Halozyme Therapeutics, Inc. (HALO) Q4 2022 Earnings Report, Transcript and Summary

Good afternoon. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme Fourth Quarter and Full Year 2022 Financial and Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Please note that this event is being recorded. I will now turn the call over to Tram Bui, Halozyme’s Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Operator. Good afternoon. And welcome to our fourth quarter and full year 2022 financial and operating results conference call. In addition to our press release issued today after the market close, you could find a supplementary slide presentation that will be referenced during today’s call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme’s President and Chief Executive Officer, who will provide an update on our business; and Nicole LaBrosse, our Chief Financial Officer, who will review our financial results for the fourth quarter and full year 2022, as well as guidance for 2023. On today’s call, we will be making forward-looking statements. I refer you to our SEC filings for a full list of risk and uncertainties. During the call, both GAAP and non-GAAP financial measures will be discussed. Certain non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. I will now turn the call over to Helen Torley.

Thank you, Tram, and good afternoon, everyone. I am very pleased with our fourth quarter and full year 2022 results, which continues to reflect strong financial and operational performance across the entire company, creating positive momentum and positioning Halozyme for an exciting 2023. In 2022, we extended our leadership as a subcutaneous drug delivery platform company through the continued expansion and progress of our ENHANZE portfolio and through the acquisition of Antares Pharma and the small volume auto-injector platforms. The acquisition also resulted in a diversification of our revenues with the addition of the auto-injector and specialty to software and products businesses. Moving to slide three, we achieved record revenue of $660 million in 2022, an increase of 49% year-over-year. This strong performance was primarily driven by the continued growth of our ENHANZE portfolio includes revenues from our acquired auto-injector and specialty product businesses. Fourth quarter 2022 revenue was $181 million, an increase of 78% over the same period in the prior year, resulting from continued growth of ENHANZE royalty revenues, incremental product sales and royalties from our small volume auto-injectors and sales of XYOSTED, our commercial testosterone replacement therapy product. As we look ahead, we entered the New Year with compelling growth opportunities. Our ENHANZE capabilities support our goal to expand the number of current and new partners utilizing ENHANZE, our high volume auto-injectors plus ENHANZE and our small volume auto-injectors. As a result, Halozyme is well positioned for continued growth. This growth is reflected in our guidance for 2023. We project record revenues of $815 million to $845 million, growth of 23% to 28% over 2022 and we project EBITDA of $415 million to $440 million, growth of 30% year-over-year growth. In 2023, we have multiple drivers of new opportunity contributing to near- and long-term growth. These include two potential new commercial launches for ENHANZE for subcutaneous efgartigimod and subcutaneous atezolizumab. Current partners advancing new targets into the clinic and advancing their development programs. And it is our goal to science in new ENHANZE agreements and ENHANZE plus high-volume auto-injector agreement and a small volume auto-injector agreement. Moving now to slide four, I will provide an overview of the royalty revenue projections. For 2023, we project total royalty revenue, including ENHANZE and our auto-injector devices of $445 million to $455 million, growth of 23% to 26% from royalty revenue of $360 million in 2022. This guidance reflects continued projected growth from our strong fourth quarter performance, in which total royalty revenue was a record $106 million, which represented 69% growth over the fourth quarter of 2021. Our Wave 2 products, DARZALEX subcutaneous and Phesgo continue to drive the strong royalty revenue growth. The robust and rapid adoption of DARZALEX subcutaneous in the U.S. and Europe demonstrate that adoption faces no real barriers in either geography. As growth growing rapidly in Europe demonstrates the acceptance of our fifth product launch utilizing ENHANZE. The strong adoption of our ENHANZE subcutaneous products by physicians and patients worldwide supports our excitement for the upcoming Wave 3, 4 and 5 product launches. I will now