Halozyme Therapeutics, Inc. (HALO) Q3 2023 Earnings Call Transcript

Tram Bui - Vice President, Investor Relations and Corporate Communications

Helen Torley - President and Chief Executive Officer

Nicole LaBrosse - Chief Financial Officer

Mohit Bansal - Wells Fargo

Michael DiFiore - Evercore ISI

Corinne Jenkins - Goldman Sachs

Jason Butler - JMP Securities

Vikram Purohit - Morgan Stanley

Mitchell Kapoor - H.C Wainwright

Hello and welcome to the Halozyme Third Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

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

Thank you, operator. Good afternoon and welcome to our third quarter 2023 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, who will review our financial results for the third quarter 2023.

On today's call we will be making forward-looking statements as outlined on slide two. I would also refer you to our SEC filings for a full list of risks and uncertainties. During the call, both GAAP and non-GAAP financial measures will be discussed. Certain non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation.

I'll now turn the call over to Dr. Helen Torley.

Thank you, Tram. And good afternoon, everyone. We're very pleased with our third quarter and year-to-date 2023 financial and operating results, which reflect the continued strength and durability of our business. We remain focused on supporting our growth trajectory and are well positioned for another record year. We are on track to meet our recently updated revenue guidance and deliver greater than 25% revenue growth for the year, including greater than 23% royalty revenue growth.

I'm also pleased to announce that as a result of our operational performance and close attention to expenses we are raising EBITDA and non-GAAP EPS guidance. EBITDA guidance has increased from $420 million to $440 million to $430 million to $445 million. And non-GAAP EPS guidance from $2.65 to $2.75 to $2.70 to $2.80. I'm pleased to forecast a strong performance on both top and bottom line growth this year.

Moving to slide three. In addition, today we announced an acceleration of the $250 million share repurchase remaining under the approved $750 million share repurchase plan that we announced in 2021. This $251 million share repurchase will be executed through an accelerated share repurchase with a finance institution this week, subject to market conditions. We have a disciplined and balanced capital allocation strategy at Halozyme, investing to grow the business, return capital to shareholders through share repurchases and seek new growth opportunity through M&A.

Our investments grow the business in 2023 have resulted in substantial accomplishments, including our high volume auto injector. We plan to invest at similar levels to grow the business in 2024. Our balance sheet is strong with continued projected EBITDA growth and cash generation throughout 2023. We have reduced our net leverage substantially and consistently each quarter from 3.2 times at the end of 2022 to 2.4 times at the end of the third quarter of this year.

Given our strong balance sheet, decreasing leverage and continued EBITDA and cash generation, we decided to implement the announced $250 million ASR using cash on hand. As we believe Halozyme is trading at a significant discount to our valuation making share repurchases, a high return on investment opportunity.

We will continue to seek growth opportunities through M&A and have increased our technical search and evaluation due diligence capabilities with the addition of Manuel Sanchez-Felix, who is a renowned leader in drug delivery technology and a prior senior fellow of novel drug delivery technologies at the Novartis Institute for Biomedical Research. At this time, we do not project any near-term M&A transactions that would add to our leverage.

I would note the highlights in the third quarter which are shown on slide four. We reported total revenue of $216 million, which gives us confident to achieve our full year revenue guidance of $825 million to $845 million, representing greater than 25% year-over-year growth. With operating expense management is strong focus in 2023 and with EBITDA and non-GAAP EPS trending to above the lower end of our recently updated guidance, today we increased guidance on these key measures of profitability.

Moving now to slide five. As an industry leading drug delivery platform company, Halozyme has built a diversified and robust portfolio. Our ENHANZE technology combined with an innovative high volume auto injector provides new and potentially improved therapeutic solutions for patients, our partners and health care providers. Throughout the year, our ENHANZE partners have made significant progress with their commercialization and development activities, which are expected to result in strong and durable, long-term revenue growth for Halozyme.

Before I provide additional details on each project, let me summarize the strong performance and momentum in the quarter, which is delivering strong results today, while also advancing new waves of growth for Halozyme in the coming years. Our Wave 2 product DARZALEX FASPRO and Phesgo remains strong revenue drivers. The approval of organics is VYVGART Hytrulo in the United States and Tecentriq subcutaneous in Great Britain, increase the total number of commercial products to seven and importantly signals the start in 2023 of two new royalty revenue streams.

The positive Phase III data for VYVGART Hytrulo in CIDP will upon approval expand the commercial opportunity in a condition where there is significant high unmet need today. And the recent positive data announcements from two additional Wave 3 products Nivolumab subcu and Ocrelizumab subcu support near-term regulatory filings and commercial launches in the '24 to '25 timeframe.

