Halozyme (HALO) 2026年第三季法說會：權利金營收成長44%，上調財測指引

重點摘要

• Halozyme Therapeutics (NASDAQ: HALO) 公布 2026 年第三季總營收為 4.93 億美元，年增 39%，主要由權利金營收成長 44% 至創紀錄的 3.41 億美元所帶動。
• 淨利成長 41% 至 2.47 億美元。調整後 EBITDA 成長 35% 至 3.362 億美元，相當於 68% 的調整後 EBITDA 利潤率。
• DARZALEX 仍是最大的權利金貢獻來源，達 1.535 億美元，而 VYVGART 權利金成長 89% 至 8,810 萬美元。隨著新產品獲得市場青睞，其他權利金亦接近翻倍。
• 管理層調升了 2026 全年總營收、權利金營收、調整後 EBITDA 以及非 GAAP 稀釋每股盈餘的財測指引。該公司目前預估總營收為 18.6 億美元至 19.25 億美元。
• Halozyme 共有 12 項 ENHANZE 計畫處於臨床開發階段，預計到 2026 年底將達到 13 項。Hypercon 前兩項合作夥伴計畫仍按進度進行，預計將於 2027 年上半年進入第一期臨床試驗。
• 歐洲法院已在數個市場限制默沙東 (Merck) 上市 Keytruda Qlex，而 Halozyme 則承認在美國面臨不利的專利有效性裁決，並預期上訴程序將持續至約 2028 年。

核心財務數據

截至該季末，Halozyme 擁有 10.8 億美元的現金、約當現金及有價證券，以及 33 億美元的長期債務。淨槓桿比率為 2.4 倍。該公司在 2026 年完成了 4 億美元的股票買回，並透過發行可轉換公司債募集了 15 億美元。

業務與營運表現

DARZALEX 在合作夥伴公布的第三季銷售額達 42 億美元，以營運基礎計算成長 15.6%。管理層表示，公布的銷售額幾乎全數來自採用 ENHANZE 技術的皮下注射劑型。

Argenx 公布 VYVGART 季度銷售額為 17 億美元，年增 54%，季增 13%。Halozyme 指出，全身型重症肌無力與慢性脫髓鞘多發性神經病變 (CIDP) 適應症的拓展、VYVGART Hytrulo 預充填針筒的採用，以及血清陰性重症肌無力獲得核准，皆為主要成長動能。

新上市產品的貢獻正變得更加顯著。全球約有 56,000 名患者正在接受 OCREVUS ZUNOVO 治療，自靜脈注射型 OCREVUS 的轉換率超過 20%。羅氏 (Roche) 表示，開始接受 OCREVUS ZUNOVO 治療的患者中，約有一半是首次接受 OCREVUS 治療的新患者。

必治妥施貴寶 (Bristol Myers Squibb) 表示，約 17% 的 OPDIVO 靜脈注射業務已轉換為 OPDIVO Qvantig。管理層表示，BMS 預期最終轉換率將接近其 30% 至 40% 目標區間的高標。

嬌生 (Johnson & Johnson) 公布 RYBREVANT 加上 LAZCLUZE 成長 63.5%，部分得益於 RYBREVANT FASPRO 的迅速採用。羅氏的 PHESGO 轉換率達到 59%，較年中上升 5 個百分點。

三家現有 ENHANZE 合作夥伴新增了四個標靶。Argenx 新增了兩個獨家標靶，Incyte 新增了皮下注射型 axatilimab，嬌生則提名了另一個腫瘤標靶。Halozyme 預期年底前將有 13 項 ENHANZE 計畫處於臨床開發階段，包括葛蘭素史克 (GSK) 規劃中的皮下注射型 belantamab 第 Ib 期試驗。

在 Hypercon 方面，Halozyme 預計於 2027 年第一季完成兩項合作夥伴產品的臨床供應，以支援 2027 年上半年展開的第一期試驗。該公司表示，五項 Hypercon 協議涵蓋超過 20 個潛在標靶或藥物。管理層表示，Aerocon 仍處於有利位置，有望在 2027 年達成潛在的新協議，並於 2028 年下半年進入臨床階段。

管理層財務指引

管理層將調升展望主要歸因於多元化的權利金組合、營運槓桿以及現金創造能力。Halozyme 計劃在 2 月公布第四季財報時發布 2027 年指引並更新長期展望。

風險與關注領域

專利訴訟仍是一大重要變數。2026 年 10 月 7 日，荷蘭法院駁回了默沙東對 Halozyme EP-622 專利的無效挑戰，並限制了 Keytruda Qlex 在多個歐洲國家的活動。此外，德國的另一項禁令目前也依然有效。

在美國，管理層承認面臨涉及不同美國專利的不利初步有效性裁決。Halozyme 計劃提出上訴，並表示該程序可能持續至 2028 年。相關訴訟費用導致第三季銷售、一般及管理費用增加。