move to slide five, which focuses on DARZALEX, which is continuing on its remarkable growth trajectory. DARZALEX FASPRO, the subset version of DARZALEX in the United States continued to grow share of total sales, achieving 86% share of total sales of DARZALEX by the end of the fourth quarter of 2022. Importantly, total DARZALEX sales in 2022 also continued to demonstrate strong growth. Janssen’s parent Johnson & Johnson reported full year 2022 worldwide sales of DARZALEX, including both the IV and subcutaneous forms of $8 billion, an increase of almost 40% year-over-year on an operational basis. For the fourth quarter, worldwide sales of DARZALEX were more than $2 billion, an increase of almost 34% year-over-year on an operational basis. Johnson & Johnson highlighted on their year-end results call that the increase in DARZALEX sales was driven by share gains in all regions, continued strong market growth and continued uptake of FASPRO. With the opportunity for more use in frontline therapy, analyst projections for DARZALEX total revenue are estimated to achieve more than $16 billion in annual sales by 2028. We predict DARZALEX FASPRO will continue to grow for years to come as a result of this strong growth in DARZALEX where the vast majority of use is and will continue to be DARZALEX subcutaneous. Our second Wave 2 commercial product is Roche’s Phesgo, which is a combination of Perjeta and Herceptin for subcutaneous injection for patients with early and metastatic HER2-positive breast cancer. In 2022, Phesgo continued to saw a good uptake with Roche reporting CHF714 million in sales for the full year 2022, well underway to becoming a $1 billion brand. With 33% conversion in the early launch countries, Phesgo offers a 5-minute to 8-minute subcutaneous administration time compared to ours with standard intravenous administration. On their recent fourth quarter call, Roche stated that they expect continued growth and significant conversion to Phesgo to continue. On slide six is an overview of our Waves of potential launches. Focusing on Wave 3, these products represent a mixed set of royalty revenue opportunities with potential launches projected between 2023 and 2025. The Wave 3 products are subcutaneous efgartigimod, atezolizumab, nivolumab and ocrelizumab. Our long-term growth trajectory is further supported by our Wave 4 products with potential launches in the 2025 to 2027 timeframe. Wave 4 is comprised of 10 partner products, two of which are in or about to start Phase 3 and the remaining eight are in ongoing Phase 1 clinical testing or have completed Phase 1 testing. I will move now to slide seven and say a few words about why I am so excited about the potential that is represented by our Wave 3 launches. Firstly, all of the Wave 3 products are approved in at least one indication as an intravenous administration. This is an important derisker in terms of development risk. Secondly, all of the potential along soon between this year and 2020. Thirdly, further derisking the opportunity two of these products, subcu efgartigimod from argenx and Roche’s subcu atezolizumab have completed positive Phase 3 studies and are currently under regulatory review with the potential for approval decision and launch in 2023. And the fourth key point is that the opportunity represented here in terms of analyst projections for total product sales is $30 billion in 2028, significantly higher than the opportunity for our Wave 2 products that are driving our strong royalty revenue growth to-date. Let me now provide some more detail on each product. A summary of the ongoing indication-seeking studies for the Wave 3 products is provided on slide right. Beginning with argenx, in November of 2022, argenx announced the acceptance of their Biologics License Application for subcutaneous efgartigimod utilizing ENHANZE for the treatment of adults with generalized myasthenia gravis and also the submission of a marketing authorization application to the European Medical Agency. In January of 2023, argenx provided an update that the PDUFA date has been extended to June 20, 2023, to allow the FDA sufficient time for a review of the data that has been submitted. We are excited that subcutaneous efgartigimod has the potential to be the first of our Wave 3 partner launches with U.S. approval and commercial launch projected in the second half of 2022. As argenx’s flagship pipeline product, efgartigimod is being developed for the treatment of multiple autoimmune disease indications with subcutaneous development of six indications, of which four indications are only for subcu delivery. Multiple data readouts are projected in 2023, including data in chronic inflammatory