I'll leave you with two key takeaways. Firstly, the multiple positive Phase III data readout from our Wave 3 product in the last 19-months, support a high success rate in the translation of Phase I, II ENHANZE subcutaneous pharmacokinetic data into positive Phase III results. This high success rate from early clinical data to positive Phase III data to approval is not always fully appreciated. The likelihood of success for our partners utilizing ENHANZE technology when bridging from an ID approval to subcu is very high, once the early clinical data is generated.

And secondly, as a result of the multiple positive Phase III data readout, we are confident to project nine royalty revenue generating products by 2025, a significant increase from five that we had as we entered 2023.

And moving now to slide six. These approvals are the key drivers of our projects and have the potential to achieve approximately $1 billion in royalty revenue in 2027.

Let me now move to slide seven. We set a goal for 2023 to deliver a new ENHANZE deal, a new high volume auto injector deal and a new small volume auto injector deal. We've made strong progress against these goals. We were very pleased to announce a new ENHANZE partnership with Acumen Pharmaceuticals, which reinforces the growing recognition of the value of subcutaneous drug delivery.

Acumen is focused on the development of targeted therapies for Alzheimer's disease and is leveraging their deep understanding of the amyloid beta oligomers to usher in a medical breakthrough. The Alzheimer's disease market is a key inflection point with recent unexpected approvals paving a new path for treatment. We are delighted to work with Acumen with the goal of creating a best-in-class subcutaneous delivery option that may ease treatment burden for patients, caregivers and the healthcare system.

Under the terms of our non-exclusive agreement for their proprietary therapy, Halozyme received an upfront payment and will be entitled to milestones, in addition to a single-digit royalty on net sales, reflecting the non-exclusive nature of this agreement. For our high volume auto injector, we have also made strong progress. We presented the full data from our clinical study, which demonstrated that delivery of 10ml of a representative biologic in 30 seconds with our auto injector was well tolerated by patients and one which, the patients would have again.

The companies we presented the data to have been impressed and views are high volume auto injector plus in hand as a breakthrough in the area of rapid auto injection of large volume biologic. Was it a breakthrough comes excitement and some inertia to something new. I am delighted that one of our current partners has agreed to test our current high volume auto injector device in a clinical test in 2024. This is a step prior to the potential development of a customized high volume auto injector for the patient population this partner is considering.

At least one other current partner is also considering proceeding with the development of a customized high volume auto injector for their patient population. We have not yet completed this agreement and our main focus to seek to get this completed in 2023 recognizing that may now occur in 2024.

As an established leader and rapid subcutaneous drug delivery with ENHANZE and our differentiated auto injector technology, we remain the partner of choice across the industry. We're also seeing strong interest from pharma and biotech companies who are interested in understanding the potential implications of the final CMS guidance on drug price negotiations for Part D drugs.

In these guidelines CMS affirmed guidance at a fixed combination, which included two or more active ingredients will be distinct drugs for the purposes of applying the IRA Price negotiation provision. Notably, Halozyme's recombinant human hyaluronidase technology ENHANZE has been recognized as an active ingredient by the FDA.

With those highlights, I'll now turn to slide eight for an overview of our royalty revenue and a more detailed review of the key product and drivers of growth. Royalty revenue for the third quarter of 2023 increased 15% year-over-year to approximately $114 million and continues to be the key driver of our revenue growth.

For the full-year, we are reiterating our royalty revenue guidance of $445 million, $455 million representing greater than 23% growth over 2022. Our Wave 2 product DARZALEX FASPRO and Phesgo are the current royalty revenue growth drivers and will be illustrated on the next two slides.

DARZALEX FASPRO is a globally established one to physicians. Using DARZALEX for multiple myeloma patients with 91% share in the United States and an estimated greater than 80% share outside the United States. With the overall brand performance driven by the use of subcutaneous formulation, total DARZALEX brand growth is now the key metric we use to measure DARZALEX subcutaneous growth and potential.

In the third quarter of 2023 DARZALEX continued to drive strong sales growth for Johnson & Johnson with an increase of approximately 21% year-over-year on an operational basis to approximately $2.5 billion in the quarter. This increase was driven by share gains in all regions and continued growth in the first line setting. Analysts project annual DARZALEX sales will continue to grow and will be $17 billion by 2028.

Turning now to Roche's Phesgo which is shown on slide 10. Phesgo is the combination of Perjeta and Herceptin delivered in a single five to eight minute subcutaneous injection for patients with early and metastatic HER-2 positive breast cancer. I'll focus firstly on Perjeta to help dimensionalize the opportunity for Phesgo. For the nine months of 2023 Roche reported Perjeta revenue of CHF3 billion.