合作營收的認列時機難以預測，預計將主要集中在第四季。此外，Hypercon 計畫在建立更廣泛的臨床概念驗證之前，還必須完成臨床試驗，包括藥動學與局部耐受性評估。

分析師問答重點

• Hypercon 商機：管理層表示，預估的 10 億美元權利金商機是假設到 2030 年代中期有 5 至 7 款處於臨床階段的產品，且該產品組合主要偏重於已在商業上取得成功的產品。
• Hypercon 規模擴產：Halozyme 預計於 2027 年第一季為首批兩項計畫提供臨床供應。管理層指出，從實驗室規模轉移至初期臨床供應是技術要求最高的步驟，而商業規模擴產應會在產量提高的情況下採用大致相似的製程。
• 未來上市產品：在開發順利的前提下，該公司持續看好在 2029 年至 2032 年左右推出多達 13 款全新 ENHANZE 產品的潛力。此數量不包含現有產品的新適應症。
• 權利金持久性：較新的 ENHANZE 協議權利金通常介於低個位數至中個位數百分比之間。部分協議規定在無有效專利適用的情況下僅適度調降，而合作專利則可為單一產品延長保護期。
• 資本配置：管理層對於能擴大 Halozyme 藥物遞送產品組合、延長權利金存續期間或增強長期營收的收購案持開放態度。任何交易均須符合該公司的投資回報與策略契合度標準。
• 默沙東訴訟：Halozyme 表示尚未與默沙東展開討論。該公司認為荷蘭的限制可能會影響特定默沙東實體在受限歐洲國家安排生產製造的能力，但目前無法評估對美國供應的影響。

完整電話會議逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Afternoon. My name is Joe, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Third Quarter 2026 Financial and Operating Results Conference Call. [Operator Instructions]

This event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations. Please go ahead.

Unknown Executive

Thank you, operator. Good afternoon, and welcome to Halozyme's Third Quarter 2026 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 Darren Snellgrove, our Chief Financial Officer, who will review our financial results and 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 will now turn the call over to Dr. Helen Torley, and we will start on Slide 3.

Helen Torley

Thank you, Tom, and good afternoon, everyone. I'm pleased to report another exceptionally strong quarter for Halozyme as more patients, physicians and health care systems experienced the benefits of subcutaneous delivery with ENHANZE. This is reflected in the record total and royalty revenues. And operationally, we continue to demonstrate new growth opportunities resulting from our compounding platform engine ENHANZE. .

In and post the quarter, we significantly expanded the ENHANZE opportunity with 3 current partners expanding their agreements to add 4 new target nominations. Additionally, 3 ENHANZE-enabled programs, 1 each from fiber, Insight and Argenx and [indiscernible] Phase 1 development. And GSK plans to initiate a Phase Ib study of a subcutaneous formulation of belantamab with ENHANZE.

With this planned start, we are on track to achieve 13 enhanced programs in clinical development by year-end. Importantly, we also advanced our 2 hyperconcentration technologies, Hypercon and Aerocon, the new name for [ Serio ], moving these closer to clinical testing. All of this contributed to the record total revenue, royalty revenue and adjusted EBITDA for Q3. Total revenue increased 39% year-over-year to $493 million, driven by royalty revenue, which increased 44% to a record $341 million.

These results reflect the continued growth of our established commercial partner product portfolio and the growing contributions from the newer launches, which is resulting in a diversified and growing set of royalty revenue streams. Profitability remained strong during the quarter with adjusted EBITDA of $336 million and an adjusted EBITDA margin of 68%, reflecting our disciplined execution.

Based on this strength, we are raising our full year 2026 financial guidance. Darren will be discussing this in greater detail.

Turning to Slide 4. Let me now say a few more words about how we are increasing the ENHANZE opportunity through expanded agreements and new nominations by current partners. 3 current ENHANZE partners expanded their collaborations and nominated 4 additional targets. Argenx Organic expanded their agreement to include 2 additional exclusive targets, bringing the total to 8. Incyte expanded and added 1 additional target to evaluate subcutaneous axalitimab. And in October, Johnson & Johnson added an additional oncology target to his long-standing ENHANZE collaboration.

Collectively, these 4 new nominations expand the opportunity, further diversify our partnered pipeline and add new potential sources of milestone and royalty revenues. Let me now move to Slide 5, and I'll provide some performance highlights on our commercial ENHANZE portfolio. DARZALEX Subcutaneous, VYVGART Hytrulo, and Phesgo have all continued to demonstrate strong royalty revenue growth.

In addition to and on top of this, OCREVUS ZUNOVO, OPDIVO Qvantig and RYBREVANT FASPRO are adding increasingly meaningful royalty revenues. ENHANZE provides a competitive advantage for our partners by improving convenience, reducing administration time and, in some cases, improving the safety and tolerability profile compared to the IV treatment. For multiple partner products, these benefits are resulting in strong growth as the SC enables new sites of care and increase access to and for patients.

I'll begin with highlights on the newer launch products. Roche continues to report strong momentum for subcutaneous OCREVUS ZUNOVO with approximately 56,000 patients globally now receiving the 10-minute subcutaneous formulation, an increase of about 12,000 patients since the first half of the year.

Global conversion from OCREVUS IV to subcutaneous has now exceeded 20%, was adoption driven by both conversion and importantly, new patients starting on OCREVUS ZUNOVO. Roche noted on their third quarter call that approximately 50% of the OCREVUS ZUNOVO starts are patients naive to OCREVUS treatment. This, I believe, demonstrates expansion of OCREVUS ZUNOVO into community and more rural treatment settings where IV capacity can be limited.

Roche continues to expect high single-digit OCREVUS growth in 2026 and CHF 9 billion or approximately $11 billion in peak franchise sales by 2029, just over 20% conversion to date and with royalty revenues to at least 2034, this represents a large opportunity for Halozyme. I'll move now to Bristol-Myers-Squibb and OPDIVO Qvantig.