demyelinating polyneuropathy in the second quarter of 2023 and for idiopathic thrombocytopenic purpura and Pemphigus in the second half of the year. Analysts predict potential total efgartigimod annual revenue of approximately $5 billion in 2028. The launch of the intravenous version is certainly off to a strong start in the early launch countries. In its preliminary results for the fourth quarter, argenx noted strong physician and patient demand for Vyvgart and reported total quarterly net product revenues of $175 million and full year 2022 revenue of $402 million. Moving now to Roche. Roche is one of our longest-standing and experienced partners with ENHANZE, and we are delighted to collaborate with them on two of our Wave 3 opportunities, subcutaneous atezolizumab and subcutaneous ocrelizumab. Beginning with atezolizumab. In November of 2022, Roche announced the submission of a Biologics License Application to the FDA and a Marketing Authorization Application to the EMA for subcutaneous atezolizumab with ENHANZE. Subcutaneous atezolizumab has the potential to be more convenient for patients and physicians with an approximate 7-minute subcutaneous administration time compared to 30 minutes to 60 minutes for IV treatment. With the PDUFA date of September 15, 2023, Roche expects atezolizumab to be only subcutaneous anti-PDL1 on the market for a full year. We are excited to see the continued growth of Tecentriq. In its recent earnings call, Roche reported IV Tecentriq revenues increased 14% year-over-year to CHF3.7 billion for full year 2022. Transitioning now to Roche’s OCREVUS for multiple sclerosis. OCREVUS achieved sales of more than CHF6 billion in 2022, representing an increase of 17% year-over-year for Roche. Currently, there are 2 IV regimens approved for use. We consider during both the treatment and the observation schedule, the range of time for patients receiving IV OCREVUS is 3.5 hours at the fastest to 6 hours at the longest. The Phase 3 trial for subcutaneous ocrelizumab is ongoing or subcutaneous, the target total administration and observation time for the first and second dose is 1 hour, with the goal that for each subsequent dose, the data supports regulators approving a 10-minute administration and observation time. As you read out from this study is expected in mid-2023. Moving to our fourth Wave 3 product nivolumab, BMS continues to progress with its Phase 3 study of subcutaneous nivolumab, utilizing ENHANZE in patients with renal cell carcinoma. And BMS also recently initiated a second Phase 3 study of nivolumab subcutaneous with ENHANZE in patients with melanoma. On its recent fourth quarter call, BMS noted OPDIVO IV sales of $8.2 billion for full year 2022, an increase of 10% year-over-year or 14% excluding FX. In summary, Wave 3 represents substantial more derisked near-term new royalty revenue opportunity for Halozyme, with that opportunity driven by the timing of approval of the subcutaneous versions of the drugs within the projected 2023 to 2025 time window and also the speed and peak of conversion to subcutaneous. Let me now just make a brief comment on the ENHANZE pipeline progress in 2022. I am very pleased to report that we continue to advance and expand our ENHANZE pipeline, supporting 12 new partner study starts, meeting our 2022 goal to support initiation of at least 10 new studies. These starts included supporting partners advancing two new products with ENHANZE into the clinic and supporting initiation of three new Phase 3 programs, the final step in development prior to regulatory submission. In addition, we supported initiation of an additional seven new studies designed to further explore and potentially expand the profile of ongoing partner subcutaneous programs. In 2022, this pipeline progress contributed strongly to recognition of the approximately $109 million in total collaboration revenue with notable milestones recognized for Phase 3 study initiations for amivantamab subcu and nivolumab+relatlimab subcu. In 2022 and beyond, our goal is to continue to expand the number of products in development and to advance products through development to regulatory approval and launch, adding multiple new royalty revenue streams. I will now move to our Wave 4 product candidate pipeline, which is shown on slide nine. We have 10 product candidates in our Wave 4 pipeline, which if they proceed in development and to approval and launch represent potential revenue drivers between 2025 and 2027. The two most advanced products again is amivantamab and BMS’ fixed-dose combination of nivolumab+relatlimab with ENHANZE, which are in or soon to start Phase 3 development. Both of these products are