Moving now to Phesgo. Phesgo sales grew at an impressive 66% to more than CHF800 million, contributing positively to the continued growth of Roche's impressive breast cancer treatment franchise. The global conversion rate from Perjeta to Phesgo continues to increase even as the number of launch countries increases. Phesgo is now launched in 44 countries, up from 38 last quarter and the conversion rate increased to 37% in the third quarter. Roche anticipates approximately 50% share over time and they noted that the key drivers of uptake include limited nurse and share capacity even in the United States and pace of preference for subcu.

Turning now to our Wave 3 products shown on slide 11. I'll touch on recent event highlights and also upcoming value driving events to watch for. Our Wave 3 products are now highly derisked with one major market approval and positive Phase III data announced for the remaining three products. Beginning with argenx is VYVGART or efgartigimod. This is argenx's flagship pipeline product and is being developed with ENHANZE and a total of six both immune disease indications today with four of these indications being developed as subcutaneous only delivery.

Analysts predict that efgartigimod will be a multi-billion dollar annual revenue brand in 2028. The launch of argenx's VYVGART and VYVGART Hytrulo with ENHANZE for patients with generalized Myasthenia Gravis is progressing well with growth of 22% quarter-over-quarter to $329 million in the third quarter of this year. With the FD approval of the subcutaneous version, VYVGART Hytrulo in June of 2023, argenx's goal is to expand the use of VYVGART by offering Myasthenia Gravis patients a new treatment delivery option and to move into earlier lines of treatment driving brand loyalty with their current prescribers.

It is exciting that are VYVGART Hytrulo is helping argenx achieve their goals. argenx recently reported that initial feedback from doctors and VYVGART Hytrulo is broadly positive and they recognize the benefit of the simple 30 to 90 second subcutaneous injection which is enabled by our ENHANZE technology.

Hytrulo was contributing to argenx expansion of the market with new prescribers with the majority of patients by Hytrulo being VYVGART naive. argenx is also making progress reaching more Myasthenia Gravis patients globally. In September VYVGART Hytrulo received a positive opinion from the CHMP signaling a path for European approval for generalized Myasthenia gravis with a self-administration label later this quarter.

Expanding the potential opportunity, argenx announced positive top line data from the adhere study evaluating VYVGART Hytrulo with ENHANZE for CIDP. With the 61% reduction in risk of relapse versus placebo, the safety and tolerability profile were reported to be consistent with the confirm safety profile of VYVGART when used in other indications. There is a significant unmet need in CIDP and we're excited that argenx will be filing with their priority review buster and are busy preparing for 2024 launch.

And further expanding the opportunity, argenx recently confirmed two additional study readouts for VYVGART Hytrulo with ENHANZE, the first in idiopathic thrombocytopenia, which is expected in the fourth quarter and the second in pemphigus which is expected around the end of the year.

I'll move now to our additional products with Roche. The Great Britain approval of Roche's Tecentriq subcutaneous with ENHANZE in August, [Indiscernible] ENHANZE commercial product approval. Based on the pivotal study conducted in non-small cell lung cancer, Tecentriq subcutaneous with approved in Great Britain for all current IV indication, including certain types of lung, bladder, breast and liver cancer.

Halozyme's ENHANZE drug delivery technology allows for an approximate seven minutes subcutaneous delivery, which compares with 30 to 60 minutes for the IV infusion. Most commented on their recent quarterly call that they project the potential for Tecentriq subcu adoption in resource constrained markets to mirror the rapid conversion and high share attainment of Phesgo.

With regard to upcoming regulatory actions, Roche project the CHMP opinion in the fourth quarter of 2023 and U.S. approval decision in 2024. We're also pleased to note that as an IV treatment, Tecentriq continues to demonstrate strong growth. Year-to-date 2023, Roche reported IV Tecentriq revenues of CHF2.8 billion, an increase of 11% year-over-year.

I'll move now to OCREVUS. Roche's Phase III Ocarina II trial evaluating OCREVUS subcutaneous with ENHANZE met its primary and secondary endpoints. Opening up the potential for people living with multiple sclerosis to receive their treatment in just 10 minutes twice a year and creating the possibility to administer OCREVUS in additional multiple sclerosis centers that do not have IV infrastructure or about ID capacity constraints which had the new growth opportunity.

In October, Roche announced additional data showing subcutaneous injection was non-inferior to intravenous infusion based on OCREVUS levels in the blood over 12 weeks. Of note OCREVUS subcutaneous injection was comparable to IV infusion and providing rapid and sustained depletion of B cells and memory lesion activity in the brain over 24 weeks. The safety profile of OCREVUS subcutaneous was reported to be consistent with a well-established safety profile of the OCREVUS IV infusion. The Ocarina II data will be submitted to health authorities around the world with U.S. and European launches expected in 2024. OCREVUS in the IV formulation continues its impressive growth trajectory.