On its third quarter call, BMS reported that approximately 17% of the OPDIVO IV business has already converted to OPDIVO Qvantig, which is a subcutaneous formulation with uptake occurring across multiple tumor types. Importantly, they also commented the conversion is tracking towards a higher end of its expectation for 30% to 40% of the IV business to ultimately convert to the subcutaneous formulation. SC administration with ENHANZE is delivering meaningful benefits for patients and physicians, including improved practice efficiency and a more convenient treatment experience. With durable royalties projected for many years and significant conversion ahead, this also represents an attractive growth royalty stream.

Johnson & Johnson's RYBREVANT FASPRO is another exciting opportunity. J&J reported 63.5% growth of RYBREVANT plus LAZCLUZE in the third quarter, driven by strong share gains in both first- and second-line lung cancer treatment, continued launch uptake across regions and rapid adoption of the subcutaneous version at RYBREVANT FASPRO.

They further noted that they expect FDA approval of RYBREVANT FASPRO in advanced head and neck cancer by the end of 2026, which would expand the opportunity beyond lung cancer into another area of significant unmet need. Johnson & Johnson also highlighted that RYBREVANT is one of their key newer products that is expected to contribute more meaningfully to future growth and have commented that this growth will be fueled by RYBREVANT FASPRO. This represents another growth royalty revenue stream for Halozyme with royalty revenues projected to the late 2030s. I'll now move to durable subcutaneous VYVGART Hytrulo and PHESGO.

And I'll begin with DARZALEX. J&J reported $4.2 billion in sales in the third quarter for DARZALEX, reflecting operational growth of 15.6%, virtually all of the DARZALEX reported sales are for the DARZALEX subcutaneous version with ENHANZE. This strong performance was driven by continued share gains across all lines of therapy, including 10 points of share gain in the frontline setting, together with ongoing market expansion.

With analysts now projecting sales of $21 billion in 2028, we are excited to support the continued growth and expansion of this exceptional product. I'll move now to VYVGART Hytrulo. Argenx reported total VYVGART sales of $1.7 billion in the quarter, impressive growth of 54% year-over-year and 13% sequentially, again, highlighted continued growth in both generalized myasthenia gravis and CIT, which is driven by the VYVGART Hytrulo prefilled syringe that provides greater patient convenience and flexibility and how treatment is administered.

A recent additional driver of growth is the approval for seronegative myasthenia gravis, which is already broadening the prescriber base with approximately 10% of seronegative prescribers new to VYVGART. Further opportunity expansion is projected in 2027 with potential approvals in ocular and pediatric myasthenia gravis. Beyond myasthenia gravis and CIDP, Argenx is seeking to expand into a new population of patients, those with immune-mediated necrotizing myositis, or IMNM, with the SBLA planned by year-end. This is a high unmet need patient population for argenx as estimated there are approximately 20,000 patients living with this disease in the United States alone.

These opportunities reinforce the potential for VYVGART Hytrulo to continue expanding across indications, patient populations and prescribers, delivering long-term growth and projected royalty revenues to Halozyme into the 2040s. Moving now to Roche's PHESGO. In the third quarter, Roche reported that PHESGO continued to deliver strong performance with global conversion reaching 59%, up 5 percentage points since midyear signaling continued strong adoption for a product that was launched 6 years ago in 2020. The continued conversion from Perjeta reinforces the durability of PHESGO with royalties projected into the 2030s, and the value of ENHANZE in enabling sustained adoption of subcutaneous therapies.

Collectively, all of the products are demonstrating the continued scalability and duality of ENHANZE. Our established products continued to deliver strong growth. Our neuro launches are becoming increasingly meaningful contributors and the ongoing clinical, regulatory and commercial progress are providing multiple drivers for future revenue growth.

Moving now to Slide 6. With the new study starts in the third quarter, we have significantly expanded our product development pipeline. To date, we have 12 ENHANZE programs in clinical development. 3 of which the partners have requested to keep confidential at this time. With GSK planning to initiate a Phase Ib study of a subcutaneous formulation of belantamab with ENHANZE, we're on track to reach 13 clinical stage programs by year-end 2026. Recent advancements to highlight are Pfizer's initiation of a Phase I study of tilrekimig, their investigational, potential first-in-class trispecific antibody that simultaneously inhibits upstream and downstream drivers of type 2 inflammation.

Also, Incyte's initiation of a Phase I study evaluating a subcutaneous formulation of their first-in-class antibody designed to selectively target mutant calreticulin. And finally, argenx is evaluation of ARGX-119, their first-in-class humanized agonist monoclonal antibody targeting MuSK. Importantly, multiple partners are moving programs from collaboration signing into the clinic rapidly within months of signing. This momentum is a strong reflection of a broader trend in biopharmaceutical companies focusing on subcutaneous administration.

Subcutaneous delivery is now recognized not simply as a convenience feature, but is an important driver of patient preference, health care system efficiency, competitive differentiation and market expansion. This pace of execution, combined with attractive opportunities across oncology, immunologies and multiple other therapeutic areas, represents a highly attractive set of opportunities for ENHANZE royalty revenue beginning in the 2029 plus period and extending well into the next decade.

This is a compounded platform engine at work, commercial success driving new partner demand, new agreements, creating additional development programs and those programs building the next wave of potential royalty revenue, an important additional benefit of our compounding platform engine is the continuous innovation that is generated as we work with partners across a growing range of molecules, formulations and delivery talents.

