Halozyme(HALO) - 2024 Q3 - Quarterly Results

Executive Summary Q3 2024 Financial Performance Overview Halozyme reported strong third-quarter 2024 financial results, exceeding expectations with significant year-over-year growth in total revenue, royalty revenue, net income, adjusted EBITDA, and both GAAP and Non-GAAP diluted EPS Q3 2024 Financial Performance (Millions) | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | YoY Growth | | :--------------------- | :----------------- | :----------------- | :--------- | | Total Revenue | $290 | $216 | 34% | | Royalty Revenue | $155 | N/A | 36% | | Net Income | $137 | N/A | 67% | | Adjusted EBITDA | $184 | N/A | 60% | | GAAP Diluted EPS | $1.05 | N/A | 72% | | Non-GAAP Diluted EPS | $1.27 | N/A | 69% | - Dr. Helen Torley, President and CEO, highlighted strong execution and accelerating momentum, attributing performance to ENHANZE pipeline advancement and new nominations from global licensing agreements[2] 2024 Financial Guidance Update Based on strong year-to-date performance, Halozyme raised its full-year 2024 financial guidance ranges for total revenue, adjusted EBITDA, and non-GAAP diluted EPS, reflecting increased confidence in future growth 2024 Financial Guidance (Millions) | Metric | New 2024 Guidance Range (Millions) | YoY Growth | | :--------------------- | :--------------------------------- | :--------- | | Total Revenue | $970 - $1,020 | 17%-23% | | Adjusted EBITDA | $595 - $625 | 40%-47% | | Non-GAAP Diluted EPS | $4.00 - $4.20 | 44%-52% | Recent Business Developments Partner Product Approvals and Submissions Halozyme's ENHANZE technology continues to drive partner product success with multiple regulatory approvals and submissions across various therapeutic areas, reinforcing its commercial validation and broad applicability - Janssen received European Commission approval for DARZALEX SC for newly diagnosed multiple myeloma patients in October 2024[2] - Roche secured U.S. FDA approvals for OCREVUS ZUNOVO™ and TECENTRIQ HYBREZA™ with ENHANZE in September 2024, leading to a $12.0 million milestone payment for TECENTRIQ HYBREZA™[3] - Janssen also received FDA approval for DARZALEX FASPRO for an additional indication in July 2024 and had its BLA for amivantamab SC designated priority review status in August 2024[3][4] - argenx announced National Medical Products Administration approval of efgartigimod SC for generalized myasthenia gravis in China in July 2024[5] Expanded Collaborations and Milestones Key partners argenx and ViiV Healthcare expanded their global collaboration and license agreements, demonstrating continued confidence in Halozyme's ENHANZE technology and generating significant upfront payments and potential future milestones - argenx expanded its global collaboration in September 2024, nominating four additional targets for ENHANZE technology, resulting in $30.0 million in upfront payments ($7.5 million per target) and potential future milestone payments of up to $85.0 million per new nominated target[3] - ViiV Healthcare expanded its global collaboration in September 2024, gaining exclusive access to ENHANZE for one additional undisclosed target[3] Clinical Study Initiations New clinical studies initiated by partners highlight the ongoing development and potential expansion of ENHANZE-enabled therapies into new indications and patient populations - argenx initiated a Phase 3 study for VYVGART Hytrulo in ocular myasthenia gravis and a Phase 2 study for kidney transplant recipients with antibody mediated rejection in October 2024[3] - Acumen initiated a Phase 1 study of sabirnetug co-formulated with ENHANZE for early Alzheimer's disease in July 2024[5] - Takeda submitted a New Drug Application in Japan for TAK-771 with ENHANZE for chronic inflammatory demyelinating polyneuropathy/Multifocal Motor Neuropathy in August 2024[4] Third Quarter 2024 Financial Results Revenue Analysis Halozyme's total revenue for Q3 2024 saw substantial growth, primarily driven by a significant increase in royalty revenue from key ENHANZE-enabled products and higher milestone revenue from collaborative agreements Q3 2024 Revenue Breakdown (Millions) | Revenue Type | Q3 2024 (Millions) | Q3 2023 (Millions) | YoY Change | | :------------------------------- | :----------------- | :----------------- | :--------- | | Total Revenue | $290.1 | $216.0 | +34% | | Royalties | $155.1 | $114.4 | +36% | | Product Sales, Net | $86.7 | $86.6 | +0.1% | | Revenues under Collaborative Agreements | $48.4 | $15.0 | +223% | - Royalty revenue growth was primarily attributable to increases in revenue from DARZALEX SC and Phesgo, and the prior year launch of VYVGART Hytrulo[5] Operating Expenses Operating expenses showed mixed trends in Q3 2024, with decreases in cost of sales and amortization of intangibles, offset by increases in research and development and selling, general and administrative expenses Q3 2024 Operating Expenses (Millions) | Expense Type | Q3 2024 (Millions) | Q3 2023 (Millions) | YoY Change | | :------------------------------- | :----------------- | :----------------- | :--------- | | Cost of Sales | $49.4 | $54.8 | -9.9% | | Amortization of Intangibles | $17.8 | $20.3 | -12.3% | | Research and Development | $18.5 | $17.3 | +6.9% | | Selling, General and Administrative | $41.2 | $35.3 | +16.7% | - The decrease in cost of sales was primarily due to lower device and bulk rHuPH20 sales[5] - Increases in R&D and SG&A expenses were primarily due to increased compensation expense and consulting/professional service fees[6][7] Profitability Metrics Halozyme demonstrated significant improvements in profitability during Q3 2024, with strong year-over-year growth across operating income, net income, EBITDA, and both GAAP and Non-GAAP diluted EPS Q3 2024 Profitability Metrics (Millions) | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | YoY Change | | :--------------------- | :----------------- | :----------------- | :--------- | | Operating Income | $163.2 | $88.3 | +84.8% | | Net Income | $137.0 | $81.8 | +67.5% | | EBITDA | $183.6 | $124.6 | +47.3% | | Adjusted EBITDA | $183.6 | $114.9 | +59.8% | | GAAP Diluted EPS | $1.05 | $0.61 | +72.1% | | Non-GAAP Diluted EPS | $1.27 | $0.75 | +69.3% | Balance Sheet Highlights Halozyme significantly increased its cash, cash equivalents, and marketable securities by the end of Q3 2024, primarily driven by strong cash generation from operations Cash and Marketable Securities (Millions) | Metric | September 30, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | | :--------------------------------------- | :---------------------------- | :--------------------------- | :---------------- | | Cash, Cash Equivalents & Marketable Securities | $666.3 | $336.0 | +$330.3 | - The increase in cash and marketable securities was primarily a result of cash generated from operations[8] Financial Outlook Updated 2024 Guidance Halozyme raised its full-year 2024 financial guidance across key metrics, reflecting strong performance and increased confidence in continued growth, particularly in royalty and collaboration revenue, and XYOSTED product sales 2024 Financial Guidance Comparison (Millions) | Metric | Previous Guidance Range (Millions) | New Guidance Range (Millions) | YoY Growth (New) | | :--------------------- | :--------------------------------- | :---------------------------- | :--------------- | | Total Revenue | $935 - $1,015 | $970 - $1,020 | 17%-23% | | Royalty Revenue | $520 - $555 | $550 - $565 | 23%-26% | | Adjusted EBITDA | $555 - $615 | $595 - $625 | 40%-47% | | Non-GAAP Diluted EPS | $3.65 - $4.05 | $4.00 - $4.20 | 44%-52% | - The increase in total revenue guidance is primarily driven by expected increases in royalty revenue, collaboration revenue, and growth in product sales from XYOSTED[9] - The company's EPS guidance does not consider the impact of potential future share repurchases[10] Company Information About Halozyme Halozyme is a biopharmaceutical company focused on improving patient experiences through its ENHANZE drug delivery technology, which facilitates subcutaneous delivery of injected drugs. The company also develops and commercializes proprietary drug-device combination products - Halozyme's core offering is the ENHANZE® drug delivery technology, utilizing the proprietary enzyme rHuPH20 to enable rapid, large-volume subcutaneous delivery of injected drugs, aiming to reduce treatment burden[13] - ENHANZE technology has been licensed to leading pharmaceutical and biotechnology companies including Roche, Takeda, Pfizer, Janssen, AbbVie, Eli Lilly, Bristol-Myers Squibb, argenx, ViiV Healthcare, Chugai Pharmaceutical, and Acumen Pharmaceuticals, and has been used in over 800,000 patient lives across eight commercialized products[13] - The company also develops, manufactures, and commercializes proprietary drug-device combination products, including Hylenex® and XYOSTED®, and has ongoing development programs with Teva Pharmaceuticals and Idorsia Pharmaceuticals[13] Webcast and Conference Call Details Halozyme hosted a conference call and webcast on October 31, 2024, to discuss its third-quarter 2024 financial and operating results, with access provided for live participation and subsequent recording - Halozyme hosted its Quarterly Update Conference Call for Q3 2024 on Thursday, October 31, 2024, at 1:30 p.m. PT/4:30 p.m. ET[12] - The call was accessible live via pre-registration link and webcast live through the 'Investors' section of Halozyme's corporate website, with a recording made available afterward[12] Non-GAAP Financial Measures Explanation of Non-GAAP Measures Halozyme provides non-GAAP financial measures such as EBITDA, adjusted EBITDA, and non-GAAP diluted EPS to offer additional insights into its core operating performance, excluding certain non-recurring or non-cash items, and to facilitate comparisons over time and with other companies - Non-GAAP measures are presented in addition to, and not as a substitute for, GAAP financial measures[15] - Non-GAAP diluted EPS excludes share-based compensation, amortization of debt discounts, intangible asset amortization, one-time changes in contingent liabilities, inventory adjustments, impairment charges, and certain income tax adjustments[15] - Adjusted EBITDA excludes one-time items like changes in contingent liabilities and inventory adjustments, providing