For the nine months year-to-date, Roche reported OCREVUS revenues of CHF4.8 billion, which represents an increase of 14% year-over-year. And moving to our fourth Wave 3 product with positive Phase III data that's Bristol Myers Squibb subcutaneous Nivolumab. BMS recently reported positive top line data from the Phase III CheckMate 6070 study which is evaluating Opdivo subcutaneous in advanced or metastatic renal cell carcinoma.

The study met its co-primary pharmacokinetic endpoints, any key secondary endpoints demonstrating non-inferiority of objective response rate versus IV Nivolumab. The safety profile of subcutaneous Opdivo was described by BMS as consistent with that of the IV Opdivo. On the recent quarterly call, BMS management indicated that Opdivo subcutaneous has the potential to open up our regulatory approvals in indication that constitute 65% to 75% of the Opdivo business today.

Importantly, the further commented that subcutaneous has the potential to expand the franchise durability into the 2030. BMS reported IV sales of Opdivo of $2.3 billion in the third quarter of 2023, an increase of 11% year-over-year.

In total, these Wave 3 products represent substantial near-term new royalty revenue opportunity for Halozyme with analyst projections for total product sales of approximately $35 billion by 2028. What is exciting and something that I think very important to highlight is that this $35 billion project opportunity is significantly higher than the $20 billion opportunity which is projected for our Wave 2 products, those that are driving the strong royalty revenue growth we see today.

We now move to slide 12 and grail touched on some highlights from our Wave 4 partner product development pipeline with ENHANZE. Our longer term growth trajectory supported by these Wave 4 products with potential launches in the 2025 to 2027 timeframe. And the potential to add multiple sustainable new royalty revenue stream. Wave 4 is comprised of 10 partner products, two of which are progressing in Phase III study and one recent advancement into a Phase IIb study. The remaining products are in ongoing Phase I clinical testing or have completed Phase I study.

The two most advanced Wave 4 products are approved as products and are in Phase III subcutaneous study. These are Johnson & Johnson subcutaneous formulation of Amivantamab and BMS has fixed those combination of Nivolumab+Relatlimab with ENHANZE.

Notably Johnson & Johnson presented strong data at ESMO from the Mariposa study demonstrating that the regimen of Amivantamab and Lazertinib, the same regimen that's being studied in a subcu versus IV study reduce the risk of progression and death by 30% compared to Osimertinib or TAGRISSO. Overall survival data is awaited. Continuing the program, we've recently initiated enrollment of our Phase IIb study which is comparing the efficacy, safety peak and tolerability of N6 with ENHANZE, which is given in combination with Cabotegravir and comparing that to the standard of care in adults with HIV.

Turning now to slide 13. We recently presented the positive clinical data result of our high volume Auto-Injector study at the 13th Annual Port Conference. There was strong interest in the data, which demonstrates the feasibility of administering a subcutaneous injection of 10ml of a representative biologic immune globulin 10% with ENHANZE in approximately 30 seconds using our high volume auto injector. We're pleased by the acknowledgment by partners and potential partners that this is a breakthrough in terms of rapid, large volume subcutaneous drug delivery via Auto-Injector. We're also delighted with the progress we've been making in advancing with two current partners.

I'll turn now to our commercial portfolio. XYOSTED is a weekly virtually painless subcutaneous testosterone replacement treatment which is delivered by our proprietary Auto-Injector. Our strategy is to convert patients who are not achieving their treatment goals with intramuscular injections of testosterone replacement therapy.

XYOSTED demand in the third quarter continued to grow contributing to a 32% increase in year-to-date demand growth this year compared to 2022. We're on a positive trajectory to achieve approximately $100 million in XYOSTED sales in 2022, representing a 20% increase from the run rate following the acquisition.

And then a further update, we recently made the decision to terminate the TLANDO licensing agreement and return the license to licensing effective January 31, 2024. This decision was made due to the inability to obtain economically acceptable coverage with pharmacy benefit managers. Well now focus all of our promotional sales and marketing activity on driving XYOSTED growth.

With that, I will turn the call over to Nicole, who will discuss our financial results for the third quarter of 2023. Nicole?

Thank you, Helen. Our financial performance in the third quarter sets us up well for another record year. We achieved top and bottom line growth in line with our plan in supporting our financial performance expectations for the full-year.

Our balance sheet remains strong with continued projected EBITDA growth and cash generation in 2023 and beyond. Our cash, cash equivalents and marketable securities were $483.3 million as of September 30, 2023, completed $348.3 million as of June 30, 2023. Our net leverage ratio is 2.4 times as of September 30, 2023 compared to 2.9 times as of June 30, 2023. We expect to continue to decrease net leverage with EBITDA growth.

