Halozyme Therapeutics, Inc. (HALO) Earnings

Management highlights

### Core Business Model Highlights - The company positions Enhanze as a mature, diversified compounding platform engine for royalty revenue, with HyperCon on track to become a second compounding platform engine leveraging a decade of Enhanze operational learnings - The business model is asset-light, generating high margin, scalable royalty revenue and strong free cash flow, with a reinforcing "halo effect": successful partner products drive additional new collaborations and target nominations, expanding long-term opportunities ### Commercial Portfolio Progress - Six commercial Enhanze-enabled products now contribute royalty revenue, with total combined partner product opportunity exceeding $55 billion - Newer launched Enhanze products (Ocrevus Zenovo, Obdivo QVantage, Ribrovant Faspro) grew 80% quarter-on-quarter, with a combined 2028 projected partner product opportunity of $25 billion: 1) Ocrevus Zenovo (Roche): 44,000 patients treated in Q2, up from 17,500 at end-2025; fastest-growing anti-CD20 multiple sclerosis brand in the U.S.; 60% of new starts from community practices, expanding patient access. 2) Obdivo QVantage (Bristol Myers Squibb): Subcutaneous conversion reached 15% on track for 30-40% target conversion; Q2 2026 global sales grew 200% YoY to $261 million, on track for >$1 billion annualized revenue. 3) Ribrovant Faspro (Johnson & Johnson): 62% YoY growth; permanent J-code awarded July 1 2026 to expand adoption; FDA granted priority review for new head and neck cancer indication (6-month review timeline) - Established Enhanze products continue strong growth: 1) DarzalexSC (J&J): 18% YoY global partner sales growth to $4 billion, with ~100% of sales now subcutaneous; 11 percentage points of share gain in frontline multiple myeloma. 2) Vivegard Hytrulo (Ergenics): 60% YoY total partner sales growth to $1.5 billion; 80% of U.S. pre-filled syringe patients are new to therapy; now approved for all GMG serotypes, expanding addressable patient population by 11,000. 3) Fezgo (Roche): 18% H1 2026 growth; 54% global conversion in 85 launch markets, on track for 60% peak conversion ### Pipeline and Collaboration Expansion - 5 new collaboration agreements signed in Q2 2026 and July 2026, the fastest pace in company history: 3 for Enhanze (with GSK, Insight, and an undisclosed partner), 2 for HyperCon (with Vertex and Roca) - Expanded Enhanze into two new modality areas: antibody-drug conjugates (ADCs) and nucleic acid therapies; management estimates at least 100 commercial and development products in these modalities could benefit from Enhanze technology, opening new growth markets - Two new Phase 1 studies initiated in Q2 2026, on track to reach 13 Enhanze partner products in clinical development by end-2026, with potential approvals starting in 2029+ - HyperCon progress: Preparations for first clinical study starts in H1 2027 are on track; first projected launches in 2030-2031, with a target of ~$1 billion in annual HyperCon royalty revenue by the mid-2030s ### Capital Allocation - Core priorities: Fund high-return organic growth opportunities, maintain a strong balance sheet, return excess capital to shareholders via disciplined share repurchases - Repurchased $332.8 million of shares in Q2 2026, on track to hit the full-year 2026 repurchase target of $400 million - Management continues to evaluate selective M&A opportunities to expand drug delivery technology and extend royalty duration, requiring strong strategic fit, durable value creation, and attractive returns

Guidance

Halozyme raised full-year 2026 guidance following a stronger than expected Q2 performance, driven by higher than projected royalty revenue from both established and new launch products and upfront milestones from record new collaboration agreements: - Total revenue guidance raised to $1.835 billion to $1.91 billion, representing 31% to 37% YoY growth, with a midpoint increase of $110 million from prior guidance - Royalty revenue guidance set to $1.22 billion to $1.245 billion, representing 41% to 43% YoY growth - Adjusted EBITDA guidance set to $1.225 billion to $1.28 billion, including ~$60 million in planned 2026 investment in HyperCon and SurfBio - Non-GAAP diluted EPS guidance set to $8.65 to $9.00 - The company reaffirmed confidence in its 2026-2028 financial guidance and long-term revenue projections for 2029 and beyond, including the HyperCon target of $1 billion in annual royalty revenue by the mid-2030s

