Halozyme Therapeutics Inc (HALO) 2016 Q4 法說會逐字稿

Good afternoon, and welcome to the Halozyme Therapeutics fourth-quarter 2016 financial results conference call.

(Operator Instructions)

It is now my pleasure to introduce our host Jim Mazzola, Vice President and Investor Relations at Halozyme. Mr. Mazzola, you may begin your conference.

Thank you, Operator, and good afternoon everyone. Welcome to Halozyme's fourth-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 the call. You will find both of them on the investors page at www.halozyme.com.

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

Before we begin, let me remind you that during this conference call, we will be making 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 Securities and Exchange Commission.

Now let me turn the call over to Helen.

Thank you, Jim. Good afternoon everyone, and thank you for joining us today. I'll begin the call with key takeaways for the quarter.

Firstly, following the release of our positive Phase 2 HALO 202 data last month, we continue to see increased momentum in our clinical development program for PEGPH20. In the HALO 301 study, our global study of PEGPH20 and pancreas cancer patients, patient screenings have increased during the first two months of the year, and interest from opinion leaders and investigators in our science has never been higher.

At the same time, we are making progress in the dose expansion portion of our KEYTRUDA study and waiting for the start of our collaborative studies with Genentech's Tecentriq in multiple tumor types.

Secondly, we are pleased with the recent progress and have strong confidence in the growth potential of our ENHANZE platform, which is a key differentiator for Halozyme. Data presented at ASH, by Genentech and Janssen, on their programs using ENHANZE, reinforces the value-creating potential that exists through our current partnerships. In addition, we foresee continued growth in royalty revenues from currently marketed products. Our Team remains focused in delivering new ENHANZE partnerships as we support existing partners to advance their programs.

And thirdly, our results, again, demonstrate the financial strength of our business model. We reported a 65% increase in royalty revenue and exited the year with more than $200 million in cash. The ability to generate revenue as we invest with a future in oncology is a key differentiator of our business model, and continue to distinguish the Company in the fourth quarter.

For additional details on our progress, I'll start with an overview of our strategy. As a diversified oncology biotech company, we offer (technical difficulty) business and make investment decisions in two strategic pillars. The first pillar is our oncology pipeline with investigational drug PEGPH20 at the core. PEGPH20 temporarily degrades hyaluronan, a glycosaminoglycan, or chain of natural sugars in the body, that can accumulate around certain tumors, and constrict the tumor vasculature. In animal models, we've demonstrated that degrading hyaluronan, or HA, reduces tumor pressure increasing blood flow and thereby the access of cancer treatments into the tumor.

We are most advanced in evaluating PEGPH20 in pancreas cancer. Each year, more than 100,000 patients in the US and EU5 are diagnosed with pancreas cancer, of which an estimated 65,000 have metastatic disease. PEGPH20 is a targeted therapy, being developed for patients with high levels of HA. And in the US and EU5, it is estimated that there are approximately 25,000 HA-High pancreas cancer patients annually. With five-year survival for patients with metastatic disease at just 3%, there remains a major unmet need. And we would expect a high degree of market penetration upon the approval of PEGPH20.

We are also evaluating the pan-tumor potential of PEGPH20 in a range of solid tumors. And on an annual basis project that there are an additional 50,000 non-small cell lung cancer, gastric cancer and breast cancer patients who are HA-High.

Our work in oncology is funded in part by the second pillar of our strategy, which is centered on our licensing agreements with six marquee partners including Roche, Baxalta, Pfizer, Janssen, AbbVie and Eli Lilly. These partnerships delivered $129 million in annual revenues to the Company in 2016.

Now let me provide some additional details of PEGPH20 on slide 2. We are furthest along in our study of PEGPH20 in pancreas cancer, where last month we reported positive data from our randomized Phase 2 HALO 202 study of PEGPH20 in combination with ABRAXANE and gemcitabine, or PAG, compared to ABRAXANE and gemcitabine alone, or AG. The study enrolled a total of 279 patients in two stages.