a clearer view of core operating performance[15][16] GAAP to Non-GAAP Reconciliations The report provides detailed reconciliations between GAAP and non-GAAP financial measures for EBITDA and diluted EPS, outlining specific adjustments made to derive the non-GAAP figures for the three months ended September 30, 2024 and 2023 GAAP to Non-GAAP EBITDA Reconciliation (Three Months Ended September 30, In Thousands) | Metric | 2024 (Thousands) | 2023 (Thousands) | | :---------------------------------------------- | :--------------- | :--------------- | | GAAP Net Income | $137,011 | $81,837 | | Adjustments: | | | | Investment and other income, net | (6,475) | (4,786) | | Interest expense | 4,524 | 4,505 | | Income tax expense | 28,136 | 19,923 | | Depreciation and amortization | 20,360 | 23,078 | | EBITDA | 183,556 | 124,557 | | Adjustments: | | | | Gain on changes in fair value of contingent liability | — | (13,200) | | Inventory write-off | — | 3,509 | | Adjusted EBITDA | $183,556 | $114,866 | GAAP to Non-GAAP Diluted EPS Reconciliation (Three Months Ended September 30, Per Share) | Metric | 2024 (Per Share) | 2023 (Per Share) | | :---------------------------------------------- | :--------------- | :--------------- | | GAAP Diluted EPS | $1.05 | $0.61 | | Adjustments: | | | | Share-based compensation | 0.10 | 0.07 | | Amortization of debt discount | 0.01 | 0.01 | | Amortization of intangible assets | 0.14 | 0.13 | | TLANDO Related Adjustments | | | | Gain on changes in fair value of contingent liability | — | (0.10) | | Inventory write-off | — | 0.03 | | Impairment charge of TLANDO product rights intangible assets | — | 0.02 | | Income tax effect of above adjustments | (0.03) | (0.03) | | Non-GAAP Diluted EPS | $1.27 | $0.75 | | GAAP Diluted Shares (Thousands) | 130,134 | 134,083 | | Adjustment for dilutive impact of senior 2028 Convertible Notes | (293) | — | | Non-GAAP Diluted Shares (Thousands) | 129,841 | 134,083 | Legal and Disclosures Safe Harbor Statement The Safe Harbor Statement clarifies that the press release contains forward-looking statements regarding financial performance, growth expectations, and product development, which are subject to risks and uncertainties that could cause actual results to differ materially from projections - Statements concerning the Company's financial performance, future growth, profitability, total revenue, royalty revenue, EBITDA, Adjusted EBITDA, and non-GAAP diluted earnings-per-share are forward-looking[17] - Forward-looking statements also cover potential benefits of ENHANZE technology, growth from partner efforts, new clinical trials, regulatory submissions, product launches, and new collaborations[17] - Actual results may differ due to factors such as unexpected revenues/costs, delays in business growth or product development, regulatory requirements, adverse events, and competitive conditions, as detailed in SEC filings[17] Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations provide a detailed breakdown of Halozyme's revenues, operating expenses, and net income for the three and nine months ended September 30, 2024, and 2023, highlighting significant growth in profitability Condensed Consolidated Statements of Operations (Selected Data, In Thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Royalties | $155,061 | $114,433 | $400,572 | $325,813 | | Product sales, net | $86,659 | $86,569 | $224,128 | $221,252 | | Revenues under collaborative agreements | $48,364 | $15,031 | $92,616 | $52,149 | | Total revenues | $290,084 | $216,033 | $717,316 | $599,214 | | Total operating expenses | $126,887 | $127,754 | $341,342 | $362,675 | | Operating income | $163,197 | $88,279 | $375,974 | $236,539 | | Income before income tax expense | $165,147 | $101,760 | $378,918 | $247,154 | | Income tax expense | $28,136 | $19,923 | $71,839 | $50,948 | | Net income | $137,011 | $81,837 | $307,079 | $196,206 | | Diluted EPS | $1.05 | $0.61 | $2.37 | $1.45 | Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets present Halozyme's financial position as of September 30, 2024, compared to December 31, 2023, showing an increase in total assets driven by higher cash and marketable securities, and a significant increase in stockholders' equity Condensed Consolidated Balance Sheets (Selected Data, In Thousands) | Metric | September 30, 2024 | December 31, 2023 | | :----------------------------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $154,318 | $118,370 | | Marketable securities, available-for-sale | $511,988 | $217,630 | | Accounts receivable, net and contract assets | $285,743 | $234,210 | | Total current assets | $1,126,976 | $746,424 | | Total assets | $2,118,030 | $1,733,270 | | Total current liabilities | $108,815 | $112,494 | | Long-term debt, net | $1,504,154 | $1,499,248 | | Total liabilities | $1,665,327 | $1,649,462 | | Total stockholders' equity | $452,703 | $83,808 | - Total assets increased by $384.76 million, primarily driven by a substantial increase in marketable securities and accounts receivable[19] - Stockholders' equity saw a significant increase from $83.8 million at year-end 2023 to $452.7 million by Q3 2024, largely due to retained earnings[19]