Halozyme Therapeutics Inc (HALO) 2016 Q1 法說會逐字稿

Good Afternoon and welcome to Halozyme Therapeutics first quarter 2016 financial results conference call. (Operator Instructions.) A brief question and answer session will follow the formal presentation. As a reminder the conference call today is being recorded. It is now my pleasure to introduce your host, Jim Mazzola Vice President of Investor Relations at Halozyme. Mr. Mazzola you may begin your conference.

Thank you Brandon, and good afternoon everyone. Welcome to Halozyme's first quarter 2016 financial results conference call. Following market close today, we issued a news release with a summary of our results and posted a short slide presentation to accompany this call. You will find both of them on the investor page at Halozyme.com.

Leading our call today is Halozyme's President and Chief Executive Officer, Dr. Helen Torley, who will provide and overview and update on our business. Then Laurie Stelzer, Our Chief Financial Officer will review financial results for the March quarter followed by a Q&A period. Also with us for today's call is Dr. Athena Countouriotis, our Chief Medical Officer.

Before we begin today, let me remind you that during this conference call we will make forward-looking statements. The Company's actual results may differ materially from those expressed in or indicated by such forward-looking statements. For a description of risks, please refer to our quarterly and annual filings with the SEC. Now, let me turn the call over to Helen.

Good afternoon and thank you for joining us today. I will begin with the key takeaways for the quarter. Firstly we demonstrated strong execution against our strategy and our PEGPH20 pillar. In March we dosed the first patient in our Phase III HALO 301 study in pancreatic cancer and received approval from the FDA allowing Halozyme to use the Ventana companion diagnostics to prospectively identify HA high patients. Since then we have continued to execute against our plan to initiate (inaudible) participating in the study. Secondly we continued to build value in our ENHANZE builder. Highlights during the quarter include Eli Lilly nominating their third target to be cited with ENHANZE triggering an $8 million milestone and Pfizer nominating an additional target, triggering $1.5 million milestone. We also had several positive developments expanding the study of Baxalta HYQVIA and Roche's co-formulation therapies. Thirdly, as we continue to make progress with our lead asset PEGPH20 we also announced two new pre-clinical programs presented for the first time last month a new check point inhibitor targeting adenosine and a novel antibody drug conjugate targeting epidermal growth factor receptor.

Pre-clinical data he from both assets were shared during the 2016 American Association for Cancer Research annual conference. We believe both have great potential for our future as we continue to demonstrate our expertise in oncology and the tumor micro environment. And lastly we experienced strong year-on-year revenue growth with revenue royalty for the first quarter growing 68% to $11.4 million and total revenue growing 128% to $42.5 million up from $18.7 million in the first quarter of 2015. Product sales to our ENHANZE partners combined worldwide milestones from Lilly and Pfizer led to increases in our revenue and cash guidance range for full year and Laurie is going to discuss these in detail a little later in the call. For additional details in our progress I might start on Slide 3 with an overview of our strategy. We operate the business and make investment decisions in two strategic pillars. The first pillars is our oncology business with our investigational drug PEGPH20 at the core.

PEGPH20 temporarily degrades hyaluronan, glycosaminoglycan, or chain of natural sugars in the body that can accumulate around certain tumors and can constrict the tumor vasculature. In animal models we have demonstrated that degrading hyaluronan, or HA reduces tumor pressure increasing the blood flow and thereby the access of cancer treatment into the tumor. We are currently studying PEGPH20 and pancreatic, non-small cell lung and gastric cancer patients. The broader potential applicability for its use in multiple tumor types in combination with immuno-oncology agents, monoclonal antibodies and chemotherapies Our work in oncology is funded in part by the second pillar of our strategy, which is centered on our licensing agreements with marquee partners including Roche, Baxalta, Pfizer, Janssen, AbbVie and Eli Lilly. These partners co-formulate our co-administer their therapies with our ENHANZE technology platform which temporarily degrades HA under the skin to enable larger fluid volumes or molecules to be delivered with a subcutaneous injection or in a less frequent dosing schedule. Both ENHANZE and PEGPH20 are based on our proprietary rHuPH20 enzyme. Now let me begin by providing some additional details on PEGPH20.

