Ladies and gentlemen, thank you for standing by and welcome to the Halozyme Third Quarter 2020 Financial Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Al Kildani, Vice President of Investor Relations and Corporate Communications for Halozyme Therapeutics. Mr. Kildani, please begin.

Good afternoon everyone. And welcome to our third quarter 2020 financial results conference call. In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced on today’s call in the Investor Relations section of our website. Leading the call today will be Dr. Helen Torley, Halozyme’s President and Chief Executive Officer, who will provide an update on our business; and Elaine Sun, our Chief Financial Officer, who will review our financial results for the third quarter 2020. During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties. I’ll now turn the call over to Helen.

Thank you, Al. I’m pleased to report strong financial results for the third quarter of 2020, evidenced by revenue of $65.3 million, which is 18% growth over Q2 and earnings per share of $0.25 which is 32% over Q2. I will describe in detail the strong third quarter results driven by a combination of growth and royalties which grew 61% sequentially primarily as a result of the DARZALEX subcutaneous update, and also as a result of substantial progress by our partners with their drug development pipelines. Based on these results and our outlook for the fourth quarter, we are pleased to announce we are raising our full year revenue guidance to $250 million to $260 million from $230 million to $245 million which is a 28% to 33% increase over prior year revenue. We are also increasing our earnings per share guidance to $0.80 to $0.85 from our prior guidance of $0.60 to $0.75. As these results demonstrate the vision we described for the future of our company approximately one year ago when we transitioned our business to focus on enhance is now truly bearing fruit in the form of growing revenues, earnings and cash flow. This has also enabled us to deliver on our commitments to return capital to shareholder in a meaningful way. In the third quarter, we repurchased $58.9 million worth of shares or approximately 2.1 million shares resulting in $312.4 million in capital returned to investors via our share repurchases in less than one year as part of the authorised three-year $550 million share buyback program. All of this progress was made possible by our partners and the [Indiscernible] team adapting very effectively to the many changes imposed by COVID-19 on the business and our lives. As a result, we are in a strong position as…

Thank you, Helen. Let me start by turning to slide eight for a review of our third quarter revenues. So as Helen indicated, we saw strong growth in the quarter as our partners continued to execute on their commercial and development plans. Total revenue for the third quarter was $65.3 million, an increase of 41% compared to $46.2 million in the prior year period. I'll now discuss the three components of our revenue. Revenue the royalties for the quarter was $23.9 million a year-over-year increase of 44%. And as Helen discussed, our royalties return to growth sooner than expected, primarily due to the successful launch of subcutaneous DARZALEX utilizing enhance technology by our partner Janssen. Product sales when $9 million in the quarter compared with $29.2 million in the year ago period, during which there was a large sale of bulk rHuPH20 to Janssen in preparation for their launch of sub-q rHuPH20. Collaboration revenue in the quarter totaled $32.3 million, up from $0.4 million in the year ago period as a result of recognizing revenue for expected milestone payments from our partner’s argenx and Roche related to their progress-to-date towards phase 3 study starts. Let me move to slide nine and you'll find a more detailed breakdown of our third quarter P&L. So beginning with total operating expenses, which were $25 million in the third quarter, down 65% from $70.8 million in the prior year period. The overall decrease in total operating expenses resulted from our shift in strategic focus to the company's enhanced drug delivery technology in November of 2019 and the related restructuring, which has now been completed. Cost of product sales were $5.6 million, compared with $22.3 million in the year ago period, with a decrease attributable to the same large sales bulk rHuPH20 to Janssen that…

Thank you, Elaine. We believe, we're still only at the beginning stages of delivering on both the clinical and financial promise of our ENHANZE drug delivery technology. Our technology delivers value for our partners, our patients and their Halozyme shareholders. Halozyme is in the strongest financial position ever as a company. And we look forward to strong growth in our revenues, profitability and cash flow in the coming quarters and years, which will allow us to deliver on our commitment to return capital to shareholders maintain long term sustainable growth and maximize shareholder value. I'll close on slide 11. Entering 2020, we established this ambitious set of goals to measure our performance as we completed the company restructuring, I could not be more pleased with the tremendous progress to date. And as you've just heard, we project we will finish the fourth quarter as strongly as this one. I'd like to end as ever by thanking the amazing Halozyme team for your tremendous efforts and these strong results. With that, we'd now be delighted to take your questions. Operator, please would you open up the poll for the question.

