Halozyme Therapeutics Inc (HALO) 2017 Q1 法說會逐字稿

Good afternoon, and welcome to the Halozyme Therapeutics First Quarter 2017 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

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

Thank you, Kerry, and good afternoon, everyone. Welcome to Halozyme's First Quarter 2017 Financial Results Conference Call. Following market close today, we issued a news release with a summary of our financial results and posted a short slide presentation to accompany this call. We also filed an 8-K noting a planned management transition in the CMO role. You will find these materials 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 an 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.

Before we begin, let me remind you that during the 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.

Good afternoon, and thank you for joining us today. I'll begin the call with key takeaways for the quarter. Firstly, we continue to make strong progress in our clinical studies of PEGPH20. HALO-301, our ongoing global Phase III study in pancreas cancer, continues to enroll in line with our expectations. During the quarter, we continued to increase the number of centers screening and enrolling patients at sites around the world.

We are also pleased that the data from our Phase II study, HALO-202 was selected for an oral presentation at the American Society of Clinical Oncology Annual Meeting in June. In parallel, we continued to enroll non-small cell lung and gastric cancer patients in the dose expansion portion of our KEYTRUDA combination study. And I'm also pleased to update that we've received FDA feedback, and protocols are under finalization to enable the start of our collaborative studies with Genentech's Tecentriq in the second half of the year.

Secondly, momentum continues to build for our ENHANZE technology, as we've seen significant development in 4 of our partnered programs. This progress includes: nearing the action date for the approval of rituximab SC in the United States; Janssen's developing a rapid-delivery subcutaneous formulation of daratumumab to confirm dose selection for their upcoming Phase III study planned to begin later this year; Roche making strong progress in their Phase I combination study of Herceptin SC and subcutaneous Perjeta; and Lilly progressing across multiple targets with their preclinical and clinical studies this year and next.

And thirdly, our financial results continue to demonstrate the strength of our business model. Laurie will review these details shortly. But key highlights include a 23% increase in year-over-year royalty revenue and entering the second quarter with $179 million in cash.

For additional details on our progress, I will start with an overview of our strategy. As a diversified oncology biotech company, we operate our business and make investment decisions in 2 strategic pillars: The first pillar is our oncology pipeline with investigational drug, PEGPH20 as 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 treatment into the tumor.

Additionally, and as shown in our poster presentation at the recent American Association of Cancer Research Annual Meeting, in preclinical models, PEGPH20 also serves to remodel the tumor microenvironment, stimulating an immune response and increasing the effectiveness of co-administered immunotherapy.

We are most advanced in evaluating PEGPH20 in pancreas cancer, and as I will update in a moment, each year, more than 100,000 patients in the U.S. 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 U.S. and EU5, it is estimated that there are approximately 25,000 high-stage metastatic pancreas cancer patients diagnosed annually. With 5-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're also evaluating the pan-tumor potential of PEGPH20 in a range of solid tumors and on an annual basis, project there are an additional 50,000 non-small cell lung cancer, gastric cancer and breast cancer patients, who are HA-High in the U.S. and EU5.

Our work in oncology is funded in part by the second pillar of our strategy, which is centered on our ENHANZE licensing agreement with 6 marquee partners, including Roche, Baxalta, Pfizer, Janssen, AbbVie and Eli Lilly.

I'll now provide an update on recent developments in our PEGPH20 program. In January, we reported positive data from our randomized Phase II HALO-202 study of PEGPH20 in combination with ABRAXANE and gemcitabine compared to ABRAXANE and gemcitabine alone. At ASCO, in June, Dr. Sunil Hingorani, principal investigator for HALO-202, will expand on top line results we shared in January with additional data from the study based on the December 2016 data snapshot.

Importantly, the improvement in the key efficacy findings on progression-free survival and overall survival from HALO-202 are supportive of our ongoing HALO-301 Phase III study, which is being conducted in a similar patient population. An overview of HALO-301 is shown on Slide 2.