We're making progress on our ongoing clinical studies to evaluate the pan-tumor potential of PEGPH20. As previously-announced, in March the FDA approved the investigational device exemption or IDE for the companion diagnostic developed with Ventana. This diagnostic was developed to detect and score levels of HA in tumor biopsies based on an algorithm that can be read by pathologist around the world with low intra and inter reader variability. IDE approval represents another significant milestone in support of our HALO 301 trial in pancreatic cancer by enabling the selection of patients with high HA tumors. Its use in the study is an integral part of the co-development of PEGPH20 and the companion diagnostic to support final regulatory approval.

An overview of the Phase III study design is shown in Slide 5 study 301 will be a 420 patient global double-blind placebo-controlled randomized trial of patient with Stage IV pancreatic ductile adenocarcinoma who will be prospectively identified and included based on high levels

of HA. We're proceeding this study with two primary endpoints progression-free survival and overall survival and plan to conduct interim analysis from the target number of progression-free survival events as reached. Based on the interim analysis the data monitoring committee will the option to recommend we stop the study based on efficacy, continue it to the target enrollment of 420 patients, increase enrollment to opt 570 patient for the final overall survival assessment or stop the study for futility.

If the progression-free survival data shows a significant benefit in the PEGPH20 treatment arm and both the overall survival and overall risk benefit are supported these data may form the basis for a marketing application in the US on a conditional marketing authorization in Europe. Approximately 200 sites in 20 countries have agreed to participate in the study and with the first patient dosing in March global site initiations are now well underway. In the United States, to support patient awareness and potential enrollment we have initiated a digital media approach to inform people searching for information on stage IV pancreatic cancer about study 301. Turning to Europe since receiving approval under the voluntary harmonization procedure in 11 participating European countries we have since obtained multiple clinical trial authorization or CTA approvals. Each represents a separate national approval process required by each country. This weekend we will be hosting our first ex-US investigative meetings with representatives from almost 100 sites attending.

Interest in our study has never been higher and we're making strong progress towards our target of having greater than 90% of the centers ready to start screening patients by the end of this year. In addition to the ongoing activities for HALO 301 study we plan to present the final analysis of data from stage 1 of our randomized Study 202 of PEGPH20 in combination with ABRAXANE and gemcitabine at the 2016 American Society of Clinical Oncology conference. This analysis utilizes the companion diagnostic asset developed with Ventana and will update the data set we shared in January to include further follow-up in the same patient population. We also remain on track to share mature response rate and progression-free survival data from Stage II of Study 202 in the fourth quarter of this year. Now furthest along in our study of PEGPH20 in pancreatic cancer our pre-clinical models support the potential for PEGPH20 in a broad range of solid tumors and it's our goal to demonstrate the pan-tumor potential. Slide 6 shows our currently active and planned clinical trials. In addition to pancreatic cancer Halozyme is conducting two separate additional trials to evaluate the pan-tumor potential.

Each study is an all comer dose-escalation phase followed by a dose expansion phase in which only HA high patients will be enrolled. Our PRIMAL study is evaluating PEGPH20 in combination with docetaxel. In locally advanced and metastatic non-small cell lung cancer patients who did not respond adequately or lost their response to a platinum based regiment and its designed to identify the dose and safety of PEGPH20 plus docetaxel. In addition to the primal study we're in a very good position to adapt to the changing landscape in the treatment on non-small cell lung cancer with our Phase 1B study of PEGPH20 and KEYTRUDA or pembrolizumab.

The PEGPH20 plus pembrolizumab trial will enroll relapse refractory Stage IIIB and stage IV, non-small cell lung cancer patients who have been treated with at least one platinum based regiment or recurrent locally advanced metastatic gastric adenocarcinoma patients who have failed at least one chemotherapy regiment. I would now like to provide an update on each trial. In our PRIMAL study we are now evaluating patient at a PEGPH20 dose of 2.2 micrograms per kilogram. We will continue to advance through the escalation phase until we reach the maximum tolerated dose of PEGPH20 at which time we will move into cohort expansion where we will select only HA high patients and explore the efficacy of the combination.

