Halozyme Therapeutics Inc

NASDAQ:HALO

Earnings Call Transcript 2021-Q2

[Operator]

Thank you all for standing by and welcome to the Halozyme Second Quarter 2021 Financial Results Conference Call. All lines will be in a listen-only mode until the question-and-answer session of today’s conference [Operator Instructions] Please also note that today’s call is being recorded.

I’ll now turn the call over to your host, Al Kildani. Sir, you may now begin.

[Al Kildani]

Thank you. Good afternoon and welcome to our second quarter 2021 financial results conference call. In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced on 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 Elaine Sun, our Chief Financial Officer, who will review our financial results for the first quarter.

On today’s call, both GAAP and non-GAAP financial measures will be discussed. The non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties.

I’ll now turn the call over to Dr. Helen Torley.

[Helen Torley, President and CEO]

Thank you, Al. I'm pleased to report that our strong second quarter financial results and outlook have resulted in an increase to our 2021 financial guidance. We now expect to achieve $425 million to $445 million in total revenue, an increase from our initial guidance of $375 million to $395 million with commensurate increases also in our GAAP and non-GAAP earnings per share guidance. The substantial increase in our outlook is supported by our recent new enhanced collaboration with ViiV Healthcare and higher than previously anticipated revenues from royalties.

We reported second quarter revenues of $136.5 million. This was driven by record quarterly royalties of $45.8 million and $60 million in collaboration revenues. Second quarter GAAP diluted earnings per share was $0.62 and non-GAAP diluted earnings per share was $0.66. Once again, we achieved these strong results against the backdrop of the ongoing global COVID pandemic. These results have been accomplished through the strong performance and hard work of our partners, our contract manufacturers and suppliers and the entire Halozyme team.

Beginning on slide 3 of our earnings presentation, I'm excited to discuss our 11th ENHANZE collaboration which we entered into with ViiV Healthcare in June. ViiV is a global specialist HIV company that is majority owned by GlaxoSmithKline and is dedicated to delivering advances in therapies for HIV treatment and prevention. With our enhanced technology, ViiV is seeking to enable development of ultra-long-acting medicines for HIV to meet the evolving needs of patients.

Under the terms of the agreement, ViiV exclusively licensed four HIV small and large molecule targets, which resulted in a $40-million upfront payment to Halozyme. In addition, ViiV is obligated to make potential future payments of up to $175 million in development and commercial milestones for each target and to pay a mid-single-digit royalty to Halozyme on net sales of any commercialized medicines using ENHANZE.

We first plan to utilize the ENHANZE technology to evaluate an ultra-long-acting form of cabotegravir with the potential for dosing every three to six months for the prevention of HIV. Cabotegraviris currently approved for the once-monthly treatment of HIV and every two months dosing regimen is currently under review by the FDA.

During GSK’s Investor Day in June, representatives of ViiV commented that they would like to use ENHANZE to expand the opportunities for ultra-long-acting regimens combining cabotegravir to ViiV pipeline products for treatment and for pre-exposure prophylaxis with the goal of offering the first self-administered long-acting treatment regimen which could potentially result in fewer clinic visits for patients.

Our collaboration with ViiV is significant as it highlights the versatility of ENHANZE and expands the ENHANZE technology opportunity in multiple ways. It's the first ENHANZE collaboration with a focus on infectious disease and includes both small molecule and large molecule drugs, highlighting the often under recognized versatility of ENHANZE.

And it explores the potential to replace current daily oral therapies with long-acting injectable therapies. I'm pleased to say that collaborative work is already well underway with the ViiV and Halozyme team working together on the first cabotegravir study with a projected Phase 1 study start by the end of this year.

Now, this is our second new ENHANZE collaboration signed within the last eight months and we're working hard to continue this new deal momentum and are actively engaged in discussions with a range of biotech and pharma companies.

Let me turn now to slide 4 and we'll discuss our strong royalty revenue growth in the second quarter and the outlook for the year. Royalties during the second quarter were $45.8 million. This represents 189% growth year-over-year and 24% sequential growth following what had previously been a record quarterly royalty. Strong royalty growth continues to be driven primarily by the successful ongoing global launches of Jansenn’s subcutaneous forms of DARZALEX which utilize our enhanced technology.

Roche's Phesgo is also beginning to contribute in a more meaningful way as global launches continue. For the full year 2021 we now predict a more than doubling in royalty revenues over 2020 based on the anticipation of continued growth primarily driven by DARAZLEX SC. We're delighted to see robust growth in this high-margin recurring revenue stream.

I'll now provide highlights of our key commercialized products. This is on slide 5 but I'll begin with the discussion of DARZALEX. During the second quarter, Janssen’s parent Johnson & Johnson reported worldwide sales of DARZALEX including both the IV and SC forms of $1.4 billion, up 53.8% year-over-year on an operational basis.