We are very encouraged by these results, which based on the December, 2016 data cap, make both the primary efficacy endpoint of progression free survival in the total efficacy evaluable population as well as the primary safety endpoint of a reduction in thromboembolic event rate in Stage 2 of the study.

Moving now to slide 3. In addition to meeting the primary endpoints as we are a targeted therapy, which was as important in the results was achieving statistical significance and meeting the secondary endpoint of progression free survival in the HA-High patients. In the Stage 1 and Stage 2 combined populations of 84 HA-High patients, we showed a 77% improvement in the median PFS, or 9.2 months in the PAG arm compared to 5.2 months in the AG arm, with a hazard ratio of 0.51 and a P value of 0.048.

For the exploratory overall survival endpoint in the combined Stage 1 and Stage 2 HA-High population, the median overall survival was similar between both treatment arms.

Given the importance of the recently unblinded Stage 2 HA-High patient data set, we were encouraged by the positive progression free survival and overall survival findings shown on slide 4. Given that this population closely mirrors the population currently enrolling in the ongoing HALO 301 Phase 3 study.

The Stage 2 data demonstrated a 91% improvement in median progression free survival with 8.6 months in the PAG arm compared to 4.5 months in the AG arm, a 4.1 month improvement with a hazard ratio of 0.63.

And a 50% improvement was demonstrated in median overall survival, with 11.7 months in the PAG arm compared to 7.8 months in the AG arm, also a meaningful improvement of approximately four months, with a hazard ratio of 0.52. What was also important was that Stage 2 data validated the Ventana Companion Diagnostic Algorithm and cap point, and supported the literature that High-HA is a poor prognostic factor.

Then moving to the tolerability profiles, the treatment-related adverse events in the combined data set were well-balanced with the exception of the highlighted rows shown in slide 5, where we saw higher rates of peripheral edema, muscle spasms, neutropenia and myalgia in the PAG arm that infrequently resulted in treatment discontinuation.

The growth in the HALO 202 study, the results we reported are supportive of our ongoing Halo 301 Phase 3 study which has been conducted in a similar patient population. These results affirm and add to our confidence in the potential benefit of PEGPH20.

We expect to present the results of Study 202 at a medical forum in 2017. I also want to remind you that while I summarize the key findings today, we have a presentation posted on our website and have archived our conference call from January 5, with detailed findings for our top-line analysis.

Moving now to slide 6 for an overview of our Phase 3 study, Halo 301 is a global double-blind placebo-controlled randomized trial of patients with stage four pancreatic ductal adenocarcinoma, prospectively identified and randomized based on high levels of HA. The protocol includes one interim analysis when the target number of progression free survival events is reached. At the time of the interim analysis, if the progression free survival data shows a significant benefit in the PAG treatment arm, and both the overall survival and overall risk benefit are supportive, these data may form the basis for marketing application in the US and a conditional marketing authorization in Europe.

During the fourth quarter and through the first two months of 2017, we made strong progress initiating our global sites. Since our last call, we are now actively screening or ready to screen patients at nearly 200 sites. The study protocol has been approved in all 22 participating countries. And we are consistently achieving our three- to five-day target to analyze patient biopsies and report HA levels to sites. I'm very pleased with the ramp and momentum and project that 2017 will be a year in which we make strong progress towards our enrollment goals.

Turning now to slide 7, I will now an provide update on our clinical development progress to assess the pan-tumor potential of PEGPH20. The PEGPH20 plus KEYTRUDA, or pembrolizumab trial is enrolling stage IIIB and stage IV, non-small cell lung cancer patients and metastatic gastric adenocarcinoma patients who have failed at least one chemotherapy regimen. Our goal in this study is to evaluate PEGPH20's potential to improve the efficacy of therapies targeted to PD-1, as has been demonstrated in our preclinical models.

At the end of 2016, we moved into the dose expansion phase of the study. We are now selecting HA-High patients who have either gastric or non-small cell lung cancer. Multiple patients have been dosed and we are targeting a total enrollment of approximately 50 patients at 30 US sites. Screening has gone well and enrollment is ongoing.

