to build on the very strong revenue growth we have by adding new platforms.

I will just say, you said even if you applied a terminal -- a negative terminal value to the company. We do, just to reiterate, because of the nature of the business and because of our contractual agreements, have strong royalty revenues continuing well past the 2030s. And just to kind of give a couple of examples, these co-formulation patents that come because we find these innovations, these unexpected benefits, all of our royalty streams will go to at least 2030. Several will go into the mid-2030s and multiple go into the 2040s. And so you're balancing a very strong cash flow business with long durable revenues. It is a great story. And importantly, the opportunity now for us to use M&A to build on that very strong story to add new revenue streams on top of that, looking again for these more royalty-based businesses, which can be so highly profitable.

Sure. Great answer. I think you've got 10 approved products, several more in development, but how do you prioritize further pipeline investments?

Yes. I mean the great news is based on our business model, Sean, we don't really have a challenge with prioritization because it is not a capital-intensive business supporting ENHANZE. This advisory nature that we have really means that our team who are excellent and they work very closely with our partners, they can support multiple partners at once. And so we can add new partnerships without having to expand a lot of people as an example. Because it's an established business, we don't have a lot of capital investment at this stage. So we are obviously continuing to make sure we focus first and foremost on our current business. But beyond that, we have the opportunity to return capital via share repurchases.

Now since 2019, we've returned about $1.85 billion to our shareholders with an average price of $33.72, really buying opportunistically. And we found that, and I find our investors very appreciative of just how successful we've been with share buyback. But we also have retained enough capital for acquisitions. We're very mindful of keeping our net debt-to-EBITDA leverage below 3% in terms of where we're going. But today, we are sitting in the position of looking for additional platforms to acquire to add to our attractive business and can do all 3 at the same time because of the strong cash flow of the business.

Wonderful. And jumping the sideways a little bit, but what lessons have you learned from the launch of VYVGART Hytrulo in the prefilled syringe? And can it be applied to other drugs?

Yes. I think first and foremost, argenx has just done a super job with the entire launch, both in gMG and now looking at CIDP. This is a therapy that is transforming the lives of many patients who haven't had terrific options up to this point in time.

What the prefilled syringe launch has really just shown not unexpectedly, is that patients are ready to embrace being able to treat themselves at home and the privacy of their own home on their own time and on their own conditions because the prefilled syringe, which includes the ENHANZE technology to make it a simple subcu injection is allowing a 20-second subcu 5 ml injection. But now a patient, and I think actually [ Karl ] mentioned this, a patient is able to, if they're working, do it before they go to work. They don't have that disruption. They don't need to be traveling to the doctor's office or the infusion suite. It's just freeing and allowing patients to get back to their everyday lives.

And so I do think that move in inflammation and immunology, neurology, nephrology, cardiovascular to more at-home care. We do see that as just being a great example for other companies to look at and follow and see how argenx is leading in being able to free the patient up even further from the burden of their disease.

What the prefilled syringe has also done is expand the number of prescribers. Of the 1,000 people who have prescribed the prefilled syringe, 150 or 15% are new to VYVGART. And that is something that we are seeing with some of our other products, but the ability of the right delivery to expand the number of prescribers. I'm going to talk about Roche's OCREVUS, where today, OCREVUS, which is a great treatment for multiple sclerosis is a multi-hour IV infusion. So a patient, it will take them their entire day. For the subcu version, it's given in just 10 minutes.

And so what Roche was hoping they would see with the launch and they're seeing just like for VYVGART is they are getting new prescribers because some doctors don't have a setup or don't want to get involved in IV infusions. Now the subcu is so simple to give, they've seen that of the people who have adopted the OCREVUS subcu, 50% were brand new to using OCREVUS. And so market expansion is the other thing, I think, that is very nicely demonstrated with VYVGART's prefilled syringe, but I'll say it's happening with OCREVUS subcu. So subcu in and of itself, that simplifies care will expand the opportunity for pharmaceutical companies, and that's the other very important lesson we want people to take from this.

Sure. Do you get much inbound on the PFS, the prefilled syringe and the market expansion opportunities? Do you think it's fairly well understood part of the Halozyme story? Or is it something that's yet to come?

It's definitely growing. I mean prefilled syringe just launched in April, and argenx talked about the results in their quarterly call, but they were, I think, early. So I do think companies are coming to terms of it. But if a company is in inflammation and immunology, they're following argenx and they are talking about it. So -- but I don't think everybody has heard about it yet.