[Operator Instructions] Your first question comes from Charles Duncan from Cantor Fitzgerald. Please go ahead.

Thank you. Hi, Helen and Elaine. Congratulations on some really awesome results in this quarter.

Thank you.

Yes, so also, thanks for taking my questions. I had two, one is kind of financial one and one is a pipeline one. Helen, with regard to the launch of FASPRO, I'm sure you won't be able to say too much on this, but maybe provide a little bit of color. When you think about the conversion rate thus far, how much of it was driven perhaps by, say, the COVID environment and how much of it is driven by substantial difference in the clinical profile of the compound or of the drug? And where would you expect the conversion rate to end up overtime?

Yes, thanks Charles. I don't have any data to support the impact of COVID on the uptake of DARZALEX and FASPRO in the U.S. And we also know that there has been successful launch outside the U.S. as well. What I can see is the performance has certainly exceeded our expectations and whether COVID has played a role in that. It would seem possible it had, but I don't have any data to support that. But we are certainly absolutely delighted with the strong initial uptake. We don't provide and we haven’t provided any specific guidance as to what we think that the conversion will be. But I would just say that when you think about a patient today facing what is often four to six hours IV infusion, who could have the option of receiving the treatment in just the three to five minutes in a sub-q injection, we certainly think this is a very strong value proposition. And we think patients are definitely going to welcome at both this new to start patients, but also the patients currently receiving the IV.

Make sense. Appreciate that. And then, quick question on the pipeline. If I look at, but for, I guess, HYQVIA, all of the drugs are primarily used in the oncology setting or haematology setting. Yet you're moving into, with this diversification with our argenx, and atezolizumab, into neurology. And I guess, I'm wondering if you think neurological disorders, or neurology is really a growth opportunity, number one, and could you see more movement in that diversification direction? And number two, what do you think the agency is going to think about in terms of reviewing the product profile? Say the neurology division versus oncology? Do you think there'll be a different risk benefit? Or do you think that's pretty well established across the agency?

Yes, I think, as it turns out, many of our initial approvals as you point out, as were in oncology that just happens to be that many of the most successful brands in the world are in oncology. And we're delighted to be seeing as not just moving into neurology, as you mentioned, but also into autoimmune diseases. And so we see continued strong potential to expand outside of oncology into multiple additional indications where patients are receiving their therapies, the alone IV infusions. In neurology, we also have OCREVUS if you recall that I mentioned that Roche is developing. So lots of potential, any injectable drug with a long infusion, we certainly welcome talking to companies to see whether a sub-q would bring benefits like competitive differentiation. We now have five approvals given by the FDA and four so far outside the U.S. And I do feel that some with the comments would be getting back with each subsequent review, there are less and less and I do believe that the safety profile and all of rHuPH20 is now very well characterized in more than 400,000 patients treated commercially with the drugs. And so I would not expect a big difference between a neurology division from an oncology divisions because of that long track record of safety data will be able to bring forward.

Okay, that’s helpful color. Thank you for taking my questions. Congrats.

Thanks, Charles.

Your next question comes from Jim Birchenough from Wells Fargo. Please go ahead.

Hi, guys, let me add my congratulations on the quarter. Couple of questions. I guess first, Helen just on DARZALEX FASPRO and sub-q, Can you remind us is there anything in terms of the agreement where the royalties might tear up with increasing sales? Or is it fixed independent of the level of sales? And then I guess, second question is just as you look at the ramp of DARZALEX FASPRO and early launch of Phesgo. Are there air dynamics or market dynamics that are different between those two products? If you can comment at all, then I have a follow up?

Yes, we don't provide specific details on a contract by contract basis. We certainly in some of our contracts do have tiering, but I can't speak specifically to the Janssen one. With regard to the launch uptake of Phesgo versus FASPRO it certainly does appear that FASPRO is out of the gate very fast. And I recall, it has been approved in the U.S. and Europe and was approved in May and June respectively, whereas Phesgo was only approved in the U.S. so far and at the very end of June. So really launching in July. So I do think timing is a factor. And we would expect and we had signaled them that our expectation was that the first few quarters would be very much focused on laying down the groundwork for physicians to be able to freely write these drugs, getting EMRs formularies, etcetera. So we would expect the first quarters to be slow and more obviously, the exception to that is how FASPRO is performing as well as DARZALEX SC. But for Phesgo as we get all of that in place we expect 2021 to be a year of robust uptake of Phesgo as well.