I am pleased to report that collaboration patents have been obtained by our licensees for 7 of the 10 launch products, and that collaboration patents are pending for the others. We continue to expect that new collaboration patents will be granted to protect our licensees innovations as they generate new data from their clinical trials. Let me now move to MD at a modified hyaluronidase IP portfolio. Halozyme pioneered and invented the use of hyaluronidase for large volume subcutaneous delivery.

On October 7, 2026, the specialized Dutch Patent Court of the Hague rejected Merck's invalidity challenges against Halozyme's hMDASE patent EP-622, [indiscernible] Keytruda Qlex to be infringing the patent. The court also found that there was no reasonable likelihood that EP-622 will be declared invalid in the other relevant European member states wheer EP 622 is granted and prohibited Merck's European marketing approval holder from committing an infringement in Belgium, Denmark, France, Ireland, Italy, Sweden, Switzerland and the Netherlands by manufacturing or causing to be manufactured, offering, putting on the market or using Keytruda Subcutaneous in those countries or by importing it or holding it in stock for that purpose.

Previously, in December of 2025, Halozyme won a critical preliminary injunction in Germany for EP-622. The Munich Regional Court ordered Merck to halt the launch and distribution of Keytruda Qlex in Germany. And in February of 2026, the German Federal Patent Court issued a preliminary opinion invalidity proceedings that were brought by Merck, finding that Halozyme's EP 622 patent is likely valid.

Together, these rulings prevent Merck from launching Keytruda Qlex in key European markets and prevent Merck from achieving the same adoption and trajectory of Keytruda Qlex in Europe as they are doing in the United States. I want to underscore just how important these recent EU court decisions are in supporting the validity of our EP-22 patent and supporting Halozyme's position as the pioneer and leader for innovating the use of human-derived hyaluronidase for large volume subcutaneous administration.

I'll now move to Hypercon and Aerocon, our hyperconcentration technologies. Hypercon and Aerocon are complementary technologies to enhance that extend our leadership in subcutaneous drug delivery, expand our addressable opportunity and will create additional long-term royalty opportunities for Halozyme. Each has been demonstrated to achieve stable formulations of biologic therapies at a concentration of approximately 500 milligrams per mL, which is 3 to 4 fold what is commonly achieved.

The resulting lower volume required catalog delivery using a small volume auto-injector at home or in the doctor's office with the potential to further improve the patient treatment experience. To date, 5 collaboration and licensing agreements have been signed for access to Hypercon, including the potential to use Hypercon with more than 20 potential targets or drugs. We are on track to complete the clinical supply for 2 partner products formulated with Hypercon in the first quarter of 2027 to support first half 2027 Phase I trial initiations.

In parallel, we're advancing the Hypercon formulation for a growing portfolio of development programs, including both commercial stage and development stage assets. with several programs originating from recently signed collaborations and others representing future collaboration agreement opportunities. Now a word on Aercon. We are on track with our plans for 2026, which continue to support new deal signings in 2027 and clinical entry in the second half of 2028. With Halozyme's deep expertise, established capabilities and proven track record in drug delivery, Halozyme is the natural home for innovative drug delivery technologies.

I'll now pass the call over to Darren, who will be discussing our financial results, updated outlook and capital allocation.

Darren Snellgrove

Thank you, Helen. I'll start on Slide 7. The third quarter was another exceptional quarter for Halozyme, we delivered record royalty and total revenue, strong earnings growth and substantial cash flow generation while continuing to advance our future growth opportunities. Our results reflect the increasing diversification of our royalty portfolio with continued outperformance of our established commercial products and growing contributions from newer launches. .

Combined with the ongoing advancement and expansion of our pipeline, this supports the long-term durability of our revenue, we also successfully completed a $1.5 billion convertible note offering on attractive terms. The transaction reflects the strength of our financial profile and confidence in our long-term outlook while further strengthening our balance sheet.

Turning to the third quarter results. Total revenue increased 39% to $493 million compared to $354.3 million in the prior year period. This performance was driven by robust royalty revenue growth and higher product sales. Moving to Slide 8 for more details on royalty revenue. Royalty revenue increased 44% year-over-year to a record $341 million reflecting continued strength across our commercial portfolio.

Third quarter DARZALEX royalty revenue increased 20% year-over-year to $153.5 million. VYVGART royalties to Halozyme increased 89% year-over-year to $88.1 million. PHESGO royalty revenue increased 23% year-over-year to $34.3 million in the third quarter. Other royalty revenue increased 92% to $65.1 million, driven by growing contributions from OCREVUS ZUNOVO, OPDIVO Qvantig, RYBREVANT FASPRO and Tecentriq hybreza.

Moving to Slide 9 for additional details on profitability and our balance sheet. Research and development expenses were $27.8 million compared to $17.3 million in the prior year period, reflecting continued investment in advancing our enhanced and next-generation technology platforms. Selling, general and administrative expenses were $58.2 million in the quarter, compared to $46.1 million in the prior year period. The increase in SG&A expenses was primarily due to an increase in consulting fees, including litigation costs related to Merck.

Net income increased 41% to $247 million from $175.2 million in the prior year period. Adjusted EBITDA increased 35% to $336.2 million from $248.2 million in the prior year period, driven by continued strong royalty growth. GAAP diluted earnings per share was $2.01 compared to $1.43 in the prior year period, and non-GAAP diluted earnings per share was $2.39 compared to $1.72 in the third quarter of 2025.