During the call, J&J management stated that 60% percent of DARZALEX sales worldwide are now the subcutaneous form which utilizes our enhanced technology and that the 60% share is in the US and also outside the United States. According to data from Symphony Health, DARZALEX FASPRO reached 66% share of sales in June in the United States.

On the right side of the slide is the percentage of total DARZALEX sales that DARZALEX FASPRO represented in the US. Looking at the last month of the last four quarters, I think you will agree this is a very impressive trend. Based on J&J’s comments about robust adoption of SC and expansion into additional patient populations as well as the most recent shared data we have seen from Symphonhy in the US we predict that conversion will continue increasing from current levels.

Supporting the future growth of DARZALEX Janssen announced a number of significant regulatory achievements during the second quarter. Last month Jannssen received FDA approval for DARZALEX FASPRO incombination with pomalidomide and dexamethasone for patients with multiple myeloma after first or subsequent relapse. This marked the sixth indication for DARZALEX FASPRO in the treatment of multiple myeloma in the United States.

And in June, Janssen was granted two marketing authorizations in Europe for DARZALEX SC in two new indications. The first authorization was for use in combination with cyclophosphamide, bortezomib and dexamethasone in newly diagnosed adult patients with systemic light chain amyloidosis, marking DARZALEX SC the first approved therapy for AL amyloidosis in Europe.

The second authorization was for use in combination with pomalidomide and dexamethasone in adult patients with relapsed or refractory multiple myeloma. With strong sales and regulatory momentum, we continue to expect that DARZALEX will be a driver of royalty revenue growth for Halozyme for much time to come.

Moving now slide six. In addition to DARZALEX, there are four other products now approved in most global -- major global markets using our ENHANZE technology. Globally, more than 500,000 patients have received commercial products utilizing ENHANZE.

I'll begin with Phesgo which like DARZALEX FASPRO is one of our recently launched wave two products. Phesgo which is a fixed dose combination of two approaches therapeutic antibodies Perjeta and Herceptin. As a reminder, Phesgo is administered in five to eight minutes compared to an administration time of several hours for the IV.

Phesgo was launched in the US in the third quarter of 2020 and in initially European launch markets during the first quarter of 2021. Now that Roche is several quarters into the launch we're beginning to see a more noticeable increase in sales of Phesgo. In the second quarter, Roche reported Phesgo sales of CHF 67 million, up from CHF 29 million in the first quarter. The strong sequential growth is driven by continued US adoption and use and by uptake in Europe following reimbursement and launches in a growing number of countries.

On its recent half year results call Roche noted that as we would anticipate, Phesgo is cannibalizing sales of the IV form of Perjeta. Interestingly, Perjeta is now Roche's largest oncology drug with sales of CHF 2 billion in the first half of 2021. And notably, Phesgo’s continuing to launch in new markets as evidenced by the recently announced approval in Canada.

I’ll move now to our Wave 1 launch products sold Roche’s MabThera SC which is also called RITUXAN HYCELA, and subcutaneous Herceptin and Herceptin Hylecta continue to experience modestly declining sales due to the ongoing impact of biosimilars. Meanwhile, Takeda continues with its commercialization of the immunoglobulin therapy HYQVIA.

Let me now move to slide 7 and a discussion of the enhanced development portfolio and I'll begin with an overview and then move into a brief review by our partner. Let's begin with the next wave of potential launches. These are called the Wave 3 launch products. These are products that are today in Phase 3 development and they include Bristol's nivolumab, Roche's Tecentriq and Argenx’s efgartigimod. Now based on historical development timelines, products today are in Phase 3 redevelopment represent potential launches in the 2023 to 2025 time frame. We had expected a fourth product to initiate a Phase 3 study this year. Recently, the partner for that program informed us that they now expect to initiate the Phase 3 study in 2022.

Moving to the earlier pipeline, we expect five new products will enter clinical development during 2021. We've made good progress here already with two new clinical development starts during the first quarter. With the ongoing programs and these projected starts, we project a total of 16 products will be in clinical development with ENHANZE by the end of 2021. The products that are today in Phase 1 development represent our way for potential launches in 2025 to 2027 time frame. This advancing pipeline of products utilizing ENHANZE is setting up, as you've heard, the potential for multiple waves of future product launches that we believe will deliver long-term growth in revenues, profitability, and cash flow.

Let me now provide that brief discussion of select partners beginning with Bristol-Myers Squibb, after indicating the start was imminent on our first quarter results call. We're pleased to confirm Bristol builds the first patient in the Phase 3 study of nivolumab using enhanced technology for patients with advanced or metastatic clear cell renal cell carcinoma during the second quarter. In addition to nivolumab, Bristol has initiated three Phase 1 studies with ENHANZE. These include studies of anti-CD73, TIM3 and the fixed dose combination of nivolumab and relatlimab.