Turning to slide 14. And as Helen mentioned, today we announced an acceleration of the $250 million of share repurchases remaining under the approved $750 million share repurchase plan announced in 2021. The $250 million share repurchase will be conducted under an ASR. This brings our total share buyback since the inception of the first program in 2019 to $1.3 billion, which has benefited the current quarter non-GAAP EPS by $0.15.

Given our strong balance sheet, decreasing leverage and continued EBITDA and cash generation, we decided to implement the $250 million ASR now take advantage of the buying opportunity. We will continue to have a disciplined and balanced focus on our capital allocation efforts, with the focus on driving value for shareholders through investing to grow the business. Shareholder return and seeking new growth opportunities through M&A with no near-term plans to add to our leverage.

Turning now to slide 15 for our detailed financial results for the third quarter of 2023. Revenue for the third quarter was $216 million, compared to $209 million in the prior year period. The revenue increase was primarily driven by higher enhanced product sales, royalty growth and the XYOSTED sales growth, offset by the timing of milestones recognized in the prior year period.

Recall that the timing of the milestone for Tecentriq SC in the U.S. with plans for the third quarter and is now expected in 2024. Royalty revenue for the quarter was $114.4 million, an increase of 15%, compared to $99.6 million in the prior year period. Driven by continued strong uptake of J&J's subcutaneous DARZALEX at both Roche and Phesgo. Research and development expenses for the third quarter was $17.3 million, compared to $16.7 million in the prior year period.

And SG&A expenses were $35.3 million compared to $34.5 million in the prior year period. The increases are primarily due to an increase in compensation expense. EBITDA in the quarter was $124.6 million, compared to $109.9 million in the prior year period. Reflecting the write-off of a contingent liability related to TLANDO. GAAP diluted earnings per share in the quarter was $0.61 and non-GAAP diluted earnings per share was $0.75.

Turning now to slide16. We are reiterating our top line guidance and raising our EBITDA and non-GAAP EPS guidance for the full-year 2023. We expect total revenues of $825 million to $845 million, representing growth between 25% and 28% over prior year total revenue. We expect royalty revenue of $445 million to $455 million, an increase of 23% to 26% year-over-year, driven by continued strength in our ENHANZE Wave 2 products, including DARZALEX SC and Phesgo.

As well as a full year Auto-Injector royalty contribution. We now expect EBITDA of $430 million to $445 million, an increase from $420 million to $440 million, representing growth of 37% to 41% over 2022 EBITDA, due to strong expense management and the release of the TLANDO contingent liability.

We now expect non-GAAP diluted earnings per share of $2.70 to $2.80, an increase from $2.65 to $2.75, representing an annual growth of 22% to 27%, which reflects our strong year-to-date results in expense management.

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

Thank you, Nicole. It has been another strong quarter of execution. Significantly advancing our royalty revenue generating portfolio and growth opportunity. We're excited to further expand current and new partner opportunities for ENHANZE and the high volume Auto-Injector, and we continue to see additional opportunity for growth. I want to thank everyone on the Halozyme team and our partners and collaborators for the strong progress year-to-date.

With that we'd now be delighted to seek your question. Operator, please open the call for question and answer.

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

Great. Thank you very much for taking my question. And congrats on all the progress. I have a two-part question regarding the Auto-Injector, so the part that you mentioned, who is looking at Auto-Injector, could you help us understand, is it related to like someone who -- so is it for a products, which already is using enhanced technology and that now could be converted into an Auto-Injector or something like that?

And then the other part of the question is, could you help us understand how much time does it take for an Auto-Injector technology like when someone conceptualizes that to actually converting it into a real product, what is the process there? How much time does it take? Thank you.

Thanks, Mohit. And thanks for those two questions. With regard to the two updates we gave on the high volume auto-injector progress, one partner moving into a clinical study as a first step before moving forward to the development of a custom auto-injector for one of their patient populations. And the second one, which is also a current partners who's evaluating moving forward into a development agreement. As those have not advance sufficiently just signed a deal, I'm unable to provide any additional information, but they are both partners who are very experienced with our ENHANZE technology.

With regard to the auto-injector timeline, the high volume one it is open to depend actually on what the product is being used is it already a subcu as an example is a very important driver of the timeline.

And the second one is what primary container, the partner wants you and is that immediately available. If it's already a subcutaneous product using ENHANZE and the sub-primary container that's available, we estimate the timeline in around the two year timeframe needs to be a comparative study done, stability work needs to be done, human factors studies need to be done, but we estimate that can be done in about two years and that as you say starts to generate revenues for Halozyme.

If it's a case of a product that's currently in IV, and this is going to be something that is adding in hand and going into an auto-injector, think of that more like the timeline we see for ENHANZE product because that, which is approximately five years, 4.5 to five years from first in human to approval that really would have to go through their comparability to show that the subcu dose is the same as IV and while that's happening all of the device development and the device stability and the human factor studies can happen in parallel.

