Q1 2024 Halozyme Therapeutics Inc Earnings Call

Participants

Tram Bui; Vice President - Investor Relations and Corporate Communications; Halozyme Therapeutics Inc

Helen Torley; President, Chief Executive Officer, Director; Halozyme Therapeutics Inc

Nicole Labrosse; Chief Financial Officer, Senior Vice President; Halozyme Therapeutics Inc

Vikram Purohit; Analyst; Morgan Stanley & Co LLC.

Jessica Fye; Analyst; JPMorgan Chase & Co

Michael DiFiore; Analyst; Evercore ISI Institutional Equities

Mohit Bansal; Analyst; Wells Fargo Securities, LLC

Corinne Johnson; Analyst; Goldman Sachs Group, Inc

Jason Butler; Analyst; JMP Securities LLC

Brendan Smith; Analyst; Cowen Group, Inc.

Mitchell Kapoor; Analyst; H.C. Wainwright & Co, LLC

David Risinger; Analyst; Leerink Partners LLC

Joe Cantie Zorro; Analyst; Piper Sandler & Co.

Presentation

Operator

Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Halozyme First Quarter 2024 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 if you would like to ask a question during this time, simply press star followed by the number one on the telephone keypad. If you would like to withdraw your question, please press the star outside the number one. Again, please note this event is this event is being recorded. Thank you. I would now like to turn the conference over to Tremblay Halozyme's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Tram Bui

Thank you, operator. Good afternoon, and welcome to our first quarter 2024 financial and operating results conference call. In addition to the press release issued today after the market closed, 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 Ross, our Chief Financial Officer, who 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 2. 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'll now turn the call over to Dr. Helen Torley.