Since our last call, we also announced the broad clinical collaboration with Genentech, to study PEGPH20 with their cancer immunotherapy, Tecentriq, or atezolizumab, an anti-PDL-1 monoclonal antibody in up to eight different tumor types with studies to begin in 2017. The first study will be a Phase 1b2, open label, multi-arm randomized global trial, led by Genentech in up to six tumor types, initially focusing on gastrointestinal malignancies, including pancreas and gastric cancers.

On their most recent earnings call, Roche showed details of their novel immunotherapy clinical trial platform, MORPHEUS, which is the platform under which their studies with PEGPH20 will be conducted. In addition, Halozyme will conduct a Phase 1 B open-label, randomized study of Tecentriq, in combination with PEGPH20, in chemotherapy in advanced or metastatic biliary and gallbladder cancers. Since announcing the agreement in November, we have selected our CRO for the study and are collaborating with Genentech on the selection of global sites in anticipation of the trial starting in the second half of 2017.

And finally, we have our Phase 1b2 clinical trial with our collaboration partner Eisai. As previously announced, the first metastatic breast cancer patient was dosed in July, and enrollment is ongoing. Of the other ongoing studies underway with PEGPH20, the randomized Phase 2, [polpertis] trial led by SWOG of PEGPH20, in combination with modified FOLFIRINOX is furthest along.

We were pleased to learn that SWOG has now enrolled more than 120 patients, and is making good progress towards its target enrollment of 172 patients. As a reminder, the primary endpoint of the SWOG study is overall survival. And HA status will be determined retrospectively.

We are also encouraged by interest from investigators at leading academic centers and have a number of promising investigator-sponsored trials ongoing and under consideration. I expect we'll be in a position in the coming months to share additional details for exciting new areas of future study.

To close out the discussion on PEGPH20, we are also looking forward to the upcoming annual meeting for the American Association of Cancer Research, where we have research abstracts that have been accepted for poster presentations. Our scientists will present findings from our preclinical models that further illustrate the potential benefits of PEGPH20 in combination with immunotherapy and on its ability to increase immune cell access.

Turning to slide 8 now, I will move to the second pillar of our strategy, our ENHANZE platform, where we license our rHuPH20 enzyme to leading companies. In November, at The American Society of Hematology annual meeting, two of our partners presented supportive data of their ongoing development programs using our ENHANZE platform.

Genentech presented data from their SABRINA Phase 3 study which showed comparable response rates and time-to-event data, for subcutaneous rituximab compared to IV administration. The presentation followed acceptance by the FDA of a Biologics License Application for subcutaneous formulation of rituximab using Halozyme's enhanced technology.

More recently, Roche has indicated that it is seeking approval in chronic lymphocytic leukemia and non-Hodgkin's lymphoma, and the FDA action date is in June. An approval represents a significant new royalty opportunity for Halozyme with oncology sales of rituximab in the US estimated to have exceeded $3 billion in 2016. Our revenue growth will clearly be driven by the indications approved in the degree of market penetration.

In addition, on slide 9, Janssen presented data at ASH indicating subcutaneous formulation of daratumumab on the ENHANZE platform was well-tolerated and had an efficacy and pharmacokinetic profile consistent with the IV formulation in patients with relapsed and refractory multiple myeloma, supporting further study in a Phase 3 clinical trial. The data demonstrated feasibility of a 30 minute, 90 mL dosing, which would offer a shorter treatment duration for patients and caregivers compared to the current multi-hour infusion. Additional work is underway by Janssen to determine if an even shorter dosing time may be achieved in the planned Phase 3 study.

Slide 10 provides an overview of our current enhanced portfolio and the potential future opportunity associated with the platform. Beginning with our current opportunity at the top of the slide, the innovator products that today utilize our ENHANZE platform reported total European and international 2016 sales exceeding $7 billion. In parallel, we saw a 65% increase in our year-over-year royalty revenue.

