Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme First Quarter 2022 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] Thank you. Don Sharlene [ph], you may begin your conference.

Good afternoon, and welcome to our first quarter 2022 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 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 first quarter. On today's call, both GAAP and non-GAAP financial measures will be discussed. The non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. 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 our CEO, Helen Torley.

Thank you, Don. 2022 is also a very strong start for Halozyme from both an operational and a capital allocation standpoint. In April, we announced our planned acquisition of Antares Pharma, which is on track to close in the second quarter. This acquisition strengthens Halozyme's position as an industry leader in drug delivery and provides revenue growth and diversification. Halozyme and Antares also share a common culture built around the same mission innovating to improve the lives of patients. We look forward to building an even stronger company together with our Antares colleagues and are excited about the greater impact we will continue to drive for patients, customers and shareholders. Nicole and her finance team have secured financing to support the acquisition with access to very favorable debt structure. She will provide more color around that during her remarks. As we progress through the completion of the Antares acquisition, we've continued our demonstration of executional excellence and delivered on the key first quarter milestones. Shown on slide 3 are Halozyme's strategic and capital allocation priorities. These are to invest to maximize ENHANZE revenue growth and durability to continue to return capital to our shareholders and to grow through M&A. Notably, we are making strong progress on each of these. I'll start by reviewing our Q1 operational performance. I'm pleased to report that our first quarter results provided a strong start to 2022 for Halozyme. We reported first quarter revenues of $117.3 million, a 32% year-over-year increase resulting in GAAP Q1 2022 earnings per share of $0.43 and non-GAAP adjusted earnings per share of $0.47. This performance is driven by strong ENHANZE royalty revenue growth and the booking of a milestone payment associated with the signing of what is our 12th ENHANZE collaboration agreement with Chugai Pharmaceutical. As we will also…

Thank you, Helen. I'll start on Slide 14, where I'll focus on some highlights from our first quarter results. Total revenue for the first quarter was $117.3 million compared to $89 million, in the prior year period. The year-over-year increase of 32%, was primarily driven by, an increase in royalty revenue partially offset by a modest decrease in revenue under collaborative agreements. Royalty revenue for the quarter was $69.6 million, an increase of 89% compared to $36.9 million in the prior year period. This was driven primarily by the continued strong uptake of Janssen's subcutaneous DARZALEX utilizing enhanced. Cost of product sales for the first quarter was $15.9 million compared to $18.2 million in the prior year period. The year-over-year decrease despite an increase in product sales was primarily driven by the timing of manufacturing overhead costs in the prior year. Operating income was $75.7 million compared to $50.7 million in the prior year period. The year-over-year increase of 49% is driven by growth of recurring royalties in our leverageable business model, which allows us to grow revenue with minimal investments in operating expenses. On a GAAP basis, diluted earnings per share was $0.43 compared with $0.19 in the prior year period. On a non-GAAP basis, diluted earnings per share was $0.47 compared with $0.37 in the prior year period. When comparing to the prior year, it's important to note that the first quarter of 2022 is our first period recording income tax expense, representing $0.10 per share. Now, let me turn to slide 15 for a review of our 2022 financial guidance which is Halozyme's stand-alone guidance. This guidance remains unchanged from what we provided at the beginning of the year and does not include any contribution from Antares. We plan to provide updated guidance including Antares at a…

Thank you, Nicole. I'd like to close by thanking, our Halozyme team, our partners and all of our collaborators for the hard work that resulted in the strong performance this quarter. In 2022, we will continue to deliver growing revenues, growing operating income and expanding our pipeline resulting in both strong near-term and long-term growth. I'd like to thank everyone for joining us today. And with that, we'd now be delighted to take your questions. Operator, please would you open the call for questions?

[Operator Instructions] Your first question today comes from the line of Charles Duncan with Cantor Fitzgerald. Your line is now open.

Okay. Good afternoon, Helen and Nicole. Thanks for taking my questions and congratulations on a good quarter of progress.

Thank you.

Yeah. So I had a couple of questions. One is on DARZALEX SC. In terms of -- I think I heard you say that, 80% SC conversion now. And I guess, that's pretty high, that's actually higher than we had anticipated. Where do you think that can go? And what would be the reason anyone would not convert over to the SC version?

Sure. Thanks Charles for that. So, yes, we did indeed find that at the end of the first quarter in the United States, the conversion was about 80% share. Now, we do think that will go higher. And to be very specific about the reasons why people wouldn't convert there are a small number of patients we hear about anecdotally who may have needle phobia or may be comfortable being in the infusion suite, because of the social aspect of that. But I would say we do see the opportunity to continually grow share in the United States and importantly, outside the U.S. as well. Janssen has not provided any update on that since the middle of last year when we knew it was lagging the U.S. a bit. So expect continued growth throughout this year as we had projected. It's going to be driven by continued share gains outside the U.S. but also the U.S. as well. And I'll just comment that we're very pleased to see the overall growth of the brand Charles, because, a, if you recall what we talked about in January we've got the overall brand growing as well as SC share growing which is why we get such confidence and conviction in the continued growth for some time to come.