Helen Torley

Thank you, Tom, and good afternoon, everyone. Beginning on slide 3, I'm very pleased to report that our first quarter 2024 operational performance was in line with our expectations and reinforces our confidence in our full year financial guidance. There are three drivers of this confidence in our guidance, our royalties, the expected milestone payments and our EBITDA.
Let me provide some additional details on these three key drivers, which will help you appreciate the Halozyme business model even more.
I'll begin with royalties. The first quarter of 2024 marks the 15th consecutive quarter of greater than 15% year-over-year royalty growth. This provides robust support for continued royalty revenue growth in 2024, driven predominantly by our Wave two products, Darzalex, subcutaneous and Phesgo, with growing contributions projected from more recently launched and launching products like our head, Tullow and Tecentriq subcutaneous.
The second driver is milestones. We have good visibility to our partner milestone revenues for the remainder of the year where we project contributions from Wave one, two, three and five products. You may be surprised to see Wave one and two product milestones. This is a valuable feature of our agreements where we can have milestone payments for attainment of prespecified sales levels potentially extending to occur many years after the original launch.
Moving now to the refi product milestone, we predicted new product will enter the clinic in 2024, resulting in a milestone payment. In the first quarter, we recognized $14 million in milestone payments related to the approval and launch of Idera, which is the brand name for Viper head Tullow in Japan.
I'll move now to provide a little more color on the cadence, quality and profitability of the milestone revenues in the upcoming quarters. In the second quarter, we will recognize a $15 million milestone related to the recently announced US. regulatory file acceptance for Nippon I-Mab subcutaneous with three products in the third quarter we project two additional milestone payments related to the Wave three product, including a regulatory filing and a first commercial sale.
Also in the third quarter, we projected milestones for the wave five product Phase one studies are I just mentioned in the fourth quarter. It is notable that we project several commercial sales attainment milestones related to Wave one two and three products for all of the above, we have strong visibility included into the information and trends that give us confidence in these milestone achievements. In addition, we predict milestone revenues from new deals and new nominations in 2024. While these may occur at any time in the next three quarters for planning purposes, we project these in the fourth quarter.
We're currently in very active discussions with multiple pharma and biotech companies and have progressed to terms discussions with several our strong operating performance and the achievements described above, together with our continued focus on operational expense management, resulting confidence in delivering our full year EBITDA, and we project that we will deliver 26% to 37% growth.
The EBITDA quarterly growth cadence is projected to track well to the quarterly milestone payments I outlined earlier. All of these factors provide us with the confidence to reiterate our 2024 financial guidance with total revenue expected to increase 10% to 19% year over year to $915 million to $985 million. Royalty revenue continues to be the main driver, which is projected to increase 12% to 17% to $500 million to $525 million.
We project adjusted EBITDA growth of 26% to 37% to $535 million to $585 million and non-GAAP EPS growth of 28% to 41% to $3.55 to $3.90 With that overview.
Let me now move to the first quarter operational highlights, which are shown on slide 4. The multiple advancements that our partners made in 2023 have paved a clear path for our strong outlook. We entered the year with seven approved enhanced partner products, and there were multiple noteworthy partner product approvals in new regions and new indications already achieved in the first quarter of this year, beginning with recent approvals, Agennix is efgartigimod subcutaneous with Enhanze, which is a brand name in Japan of five.
Dura was approved in Japan for generalized myasthenia gravis included options for patient self-administration with the subsequent commercial launch of five direct. These events resulted in a combined $14 million in milestone payments to Halozyme. It was also exciting that Takeda's HyQvia, which is a wave one product received approval for an expanded indication in the United States and Europe during the first quarter.
The new indication is for maintenance treatment of patients with chronic inflammatory demyelinating polyneuropathy or CIDP. In addition, Roche received European approval for Tecentriq subcutaneous. As a reminder, the potential U.S. approval is expected in September of this year, also in the first quarter and more recently, multiple partners advance regulatory progress towards potential approvals and additional milestones and royalty revenues.
In February, organic cement FDA acceptance of the SBLA. with priority review for BiPar head-to-toe NCIDP. with a produce a target action date in June of 2024 and Roche announced the potential approval for ocrelizumab subcutaneous in Europe in mid 2024, and FDA produce a target action date in September of 2024
For both Tecentriq subcutaneous and ocrelizumab subcutaneous Janssen announced U.S. and European regulatory submissions for a new indication for Darzalex subcutaneous as part of a regimen for transplant eligible newly diagnosed multiple myeloma patients and BMS has announced the FDA acceptance of the BLA for the Balmat subcutaneous with a PDUFA target action date of February 2025. We're also pleased to report two pipeline advancements. Firstly, our Agennix initiated registrational studies of efgartigimod subcutaneous with Enhanze for a new indication thyroid eye disease.
Excitingly, these studies will utilize efgartigimod with Enhanze delivered by prefilled syringe. And secondly, our partner Vive initiated another Phase one study for v. eight four five two four one eight four, which is an integrase inhibitor with enhanced the performance of our Wave two products along with the start of the launches of our Wave three pipeline and strong regulatory progress I just discussed, give us high confidence in achieving our projections of $1 billion in royalty revenue in 2027.
Let me now provide an update on each of our royalty revenue drivers, starting with Darzalex Hasbro on Slide 5. I'll begin its review by overviewing the potential opportunity size for subcutaneous and then cover recent progress and new opportunities.
In the first quarter of 2024, J & J's Darzalex sales were $2.7 billion, up 21% year over year on an operational basis. This strong growth was driven by share gains in all regions resulting in share gain of six points across all lines of therapy out of 10 points in the front-line setting, with subcutaneous penetration in excess of 90% in the United States and estimated to exceed 80% outside the United States. Sub-standard Darzalex is driving the strong demonstrated and projected total brand growth.
Analysts continue to expect our wireless revenues to grow to exceed $17 billion in 2028. The potential approval in 2024 for the new indication of transplant eligible newly diagnosed patients based on recent US and European regulatory submissions would provide an important new front-line opportunity for us on exactly I'll move now to Phesgo, which is shown on Slide 6. First quarter fiscal sales increased 70% to [CHF] 388 million, which represented the second best performer and Roche's self ascribed young portfolio.
Most recently highlighted that U.S. conversion is reaching 25% and global conversion was 41% in the quarter, with the strong launch uptake and ongoing geographic expansion. Roche has commented that it predicts overall conversion will increase to approximately 50% over time as patients continue to convert from IV Perjeta, there remains a substantial conversion opportunity from Perjeta to Phesgo was projected generating almost [CHF]1 billion in sales in the quarter.
I'll turn now to our Wave three product and product candidates, which is shown on the right hand side of slide 7, the opportunity per wafer is meaningful with five products and analysts project will generate total sales of $35 billion in 2028.