HALO-301 is a global double-blind placebo-controlled randomized trial of patients with stage 4 pancreatic ductal adenocarcinoma prospectively identified and randomized based on high levels of HA. The protocol includes 1 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 PEGPH20 treatment arm, and both the overall survival and overall risk/benefit are supportive, these data may form the basis for our marketing application in the United States and a conditional marketing authorization in Europe.

Since our last call, we've continued to make good progress and are now actively screening already to screen patients in over 200 of our global sites. Enrollment is proceeding in line with our expectations, and we continue to achieve our 3- to 5-day target to analyze patient biopsies and report HA levels. Additionally, our Data Safety Monitoring Committee recently met in March to review the ongoing safety data from the trial and informed us the study should proceed as planned.

Turning now to Slide 3, I'd like to provide an update on our clinical development progress to assess the pan-tumor potential of PEGPH20. Beginning with our trials in combination with checkpoint inhibitors, the PEGPH20 plus KEYTRUDA or pembrolizumab trial is enrolling stage 3b and stage 4 non-small lung cancer patients and metastatic gastric adenocarcinoma patients, who have failed at least 1 chemotherapy regimen.

At the end of 2016, we moved into the dose expansion phase of the study where we're now selecting for HA-High patients a target enrollment of approximately 50 patients at 30 U.S. sites. Since that time, we've seen strong interest in the study as reflected by good screening activity and depending on the pace of enrollment and time to responses, believe we may be in position to share initial response data by year-end.

We're well advanced in our planning of the 3 initial studies that are part of our collaboration with Genentech. The study PEGPH20 with their cancer immunotherapy, Tecentriq or atezolizumab, an anti-PD-L1 monoclonal antibody, in up to 8 different tumor types. The first 2 studies will be a Phase Ib/2 to open-label, multi-arm randomized global trial led by Genentech in up to 6 tumor types. Genentech's initial focus will include pancreas and gastric cancers as part of their MORPHEUS immunotherapy clinical trial platform. Halozyme will also conduct a Phase Ib open-label randomized study of Tecentriq in combination with PEGPH20 and chemotherapy in advanced or metastatic biliary and gallbladder cancers.

In addition to receiving feedback from the FDA for each of these 3 studies, we've worked closely with Genentech to select our CROs and are now finalizing the study protocols. Site selection is ongoing in anticipation of initiating our studies in the second half of 2017, and further details in the protocol designs will be posted to clinicaltrials.gov in the coming months.

Turning now to chemotherapy combinations. In July of last year, a Phase Ib/2 clinical trial was initiated to evaluate Halaven in combination with PEGPH20 in patients with HER2-negative metastatic breast cancer. Enrollment is ongoing in the Phase I dose-finding portion of this study.

And finally, as announced at the end of March, SWOG, an independent network of researchers that design and conduct cancer clinical studies, stopped enrollment in a Phase Ib/2 trial evaluating PEGPH20 plus modified FOLFIRINOX versus modified FOLFIRINOX alone in patients with previously untreated metastatic pancreas cancer.

PEGPH20 is a targeted investigational therapy for patients with high levels of HA. The SWOG study was enrolling patients irrespective of HA levels referred to as an all-comer population. During the planned early futility analysis, SWOG's independent Data Monitoring Committee found, based on preliminary data, that the addition of PEGPH20 given every 2 weeks to modified FOLFIRINOX in this all-comer population would be unlikely to demonstrate a statistically significant improvement in the primary endpoint of overall survival.

SWOG further reported that a higher rate of death was observed in the PEGPH20 treatment arm versus the modified FOLFIRINOX alone arm. SWOG has stopped the study and continues its ongoing efforts to collect and clean outstanding data. Upon completion, Halozyme will work with SWOG to analyze and evaluate the data set.