Segment performance

Halozyme operates two core technology platforms: Enhanze and HyperCon. Total Q2 2026 revenue was $481 million, a 48% year-over-year increase from $325.7 million in Q2 2025. Royalty revenue (from Enhanze partner products) totaled $307.7 million, representing 64% of total Q2 2026 revenue, growing 50% year-over-year. Breakdown of Enhanze royalty revenue: 1) DarzalexSC (J&J): Royalty revenue of $152.2 million, 27% YoY growth; accounted for 49.4% of total royalty revenue, 31.6% of total Q2 revenue. 2) Vivgard Hytrulo (Ergenics): Royalty revenue of $72.6 million, 143% YoY growth; accounted for 23.6% of total royalty revenue, 15.1% of total Q2 revenue. 3) Other recently launched Enhanze products (OcrevusSC, Opdivo QVantage, RypervanSC, TocentricSC): Royalty revenue of $54.4 million, 85% YoY growth; accounted for 17.7% of total royalty revenue, 11.3% of total Q2 revenue. Collaboration revenue contributed $35.5 million from five new 2026 collaboration and licensing agreements (three for Enhanze, two for HyperCon), representing ~7.4% of total Q2 2026 revenue, evenly split between the two platforms.

Risks & headwinds

- Ongoing patent litigation with Merck related to alleged infringement of Halozyme's ENHANZE technology by Merck's product using Alteogen technology; the company is pursuing injunctions in 8 countries outside the U.S. and expects key European rulings by end-2026; U.S. Patent Office proceedings are ongoing, with a PTAB decision expected in fall 2026, and uncertainty remains around the timing and outcome of district court proceedings - Alteogen is a competing technology provider; while Halozyme notes its competitive moat from a 15-year track record, 1.3 million patient safety database, and operational expertise, competition could impact future collaboration win rates - Clinical development attrition is inherent to the 13-product Enhanze pipeline, though management notes most pipeline products are either already commercial (high probability of approval) or well-established antibody mechanisms where Halozyme has significant experience - Final plans for HyperCon manufacturing investment have not been finalized, creating near-term uncertainty around capital expenditure requirements and margin impact for 2026-2028

Analyst Q&A

• Q: The raised 2026 royalty guidance implies sequential revenue acceleration in the second half of 2026 compared to Q2; what is driving this acceleration? Is it from newer or established products?

  A: Management expects continued sequential royalty growth in H2 2026, though the pace of quarter-over-quarter step-ups will be slower than the Q1 to Q2 increase. Most of the projected acceleration comes from growing uptake of newer launched Enhanze products like Ribrovant SubQ.

• Q: How will target exclusivity terms change as core patents expire, and will this open new partnership opportunities that were previously unavailable?

  A: Exclusivity terms are driven by partner preference: if partners request exclusivity and are willing to pay the associated higher economics, Halozyme will still agree to exclusive deals. A growing share of new partners are comfortable with non-exclusive licenses, so the company expects a mix of both deal types going forward, as seen in the five most recent signed deals.

• Q: What is the timeline for additional HyperCon clinical studies beyond the first two launches, and how many assets are assumed to hit the $1 billion mid-2030s royalty target?

  A: Additional Phase 1 starts could occur as early as H2 2027, with more pipeline activity coming in 2028, since existing HyperCon agreements include up to 20 total targets across partners. The $1 billion mid-2030s royalty target assumes 5-7 launched products; most of these will come from already signed agreements, but deals signed in the next 1-2 years could also contribute based on typical development timelines.

• Q: How is the mix of new partner deals versus follow-on target nominations from existing partners expected to shape future deal cadence, and how is the company prioritizing the new ADC and nucleic acid modalities?

  A: Both new partner wins and follow-on nominations from existing partners will contribute to future pipeline growth: the company has 13 planned Enhanze development programs for 2026, with additional nominations from existing partners expected in H2 2026. There are an estimated 50 potential ADC candidates and 50 potential nucleic acid candidates that could benefit from Enhanze, opening a large new market and dramatically increasing the number of partnership conversations for the company.