Halozyme Therapeutics Inc (HALO) 2017 Q4 法說會逐字稿

Good afternoon, and welcome to the Halozyme Therapeutics Fourth Quarter 2017 Fiscal Results Conference Call. (Operator Instructions) As a reminder, this conference call 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 now begin your conference.

Thank you, Carie. Good afternoon, everyone. Following market close today, we issued a news release with the summary of our results and posted a short slide presentation to accompany this call. You can find both of those at the investor page of halozyme.com. Leading our call today as always is Halozyme's President and Chief Executive Officer, Dr. Helen Torley, who'll provide an overview and update on our business; then Laurie Stelzer, our Chief Financial Officer, who'll review financial results for the December quarter and year, followed by a Q&A period. Dimitrios Chondros, our Chief Medical Officer, will also join for Q&A.

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, and good afternoon, everyone. We entered 2018 with strong momentum, based on the results we delivered during 2017 in both our ENHANZE technology pillar and our PEGPH20 oncology pillar. Let me begin with the key takeaways from the fourth quarter.

Firstly, in 2017, our enhanced technology has become established as a go-to-option for converting IV therapeutics to subcutaneous administration with the signing of the agreement with Bristol-Myers Squibb and the expansion of the Roche agreement. This decision was further reinforced in December with the signing of a collaboration agreement with Alexion, our second new partnership in 2017.

Secondly, we continued to advance our PEGPH20 clinical program, we're in our registration study HALO-301. We made strong enrollment progress, with more than 200 sites screening for patients, and announced we project we will achieve the target number of progression-free survival events in late Q4 2018.

And finally, the strength of our business model continues to distinguish Halozyme. ENHANZE royalties grew 24% over Q4 2016 and record upfront in milestone payments of $190 million in 2017, enable us to begin 2018 with $469 million in cash, the strongest cash position in company history. With those takeaways, let me now provide some additional color on each pillar.

In our ENHANZE strategical pillar, we licensed our rHuPH20 enzyme to 8-leading companies to date. Most recently adding Bristol-Myers Squibb and Alexion.

Starting on Slide 2. 2017 was a transformative year for ENHANZE as we achieved significant accomplishments on several fronts. These include the regulatory approval for our first oncology product in the United States. A critical inflection milestone achievement with one product entering Phase III clinical study and expansion of one and signing of 2 new ENHANZE agreements.

Now let me review these accomplishments in greater detail. Firstly, the FDA approval of RITUXAN HYCELA in June of last year represented a significant event for ENHANZE. It is the second U.S. FDA enhanced product approval and maintained our 100% track record with, to date, 5 of 5 U.S. and EU regulatory submissions gaining approval.

Secondly, we're pleased that 2 of our corporate partners Janssen and Roche made substantial progress in their clinical testing of DARZALEX SC and the combination of Herceptin SC and Perjeta SC, respectively, generating data that supports proceeding with Phase III studies. With this data, Janssen initiated multiple Phase III studies in the fourth quarter of 2017.

And thirdly, following the FDA approval of RITUXAN HYCELA last year, we signed 2 new collaboration agreements with Bristol-Myers Squibb and Alexion. In addition, we expanded our long-standing existing agreement with Roche for one additional target. We are very pleased that ENHANZE is being developed with some of the world's leading products such as Janssen's DARZALEX and Bristol-Myers' Opdivo, which are projected by analysts to exceed $7 billion and $10 billion, respectively in annual peak sale.

As illustrated on Slide 3, with Halozyme receiving on average a mid-single digit royalty on net product sales, we project that based on the improved ENHANZE products and currently planned new ENHANZE target development from our existing agreements that the ENHANZE royalty revenue has the potential to achieve approximately $1 billion in 2027. As always, the actual subcutaneous portion of these sales will depend on a number of indications approved, geographies launched and the degree of market penetration over time.

Turning now to Slide 4. Our focus in 2018 is to support our partners to advance their target towards commercialization. More specifically, we have 2 key goals for the advancement of the ENHANZE targets. Our first is to grow the number of targets in late stage of Phase III clinical testing to support the near-term royalty growth we project. The second goal is to grow the number of targets entering clinical testing to support the future royalty growth we project. I'm very pleased to confirm that we project having 2 separate products in Phase III clinical testing in 2018. The first is DARZALEX SC, Phase III studies were initiated in 2017 and continue to progress in 2018.