So two years to five years, I think is a reasonable timeframe depending on the type of product, Mohit.

Thank you very much. Appreciate it.

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

Hi, guys. Thanks so much for taking my question. And congrats on all the progress. Especially congrats on today's newly announced deal with Acumen. My first question is, why is this deal non-exclusive? Is the A beta target still up for grabs from any other manufacturer and if so, would this potential future manufacturer have the option of securing an exclusive deal outside of Acumen, of course. And my second question is regarding subcu OCREVUS, how should we think about the maximum IV to subcu conversion rate in the U.S. assuming that launches next year.

I mean, if we think back to rituximab high sellers launch in the EU, Roche adopted a much more proactive biosimilar defense strategy compared to the US and launched high seller roughly four years prior to biosimilar entry and as a result the MAX IV to subcu conversion rate in Europe with 60% and I guess my ultimate question is, could we expect a similar 60% conversion here in the US? Thank you.

All right. Thank you for that question, Michael. We actually do have another partner that is confidential who has the non-exclusive access to the amyloid beta. And in light of that, the opportunity with Acumen was non-exclusive given that we already had somebody who has the target non-exclusively. And I think that's a nice example as to how we're able to do non-exclusive deals, we can licensed to multiple different partners.

So I think that answered that question. And we're excited to be working with Acumen on their novel approach to this very dreaded disease where we're seeing significant advances and support all fee amyloid beta hypothesis as a key mechanism where we may be able to see real benefits for patients.

With regard to subcutaneous OCREVUS, what we're hearing from Roche if you've been listening to the prepared remarks is Roche felt that their growth of -- OCREVUS has been a little limited by the lack of infusion, the seat capacity both outside the U.S. and in the U.S. And also sites who are able to have IV infrastructure.

In light of that is a lot of commentary from Roche to think about this a little bit like FASPRO became after the conversion was done which is there going to be trying to grow the overall market as a primary goal and also have some twitch but it's going to be a little bit of a different dynamic than the one you mentioned for rituximab high seller where it was switched before biosimilars.

I think we're going to see both dynamics happening and we're very excited by that because it means that patients who are living far away on a per access such as patients in rural communities or countries where there isn't good access to IV therapies are going to be able to start on OCREVUS which is the leading therapy for multiple sclerosis in the U.S. and EU-5. So we'll see a market growth strategy and the conversion strategy because we haven't seen exactly this dynamic happened before. It's hard to peg exactly how much conversion will happen, but we certainly are seeing for FASPRO, I can turn your attention to that.

The availability of FASPRO is what's been fueling the dramatic growth we're seeing of DARZALEX in the last couple of years and that's what is projected to be taking DARZALEX from an $8 billion brand last year to $16 billion brand next year. So new way to think about it, but I think equally exciting in terms, all the opportunity, we're going to see here for OCREVUS, where it'll be 10 minutes subcu, two times a year instead of 3.5 to six hours IV twice a year. And very likely closer to the patient's home.

Super helpful. Thanks so much.

Your next question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is open.

Great. Maybe a couple from us. First, could you just talk to us about some of the drivers of the XYOSTED gross this quarter's I think pretty meaningful. Are you seeing an inflection and what pockets are driving that?

Yes, with -- Thanks, Corinne. What I said, with a focus on two drivers. First one is driving that conversion in the physician's office to get the patient some identified who are not doing well on their IM XYOSTED and getting them on to -- sorry, their IM testosterone therapy and getting them on to XYOSTED. And the second one is very careful attention in the office to make sure the office is filling in any prior operations of authorizations that might be required.

But also making sure when the patient gets a prescription filled, they're being more successfully connected with the copay assistance and other programs we put in place. So it's that some pull through of all of the programs and a higher rate of identification of patients. But really is driving the growth that we're seeing and we do predict, we're still under 5% share. All of this overall market which is dominated by the IM security, which is our conversion target that's what we're trying to switch patients from. So in lot of growth still to come with that this strategy that is beginning to really pay dividends.

Yes. Helpful. Thank you. And maybe one last one from us. It sounds like there is a number of partners that are kind of circling around the auto-injector, what's your sense of some of the gating factors are things they'd like to better understand before actually signing on the deal. And what will they be exploring with the studies next year?

Yes. As I mentioned in the prepared remarks. Really when we've been presenting it, we've had comments like fantastic breakthrough, never felt this was possible. And I think is a degree of innovation that's referenced here, Corinne, that like with any new innovation there is always a period of inertia. And we'll see is exactly what we saw with ENHANZE if I go back to, right when I was in the company and where we just on a couple of the deals that took a couple of companies to come in and do it. And then the waves happened after that.