Okay. That's helpful. And then, I wanted to ask you, Helen, regarding Wave 3. I'm particularly interested in Efgartigimod and in Generalized Myasthenia Gravis. Congrats on the recent data there. But I guess, I'm wondering, if you could share with us your perspective of the value proposition, especially as it may relate to the potential pace and ultimate peak of conversion for that drug from the IV?

Yeah. So absolutely, we were very pleased as we said in the prepared remarks to see the positive data for subcu Efgartigimod and importantly, for anyone who was listening Argenx also reported that the launch of the IV is off to a very strong start. And this obviously is a new mechanism of action offering new hope for patients. So, all very good to see the IV taking off well, the subcu data is expected to be filed by the end of this year. So we're looking at a 2023 launch. And in terms of the value proposition for patients the SC does offer the opportunity for a quick non-complex subcutaneous injection as opposed to a more lengthy IV. And we do know based on Argenx' comments in their clinical studies for patients who received both IV and subcu 70% of patients expressed the preference for the subcu. And so this is one chance where we do see many dynamics that are going to be similar to what we observed with DARZALEX. We see a company that is very motivated to have high success in the market and what is going to be a growingly competitive environment. And we see an office setting where the physicians are very comfortable and used to giving subcu drugs that perhaps more so than IV as we see a strong value proposition for patients. So, we don't give specific guidance as to what we think the conversion rate is, but everything does support the unmet need and I think the excitement of patients to be using a subcu in Generalized Myasthenia Gravis and specifically Efgartigimod given the convenience or the once-weekly regimen.

Very good. Could be a neurology game changer. Thanks for taking my questions.

Thank you.

Your next question comes from the line of Mike DiFiore with Evercore. Your line is now open.

Hi, guys. Thanks so much for taking my questions. Two for me. One on Phesgo ex-US launch of Phesgo, if you could provide more color on the actual cadence of EU reimbursement will it be lumpy throughout the rest of the year or evenly distributed? And also, if there's any additional gating factors in the US for continued growth? And I have a follow-up.

All right. For the ex-US launches Mike as I'm sure you may be hearing from other companies, while it used to be that you could consider that the top five or six companies would all get reimbursement within 12 months, we do know that, that is sometimes ticking up to 24 months. And so Roche has not provided specific comments on that, but we can say that, we know that some of the traditionally larger European markets have not yet launched. And so that is taking up to two years. So that is why we're excited about the continued growth in Europe, strong performance so far, but with some of the more traditional major markets yet to come. And for the United States we do predict then this is based on conversations with Roche as well continued penetration into accounts and new accounts coming on board. So, this is a question of them gradually growing throughout the year and adding to the quarter-on-quarter growth that we have projected for the year.

Okay. Very helpful. Thank you. And my final question is regarding the Antares acquisition. You may not be able to comment on this, but I'm not sure, if this was commented on during the actual acquisition – the deal call, but Antares has some three very early assets 1901, 1902, and 1903. Do you guys intend to develop those and then thereby incurring more R&D expense, or will those be something that you divest? Any color along those lines would be helpful?

Yeah. Thank you. And Mike what I will say is I'm very pleased with the progress we're making on our integration. Obviously before the acquisition we did diligence. We're continuing in integration work streams and the R&D program is certainly an area where we are digging in and seeking to understand. So no decisions made on that and we look forward to continuing to work with Antares colleagues post-close on really making sure we have a full understanding of that. I will say one differentiation here is the R&D expense. These obviously -- these programs tend to follow ANDA or 505(b)(2) pathways, which are a lot less costly and a lot faster than traditional drug development. So that obviously is something we're very much going to be taking into consideration as we look at each of these opportunities and look at the potential return for investment that would exist with these areas, each of which is in an interesting area of unmet need but no decisions as yet.

Great. Thank you very much. Very helpful.

Thank you.

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

Good afternoon everybody. So obviously the FASPRO conversion has been quite high and I think probably surprised a lot of people for the upside. But as we think about the next launch with efgartigimod, what are some of the factors that we should keep in mind when thinking about potential conversion there? And what has your market research revealed about the appetite to use the subcutaneous injection in that market versus some of the others we've seen you bring the ENHANZE co-formulation products to bear?

Yeah. Thank you. And I'll refer back to comments I made earlier in the year where we do see a lot of similarities between the efgartigimod opportunity and the DARZALEX opportunity. And specifically we think some of the drivers of DARZALEX that are present with Efgartigimod are Efgartigimod is a very important product obviously for argenx or looking to be successful. It's an area where there are additional competition today but competition coming into the market both in form of C5 and also FcRn products. So having a winning strategy with the most convenient type of therapy possible I think is going to be a very important factor. Corinne, we've not done any detailed market research ourselves but we can cite comments that argenx has made on the calls to say that in their clinical study where patients received both IV and subcu, 70% of patients expressed a preference for the subcu after receiving both forms of therapy. So with all of these factors and the fact that the treatment here is happening in immunologist offices, rheumatologist offices who are not set up necessarily for IV therapy. So this is saying that is very conducive we believe to subcu drug delivery. We think all of those factors speaks very well to a robust uptake. And I'll just finish on the patients. You can imagine for a patient with chronic disease, the ability to have a simple short subcu injection delivered versus long-IV infusions IVs et cetera, we think there's a strong winning patient preference here as well.