Moving to Horizon Therapeutics of TEPEZZA continues to advance its subcutaneous form of the Pozzo within hands. As we announced on last quarter's call, Horizon has completed dosing of their Phase one study. Horizon recently provided an update that it nixed plans to have initial discussions with the FDA later this year about moving the subcutaneous version forward.

If development is successful, Horizon hopes to potentially shorten drug administration time, reduce health care practitioner time and offer patients suffering from thyroid eye disease, additional flexibility and convenience. We look forward to further developments in this exciting program for a drug that according to Horizon has an anticipated peak sales potential of $3.5 billion.

Moving next to Argenyx. Argenyx’ continuous development or the subcutaneous form of efgartigimod with ENHANZE hands in four Phase 3 trials and four separate potential indications. The four indications being studied are chronic inflammatory demyelinating polyneuropathy or CIDP which is a neurological disease leading to impaired motor function.

The second is immune thrombocytopenia which is a chronic bruising and bleeding disease. Thirdly, there’s pemphigus vulgaris which is a chronic disease characterized by severe blistering of the skin. And finally myasthenia gravis or MG, a chronic disease that causes muscle weakness.

On its recent half year results call, Argenyx indicated they expect to complete enrollment in the ADAPT SC trial which is evaluating efgartigimod in myasthenia gravis by the end of 2021 and have top line results in the first half of 2022. This is consistent with the potential for approval and launch in the 2023 to 2025 timeframe. And lastly on Argenyx, development continues with its second nominated target ARGX-117 which is being evaluated in a recently initiated Phase 1 study in healthy volunteers.

I’ll move now to Roche. Roche is continue with two products in development utilizing ENHANZE Tecentriq and OCREVUS. Tecentriq which is now Roche's second largest oncology drug with sales of $1.6 point six billion Swiss francs in the first half of 2021 is being studied in an ongoing Phase three trial within hands in stage four non small cell lung cancer and was also continues with its Phase one study evaluating SC administration of Okra's with ENHANZE. OCREVUS is another approved blockbuster product

is another approved blockbuster product and is indicated for patients with multiple sclerosis. We are pleased with this progress our partners are making in advancing therapies using the ENHANZE technology. This progress is setting up multiple waves of potential future approvals and launches that can drive long-term revenue growth for Halozyme.

And we see further growth opportunities even beyond this exciting pipeline I've just described. In addition to new development programs arising from new potential collaboration agreements, we also have the opportunity to expand the pipeline through current partners, nominating new targets and advancing them into the clinic. With current partners having access to more than 20 open slots, we're excited for the growth opportunity that exists here. Products moving into development in the next 12 to 18 months as a result of new collaborations or new nominations by current partners have the potential to create our fifth wave of launches in the 2027 to 2029 time period.

I'll move now to slide 8 to discuss how pipeline progress drives revenues for Halozyme. We're again reiterating our three-year outlook for projected revenues from milestones. You can see here that for 2021 through 2023, we continue to project $400 million to $450 million in milestone revenues. This reflects our expectations for partner development and commercial milestones during that period and new deals.

The blue bars represent our three-year outlook since 2019 and the green bars represent actual annual milestone revenues, demonstrating that we're performing well against these projections. Specifically, with six months still remaining of our 2019 to 2021 projection period, we have already achieved near the top of the projected range of $225 million to $300 million, with $274 million in milestone revenue through June of 2021. And at the halfway point for our 2020 to 2022 projection period, we're making strong progress with $240 million in milestone revenues against the projection of $350 million to $450 million.

This near-term milestone revenue progress is an important and strong indicator for future royalty revenues. We predict royalty revenue potential of approximately $1 billion in 2027 based on known risk adjusted revenue projections for programs that we currently have line of sight to and assuming global launches in all indications.

We're certainly excited by this ongoing momentum growth and the growth potential for an ENHANZE technology and the franchise. At the same time, we continue to evaluate the potential for new technology platform expansion through acquisition with the goal of accelerating and extending our long-term revenue growth. We see the opportunity to create incremental value for other platform technologies applying, Halozyme’s proven partnering and commercialization capabilities. Now, as we've said before, ENHANZE is still early in its growth cycle. So, we have the opportunity here to be highly selective in what we choose.

Now, with that update, I'll turn the call over to Elaine for a discussion of the second quarter financial results.