And Helen, just a second line of inquiry. Just around IP, and we get the question often about how to think about the 2027 and 2024 “Patent claims for PH20”. So, just giving you an opportunity, how do you think about it both in terms of new deals, posts, those find points, products and development and products on the market? What do you see in terms of the risks of each of those layers of the business?

Yes, I think what's unique about ENHANZE and the fact that yes, our U.S. patent does expire in 2027. Recall, the construct of our contract is that we will continue to receive royalties for a minimum of 10 years after the first commercial sale. So that's a very important factor, as you're thinking about the products that are entering the clinic today, that could get approved in 2004, or five, six, in 2027, they will be in a very robust part of their growth cycle. No, at the time of the patent expires, there was no co-formulation patent in place, there is a step done to approximately 50%. Recall, these could be products that are in a very attractive growth period. So you've got to layer that on and think about that dynamic as well. And our current predictions only include those products that we have line of sight for today. And so I've already mentioned that in 2021, we expect additional partners will bring targets into the clinic, those are additional launches that are going to continue that overall revenue growth. So that even if there is a step, then there is still the potential that we can continue to grow beyond that. And then finally, we have this wonderful option of applying for co-formulation, patents, which are not all guaranteed to be granted. But if there's novelty [ph] it can be granted. And the general effect of those is that they prolong the time that we can get the duration of the royalties and can push out the times of the step done. And so I will say that post 2027 Jim, the key takeaway is, we can see a very clear path to continued royalty growth after 2027. We know exactly what we need to do that, we need to launch more products. And we need to get more co-formulation patents. And so that that is unique about ENHANZE and what we're excited about that, and what it can mean for the on-going substantial royalty revenues from our pipeline.

Helen, just quickly on that last point, can you see if there's any been any new co-formulation patents filed this year are expected to be filed this year without naming any specific products?

Yes, we do have about one partner who is intending to file a co-formulation patent this year.

Terrific. Thanks for taking the questions.

Thanks Jim.

Your next question comes from Do Kim from BMO Capital Markets.

Good afternoon and congrats on the quarter from myself also. First on the performance of DARZALEX SC, do you have a sense of what the distribution of sales was between the U.S. and EU? And also if you think that timing is a potential factor between the -- for the difference between FASPRO and Phesgo? Is it possible that we'll see a similar kind of strong quarter for Phesgo IN 4Q? And does your raised guidance include that possibility?

Yes, let me let me start for the second question. We expect that the European approval, the earliest that will occur is the first quarter of 2021. And so as we think about the total potential for Phesgo, the approval in Europe in 2021, the duration of time it takes to get things in place in the U.S. really does signal towards us thinking the robust growth of Phesgo is in 2021 with the fourth quarter really being a setup here. We don't have and J&J did not provide them, though any specific breakdown between the U.S. and Europe. Based on our triangulation of syndicated sales data and reported sales, we estimate that the majority of sales are occurring in the U.S, but there has been good uptake in European markets as well. So we'll look forward to perhaps some Janssen providing some more color in that at a later date.

Great understood. Thank you. And a question on the pipeline. For Roche when they start the phase 3 for atezolizumab in lung cancer. Do you know what their potential registration path for expanding that therapy beyond its current approval in lung cancer and all the other cancers that it's already approved for?

I will say that some in conversations that each individual partner has with the FDA. They talked with them about what the potential scope of indications that might be possible from their proposed clinical development program. That obviously is proprietary information that is the property of each of those companies. So while we are aware of it, we unfortunately aren't able to talk. But what we do know is that they the FDA, as Rituxan Hycela ODAC, did say that a separate study may not be needed for each and every indication as we go forward. And we know that all of our partners are aware of that, engage in discussions with the FDA to try and identify what is the right size clinical program for all of the indications that they want?

Great. That's very helpful. Thank you very much.

Your next question comes from Jessica Fye from JPMorgan. Please go ahead.

Hey, this is what [Indiscernible] on for Jes. Thanks for taking our questions. So with how long the share repo has been? Can we get some color on how your team has approached those decisions? And is that sort of going to be your strategy moving forward?

All right. Let me ask Elaine to address that.