And looking ahead to 2017, Roche has stated that they expect further conversion from Herceptin ID to SC. In their last detailed update, which was provided in July of 2016, Roche reported Herceptin SC accounted for approximately 50% of total Herceptin sales volume in launched countries. And MabThera SC accounted for 34% of total MabThera sales volume in launched countries.

US sales for Rituxan in oncology, for which the BLA is under FDA review, represent an additional $3 billion in potential opportunity. Recall, we receive a mid single-digit royalty on net sales with our royalty potential being based on the number of indications approved and the degree of market penetration for each product.

Moving now to our future potential opportunity, our partner pipeline includes Janssen's daratumumab, which I discussed a moment ago, and Roche's Perjeta which is being studied with [in hand], in a Phase 1 trial of HER2-positive breast cancer patients. With [M-List] and other sources projecting future sales in these two products totaling greater than $10 billion, we are very excited to be working with these companies to evaluate the potential of our combined technologies and to develop additional product offerings.

And finally, we have four other targets that have been selected, but not disclosed by our partners and 26 additional targets that have been licensed. We also continue to assess new deals to expand the value of our ENHANZE platform. I believe many targets are still available that may benefit from ENHANZE.

While it is always difficult to predict the timing of a new deal, this is something our Team continuously works towards, and we continue in dialog with a number of companies towards a new agreement in 2017. I'm pleased with our commercial progress and see clear opportunities for continued growth through new collaborations and as we support our current partners in advancing their programs.

With that, I'll now turn it over to Laurie to discuss our financial results in greater detail. Laurie?

Thank you, Helen. I will begin on slide 11, where you will see that revenue for the fourth quarter was $39 million compared to $52.2 million in prior-year period. The decrease was expected due to the $25 million we recorded in the fourth quarter of 2015, with the signing of our global collaboration and licensing agreement with Lilly. Adjusting for this one-time benefit, revenue grew 43% in the fourth quarter.

The largest contributor was royalty revenue, which totaled $14.3 million, increasing 10% sequentially from last quarter and 50% from the fourth quarter of 2015. This increase came from higher sales of our partners' products during the third quarter of 2016.

Bulk sales of rHuPH20 totaled $9 million, Hylenex products sales totaled $4.4 million and other collaboration revenue totaled $11.3 million. Revenue for 2016 totaled $146.7 million, an increase of 9% from 2015. This included royalty revenue of $51 million, an increase of 65% from 2015.

During 2016, we were reimbursed for expenses related to a new manufacturing facility for Roche API that resulted nearly $20 million in sponsored research revenue and associated expenses, the majority of which will not repeat in 2017. Once this new facility is approved, it will become the primary source for Roche API. As a result, we anticipate Roche will deplete their existing inventory of rHuPH20 ahead of the transition to the new facility, which will result in lower bulk product sales during 2017 and 2018. This transition is fully reflected in our 2017 revenue guidance.

Turning to slide 12 for a more detailed breakdown of our P&L, cost of product sales was $8 million in the quarter, nearly even with a $8.4 million in the prior-year period. Research and development expenses for the quarter were $41.3 million compared to $27.7 million for the fourth quarter of 2015. As we've reported in prior quarters, this planned increase was primarily due to a ramp in spend associated with HALO 301, as well as manufacturing and clinical supply expenses that are reimbursed by our ENHANZE partners.

Selling, general and administrative expenses were $12.2 million compared to $10.6 million for the fourth quarter of 2015. The increase was primarily due to personnel expenses, including stock-based compensation for the period.

In total our operating expenses increased by $14.8 million from the fourth quarter of last year as we ramped the Phase 3 study and continued to support new programs initiated during the year. For the full-year operating expenses were $230 million, an increase of 41% from 2015 and consistent with the step up we forecasted at the beginning of the year. That said, our 2016 operating expenses were lower as compared to the guidance range we updated last quarter, driven by a number of projects. We do not expect any program delays or impact on 2017 spend as a result of this variance.