I'm also pleased to report that we've recently presented several posters at the American Association of Cancer Research Annual Meeting that illustrate the potential benefits of PEGPH20 in combination with immunotherapies. These preclinical studies further elucidate the mechanism of action of PEGPH20, demonstrating a significant increase in the accumulation of cancer-fighting CD8 positive T cells in mice treated with PEGPH20; and that PEGPH20 significantly increased the effectiveness of an anti-PD-L1 therapy in an HA-rich mouse model.

We remain committed to continuing both preclinical and clinical studies of PEGPH20 with immuno-oncology targeted agents, as we've built a strong base of preclinical rationale for combinations with checkpoint inhibitors.

Let me now move to the second pillar of our strategy where we license our rHuPH20 enzyme to leading companies. Slide 4 provides an overview of our current ENHANZE portfolio and the potential future opportunity associated with the technology. Beginning with the current opportunity at the top left of the slide, the innovator products that today utilize our ENHANZE technology, reported total 2016 royalty eligible sales in currently approved geographies in excess of $8 billion. The subcutaneous portion of these sales will depend on the number of indications approved and the degree of market penetration over time and is based on a mid-single digit royalty on average on the net sales of the subcutaneous product.

Looking ahead, in 2017, we expect continued growth in all 3 products. During the recent quarterly call and sales update, Roche indicated that MabThera SC has been launched in an additional 18 countries in the first quarter, bringing the total number of launched countries to 41. With MabThera SC contributing approximately half of the sales growth of Roche's CD20 franchise, we continue to be very pleased with the strong market conversion in countries outside of the United States.

Roche previously reported Herceptin SC conversion rates approaching half of the total Herceptin sales volume in launched countries and shared on a recent quarterly call their expectation for further conversion in 2017.

Moving now to the products and development shown in the middle of the slide. We were pleased with the outcome of the FDA's Oncologic Drug Advisory Committee in March for subcutaneous rituximab, which resulted in an unanimous vote of 11 to 0 that the benefit/risk of rituximab with hyaluronidase for subcutaneous injection was favorable in the proposed indications of follicular lymphoma, diffuse large B-cell lymphoma and chronic lymphocytic leukemia. We look forward to the action date in June as the next milestone in this program.

Upon approval, subcutaneous rituximab would offer a new treatment option for U.S. patients that could reduce the administration time for rituximab to 5 to 7 minutes as compared with the 1.5 hours or more needed for the intravenous administration. On their recent quarterly call, Roche discussed their initial considerations for bringing subcutaneous program to the United States. As a result of the capacity constraints that face many practices today, and the potential time and cost savings associated with subcutaneous administration, Roche now believes the U.S. marketplace is receptive to a subcutaneous product.

In addition to the potential benefits for patients and the health care system, the potential U.S. approval represents a significant new royalty revenue opportunity for Halozyme with oncology sales of rituximab in the United States estimated to have exceeded $3 billion in 2016.

And recall, we receive on average a mid-single digit royalty on net sales, with our royalty potential being based on the number of indications approved and the degree of markets penetration.

Now let's look at the future opportunities and these in our partner pipeline, include subcutaneous formulation of Janssen's DARZALEX and Roche's Perjeta. In December of 2016, Janssen presented data at ASH indicating subcutaneous formulation of daratumumab using our ENHANZE technology was well tolerated and had an efficacy and pharmacokinetic profile consistent with the IV formulation in patients with relapsed and refractory multiple myeloma.

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 IV infusion. Since our last update, Janssen has developed an even faster delivery subcutaneous formulation of daratumumab using the ENHANZE technology and recently dosed the first patients to confirm dose selection for their Phase III study. We're working closely with Janssen to support the clinical development leading to the Phase III study, which is planned to begin later this year.

Based on the results of the Phase III APHINITY study of IV Herceptin and Perjeta to be presented at ASCO in June, Roche commented on their recent call that they continue to expect growth from their HER2 franchise despite the entrance of biosimilars. Roche also has an ongoing Phase I study to examine the combination of Herceptin SC and a subcutaneous formulation of Perjeta using ENHANZE. We look forward to continuing to support Roche in the study of a single injection of Herceptin SC and subcutaneous Perjeta, which could potentially provide more convenience for patients.