Great. What are the most promising areas of innovation with drug delivery platforms that beyond subcutaneous delivery, maybe set the scene for us a little bit there.

Yes. So we talk about adding platforms to our remarkable business. And when we think about drug delivery and did a giant survey to say, well, what else would be helpful, and we actually came up with 30 different areas. And I'll mention a range of them just so you see the bridge of what we consider drug delivery and where we think there could be an opportunity for a similar business, which is where pharma and biotech is not investing themselves in a technology, but they're willing to license it for the drugs in their portfolio they need it.

And so there are therapies that are used as an example -- or delivery devices that are used in intraocular delivery, lipid nanoparticles, oral delivery of biologics, long-acting delivery for small molecules. These are all platforms that exist that we are and another 25 on top of that, that we are actively mining to look for the opportunity to either get a platform that is more advanced and derisked if that exists, which is more of a challenge or something earlier on where we can do exactly what we did with ENHANZE, which is take something from the lab or early stage to commercialization using the expertise and the learnings we have as a company to burst a new terrific licensing business model like we've done with ENHANZE. And so that's what we're very actively looking at for M&A. Our business is strong. We've got strong growth projected. So we're not rushing into it. We're going to wait until we find the right type of platform to add to our already terrific business.

Sure. And I guess just generally on that front, when it comes to business development, how competitive a space is it? I think Halozyme is the biggest business that I'm aware of in the drug delivery platform space. How competitive do you think that, that space is in terms of business development opportunities?

Without sounding modest on the part of Halozyme, I don't think there's anyone who is quite like us in terms of being able to take something from the lab to such a broad commercial success. And so for, I think, platforms that have that potential, we don't come across many other companies who are, to our knowledge, kicking the tires and evaluating it because it's not necessarily a business model people have experienced with, and they don't necessarily want to go down that path. And so not too competitive. I think what the art here, Sean, is identifying that asset that is needed by multiple pharma and biotech companies where we can replicate the ENHANZE business model. And obviously, there's a great opportunity there for the relationships we already have and getting some great synergies in terms of the cross-selling. So we're in, I think, a very strong position when we're looking at drug delivery platforms.

Wonderful. You've historically signed, I believe, one ENHANZE deal per year. How do you view the cadence of those deals going forward?

Yes. This year already, I'm very proud to say that we've already signed one small volume auto-injector development agreement, one -- and that's with the current partner, one high-volume auto-injector development agreement with the current partner. And we're very active in a broad set of discussions on ENHANZE. And so I will say based on the cadence and the progress of those conversations, Sean, I'm very confident we will sign another ENHANZE agreement this year and at least one.

We are seeing that there's just a certain period of time of going through the decision-making in the pharma and biotech company, so you have to be patient, but we're working through that. So I say at least one, we may be successful with getting more than one over the finish line, but I'll be very happy to have an additional one.

I'll just mention, in addition to new deals, and that's an important metric for us for sure, recollect that many of our partners also have open slots. They don't necessarily -- if they want to work in a drug, just take one slot, they take multiple slots. And so we're going to continue to see our pipeline expanding with current partners moving more products into the clinic. One's already happened this year. We're projecting another one by year-end and then another one at the beginning of 2026. And so that's another important source of growth and expansion for our pipeline.

And what criteria do you use to evaluate potential partners for ENHANZE or auto-injector technologies?

Yes. So when partners come to us, I mentioned we've got such a leverageable business model and so much expertise in our team. We actually evaluate everybody. And we're very happy to work with everybody, Sean, in terms of potentially having our therapy extend the use of their product for more patients. And so it's a terrific thing about the leverageability. No challenges there.

Cool. A couple of competitive considerations, but how do you plan to maintain ENHANZE's leadership as competitors explore alternative hyaluronidase?

Yes. We are the pioneer in the hyaluronidases inventing the whole field, if you like. And with that leadership has come many, many years of progress and success. We talked earlier about there being 10 products already approved. With those comes an incredible depth of knowledge and expertise that is valued by our partners in terms of how to get a drug quickly to the clinic and approved, advising on regulatory strategy and CMC strategy.

With those 10 approvals has come now an amazing 1 million patients treated. That gives us an extensive safety database. And it's something that isn't talked about often, but there's always a worry when you combine 2 biologics together of a safety issue called immunogenicity. It's an unusual unexpected event where you need to have a lot of exposure to identify whether or not you having a problem of immunogenicity. Every partner who comes to us wants to understand that immunogenicity risk, and we're in a position with this giant safety database to assuage those concerns.