Moving to Slide 10. Our capital allocation priorities are unchanged. We remain focused on embedding in the highest return opportunities across ENHANZE, Hypercon, and Aercon maintaining a strong balance sheet and returning excess capital to shareholders through a disciplined capital return framework.

Consistent with this approach, we completed $400 million of share repurchases in 2026. We also remain focused on deleveraging, including addressing our 2027 and 2028 convertible notes at maturity. Our net leverage was 2.4x. We ended the quarter with $1.08 billion in cash, cash equivalents and marketable securities and $3.3 billion of long-term debt, leaving us well positioned to fund our organic growth initiatives while maintaining significant financial flexibility.

Beyond our organic investments, we will continue to evaluate selective strategic opportunities that complement our portfolio and meet our disciplined criteria for strategic fit, durable value creation and attractive returns. Moving to Slide 11. Based on our performance through the first 9 months, we are raising our 2026 financial guidance. We now expect total revenue of $1.86 billion to $1.925 billion, an increase of $20 million at the midpoint, representing growth of 33% to 38% over 2025.

Within that, we now expect royalty revenue of $1.235 billion to $1.255 billion, up $12.5 million at the midpoint, representing growth of 42% to 45%. Royalties remain the engine of our business and the main driver of this raise. We now expect product sales of $525 million to $540 million, up $7.5 million at the midpoint. We are raising adjusted EBITDA to $1.24 billion to $1.29 billion, up $12.5 million at the midpoint.

With our adjusted EBITDA margin unchanged at approximately 67%. Finally, we now expect non-GAAP diluted EPS of $8.75 to $9.05 and up $0.08 at the midpoint. The updated outlook reflects the continued strength of our diversified royalty portfolio, substantial operating leverage and strong cash generation.

With that, I'll turn the call back to Helen. .

Helen Torley

Thank you, Darren. In closing, our third quarter performance demonstrates the strength of our compounding technology platform, ENHANZE, where the actions during and post this quarter added meaningful near and long-term value. Hypercon and Aerocon share many similar features and will create 2 additional compounding platforms on top of ENHANZE.

Let me leave you with 4 key takeaways. Firstly, our royalty portfolio continues to grow and diversify, record royalty revenue and growing contributions from 3 more recently launched products demonstrate the increasing breadth and durability of our business. Secondly, demand for ENHANZE remains exceptionally strong. The expanded agreements with existing partners will add multiple new programs into the development portfolio with the potential to broaden the reach of ENHANZE and create new royalty revenue streams.

Thirdly, we are growing the next wave of royalty opportunities. We're on track to add 13 ENHANZE programs in clinical development by year-end. Hypercon also remains on track for its first clinical trial starts in the first half of 2027. And finally, our strong cash generation and financial flexibility provide additional capacity to invest in our technologies, while maintaining a disciplined approach to capital allocation. Each new royalty stream, future launch opportunity and partnership adds another layer of growth on top of the foundation we have already built.

I thank you all for your time today. And operator, you can now open the call for questions.

Operator

[Operator Instructions] Your first question is from Jason Butler with Citizens JMP.

分析師問答

Jason Butler

Helen, now that you're several quarters past the last 2 acquisitions, what do you think your capacity is to bring in more synergistic technologies and what's your kind of perspective and priority there? And then I have a follow-up.

Helen Torley

Yes. If it's okay. Jason, I'll ask Darren to address that.

Darren Snellgrove

Yes. Thanks for the question, Jason. So for M&A, what I'd say is that our 2 recent acquisitions, Hypercon and Aerocon are progressing well. And so those are important growth drivers for us to continue to invest behind. And the good news is both our organic opportunities and our financial position are strong. So -- that really gives us the patience to be disciplined as it relates to M&A and act really only when we can find a deal that can clearly improve the long-term outlook.

So we would expect a new deal to really be something that would expand the drug delivery portfolio something that could extend our royalty duration or strengthen the long-term revenue outlook. And obviously, it needs to meet the appropriate return thresholds. So we're definitely interested in technology that complements our platforms that can be deployed through scalable partnerships. And so that's really what we're looking for.

Jason Butler

Great. And then in terms of the hyperconcentration technologies, when you're speaking to prospective partners, what are they looking for in terms of technical proof of concept to move forward with a program? And when do you start -- when do you think we'll have the initial data from established partnerships that could provide that initial proof of concept?

Helen Torley

Yes. I think there's 2 kind of elements of proof of concept, Jason, to think about. One is the actual formulation, can you formulate the product into a hyper-concentrated product. And as you know, we've got multiple examples and a very successful example of doing that up to 500 milligrams per mL. What we're finding is for some companies, they want to see it first and other companies, they will accept the fact it's going to be very possible based on the wealth of data we already have.

So I think that's one. And on the call, I mentioned we've got multiple people in feasibility testing. Some of them are partners who signed before the early development testing does encompass that formulation testing. Some of that is our current partners and some of it is people who want to get that data before they move forward to a new agreement. So we actually have a little bit of a pipeline of potential future agreements in that group of companies who are testing the formulation.

I think the next proof of concept is the clinical proof of concept. The companies that are most advanced and we expect to be in the clinic in the first half of '27 have done the preclinical data. They've done all of that testing they can do. The next real step that they want to see is the clinical data. And so we're excited to be supporting them and moving to these Phase I studies that will evaluate PK local tolerability, things like that. So those would be the 2 things. But everything is advancing exactly as we had expected, and we're looking forward to starting the clinical studies in '27.