I am pleased to report that with our partner Ventana we have identified the technical cut-off for a companion diagnostic to prospectively select HA high non small cell lung cancer patients for this study. In summary, we're making excellent progress towards the expansion phase of the PRIMAL study and it remains our goal to start the expansion phase in the second half of this year. In our study in combination with KEYTRUDA after advancing into the second dose cohort we recently submitted a protocol amendment to the FDA based on bleeding events observed in heavily pre-treated relapsed gastric cancer patients. These events were not classified as dose limiting toxicities or determined by investigators to be related to PEGPH20. We have initiated a dialogue with the FDA and upon approval of the amendment, plan to resume enrollment in the second dosing cohort. Interest from our investigators remain high for this combination study and it remains our goal to identify the maximum tolerated dose of PEGPH20 so we may move into a dose expansion phase in the second half of this year.

Key factors affecting this timing will include the time frame to receive FDA approval of the protocol amendment and the number of dose cohorts to evaluate and determine the maximum tolerated dose. Finally, and also reflected in this slide we have our planned Phase 1B2 clinical trial with our collaboration partner a Eisai, to evaluate HALAVEN, or eribulin, in combination with PEGPH20 in first line HER2 negative high HA metastatic breast cancer patients. Since our last update Eisai has expanded the protocol for this study to include second line patient in order to further explore the applicability of PEGPH20 with eribulin, in a larger patient population. Eisai is on track to initiate the study in the second quarter of 2016 and we look forward to updating you once the first patient is dosed. The primary objectives of this trial are to determine the safety, tolerability and recommended dose in the Phase 1B portion and to determine the objective response rate of eribulin metholate in combination with PEGPH20 in the phase 2 portion.

Now, in addition to the ongoing development of PEGPH20 I would now like to turn your attention to Slide 7 and briefly highlight our two new pre-clinical programs presented for the first time during the 2016 American Association for Cancer Research annual conference last month. Both pipeline assets are complements to our lead asset PEGPH20 and demonstrate our expertise in the tumor environment on our progress in oncology. A summary of the first program is shown on Slide 8. The study of the immune check point inhibitor targeting adenosine we call PEG-AD2. The accumulation of adenosine in around certain solid tumors is believed to contribute to a suppressed immune response and PEG-ADA2 which is a pegylated human enzyme engineered to decrease the concentration of adenosine this is tumor micro environment, In pre-clinical studies PEG-AD2 demonstrated tumor growth inhibition in certain colon, lung and pancreatic cancer animal models, as well as an increase in infiltration of T cells and decrease in tumor adenosine levels. This program is in lead optimization with the goal of identifying a candidate molecule for development by the end of this year. A second preclinical program is shown in slide 9 and involves HTI 1511, a novel antibody drug conjugate or ADC targeting epidermal growth factor receptor or EGFR.

And this seeks to address two key limitations with the current anit-EGFR therapeutics. Skin rashes and downstream activating mutations that may limit efficacy. HTI 1511 was engineered to bind to EGFR at the low tumor micro environment while decreasing or attenuating binding at the neutral ph of skin. It has been developed as next-generation ADC with a potent cytotoxin to treat EGFR positive patients including those with KRAS and BRAF mutations. In preclinical studies HTI 1511 has demonstrate tumor growth inhibition or regression in colon, lung and cholangiocarcinoma animal models. CMP development attempt are now ongoing and initial toxicology studies are planned for 2017 to support an IND filing in the first half of 2018. We look forward to updating you at future scientific forums as we progress these programs. Now let me move to Slide 10 for a concussion of the second pillars of our strategy, our ENHANZE platform. Our ENHANZE platform remains a key driver of value for the Company as our existing partners continue to nominate targets and announce plans to initiate clinical trials involving our proprietary technology.

Among the reasons for the wide licensing of ENHANZE is that the platform can be used in combination with a variety of other drugs and is applicable across many therapeutic (inaudible). The value proposition is shown in slide 11 and includes lifecycle management with the opportunity to prolong the exclusivity periods for the combined product and the ability to reduce those and frequency and duration by taking drugs from an IV to a subcutaneous formulation or allowing for higher volumes to be infused at one time. Turning to slides 12 and 13 through our recent progress we have six marquee partners generating milestone revenue, three approved products generating royalty revenue, four new products in the clinic that have the potential to generate future milestones and royalties and three potential new indications for existing approved products in development. I'm very pleased with the strong progress we're seeing in our ENHANZE program with a growing list of partners generating more than $64 million in upfront payments and milestones just in the last 12 months. Our partners have initiated four separate phase 1 trials.