I think the third area is continuity of supply. I was just in the argenx talk, and that was one of the top things mentioned by [ Karl ], the CFO. We have 10 years of reliable, high-quality supply, and that's not to be ignored either. That combination, Sean, is what's important to our partners. And because we've been in this leadership position, we have the first-mover advantage, that will be unassailable in terms of people trying to come in and do similar copycat activities.

Wonderful. Next question, it seems like very asymmetric risk. But can you remind us what the current status of the Merck litigation is? And how it might impact your royalty streams?

Yes. We -- I mentioned we're the pioneer in hyaluronidases. When we were inventing ENHANZE, we also did a lot of experiments, thousands of experiments actually looking at different modified hyaluronidases. And by that, ENHANZE is a human truncated hyaluronidase, so identical amino acid structure to the human. Our modified hyaluronidases have got different amino acid sequences from the human.

We've patented those modified hyaluronidases. And so the Merck litigation is that we have sued Merck for infringing our MDASE portfolio. Importantly, MDASE is totally separate from ENHANZE. So think about MDASE in this Merck litigation has been all upside. It was 0 risk to it because ENHANZE is separate. But we believe that Merck is infringing. And so we expect to hear about the scheduling of that court case in the next week, Sean. And it will take a number of years to play out unless Merck successful before that, but all upside and protecting our IP.

Wonderful. Just out of time, but is there anything that you'd like to leave the investor base with?

No, I think you've covered it very nicely, Sean. I would just say that we have these 10 amazing products that are going to be resulting in strong durable royalty revenue growth for the company for years to come. And we've got the opportunity to build on top of that with our strong cash flow, allowing us to replicate this brilliant ENHANZE model. And so we're very excited to be focused on that today.

Wonderful. Thank you for your time today, Helen, and thanks for contributing to the conference. Appreciate it. Thank you.

Appreciate it. Take care. Thank you.

Awesome. Thank you very much for joining us today. This is not quite the first lunch one after the post-lunch session. So my name is Mohit Bansal. I'm one of the biopharma analysts here at Wells Fargo, and I'm joined by Helen Torley. Helen has been coming here longer than I have been here. So thank you very much for being consistent with coming to this conference.

We appreciate it, Mohit. It's always a great opportunity.

Thank you. So I'll give the floor to you because there are exciting times. I mean you -- like we were expecting a lot of launches and now there are new launches there. So -- and you have been raising guidance consistently. So talk a little bit about the progress on the commercial side and the investment case in the company at this point?

Yes. So for those who are less familiar with Halozyme, just let me give a little bit of background. We are the pioneers in hyaluronidases to be used for a large volume subcutaneous delivery. This has resulted in our core platform, which is called ENHANZE, which we licensed to leading pharmaceutical companies to allow them to transform their IV drugs to be able to be given subcutaneously or underneath the skin.

We get 10 approvals to date, and I'll talk about those in a moment in a lot more detail. We also have an auto-injector platform. This is also very consistent with our passion to be able to make treatments fit the patient's life rather than the patient's life having to rotate around it when they're suffering for grievous illness. And it's also very consistent with the trend we're hearing more and more from pharma and biotech, which is at-home delivery of biologics. Everybody wants that. So we have a small volume auto-injector that delivers up to 2.25 mls. And we also have a high-volume auto-injector, which is something that we have invented by being able to combine the 2 technologies I mentioned, the ENHANZE with our auto-injector technology, and that can deliver between 3 and 10 mls of a biologic drug at home or in the physician office in under 30 seconds.

Now these are very attractive growing opportunities. Mohit mentioned our second quarter, we were able to raise our revenue guidance. Now for the year, we expect $1.3 billion in revenue. The largest majority of that is our royalties, which we're getting from the ENHANZE platform. And that's $825 million to $860 million this year, which is a 46% to 51% year-over-year growth. And that really is going to continue to grow, obviously, because these are royalties, we have a very profitable business.

And just to give you a sense, we expect our EBITDA to be at least $865 million this year, also a growth in the high 30%. And a lot of this is driven by just 3 products that launched in 2020 and 2023. That is DARZALEX subcutaneous, VYVGART Hytrulo and also Phesgo. But just between '24 and '25, we had 4 additional launches for Opdivo subcutaneous, Tecentriq subcutaneous, Ocrevus subcutaneous and now RYBREVANT, all of which are going to start to contribute meaningfully in 2026 and beyond.