This compares to $20 billion for our Wave two products, which are driving the robust royalty revenue growth we see today. Importantly, we three is largely derisked with positive Phase three data and regulatory submission plans already reported by our partners for all products, with the exception of Johnson & Johnson and the bottom up where Phase three data and regulatory submissions are expected this year.
Let me begin with Viper actual. The subcutaneous version of Viper HER2-low is currently approved for generalized myasthenia gravis in the US and Europe and also in Japan where it has the brand name five group, notably the European and Japanese approvals also allowed for patient self-administration subcutaneously.
In 2023, Vicor generated $1.2 billion in sales and Agennix continues to broaden ease of access and coverage for generalized myasthenia gravis, securing the J-code for the subcutaneous formulation in January of this year, with Symphony data showing positive quarter-over-quarter growth for the brand.
We look forward to growing adoption and use of subcutaneous BiPar head-to-toe as the number of physicians prescribing Bhaskar headroom to expand and nice increases in the earlier lines. Of treatment, the potential approval of a new indication of CIDP. in June in the United States, representing another exciting near-term growth opportunity for Viacom.
Look, this is the indication that will be a subcutaneous delivery only launch. Based on our genetics research and comments, approximately 42,000 patients are receiving treatment for CABP to date, only 20% of those patients are getting to remission on the current standard of care and 50% of patients remain dissatisfied with the current burden symptoms signaling a real unmet need in this challenging condition. We appreciate the strong partnership with their genetics and share their patient centric vision as they also grow and expand their pipeline. The recent initiation of two registrational studies evaluating efgartigimod within hand, administered by prefilled syringe for thyroid eye disease represents another future opportunity with it created demand.
Moving now to Tecentriq, subcutaneous, which is approved for subcutaneous delivery in the UK and Europe with both approvals covering all of the approved indications for Tecentriq IV, total revenue for Tecentriq was almost [CHF]900 million in the first quarter of 2024 with potential U.S. approval in September of 2020 for Roche has commented that they believe subcutaneous Tecentriq will be largely protective of their IV formulation with a very modest potential to add to brand growth, meaning the expectation is that the majority of subcutaneous use will be from patients currently on Tecentriq IV.
Switching to Tecentriq subcutaneous with enhanced, I move that Ocrevus in the first quarter of 2024 for Octopus IV generated approximately [CHF]1.7 billion in revenue for Roach, increasing 8% year over year. Although this remains the market leader in the U.S. and EU5 with approximately 24% global market share. The approval of subcutaneous ocrelizumab will dramatically change the patient treatment experience. Today's treatment and observation time can be from 3.5 to 6.5 hours. The IV, given every six months.
A target for total time for subcutaneous treatment and observation is 10 minutes. Also every six months. Importantly, Roche has commented that they see ocrelizumab subcutaneous being a standalone blockbuster opportunity, expanding use of ocrelizumab to treatment centers without IV infrastructure, with IV capacity limitations supporting even stronger brand growth in the future.
Roche recently announced that the European Medicines Agency's Committee for Medicinal Products for Human Use has recommended the approval of ocrelizumab subcutaneous for multiple sclerosis indications. The European Commission is expected to give a final decision on the approval in mid 2024.
Roche also announced that ocrelizumab subcutaneous heavy producer action date in the United States of September of 2020 for the key data supporting these approvals is from the O Karina to study. Roche recently presented updated longer-term results from the O Karina to study at the 75th American Academy of Neurology Annual Meeting. The results highlighted the significant potential benefits of subcutaneous ocrelizumab for patients with both relapsing and progressive forms of multiple sclerosis. The data showed that patients receiving ocrelizumab subcutaneous experienced near-complete suppression of relapse activity with 97.2% of patients experiencing no relapse during the treatment phase.
In addition, it was reported that patients treated with subcutaneous service, experienced appropriate B-cell suppression and impressive near-complete suppression of new inflammatory disease activity. Notably, patients reported a very high 92% satisfaction level and 90% of patients felt that it was very convenient to receive the ocrelizumab subcutaneous injection.
These results demonstrate the potential of subcutaneous ocrelizumab as a treatment option that can be matched to the individual needs of patients with MS and also health care professionals. Approval of ocrelizumab subcutaneous will represent our eighth approved subcutaneous product within hands.
I'll turn now to Bristol-Myers Squibb's, nivolumab, subcutaneous with Enhanze. Bristol-myers Squibb recently announced the FDA acceptance of its biologic license application for nivolumab subcutaneous co-formulated with Enhanze and assigned a PDUFA action date of February 2025.
Bms reported that a depot, which is nivolumab, which has delivered intravenously, generated approximately $2.1 billion in sales in the first quarter of 2024, with subcutaneous nivolumab projected to cover up to 75% of the IV indications over time. Bms' commented that nivolumab subcutaneous or help them extend their immunology and oncology franchise well into the next decade. Approval of nivolumab subcutaneous or represent our ninth and hence approved partner products.
I'll move now to Johnson & Johnson's amivantamab subcutaneous with Enhanze. Amivantamab subcutaneous remains on track with the potential for launch in 2025. Amivantamab is already approved as an IV treatment under the brand name right prevent with Johnson & Johnson, projecting that driver event will become a multibillion-dollar brand. We look forward to Johnson & Johnson presenting the Phase three amivantamab with enhanced subcutaneous data at an upcoming medical meeting, approval will represent our 10th enhance partner products.
I'll now move to Slide 8 for an update on our Wave four pipeline, which is expected to support our future growth trajectory with potential launches in the 2025 to 2027 timeframe. We have six products currently in development, reflecting a range of therapeutic areas including oncology, neurology, immune disease and HIV. Our two most advanced programs that are in Phase three development articulated immune globulin 20%, which is Taq eight eight one with enhanced and Bristol-Myers Squibb's nivolumab, relatlimab fixed dose combinations, subcutaneous with ENHANCE Phase three study of tech 81 and nivolumab plus relentless. That's continued to progress, also advanced into later-stage development in these broadly neutralizing antibody and six centers, which is progressing in an ongoing Phase two study.
As I close out this section on our upcoming launches and pipeline.
Let me now highlight the actions and progress we are making as we seek to expand and add additional partners and development products that will further add to and extend our revenues in the post 2027 timeframe.
We've continued with its mission to transform the treatment experience for HIV patients and recently initiated a new Phase one study for an integrase inhibitor, VH. four five two four one eight or given subcutaneously with enhanced. And we're also excited that acumen announced they plan to initiate a Phase one study of a subcutaneous version of AC. one nine three for the treatment of Alzheimer's disease in mid 2024.
We've also continued to be in very active discussions with multiple pharma and biotech companies regarding Enhanze and also our high volume autoinjector. We've progressed several companies to the stage of discussing terms for ENHANCE. This is the final stage prior to negotiation of the collaboration and licensing agreement.
With regard to our high volume auto-injector in the first quarter, a current partner completed a human factor study of the high-volume auto-injectors to evaluate device usability. Based on the results that were shared confidentially with Halozyme, the test was a success. We continue in discussions with that partner and several additional companies are expressing interest in our high-volume auto-injector.
With that overview, I'm pleased to now turn the call over to Nicole, who will discuss our financial results in more detail.

