Halozyme Therapeutics, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon and welcome to our second quarter 2026 financial and operating results conference call. In addition to the press release issued today after the market 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 Darren Snellgrove, our Chief Financial Officer, will review our financial results as well as our outlook. On today's call, we will be making forward-looking statements as outlined on slide two. I would also refer you to our SEC filings for a full list of risks 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 Dr. Helen Torley and we will start on slide three.

Thank you, Tram. Good afternoon, everyone. I am pleased to report our results from an exceptionally strong second quarter, led by ENHANZE royalty revenue growth and new deal momentum that resulted in meaningful upfront milestones. You've heard me say before that ENHANZE is a unique compounding platform engine. On this call, we will share multiple proof points demonstrating how ENHANZE is delivering on all of the attractive features of a compounding platform engine. I'm talking about the repeatability of success, the scalability and diversification, and the durability of revenues that result from this. The ENHANZE value proposition is attracting new partners and additional products from our current partners at a cracking pace.

On top of this, Hypercon is already off and running as a second future combining platform engine for Halozyme, showing the same features and in fact doing so even earlier in the life cycle than ENHANZE as we apply the knowledge and learnings of the last decade. Let's look now at what's new in the quarter. I will start with the broadening diversification and record growth of our royalty revenue streams. We are reporting increasing contributions of our newer launch products, Opdivo SC, Ocrevus SC, and RYBREVANT SC, to our royalty revenues with 80% growth quarter-on-quarter. This is repeating and building on top of the success and continued growth and performance of DARZALEX SC, VYVGART Hytrulo, and PHESGO.

What I love about this is that over the last years, we've moved from all focus being on DARZALEX SC performance to it then expanding to PHESGO and then to VYVGART Hytrulo as it was recognized just how much opportunity these products represented. Now we're expanding to six products to focus on. This is exactly what I meant by the compounding platform engine, multiple winners creating revenue diversification and durability. This broadened launch portfolio resulted in record total royalty revenue growth of 50% year-over-year to $308 million, providing strong support to and conviction for the 2026-2028 financial guidance and for the revenues in 2029 and beyond. Let me now move to the second highlight, the significant expansion in new partnerships for ENHANZE and Hypercon in the quarter.

In the second quarter, we signed four new collaboration and licensing agreements, and we signed a fifth agreement in July. We have never had this pace of new collaboration agreements in the history of Halozyme. For those of you who asked, "Can they sign great new deals for ENHANZE?" The answer is a resounding, emphatic, and demonstrated yes, with three of these five agreements being for ENHANZE. This year, we have added new ENHANZE agreements with GSK, Incyte, and a third confidential partner. We added two new Hypercon agreements with Vertex and with Oruka. I will add, not only did we broadly expand the number of partners, we also expanded use areas to beyond monoclonal antibodies into two new expanding and leading-edge modality areas, ADCs and nucleic acids. This means brand-new growth opportunity for ENHANZE.

The new CLAs contributed $35.5 million in upfront collaboration revenue in the quarter, approximately evenly split across ENHANZE and Hypercon. This was also an important contributor to record total revenue in the quarter. This is how we said we would and how we are bending the curve in the 2029+ period. The third area I want to highlight is development portfolio expansion and progress. In the second quarter, we advanced our pipeline of future potential royalty streams with two new phase I study starts. It is our goal to have 13 ENHANZE development programs in 2026, which is also bending the curve in the 2029+ period. Moving now to slide four, I'll highlight the second quarter financial results. For the second quarter, total revenue increased 48% year-over-year to $481 million.

This was largely driven by robust royalty revenues of CHF 308 million, a strong 50% year-over-year growth. The robust revenue performance resulted in adjusted EBITDA of CHF 329 million, adjusted EBITDA margin of more than 65%, and non-GAAP earnings per share of CHF 2.28, highlighting the strength of our diversified royalty portfolio and the operating leverage that's inherent in our differentiated business model. Moving now to slide five. Based on the strong second quarter, and in particular, the robust royalty revenue growth, we are pleased to raise full-year 2026 guidance. What I will highlight is the increase in total revenue guidance of CHF 110 million at the midpoint. This is driven by the increased projected royalty revenues from established products and the new launch products that I discussed earlier, and also by the upfront milestones resulting from what has already been a record year for new collaboration and licensing agreements.

Let me move now to slide six. I'll provide additional detail on the key business drivers in the quarter, beginning with the current ENHANZE portfolio. In the second quarter, the contribution from the more recently launched subcutaneous products with ENHANZE, including OCREVUS ZUNOVO, Opdivo Qvantig, and RYBREVANT SC, increased by approximately 80% quarter-over-quarter. OCREVUS ZUNOVO is demonstrating how ENHANZE-enabled subcutaneous delivery can compound the value for our partners' products by expanding the accessible patient population. On their second quarter call, Roche reported that the number of patients receiving the subcutaneous formulation increased to 44,000. Contrast that with the 17,500 patients at the end of the fourth quarter of 2025, and you can see just how many new patients have been added for this every six months subcutaneous treatment. ZUNOVO is now the fastest-growing anti-CD20 multiple sclerosis brand in the U.S.

Roche noted that approximately 60% of the U.S. OCREVUS ZUNOVO starts are coming from community practices, demonstrating how an ENHANZE-enabled delivery can reach new sites of care, enabling access to Ocrevus for new patients. Reflecting this momentum, Roche reaffirmed its expectation for CHF 9 billion in peak Ocrevus IV and subcutaneous sales by 2029, including approximately CHF 2 billion in growth resulting from the expanded accessibility created by OCREVUS ZUNOVO. Moving now to Bristol Myers Squibb. Bristol's Opdivo Qvantig continued its strong launch trajectory, with subcutaneous conversion reported to have increased to 15%, well on track for BMS's targeted 30%-40% conversion rate. This resulted in global sales growth of more than 200% year-over-year to CHF 261 million in the second quarter. Based on this, Opdivo Qvantig is projected to exceed CHF 1 billion in annualized revenue.

Johnson & Johnson's RYBREVANT FASPRO is another strong example of how ENHANZE creates value for our partners and for Halozyme. For the second quarter of 2026, J&J highlighted rapid uptake of RYBREVANT FASPRO, contributing to the strong 62% year-over-year growth. Supporting growth acceleration in the upcoming quarters, the permanent J-code was awarded on July 1st. This has been a contributor to broadening adoption and growth in multiple prior subcutaneous launches. J&J also commented that they have submitted a filing to the FDA for head and neck cancer. We're pleased to note that the FDA recently granted priority review to the filing, meaning an FDA review timeline of approximately six months. Upon approval, this new indication would expand the opportunity for RYBREVANT FASPRO beyond its existing lung cancer indications into this new area of high unmet need.

It is certainly very exciting to see the growth and contribution of these three newer launch brands, where for these three brands alone, the total IV and subcutaneous opportunity based on total sales is projected to be $25 billion in 2028. This is resulting in a diversified set of six products contributing royalty revenues where the total opportunity now exceeds $55 billion. I'll move now to DARZALEX subcutaneous, VYVGART Hytrulo, and PHESGO, beginning with DARZALEX. DARZALEX continued to demonstrate robust revenue growth, increasing approximately 18% year-over-year to over $4 billion in the quarter, with virtually all global sales being for DARZALEX subcutaneous with ENHANZE. J&J attributed the strong performance to continued market growth and share gains across all lines of therapy, including nearly 11 percentage points of share gain in the frontline setting.