So you can see we've got layers upon layers of royalties from very exciting large drugs that's leading to very strong cash flow for the company. And just to close on the introduction for the cash flow for the company, we invest first in the business in terms of our capital allocation. We have been very good at returning capital to shareholders through share repurchases. We're up to $1.8 billion since 2019, including $303 million this year. But we also plan to use our capital to add additional growth to add to the strength of the current business and are looking to add new delivery platforms. So that is Halozyme in a nutshell today, a very exciting time with 14 catalysts this year, 11 of which have already occurred.

Got it. Awesome. So I think VYVGART has been pretty strong this year so far. I mean -- like I mean, you can look at your guidance as well as VYVGART's consensus expectation they have been going up. So when you talk to your partners, I mean, how are you thinking about long-term growth? And then also updating like your number, like you have this policy to update once a year in the beginning of the year. So how do you think about expectation -- internal expectations changing over a period of like last 6 months or so?

Yes. We do. We actually, a couple of years ago, put out 5-year guidance, and that was based on the approved products. And as Mohit said, it will be our practice to refresh that in the beginning of 2026 as well. We have updated guidance twice this year in 2025. And so I think you can expect that we will be, just if you look at the numbers down, moving forward to update '26, '27 and '28 as well.

It really is -- I mentioned the strength of some of the products. And just to talk about what's going on. The 2 updates to our guidance this year have been driven by DARZALEX and VYVGART, if I focus there. DARZALEX has been on the market since 2015. It is still growing at 20% year-over-year, but it's still surprising us with its incremental growth. And I think this is coming from its ability to penetrate into the frontline patient population where patients live longer and stay on therapy longer.

And we're beginning to see that compounding effect, which is why analysts project that VYVGART will grow -- sorry, DARZALEX will grow from $13 billion to $18 billion by 2028. That is all subcu. The market has converted to the subcu using our technology, and we get a mid-single-digit royalty on that. That's a little bit why we're going to see that there's a potential for an update there.

And then VYVGART Hytrulo, what an amazing product, very recently launched at $1 billion in the second quarter, 100% year-over-year growth. A lot of that driven by the subcutaneous launch being able to increase the number of doctors using VYVGART in both gMG and CIDP, which are the 2 indications they have. And the very recent launch of the prefilled syringe, which includes the VYVGART Hytrulo, which is the one that has our technology, also increasing the number of doctors prescribing. So many of the doctors who use the prefilled syringe had never used VYVGART before the launch of the prefilled syringe last quarter, but also new patients coming in.

Patients want that 30-second at-home delivery, which is what our technology plus the great VYVGART Hytrulo has been able to deliver for patients. Simple to use, use it before you go to work, get their life back. That's exactly where we want to go. And again, for VYVGART Hytrulo, just the beginning, looking out several years, the studies are ongoing to expand the gMG opportunity to seronegative and ocular, the use of biologics, it simply is going to bring more people into the market.

Argenx actually predict it's going to double the number of patients than the number they predicted at launch in gMG. CIDP growing nicely, but 3 additional indications in Phase III development with the subcu in myositis, Sjogren's disease and also in -- I forget the third one. The [indiscernible] thyroid eye disease.

And so all of those potential before 2028, '29 to just continue to fuel amazing growth for VYVGART. So those 2 alone are driving it. And remember, we've also behind that got Phesgo, Opdivo, RYBREVANT, OCREVUS and Tecentriq, which have just launched. And so it's a very exciting time at Halozyme as the company's focus on new indications being launched, new reimbursement, new countries. That is why we predict continued strong durable growth for many years to come.

Got it. And how have been the launch trajectory of these PD-1s at this point, PD-1, PD-L1s, right? So Tecentriq is there and also Opdivo subcu is out there. So how has been the progress so far? Because I mean, if I look at the history, there have been buckets. I mean, DARZALEX was really rapid. Phesgo was slower, but it is still -- like now it is maturing to a really nice level. So would it be more like a Phesgo situation or more like a DARZALEX situation?

Yes. DARZALEX had a couple of things going for it. I think, firstly, it had a much-improved safety profile with reduced infusion-related reactions. And I think that does differentiate it, but that bodes very well for physician adoption of RYBREVANT, where with our technology compared to the IV, where the infusion-related reaction rate is 76%, it's going to go down to the teens.

