On November 8, 2022 Halozyme Therapeutics, Inc. (NASDAQ: HALO) ("Halozyme") reported its financial and operating results for the third quarter ended September 30, 2022 and provided an update on its recent corporate activities and outlook (Press release, Halozyme, NOV 8, 2022, View Source [SID1234623405]).

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"Our third quarter accomplishments are reflective of the expanded opportunities and capabilities at Halozyme that support an enhanced and extended revenue and earnings growth trajectory. DARZALEX SC and Phesgo have continued to demonstrate strong momentum driving 70% year-over-year royalty revenue growth in the third quarter. Our partners also continued to advance their development pipelines with ENHANZE. Our Wave 3 products represent the most near-term opportunities with the potential to launch between 2023 and 2025. We are excited for argenx’s biologics license application to the FDA for efgartigimod SC with ENHANZE for Myasthenia Gravis as well as Roche’s plans for regulatory submissions for Tecentriq SC in the U.S. and EU," said Dr. Helen Torley, president and chief executive officer of Halozyme. "Our leadership in drug delivery technologies and innovative commercial products have augmented our growth initiatives, diversified our revenue streams and extended revenue durability. We look forward to further strengthening our position as the drug delivery partner of choice for pharmaceutical and biotechnology companies with both ENHANZE and our auto-injectors."

Recent Partner Highlights:

In October 2022, Roche Pharmaceuticals China announced the approval of Herceptin (trastuzumab injection subcutaneous with ENHANZE) in China for the treatment of patients with early-stage and metastatic HER2-positive breast cancer.
In September 2022, Janssen initiated a Phase 3 study of lazertinib and amivantamab with ENHANZE in patients with epidermal growth factor receptor (EGFR)-mutated advanced or metastatic non-small cell lung cancer (PALOMA-3).
In September 2022, argenx announced the submission of a biologics license application ("BLA") to the U.S. Food and Drug Administration ("FDA") for subcutaneous ("SC") efgartigimod for the treatment of adults with generalized myasthenia gravis ("MG"). SC efgartigimod is co-formulated with ENHANZE.
In September 2022, Chugai Pharmaceutical Co., Ltd. (a Member of the Roche Group) announced the submission of a New Drug Application in Japan for fixed-dose subcutaneous combination of pertuzumab and trastuzumab (same monoclonal antibodies as Phesgo in U.S. and EU).
In August 2022, Bristol Myers Squibb ("BMS") initiated a Phase 3 trial to compare the drug levels of nivolumab with ENHANZE administered subcutaneously versus intravenous administration in participants with melanoma following complete resection (CheckMate-6GE).
In August 2022, Roche announced that the Phase III IMscin001 study evaluating a subcutaneous formulation of Tecentriq (atezolizumab) with ENHANZE met its co-primary endpoints. The study showed non-inferior levels of Tecentriq in the blood (pharmacokinetics), when injected subcutaneously, compared with intravenous infusion, in cancer immunotherapy-naïve patients with advanced or metastatic non-small cell lung cancer for whom prior platinum therapy has failed. The safety profile of the SC formulation was consistent with IV Tecentriq. Roche announced that they will submit the data for regulatory approval to health authorities globally, including the FDA, resulting in revenue recognition of $19 million for Halozyme in Q3 2022 for associated milestones.
In July 2022, Takeda announced positive topline results from pivotal Phase 3 trial evaluating HYQVIA (Immunoglobulin infusion 10% (Human) with rHuPH20), for maintenance treatment of chronic inflammatory demyelinating polyradiculoneuropathy ("CIDP").
Recent Corporate Highlights:

In August 2022, we completed the sale of $720 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028. We used a portion of the net proceeds to facilitate an induced conversion with certain holders of our outstanding 1.25% Convertible Senior Notes due 2024. In connection with the induced conversion, we paid the note holders $77.6 million in cash and issued 1.51 million shares. We also used portions of the net proceeds to repay all of the $250 million term loan facility due 2026.
In August 2022, we entered into an amendment to our revolving credit agreement that increased the size of the facility from $350 million to $575 million.
In the third quarter of 2022, we accelerated $100 million of planned share repurchases from 2023 into 2022, for a total of $200 million planned share repurchases in 2022. In August 2022, we repurchased 2.1 million shares of common stock in open market purchases for $90.2 million at an average price per share of $43.09 and entered into an accelerated share repurchase agreement to repurchase $109.8 million of our common stock, for which we took an initial delivery of 2 million shares.
Third Quarter Financial Highlights:

Revenue for the third quarter was $209 million compared to $115.8 million for the third quarter of 2021. The 80% year-over-year increase was driven by an increase in royalty revenue primarily attributable to subcutaneous DARZALEX (daratumumab), the addition of product sales as a result of the Antares Pharma acquisition and an increase in revenues under collaborative agreements due to milestone recognitions from BMS and Roche. Revenue for the quarter included $99.6 million in royalties, an increase of 70% compared to $58.6 million in the prior year period.
Cost of sales for the third quarter was $47.3 million, compared to $18.6 million for the third quarter of 2021. The year-over-year increase was driven by an increase in product sales as a result of the Antares Pharma acquisition.
Amortization of intangibles expense in the third quarter was $27.2 million, an increase from no expense in the third quarter of 2021 due to the Antares Pharma acquisition, in which we acquired intangible assets that are amortized over a useful life related to the auto injector technology platform, XYOSTED and TLANDO.
Research and development expenses for the third quarter were $16.7 million, compared to $8.5 million for the third quarter of 2021. The increase is primarily due to planned investments in ENHANZE, the Antares Pharma acquisition and increases in compensation expense related to the ongoing combined larger workforce.
Selling, general and administrative expenses for the third quarter were $34.5 million, compared to $13.2 million for the third quarter of 2021. The increase was primarily due to the Antares Pharma acquisition and an increase in compensation expense related to the ongoing combined larger workforce.
Operating Income in the third quarter of 2022 was $83.3 million, compared to operating income of $75.6 million in the third quarter of 2021.
Net Income: On a GAAP basis in the third quarter of 2022, net income was $61.6 million, compared with net income of $216.6 million in the third quarter of 2021, which includes the reversal of substantially all of the valuation allowance recorded against the Company’s deferred tax assets and resulted in the recognition of a non-cash income tax benefit during the quarter of $142.5 million. Non-GAAP net income was $103.3 million in the third quarter of 2022, compared with non-GAAP net income of $80.5 million in the third quarter of 2021.1 The Company notes that 2022 is the first year in which Halozyme is recording income tax expense as part of its income statement.
Earnings per Share: On a GAAP basis in the third quarter of 2022, diluted earnings per share was $0.44, compared with $1.48 in the third quarter of 2021. On a non-GAAP basis diluted earnings per share was $0.74, compared with diluted earnings per share of $0.55 in the third quarter of 2021.1
Cash, cash equivalents and marketable securities were $265.6 million on September 30, 2022, compared to $740.9 million on December 31, 2021.
Financial Outlook for 2022

The Company is reiterating its financial guidance for 2022, which was last provided on August 9, 2022 as a result of the close of the Antares Pharma transaction and strong year-to-date results. For the full year 2022, the Company expects:

Total revenue of $655 million to $685 million, representing growth of 48% to 55% over 2021 total revenue primarily driven by projected revenue contribution from the Antares business of $115 million to $125 million. The Company expects revenue from royalties to increase by approximately 70% over revenue from royalties in 2021, to approximately $350 million to $360 million.
GAAP operating income of $240 million to $265 million, which includes one-time transaction costs of approximately $45 million and amortization of approximately $80 million related to the Antares acquisition. Adjusting for these costs, we expect adjusted operating income of $365 million to $390 million. 1
GAAP net income of $170 million to $195 million and non-GAAP net income of $295 million to $320 million.1 The Company notes that 2022 will be the first full fiscal year in which Halozyme will record income tax expense as part of its income statement.
GAAP diluted earnings per share of $1.20 to $1.35 due to acquisition related costs in 2022.
Non-GAAP diluted earnings per share are expected to be $2.10 to $2.25,1 reflective of the projected accretion from the Antares Pharma acquisition.
The Company’s earnings per share guidance does not consider the impact of potential future share repurchases.

Webcast and Conference Call

Halozyme will host its Quarterly Update Conference Call for the third quarter ended September 30, 2022 today, Tuesday, November 8, 2022 at 4:30 p.m. ET/1:30 p.m. PT. The call will be webcast live through the "Investors" section of Halozyme’s corporate website and a recording will be made available following the close of the call. To access the webcast and additional documents related to the call, please visit the "Investors" section of www.halozyme.com.