Let me just take a moment to outline the potential additional value ENHANZE may be able to bring to DARZALEX. Last December at ASH, Janssen shared clinical data, which allowed them to finalize their development and registration plan for a 15 ml injection of DARZALEX SC to be delivered in 5 minutes or less. Of note, a lower rate of infusion-related reactions was reported for the SC formulation when compared to the current multi-RIV infusion. Janssen is now studying DARZALEX SC with ENHANZE in 4 Phase III trials. These trials are evaluating the following population: relapsed or refractory multiple myeloma, second-line multiple myeloma patients, where we are evaluating DARZALEX SC in combination with pomalidomide and dexamethasone, amyloidosis and smoldering myeloma.

In addition, Janssen is planning a Phase II study of DARZALEX SC with various combination therapies in newly diagnosed and in relapsed or refractory multiple myeloma patients and has initiated a development plan for DARZALEX XC in Japan with a Phase I study in relapsed or refractory multiple myeloma patients. With 6 planned or ongoing studies, including 4 Phase III studies for DARZALEX SC, Janssen is clearly committed to the program and its potential to reduce the treatment burden for patients.

The second ENHANZE-enabled program we expect to initiate Phase III study in, in 2018 is a fixed-dose combination of Herceptin SC and Perjeta SC. Based on the Phase I results shared at the 2017 San Antonio Breast Cancer Symposium, over the fixed-dose combination of Perjeta SC and Herceptin SC and the recent approval by FDA of the combination of the IV formulation in adjuvant HER2-positive early breast cancer, Roche has confirmed plans to advance clinical development of our Perjeta/Herceptin fixed-dose combination product using ENHANZE with a Phase III study to start later this year.

In addition to the 2 products in Phase III studies, we project 4 separate ENHANZE-enabled SC products to enter or to be in Phase I clinical testing in 2018. Bristol-Myers Squibb's Opdivo, Alexion's ALXN1210, Lilly's investigational target and a new unnamed Roche target.

And turning to our other programs with Roche. Roche is making good progress in the launch of RITUXAN HYCELA in the United States, following approval by the FDA in June of last year. With a strong focus on the many hospitals and infusion centers that are experiencing capacity constraints, Roche has protected that the shorter treatment duration time is expected to be viewed as a benefit for both patients and for those delivering care.

And finally, we're delighted to have already made strong progress in our startup activities following the December signing of the new collaboration agreement with Alexion. On its most recent earnings call, Alexion noted plans to initiate a Phase I study this year of the subcutaneous formulation of ALXN1210 with ENHANZE, with the goal of further extending the dosing interval to once every 2 weeks or once per month. To close on ENHANZE, our focus in 2018 is on unlocking the value that exist in our current 8 partnerships, by supporting our partners moving products into and through the clinic.

In parallel, we will continue to seek additional collaborations with new partners and believe many targets are still available that may benefit from our technology. Our pipeline of active partner discussions remains robust and we continue to pursue opportunities to maximize the value of ENHANZE.

I'll now turn to our oncology pillar and our investigational drug PEGPH20. PEGPH20 is a targeted therapy that temporally degrades hyaluronan, or HA, that can accumulate around certain tumors and constrict the tumor vasculature. We're studying PEGPH20 with a companion diagnostic developed with our partner Ventana to identify patients with HA high tumors and protect an approximately $1 billion potential global opportunity in pancreas cancer alone. I'm pleased to share that results from our Phase II study and first-line metastatic pancreas cancer, HALO-202, were published in the peer-reviewed Journal of Clinical Oncology in December of 2017.

Turning to Slide 5, there's an overview of our Phase III study evaluating PEGPH20 in combination with ABRAXANE and gemcitabine in first-line pancreas cancer patients. Investigator interest remained strong in the study, resulting in continued progress with enrollment. Recall, an interim analysis will be conducted for our first primary endpoint when we achieve the target number of progression-free survival events. We continue to project that target number of PFS events will be achieved late in the fourth quarter of 2018.