Operator

Your next question is from Michael DiFiore with Evercore ISI.

Michael DiFiore

Congrats on all the continued progress. Another question for me on Hypercon. Helen, what's the most important assumptions driving the $1 billion Hypercon royalty opportunity? And how much of that opportunity depends on established molecules just undergoing a formulation bridge versus investigational molecule that still need to demonstrate efficacy?

Helen Torley

Yes. As we put out that projection that we can achieve $1 billion, we were looking at an expectation of having 5 to 7 products that would be in the clinic by the mid before, the mid-2030s for that, Mike. So and that does include majority of those products, already are clinically derisked in terms of already being launched products. But there are some exciting earlier-stage products that we do anticipate have the potential to launch by that time as well. But a heavy skew to already successful commercial product.

Operator

Your next question is from Mitchell Kapoor with H.C. Wainright.

Unknown Analyst

This is Amit on from Mitchell. Congrats on a strong quarter. So for subcutaneous belantamab, is the Phase Ib study does that primarily to establish PK comparability. Are you also looking at peak exposure and have that improved safety. And I think one thing that we're interested in is like which toxicities do you believe could improve? And I have a quick follow-up.

Helen Torley

Yes. I don't believe GSK has posted a lot of details with regard to this study. So what I will be able to do is just speak in generalities about where we believe that ENHANZE is going to be able to impactful with antibody drug conjugates. And Phase I studies often evaluate the pharmacokinetics, and that's exactly what I would expect in this case.

And I do believe we'll be looking at the absorption profile identifying Cmax coming down with ENHANZE versus perhaps what's historically been seen with IV, but also what is the overall, which does correlate generally very well with efficacy. So that, in general terms, is what we would expect for them to be looking at.

Again, speaking in generalities, we're talking with broad partners, Cmax-related toxicities can be anything from low white cell counts to GI distress to even ocular challenges as well. So each ADC that we work with is going to be different in terms of what the partner is seeking to mitigate potentially with the change in the profile. Some are very much just focused on [indiscernible] getting to an even stronger overall risk benefit profile, perhaps being able to even dial up the efficacy a bit with a higher exposure.

So each partner has got different objectives, and we look forward to GSK sharing their objectives at some later date.

Unknown Analyst

Got it. And I guess with additional targets being committed to existing partners, what obligations or what are the dynamics and the dead lines accompanying ENHANZE exclusivity? What can Halozyme cover our target, for example, if a partner does not advance it?

Helen Torley

Yes, we've been in a very fortunate position that most of our partners when they take targets have advanced them or are advancing them. There have been instances rarely over the years where, perhaps, product has not progressed in the clinic or had the efficacy that was -- and I will say in those instances, as soon as the company made a decision not to move forward with that target, they have returned it to Halozyme. So that's generally the structure of our agreements. .

Operator

Your next question is from Sean Laaman with Morgan Stanley.

Sean Laaman

Helen, on Slide 6, when you're talking through those new products, new pipeline products, which are largely in Phase I. I mean how should we think about those as potential contributors post the commencement of reduced royalty rates? I assume some of these partners, the royalty rate reduces in line with some of your existing marketed products? And then I have a follow-up.

Helen Torley

Yes. The way we think about that portfolio, Sean, is very much one that -- what's exciting about it is the bridge of products that are in there. There is a mix of already established commercial products but we're also very proud to be working with partners who are trying to move forward through innovations in care and not just me-toos.

And so if we -- on the call, I happen to mention Pfizer's trispecific remit, which is going to make a big difference, we believe, in patients with inflammation. And so think of it as an exciting and broad portfolio. The deal structures are a little bit different in some of our more recent deals, some of which are represented on that chart. We have a deal structure where there is -- it starts in the low single-digit royalties going up into the mid-single-digit royalties, but in that instance, there is a modest reduced reduction in the royalty rate if there are no valid patents.

And so it's a very wide range of opportunities, but the message we have is exciting products, big TAM represented by these products, durable royalties with many of them going into the 2040s we project and not all of them having stepped on depending on if they get Coform patents, which we believe many of them will get. This is why we talk about the great value of our compounding platform engine because we're able to just keep adding wave on wave of attractive royalties.

Sean Laaman

Interesting. And I have a question on Keytruda Qlex. So according to the FDA approval letter for Keytruda Qlex, the finished product gets manufactured and filled by, I think it's BSP Pharmaceuticals in Italy, which appears to be the only FDA approved facility for this purpose. I think the October 7 bunch injunction prohibits Merck's subsidiary from manufacturing or arranging manufacturing in the affected countries as well as facilitating infringement by its affiliates.

I'm just wondering the injunction does not appear to distinguish between manufacturing for sale in those countries and manufacturing for export elsewhere. Would it be right to potentially assume that it affects Merck's ability to supply Qlex to the U.S. and other markets outside of the scope of the injunction.

Helen Torley

Yes. So we can't address the potential impact on U.S. supply, as we don't have full knowledge of Merck's worldwide supply chain. But let me just take a step back and talk about what the Dutch court prohibited, just to provide a little bit of context and tell you where the prohibition is. .