Net loss for the quarter was $27.4 million, or $0.21 per share compared to net income of $4.3 million, or $0.03 per share in the fourth quarter of 2015; driven again by the $25 million we recorded in the fourth quarter of 2015, with the signing of our Lilly agreement. Net loss for 2016 totaled $103 million, or $0.81 per share.

Cash, cash equivalents and marketable securities were $205 million at December 31, 2016, compared to $221 million at September 30, 2016, and $108.3 million at December 31, 2015. I would like to reiterate the 2017 guidance ranges we provided last month and update the cash portions as shown on slide 13. For the full year 2017, we expect net revenue of $115 million to $130 million, which does not include potential revenue from new ENHANZE partnerships.

Operating expenses of $240 million to $250 million. Operating cash burn of $75 million to $85 million, which excludes the impact of financing and debt principal repayment and year-end cash balance of $110 million to $125 million, an increase from where we had forecasted last month based on where we exited 2016.

Finally, as you may have seen, today we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission as part of normal business practices.

With that, let me turn the call back to Helen, who will provide closing statements.

Thank you, Laurie. In summary, as you heard, we made strong progress across both pillars of our strategy during 2016 and as we have entered 2017.

In the oncology pillar, we start 2017 with positive randomized Phase 2 data that continues to generate enthusiasm from opinion leaders and their Phase 3 investigators. This follows the progress we made at the end of 2016 with the announcement of our clinical collaboration with Genentech and progression of our KEYTRUDA study into the expansion phase.

The events we expect in 2017 include presenting new preclinical data on the effects of PEGPH20 with immuno-oncology therapy. Presentation of this study 202 data in a scientific forum, making strong progress on study 301 enrollment, and enrolling and then generating data in HA-High patients in our KEYTRUDA study.

Similarly, our enhanced platform continues to generate value for the Company with growing royalties and supportive data from our partners in their key programs. In 2017, key events include the potential approval of rituxumab SC in the US, and advances in the daratumumab SC development program. In addition, it is my goal to sign a new enhanced collaboration and licensing agreement.

These events all can create our next inflection point in ENHANZE growth. Above all, we remain confident that the investments we're making in both pillars will generate near- and long-term value for our shareholders and partners. And I'd like to close by expressing my gratitude and appreciation for our talented Halozyme Team for their continued hard work to advance our programs and in support of our partners and patients.

We're now ready to take your questions. Operator, please would you open the call?

It is now time to open the floor for questions.

(Operator Instructions)

Our first question will be from Charles Duncan, with Piper Jaffray.

Hi, Helen and Team, congrats on a great quarter of progress and thanks for taking my questions. I had just two quick questions.

On PEGPH20, first of all kind of looking backwards at this Stage II, Phase 2 data, I'm wondering if you would characterize any impact on the patient interest and/or investigator interest. Any feedback from investigators on that data?

And then, when would you anticipate being able to present that? Could that be at the upcoming ASCO meeting?

Thanks Charles, and thanks for the feedback in the quarter. Athena, do you want to address Charles' questions?

Yes. Hi, Charles. Thank you for the questions. I think as Helen mentioned in her prepared remarks, we've seen continued increased interest in regards to not only the screening that we are seeing from the Phase 3, but also just an active dialogue. We had a very positive ASCO GI meeting where we had an advisory board meeting specifically to talk about our new study with Tecentriq, but also again, just continued interest in the Stage 2 data. What we have said is that we do plan on updating the 202 data in terms of providing additional information at a medical forum in 2017 and as you can appreciate, we have just submitted our abstracts earlier this month to ASCO.

Sure. And then my last question or other question regarding PEGPH20 in the pancreatic cancer program. I'm wondering if you could provide us any color on the screen-to-failure rate in terms of HA-High percentage and if the protocol for establishing HA-High is fairly well-established, do you see any risk of operator error across geographies?

And then finally, is there any chance that you will give us the number of events that will trigger PFS interim, or at least a percentage expected?