In the HALO-301 study, patients receive a daily injection of low-molecular-weight heparin. Recently, Dr. Kenneth Yu reported results from his ongoing investigate response trial conducted at Memorial Sloan Kettering Cancer Center, examining the use of an oral anticoagulant rivaroxaban in place of low-molecular-weight heparin injections. The trial is being conducted in the -- with the same chemotherapy backbone as HALO-202 and HALO-301 of PEGPH20 in combination with ABRAXANE and gemcitabine. The first part of Dr. Yu's study included 28 patients irrespective of HA status. And data reported to date shows no cases of Grade 3 or Grade 4 thromboembolism. In addition, the study showed a 57% overall response rate in this all-comer population. Dr. Yu is now conducting a retrospective analysis to determine patient HA status to evaluate the response rate in HA-high patients. An evaluation is now underway to identify the feasibility of -- and the path to gain future regulatory labeling for the use of rivaroxaban with PEGPH20.

Turning now slide 6. I'd like to provide an update on our clinical development progress to assess the potential of PEGPH20 in other tumor types. Beginning with our trials in combination with the checkpoint inhibitors, we are studying PEGPH20 plus KEYTRUDA or pembrolizumab in non-small cell lung and gastric cancer patients. Pending continued enrollment progress and a sufficient number of PD-L1 positive and negative patients in each tumor cohort, we project we may be able to share response rate data from the study in the second half of 2018.

Moving to our clinical collaboration with Eisai. Eisai has made a portfolio decision not to proceed with further clinical development of PEGPH20 plus eribulin. In January, enrollment in the Phase Ib portion of the study was closed and a total of 14 patients were enrolled. Initial investigator report of response data from the study is encouraging. And we have initiated collection and cleaning to fully evaluate these data, which is planned to submit the data for presentation at a scientific forum in 2018. And continuing with our collaboration study, we and Roche are making good progress in the dose-finding portion of our study of PEGPH20 and atezolizumab in pancreas cancer, gastric cancer, cholangiocarcinoma and gallbladder cancer.

Closing on PEGPH20, our focus in 2018 is to continue to make strong progress in all of our clinical studies, examining the pan-tumor potential of PEGPH20 in patients with high HA tumors. The pancreas cancer indication has successfully cleared several derisking events with the projected timeline to start data analysis just months away at the end of this year. Success in pancreas cancer represents a large opportunity for Halozyme and this may be only the beginning with multiple other tumors we're evaluating, representing additional significant opportunity.

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

Thank you, Helen. I will begin on Slide 7, where you will see that revenue for the fourth quarter was $189.6 million compared to $39 million in the prior year period, driven by the recognition of $101.4 million of the upfront payment from Bristol-Myers Squibb and the $40 million upfront payment from Alexion. Royalty revenue totaled $17.7 million, an increase of 24% from the fourth quarter of 2016. Bulk sales of rHuPH20 totaled $8.4 million. Hylenex product sales totaled $4.2 million and other collaboration revenue totaled $159.3 million, which includes the upfront payments from BMS and Alexion.

Turning to Slide 8 for a more detailed breakdown of our P&L. Cost of product sales was $7.5 million in the quarter compared to $8 million in the prior year period. Research and development expenses for the quarter were $41.4 million, which was flat to the fourth quarter of 2016. Selling, general and administrative expenses were $14.8 million compared to $12.2 million for the fourth quarter of 2016. The increase was primarily due to personal expenses, including stock-based compensation for the period.

Net income for the quarter was $123.9 million or $0.85 per share compared to a net loss of $27.4 million or $0.21 per share in the fourth quarter of 2016. Cash, cash equivalents and marketable securities were $469.2 million at December 31, 2017, compared to $205 million at December 31, 2016.

2017 was also noteworthy due to our financial performance as shown on Slide 9. Revenue for the full year totaled $316.6 million, a $169.9 million increase from 2016, and through disciplined expense management, we ended the year with operating expenses of $235.6 million, a 2% increase from 2016. Net income for the full year was $63 million or $0.45 per share compared to a net loss of $103 million in 2016 or $0.81 per share.

