On November 6, 2023 Halozyme Therapeutics, Inc. (NASDAQ: HALO) ("Halozyme" or the "Company") reported its financial and operating results for the third quarter ended September 30, 2023 and provided an update on its recent corporate activities and outlook (Press release, Halozyme, NOV 6, 2023, View Source [SID1234637027]).
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"I am delighted that our strong operating performance and expense management throughout the year have resulted in an increase to EBITDA and non-GAAP EPS guidance. Today, we also announced an acceleration into this year of the remaining $250 million under the current approved $750 million share repurchase plan, authorized in 2021. This action is part of our disciplined and balanced approach to capital allocation and reflects our assessment that share repurchases today are a strong return on investment opportunity," said Helen Torley, president and CEO of Halozyme. "Supporting our conviction in long-term revenue growth and durability, the third quarter was remarkable, with multiple, meaningful, de-risking events and progress for our upcoming series of Wave 3 potential product launches, projected for 2023-2025. I am also pleased with the progress in the quarter in advancing discussions on development of our HVAI."
Recent Corporate Highlights:
•Announced an acceleration, into this year, of the remaining $250 million under the current approved $750 million share repurchase plan authorized in 2021. The Company intends to execute the $250 million share repurchase by entering into an accelerated share repurchase ("ASR") transaction with a financial Institution, immediately, subject to market conditions.
•In August 2023, the Company announced positive results of a clinical study with its high-volume auto-injector demonstrating SC administration of 10 mL of a representative biologic product co-formulated with our ENHANZE drug delivery technology in approximately 30 seconds. The results were presented at the 13th annual Partnership Opportunities in Drug Delivery ("PODD") conference in October 2023.
Recent Partner Highlights:
•In November 2023, Halozyme and Acumen entered into a global collaboration and non-exclusive license agreement that provides Acumen access to ENHANZE technology for a single target. Acumen intends to explore the potential use of ENHANZE for ACU193, Acumen’s clinical stage monoclonal antibody candidate to target Amyloid-β Oligomers for the treatment of early Alzheimer’s disease.
•In October 2023, Bristol Myers Squibb reported positive topline results from the Phase 3 CheckMate-67T trial evaluating a SC formulation of Opdivo (nivolumab) with ENHANZE in patients with advanced or metastatic clear cell renal cell carcinoma ("ccRCC") who have received prior systemic therapy. The study met its co-primary pharmacokinetics ("PK") endpoints and a key secondary endpoint.
•In September 2023, Chugai Pharmaceuticals, a member of the Roche Group, announced that it had obtained regulatory approval for Phesgo from the Ministry of Health, Labour and Welfare ("MHLW") in Japan. Halozyme is entitled to receive royalties for Phesgo sales in Japan under its agreement with Roche.
•In September 2023, argenx announced the Committee for Medicinal Products for Human Use ("CHMP") of the European Medicines Agency ("EMA") has recommended European Commission ("EC") approval of the SC injectable formulation of efgartigimod as an add on to standard therapy for the treatment of adult patients with generalized myasthenia gravis ("gMG") who are anti-acetylcholine receptor ("AChR") antibody positive. The EC is expected to make a decision on the argenx marketing authorization application within approximately 67 days following the CHMP recommendation.
•In September 2023, Zai Lab limited (argenx commercial partner for China) announced the Center for Drug Evaluation ("CDE") of the National Medical Products Administration ("NMPA") granted Breakthrough Therapy Designation for efgartigimod alfa injection (SC injection) (efgartigimod SC) for the treatment of patients with chronic inflammatory demyelinating polyneuropathy ("CIDP"). The Breakthrough Therapy Designation for efgartigimod SC was supported by data from both global and Chinese patients enrolled in the ADHERE study.
•In September 2023, Roche informed the Company that there will be a delay in the projected launch timing for Tecentriq SC in the U.S. as a result of Roche’s need to update chemistry, manufacturing, and controls ("CMC") processes for Tecentriq SC. Roche expects these updates to be completed in 2023 to support a potential launch of Tecentriq SC in the U.S. in 2024. There is no expected impact on ex-U.S. filings for Tecentriq SC.