Right.

And so that would be a good analog in that case. For the PD-1s, I do think Phesgo would be a good analog. It's very recent launch for Opdivo just got approved in the first -- or launched in the first quarter of this year. Just got the J-code, the permanent J-code in July 1.

So what BMS has shared so far is they're very pleased with the adoption they're seeing. It's being used in all of the indications. And so I think by that, they mean indications which are where there's no IV therapy. So it's maybe with oral therapy or monotherapy, but also in regimens where there is IV therapy. So that's exciting to see and used in academia and in the community.

And when you think about it, this enables a 5-minute subcu injection the physician can do in his office, that's going to be very attractive. So, so far, they're very pleased with what they've seen, but they did say that the J-code in July will be an accelerator for use of the drug. Roche has not provided a lot of detail on Tecentriq. It is a switch strategy, and I would imagine it will very much parallel what we are seeing with Opdivo.

Got it. And where do you -- how do you think of -- again, your discussion, where do you stand on OCREVUS in the same launch trajectory?

Yes. OCREVUS is, again, a different case. It's very exciting. Our initial launches were all IV to subcu. OCREVUS and VYGART are great examples where the subcu is expanding the market and expanding the overall sales that are possible for the drugs. I described VYGART earlier. For OCREVUS, what Roche has said is we expect the availability of subcu to expand their market by $2 billion. So that's bringing in new physicians who can't use the IV OCREVUS, and it's bringing in new patients who perhaps can't get to the infusion suite.

OCREVUS IV is an up to 6-hour infusion and observation period. It's an entire day in infusion suite. So there are just not enough beds and not everybody wants to do that. With our subcu technology, it's a subcu injection that takes just 10 minutes. That's transformative. More patients can be treated, but it also can be done in physician offices.

And so, so far with that launch, what Roche has commented on, they're seeing exactly what they hope to see. 6,500 patients are already on OCREVUS subcu worldwide. All of those 50% are brand new to OCREVUS. So that's that market expansion they talked about to get another $2 billion overall. 50% are coming from the IV. And so very nice execution of the strategy they want, which is expand and switch. And so obviously, patients are benefiting from that much shorter infusion time.

I think the 50% switch is still better than what Roche was initially talking about, right? They were talking about this to be more like a newer market versus the switch market.

I think they wanted to get everybody's mind around the fact don't ask us for metrics on switch because that's not going to be how we judge success. I think we successfully did that.

Got it. Very helpful. So like with that, I mean, I think I want to switch to the partnership discussions because, I mean, there are a lot of benefits you can provide to a prospective partner because like, I mean, life cycle management is one part. But again, you can expand the market like OCREVUS and Hytrulo. So talk a little bit about how these discussions are progressing and what appeals to your pharma potential partners at this point?

Yes. We're very active in discussions with a whole range of types of opportunities. There are still opportunities which we call our traditional opportunity. That's an established IV drug that takes hours where the partner wants to move it to subcu to improve the patient treatment experience. So there's definitely still opportunities we're pursuing there.

Also companies because they've seen the success in the market of the subcu drugs, we're talking to other companies who are developing drugs initially as an IV, but they're thinking of adding subcu in Phase II or Phase III. So they launch with the subcu version or they launch shortly after the IV version with a subcu version, if you like, they want to derisk it first and then move into subcu. So we definitely are getting this.

And I'd say the areas of focus are oncology, inflammation and immunology, neurology and nephrology. Those are where companies are really beginning to think subcu earlier, subcu from the start because they recognize that potential to get drugs into the patient's hands at home and a simple auto-injector is where they want to go in all of those indications.

The other area that is very active is subcutaneous drugs that are already developed. Now today, if you don't use ENHANZE, you are limited to 2 mls in a single injection. After that, you start to get a lot of pain and back swelling. ENHANZE can enable, as an example, with VYVGART, injecting 5 mls in just 30 seconds with no swelling back pressure, et cetera.

And so what companies are coming to us to talk about is they developed a drug with this, say, the max with 2 mls and it's an every 2-week interval. And they want to see could they be more competitive if they went to a monthly interval. With our technology, you can do a single injection of 4 ml.

And so that extended dosing is a whole new area of opportunity for ENHANZE, whereby being able to double the dose, if that doesn't cause any difference to the safety profile of the drug in inflammation and immunology, in particular, a lot of interest as everybody is playing on that patient convenience as a core differentiator for patients.