I will say it is our practice to provide details, statistical assumptions. So we won't be providing the number of PFS events that would trigger the interim analysis. But I will ask Athena to comment on the screen/failure rate and also our approach to measuring HA-High, which I think you will hear the approach that limits the possibility of inter-observer error.

Yes. Hi, Charles. So, in regards to what we've shown from the randomized Phase 2 data in pancreatic cancer, we have shown a prevalence of approximately 35% to 40% of patients are HA-High. And that's consistent with what we are seeing in the Phase 3 study. We are seeing a screen/failure rate of approximately 60% based on HA level.

As Helen mentioned, remember as you establish the Companion Diagnostic, and as we have with our partner, Ventana, we had to go through quite a bit of additional steps to have IDE approval for the diagnostic; specifically inter-reader and intra-reader variability, which passed with a very high precision rate. So we have not seen any changes in regards to geography. We now, as Helen mentioned, have all 22 countries with approval of the protocol and many countries are obviously submitting biopsies to Ventana for evaluation.

Just to add to the screen/failure point that I made, that the number I gave in terms of 60% to 65% is predominantly due to HA. And then you obviously lose a few patients due to other inclusion/exclusion criteria.

Okay, thanks for the added color.

Our next question is from Andrew Peters from Deutsche Bank.

Hi. Thanks for taking my questions and let me add my congrats on all the progress as well. A couple of questions on the Tecentriq combinations.

Going back to the initial press release, it seemed like you described the ability to go from Phase 1b studies to scale to registration studies. I guess I wanted to understand a bit more exactly kind of what is driving that confidence? Is it because the studies are targeting a specific subpopulation? And should we think about those specific comments as it relates to the ongoing Pembro study?

All right, Athena is working closely with the Roche team. So I'll ask her to comment on that.

Hi, Andrew. In regards to the collaboration with Genentech. As Helen mentioned, there are two studies that we will be doing in the collaboration. The first is our own study in both gallbladder and biliary tract tumors, where we will be testing all patients for HA upfront prospectively.

And then Genentech most recently, and Roche's last investor presentation. They had a very nice slide that showed the design of their unique immuno-oncology study, called MORPHEUS, which really is a platform study. I think they showed nicely how they will have multiple arms within an umbrella study that potentially could progress right from Phase 1 into a Phase 3. So I would guide you towards their presentation because from what I remember it was very well outlined in one slide.

I guess maybe the question is more is that a possibility, then, as you think about your own study with KEYTRUDA?

I think it's always an option to try to advance as fast as possible when you have a strong signal. As you've seen, Pembrolizumab initially got approval on a Phase 1 study in lung cancer. So we have learned a lot from Genentech already in how we have also designed our study and that's one of the key points I think we will update later this year is more details in regards to both of those study designs.

Okay, thanks. And then just quickly, you mentioned that -- it seems like enrollment in the 301 study may have been positively impacted by the 202 data. Does that mean that enrollment is ahead of kind of your initial assumptions on timelines when you first designed the study? Or had you taken into consideration the possibility that you'd see a bump post data?

I just want to get a sense on how enrollment is going and how you think about timelines relative to your initial assumptions?

Thanks Andrew. I'll take that one now. With regard to enrollment, we are very much tracking in line with how we expected it to happen. What I had mentioned was, that we have seen an uptick in screening in the beginning of this year and a number of factors, I think, are obviously impacting that, including the positive data. But we've also been, throughout 2016, adding countries and centers and we did have a number of centers come on board just in the fourth quarter.

So we are very much tracking to our original timeline and expectations with regard to enrollment and do expect to see, as I mentioned in my prepared remarks, as making very strong progress toward our enrollment goals in 2017. But it's still premature to give an update. As I mentioned, we are still adding centers as of the fourth quarter.

Okay, thank you.

Our next question is from Jason Butler from JMP Securities.

This is Harry on for Jason. Congrats on the progress. One of the PEGPH20 improvement process, you talk a little bit about the other clinical trials that are enrolling PAG patients and the landscape there.

You cut out a little bit, Harry. Are there competing pancreatic cancer studies to our HALO 301?