These include clinical trials including Pfizer rivipansel for vaso-occlusive crisis in sickle cell patient, Janssen's NTCD 38 tumor for multiple myeloma patient, (inaudible) to help reduce the number of induction injections at higher doses and Pfizer's phase 1 trial evaluating the safety, tolerability and (inaudible) an investigational PCSK9 in inhibitor all using our ENHANZE platform. More recently and further supporting the growing momentum Lilly nominated their third target resulting in an $8 million milestone and Pfizer nominated and additional target resulting in a $1.5 million milestone. Now let me turn to Roche and Baxalta. We benefit today from sales of Roche's Herceptin SC and MabThera SC in countries outside the US and Baxalta's HYQVIA in the US and multiple other countries. As Roche indicated during their most recent quarterly call and as shown in Slide 14, Herceptin-SC is now available in 51 countries and its sales account for approximately 41% of total Herceptin sales in Europe. Also, on their last quarterly call Roche announced that after their filing in Europe in the fourth quarter of 2014, MabThera SC has received a positive opinion from the committee for medicinal products for human use for patients with previously untreated chronic lymphocytic leukemia representing positive development for our co-formulation with MabThera and in terms of new studies Roche recently published plans to study Perjeta in combination with ENHANZE in a phase 1 trial in early breast cancer patients. Moving on to our other market product Baxter's HYQVIA combines immune globulin infusion 10% with our PEGPH20 and is currently indicated for adults with primary immuno deficiency or PID is a chronic condition and HYQVIA is the only once a month subcutaneous treatment for adult patients.

As Baxalta announced last week HYQVIA received a positive opinion from the committee for medicinal products for human use recommending marketing authorization in Europe for pediatric indications. Pending approval from the European Commission this will represent the first pediatric indication approved for use with our ENHANZE platform. And finally after receiving orphan drug designation for HYQVIA for the treatment of chronic inflammatory demyelinate polyneuopathy or CDIP, Baxalta recently initiated a Phase III trial to explore treatment inpatient with this disease. We're pleased with the evidence of continued progress in our enhanced platform both commercially and in the clinic. As a Company we constantly review our potential new collaborations and support all of our current partners to advance their programs with the goal of helping as many patients as possible. With that I am now pleased to turn the call over to Laurie to discuss our financial results for the first quarter in greater detail. Laurie.

Thank you, Helen. I will begin on Slide 16 where you will see that the revenue for the first quarter was $42.5 million compared to $18.7 million for the first quarter of 2015 driven primarily by the $8 million milestone from Lilly which was recorded in the first quarter and will be received in the second quarter, $5 million milestone payment from AbbVie for the dosing of their first patient in their study of HUMIRA as well as another strong year-on-year increase in royalty revenue. During the quarter royalty revenue totaled $11.4 million an increase of $1.8 million sequentially from last quarter and $4.6 million above the first quarter of last year. The year-on-year increase came largely from higher sales of Roche's Herceptin SC during the fourth quarter of 2015. Sales of rHuPH 20 totaled $9 million Hylenex product sales totaled $3.9 million and other collaboration revenue totaled $18.2 million dollars which includes some milestones from Lilly and AbbVie. Turning to Slide 17 for a more detailed breakdown of our P&L, costs of product sales was $7.8 million in the quarter compared to $6.5 million in the prior year. This increase in manufacturing costs primarily reflects our increase in product sales to partners. Research and development expenses for the first quarter were $40.1 million compared to $16.7 million for the first quarter of 2015, a continuation of the planned increase we have discussed for several quarters to support our growing clinical and manufacturing activities for PEGPH20 namely the launch of our Phase III trial in a pancreatic cancer in March. Selling, general , and administrative expenses were $10.8 million compared to $9.4 million for the first quarter of 2015. The increase was primarily due to personnel expenses including stock based compensation for the period. Overall our operating expenses increased by $26.1 million from the first quarter of 2015.