I would now like to move on to our guidance for 2018, as shown on Slide 10, which is unchanged from the guidance we provided at the start of 2018. For the full year 2018, we continue to expect net revenue of $115 million to $125 million, which does not include the potential for new ENHANZE deals. Within the revenue line, we anticipate royalty growth of 25% to 30% from 2017, largely driven by RITUXAN HYCELA, offsetting this royalty growth and as we have shared, we are forecasting a decline in API product orders as our partners complete manufacturing transitions.

Recall, partners currently have sufficient API and safety stock to support their near-term plans and we project API orders will remain low until our partners gain FDA approval of these manufacturing changes, which is expected in 2020. We continue to expect operating expenses for 2018 of $230 million to $240 million flat to both 2017 and 2016.

Operating cash burn of $75 million to $85 million, debt repayment of approximately $95 million, which includes principal and interest payments related to our royalty-backed and SVB Oxford loans and year-end cash balance of $305 million to $315 million, which we project will take us into 2020.

Finally, I would like to share additional details around the upcoming impact to our financial statements, following our adoption in January of FASB Topic 606 as it applies to how we record royalty revenue. Historically, we have recognized royalty revenue one quarter in arrears due to the timing difference between our financial close and when we receive payments from our partners. Under the new revenue recognition guidance, starting in Q1 2018, we will be recording an estimate for royalty revenue for the current reporting quarter and will reflect the difference between the actual payment and the estimate in the subsequent period. For reference, applying this approach in Q4 2017 would have resulted in royalty revenue of $19.4 million, a sequential increase of $1.7 million from the $17.7 million of royalties reported this quarter based on our Q3 partner sales.

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

Thank you, Laurie. In summary, 2017 was a transformative year for Halozyme and we entered 2018 with strong momentum. Specifically, we entered 2018 with the strongest cash position in our company's history with $469 million in cash. We've got great momentum in our ENHANZE pillar, highlights include Janssen's plans for 6 studies, including 4 ongoing Phase III studies with DARZALEX SC. And Roche planning to initiate a Phase III study of Herceptin SC and Perjeta SC with ENHANZE. Roche recently initiated Phase I study and Alexion and BMS planning to initiate Phase I studies later this year.

And finally, our currently approved and marketed products, projected to deliver another year of robust 25% to 30% royalty growth. In our oncology pillar, we are -- we'll continue to make strong progress with our HALO-301 study and project achieving the target number of PFS events in the fourth quarter of this year. In addition, based on continued progress, we have with -- the potential to report response rate data from 2 pan-tumor studies in the second half of the year. Above all, we remained confident that the investments we are making in both pillars of our strategy will generate near and long-term value for patients, shareholders and partners. And as ever, I want to close by expressing my ongoing gratitude and appreciation to 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 calls. Operator, would you please open the call.

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

Just a question on the ENHANZE royalty outlook. When you think about the $1 billion number that you talked about, just wanted to get a sense of, if you can break out kind of the biggest components or the biggest drivers of those assumptions? Then, as you think about the number, are there potential areas of upside to that outlook? And how does that factor into the potential for revising that number upwards or downwards, as you continue to book new ENHANZE collaborations? And then, just on the eribulin decision, can you provide a little bit more color on kind of what you've learned from Eisai around that portfolio decision? And as you went into the study, if there was a target profile in mind and did the data fail to live up to that?

Great. Thanks, Andrew. Let me address that ENHANZE question first, then. We have a nice chart, I think in the presentation, where you can see there's a period of time where we have growth on our ENHANZE royalties and then there is an inflection point. And really what's driving the pattern you see there is the near-term growth is coming from our already marketed products where we project continued nice growth there. But then with the anticipated launches of products, including products like DARZALEX and Opdivo, which have substantial revenue projections based on analyst projections, that's where you really see the inflection point in that curve in terms of meeting the key steps towards getting to that $1 billion potential sales by 2027. Now you raised a good point, Andrew, in that, what's included in that chart are just the steady starts that we anticipate in 2018 based on current plans that we knew of from our partners. So this does not include the potential for new starts of exciting products in 2019 and 2020, and so we do see the potential for upside to this based on additional targets entering the clinic. So with that, let me turn to the Eisai question. The feedback we got from our counterparts, the Eisai, was just that there wasn't a portfolio evaluation and proceeding with them our study with them, Halaven and the PEGPH20, did not make the cut in that evaluation. We didn't get any additional color, I can say that this decision was taken before the final data from the study has been seen. So there wasn't a go-no-go target profile to be specific nor has the final data been fully assessed by which Eisai, so I believe, this was really a portfolio decision on their part.