With analysts and other sources projecting future sales of DARZALEX and Perjeta totaling greater than $10 billion, we're very excited to be working with Roche and Janssen to evaluate the potential of our combined products and to develop additional product offerings.

And finally, we have 4 other targets that have been selected, but not disclosed by our partners and 26 additional targets that have been licensed. Since our last update, the collaboration with Lilly using Halozyme's ENHANZE technology is progressing across multiple targets with preclinical and clinical studies this year and next.

We also continue to assess new collaborative agreements to expand the value of the ENHANZE portfolio and believe many targets are still available that may benefit from our technology.

In addition to the progress of our already marketed products and those in clinical developments, our pipeline of active partner discussion is robust, and as a result, our outlook for ENHANZE has never been stronger. While it's always difficult to predict the timing, it remains our goal to find another agreement in 2017.

Now before I turn the call over to Laurie, as we've announced prior to the call, Dr. Athena Countouriotis, our Chief Medical Officer, will be leaving Halozyme later this month. This was a mutual decision and I wish Athena the very best as she pursues new opportunities. Athena has made numerous contributions to the PEGPH20 program, as we've transitioned from our early clinical work to where we stand today with a targeted biomarket-driven investigational therapy.

We're very well prepared for Athena's transition, and today promoted Dr. Dimitrios Chondros to the role of Chief Medical Officer. Dimitrios joined us in 2015 from Genentech to lead the PEGPH20 clinical development program, including the HALO-301 Phase III study. With his deep experience, which has been gained developing Avastin in GI cancers, he has done an excellent job initiating 301 study and building relationships with global investigators. We're in a strong position with oncology experts like Dimitrios and I look forward to introducing him to you in the coming quarters.

With that, I'd now like to turn the call over to Laurie to discuss our financial results in greater detail. Laurie?

Thank you, Helen. I will begin on Slide 5, where you will see that revenue for the fourth quarter was $29.6 million compared to $42.5 million in the prior year period. The decrease was anticipated due to the to the $15.5 million we recorded in license and milestone payments in the first quarter of 2016 from Lily, AbbVie and Pfizer.

Royalty revenue, which totaled $14 million, increased 23% from the first quarter of 2016, and was down slightly from last quarter due to the impact of foreign exchange, largely related to the Roche products. Note, the underlying global sales volume for both Herceptin SC and MabThera SC increased as compared to the prior quarter.

Bulk sales of rHuPH20 totaled $8.2 million; Hylenex product sales totaled $3.2 million; and other collaboration revenue totaled $4.2 million.

Turning to Slide 6 for a more detailed breakdown of our P&L. Cost of product sales was $7.5 million in the quarter, nearly even with $7.8 million in the prior year period. Research and development expenses for the quarter were $36.9 million compared to $40.1 million in the fourth -- first quarter 2016. The decrease was driven by drug product purchases for the HALO-301 study as well as onetime costs related to companion diagnostic development and was in line with our expectation.

Selling, general and administrative expenses were $12.6 million compared to $10.8 million for the first quarter of 2016. The increase was primarily due to personnel expenses, including stock-based compensation for the period.

Net loss for the quarter was $32.9 million or $0.26 per share compared to a net loss of $19.8 million or $0.16 per share in the first quarter of 2016, driven by the $15.5 million in revenue we recorded from the license and milestone payments from Lilly, AbbVie and Pfizer in Q1 of 2016.

Cash, cash equivalents and marketable securities were $179 million at March 31, 2016, compared to $205 million at December 31, 2016.

Finally, I would like to reiterate our 2017 guidance ranges we provided on our last call, as shown on Slide 7. For the full year 2017, we continue to expect net revenue of $115 million to $130 million, which does not include the 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 repayments; and year-end cash balance of $110 million to $125 million.