[Elaine Sun, CFO]

Thank you, Helen. Before I begin, I'd like to again note that last quarter, we began and will continue reporting key measures on a non-GAAP adjusted basis in addition to a GAAP and we will also provide financial guidance on a non-GAAP basis. We consider these non-GAAP financial measures to be important because they provide useful measures of our operating performance, exclusive of factors that do not directly affect what we considered to be our core operating performance such as stock-based compensation, amortization, as well as unusual events and their related tax effects.

I'd ask you to refer to our press release and filings for a reconciliation of GAAP and non-GAAP net income and earnings per share.

With that I'll now turn to slide 9 for a review of our second quarter revenues. Highlighting our strong financial results, total revenue for the second quarter was $136.5 million more than double our revenue for the prior year period of $55.2 million. We gained some growth from all three sources of revenue in the second quarter.

Revenue from royalties for the quarter was $45.8 million, a 189% increase over the prior year period. This was driven primarily by the continued strong uptake of subcutaneous DARZALEX utilizing in hand by our partner Janssen and to a lesser extent by Roche's ongoing global launches of Phesgo. Product sales were $30.4 million in the quarter up from the prior year period product sales of $6.3 million. This significant growth in product sales was primarily driven by higher API sales to our partners Janssen and Roche in support of their ongoing commercial activities.

Moving to collaboration revenue, in the quarter totaled $60.3 million up 83% from $33 million in the prior year period. In addition to the $40 million upfront license fee from ViiV we recognized $20 million in collaborative revenue from Janssen related to a commercial milestone that was earned in the quarter highlighting the continued momentum of subcutaneous DARZALEX.

Let me now turn to slide 10 for a more detailed breakdown of our second quarter P&L. Total operating expenses of $43.4 million in the second quarter up from $25.7 million in the prior year period. The overall increase in total operating expenses resulted from higher cost of product sales which were $23 million compared with $5.7 million in the prior year period. This increase in cost of goods in the second quarter was attributable to the markedly higher level of API sales versus the prior-year period in support of our enhanced partners’ products and programs.

Research and development expenses of $8.1 million decreased 10% from $9 million in the prior-year period. SG&A expenses were $12.3 million compared to $11 million in the prior year period. Total operating expenses excluding costs of goods were $20.4 million for the second quarter compared with $20 million in the prior-year period and consistent with the guidance we provided at the outset of the year on spend.

As a result, GAAP operating income for the quarter was $93 million compared to GAAP operating income of $29.6 million in the prior-year period, reflecting our strong top line growth and leveragable business model. And in terms of our bottom line, on a GAAP basis, we achieved net income for the quarter of $91.5 million or $0.62 per diluted share and this compared with $25.8 million and $0.19 per diluted share, respectively, in the prior-year period. On a non-GAAP or adjusted basis, net income was $97.8 million or $0.66 per diluted share compared to net income of $33.6 million or $0.24 per diluted share, respectively, in the prior year period.

I'll now turn to slide 11 for a discussion of our 2021 financial guidance. We are pleased to be raising guidance for 2021 based on our latest collaboration with B and the strong results so far in the first half of the year. We now expect total revenues of $425 million to $445 million, which would represent year-over-year growth of 59% to 66% over our already substantial revenues in 2020. This is up from our prior guidance for the year of $375 million to $395 million.

Moving to the components of revenue. As we continue to expect revenues from royalties to more than double from 2020 levels and product sales to increase 70% to 80% from 2020 levels driven primarily by bulk API sales to our ENHANZE partners. Given our new collaboration with ViiV and ENHANZE in commercial milestone, we expect revenue under collaborations to be higher than the already meaningful collaborative revenue we achieved in 2020.

And we now expect GAAP operating income for 2021 to be in the range of $260 million to $280 million, which would represent 80% to 94% growth over 2020 and a greater than 60% operating margin. And this translates to strong bottom line growth. With respect to net income, we now expect GAAP net income of $235 million to $255 million and non-GAAP net income of $280 million to $300 million.

Moving to earnings per share, we now expect GAAP diluted EPS of between $1.55 and $1.70 per share, representing growth of 70% to 86% over 2020. This is up from our per GAAP EPS guidance of $1.25 to $1.40 per share. And lastly, we now expect non-GAAP diluted EPS of $1.85 to $2 per share, representing growth of 65% to 78% growth over 2020.

With that, let me turn to slide 12 for a summary of our approach to value creation and capital return. We've been consistent regarding our balanced capital allocation priority. These include maintaining a strong balance sheet, capital return via share repurchases and commitment to driving both internal and external growth. We have a strong balance sheet with cash and cash equivalents of $755 million as of June 30. And we anticipate the strong projected free cash flow driven by ENHANZE will support both our ongoing commitment to capital return, as well as funding both internal and external growth via our longer-term M&A strategy.