Your next question will be from Dana Flanders with Goldman Sachs.

My first one here, just maybe follow-up on ENHANZE. I know you have a couple of maybe longer dated partnerships, where we haven't seen as much activity from the innovator. How should we think about your ability to just reengage and push them towards maybe using the ENHANZE platform on a go-forward basis?

Yes. Thanks for the question, Dana. This is something our alliance teams do on a regular basis with those longer-standing partners and it's generally is a question of their portfolio and their portfolio priority. Sometimes there isn't a product, Dana, at this moment in time that's at a state of development, where they want to contemplate going subcutaneously, or sometimes it's just is not part of their plans to go subcutaneously. But there is no stone left unturned by our team in bringing ideas forward to partners as to how ENHANZE could help their products become more competitive and differentiated.

Okay, great and my quick follow-up here. I know you reiterated that you expect the interim data by Q4 -- or sorry, the study by Q4. Would we actually see the data in Q4? Or could that come in early '19?

Yes, thanks for asking that clarifying question. Because what we anticipate is that we will achieve the target number of PFS events late in the fourth quarter. That will start the final data cleaning and data analysis. So you're absolutely right, the actual data will be available to the DMC in 2019.

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

This is Sarah on for Charles. Just a couple questions on ENHANZE. Can you remind us what updates from the BMS collaboration we should look for this year? And then can you maybe also provide some color on why you believe Roche is choosing to move the Herceptin/Perjeta fixed-dose combo into Phase III at this stage in its life-cycle?

Thank you, Sarah. Yes, on the BMS collaboration, as you know we signed the agreement for up to 11 targets last year. At this point in time, the only plan that is public is that they will move into clinical testing with Opdivo. But I can say that we are in discussions with BMS on their entire portfolio and identifying what, if any, additional steps would be taken. But the firm thing is to look for the start of the Opdivo SC study in 2018. With Roche and Herceptin/Perjeta, the data that was presented earlier this -- last year did show the potential for benefit for patients, and I believe that will be the motivation from Roche about bringing this forward with certainly the recent support from the FDA for the IV formulation. If you think about these patients, they tend to be living well with their cancer on therapy for a long time. So the ability to free these patients up from having to go to infusion centers for IV, I imagine that is what is in Roche's mind by seeking to get a fixed dose, subcu, single injection, how much easier that is for patients who are wanting just to get back to their everyday life and not think about being in hospitals or infusion centers.

Great. And just one follow-up. So for the Phase II combo study of PEGPH20 with KEYTRUDA, it sounds as though the enrollment rates picked up somewhat. Any color on why that's been the case? And then anything beyond enrollment that we should think about driving time lines for that first data look during second half?

All right. Let me ask Dimitrios to comment on that.

Sure. Thank you very much, Helen. So we're very pleased with enrollment in our KEYTRUDA study. Recall at our last update, we said that we have approximately 20 patients enrolled by the end of last year. And if enrollment continues in the current trajectory, we might be in a position to see our initial response data of that study in the second half of this year. So overall, it is going very well and according to our expectations. Particularly, the gastric cancer cohort is going very well.

Thanks, Dimitrios.

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

Just another one on the PEGPH20/KEYTRUDA combo study. Based on what your current plans are, can you talk about what we should expect from that data readout in terms of median duration of therapy and the specifics around the patient population, biomarkers, et cetera?

Yes, let me ask Dimitrios to address. I think it's quite useful to think about what the background response rate might be in the PD-L1 positive and negative that we will be looking at, and I don't know, Dimitrios, if you can comment on duration of therapy, too.

Sure. So as you recall, the study is enrolling in 2 cohorts, [in 2] cohorts: gastric cancer as well as lung cancer. We are enrolling a PD-L1 all-comers population and analyzing the PD-L1 status retrospectively. The objective of the study is to really look into both cohorts -- into both subgroups, the PD-L1 positive as well as the PD-L1 negative, whether -- and we would analyze response data -- overall response data and compare them to the most recent historical available data for KEYTRUDA alone in [that specific in these] cohorts.