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

Thank you, Laurie. In summary, I'm very encouraged by the development over the quarter in our PEGPH20 clinical program and by the advances across our ENHANZE portfolio. As we continue to enroll patients in our HALO-301 global Phase III trial, support from opinion leaders and investigators remain high, and we look forward to expanding upon the top line results from the HALO-202 Phase II study during the upcoming oral presentation at ASCO.

We also look forward to the possibility of sharing initial response rate data from patients from the KEYTRUDA combination study by the end of the year, as we further explore the pan-tumor potential of PEGPH20. Our ENHANZE portfolio continues to drive value for the company as currently marketed products advance into new geographies and products progress into and through the clinic. In 2017, key events include the potential approval of rituximab SC in the United States and advances in the subcutaneous development program for DARZALEX and Perjeta. These programs serve to create our next inflection points in ENHANZE growth. Above all, we remain confident with the investments we're making in both pillars of our strategy and that they will generate near and long-term value for our shareholders and partners.

I'd like to close by expressing my ongoing gratitude and appreciation to the 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?

(Operator Instructions) Our first question will be from Andrew Peters with Deutsche Bank.

I guess, first, just regarding the atezo collaboration with Roche in PEGPH20. Can you discuss why some of the, kind of, key questions coming from FDA were ahead of the collaboration? And then, you mentioned you may have response rate data from the KEYTRUDA study available by year-end. What are some of the limiting steps there in terms of having that availability or not? Would you wait for all patients to have data or would you be able to give us an interim look?

Thanks, Andrew. Well, to begin with, the types of questions we've been getting, they just have been clarifications with some of the inclusion, exclusion criteria of where the population being studied, areas around thromboembolic disease and questions with regard to the approach we're taking to the use of low-molecular-weight heparin, all very straightforward questions that we are working through to address with the FDA, and we remain nicely on track with our plan to get both our study and the Roche study started in the second half of the year. For the KEYTRUDA study, I mentioned it would be initial response rate data. While we're targeting enrolling 50 patients, what we're seeing is a trend today where we're seeing a nice growth in enrollment, where we believe by year-end, if we continue this rate, we'll have a sufficient number of patients to evaluate the initial response data. As you know, Andrew, with immunotherapies, we can sometimes see a longer time to response and that's one of the key unknowns that we have, as to whether we're actually going to be able to provide an update by the end of this year, but based on our estimates, if enrollment continues as it's going and we see responses in line with what -- where KEYTRUDA seemed responsive, we're very hopeful we'll be able to give an initial readout by later this year.

Okay, great. And then just regarding the SWOG update. Do you have any sense of the timing as it relates to some of the analysis around HA status, et cetera, from that data set? I think that would be important just to see -- to really draw some conclusions about that trial as opposed to just the all-comers as you mentioned. So any timing there would be great.

Thank you, Andrew. And SWOG is actively at work first of all to complete all of the data that was missing from the initial futility analysis, but also, reinitiating the process to start collecting, so that we can analyze the tissue samples for HA status. So while that work is started, I don't have a firm time line of exactly when it's going to be completed, but I can say that SWOG is very committed to collecting all of this data and supporting our plans to analyze by HA status.

Our next question will be from Charles Duncan with Piper Jaffray.

Sorry, if this has been handled on the prepared remarks, I was hopping between calls. But I'm wondering if you could provide some additional color on how the 301 trial is going, specifically in terms of the number of sites started. And any thoughts on enrollment patterns at this point?

Thanks, Charles. So we have got over 200 sites now actively screening or ready to start screening, which is right on track with our expectations. And I did also mention in the prepared remarks that enrollment is tracking with our expectations. Recall, last year was very much the year of getting all of the sites running. What we said in 2017 is that we may get good progress towards our enrollment goals and that's indeed what we are seeing. So everything is going well, where we continue to see a lot of opinion leader and investigator interest in PEGPH20, certainly supported by the encouraging Phase II data that we reported out in January.