Right. Exactly.

Athena, do you want to address that?

Yes. Sure. Hi, Harry. If you look at clinicaltrials.gov, I think what you would see in regards to front line metastatic patients, specifically in this stage in Phase 3, there really is only one that is just recently started enrolling in the United States.

We are also aware of the ongoing Phase 2/3 pancreatic study with Ibrutinib. But both of those studies would be slightly different in that they're not using a biomarker-driven asset. They're clearly not using a companion diagnostic.

So we believe we still are a unique trial and much of our conversations with our investigators are always to try to screen patients for our study first. And then if they are not eligible for our study based on being HA-Low, then to potentially offer one of the other two. I mean, obviously, additionally there are also other earlier Phase 1 studies as well.

Okay, great. Thanks. And on the Daratumumab progress, what sort of considerations are being made do you think regarding the trial design for the upcoming Phase 3?

Harry, this is one of these areas, obviously, where Janssen has not provided any detailed updates on that. So we're not in a position to add any color, other than to say we certainly were excited to see the Phase 1 data that was presented at ASH, that does suggest that there is a dose the Company is considering taking into their Phase 3 study. But no additional details available at this point in time.

Understood. The final question is on the PEGPH20 collaboration programs. Any chance you could -- sorry if I missed this earlier, provide any color on the time for data from the KEYTRUDA and Halozyme studies?

Yes. Let me ask Athena to comment.

Hi, Harry. So we are furthest along in our study with Pembrolizumab. As Helen mentioned, in both relapsed non-small cell lung cancer and gastric cancer patients. We moved into the dose expansion phase towards the end of last year, so we are still early in terms of enrollment. I think based on where we are with enrollment, data generation really will be dependent on when we achieve a significant number of patients enrolled, as well as substantial follow up.

The Eisai collaboration remains in the dose escalation phase so we have yet to determine an [MTD], so it's premature to speculate when that data would be shown.

Thank you, very much.

Your next question will be from Joel Beatty with Citi.

Thanks for taking the questions. The first question is on the biomarker test that's needed for the Phase 3 study. With the 3- to 5-day delay in getting those results back, could you give any feedback from the sites and how the 3- to 5-day wait affects the an interest in enrollment in your study?

Yes. Let me let Athena address that.

Hi Joel. I actually wouldn't characterize it as a delay, as much as it is one of the many screening tests that have to be performed for our patient to enroll into a clinical trial. Remember, patients undergo CT scans, as well as laboratory evaluations. So the biopsy is sent during a window that's typically between 21 and 28 days.

I think from what we heard initially from investigators, up to five days was very tolerable and this is obviously a global trial. We haven't heard necessarily negative feedback or in any way that it is a delay because again, it is just part of one of the many screening procedures that is done prior to eligibility being confirmed.

Okay. Thank you. That's helpful. One other question on the royalties that you report. Could you provide a sense of a breakout on how they compare between the different partnered products?

Let me ask Laurie to address that, but I will say we don't break down our royalties specifically at the request of our partners, but we can maybe just get some general color.

Yes, Joel, that's a great question, and we typically don't break that down. But to reiterate, we did see royalties grow 65% year over year. We do anticipate strong growth in 2017 as well and it's been reflected in our guidance.

Great, thank you.

Our next question will be from (inaudible) with Barclays.

Thanks for taking my questions. This is (inaudible) on for (inaudible). I just want to follow-up. Maybe a little bit of color on the new partnership with Genentech regarding Tecentriq. Who is mainly funding the trials? Can you give any color on that? Maybe on what specific type of tumor types and are any of these new indications for Tecentriq? And maybe timelines?

I believe Athena, you can just walk through how it is structured and the initial areas of focus.

Sure. The initial focus is that we will run one study using Tecentriq with PEGPH20 and chemotherapy in first line, non-previously treated, gallbladder cancer as well as biliary tract cancers. This is a small Phase 1b study were Genentech will be providing the drug to us and the cost of the trial will be at our expense.