Got it. Very helpful. So I mean, in terms of IRA -- like we'll talk about IRA because you have to talk about IRA here. So like again, I mean, there could be some new guidance coming at some point here. So I know initial read, I mean, us included the read was probably this guideline is a little bit different from the previous guideline. We had probably 2 active moieties. The second active moiety would have to prove that it is adding to the core. What is your understanding there? And -- and your products, I mean, can you prove that you are adding more than just -- like in the case of DARZALEX FASPRO more than just a DARZALEX?

Yes, you're right, Mohit. There was a difference in the description of the fixed combination drug in the Part B guidance that came up just suggesting that -- and asking for feedback actually. So this is a feedback question from the FDA should be thinking that the second active ingredient, which ENHANZE is, should needs to have active clinical effect on the disease and active -- sorry, action on the disease and thus deliver clinical benefit.

It created a lot of confusion in the specific language that was there. Is it the fact that it acts on the disease? Or is it all that matters that there's clinical benefit? So we've been very active in seeking to understand that and shape the policy world around that topic because it is very clear that if you define clinical benefit as how a patient feels, functions and survives, we have data in all of those to say that the subcu delivery of drugs with ENHANZE impacts and improves all of those.

And so yes, I'll talk about our strategy to influence that, Mohit, is we submitted a very comprehensive comment letter that laid out the policy and legal arguments as to why this change was not good policy for the -- for CMS to do and frankly, wasn't necessary and urge that they stuck to the same language that was in Part D. We further spent the majority of the letter articulating all of the very well demonstrated and repeatedly demonstrated benefits of subcu delivery with ENHANZE.

I've mentioned infusion-related reactions. If you have an infusion-related reaction when you're receiving a drug, it will make you feel terrible. You will have low blood pressure, you'll be sweaty, you'll have a headache. You could have anaphylaxis, and you could die. The next time you go in, the doctor will lower your dose. They might delay your dose. All of those can impact your outcome. So infusion-related reactions are very serious.

With our subcu technology, we caused a threefold reduction in IRRs with DARZALEX, and we caused a 6 to sevenfold reduction with amivantamab, that is clinically meaningful benefit. There is nobody who could ever argue that's not clinically meaningful benefit.

With all of our drugs now use Tecentriq, we reduced the rate of serious and severe adverse events by 40%. And it's been pretty consistent in our profile. The subcu is better tolerated, which means patients may stay on therapy longer. And importantly, with RYBREVANT, we also were able to demonstrate a statistically superior outcome in terms of overall survival with the subcu versus the IV. All of those are incredibly meaningful benefits as well as keeping people out of infusion suites where they pick up infections.

And so our letter, we believe, is very compelling. We believe we will prevail to have CMS listen to all of the arguments, which -- and the legal and policy ones are very powerful as well, why there should be no change between the 2.

I will say, Mohit, you talked about the reaction. There's also been a change and maybe we could just talk about the one big, beautiful bill as well because that provided a bit more additional help for people in thinking about would the IRA have an impact on Halozyme. The one big, beautiful bill clarified that if a product has got multiple orphan indications, it will also be excluded from the Inflation Reduction Act.

Now this is very relevant to us because one of the first drugs up for potential consideration is DARZALEX. It's first 2 indications of multiple myeloma and only indications of multiple myeloma and amyloidosis are both orphan. So DARZALEX will not be included in the IRA. Also, it may have biosimilar competition. So it's a very important drug for us, but it is excluded for that.

For Opdivo, the very first indication is an orphan drug. So that will defer any consideration for Opdivo for a year as well. And so all of this, we just say we think on a policy basis, recognizing that fixed combinations of 2 active ingredients where there is clinical benefit should be treated the same in Part B as Part D for Halozyme, the actual -- how that language lands will not have a very big impact in our long-term revenues for those reasons I've just articulated. But we still believe it's better policy to keep it the same.

So DARZALEX may never be included particularly...?

DARZALEX, we believe will not be included yet.

Got it. Got it. Very helpful. And do we have any thought process on like when we could hear from the CMS here?

Our DC team seems to say September, October. There's no specific statutory time line. So September, October would be what it is based on precedent.

Got it. Very helpful. And do your potential partners talk about IRA, these guidelines at all?