Nicole Labrosse

Thank you, Helen first quarter of 2024 is on track with our plans and supports our strong financial performance expectations for the full year from the continued momentum of our business.
Let me now briefly touch on our capital allocation priorities on Slide 9. We remain consistently focused on a balanced three pillar strategy, which is to invest in our current business, deploy capital through share repurchases and seek new growth opportunities through M&A as we continue to execute on the $250 million ASR that was announced in the fourth quarter of 2023.
The new $750 million share repurchase program that was recently approved by the Board in February is a reflection of the confidence in our long-term projections, durability of our business. We maintain a strong balance sheet with cash, cash equivalents and marketable securities of $463.5 million as of March 31s, 2024 compared to $336 million on December 31, 2023. Our net leverage ratio was two times at the end of the quarter and we expect to reduce our net leverage ratio as we continue to grow EBITDA throughout the year.
Turning now to Slide 10 for our detailed financial results for the first quarter, revenue grew 21% to $195.9 million compared to $162.1 million in the prior year period. Royalty revenue for the quarter was $120.6 million, an increase of 21% compared to $99.6 million in the prior year period, primarily attributable to continued momentum of our Wave two products, Darzalex, Bass Pro and Phesgo research and development expenses were $19.1 million compared to $18 million in the first quarter of 2023.
The increase was primarily due to planned investments in enhanced selling, general and administrative expenses were $35.1 million in the quarter, down from $37.4 million in the prior year period, primarily due to reductions in commercial marketing expense, offset slightly by increased compensation expense, growing revenues and relatively flat operating expenses resulted in EBITDA growth of 56% to $115.7 million from $74.3 million in the prior year period.
Gaap diluted earnings per share was $0.60 and non-GAAP diluted earnings per share was $0.79. This is compared with GAAP diluted earnings per share of $0.29 and non-GAAP diluted earnings per share of $0.47 in the first quarter of 2023.
Turning now to Slide 11 and our 2024 guidance.
We continue to see robust growth in our business.
And as Helen mentioned, we are reiterating our full year 2024 guidance of revenues of$ 915 million to $985 million, representing growth of 10% to 19%. Adjusted EBITDA of $535 million to$585 million, representing growth of 26% to 37% and non-GAAP diluted EPS of $3.55 $3.90, which is growth of 28% to 41% year over year as you refine your models.
I'd also like to reiterate the following. We continue to expect milestones in API sales to be substantially weighted in the second half of the year with the second quarter, flat to the first quarter for royalties, we expect continued expansion of Wave two products and launched Wave three products, partially offset by a royalty rate step down for Darzalex SC outside the US, Q2 royalties will be similar to Q1 with sequential growth in Q3 and Q4 to achieve the $500 million to $525 million guidance. Non-gaap diluted EPS growth of 28% to 41% reflects adjusted EBITDA growth of 26% to 37%, as well as the impact of our 2023 share repurchases.
I will now turn the call back to Helen.

Helen Torley

Thank you, Nikhil. 2024 is off to a strong start, as you've just heard, with excellent momentum in the current business and major progress made in advancing new approvals and growth opportunities. These opportunities include the FDA acceptance of Bristol's submission for their BLA for nipocalimab subcutaneous with a PDUFA action date of February 2025.
Potential new indication approval and launch for Agennix is Five Star, HER2-low, ECIDP. in the United States in June, potential approval and launch of Ocrevus subcutaneous in Europe, midyear, potential U.S. approvals and launches for Roche's Tecentriq subcutaneous, an all-purpose subcutaneous in September and a Phase three data readout for J & J's amivantamab subcutaneous.
I want to close by thanking our terrific Halozyme team, our partners and collaborators for all of the hard work that resulted in such strong first quarter progress.
Operationally, we are now ready to open the call for questions.

Question and Answer Session

Operator

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.
If you would like to advise your question, please press star one again if you are called upon to ask your question and are listening via loudspeaker and your device, please pick up your handset to ensure that your phone is not on mute when asking your question again, please press star one to join the queue. Your first question comes from the line of Vikram Purohit from Morgan Stanley. Your line is open.

Vikram Purohit

Thank you for taking your questions. We had one on the pace of business development for Helen. You mentioned that there were some discussions ongoing with potential new partners for Enhanze. Just wanted to see if you could provide some more color on and kind of what the the cadence of those discussions could be throughout the rest of the year and kind of the different stages that they're at and how you might expect those to turn into new agreements throughout the course of the year and 2025.
And then on DM, high-volume auto-injector, just also wanted to see if you could provide some more detail on how those discussions are progressing and what it would take given where some of those discussions are now to move towards some closed agreements. Thank you.
Yes.
Thank you.