Net loss for the quarter was $19.8 million or $0.16 per share compared to a net loss of $15.1 million or $0.12 per share in the first quarter of 2015. Cash, cash equivalents an marketable securities were $238.6 million at March 31st, 2016 compared to $108.3 million at December 31st, 2015, and $128.5 million in the first quarter of last year. With the completion of the $150 million non-dilutive royalty backed debt financing in January we remain well capitalized for our 2016 plans and well into 2017. Our ability to finance the Company in this manner is another differentiator of our business model with the foundation of our ENHANZE franchise supporting our investment in a promising oncology franchise. Finally I would like to touch on the updates to our 2016 financial guidance as shown on Slide 18. As previously indicated, our revenue guidance range of $110 million to $125 million did not include revenue from new ENHANZE partnerships or new target nominations. As a result of the milestones earned from Lilly and Pfizer's new target nominations as well as an increase in product sales and research to support our ENHANZE partners we are increasing our full year revenue guidance to a range of $130 million to $145 million. In addition, we are narrowing the bottom end of the full year expense guidance to a range of $245 million to $260 million as a result of the increase in costs to support our new ENHANZE partners. We are also raising our full year cash flow guidance to a range of $45 million to $65 million and year-ends cash guidance to a range of $150 million to $170 million. With that let me turn the call back to Helen in who will provide some closing comments.

Thank you, Laurie. In summary we have reported another strong quarter of performance. We met our key milestones or our Phase III trial in pancreatic cancer and we are moving ahead in our preparing our sites around the globe to screen patients. In addition, we continued our exploration of the pan-tumor potential of PEGPH20 and announced expansion of our oncology pipeline with two promising pre-clinical assets that target components of the tumor microenvironment. At the same time we experienced yet another quarter of milestones and growing royalty revenues with nomination of two additional targets and the announcement of another study with our proprietary ENHANZE technology. I remain enthusiastic about our strong execution as well as the investments we're making to build and deliver even greater value for the future. And I would like to close by expressing my gratitude and appreciation for the talented Halozyme team for their continued hard work in advancing our programs in support of our partners. We're now ready to take your questions. Operator, please would you open the call for questions.

Thank you. (Operator Instructions). The first question will come from Jessica Fye with JPMorgan. Please go ahead.

Thanks for taking my questions. I have a couple. The first is can you remind us how you're thinking about -- I know past you said you would be prepared to file on your phase 2 data, but just remind us how you're thinking about that potential? Second, I know you kind of updated the stage 1 data, at healthcare conference earlier this year for the new Roche diagnostic. Is that what we will see at ASCO a real data presentation under that diagnostic and, finally, can you just elaborate a little bit on the safety signal that you saw in the pembro combo study and any color on what is going on there?

Great. I'll take the first question Jessica with regards to the potential filing based on Stage II data and I will ask Athena to take the next two questions. With regards to the potential to file based on the phase 2 data we mention on our last call it say that this was a very unlikely scenario but in light of the unmet needs that exist for patients with Stage IV pancreatic cancer we were preparing to be able to our do that, and that remains our intent. We're cleaning the data as those patients are continuing in the study we expect to report out the data or project to report out the data in the fourth quarter and if the data is supportive, then we would proceed to have a conversation with the FDA to see if there would be support on their side for us potentially using this data for accelerated approval, but again just to say that we don't think this is a likely scenario but we certainly will be prepared. Athena would you like to comment on the other two questions?

Good afternoon, Jessica. In regards to your second question, you're correct in that Helen did show the stage 1 data with the new diagnostic at your healthcare conference back in January. That was essentially the progression-free survival and response rate data. It's our intent at ASCO to show the final data set in the same patient population so it's still the same 43 HA high patients yet it will be the entire study so we'll also showing data from the HA low patients as well as the safety data. I think its equally important to say that even though the data is embargoed it continues to give us confidence in the current Phase III design.

In regards to your third question from the KEYTRUDA update, the one thing I would say is that Helen in mentioned bleeding events so let me give you little bit more information. There have been three cases of bleeding events in the combination with KEYTRUDA study and I do think it's important to focus on two key additional points The first is that these patients remember have been heavily pre-treated they have been treated with multiple lines of therapy and they are unfortunately, are very sick and prone to bleeding. Now, having said that, you can see in the literature rates of bleeding any from between 20% to 40% in the second line setting and we're essentially treating third line and greater patients in this study. The second point to emphasize is that these were not deemed related by our investigators to PEGPH20 nor were they classified as just limiting toxicities yet we did make a modification to the protocol with feedback from our investigators with the intent of decreasing the potential risk of future bleeding in additional patients that are enrolled and it is our full belief that we will continue enrolling in this trial at the current dose of 2.2 micrograms per kilo upon approval of the FDA of the amendment.