No. I mean they really don't. We've never made it a big part of our conversation with partners. And if you think about it, they're looking for competitive differentiation. That's what they want to do with their products. And so we focus on this aspect of the IRA, which was a big bill. Our investors do, but I cannot remember the last time anyone outside of an investor group spontaneously asked me about the IRA.

So we are focused on the wrong things, basically. [indiscernible] so thank you very much for this. Maybe talking a little bit about the other side of litigation, the Merck litigation that is going on here. So there are different facets to it, like one is the PGR and then you have launched lawsuit is that here. Can you talk a little bit about -- just like walk us through what is going on here? And what could be the time lines at this point?

Yes. So I mentioned at the start that Halozyme is a pioneer in hyaluronidases. We did thousands of experiments 15, 20 years ago, where -- which resulted in us moving forward with ENHANZE as the platform that we licensed to our partners. But at the same time, we created many different modified hyaluronidases.

And by that, it means that it doesn't have an identical amino acid structure to ENHANZE, which is a modified human. So ENHANZE is the identical structure to human hyaluronidase segment. The modified changes in and out the sequence of amino acids. We have filed a lawsuit against Merck, who is using Alteogen's modified hyaluronidase for their SC KEYTRUDA in District Court alleging that they are infringing on our modified hyaluronidase patents.

Now -- that court case, we're still waiting for our scheduling date, which we expect to hear about in the next weeks. But the District Court case, just to set expectations will take a number of years to play out. We have asked for a number of remedies there, including that Roche pay us a royalty, which we would expect to be at the mid-single-digit rate. There is a possibility also that there could be damages awarded to Halozyme as will infringement is found, and that can be up to 3x the amount of lost revenue for Halozyme.

And we've also asked for injunctive relief, which means that until there is a satisfactory resolution of the infringement, such as by paying a royalty, Merck would no longer be able to commercialize the product. So several years for that to play out to the very end. We're very confident we're going to win it. We are able to know the structure of their modified hyaluronidase that's being used because it's published in the patents, and it's also available on the NIH website. And so that is what, in part, gives us such confidence in our ability to prevail because we know it is identical to sequences that we patented many years ago.

So at any time during that course, Merck can say, okay, we will take a license. And we, of course, would be delighted if they wanted to do that. We don't necessarily want to get to litigation. We try to take -- get them to take a license, but we will play that process out. And that's the key one to watch because that is the one that is going to result in a potential license to Halozyme.

Now I'll just say for clarity here, the MDASE portfolio has nothing to do with the ENHANZE portfolio. It is all upside what happens on MDASE. There can be no impact on ENHANZE whatsoever no matter what happens on the MDASE. Just think about it as a great option for Halozyme for additional revenue for our license to KEYTRUDA.

Mohit mentioned the PGR process. That's called the post-grant review process where companies can challenge newly issued patents within 9 months of their issuance in the United States. And that's what Merck has done with some newly issued. We've got 100 patents and MDASE, but we've continued to process and have new patents issue. For some of the recent ones, Merck has challenged those.

The PTAB agreed to institute 4 of them, which means that we will go forward to have those heard in a full PTAB review between March and June of next year. The outcome of that could be the patents are upheld, or they're invalidated. Again, it doesn't actually matter what the outcome there is because we have got patents that are in our District Court case that are not subject to this PGR review because they were issued so long ago.

And so you might say, why is Merck doing this? I think they are trying to get some of our patents knocked out to increase their chance of success. But we're feeling very confident in as a pioneer, working in this area 10 years ahead of anyone else that we -- our patents will prevail and will prevail in the whole review of the validity of those patents as well.

So some of the patents, I mean, have gone past the 9-month window now. So even if Merck is in all those PGRs, there are still patents which are -- District Court has more patent than PGR right now.

The District Court has more patents than PGR because we were issuing these patents in -- I won't get into dates, right, but we're talking about the 2012-to-2018-time frame...

Right.

Many years ago.

Got it. Got it. So PGR has no bearing on the...

PGR has no bearing on a good number of the patents that are in our District Court case, right?

Got it. Very helpful. And then can you remind us if -- what is the -- what is it -- what are the time lines for patents? Like how long do these patents last for you?

So for the MDASE patents, because these were issued solo -- so a number of years ago when we were doing our work on the modified hyaluronidase, it expires in 2032 in Europe and 2034 in the United States. So if we were to be successful in getting a license, the license would go to 2032 and 2034.