Helen Torley

That Crown, ma'am or yes, I'm delighted to give an update on both of those areas and obviously is a strong focus for us. As we mentioned in the prepared remarks, some in the quarter, we were delighted to see several companies progressing from technical discussions in terms discussions. And importantly, this is a state that happens prior to negotiating and signing the CLA.
So that is a very strong sign of progress. And this is really a result of conversations in the first quarter with more than 10 pharma and biotech companies where at least one conversation has happened in several occasions, we've had multiple conversations and in terms of the feedback, let me give you the very consistent feedback, which is, I think, a very strong sign for the value proposition that enhance provide and how companies are thinking more and more about subcutaneous. The first is at companies definitely are thinking more and more of a subcutaneous delivery right from the start, particularly in diseases like autoimmune disease CNS disease and oncology.
Moving to enhance, it's very clear.
They see enhances the gold standard for rapid subcutaneous delivery for patients, particularly in the autoimmune, CNS and oncology areas. But in all areas as well and why they think that is because of what they see in hand as a highly derisked product with a strong safety track record and a great history of global regulatory approvals and commercial success.
And we've always talked about that. But the companies are very focused on the safety profile. They don't want something experimental that could delay their progress with development or do something to their commercial product. So that's a very important fact. And it's great to see that our messaging of that and our data and that is well received.
And while IV to subcu conversion is the main focus of discussions, we are seeing more and more companies wanting to get to extended dosing. First, subcu delivery two weeks to a month, one month to three months, that type of thing. And again, particularly in autoimmune and chronic diseases. And then we are seeing focus expand from the traditional monoclonal antibody space to companies inquiring about use of enhanced with bispecifics, nucleic acid therapies and also antibody drug conjugates and so great and very consistent feedback in all of those areas.
In terms of the evaluation and decision making process.
As we've described before, each company's unique, they have their own process for technology approval and then for budget approval, each of which moves at a different pace. And so it's an N of one with each company, which makes it always hard to predict the exact time line for signing on each deal. But what we can see in the quarter was we had multiple technical discussions advancing to the decision makers and separately and several of those been advancing to terms discussion the last decision point prior to negotiation of the CLA.
So excellent progress, Vikram, where based on the breadth and depth of discussion and the progress and confident in signing and hence deals based on all of this strong progress, our move to the high volume auto-injector, where we are delighted with the interest receiving since we communicated our phase one clinical study data, and we're in discussions with that current partners, but also potential new partners as it relates to HVI.
And we talked in the past to say repeat value really is truly groundbreaking. We hear that often in conversations, it's not something that's been done before and many believed it could not actually be done within this space has been a bit of a history of some of the prior types of on-body injectors and other technologies, not meeting biotech and pharma expectations.
And so what we experienced are two things. One, as we've talked about, companies wanted trial, they wanted to test it. And that was obviously an example of our one of our current partners who completed a human factor study up to evaluate device usability in the first quarter we were delighted that that was a success and we continue in discussions with that partner and also with other potential partners.
And the second area is as companies start thinking about them getting into development agreement and commercialization. We want to understand and have confidence in the device development plan and specifically key aspects like availability of the primary container.
They want to use the manufacturing plan, including the sites, the capacity, the equipment, the slots to meet their demand projections. And so and I think all of these are very good signs of progress in terms of the depth of questions, people are getting into really wanting to understand when this can be commercialized for them and how it will fit.
And so the great news is the Halozyme team has deep experience in developing and commercializing of devices, having done it many times with the small-volume auto-injectors. And so all of this work and the manufacturing plan is also well underway at this time. So we are continuing discussions and we expect those to also advance to development agreements. Again, hard to pin the exact time, but the progress has been very strong.

Vikram Purohit

Appreciate it.
Thank you.

Operator

And your next question comes from the line of Jessica Fye with JP Morgan. Please go ahead.

Jessica Fye

Great, and thanks for taking my question. Sort of sticking with a similar theme here on Q2 on kind of potential new deals. First, when you say that you're in terms discussions with several companies, should we think of those potential deals as being both pure enhanced deals and auto injector deals as well.
And second, should we think of the terms of these new potential deals at similar economics to Halo as the existing kind of portfolio deals.
And lastly, I think in the past you had and talked about a partner and who is interested in a customized high-volume auto-injector for their patient population? Is that one among the several companies with whom you're in these terms discussions?

Helen Torley

Yes, thanks.
Just with regard to the types of discussions, I can say we're having discussions on Enhanze alone. And I would say that is the most frequent discussion we're having. We are also having discussions on and hands with a high-volume auto-injector as well as small volume auto-injector as well. So across the portfolio, but definitely the Enhanze is the highest volume of the conversations and particularly the ones that we're seeing advancing at this point in time.
And with regard to terms in the past, we have been mostly done terms for a product set and companies are looking for exclusive agreements and exclusive rights. I will say that as ever, we are talking to companies also about nonexclusive rights.
And so there is a difference in our terms between exclusive rights and nonexclusive rights. So I would say you could see some differences in that.
But in some of the areas we're talking about them, they certainly are areas of strong interest for multiple companies. And so it would be our goal if we did nonexclusive deals to seek to get multiple agreements. And obviously, we find ourselves in potentially even a stronger position if we were to be successful with that. And then they beat the customized HBI. all of the discussions and HVI. and frankly are an element of some customization.
And depending on the volume, the partner wants to inject.
They have to identify what the primary container is going to be, and they may have a preference and the thought for that female. So depending on the patient population have a preference for needle decks and the viscosity of the drug may dictate a certain difference in the Volt, the needle of dose. And so there is always an element of customization in the discussions of the HBIGS., nothing major, but all kind of appropriate for really having an offering that is the right thing for that partners. Our patient population and drug.

Jessica Fye

Thank you.

Operator

And your next question comes from the line of Michael, the Y. from Evercore at Evercore ISI. Your line is open.

Michael DiFiore

Hi, guys. Thanks for taking my question and congrats on all the progress to for me. Thoughts on obviously for Phesgo is it is becoming a huge product for you guys. Thoughts on how a projected biosimilar the uptake may affect the uptake of Phesgo?
And I ask because there's one that seem to be completing Phase three trials late this year. And separate question is on the I think you mentioned for a subcu, neither you said that if it's approved, it would cover 75% of the IV indications. And my question is why not 100% and could we expect the same 75% of the indications for subcu atezo? Thank you.
All right.