So the ruling from the Dutch court did stop Merck's EMA Holder and its affiliates from committing an infringement in multiple European countries, as you know, including though, by the manufacturer are causing Keytruda Qlex to be manufactured in those countries. Now as you mentioned, we know that BSP Pharmaceutical in Italy is a manufacturer for Qlex for Merck. The current provision by the court that's in place for Merck's EMA holder and its affiliates, we believe does impact those entities' ability to supply Qlex entity regardless of the ultimate destination of the product. and that's an important distinction there. And I will say Halozyme has also taken some additional actions and assumed BSP directly for infringement of EP 622. So it's clear around the EMA holder its affiliates and what we know about BSP Pharmaceutica cannot comment on U.S. supply. .

Operator

Your next question is from Dave Risinger with Leerink Partners.

David Risinger

Sorry about that. So thanks very much for all the updates today and nice to see the progress. I guess I wanted to start on Hypercon. So Helen, could you just comment on whether there's any change today in the expected timing of 2 potential Phase I starts in 2027. I think you mentioned -- the first half of '27, I don't know if both were previously expected to start in the first half. I just can't recall. And then Second, with respect to -- so 1 other hypercon question, and then I have 1 more, please. So the second Hypercom question is, could you talk about scale-up. I know that it's been somewhat challenging to scale up Hypercon. Could you address that, please?

Helen Torley

Yes, David, there is no change recently in our time line of the expectation of when we would have the first clinical, much earlier this year. We had stated that we expected now that the first clinical starts will be in the first half of 2027, and that's where we're tracking. And I mentioned on the call, we are expecting to make our first clinical supplies for the first 2 partners in the first quarter to support the starts during the first half of 2020. .

With regard to the scale up, any novel project like this does come with the need to evolve it as you're going on. And I have to say we've been making very, very strong progress with that, and that's what gives me [indiscernible] supply. So the team has done a super job going from bench scale into now being this quarter and a bit away from the actual scale up to clinical supply.

And obviously, that was incredibly important as a milestone for us to be able to support the new clinical starts. Once we have done that, we have to start thinking about commercial launch and commercial supply. And so that's where we're very hard at work at the moment, finding additional partners to be able to do that process. But we expect that to be a very strict forward process because the hard work happens between your bench and your first clinical scale up because all that commercial scale-up will be will be a slightly bigger volume, but it will use largely the unidentical process. So really pleased with the progress and success that we are having there and look forward to keeping you updated. .

David Risinger

Great. And then the other 1 relates to the Merck litigation. So I think many observers have been surprised that Merck hasn't settled with Halozyme to be able to introduce its subcutaneous KEYTRUDA in Europe. And I'm guessing that if the company is having conversations with Merck that it may relate to not just Europe, European litigation, but also U.S. litigation.

So my 2 questions are first, could you compare and contrast your success in Europe versus your lack of success to date in the U.S. and comment specifically on that patent that Block Merck in Europe. And then second, where are you with respect to having conversations with Merck? .

Helen Torley

Yes. I'll take the second part first, David. We haven't engaged in any conversations with Morgan. Obviously, if we did do that, we wouldn't be in a position to provide any update on that. But let's talk about where we are in Europe. We're absolutely thrilled with the resounding -- win from the Dutch court, which not only found that Merck was infringing, and this was a final decision after a full trial.

They were found to be infringing on October 17. And importantly, the court also said at that time that there is no reasonable likelihood the EP 622, which is the key European patent will be declared invalid in any other [indiscernible] member states where EP 622 is granted. Now why do I emphasize that? I emphasize that because that really supported the court's decision to have this broad restriction from launching in of the European markets. And as you know, we already have an injunction in Germany as well.

The European business EP 622 is distinct from the U.S. patent. And we're very pleased with the recognition by the European and particularly the Dutch and German patent court that on the validity of our patent and the fact that we are being infringed. And it's important because as we look at Europe, those markets and 9 markets, including Germany, in our experience from the subcu market represent about 20% of total global royalties. So we think this was a very important win strategically for Halozyme.

If we move to the U.S., to date, yes, Merck has been successful in gaining initial rulings on our U.S. patents, which, as I say, are distinct, and we've received adverse validity decisions on multiple our PDRs that were filed. However, we are very confident that as we move forward into an appeal process here, which will take likely until 2028 that we will prevail.

There's a lot of facts behind that statement, Dave, but it really comes from us being the pioneer in this area. And we believe that the appeal Corp. will recognize how strong our arcade IS in terms of that. So very different patent system, different patents in each of these. We do expect over time, we're going to reap the same success in the U.S. as we have seen in Europe to date. .

Operator

Your next question comes from Brendan Wiatrowski with TD Cowen.

Unknown Analyst

I think that's supposed to be maybe start with the confusion there. I appreciate all the color on especially the progress kind of the next wave of in [indiscernible] assets and I did notice kind of higher bulk API sales for the Hanes enzyme itself this quarter, which presumably will continue to ramp, I guess, as more drugs move through the clinic, I guess, is the next year.

But Helen, can you just remind us how should we think about kind of the comparable revenue contribution from Hypercon as those assets move into and through the clinic. I think it's more milestone-based rather than API sales, but I guess, how material could those be next year as the first couple of hypercondrugs start Phase I? And I guess just secondly, related to that, are there any updates on when you might expect kind of the third and fourth drugs clinic after those first 2 start in the first half of next year.

Helen Torley

You're quite right, Brendan, the forward Hypercon, we won't be seeing API revenue. We'll see a small amount of collaboration revenue as we do permits and partners pay for that work and our FTEs, but it's not the same model in terms of the API. So don't expect a line in API. But the model is very similar to our ENHANZE profile that you've seen for the 10 approved products where as a product is progressing, to become more and more derisked, there are escalating milestones.