Great. Thank you. That's helpful. And then just with respect to completing the Antares acquisition, can you help us understand what steps remain to complete that deal I think you said in the second half -- probably the first half of this year?

Yes. This perhaps include the tender offer at completion not also the regulatory reviews Corinne. So everything is progressing at this point in time. And we can say that based on the completion of the conditions as well as regulatory reviews the earliest time the transaction could close would be 2024 but we've got to wait for those two areas I just mentioned to be satisfactorily completed before we can close.

Thank you.

Your next question comes from the line of Jessica Fye with JPM Chase. Your line is now open.

Hey guys, good afternoon. Thanks for taking my questions. Could subcu Efgartigimod be a candidate for auto-injector delivery and how much work would be required if so? What about for the HIV drugs with Janssen and ViiV? And then lastly following the Antares close, recognizing that you've kind of provided some commentary about share repo this year, thinking in '23 and beyond how will you prioritize paying down debt after the acquisition versus returning cash to shareholders via share repo?

Let me take the auto-injector questions and then I'll pass it to Nicole for the question on paying down of the debt. Yes we -- obviously once the transaction is closed do plan to engage with all of our partners to take a look at their portfolios and see if there might be a match for the auto-injector. I think the most important thing is going to be the volume of injection immediately upon the close, we would have access to a one ml and a 2.25 ml auto-injector. But as we stated when we announced the transaction we're very excited about the potential to be developing a 5 ml auto-injector. So premature to comment specifically on any products that are currently in the portfolio, but we certainly in doing this transaction see the opportunity for both biologics and for small molecules that can be delivered in a volume of up to 5 ml. So, there is a lot of opportunity out there we believe.

And I'm happy to cover your second question Jessica. So in regards to our capital allocation priorities they do remain unchanged. So, we do project availability to continue on all of our objectives here and we are projecting to be able to address both our share repurchase plans which are inclusive of the three-year plan that we announced at the end of last year to purchase $750 million of which $115 million is in progress via an ASR at the moment, but we are still on track with those plans. And as well as we mentioned that we do plan to quickly deleverage the debt we're taking for the Antares acquisition as well in the coming quarters just again driven by our really strong cash flow projections.

Great. Thank you.

Your next question comes from the line of Anita Dushyanth with Berenberg Capital Markets. Your line is now open.

Hi, good afternoon. Thanks for taking my question. Helen can I ask you about the guidance you've provided now obviously does not include the assets from Antares, but post-closing in the first half would that be updated towards the second half of the year?

Yes it is our intention to -- after the close at the next earnings call to provide an update on guidance.

Okay. Great. And also regarding your partnerships I mean historically HALO has signed on one partnership at least annually with the pharma players. So, going forward, would there be a preference or towards signing on partnerships using ENHANZE or auto-injector or you kind of remain agnostic?

It's a great question and I do think what is exciting for us now is that we have the opportunity I see three buckets and segments that we're going to seek to address post close that would be ENHANZE only. Auto-injector only small volume and ENHANZE plus auto-injector probably the 2.25 and 5 ml. And that really is how we're looking at the opportunity as we assess Antares. So we see all three areas, where Halozyme have the potential to create new deals.

Great. Thank you.

Your last question today comes from the line of Jason Butler with JMP Securities. Your line is now open.

HI, it's Roy [ph] in for Jason. Thanks for taking our questions. I had a few on the 5 ml. I guess how straightforward do you think it will be? And what remains gating to get the auto-injectors to 5 ml? And based on your preliminary work what do you think the time lines are to get that option available? And is that going to be generally compatible with the high viscosity formulations? Thanks.

Yes. Thanks, Roy, all great questions and work that is still a little premature for me to be able to comment specifically, but we do expect that we will be able to deliver a range of viscosity. So that's a very important thing for us. We've seen some feasibility testing with regard to this. But in terms of the specific time line, et cetera we want to spend a bit more time with the Antares team after the close to really build out those plans. But this is going to be a priority for us moving forward and very excited with what we've seen so far. And the great Antares technology which we do think work together with the ENHANZE will provide a unique offering in the marketplace to be able to deliver a large volume like 5 ml subcutaneously.

Got it. Very good. Thanks.

There are no further questions at this time. Helen Torley, I turn the call back over to you.

Lovely. Thank you very much. Well, we thank everybody for joining us today and for your attention and support. Obviously, we're off to a very strong start in Q1. We look forward to the close of the Antares transaction and being able to provide you with further updates on our Q2 call later this year. Thank you very much everybody. Goodbye.

This concludes today's conference call. You may now disconnect.