Halozyme's Q3 2025 Earnings Call: Contradictions Emerge on Deal Activity, IP Litigation, ENHANZE Compatibility, Leverage Strategy, and 2026 Revenue Growth

Date of Call: None provided

Financials Results

• Revenue: $354.3M, up 22% YOY (vs $290.1M prior year)
• EPS: GAAP diluted EPS $1.43 (vs $1.05 prior year); non-GAAP diluted EPS $1.72 (vs $1.27 prior year)

Guidance:

• Total 2025 revenue $1.30B–$1.375B, +28%–35% YOY
• Royalty revenue $850M–$880M, +49%–54% YOY
• Adjusted EBITDA $885M–$935M, +40%–48% YOY
• Non-GAAP diluted EPS $6.10–$6.50, +44%–54% YOY
• Product sales $340M–$365M (+12%–20% YOY); Collaboration revenues $110M–$130M
• Electrovive: expected <5% dilution to non-GAAP EPS medium term; ~2x net debt/EBITDA at close with planned deleveraging
• Expect ~ $55M incremental operating expense in full-year 2026

Business Commentary:

* Record Royalty Revenue and Revenue Growth: - Halozyme reported record royalty revenue of $236 million for Q3 2025, representing a 52% increase year over year, contributing to a 22% growth in total revenue to $354 million. - Growth was driven by the strong performance of its three established blockbuster subcutaneous therapies, Darzalex Subcutaneous, Fesgo, and Vyvgart Hytrulo.

• Strong Performance of Partner Products:
• Darzalex Subcutaneous sales increased 20% on an operational basis to $3.7 billion, while Vyvgart Hytrulo sales rose 96% year-over-year to $1.13 billion.

• This growth was attributed to market share gains, increased conversions from intravenous to subcutaneous formulations, and expanded geographical reach.

• Adjusted EBITDA Exceeding Top-Line Growth:

• Halozyme's adjusted EBITDA grew 35% over the prior year's third quarter to $248 million.

• The increase was driven by the leverage of its royalty-based business model and strong royalty revenue performance.

• Strategic Acquisition and Technology Enhancements:

• The acquisition of Electrovive was announced to enhance Halozyme's portfolio of drug delivery technologies, further expanding its capabilities with the HyperCon technology.
• This acquisition is expected to enable more drugs to be delivered at home via autoinjectors, broadening Halozyme's role as a partner of choice in drug delivery.

Sentiment Analysis:

Overall Tone: Positive

• Management reported "record royalty revenue of $236 million, representing a remarkable 52% increase year over year" and raised full‑year 2025 guidance (revenue, royalties, EBITDA, EPS); adjusted EBITDA grew 35% YoY, demonstrating strong leverage of the royalty model.

Q&A:

• Question from Sean Lehman (Morgan Stanley): How do you weigh paying down debt vs buybacks and potential M&A next year, and how will investors monitor Electrovive performance?
  Response: Expect a modest draw to fund Electrovive with rapid paydown and quick deleveraging; maintain balanced buyback/M&A approach (capacity up to 3x net leverage). Electrovive will be monitored via three metrics: two anticipated partner first‑in‑human starts by end‑2026, streamlined development plans, and partner advancement/new deals moving HyperCon into clinic.

• Question from Jason Butler (Citizens JMP): What is partner awareness/feedback on Electrovive/HyperCon and where is market growth coming from (share vs earlier use)?
  Response: Pre‑close partner engagement has been limited but diligence showed good awareness and supportive feedback; market growth is driven by conversion plus new‑to‑brand uptake and expanded access (e.g., Ocrevus subcutaneous showing ~50% new‑to‑brand and community adoption), though granular origin data not provided.

• Question from Michael De Viere (Evercore ISI): How high will you lever for M&A and could there be another transaction this year; when will ENHANZE+HyperCon feasibility studies occur?
  Response: Unlikely another acquisition this year; firm has capacity up to ~3x net leverage but expects ~2x at Electrovive close and rapid deleveraging thereafter; combinability feasibility between ENHANZE and HyperCon will be evaluated by technical teams early, but initial priority is pursuing each technology's opportunities separately.

• Question from Jessica Vai (JPMorgan): Any near‑term new ENHANZE deals and which products drove the guidance upside?
  Response: Confident of at least one new ENHANZE deal this year given advanced discussions (no pre‑announcement). Guidance upside driven primarily by stronger royalties—Vyvgart Hytrulo, Fesgo and Darzalex (including recent/new indications).

• Question from Mitchell Koppur (HCW): How should we think about maintaining growth into 2026 and are ENHANZE and HyperCon outreach parallel or integrated?
  Response: More 2026 detail will be provided early next year; current trends track above prior expectations. Until HSR close, ENHANZE and HyperCon outreach operate separately and in parallel—ENHANZE targets larger‑volume clinic/office use, HyperCon/autoinjector targets at‑home small‑volume use.