We've made substantial progress to-date with our three-year $550 million share repurchase program, which we initiated in November 2019. We began the year with a goal of repurchasing up to $125 million in our common shares during 2021. And I'm pleased to report that with the purchase of an additional $49 million of our shares during the second quarter, we've now completed our goal of $125 million in share repurchases this year, in total at an average price of $4.43. As a reminder to-date, since the initiation of our program, we have repurchased $475 million in our common shares at an average price of $23.27 per share. And we have up to $75 million remaining under our current three-year $550 million share buyback authorization.

So with that, I'll now turn the call back to Helen.

[Helen Torley, President and CEO]

Thank you, Elaine. Our revenue growth and the robust development pipeline of partner products place Halozyme in a strong position for continued strong growth in our revenues, our profitability and cash flow in the coming quarters and indeed years, which will allow us to deliver on our commitment to return capital to shareholders, maintain long-term sustainable growth and maximize shareholder value.

As we summarized on slide 13, we continue to expect multiple important value driving events in 2021. We expect launch momentum for DARZALEX SC and FASPRO to continue with broadening adoption and use in the already launched markets and through additional global launches. We project three additional new Phase 1 starts resulting in a total of 13 products in or having completed Phase 1 testing by year end. These represent, if development proceeds, are way for potential launches in the time window of 2025 to 2027.

In addition, we will work to create new revenue growth opportunities by seeking to sign new collaboration agreements and advance new targets into development.

And finally, we'll continue to seek to identify a platform technology that can add to our long-term revenue growth.

None of the terrific results you just heard Elaine and I discussed would have been possible without the terrific team here at Halozyme, and I'd like to pass on our sincere thanks to each of you for these terrific results. Thank you everyone for your attention today. We're now delighted to take your questions. Operator, would you please open the call for the questions?

[Operator]

[Operator Instructions] Speakers, our first question is from the line of Charles Duncan of Cantor Fitzgerald. Your line is now open.

[Charles Duncan, Cantor Fitzgerald]

Yes. Hi. Congratulations on a great quarter, Helen and Elaine. Thanks for taking our questions. I had a question on the ViiV collaboration. I believe that's also the first pre-exposure prophylaxis candidate that you're looking at. I'm wondering if you could, I guess, validate that observation. And then secondarily, could you anticipate Phase 2 start next year and is there potential for IP around a co-formulation with that candidate?

[Helen Torley, President and CEO]

Yeah. Thank you, Charles. Yes, we do have, as you're aware, two Phase 1 studies gone in HIV with CAPRISA and the NIH. But you're right. This would be the first move into pre-exposure prophylaxis with cabotegravir. So we're very excited to be working with ViiV on that.

With regard to Phase 2 ViiV has not shared plans beyond -- publicly beyond this Phase 1 start such as I can't comment on that. And like with all of our programs, we begin discussions on the potential for novel findings that could result in intellectual property gains for co-formulated products. So those conversations have begun or if they haven't they'll begin very shortly. And we believe there's still a lot of opportunity to find novelties that result in new co-formulation patents. But stay tuned for updates on that.

[Charles Duncan, Cantor Fitzgerald]

Okay. And then one last question Helen regarding DARZALEX FASPRO, I guess thinking about conversion and what would be an ultimate level of conversion that would be impressive, I guess already impressive so far 66%. But could you even imagine an 80% conversion. And then with the broadening use and the new indications for DARZALEX FASPRO would you anticipate new growth in terms of royalties to come from conversion or broadening use?

[Helen Torley, President and CEO]

Yeah. I think it’s great question Charles and I was going to start with the broadening use. We certainly are seeing with the momentum that Janssen reported in the total DARZALEX product with the first half sales of $2.8 billion consensus estimates have now increased from $7.3 billion to $8.5 billion in 2024.

And so the size of the pie if you like is definitely getting bigger. We believe that's because of increased penetration into the frontline therapy where especially subcu is going to be we believe particularly helpful. So bigger pie for sure with these new indications and then the amount of conversion we haven't put a number out there, Charles.

We're obviously after basically a year at 66%. It's pretty impressive and the trend line shows it's not stopping. And we believe there -- it'll go a good bit higher than that, but we're not going to put a number on it. But we recently talked to some physicians and it is definitely fulfilling an important need in the marketplace. And physicians are very enthusiastically converting their patients.

[Operator]

Next question is from the line of Matthew Luchini of BMO. Your line is now open.

[Matthew Luchini, BMO]

Hi. Good afternoon and thanks for taking the questions and congrats on a very nice quarter. So, first on Phesgo. Just wanted to get a little bit more, your latest thinking, latest color that you can share on what you're seeing and hearing in the market. Since it -- from a brand perspective continues to lag a little bit dara’s admittedly impressive ramp. I think you've talked about differences in payer mix and patient types in the past. But just love your latest thinking there.