Okay. Got it yes. It just seemed like through the opposite signal is what you saw in pancreatic so is it -- you're saying it's not drug-- so are these patients -- they're just prone to bleeding Is that?

I do think, Jessica, if you look in the literature in regards to gastro cancer, unfortunately, in both cancers they are in both camps, they do have an incidence rates of thromboemolic events and yet they also because of where their tumor is located and also the therapies that they have received previously they are at risk of bleeding, and again we took a step to make modifications with guidance from our investigators. We have submitted the amendment to the FDA and in the most recent days and we anticipate their feedback and restarting enrollment.

Okay. Got it. Thank you.

Thank you. The next question will come from John Eckard of Barclays. Please go ahead.

Good afternoon, thanks for taking my questions. I guess my first question comes to Helen's comments about the HA cutoff for non-small cell lung cancer. I just was wondering since your still in the dose-escalation phase of this trial what is it that you can learn during this phase of the trial that could give you confidence that the HA cutoff is the right cutoff?

Thanks, Jonathan. Yes. We call it the technical cutoff because we really used a lot of pathological specimens if you like to identify a cutoff that will allow us to enrich the population going into the study and so we will do the same as we did in pancreas cancer we'll now with this enriched population be able to look as we enroll patients to able to correlate response with HA levels and allow us to further refine it towards a cutoff for formal testing in later stage studies' we go forward. So if you like, consider this a technical cutoff more than an enrichment strategy at this stage to allow us to generate efficacy data to be able to correlate with the HA levels moving forward.

Great. And then this is kind of a housekeeping question but your increased topline guidance it seems to reflect quite a reasonable amount more of both products sold to partners if I'm backing into the numbers. So is that -- is that bulk sales are those something like for example you said Baxalta is starting a new Phase III. Is that the type of event that could trigger a bulk purchase of material and if so how should we think about that revenue line? I know it's never going to be massive but that revenue line as some of these partnered products start moving into more advanced clinical trials.

Yes. Thanks, Jon. Let me ask Laurie to give a little update on the color of the elements of the revenue that was reported.

Yes. Hi Jonathan. I think you have to think --you're right. We did reflect not only an increase due to our new targets being named but as well bulk sales and research that -- that we provide too our partners. I think you have to think about the bulk sales that show up in product sales. Those are the sales of bulk for marketed products. For our partners that are in the clinic those show -- that cost shows up in R&D and then in the revenue through sponsored research. So I think it's safe to say that we are seeing an increase due to increased activity with our partners, but we don't break it down any farther.

Okay. Thank you very much.

Mm-hmm.

Thank you. Next question completion.

Thank you the next question will come from Arlinda Lee with Canaccord. Please go ahead.

Hi, guys.

Hi Arlinda.

Hi. I had a couple questions for Laurie. On the milestone payments you guys have increased guidance by $20 million and I think you outlined $10 million worth in the first quarter so far. Could you give us some guidance on where the additional $10 million is coming from. Is that from milestones, is it from increase in royalties or how should we think about that?

Yes. No. It's -- it's a combination. You are right. $10 million extra that were un planned in milestones. As I said before, increased bulk sales to our partners as well as increased sponsored research and it's really just a combination of a number of items in our revenue line that's increasing our -- our range.

Okay. And then I guess on the cash use, though, is that -- those increases were on the order of I think $10 million? Is that -- sorry. It wasn't $20 million. Could you help us walk through what the differences were. Thanks.

Yes. It's -- it's offset as I said we bottom end of our expense range. It's really some of these for instance sales of bulk. It's really creating an increase in the cost of goods sold, an increase in our R&D as well so as to support our partners.

Okay great. Thanks.

Mm-hmm.

Thanks, Arlinda. Next question, please.

Joel Beatty with Citi. Please go ahead.

Thanks for taking the questions. First question is on the combination trial with KEYTRUDA. Is prophylaxis with low molecular weight being used in that trial?

Yes. Let me ask Athena to address that.