So Phase III is usually substantially higher than a Phase I milestone. There are meaningful milestones at and then milestone as products achieve certain sales thresholds. So very similar and again, you're quite right, be a meaningful contributor to our milestone revenue over time. With regard to product 3 and 4, I mentioned that we are very pleased with the progress we're seeing and how broad the development pipeline is. We don't have specific dates from those partners as to when we'll be moving into the clinic, but we can say #3 and 4 are getting teed up, and we'll look forward to providing an update when those clinical start dates are more clear to us.

Unknown Analyst

Great. And then if I could just quickly follow up. I know you've been in the past, I think, flagged, I think, 13 new launches between 2029 and 2031 and I guess can you first confirm if that's still what we should expect in terms of the number and timing of that next wave. But then also if the 13 ENHANZE drugs you're flagging here in the deck to be in the clinic by the end of this year? Are those kind of the same 13 or if there's any other maybe new indications or Hypercon included in that '29 to '31 time frame.

Helen Torley

Yes. The 13 products are all new molecular entities in terms of what we count, we actually will have other new indications for the launching Brenden, particularly as an example, on VYVGART that continues to just add and expand. Those aren't on the list. So that is not considered. This is actual new product, some moving into the clinic. We have said, yes, up to 13 of these will launch between '29 and I do believe it was more 2032. But it is going to be in that window if they follow and we would expect them to our usual time line for development, which is anything from 4.5 to 5.5 years. So that's what's giving us that confidence in that window. Now obviously, they have to advance in development, but up to 13 is exactly the number.

Unknown Analyst

Your next question is from Jessica Fye with JP Morgan.

Jessica Fye

Maybe coming back to Hypercon just you've mentioned for a couple of quarters now that a Hypercon partner is evaluating the potential return of a target. Can you just talk us through like what are various reasons the partners return targets? And then the second one is what's the viscosity that you're seeing with the Hypercom formulated products? This maybe this varies by product. But is there any upper bounds that you want to stay under? And are you finding that you're able to do that thus far?

Helen Torley

With regard to -- and I guess I'll talk broadly on this as to why might choose to return a target. It could be that they may have decided not to develop that product. That's the most common reason and I talked about that a little bit earlier that, that's happened over the years with them ENHANZE.

With regard to the specifics statement on Hypercon, we really can't say any more about that. That program is actually progressing. And so we can't say more about that at this period of time. But generally, is -- if a product doesn't progress in the clinic or didn't achieve the efficacy profile a partner would want. And you may remember with our Bristol agreement, some of the earlier immunology immune-oncology targets that were more novel didn't actually meet the clinical expectations.

And so and BMS returned those targets when that was determined. So that is the most common reason that we see. The Hypercon team don't talk in terms of viscosity. But basically, what I can say is we see have the injection strength be perhaps in the 40 to 50 [ mutants ], which is the hand grip of a small child, as an example, many of our drugs that is easily injectable by an adult, as you can imagine. But many of the drugs in Hypercon we expect to be absolute. -- being given by auto-injector, which obviously can exert and certainly the Halozyme multi-injector have a lot more force that they can inject than that. So what is remarkable about the Hypercon formulation is for the concentration, the ease with which it can be injected .

Operator

Your next question is from Mohit Bansal with Wells Fargo..

Yanan Zhu

This is Zhu on from Mohit. congrats on the quarter. I just have 1 question regarding the 2027 and beyond. So shall we expect an update on the multiyear outlook in early next year as typical? And then I think you guys previously mentioned that the new launches for ENHANZE, like, together contribute around 80% -- sorry, grow about 80% sequentially in the second quarter. Just curious how much of that potential royalty step down between 2029 and '30 could be offset by these new launches? And then I have a follow-up question.

Darren Snellgrove

Yes. Thanks for the question. So we do plan to give 2027 guidance and an update on our long-range outlook when we report fourth quarter results in February, and we remain very comfortable with the outlook and look forward to providing the update. .

Helen Torley

I think on the quarter-on-quarter growth and talking about new waves that we're seeing, we continue to see strong growth in those products. And for each of those, there's a lot of growth left. I highlighted some of it in my call, but just to mention, OPDIVO Qvantig is about 17% converted today. Bristol expects it to be to 30% to 40% over the next several years and for that to continue as we have seen that moving to subQ is a very sticky in terms of share. .

For OCREVUS ZUNOVO,, that's just a 20% conversion today of what will be an $11 billion market. So very exciting there as well. And then rHuPH20 RYBREVANT subcu annualizing out by $1.3 billion, but J&J has projected at least $5 billion in shares there. So you're quite right and focusing on these being very meaningful contributors, but with that's all the detail we can give you today.

Yanan Zhu

And I just have another question regarding the collaboration revenues. I think you guys maintained the full year guidance of $110 million to $130 million versus roughly about $65 million so far has been kicking. So shall we still expect the remaining revenue to be recognized in the fourth quarter? Or has some portion of it will be shifted to 2027?

Darren Snellgrove

It was hard to predict exactly how the collaboration revenue is going to pan out, but we did guide to expect a little bit heavier weighting of that in the fourth quarter. So I think you can expect to see some more coming in, in the fourth quarter.

Operator

We have reached the end of the Q&A session, which concludes today's call. Thank you so much for attending. You may now disconnect.