• Question from Brendan Smith (TD Cowen): What is the autoinjector development path, economics and compatibility with HyperCon; any updates on ViiV/Acumen?
  Response: Small‑volume autoinjectors (≤2.25 mL) are compatible with HyperCon; high‑volume autoinjector prototypes are clinic‑ready; device validation/human‑factor work runs parallel to clinical development. Economics: per‑device fees for small‑volume; high‑volume expected to carry royalties plus device fees. No new public updates from ViiV; Acumen completed phase‑1 publicly.

• Question from Corinne Johnson (Goldman Sachs): Do you have partnerships to sustain revenue into the next decade given expirations and multi‑year development timelines?
  Response: Company expects layered durability: current blockbusters with ongoing new indications, recent launches (Ocrevus, Opdivo, Rybrevant, etc.), and pipeline/deals that will replenish royalties into the 2030s/2040s; deals signed now can result in launches in the early 2030s, supporting long‑term growth.

Contradiction Point 1

Deal Activity and Partnership Strategy

It involves the company's approach to new deals and partnerships, which are critical for revenue growth and strategic positioning.

What are your thoughts on potential new ENHANZE deals in the near term, and which products drove the guidance increase this time? - Adam (JPMorgan)

2025Q3: We are very confident to have a new ENHANZE deal this year due to the proximity of completion of ongoing discussions. - Helen Torley(CEO)

What is the status of the IP litigation with Merck and the next steps, including PGR? - Yijun Chen(Wells Fargo Securities)

2025Q2: We are extremely excited to have completed a transaction where we join the leading company, Roche, to bring to market new formulations across the rest of our entire ENHANZE portfolio, instantly enhancing our long-term growth profile and providing superior incremental value to our shareholders. - Helen I. Torley(CEO)

Contradiction Point 2

IP Litigation and Merck Settlement

It pertains to the company's legal strategy and expectations regarding the IP litigation with Merck, which could impact royalty revenue and market positioning.

When can we expect clarity on Halozyme royalties associated with the MDASE patents? - Adam Ferrari(JPMorgan Chase & Co)

2025Q3: Clarity could come from Merck settling or concluding the district court case, which will take a couple of years. We believe our case is strong, and Merck could settle at any time. - Helen Torley(CEO)

Can you discuss updating long-term guidance based on recent trends and royalty growth? - Jason Nicholas Butler(Citizens JMP Securities)

2025Q2: The district court case has not received a scheduling order yet, but we expect that soon. The PGRs have been instituted, with hearings set for March 2, 2026. Decisions on the validity issues are expected on June 2, 2026. We continue to be confident in the patent validity, and Merck will be found infringing. - Helen I. Torley(CEO)

Contradiction Point 3

Future ENHANZE and HyperCon Compatibility

It pertains to the future development and integration of ENHANZE and HyperCon technologies, which could significantly impact Halozyme's growth strategy and partnerships.

When will feasibility studies on the combination of ENHANZE and HyperCon be available? - Michael De Viere(Evercore ISI)

2025Q3: We are interested in exploring combinability, but the initial focus will be on pursuing each technology's own successful strategies for now. - Helen Torley(CEO)

What progress in ENHANZE discussions supports new deal signings? - Brendan Smith(TD Cowen)

2024Q4: We are in advanced discussions with multiple companies, and progress is being made through each company's internal processes, increasing confidence in signing new deals. - Helen Torley(CEO)

Contradiction Point 4

Leverage Strategy and Debt Management

It involves changes in the company's approach to leverage and debt management, which affects financial risk and investor confidence.

What leverage level are you willing to assume for future transactions, and could another transaction occur this year? When will feasibility studies for the combination of ENHANZE and HyperCon be available? - Michael De Viere (Evercore ISI)

2025Q3: We have the capacity to go up to three times net leverage, but we expect to be at about two times post-Electrovive acquisition, with plans to delever quickly. - Nicole LaBrosse(CFO)

Can you provide the expected timeline for PGR decisions and the actions you would take if PGR favors Merck? - Sadia Rahman (Wells Fargo)

2025Q1: We continue to expect to be in the range of 1.5 times to 2 times debt to EBITDA for the year. - Nicole LaBrosse(CFO)

Contradiction Point 5

2026 Revenue Growth and Expectations

It involves differing expectations for revenue growth in 2026, which is crucial for investor projections and strategic planning.

How do you plan to sustain growth through 2026, and are current 2026 projections near the upper end of expectations? - Mitchell Koppur(HCW)

2025Q3: We are tracking to exceed 2025 expectations. We will be able to provide more details on 2026 growth when we give full-year guidance and update in the new year. - Helen Torley(CEO)

Which partner signed the small-volume auto-injector deal, and what defines mid-single-digit royalties? - Jessica Fye(JP Morgan)

2024Q4: For the full year 2025, we are expecting revenue to grow to between $725 million and $775 million, up 18% to 24% over 2024. - Nicole LaBrosse(CFO)