And then secondarily, you finished out your share repurchase for the year. So, how do we think about any capital allocation for the remainder of the year? Is there a reason why you wouldn't pull some of the remaining share repurchase program forward? Is there something else that's on your mind? Just how do we think about capital allocation from here given you've maxed out your stated repurchase for the year? Thank you.

[Helen Torley, President and CEO]

That's great. I'll take Phesgo and I'll turn the share repurchase question over to Elaine. So, Phesgo, if you recall, when they were launched, we had anticipated that would take a period of time in the US for Phesgo to get all of its reimbursement in place and then we'd start to see sequential quarter-over-quarter growth.

We also had expected that for Europe we'd start to see after the initial markets got the reimbursement we'll start to see that quarter-on-quarter growth. So, I think we're very pleased with

them obviously the growth in Q2 over Q1 and we see that type of pace continuing as more and more physicians adopt and increase their use of Phesgo. Certainly not the same pace, not the same volume as daratumumab map.

But in terms of insights we actually have just completed some qualitative primary market research with a group of oncologists and hematologists. And I can tell you that based on the potential patient practice in healthcare system benefits of the shorter overall treatment time that the subcu fiasco can result in. This was definitely well understood and valued by many of the people we interviewed. And so as a result we see that the adoption continuing albeit at a slower pace than we've seen for faster growth. And with that, let me turn it over to Elaine to address the question and share repurchase.

[Elaine Sun, CFO]

Sure, happy to. So we've been consistent in our commitment to a balanced capital allocation strategy and that's really supported by both the strong growth profile and profitability driven by our partner driven enhanced business model supporting our ongoing commitment to capital return and also funding growth both internal and external via M&A. And as you noted we've already made a substantial commitment to capital return.

We're still working through our existing three year $550 million buyback plan. In fact we're 85% or over 85% of the way through that total authorization. And we still have $75 million remaining. We did complete the $125 million that we had planned for the year. And while we always evaluate opportunities to maximize value for shareholders, to maintain our ongoing commitment to capital return, and maintain our long term sustainable growth it would be premature to discuss specifics beyond that, but certainly an ongoing commitment to capital return.

[Operator]

The next question, speakers, is from the line of Bridget Smith [ph] SVB Leerink. Your line is now open. Again, Bridget Smith from SVB Leerink, your line is now open.

[Unidentified Analyst]

Hi. This is Jeff from SVB Leerink. Thanks for taking the question. Helen, congratulations on terrific results. And just on DARZALEX SC, could you give us a sense of the durability of the royalties from DARZALEX? Is there a step-down between now and the mid-2020, so between that 2020s and the end of 2030?

And is there independent IP on the SC formulation that will extend even beyond potential composition not a patent for DARZALEX? That would be helpful. And then if there's any indication you can give us about whether there's a step-down also in Phesgo, that would be useful as well. Thanks.

[Helen Torley, President and CEO]

Yeah. Thanks, Jeff. As I think many people know, the individual contracts that we have are confidential, so we can't talk in specifics for any. What we generally do have is a minimum of a 10-year royalty revenue term where if there are no valid patents, there would be indeed, Jeff a step-down when we lose our composition of a master patent, which is in 2024 and 2027. In general, if our co-formulation patent is granted, that counts as a valid patent and it can in many, but not all cases extend the duration of time we get royalties and it can also preset the time to step down. But we can't give specific instances.

And what we've always talked about is in the absence of being able to do that, we recommend that they -- our investors and model the base case which is assume that there are no additional patents in its this tenure where there is a step down in 2024 in Europe and 2027 in the US and make investment decisions based on that because we're unable to provide any details beyond that.

[Unidentified Analyst]

Great. Can I just follow up, Helen? I just want to ask about the [indiscernible] partnership. And specifically do you see many other opportunities for small molecule options with ENHANZE, because this was as far as I know the first that's in the clinic and it would seem there might be other instances where you could partner with or develop a long-acting the subcu formulation?

[Helen Torley, President and CEO]

Yeah. Jeff, it's something we've always looked at and actually I don't know if you recall back when Pfizer was studying rivipansel, that was one of the small molecule approaches. So we've always recognized there is the utility of ENHANZE both with large and with small molecules. So we definitely are looking at a few small molecule areas. We have mostly though seen the opportunity particularly as we mostly work with large successful blockbuster products.

Most of those happen to be monoclonal antibodies and large molecules. But we see opportunity here in small molecules as well. And so we are always looking at company portfolios, not putting any filter on the size of the molecule, really looking at what the commercial goal is in terms of reducing the volume, getting the drug delivered subcu or extending the dosing interval. So you may see more in the future.

[Operator]

Next question is from the line of Na Sun of SVB Leerink. Your line is now open.