already approved as IV treatment, an important subcutaneous development derisk. In 2022, Janssen initiated a Phase 3 study of lazertinib+amivantamab with ENHANZE in patients with EGFR mutated advanced or metastatic non-small cell lung cancer. In 2022, Bristol-Myers Squibb also initiated the Phase 3 study called RELATIVITY-127, which has the goal of demonstrating that drug exposure levels of nivolumab+relatlimab fixed-dose combination of ENHANZE is not inferior to intravenous administration of the same combination. And this is being studied in patients with previously untreated metastatic or unresectable melanoma. We are expecting the first patient to be dosed in this study in early 2023. Let me now transition to an update on our auto-injector and specialty product businesses beginning on slide 10. Our acquisition of Antares last year, further strengthened our leadership in drug delivery, creating the opportunity to develop a high-volume auto-injector by combining ENHANZE with our auto-injector know-how. In the fourth quarter, we continued our discussions on the opportunity for our high and small volume auto-injectors with current and new potential partners. Our high-volume multi-injector for rapid delivery of up to 10 ml enabled ENHANZE offers a truly differentiated opportunity for patient-friendly, high-volume subcutaneous treatment delivery that can be utilized across the spectrum of disease areas for both small molecule drugs and biologics. In 2022, the team made significant progress on the development of the working prototype. The prototype is ready for clinical testing and we expect to initiate and complete human feasibility studies by midyear 2023. Our goal in 2022 is to gain an agreement with a current or a new partner to elaborate on the custom development of a high-volume auto-injector. I will turn now to our commercial business, which includes XYOSTED and TLANDO as shown on slide 11. Beginning with XYOSTED, this is our weekly virtually painless subcutaneous testosterone replacement treatment, which is patients delivered by auto-injector. Our goal in 2023 is to grow XYOSTED to over $100 million in revenue as a stepping stone to accelerate growth in 2024 and beyond. In 2022, in the seven months since the acquisition, we focused on increasing XYOSTED demand, identifying opportunities to reduce gross-to-net deductions and identifying and developing plans to address points-of-prescription leakage that we have identified. While we have continued to achieve new weekly high prescription levels each month in 2022, Q4 XYOSTED revenue came in slightly lower than our expectations, driven by a mix of lower demand and lower net price than projected. As we start 2023, year-to-date, I am pleased to see that XYOSTED demand is off to an excellent start, with the growth over Q4 exit on track with our plan to deliver $100 million in revenues in 2023. Our growth strategy focuses on converting patients from the most common treatment approach, which is intravascular injections. IM testosterone injection can be associated with pain and can require physician or healthcare practitioner administration. XYOSTED with its weekly virtual painless subcutaneous injection delivered by a patient-administered auto-injector offers a new approach that may address these challenges. We also remain focused on gaining access for TLANDO, our oral testosterone treatment. We have not yet reached agreement with pharmacy benefit managers on an appropriate rebate rate. Until access is established, we are projecting low revenue for TLANDO in 2023. Closing on Antares, our total revenue since the acquisition was $113 million, which came in slightly below our projected range of $115 million to $125 million, which we have provided at the time of the acquisition. Before I hand the call over to Nicole, let me reiterate our commitment to our strategic growth and capital allocation priorities shown on slide 12. Our goal continues to be to maximize revenue growth and durability. We are continuing to return capital to our shareholders with our share buyback plan. We have now completed $350 million of the $750 million three-year program that was approved by the Board of Directors in December of 2021. Our goal in 2023 is to repurchase up to an additional $150 million pending market conditions and other factors as part of this plan. And we are also continuing to evaluate M&A opportunities, seeking additional platforms or companies with derisk assets, platforms or technologies where we see the opportunity for significant revenue growth and revenue durability. I will now turn the call over to Nicole, who will discuss our financial results for 2022 and the outfit for 2023. Nicole?