So I think we're just seeing that traditional innovation adults incurred and people moving into the clinic now to test it is going to help generate additional data and just because it was so remarkable we show them a video of patients receiving the therapy and it's invisible disease. The patients had received 10ml into the abdomen, I think in just 30 seconds. So I think it's a wonderful reflection of the innovation and people are doing their work now to evaluate that, think about it for their patient populations and in the case of one partner I mentioned moving into clinical study next year. So we're going to see more of that over the next step in months, I believe.

Helpful. Thanks.

Your next question comes from the line of Jason Butler with JMP Securities. Your line is open.

Hi, thanks for taking the question. Just one on the accelerated buyback. I mean, now that you're wrapping up this buyback, can you just talk to us about how you're thinking about future return of shareholder capital. And I guess put that in the context of your appetite for bringing on new technologies. Thanks.

Yes, I'll ask Nicole to address that.

Yes. Thank you, Jason. So as we think about our capital allocation strategy. It really remains unchanged. We're focused on the three pillars that we've been focused on, which is really continuing to invest in our current platforms, continuing to return capital to shareholders and we're very excited to take advantage of this buying opportunity now and accelerate the remaining portion on the current plan to do that starting this quarter.

And then also again very much continuing to look for growing that revenue growth, that durability long term via M&A. We implemented the ASR this quarter because there are no near-term plans to grow via M&A and we wanted to deploy our capital in the best way to return value to shareholders, but that will very much continue to be a focus in those longer term as we grow the business.

Great. And then just one more from me on Phesgo. Can you just speak to how you think about peak adoption here and how the self-administration product could drive whether it could drive further adoption subcu?

Yes, Thanks, Jason. On Phesgo, on Roche's comments obviously what we're seeing every quarter is an increase in the overall conversion, but I'll just mention that every quarter there's always four to six countries being added which is diluting the overall conversion. So that 37%, 38% reflects a range from very recent start of conversion up all the way up to I think mentioned 92% conversion in Europe with a U.S. based on latest comments, maybe two quarters ago at 20% at that time. Roche has commented that they expect up to get to 50% conversion with that, obviously continuing to be a range of recently launched markets and also high conversion in those markets where we're seeing resource constraints, nursing shortages, ID capacity constraints.

And so, we're obviously delighted with the very strong progress we're seeing and the continuous growth to come as we get to that 50% overall conversion of the market. And I wouldn't be surprised myself if it was able to go even further than that based on the value proposition that we're seeing here and just to reiterate that, for breast cancer patients, many of them -- many of them working instead of having to be an infusion center for the treatment which can take up to 1.5 hours. But then there is the observation that injection of Phesgo is given in just five minutes or so with a shorter observation time.

That means a mum can go in before work at lunch time after work and not be able to take -- have to take so much time. So it's a strong value proposition, and I am expecting more growth to come. The focus of the on-body which does include Phesgo so sometimes people ask is that ENHANZE in it. Yes, ENHANZE is an intrinsic part of Phesgo which also included Herceptin and Perjeta.

The goal with that is to allow for more at-home therapy. And so I haven't heard Roche comment if that, how much they think that will impact the growth and grow the market but based on patient population, we've just described. I think this is going to be a very nice option for certain segment of that population who that is fits better into their lifestyle.

Okay, great. Thank you.

Your next question comes from the line of Vikram Purohit with Morgan Stanley. Your line is open.

Hi, good evening. Thanks for taking our questions. So we had two. One on capital allocation, one on the auto-injector. So going back to some of your prepared remarks, it sounded like there is a renewed focus on business development and M&A and so while we understand that you're not anticipating any near-term M&A, could you speak generally about the profile of businesses and the profile of assets that you'd find additive to pulled into Halozyme. And then on the auto-injector just a clarification, are the economic terms associated with these potential initial contracts? Would they be in line with economics in terms associated with your current ENHANZE contracts? Thanks.

All right. With regard to BD and M&A. As Nicole mentioned, we didn't find any near-term opportunities, but we are continuing to look because that remains one of our three core pillars, which is to seek growth through deploying our capital for M&A. As a leader in drug delivery, we are looking for derisked broadly licensable assets where we can see a path to near-term accretion. So some form of drug delivery that is something major pharma, major biotech cannot do themselves and which they would be needing to license from a company that has that specific asset.

There are assets out there to anticipate that question. It just has to fit a grid of criteria for us, including that has the near-term accretion. So we will keep looking, we spent a number of years looking for the Antares acquisition and so we will just keep focusing on that. But also as Nicole mentioned the -- what we consider to be the undervaluation of the Halozyme stock made the share repurchase, the right thing, we believe to return capital to shareholders, given the strong opportunity that that represented.