Helen Torley

Thanks so much, Mike. With regard to back-to-school, obviously you're right as a showing very strong progress with some 70% growth some year over year in the first quarter, and that has resulted in at 41% global conversion out with the U.S. approaching 25%.
And I do think what's going to be important for Roche's that they continue to support the conversion. They've talked about to them reaching and exceeding 50% and I certainly think the progress we're seeing, it might even do better, and that's going to be important for the conversation.
We have about 10 biosimilars because what we have seen and I like to use Herceptin is, I think a very relevant example for that, that Herceptin got to 60% share of sales of subcu after about three years, and we meet with that Rosie every twice a year. And here that the share of the Herceptin subcu has remained sticky. And by that meaning clinics that move to giving their patients and themselves the staff experienced the convenience of subcu did not move to IV biosimilars.
And it's because the value proposition is so strong in terms of convenience for patients, much shorter treatment time obviously for phase go the differences between five to eight minutes versus what can often be 2 to 2.5 hours for the sequential administration and for a clinic that means a lot less that need for nursing time oversight, et cetera, and not to mention the pharmacy having to be involved in making up the IV. So yes, I think what's going to be important as we continue to see this very strong progress to subcutaneous and down. Then I think that the IV project, I will note if we can look at that example with Herceptin, it may be an issue.

Michael DiFiore

Very helpful.
And I guess the my other question regarding the subcu nivo, we are starting something yet.

Helen Torley

This is a comment that Bristol has made with regard to the 75% of the IV indications. And then I'm not recalling off the top of my head, Mike, exactly what it is. And the reason for it. And what we do know that down before to Centrica outside the US, if a U.S., U.K. and Europe are 100% of the indications and that certainly would be the goal in the United States. And so there is, I think, a couple of the patient indications, which I believe actually as I'm recalling this, I think it's where it is combined with the indications for CTLA4 IG. So when I say Europe, I am combined indications. Those are the ones that are being excluded when they get the 75% because that combination was not studied.

Michael DiFiore

Very helpful. Thanks again.

Operator

And your next question comes from the line of Mohit Bansal with Wells Fargo. Please go ahead.
Great.

Mohit Bansal

Thank you very much for taking my question and congrats on the progress. I have two questions last first. So in terms of the partnership terms, discussions in general, you expect the dealer deals to have some kind of different a different kind of terms or are you think they could be generally the same and no meaningful change there?

Helen Torley

Yes, I think and I'm looking at the way to think about it is there will be a difference if the the partner is asking for exclusive rights to target versus nonexclusive, obviously, with the economics for nonexclusive being lower as we have the opportunity to license that to multiple companies.
And also if it is a partner who has a product that is in earlier stages of development, the are there may be an opportunity for you to see a different distribution between less payments while the product is in development.
one that's getting the risk and more more of a weighting of the payments and a different balance of the royalties based on once it has achieved regulatory approval and is derisked. So there could be a few of those nuances across these are agreements. But obviously, each of these will offer a new royalty revenue stream for Halozyme and for the mid-single digit for an exclusive deal and probably be lower than the mid single digit if it's a nonexclusive deal.

Mohit Bansal

Got it. That's super helpful. And then one clarifying question. So I mean, the press release mentioned that there was a little bit lower bulk out at your peers 20 cities, should we read anything into it? It was just like a one-off thing.
Yes.

Helen Torley

I'll ask Nicole to address that,

Nicole Labrosse

Thanks for the question.
So we were expecting that for the first quarter. You might recall going into the year, we had indicated that our API sales just based on our partners ordering patterns and as we enter into firm the firm periods for our orders. We did have line of sight to the fact that those orders would be more weighted to the second half of the year. So this is all in line with our expectations.

Mohit Bansal

Got it. Super helpful. Thank you very much.
Thank you.

Operator

And your next question comes from the line of Kevin Johnson with Goldman Sachs. Please go ahead.

Corinne Johnson

I wanted to clarify one of the comments you made on the term discussions. You're having a mix of contracts in hand on the auto-injector and auto-injector only and just kind of get a sense for the breakdown there.
And then on the auto-injector with enhanced partnerships, are these companies that have already and gone through or fine without doing the human factor study, you've highlighted as being a key focus for one of the potential partners or will that be another item that you need to check off before announcing ideal state?
Yes.

Helen Torley

Thanks, Karen. In terms of the discussions that definitely more conversations happening around enhance only that, that is some and again, that is based on the volume of the drugs that we're discussing predominantly for those where there is a product that is falling into the for example, three to 10 ML.
We are having discussions with several companies with regard to high volume auto-injector and its applicability really to give some state of the art delivery for that company. And then there are a few conversations on small volume that really is a lesser focus for us as we have a unique set of circumstances where our SVI. is the best.
It's in areas where somebody is looking for high reliability or there is a high viscosity drug. So that really is tied to think about the number of conversations we're having. I would say in the conversations on the HVI. as I mentioned, all companies will want to hold it and test it.
That definitely is something that we're seeing. Again, it's something that hasn't been done before. This is a breakthrough and so they want to test it, whether they will want to do human factor studies. I don't think we know that yet, but them certainly companies are wanting to evaluate it themselves out in terms of some understanding how it delivers, et cetera. So stay tuned for any more information as to whether it will be more human factor studies. But definitely, there is an evaluation period where they want to play with it themselves.

Operator

I think your next question comes from the line of Jason Butler with Citizen's GMP. Please go ahead.