•In August 2023, Roche announced the approval of Tecentriq SC with ENHANZE by the Medicines and Healthcare products Regulatory Agency ("MHRA") in Great Britain, triggering an $8.0 million milestone payment to Halozyme and the right to receive royalties on net product sales.
•In August 2023, ViiV initiated a Phase 2b study to evaluate the efficacy, safety, PK and tolerability of VH3810109 (N6LS) administered subcutaneously with ENHANZE in combination with cabotegravir.
•In August 2023, ViiV achieved a development milestone, which triggered a $5 million milestone payment to Halozyme.
•In July 2023, argenx reported positive data from the ADHERE study evaluating VYVGART Hytrulo with ENHANZE in adults with CIDP. The study met its primary endpoint resulting in a 61% reduction in risk of relapse compared to placebo.
•In July 2023, Roche announced that the Phase III OCARINA II trial evaluating OCREVUS (ocrelizumab) with ENHANZE as a twice a year 10-minute SC injection met its primary and secondary endpoints in patients with relapsing forms of multiple sclerosis ("MS") or primary progressive MS ("RMS" or "PPMS").
Third Quarter 2023 Financial Highlights:
•Revenue was $216.0 million compared to $209.0 million in the third quarter of 2022. The 3% year-over-year increase was driven by growth in ENHANZE revenue streams with an increase in royalty revenue and an increase in product sales as a result of an increase in bulk rHuPH20 sales driven by partner demand and continued growth in XYOSTED, partially offset by in the timing of milestone revenue. Revenue for the quarter included $114.4 million in royalties, an increase of 15% compared to $99.6 million in the prior year period, primarily attributable to increases in revenue of subcutaneous DARZALEX (daratumumab) and Phesgo.
•Cost of sales was $54.8 million, compared to $47.3 million in the third quarter of 2022. The increase was driven by growth in proprietary product sales and bulk rHuPH20 demand.
•Amortization of intangibles expense was $20.3 million, compared to $27.2 million in the third quarter of 2022. The decrease was due to a remeasurement period adjustment of our acquired intangible assets recorded in the fourth quarter of 2022, partially offset by an impairment charge of $2.5 million to fully impair the TLANDO product rights intangible asset as a result of the license agreement termination notice provided to Lipocine in September 2023.
•Research and development expense was $17.3 million, compared to $16.7 million in the third quarter of 2022. Selling, general and administrative expense was $35.3 million, compared to $34.5 million in the third quarter of 2022. The increases were primarily due to an increase in compensation expense.
•Operating income was $88.3 million, compared to operating income of $83.3 million in the third quarter of 2022.
•Net Income was $81.8 million, compared with net income of $61.6 million in the third quarter of 2022.
•EBITDA was $124.6 million, compared with EBITDA of $109.8 million in the third quarter of 2022. Adjusted EBITDA was $114.9 million, compared with Adjusted EBITDA of $110.2 million in the third quarter of 2022.1
•Earnings per Share: GAAP diluted earnings per share was $0.61, compared with $0.44 in the third quarter of 2022. Non-GAAP diluted earnings per share was $0.75, compared with $0.74 in the third quarter of 2022.1
•Cash, cash equivalents and marketable securities were $483.3 million on September 30, 2023, compared to $362.8 million on December 31, 2022. The increase was primarily due to the cash provided by operating activities, partially offset by repurchase of common stock for $150.0 million in the first quarter of 2023.
Financial Outlook for 2023
The Company is raising its EBITDA and non-GAAP EPS guidance ranges to reflect strong expense management. For the full year 2023, the Company now expects:
•Total revenue of $825 million to $845 million, representing growth of 25% to 28% over 2022 total revenue primarily driven by continued strength in Wave 2 products, including DARZALEX SC and Phesgo utilizing ENHANZE, as well as full year auto-injector royalty and product contribution. The Company expects revenue from royalties of $445 million to $455 million, representing growth of 23% to 26%.
•EBITDA of $430 million to $445 million, representing growth of >30% over 2022. EBITDA excludes the impact of amortization costs related to the Antares Pharma acquisition.1
•Non-GAAP diluted earnings per share of $2.70 to $2.80, representing growth of 22% over 2022.1 The Company’s earnings per share guidance does not consider the impact of potential future share repurchases.