[Na Sun, SVB Leerink]

Hey, guys. My questions were answered by Jeff. I'm just going to sign off now. Thank you.

[Helen Torley, President and CEO]

That's great. Thanks.

[Operator]

Next question is from the line of Jessica Fye of JPMorgan. Your line is now open.

[Jessica Fye, JPMorgan]

Hey there. Good afternoon. Thanks for taking the question. So, I'm just following up with sort of a longer-term version on the earlier capital allocation question. With $75 million left on the repo authorization, how do you think about the period after that's complete and when it might make sense to build some cash on the balance sheet in anticipation of potentially acquiring a future technology to kind of fill in the kind of post-ENHANZE patent expiration period?

[Helen Torley, President and CEO]

Yeah. Thanks for that, Jess. I'll turn that over to Elaine.

[Elaine Sun, CFO]

Thanks for that. So, as we've noted with the ENHANZE business model, we end the strong growth profile and cash flow generation, we see the potential to continue to strengthen our balance sheet with our strong operating performance. We also take advantage of opportunities to strengthen our balance sheet. We certainly did so in the first quarter of this year with the leveraging of a historically strong convertible market to add cash to the balance sheet and repurchase 80% of our sen outstanding 2024 notes.

So managing an outstanding liability, pushing out our maturities, and lowering our cost of capital. So we look opportunistically to strengthen our balance sheet and to optimize our capital structure, and we think this in combination with our strong operating performance and the cash flow generation from our ENHANZE puts us in a great financial position and have the wherewithal to be able to take advantage of opportunities not only to continue our commitment to capital returns, but to also fund potential acquisitions of a new platform technology that we can leverage our existing expertise to be able to drive additional value for shareholders.

[Operator]

Next question is from the line of Anita Dushyanth of Berenberg Capital. Your line is now open.

[Anita Dushyanth, Berenberg Capital]

Hi, Helen. Congrats on the quarter. I just wanted to quickly ask you if the -- how many total early versus late stage candidates are among the undisclosed targets you think.

[Helen Torley, President and CEO]

All right. You broke up a little bit, Anita. Just to be sure, how many early versus late-stage products are amongst the undisclosed. So people probably see we'd get on our corporate deck, there’s those two products that are named undisclosed. Both of those are in -- let me just correct myself. One of those is in Phase 1 clinical testing and the other one is an approved product as the IV where we are studying the subcu.

[Anita Dushyanth, Berenberg Capital]

Okay. That's very helpful. And then as far as sort of the -- your sort of scanning the landscape for potential opportunities, are you looking at sort of already proven technology and if so that kind of what timeframe are you likely to make this move?

[Helen Torley, President and CEO]

Yeah. As I mentioned in the prepared remarks, because ENHANZE is experiencing strong growth and we project continued growth, we don't feel that the time pressure. So we haven't given ourselves the time window to achieve this. And I think that's important because we want to make sure we pick the right thing.

We probably use more the language that it is de-risk Anita, it is something where we have high confidence, it will work. And that generally is that it's already approved which may be your program technology or it could be something that got compelling data that has been presented and has been reviewed in part by the FDA. So we definitely are looking for something that is de-risk because we think that's a very important part of our story to be able to be confident that it's going to add to the growth profile of ENHANZE in the right timeframe.

[Anita Dushyanth, Berenberg Capital]

Okay. Thank you. And just one more from me. And then in terms of candidates that are being developed with ENHANZE especially those that are early stage versus late stage, are you sort of seeing any difference in the way the FDA is looking into the process in the sense that does it expedite some of the programs. I know different programs are kind of specific to the indication but still having so much safety data out there. Are we likely to see something going forward?

[Helen Torley, President and CEO]

So with probably two development paths. One is a bridging study where the product is developed where it's a bridge to a larger IV database which actually can be products that are currently approved or as we're seeing with companies like argenx, they're developing indications in parallel. So, the IV and the subcu are not approved yet, but the process progressing in parallel. And that's where you are able to bridge to what is generally the larger IV database.

We are seeing slightly higher requirements would be if you were just doing subcu right from the start. And there isn't an IV database to have the broader patient safety database. For pharmas to do that, they have to go through what's more of a traditional Phase 1, Phase 2, Phase 3 or a Phase 1 with 2/3 study. And the key thing is just generating enough safety data to meet the FDA requirements. But other than the amount of data that is required to complete the expectations on the robustness of the safety database, we're not seeing a big difference in expectations.

[Anita Dushyanth, Berenberg Capital]

Okay. Thank you. That's helpful.

[Operator]

Next question from the line of Michael DiFiore of Evercore ISI. Your line is now open.