In contrast, the Genentech study, as I mentioned previously, is part of a much larger umbrella study were they will be using PEGPH20 with a specific focus, initially, in gastrointestinal malignancies, predominantly pancreatic cancer and gastric cancer, initially. But they have the option to go up to six tumor types total.

And I think in regards to where Tecentriq is currently approved, yes, these are obviously areas where they do not currently have an approved label.

Great. Thank you very much. I just have one more follow-up. On the facility that was recently built there that Genentech is partially funding, can you give any details on what other products that will be able to be manufactured there? Is it going to support anything else in the business? Any additional color on that would be great.

Let me ask Laurie to just give a bit of color on that.

Just to clarify, it is a new facility at one of our contract manufacturers. It is dedicated to Roche API materials, so it won't be shared, but it is flexible manufacturing, so our contract manufacturers will be managing that line. It was just about $20 million in expenses that were reimbursed fully by Roche in 2016.

Thanks very much. Thanks for taking my questions.

Our next question is from Jessica Fye from JPMorgan.

This is Ryan in for Jess. Thanks for taking our questions. Helen, I know you were talking about trying to find a new ENHANZE collaboration during the year, but maybe for the existing partnerships that you have, it sounds like there's a lot of products in that pipeline. So is there any color you can give us on targets that may be coming, that we could see in the near future?

Yes. Thanks, Ryan. As I mentioned in the prepared remarks, we do have four targets that have been selected by our current partners, where we're working with them but they have not declared those targets as of yet. As we are working on them, we are working to make progress towards identifying the path to get those to the clinic. So those always are potentials that sometime in 2017, you may hear something from our partners about one of those products.

In addition, our partners have targets available for them to select that they have not selected yet. Our Team continues to work with them to identify if anything in their portfolio may benefit from PEGPH20. Again, that is something we would obviously provide an update on if any of them do elect to do that. With our current partners, you are absolutely right. There are several ways where we can expect them to be able to select and make progress of new products towards and into the clinic.

Great, thank you.

The next question will be from Jim Birchenough, with Wells Fargo Securities.

Thanks for taking the questions, this is Yanan Zhu on for Jim. The first question is looking ahead for Rituxan SC in the US. Would you expect a similar pattern of adoption in the US compared with MabThera in the EU? And along that line, what is the highest percentage of market penetration in the EU, in the select EU market?

Thanks for the question. We have obviously been very pleased with the reaction to Rituxan SC in the ex-US markets. If we step back and ask why that is, it really relates to two things. I think the first thing is the added convenience for patients and caregivers to have a shorter duration of infusion is obviously benefit and with that comes healthcare system cost savings.

I think both of those will be factors that will be important in the US adoption. And I do expect strong adoption in the United States as well.

Recently, Roche has not provided a detailed update as to, by country, what the highest market penetration, but what we said in our prepared remarks, is that overall, SC represents over 30% of sales volumes, suggesting there is a very nice volume and certainly in some markets, it's above the 30% to get to that average. But we don't have any additional details we can share, as Roche hasn't provided that publicly.

Got it. The last question from us is going to be for the gallbladder study, the Tecentriq combination, I'm just curious. Down the line, do you anticipate a comparative study with the -- against Tecentriq alone arm, to kind of set aside the combination ruled by the agency?

Athena will address that.

What I can say is that we are continuing to work with Genentech very closely on the design. We have joint development committees now in place. And again, without giving too many details until the protocol has now been finalized, the CRO has been selected and we are sending it to the FDA for feedback. But this trial does have multiple arms and we will give more information after we have received FDA feedback on the design later this year.

Great. Thank you for taking the questions.

Great. Operator, do we have any other questions?

I'm showing no further questions in the queue at this time.

(Operator Instructions)

All right, if there are no further questions, I would just like to thank everyone for joining us today. We look forward to speaking with you at our next call and providing an update then. Have a great evening. Thank you.

Thank you, Ladies and Gentlemen. This concludes today's teleconference. You may now disconnect.