Thank you, Helen. 2022 was a year marked by strong financial performance. Halozyme recorded record revenue as a result of growing ENHANZE royalties and the addition of the Antares business. We completed the acquisition of Antares that met our expectations in being accretive to revenue and non-GAAP EPS. We also strengthened our balance sheet through a strategic refinancing walking into a lower interest rate that combined with our cash generation, puts us in a strong capital position with a net debt-to-EBITDA ratio of 3.2% at year-end. And as Helen mentioned, we remain committed to deploying capital through our share repurchase program to complement our EPS growth. With our 2022 repurchases, our share buyback programs have resulted in the repurchase of 30.6 million shares since 2019, which contributed $0.32 to non-GAAP earnings per share for the full year 2022. I will now turn to slide 13 for our fourth quarter 2022 financial highlights. Here, I will focus on total revenue for the fourth quarter, which was $181.5 million, a 78% increase compared to $102 million for the fourth quarter of 2021. The increase was driven by an increase in royalty revenue, primarily attributable to subcutaneous DARZALEX and the addition of product sales as a result of Antares acquisition. Revenue for the quarter included $106 million in royalties, an increase of 69%, compared to $62.6 million in the prior year period. Lastly, for the quarter, GAAP diluted earnings per share was $0.42 and non-GAAP diluted earnings per share was $0.48. I will now turn to slide 14 for a review of the full year 2022 results. I will briefly touch on some highlights here with more details available in our press release and 10-K filed with the SEC today. Total revenues grew 49% to $660.1 million in 2022, off of an already substantial revenue base in 2021 of $443.3 million. The main contributor to this increase was higher revenue from royalties of $360.5 million, up 77% from 2021. Product sales of $191 million were up sharply from $104.2 million in 2021 due to the product contribution from the Antares acquisition. Collaborative revenues of $108.6 million saw a decrease from prior year of 20% from $135.3 million, resulting from fewer partner milestone driving events. Now for the year is amortization expense of $43.1 million as a result of the Antares acquisition, in which we acquired intangible assets that are amortized over a useful life related to the auto-injector technology platform and proprietary products. Research and development expenses were $66.6 million, compared to $35.7 million in 2021. Selling, general and administrative expenses were $143.5 million, compared to $50.3 million in 2021. These increases were primarily due to the acquisition and an increase in compensation expense related to the ongoing combined larger workforce. GAAP EPS was $1.44, compared to $2.74 in 2021. As a reminder, 2021 GAAP EPS included a onetime tax benefit from the reversal of our tax valuation allowance, representing approximately $1.05 per share. Non-GAAP EPS for the year was $2.21, an increase from $2 in the prior year and an impressive achievement as 2022 reflects our first year recognizing income tax expense, impacting 2022 non-GAAP EPS by approximately $0.50 per share. Cash, cash equivalents and marketable securities were $362.8 million on December 31, 2022, compared to $74.9 million on December 31, 2021. Now let me turn to our 2023 guidance on slide 15, which we are reiterating and was first provided on January 10th of this year. For the full year 2023, we expect total revenues of $815 million to $845 million, representing growth of between 23% to 28% over 2022 total revenue. We expect revenue from royalties to increase between 23% to 26% over revenue from royalties in 2022 to a range of $445 million to $455 million. We expect EBITDA of $415 million to $440 million, representing growth of more than 30% over 2022 EBITDA and excludes the impact of amortization costs related to the Antares acquisition. We expect non-GAAP diluted earnings per share of $2.50 to $2.65. Our earnings per share guidance does not consider the impact of potential future share repurchases. With that, I will now turn the call back over to Helen.