Duration of therapy that we might expect, that we've seen with perhaps in the KEYTRUDA study? Jason, we might -- we'll get back to you on that. It certainly is [long] in these later-line patients in the range of a couple to 3 cycles from my recollection, but we can get you the exact information.

Great. And then I just had a follow up on the change in royalty revenue recognition. Sorry, if I missed this, but as you change this quarter from -- reporting from a lag to a real-time estimate, is there going to be some kind of true-up where you have 2 quarters that are being reflected in the same reporting period?

Jason, it's Laurie. No. Actually, the way the rule is going to play out, the fourth quarter sales, so the royalties from our partner's fourth quarter sales it will go to retained earnings. In Q1, we will book only one quarter. We'll book Q1 sales and -- as it relates to royalties in that quarter, so there won't be a doubling up. It will go to retained earnings.

Our next question will be from Gena Wang with Barclays.

Just one quick question regarding the royalty. Can you -- I mean, the ENHANZE technology platform, can you remind us general time line for Phase III readout from the time it starts?

Thanks, Gena. the heuristic we usually give is it tends to be about 5 years from first in-human to launch an approval. And so obviously, the duration of the Phase III study will be very dependent on the endpoint being studied and the amount of enrollment. But what we tended to see is a year to get through Phase I testing and agree on the design of the Phase III with the FDA, perhaps a year for enrollment, a year to -- or half a year to a year to get to the actual endpoint of the study and then time to file and get approval. So if you're asking the question specifically, for example, for DARZALEX, what Janssen has commented on is the expectation that they will be launching in the 2020 time frame, which is very consistent with that 5-year time frame overall.

Another question about the PEGPH20. I note the ASCO GI data, they're like different efficacy profile when combined with FOLFIRINOX versus gemcitabine ABRAXANE. So anything you can learn from these data for the PEGPH20 for the other oncology programs?

Thanks for that question. You bring up a great point. What we learned from that study, and referring to the SWOG data, is that when PEG is combined with modified FOLFIRINOX, which is 4 different chemotherapy agents, we saw poor tolerability and a limited ability for patients to be able to dose the FOLFIRINOX at the full dose or at all. And so that was an important finding for us about that particular combination. So we'll take those thoughts through if we were ever going to contemplate a multiple chemo combination, particularly one which has got a very strong track record of having challenges of patients being able to tolerate it. Obviously, we're excited to be going forward with them. Our combination with gemcitabine ABRAXANE, where we study 270 patients overall in our Phase II study, we didn't see similar tolerability issues or dosing problems. So it certainly did give us some information about FOLFIRINOX, but no impact on our registration program 301.

And last question, regarding the use of a low-molecular-weight heparin. It seems like several different drugs have been tested. Going forward, do you have any thoughts regarding oral or IV version for a thrombotic -- for prophylactic treatment for the thrombotic risk?

Yes, we're quite encouraged by the results Dr. Yu reported at -- from his IST earlier this year, where he actually is doing a study of PEGPH20 with ABRAXANE and gemcitabine and using rivaroxaban, one of the oral anticoagulant, factor Xa inhibitor, for his prevention of thromboembolic events. He studied 28 patients. The initial data shows no grade 3 or 4 TE events. And so our next step there is to continue to study more patients, but also to evaluate what would be the path and what would be the feasibility to gain labeling for PEGPH20 with the oral anticoagulant, rivaroxaban. So stay tuned for that. We do need to do a bit more work to identify what the path is.

Your next question will be from Joel Beatty with Citigroup.

The first is on the Phase III programs. So we've seen the Phase III from DARZALEX underway, and we will have additional Phase IIIs over time. Is there potential for those to shorten as we get additional ENHANZE products approved, such as being -- relying a little bit more on PK/PD data as opposed to larger studies? And then the second question is related to PEGPH20. And just can you go over what the possible outcomes are of the decision that will be announced in early 2019?

