HALOZYME THERAPEUTICS, INC. Q1 FY2025 earnings call

Thanked shareholders and sell-side analysts for their feedback, which was invaluable. Reiterated the strategy of growing organically and through serial acquisitions in drug delivery platform technologies. Highlighted three blockbusters driving growth: DARZALEX subcutaneous, which had strong growth with share gains across therapy lines; Phesgo, which showed strong adoption and commercial success with sales up 52% in the first quarter; and VYVGART Hytrulo, which had approved indications and strong growth. Discussed 11 new growth catalysts including European approval of a DARZALEX-based quadruplet regimen, Phesgo gaining national reimbursement in China, and FDA approvals for VYVGART Hytrulo. Mentioned pipeline progress with Acumen and ViiV, and signed the first development agreement for a high volume auto-injector, with a partner testing a small volume auto-injector in a Phase 1 study.

Total revenue increased 35% year-over-year to $265 million in the first quarter of 2025. Royalty revenue grew by 39% to $168 million, primarily driven by DARZALEX subcutaneous, Phesgo, and VYVGART Hytrulo. Product sales were $78 million, up 33% year-over-year. Collaboration revenue was $18.6 million, an increase of 12% from the prior-year period. Adjusted EBITDA increased to $162 million, and non-GAAP EPS reached $1.11, both up approximately 40% year-over-year. Net income grew 54% to $118 million.

Raised full-year 2025 guidance. Now expects total revenues to be between $1.2 billion and $1.28 billion, representing year-over-year growth of 18% to 26%. Royalty revenues are projected to be between $750 million and $785 million, a year-over-year growth of 31% to 37%. Product sales are expected to be between $340 million and $365 million. Collaboration revenue is anticipated to be between $110 million and $130 million. Adjusted EBITDA is forecasted to be between $790 million and $840 million. Non-GAAP diluted EPS is expected to be between $5.30 and $5.70, a year-over-year growth of 25% to 35%.

Mentioned the patent litigation with Merck. The first decision on the PGR institution is expected in early June. If there is institution, the case will be reviewed about 12 months later. PGRs are seen as a sideshow, and the company is confident in prevailing in these PGRs, with no expected impact on the ENHANZE business even if Merck were to win some PGRs.

Q: On the IP case with Merck, what are the expected timelines for the PGR decisions and what action could be taken if the PGR goes in Merck's favor?

A: The first decision on institution of the PGR will be in early June. If there is institution, the case will be reviewed approximately 12 months later. If the PGR does not pick up the case, it will not proceed.

Q: Is there a possibility that the PGR case and the patent infringement lawsuit could be tied together?

A: No, they are two very different approaches. PGRs are typically filed when companies are concerned about infringing and seeking to invalidate patents. The company is confident in prevailing in the PGRs, and even if Merck were to win some PGRs, it would not impact the infringement case which has additional claims not subject to the PGRs.

Q: Do you see AstraZeneca's Alteogen deal as evidence that large pharma companies are willing to accept patent litigation risk rather than sign ENHANZE deals? And how do you counter that narrative?

A: All those with deals with Alteogen have discussed specific targets with Halozyme first, and the trend is that companies come to Halozyme first.

Q: Have any ENHANZE partners paused new target add-ons or renegotiations while watching the litigation play out? And how material could that be to long-term growth?

A: No partners have paused. ENHANZE is seen as the market leader with a million patients treated, and the company does not expect this to have a material impact on long-term growth.

Q: How are you thinking about the implications of the ENHERTU front-line breast cancer data for Phesgo sales and royalties?

A: Phesgo is expected to continue strong market adoption due to its long-term data and convenient administration, and there is no concern that the ENHERTU data will impact Phesgo's growth.

Q: How are you thinking about the changing proportion of the mix of royalty revenues as the pipeline evolves?

A: Multiple products like VYVGART Hytrulo, Phesgo, etc., will be important contributors, and the next wave of products is expected to have a significant market opportunity.

Q: What are the expectations for M&A activity?

A: The focus is on drug delivery platforms for durable revenue streams, with no specific timeline or size comment.

Q: How does the litigation against Merck impact the core ENHANZE business?

A: The MDASE litigation has no impact on the ENHANZE business, guidance, or future growth of ENHANZE.

Q: What is the impact of pharma tariffs?

A: Halozyme's manufacturing is in the US with limited exposure to tariffs, and there will be no impact on royalty revenues.