Sure, thanks for the question. So I think we've indicated that we have a total three year share buyback program that was approved by the board in November of 2019. We're about 56%, 50% or so percent of the way there with only one year into the program. To date, we've repurchased about just over 312 million of our common shares, about 16.5 million shares at an average price of $18.92. This year, we purchased of that 112.4 million at an average price of $20.76. Obviously, our stock has traded up, I think reflecting the strong growth potential of our of our partners, products and programs, and the strong growth trajectory for Halozyme . We continue to have, I think, a lot of confidence in terms of the diversified portfolio that Halozyme represents of the multiple blockbuster products and programs and our partners. And our share buyback program, I think will continue to reflect that.

Okay, thanks. And then just looking at Phesgo, you mentioned a couple times, you've started to really robust, you're heading into 2021 here. Do you have any color or expectations you can give us for timeline on getting EMA -- you reimbursement contracts set up there?

Yes, we know if the EMA do a standard review. Based on when Roche indicated they had submitted the application, we would expect a positive if there's a positive opinion approval in the first quarter of 2021.

Okay. Thanks for taking the questions.

Your next question comes from Jason Butler from JMP Securities. Please go ahead.

Hi, thanks for taking the questions. And let me add my congrats on the quarter. Helen, just wanted to follow up on a couple comments you made about FDA. And then you said Rituxan Hycela, the FDA had comment, but not all indications may need separate trials. Is there anything that you're, you know, in your dialogue with partners and FDA that suggest this perspective is shared broadly across the agency versus being specific to, to that review, division or specific to oncology or hematology?

Yes, as I think Chad [ph] pointed, the majority of our products have been in the oncology division, and I'd say that's where many of the conversations are happening. But there are also conversations happening with some of the other divisions based on the stage of the programs, but there are less of those. But I do think even if we triangulate as to what the FDA might have in their mind, and you know, we see that through DARZALEX with them with if they are not receiving the pomalidomide with daratumumab indication initially for the sub-q, because there wasn't any data supporting it. And there might have been a safety question. And so what I think is logical for the FDA, no matter the division to support is to look at this from the perspective of, is there any theoretical reason why the addition of rHuPH20 would add a new safety question? In the majority of cases, that is not going to be the case and therefore, we don't think that's going to be an issue, but there will be instances where the FDA does say, please generate data, there isn't any data. And this is a theoretical concern. So I think that is the logic the FDA will apply. And I think it could happen in any of the divisions. And I'll just say, again, we have a, we have a robust safety database with over 400,000 patients treated commercially, which I do think really does help with the FDA in understanding that they are very well established and clear, strong safety profile of rHuPH20.

Okay, great. And then in terms of the additional trial, phase 3 study from the undisclosed program to start in 4Q, is there a milestone payable on the start of that study? And also either the other two undisclosed phase 1 studies that could start this quarter?

Yes, there are there are milestones associated with the phase 3 and the phase 1s.

Great. Okay. Thanks for taking the questions.

Your next question comes from the line of Joe Catanzaro from Piper Sandler. Please go ahead.

Hey, guys, congrats on the nice quarter here. And thanks for taking my questions. Helen, you may have touched on this a bit in your prepared remarks. But wondering if you could comment a little bit more qualitatively maybe on how the legacy products performed sequentially in the quarter, just to maybe get a better sense of DARZALEX [ph] sees full contribution in the quarter. And then I know you mentioned you did have visibility into revenues with regards to U.S. and ex-U.S. and DARZALEX FASPRO but I’m wondering if you can speak to just the general conversion rates you're seeing in different territories and whether the U.S. is in fact seeing the highest early conversion rate, or are there other ex-U.S. territories that are seeing that? Thanks.

Yes, I will take the DARZALEX one and then I'll turn the legacy products over to Elaine. And -- we've found the uptake of DARZALEX we’re aware from triangulating on the syndicated sales data, and the overall sales that are present published by J&J, that there are sales in the U.S. and ex-U.S. for sub-q. With the U.S. being the larger one of the two. We do not have any insights into the actual specific conversion rate outside the U.S. There is some directional information, as you're probably aware in the syndicated data. However, this has not been confirmed or verified by J&J. And so we're not in a position to talk about the uptake. But, I think it's very clear to see that with this substantial increase that we saw quarter-on-quarter, which we've said is primarily driven by DARZALEX, there has been very strong uptake, predominantly in the U.S., but also in in markets outside the U.S. coming from new and continuing patients. And, and with that, I'll turn it over to Elaine just to talk about the trends with the legacy product.