Okay, that's helpful. And then regarding the CMO change, I'm wondering what the plan is. Is it to hire an interim CO -- CMO or go it alone at this point?

Thanks on that, Charles. What I did mention in the prepared remarks is we have already met successor in-house, that his name is Dr. Dimitrios Chondros. He has been with us since 2015, and we actually hired him to lead the PEGPH20 clinical development program and he actually has been leading the 301 study since it started. So Dimitrios will be stepping up and taking over from Athena as she transitions out of the company.

Okay, that's helpful. And then last question is regarding daratumumab. Congrats on seeing that program started. You're probably not going to be able to answer this, but what is it that Janssen is looking for in that Phase I in terms of a successful outcome of that study?

As you know, in ASH of last year, they demonstrated success with a 30-minute injection subcutaneously of daratumumab using in hands. What they are seeking to do is to make it even shorter and I think the study is going to identify exactly how much shorter it can be. But I think they're looking for something that really does bring a convenient benefit for patients by being able to inject the dose in under 30 minutes. And so they have a Phase I study, where they've dosed first patients, testing this faster infusion or subcutaneous injection of DARZALEX and then they will use the approach and dose selected to start their Phase III study this year.

Our next question will be from Jim Birchenough with Wells Fargo.

Just a few follow-ups. Just on the feasibility of analyzing SWOG data by HA status, did all patients in that study get baseline biopsies?

Jim, that's information we don't have. All patients, as you know, when they are staged 4 or diagnosed with pancreas cancer, do have a biopsy. So we expect the majority will. We just do not have confirmation because that is not data that SWOG has collected to date, but is initiating the process of how they're going to go about doing that.

And from a process perspective, do you have rights to the data or is that something still to be negotiated with SWOG? And what are kind of the gating items between you getting access to the data to analyze it? Or is it just you provide the assay and SWOG will analyze it?

So in general terms, this is SWOG's data, but per the agreement we have, certainly anything that relates to safety is something that SWOG share with us in an ongoing manner. And so as we are planning to do the HA analysis, the approach that we will use is that SWOG will provide us with the tissue samples and we will arrange that Ventana does the analysis for them. But it is SWOG's data and SWOG will be the one to communicate this to the clinical community when the results are available.

Great. And then just on the 301 study, Helen, can you remind us what your expected rate of HA-High is in the study? And is your screening confirming that rate? Are you seeing the same rate of high-HA is what you'd expect going into the study?

Yes, based on the 202 study, we projected a 35% to 40% rate for HA-High, and what we're seeing is very in line with that. So we're screen failing about 60% to 65% for not being HA-High.

And then, just one final on ENHANZE, maybe hard to say at this point, but when you look at the partner discussions you're having, are you focused more on commercial-stage assets, late-stage development assets or early-stage candidates? Just trying to get a sense of what we should expect in terms of type of deal you're trying to work towards.

I can say there certainly is a range as there is in our current agreements of studies that are already marketed products as well as studies that are -- products that are in early development. I would say there's probably a preponderance of marketed products where this becomes more of a discussion of life cycle or offering new dosing option for patients. But we certainly are in discussions on both ends of the drug development spectrum.

Our next question will be from Jessica Fye with JPMorgan.

This is Yuko on the call for Jessica. Regarding the SWOG study, do you see any research or ongoing Phase III Study 301? And also, could you give -- also give any more details on the higher rate of deaths observed in the PEGPH20 arm?

Thanks for the questions. So we do not see any read through for 301. 301 continues unchanged. So far, the data that we have received from SWOG is preliminary. And so we're awaiting SWOG to complete their data collection and analysis for us to be able to analyze and evaluate this data ourselves. So I can't provide any additional color other than the comments we've made so far, because that really is all we know to date from SWOG.

Our next question will be from Jason Butler with JMP Securities.