Thank you, Nicole. 2022 was a transformational year for Halozyme. We made great strides as a combined company with our one team culture that enhanced our leadership in drug delivery and supported our continued growth. 2023 will be another year with significant growth opportunities. Highlights include the potential start of our Wave 3 product launches with two potential approvals in 2023 for subcutaneous efgartigimod and subcutaneous atezolizumab, continued progress in the development of our high-volume auto-injector with ENHANZE, the goal of signing new collaboration agreements across our platform and continued revenue growth resulting from our commercial products. I will end by thanking our Halozyme team and our partners and collaborators for the strong progress made in 2022. I am excited regarding our 2023 plan that is resulting in our strong revenue and EBITDA growth guidance. And with that, we would be now delighted to take your questions. Thank you, everyone, for joining us today. Operator, would you please open the call for questions.

[Operator Instructions] Our first question will come from the line of Mohit Bansal with Wells Fargo. Please go ahead.

Great. Thank you for taking my question and congrats on all the progress. Maybe one question we get a lot is, do we have some clarity on how Inflation Reduction Act will treat ENHANZE products at this point, especially the products which have longer patent protection due to the co-formulation patterns? Thank you.

Thanks, Mohit. At this time, we are still awaiting CMS to provide regulations and the details as to exactly how it’s going to be implemented and so there still is not a clarity. We obviously are watching that closely and we will provide an update as it becomes clearer. And obviously, the question really is, whether it’s a subcutaneous, which have a different BLA filing and a difference that launch date would restart a different clock. And so, no answer we can give them that yet, Mohit, but that’s definitely of interest to us and our partners.

Got it. Super helpful. Thank you.

Your next question will come from the line of Mike DiFiore with Evercore ISI. Please go ahead.

Hi, guys. Thanks for taking my question and congrats on the quarter. Two for me. Number one, I noticed that Merck is conducting a Phase 3 non-small cell lung cancer trial of pembrolizumab+hyaluronidase. Any thoughts on how this may be different from ENHANZE? And the second question is concerning subcutaneous Vyvgart. Obviously, Vyvgart expected to be a big project in 2023 and you seem to be pretty bullish on the size of the subcu opportunity. So having said that, why didn’t the Vyvgart PDUFA delay not lead to a change in your guidance?

Yeah. Thanks for those questions. Let me begin with the question on Merck. We noted that the data on that study start. Mike, we don’t have any details as to exactly what Merck is using and how they are proceeding. So we really can’t comment on that. That would be a question, obviously, better address to them. What we can say is with regard to ENHANZE, we obviously have established versus the proven well-tested leader in supporting subcutaneous delivery of drugs and we do find that our proven track record of success with five approvals, more than 600,000 patients who have received treatment with ENHANZE drug really puts us in a great position and a great negotiation position for continue to expand the number of deals we have. So that’s all I will say on that one. On Vyvgart, as people may be aware, the FDA did feel that due to some additional data that was submitted during the review process that they needed more time to review. They extended the PDUFA date by three months and so now that PDUFA date is June of 2023. We do have milestones associated with approval of products, and so, obviously, just pushing out three months doesn’t make any change to our guidance that we still expect this to fall within 2023 based on all the information we have today.

Got it. Thanks so much.

Your next question comes from the line of Jason Butler with JMP Securities. Please go ahead.

Hi. Thanks for taking the question. Two for me. First of all, you pointed previously to the potential for an ENHANZE auto-injector partnership or collaboration this year. Is that still your expectation that, that could occur? And then, secondly, the clinical work that you are doing, the feasibility testing, can you maybe give us some parameters about how you are assessing success or progress with that work in 2023? Thanks.

Yeah. Thanks for that, Jason. Yes. We are indeed -- we are still planning and actively discussing with both current and potential new partners, the beginning development program of ENHANZE with a high-volume auto-injector. So very happy with the progress of those discussions. The clinical studies of which we -- in my prepared remarks mentioned, we expect to have data for that midyear is a feasibility study. We created a prototype. We tested it in some other models by the end of last year, which was our goal. But now we want to take it into patients, human volunteers and basically just show the feasibility and reliability of it. So, as an example, the primary endpoint will focus on the number of devices that fired appropriately and deliver the drug in the required amount of time. That’s pretty standard for these types of tests and it’s a nice way just to confirm the prototype is effective in doing what it was designed to do.

Great. Thanks for taking the questions.

Thank you.

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

Great. Good afternoon. Thanks for taking the questions. First, can you elaborate a little bit on the studies -- the profile enhancing studies mentioned on the last slide of the deck regarding patient preference and on-body device. Just curious to learn a little more there. And then, second, following up on an earlier question about Merck’s subcu pembro that sounds like it’s using hyaluronidase as well. Can you walk through why you would not be worried about partners trying to pursue a similar approach, creating their own ENHANZE-ish products with hyaluronidase and/or whether you expect Merck to infringe any IP? Thank you.