Jason Butler

Hi, thanks for taking the question. And Helen, wondering if you're able to comment yet on the sales potential for the Wave four pipeline or give us some context about how that magnitude might compare to Wave one or wave two or wave one, two or three? And then secondly, can you just give us an update on at that? And specifically, what are you seeing in the market in terms of promotion sensitivity and just in the context of your measured spend on that product?

Helen Torley

Yes, happy to do that. And so for the waste for as we as we talked about that between week four and week five, we have nine products that are in development, which we're obviously very excited about. And we aren't giving projections for week four, but I certainly can say that we're excited about some of the products that I mentioned earlier, including nivolumab relatlimab, which Bristol Myers Squibb, talks about being a blockbuster brand and also tax 20%, which has a very high potential as well.
And then behind that is the SMN. six LS. So some of the other products are a little earlier in their development and then there aren't good estimates them as to their potential. But I think all of them we can say are meeting substantial patient unmet need but a little premature for us to be giving projections on week four and week five.
But a very exciting set of products across multiple therapeutic areas is with regard to our desires that aim you. We have a very focused and clear strategy for, as I said, with our sales representatives really focusing on thriving and identifying the patients that down or not doing well on iron therapy and having the conversion and assuring that the patient is connected to all of the great services that we provide to assure affordability.
We feel we've got a the right size of the sales force, the right amount of promotional spend, which actually is less than last year because we've been able to optimize that as we understood better so we're at, I think, the rate term footprint and then operating expense to be driving this very nice asset growth that we saw last year to [$100 million]. And we're projecting, as you know, strong paper over the next five years with the current footprint that we have, we did less than 100 representatives.

Jason Butler

Great.
Thank you.

Operator

Your next question comes from the line of Brandon Smith with TD Cowen. Please go ahead.

Brendan Smith

Thanks very much for taking the question. Maybe maybe first on the latest repurchase program, actually, just wondering if you can confirm over what period of time you expect to complete the $450 million -- $750 million , excuse me, and how we should think about the cadence of buybacks, whether you're kind of planning for steady increments in each quarter or are concentrated more in certain parts of the year.
And then I just wanted to ask quickly about Xencor, a truly a pipeline can you maybe remind us which indications are going directly into the enhanced subcu? Or there are some where they either plan to use either exclusively or IV first and they run confirmatory study. Just trying to understand what part of that broader portfolio with the focus on ESG.
Thanks.

Helen Torley

That's great.
Thanks.
Thanks, Brandon, and welcome.
I'll ask Nicole to address your share repurchase question.

Nicole Labrosse

Yes.
Thanks, Brendan.
So for, $750 million authorized plan, we did not time bound that plan. But to give you a sense in how we've performed historically prior to plan and especially the prior plan with it, which was a similar size we completed in less than three years.
So you can think about that level of Cadence And historically, how much we have repurchased totaling today, $1.3 billion deployed to share repurchases. So it continues to be an important pillar of our of our capital return strategy. But this specific cadence is something that we continue to monitor as we deploy our cash amongst the pillars and really balance it between investments in our current business as well as investments in growing the business through M&A as Breht.

Helen Torley

And I will take the question on Viper had truly so obviously on the Tim Bent Hammer in the CY. O Organics has talked about his vision that patients with autoimmune disease are going to be able to self-administer five, got it truly overtime where possible.
And this really is a you can see reflected in his development portfolio where more and more indications are moving towards subcutaneous, what I can say based on what's been shared publicly and is that, Sam, obviously generalized myasthenia gravis started as an IV, but some of the subcu obviously launched beginning last year, CIBT. this year, CIDP. this year sorry, is a subcu indication only and pemphigoid, I believe, is a subcutaneous indication only.
And we're delighted this quarter to be announcing that some with organics that they've started to subcu studies in TED that our Phase three registration studies. And as far as I'm aware, there are no IV studies that are listed on clinicaltrials.gov, something that as a strong opportunity to be another subcu only on indication. And so I think this will roll out to more information on these over time as some are organic, some are articulate how they're going to go towards all of the 15 indications.
But I think to meet Tim's vision of this, some are five got really being transformative for patients with autoimmune disease. And I that's my expectation the majority of indications will be subcu.

Brendan Smith

Right, great. Thanks very much.

Operator

Your next question comes from the line of Mitchell Kapoor with Aegis C. Wainwright. Please go ahead.

Mitchell Kapoor

Hi, everyone. Thanks for taking the question. Wanted to ask on data like the ex U.S. royalty step down in March with that happening, how much volume growth in the coming quarters due to kind of stay on pace for the 500 million and royalty revenues? Or I guess what would be the necessary performance of some of these Wave three launches that you would need to see this year to be successful and kind of meet that threshold different?

Helen Torley

I'll ask Nicole to address that.

Nicole Labrosse

Yes, I think to that. So we had included in our forecast the expected step down related to our US sales for Darzalex SC. So that is part of our plans. It's the driver for our forecast, which demonstrates that we expect Q1 and Q2 royalties to be relatively flat with where we exited 2023.
So that's why you see that phenomenon. And our expectations for 2024 is that Q1 and Q2 will be flat, but because the brand is expected to grow, that will offset and that royalty rate reduction as well as continued growth with Phesgo, our other Wave two product and as you mentioned, contribution from our Wave three launch products.
And that's that's what gives us the confidence to project sequential growth in the third quarter in the fourth quarter of 2024, allowing us to achieve our total royalty projections for the full year at $500 million to $525 million.