Hi Joel. Yes. It's somewhat similar to the question Jessica had made earlier it just a reminder gastric cancer is one of the higher tumor types in regards to the incidence of (inaudible) so we are giving prophylaxis in the KEYTRUDA trial to our gastric cancer patient. Remember it has a second arm which is relapse non-small cell lung cancer and in those patients we are not giving prophylaxis.

Have you looked to see whether it could be related to the prophylaxis -- the bleeding event?

I do think it's premature to speculate on the specific cause as Helen commented I think other prepared remarks we're in our initial dialogue with the Food and Drug Administration and we're a waiting their feed back and given the fact that this is an ongoing database it's premature to speculate.

Sure. One last question. On cutoff that's been announced would you expects a similar (inaudible) to meet that cutoff as you see in the pancreatic cancer trial?

You know, I think it's premature to comment on that. What we're doing is seeking to enrich this and we know in pancreas cancer we are estimating it's 35% to 45% of patients. Using the Ventana diagnostic we don't have an answer to that Joel, but we do know that based on some of our earlier work where we were estimating 30% to 40% of non small lung cell cancer patients but using the companion diagnostic we're going to have to wait for the data from the studies we're doing now to answer that question.

Okay. Thank you.

Thanks, Joel. Other questions, operator?

Yes, sir. At this time the next question is Charles Duncan with Piper Jaffray. Please go ahead.

Hi, guys. First of all, congrats on a good quarter of progress and secondly thanks for taking my questions. I have two quick ones. On the 202 trial besides possibly informing a regulatory strategy what else do you hope to learn from it that could modify or inform the conduct of 301 trial?

I'll start that and maybe I'll ask Athena to comment. When we started Study 202 Stage II one of the primary objectives of it was to test the effectiveness of our interventions to see if the addition low molecular weight Heparin and other changes we made were going to be effective in reducing the rate of thromboembolic events. We have reported out on that at several meetings and we continue to be pleased with the progress that we see here. So that's one of the important areas. And so, Athena, any other comments.

Thanks, Charles. I do think the only other points would be obviously Stage II is an uninterrupted treatment patient population so what we can learn from the potential additional efficacy without the interruption for PEG it's important to remember in the Stage I data set that over 40% of the patients had to stop PEGPH20 at the time of the clinical hold so we're very intrigued to see how the data will pan out once we have the Stage II final data set to show uninterrupted PEG dosing.

But it l for just could enhance your conviction on the clinical benefit you're anticipating or powering assumptions behind 301?

That's correct. I think that's very well said, Charles. We are looking at it that way although as Athena commented earlier we continue to report out at ASCO that the stage 1 population and -- it strongly supports the approach we're taking for 301 already but it will be good to have another data set doing that.

Okay and then my second question is more kind of broad or speculative, but we have now seen three pancreatic cancer trials or programs not deliver goods. You folks have a very differentiated approach. We have done a compare and contrast in the past, but I guess I'm wondering if there was one or two things that you could highlight that really differentiates your approach and gives you confidence in the pancreatic cancer indication.

Yes. I think, Charles, for me it all comes down to the science. We have strong pre-clinical data supporting the importance of HA in pancreas cancer patients and the approach we're taking which is a targeted therapy to take those patients who have high HA, who we believe are having issues with the drug therapy getting into the tumors where it needs to work, is why we have such conviction that PEGPH20 is going to be able to add on to the efficacy of ABRAXANE and gemcitabine. We continue in dialogue with experts into the field who support this and certainly as we are talking with these 200 centers and the world there's strong support for the mechanism of action in testing this in our Phase III study. Let me ask Athena to add on.

I think the only thing I would additionally say, Charles, is remember the unique aspect of our Phase III design is that we have two primary end point. The progression-free survival and overall survival and in likely the three cases you're referring to all of which had overall survival primary endpoints and we all know it's very difficult to win in those settings. So I do think the uniqueness of our design as well as what Helen said, the fact that we're using a companion diagnostic that we worked very hard with Ventana to get to be able to prospectfully test are two differentiation factors.

Got it just wanted to hear it again. Appreciate that you guys are taking a different approach. Thanks.

Thank you, Charles.

Thanks, Charles. Next question, please.

Thank you. (Operator Instructions).

All right, if there's no further questions, I would just like to thank everyone for joining us today. You have heard the report of another strong quarter of performance and we look forward to updating you next quarter with our continued progress. Thank you so much and have a good evening.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect your lines.