Thanks for those questions, Jess. I will begin with the profile enhancing studies and for everybody that’s on slide 18 of the deck that we showed. And I think, Jess, you particularly wanted to hear about the patient preference study on the on-body device. These are studies that partners are doing for already commercialized or late-stage development drugs. And it’s all -- these types of studies are done to enhance the profile or provide additional information to inform patients and/or physicians with regard to how the drug can be used. These are trials that are actually listed on clinicaltrials.gov, but we didn’t have permission from our partners to actually list them here, but you can find more about them and pretty routine and I think exciting that partners are continuing to explore and expand the profile on all drugs that are in development. With regard to Merck, I think, the reason we are not worried about our current partners wanting to move and develop their own hyaluronidase and start incorporating that really focuses on a number of factors. The first one is that we bring a very strong safety track record. The issue when you combine two biologics together is a worry about immunogenicity and with 600,000 patients treated, they know that, that has been a very well-characterized safety profile. First question that comes up in all of our new deal negotiations is that worry. I think that’s the first one, Jess. We also have established a very strong relationship with all of our partners, demonstrating our expertise in development and regulatory and reliability of supply. And if you like the phrase of the aims broken, why fix it, I think, that is another reason that would not consider doing that. We obviously are very conscious about being reliable and a low-cost supplier to our partners. So then thinking about that would make no sense. And then the third one, I think, is a little bit more strategic for the partners, and they are, as we look at our partners, many of them are more focused on developing new molecular entities to deliver new large revenue speeds rather than take the time and resources to focus on in modest reduction to what it’s costing, for example, in a royalty rate. And so for all of those factors, we think it’s highly unlikely that our partners would want to develop their own rUpH20 and with no indication there.

Thank you.

Our next question will come from the line of Corinne Jenkins with Goldman Sachs. Please go ahead.

Yeah. Good afternoon, everyone. So I think maybe just for clarification for me. I think we have previously talked a lot about the 5 ml, but now you are talking about a 10 mL as well. Can you just talk about where you stand in the development of that 10 ml version and what are some of the gating steps before that can enter the clinic?

Yeah. Thanks for that, Corinne. And our prototype has actually been designed with flexibility that depending on what a partner actually wants, it can deliver anything from 5 ml to 10 ml. And so it’s the same basic prototype that we have in development. It’s just the fill cartridge will be able to be varied depending on what volume the partner actually wants. So this clinical testing that we plan to do this year will evaluate some several options of volume up to 10 ml.

That’s helpful. Thanks. And then as you think about kind of your current portfolio of partnered products, what portion of them fall under 10 ml versus 5 mL versus less than that? Is that something you can provide clarity on?

Yeah. We have mentioned when we did the acquisition, that we have a small number of our partner programs today that are in those volume ranges. We tended to work on larger volumes, 15 mls being quite common for our Boeing, but there are certainly a handful of current partners who are in that 5 ml to 10 ml range. They haven’t provided that information publicly, so we are not in a position to do that. But as we said when we did the acquisition, this is also a part of the strategy and moving to ENHANZE what the high-volume auto-injector is to get new deals and new collaboration partners. And I can say from us evaluating the landscape, we see a number of opportunities out there that may be used for us in the future that allow us to be delivering that 5 ml to 10 ml alone as well. So think of it as some opportunity for the current partners, but really this was to open up a whole new market of opportunity for ENHANZE here with that.

Thanks. Maybe just one last one for me. We have got a couple of product launches coming this year. How should we think about the path to co-formulation patents for those products? Is that something we can get some visibility on in the near-term?

Yeah. I can say that all of our currently marketed products have received or pending patents for co-formulation patents. I can also say, Corinne, that all of our development partners are very actively engaged in a number of the ones who have got advanced- to late-stage development have already filed applications for co-formulation patents. Specific by partner is not something we can talk about because that’s partner confidential information and I think the visibility will come as patents are issued, those become public domain, and at that point in time, you will be able to find them and we will be able to talk about them. But our partners have been unanimous in their support or protecting their inventions and filing co-form patents, which obviously, we are very pleased about and support, because, in general, those have benefits to us in terms of the duration of time we get royalties and they can also push out the time for the spec down. So we are very -- we are aligned and our very active focus on new co-form submissions.

Yeah. Thank you.