Sure. So as you know, Joe, we don't break out our individual royalties. But for quarter-on-quarter, the overall royalties were relatively flat for all the sub-q products excluding DARZALEX, Herceptin, MabThera, and HYQVIA and for 2020, we projected decline in Herceptin sub-q and MabThera sub-q as a result of, of ongoing biosimilar competition based on the information that Roche has provided as well.

Okay, got it. Thanks. That's, that's helpful. And thanks for taking my question, sir.

Thanks, Joe.

Your next question comes from Anna [Indiscernible] from Goldman Sachs. Please go ahead.

Hi, this is Anna on for Graig Suvannavejh. Thank you for taking our questions. And congratulations on the quarter. Just a few questions from us. When can we expect to see some contributions and meaningful contributions from DARZALEX to hit the top line from EU and also similar for Phesgo. And just also any comments for any additional updates on any potential BD [ph] in the future I think?

Alright, so we do have commented on a bit some of the royalties that we're seeing in the third quarter. There are already contributions from outside the U.S. We don't have any details as to exactly where those are coming from as yet. But they already there is uptake in markets outside the U.S. For Phesgo, we anticipate some European approval if it follows standard or standard timelines would occur in the first quarter of 2021. And so at the moment, as I mentioned earlier really focus is on getting everything set up in the United States and continuing to get the formularies and the EMR and all of the other logistics with Phesgo. For additional BD, we are as very engaged in a number of discussions with regard to ENHANZE, and I remain very comfortable sign additional deals for ENHANZE. And then as we're looking at other technologies, yes, we continue to be evaluating a number of technologies, looking for a match to what we're seeing today is going to be important an opportunity to increase our revenue growth in a manner that has a proven like, ENHANZE with it with the high margin and high growth, so nothing to update specifically there, but actively at work, looking at opportunities.

Great, thanks so much.

[Operator Instructions] Your next question comes from Joel Beatty from Citi. Please go ahead.

Hi, congratulations on the quarter. My questions on FASPRO, are you able to provide any context and the trajectory of growth and royalties that you're seeing and trajectory of the conversion from IV to sub-q? And any reason to think that the next few months could be any different than the trajectory you saw over the last few months?

Yes, thanks Joel. As we look at it, we mentioned that this is the first few full quarter of sales for FASPRO. And so we are going to be evaluating the continued trend and the additional data points over the next month. When we think about where additional growth could will come from in the already launched markets, which is U.S. and some of the markets outside the U.S. Obviously, there's an opportunity, given we’re only one quarter in the growth is going to come from more physicians adopting, and getting deeper penetration and uptake in the individual clinics. And so, that I think will continue to drive strong growth. And then as we think about markets that have not yet launched them, we know that as that reimbursement is in place, we're going to see a cascade of additional launches occurring over the next step months and quarters. And so Joel based on everything we know, there are so many growth drivers with only one quarter of sales under our belt. I do expect to see a very good trend. But we're trending off three data points at the moment. And so we certainly are going to be watching very carefully in the next month to see exactly what that rate of growth is going to be. But there are, as I mentioned, many drivers for strong continued growth.

That makes sense. And then maybe another question, and it's, just at a higher level on partnering. I mean you have new targets that are not selected by any partners to date. How does the discussion go in terms of who gets first preference, can a new company come in and grab it? Or do existing partners get any type of no look at the new target before a new company could grab it.

I think it's fair to say it’s a simplification of its first come first serve. If someone is in bonafide negotiations with us for a target and they are a new partner, then they will get the target. If it is an existing partner and they nominate the target, they will get the target. So it really is a first come first serve situation.

Thank you.

That was our last question. At this time, I will turn the call back over to the presenters.

Thank you very much. And thank you everyone for joining this call as you can hear, we are absolutely delighted with the very strong progress in the third quarter and what it means and signals for the importance of the enhanced portfolio. Obviously, we're seeing a very robust uptake in the United States, all the sub-q products. And I think that's a milestone we certainly should be marking and recognizing. I'll say again, the team has navigated through a lot of challenges in 2020. And we are very excited about all of the progress to date and importantly what that means for the company for 2021. Thank you so much for your attention.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating You may now disconnect.