It's Roy for Jason. I had a follow-up on the -- Andrew's question about the KEYTRUDA study about the number of patients. Do you have a certain threshold for data from a certain number of patients you need to see before presenting that data?

Thanks, Roy. There obviously is. We need to see a decent number of patients where we can make a judgment to say this is the same or different from when KEYTRUDA was used alone. And so what we will do is we will look at the background rates in each of the tumors and then assure we've come up with a sufficient enough sample size to be able to draw at least some initial inferences as to whether this is trending the same or different to the use of KEYTRUDA alone.

Okay, great. And then, considering the recent preclinical data for the immunotherapy work, just wondering if you could give us a sense of where you are thinking of going for maybe cell-based therapies and maybe throw cancer vaccines in that bucket as well?

Yes, certainly both areas of interest as we begin to elucidate the effects of PEGPH20 on the immunology of the tumor microenvironment. I can say we do have experiments and collaborations ongoing, evaluating the potential impact of PEGPH20 with CAR T agents and additionally, with cancer vaccines. These are all preliminary where we're just beginning to generate some early data. So I don't really have any updates I can give, but based on the mechanism by which we believe PEGPH20 may add on to these therapies, these certainly are very valid areas for us to pursue and identify can we see a benefit of PEGPH20.

Your next question will be from Joel Beatty with Citi.

First question is related to the SWOG trial and your Phase II PEGPH20 trial in pancreatic cancer that showed encouraging trends. Could you just discuss the differences between the 2 trials that may explain the different results?

Thanks, Joel. I think, as you know, the SWOG study is being run in an all-comer population. So at this point in time, the data that's being provided is irrespective of HA status. It's studying PEGPH20 with modified FOLFIRINOX regimen as opposed to our Phase II study, which was looking ABRAXANE and gemcitabine, and interestingly, the dosing is also different between the 2 studies: within the modified FOLFIRINOX, PEGPH20 being dosed once every 2 weeks; whereas in the ABRAXANE and gemcitabine study, we dose 6x in the first month and then 3x a month thereafter. So a very different profile in terms of the design of the clinical studies.

Okay, great. And then one other question. The first quarter revenue that just reported was on a run rate for around $118 million a year, which is right in the range of the guidance of $115 million to $130 million. Yet there seems to be multiple opportunities for revenue growth, such as you mentioned the Roche partnered drugs launching in more countries in Europe next month, and there'll be a potentially U.S. approval of rituximab and then, also potential existing ENHANZE partners could opt in for other products. So could you help put into perspective the flat revenue guidance with revenue growth opportunities?

Thanks, Joel. Let me ask Laurie to address that.

Joel, you're right. We do have a number of opportunities for revenue growth throughout the year and you've named most of them. I do think any new ENHANZE deal, as we've said, isn't included in guidance and it will be added as the underlying growth in our royalty revenue as expected. And we talked about, I think, in a previous call that there are some components of our revenue that aren't necessarily steady and where the math of multiplying x4 or that sort of math would work. So things like our API sales, or our sponsored research, or our reimbursed research. And so I think that's where maybe the kind of taking it and just trending it out for fourth quarter affects the math there. But again, we are expecting good growth in our royalties for the remainder of the year and we continue to look forward to the potential upside of new ENHANZE deals.

Our next question will be from Jo Kim with BMO Capital Markets.

I was hoping that you could go over the percentage of HA-High you would expect in other tumor types. And if you're getting a sense of the HA distribution from the enrollment in your earlier studies?