Mitchell Kapoor

Okay, great. And then separately, could you just provide any update on the progress towards a next-generation Enhanze technology? Or is that something that's a little further?
Yes.

Helen Torley

We a couple of years ago had talked about having a more room temperature, stable, enhance them. We have been talking to different than current partners and potential partners about it's a different dumb structure than in hands, and it has slightly more extended into IP to 2032 in Europe and 2034 in the United States because the majority of products.
We continue to work on mix or are at certain products that need to be refrigerated such as antibodies and bispecifics. We have found that there so far is limited interest it to a new, enhance our current Enhanze does everything people need it to do.
And importantly, it's coming with this 800,000 patient database now establishing the safety and the very strong regulatory track record of success around the world with multiple approvals in up to 100 countries. And so I will say that some because in hand, does everything people need and the products have to be refrigerated anyway, we haven't seen traction with it.
I do think in the future, if we had a small molecule where the goal was that the patient would be able to carry an autoinjector and with them that might be the type of product that the partners would want to use the additional enhance for. But that's a very limited opportunity. And so far, while we're in discussions we haven't advanced those discussions.

Mitchell Kapoor

Okay.
Great.
That's super helpful. Thank you, Helen, and thank you, Nicole. Really appreciate it.
Thanks.

Operator

Your next question comes from the line of David Risinger with Leerink Partners. Please go ahead.
Yes.

David Risinger

Thanks very much, and thank you as well from my side on the updates on So my questions have been asked. I just have one more which is the company spent $19 million on R&D in the first quarter, is that basically the run rate that we should be expecting going forward? So maybe $75 million plus a year? And could you just provide some more color?
I think that is primarily on Enhanze, but I'm not sure. Could you just help us understand that spending, whether it's for internal activities of innovation, whether it is spending, you know, to help partners develop their products. Just anymore. A color on that would be helpful.

Helen Torley

Yes, Nicole will address that.

Nicole Labrosse

Yes, happy to David, your first question on the run rate on, I will say that the comps you saw in the first quarter are expected to grow for the remainder quarters of the year and as we make investments in our in our product development.
And so that I would I would advise you to build that into your models as well as growth from the amounts that you saw in the first quarter and where we spend our R&D dollars on is on the enhanced side as well as the HVAI. development we're making some investments in the development of the high-volume auto-injector this year. And so that is another driver of the expenses that we see in this year.
Thank you.

David Risinger

And could you just add a little more color since Enhanze is going off patent and one 27, what what is the product development that you're doing in the R&D line.

Nicole Labrosse

One example, and we've talked about the higher yield API that we're making investments that are expected to be available to our partners in 2026. That is a good example of the investments we're making that will benefit our partners and in particular their cost in buying the APA from.

Helen Torley

And David, I'll just I just mentioned.
While the US patent is expiring in 2027. That's basically the composition of matter patent. As we have shown, we expect based on co-formulation patents that we're going to continue to receive royalties on all of our royalty streams out until 2030 for many of them beyond 2030 for a number of them and beyond 2040 for another. And so we have got very durable revenues.
And so it does make sense for us to invest to have the best and lowest cost API because we have got some 20 years still ahead of us.
How bar plus that for our product. And hence and so it's a very wise investment given the durability and length and long stream of royalties we are expecting.

David Risinger

Got it.
Thank you.

Operator

And our next question comes from the line of Joe Catanzaro with Piper Sandler. Please go ahead.

Joe Cantie Zorro

Yes, thanks. Thanks for taking my question. I had maybe a quick one that maybe goes back to the discussion around Tecentriq, Opdivo subcu. As it relates to the the early days of Tecentriq subcu in the EU., wondering if you have any early data points there on conversion rates where you're seeing we're seeing use that gets within indications and settings. And then maybe stepping back more generally, is it fair to us to assume what we see around the Tecentriq subcu trajectory will be comparable to maybe what we will ultimately see for Opdivo subcu in the 2025 timeframe?

Helen Torley

Yes. A Roche has not provided a lot of details they did on their Q4 call, talked about the fact that after one quarter in the UK, they've seen 18%, some conversion, which I think is a very strong performance for such a short period of time.
But since the European launch in January, they haven't talked about the conversion. And recall for Europe, we're going to see countries them rolling out some over the course of the year as reimbursement is obtained them. So we look forward to Roche providing some updates on that.
With regard to comparing the uptake for Opdivo and Tecentriq is going to have a different cadence of the timing of approvals that I think you'll have to factor in as you're thinking about that because to Centriq, obviously is going to have you're going first and US. coming nine months later.
I would have an expectation that some and we still have to see based on what Bristol says about the Opdivo European file acceptance and then launch timing that that will be closer together or apart from that, I think the factors are probably going to be pretty similar in terms of strong value proposition where patients get the opportunity for treatment in just five minutes approximately instead of up to 60 minutes. And that strong patient preference for Tecentriq that we can talk about where 71% of patients, some preferred app subcutaneous Tecentriq really exciting less time in clinic.
And the administration of the subcutaneous was much more comfortable for them.
And the treatment was less emotionally distressing for them. And so all of those are good factors. But I think the launch cadence might be one of the factors that would make of these out launches, not identical, but strong value proposition for both.

Joe Cantie Zorro

Okay.
Great.
That's helpful. Thanks for taking the questions.

Operator

Thank you. And we have reached the end of our Q&A session. Thank you, presenters.
And ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.