Your next question will come from the line of Vikram Purohit with Morgan Stanley. Please go ahead. Vikram, your line maybe on mute.

Hi. Can you hear me now?

We can.

We can, Vikram.

Okay. Great. Thanks for taking my question and sorry about that. So we had one question on subcutaneous ocrelizumab. So assuming the Phase 3 data here is positive, how do you foresee uptake for a subcu oc should ramping in this market, particularly given some recent competitive developments here in the multiple sclerosis space? Thanks.

Yeah. And so we are expecting, based on latest comments from Roche, the data midyear, which with the goal of taking therapy from the treatment and observation time for a minimum of 3.5 hours to 6 hours down to the initial doses with subcu being an hour for injection and observation, and ultimately, the goal is 10 minutes if the data supports that. So you can see what a transformation that will be for patients who are receiving MS therapy, lifelong and having to go to an infusion suite. And so I do think that based on that profile and be able to get to a simple 10-minute injection, this will be very competitive with the other products that are available on the market. Roche has not commented on specific uptake, but they have commented that they see an exciting market for the subcu option and delivery.

[Operator Instructions] Your next question will come from the line of David Risinger with SVB Securities. Please go ahead.

This is Dan Tarjan on for Dave. Two questions for us, please. So, one, can you provide some more color on your portfolio of Phase 1 candidates and including the historical on Phase 1 candidate in actually advancing to Phase 3 and also the typical time line for a Phase 3 go/no-go decision after candidate enters Phase 1. Second question, any modeling color you can provide on the first quarter of 2023 and the following quarters? Thank you.

All right. So our -- with regard to the Phase 1 candidates, that those really today would be what we are calling our Wave 4 products simply, just turn to that page, right? So that will be listed on page nine. And as you can imagine, Dan, it really does all depend on the individual partners plans and programs as to exactly what that time line is. The two products that are at the top of the list in that case atezolizumab and nivolumab moved pretty rapidly from their end of Phase 1 into the Phase 3 decision. In other cases, we have studies that are ongoing, such as ARGX-117 and repilvary [ph]. So those are still active studies and so you wouldn’t move forward. There is one study there, teplizumab. I think we have talked about that before, where we heard comments from Horizon to say they were evaluating going forward in options with and without Page 20 and so we are still waiting for a final decision on the plan there. But I would say just based on those examples, the majority of the studies here listed are still ongoing in the Phase 1 with teplizumab being one that’s completed. And so once those studies are finished and a decision is made and often there’s a conversation with the FDA about the design of the Phase 3 study. It usually is measured in months of time, I think, six months plus or minus, is a reasonable time frame for a transition, we might see between a Phase 1 and a Phase 3 for a partner who is wanting to move quickly to move forward into Phase 3 development. If I am sorry, can you just repeat the second question, you cut out a little bit for us.

Yeah. No problem. So the second question was, any modeling perspective for the first quarter of 2023 and the following quarters?

Yeah. I will ask Nicole to address that.

Yeah. Happy to share. So while we don’t provide guidance on a quarterly basis. What I can say is we look forward to Q1, from a revenue perspective, we are able to share that total collaboration revenue. We are forecasting to be relatively flat in 2023 versus 2022 and we do have line of sight to milestones beginning in the second quarter of the year and really being more weighted into the second half of the year. So that can give you a little bit of line of sight to expectations. And then when I talk about maybe looking at royalty. So just to reiterate, our royalty guidance for the full year is $445 million to $455 million. While what we do see in Q1 is sequential growth to be flattening in the first quarter and then grow sequentially there after throughout the year and that’s really a driver of seasonality with our EpiPen. We have FX reset at the start of the year and also looking into Q1, we are expecting minimal true-up in the first quarter.

And so I will just add that we wanted to provide that bit of color. We are very excited about the continued growth that we are going to see in the subsequent quarters both in terms of our royalties but also milestones that are a little -- that will begin in Q2, as Nicole said.

That’s very helpful. Thank you.

We have no further questions at this time. Ladies and gentlemen, that will conclude today’s meeting. Thank you all for joining. You may now disconnect.