[Michael DiFiore, Evercore ISI]

Hey, guys. Thanks so much for taking my question and congrats on the quarter. Just three for me. Number one, does Halo have any plans to develop a subcutaneous Alzheimer's therapy formulation? And if so, could this be one of the new assets to enter the clinic this year? And I have two follow-ups.

[Helen Torley, President and CEO]

All right. Well, what I can say we don't discuss individual targets. But what I can say is that they -- as an example, the amyloid beta target is still available, if anyone wanted to approach us to use that.

[Michael DiFiore, Evercore ISI]

Got it. Okay. The second one is just any thoughts on competitive profile of ULTOMIRIS versus efgartigimod, especially in the light of the Phase 3 myasthenia gravis results announced in July. And on the heels of that, how much should we expect efgartigimod’s IV formulation to take in the myasthenia gravis and ITP indications versus Halo subcu version? Thank you.

[Helen Torley, President and CEO]

Yeah. With regard to that, I will say I'm not an expert and many of my -- much of my reading on this is reading the different opinions or perhaps Argenx leadership versus Alexion leadership. There certainly seems to be points of differentiation where Argenx believes they have got a stronger more efficacious molecule.

But I will say I don't have expertise in that area. What I can say is that based on everything we hear from the reported patient feedback and physician feedback on their Argenx product, it certainly seems to have a strong profile. But I cannot -- I can't -- I'm not qualified to comment on it comparatively versus the ULTOMIRIS.

With regard to IV versus subcu for the indications, yeah, we don't, as a practice, give out our projections. But I do think it was interesting to note that on their recent investor call Argenx commented that they're seeing about a 70% of patients moving to the subcu and 30% of patients wanting to still stay on the IV. I would say that's pretty much in line with our thinking on it, informed by experiences Roche had, and studies that they specifically did on patient preference with Herceptin and [indiscernible] where there's always a small percentage of patients who perhaps because of needle phobia perhaps because of the community of being in the infusion suites don't want to go to the subcu. So I felt that was a useful benchmark with argenx mentioned at that 70% to 80% might prefer to stay just to move to the subcu with the remainder staying on the IV.

[Michael DiFiore, Evercore ISI]

Thank you. Got it. Thank you very much.

[Operator]

Last question is from the line of Graig Suvannavej of Goldman Sachs. Your line is now open.

[Unidentified Analyst]

This is Anna [ph] on for Graig Suvannavej. Thank you for taking our questions and congrats on an excellent quarter. One just from the high level, could you help us frame the next wave of product launches in particular those slated for beyond 2023, and how should we think about growth beyond 2023? And two, just curious if there's any room for improving the -- improving around optimizing the raw material production. Thank you.

[Helen Torley, President and CEO]

Yeah, and let me just clarify, Annabelle a bit the raw material question, is that our API?

[Unidentified Analyst]

Yeah, that's right. That's right. Any further optimization that could be done there to reduce the costs?

[Helen Torley, President and CEO]

Okay. Thank you. Well, we find it useful to talk in our waves of products. And so, if we're thinking about launches in the 2023 to 2024 time -- sorry, 25 timeframe, those are the products today in wave -- in Phase 3. So, think about those as OPDIVO and efgartigimod, all of those based on standard development time lines that we've seen with products should be launching in that time if everything goes according to plan.

Obviously, all of them exciting drugs either already blockbusters or with blockbuster potential as we see in the case of efgartigimod where analysts have it as a $4 billion potential brand. Following that, it is the products that are in Phase 1 testing. And by the end of this year, we estimate we'll have 13 products that will be in or having completed Phase 1. Now that is a terrific portfolio. And again if you look at those products as very exciting products in there and that's 2025 to 2027 would be the next potential, if those ones follow that approximately five years from first in human to approval. And so that is the way for launches.

And as I mentioned, Wave 5 is even possible beyond that, based on current partners taking targets into the clinic in the next 12 to 18 months, as well as, new collaboration agreements and nominations, which could bring us into another set of launches in the 2027 to 2029 time period. And so the message really is, the way the development works and because we can work with so many partners and have such a robust pipeline, we are predicting multiple additional launches, driving continued and sustained revenue to 2027 and beyond.

[Unidentified Analyst]

Great. Thank you.

[Helen Torley, President and CEO]

All right, that -- thank you. Operator, were there any more questions?

Operator

No further questions on queue.

[Helen Torley, President and CEO]

All right. Well, we appreciate everybody's attention. Obviously, a very strong quarter and first half for Halozyme as we execute our strategy, maximizing ENHANZE, returning value to our shareholders and exploring the potential to accelerate and add to our growth through M&A. Really appreciate the continued support and look forward to speaking with you next quarter. Thank you.

[Operator]

Thank you, Dr. Torley. And that concludes today's conference. Thank you all for joining. You may now disconnect.