Thank you, Jo. For our other clinical studies, so particularly for gastric, non-small cell lung and gastric -- breast cancer patients, sorry, we have an assumption that this will be approximately 30% of patients. What we don't have for these cancers, though, is an assessment that all would look at the patient population we're studying and have been developed based on a response rate. And so what we've done for those studies, when we say, we're looking at HA-High, we're enriching the studies for patients who have high levels of HA and that will allow us to go back over time once we generate a response data to identify what the cut point would be for HA-High where we see that nice differential in response that we've seen with PEGPH20 in pancreas cancer, for example. So our working assumption is 30%, but that needs to be confirmed by generating data in the target populations of patients that we are studying and confirming that, that truly is where we would see a nice differential in response to PEGPH20 and that work is still ongoing and will be generated in part through the studies that we've initiated this year.

And for Rituxan SC, how do you think about that drug to capture the $3 billion in IV sales with a possible biosimilar coming to market?

I think what's important about the Rituxan SC, and we can take a lot of lessons from how it's been launched successfully in markets outside the U.S. where a lot of the same dynamics will be present in the United States, for patients, imagine the increased convenience of them, instead of having to be at the infusion center for at least 1.5 hours but often more, versus being able to get a 5- to 7-minute injection. And as Roche mentioned in their prepared remarks and this was a conversation also at the ODAC, within the U.S. there are long waiting lines for space in infusion centers. And so the idea that there's now a therapy where the patient can have a shorter visit to an infusion center and get rituximab SC is attractive to many centers who are looking to manage the -- getting all of the patients treated. And so I do expect because of the convenience for patients, the need that exists for getting patients in and treated at these infusion centers, I'm very hopeful we'll see the same type of uptake that we've seen in countries outside the U.S., which is robust and driven by the value proposition that rituximab SC offers.

Our next question will be from Arlinda Lee with Canaccord.

Maybe another follow-up on the partnerships. You mentioned that you had a number of partners have selected, but not disclosed other targets. How does that factor into your guidance? And when might we start hearing about that? And then, secondarily, and I'm sorry if you said this earlier, but could you maybe help frame what we might see in terms of the KEYTRUDA combination in terms of response rate at the end of the year?

All right. I'll ask Laurie to address the first part of your question, which is for the undisclosed targets that have been named, are they in this year's guidance?

They are not in this year's guidance. We typically would include them in guidance when they have a definitive start to their program.

All right. And then for the KEYTRUDA response, how we're looking at that, Arlinda, it'll all depend on the number of patients we enroll and the time it takes to get to response. But this is an open study, so we're going to monitor the response rates in the study and if we have a robust enough sample size, where we can draw any conclusions to say that this is different from the use of KEYTRUDA alone, that those are the markers I'll use as to can we communicate any preliminary data by the end of the year.

Okay, great. And then, I guess, maybe 2 follow-ups. What would you consider a robust enough in sample size? And then, on the partner disclosure, does that mean that they've not decided to move forward yet with -- or they haven't passed the certain threshold of advancement, or -- I guess I'm not clear on what that really means?

So just for some of our partners, for competitive reasons and other reasons, they want to do a lot of their preclinical or -- and even normal volunteer studies without disclosing that they're doing the study. So they are taking advantage of what they see as a competitive situation. So sometimes if we say that partner has taken a target and not disclosed it, they may be just thinking about it, but they also could be well advanced into their preclinical and early clinical testing as well. And the reason they don't disclose is for competitive reasons. On the KEYTRUDA response, I'll just give an illustrative example. Even any of these tumors for example, the background rate of response was 20%, I would want to have enough patients where it would be clear that there was a difference between 20%, and whatever the response rate was. So if I thought we're staying in 5 patients, I had 1 response and it was 20%, and it was as good as KEYTRUDA, that obviously wouldn't be compelling. That's how we'll look at it. There's no hard and fast rule to this, Arlinda. It just has to be that a comparison can be drawn from the historical data with KEYTRUDA alone. And so it does need to be a decent sample size of patients, so that we all can get some confidence, conviction that there is a signal there.

Operator, any other questions?

Dr. Torley, there are no further questions at this time. I will now turn the call back to you for closing comments.

Thank you so much, and I'd like to thank everyone for joining us today. We look forward to speaking with you on our next call. Have a great evening. Thank you.