With regard to the high volume auto-injector what we're going to see it because the high volume auto-injector has to be used with ENHANZE, strategically, this is positioned to help us expand the number of current partner assets in the clinic and moving into the clinic, but also to allow us to sign more ENHANZE partnerships.

So the HVI is always going to be associated with a royalty payments for the drug, but that is primarily going to be driven by ENHANZE and the model that most likely for the high volume auto-injector will be development down payment as it's being created. But -- and then product sales. We are -- we would make money on the number of devices that were purchased in the sale of created product.

Got it. Thank you.

[Operator Instructions] Your next question comes from the line of Nason with JPM Chase. Your line is open.

Q - Unidentified Analyst

Hey, guys. This is [Nason] (ph) on for Jess Fye. Question on the non-exclusive deal, I guess is there more, are you seeing more interest in non-exclusive deals from potential partners? And then another one on the auto-injector. What is the pathway for developing the auto-injector into a self-administered auto-injector, the first -- the first auto-injector Phase I is still administered by a physician. Thanks.

All right. I will take the one on the auto-injector maybe I'll ask Nicole to comment afterwards on the -- the non-exclusive deals. Because this was a prototype now, and the first time visit ever been done to attempt to deliver 10ml in 30 seconds, we thought it was prudent and appropriate for patients that we had a health care administered approach to it. What we will find now is that some partners are going to be moving at the partner that we mentioned is likely going to move into the clinic to do a patient self-administered.

And frankly there's nothing additional that has to be done other than take right the protocol that way. It's very simple, it's a injector or place the device on the auto-injector on the abdomen and click a button and hold it there. So it's going to be very straightforward for patients to do, but the only reason we didn't do in the first study was because it's never been done before having seen how well tolerated it was and how well it worked, we have no hesitation in supporting patient studies at this stage them. So there will simply be the patient does that themselves.

And well, this is a larger volume than some other auto-injectors, the actual mechanism of doing it is tried and tested. I'll say tried and tested by -- it seems like hundreds of thousand patients around the world with GLP-1, it's very similar to that, it's just a larger volume and a longer hold time. Nicole, do you want to comment on the interest in non-exclusive deals at the moment?

Yes, happy to non -- So I will say, historically we always have tried to market exclusive and non-exclusive deal. I think historically the interest has been on the exclusive side, but obviously that comes with a higher price tag as well. We are very interested in non-exclusive deals, we see the benefit of reaching more partners and more patients that way. So I think both you'll see coming through and we'll continue to pursue both types of models.

Thank you.

Your next question comes from the line of Mitchell Kapoor with H.C Wainwright. Your line is open.

Hi, everyone. Thanks for taking the questions. I wanted to ask about the evolution of the royalty revenue business. And right now we have a lot of it coming from DARZALEX and Phesgo, but obviously we'll have VYVGART Hytrulo and to centric subcutaneous and others that we'll be making up a little bit more of the revenue, royalty revenue business share. Could you just kind of comment on how soon you expect meaningful uptake to occur for some of these other agents. And then also on the Tecentriq subcutaneous approval in 2024. Can you just comment on when you have a new PDUFA date or what is kind of the gating items to getting to that timeline?

Okay. All right. With regard to the evolution and thanks for asking that question because we're very excited that the Wave 3 products are now all four of them largely derisked with one approval and three positive Phase III study. So looking very encouraging, four launches of these products in the 2023 to 2025 timeframe. And importantly as I mentioned if you look at where these products are projected to be in terms of size by 2028, it's $35 billion in sales of the product, which is substantially higher than the $20 million we're seeing with DARZALEX and Phesgo today. So we're very excited about how attractive that whole opportunity is.

Depending on how you define meaningful all four products are going to be commercialized by 2025. With several of them launching one to two years before that. So I think '24, late '24, '25, '26, '27 is where we're really going to see these products growing very nicely, following what we've seen in the past, which has been, maybe a 2.5 to three year to PKI conversion. So definitely going to be a very nice addition to the continued contributions from the Wave 1 and Wave 2 products, but adding four new very attractive royalty revenue streams in '23, '24, '25 and then onto '27 and beyond.

Great. Thank you. And on the centric new date for potential approval, is that something more narrow that you'll have a timeline on as we get closer to that? Or do we have an assigned date at this point?

Yes. As far as we're aware versus not communicated any assigned date, what they did state was the filing will go in, by year-end this year and assuming a standard 10 month review time. Mitch, I mean, we take it into, let's say the September-October timeframe. But Roche has not communicated anything about that as yet.

Okay, great. Thank you all very much.

Thank you.

That is all the time we have for the question-and-answer session. This will conclude today's conference call. We thank you for joining. You may now disconnect your lines.