All right. I'll do the DARZALEX question, and Dimitrios will address the PEGPH20 question. For DARZALEX, you bring up a very good point because the FDA, with the RITUXAN HYCELA approval, laid out the pathway which included PK bridging and then the generation of data that shows that there was not a difference in the safety or efficacy. So I do think that as companies are taking a look and doing their development plans using ENHANZE, that it's certainly a question they will be asking themselves. What Janssen is choosing to do is to generate data with the different drug combinations that are available for patients with multiple myeloma because the later lines of therapy tend to be monotherapy DARZALEX. The second line population is DARZALEX plus pomalidomide. And so I think they are wanting to generate that data so physicians know what to expect in terms of safety and efficacy with all of those combinations. But it certainly is a great question, Joel, and very possible that over time, companies may be able to talk to the FDA and do lesser studies. And then Dimitrios...

And then your question about the outcomes potential of the interim read?

Sure. So as Helen outlined, towards the end of the year we expect the final number of PFS events to occur and that will trigger the interim analysis. And the interim analysis will be conducted by the independent Data Monitoring Committee, and they will do a final analysis of PFS. They will look at the interim at the overall survival and obviously, they will look at overall safety and making assessment of the overall benefit/risk assessment of the study. And based on this outcome, they will provide a recommendation. To us, that will include filing based on the PFS data or continuing the study until the final OS analysis.

Thanks, Dimitrios.

Our next question will be from Jessica Fye with JPMorgan.

Just a bigger picture question. Seems like most investors we speak to on the stock for the ENHANZE pillar have more mixed views on PEGPH20. So if the Phase III study does not hit the PFS hazard ratio you're targeting or kind of have sub-optimal OS, would you stop investing R&D dollars behind that product? And how much of the 2018 R&D spend is that Phase III study alone versus other R&D activities?

Right. Thanks, Jess. Certainly, from investors, we do hear a great enthusiasm for the ENHANZE platform. We do have people who recognize that a win in pancreas cancer with PEGPH20 is a huge upside to the stock, and there is some enthusiasm for that. But because it pancreas cancer. I think what you're reflecting is a little bit more hesitation about that side of the pillar. We believe we've developed a product in a way that has derisked it. But in the event, you're saying if PEGPH20 is not successful in pancreas or other cancers, what would the company look like, and then I have been saying for the last year or so that the most likely scenario is that then we would become an ENHANZE-only company if PEGPH20 does not have the possibility to be a meaningful product for patients. And then I'll ask Laurie now to address the question on the expense investment.

Sure. Hi, Jess. As you know, the vast majority of our spend is on PEG versus ENHANZE. In our R&D line, about 80% of our spend is on PEGPH20. Your question specifically around the Phase III, we don't really break that out, but what I can say is that the majority of that spend is on our Phase III study. The smaller Phase I/II, they don't have near the cost or cash burn that our Phase III study does. So without giving you exact numbers, just the majority of that PEG spend is on Phase III.

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

Just wondering, first, if you might be willing to characterize how you're seeing the trajectory for the RITUXAN HYCELA launch in the U.S. versus what you saw with MabThera in Europe, maybe as a guide to how differences in reimbursement might impact adoption. And I have a couple follow-ups.

Thanks, Jim. On RITUXAN HYCELA, Roche has not provided any updates from that, so I can't specifically say. But we can kind of think about some of the specifics in the U.S. marketplace that we know Roche was anticipating or working through, which includes getting on the hospital formularies, getting all of the IT systems updated for the orders. And from everything we've heard from Roche, they've made comments that they're pleased with the progress that they were making with those particular steps. But we don't have any data we can share about comparing the U.S. and the EU. The value proposition remains strong in the U.S. when we think about what this can mean for patients to be spending less time in the infusion centers. And with so many overcrowded, Roche has made comments to say we do expect that the value proposition will be well received by both patients and by the health care providers. But no specific numeric updates we can give at this time.

And then just in terms of additional deals, Helen. You've had great success in accelerating the pace of deals and the economics you're getting on each deal. Should we expect additional deals in 2018? And are there particular areas that you're focused on? Maybe talk a bit about the process for consummating these deals.

The beauty of ENHANZE is that it can work with products in any therapeutic area where specifically, companies are looking to get a large volume infused or they have a large molecule that they want to get infused subcutaneously. So we have a very broad look at what molecules are available, and I can say we're in active discussion with a number of companies as of this time in some interesting therapeutic areas. With regard to specifically another deal in 2018, we certainly are working to try towards that. What is not in our control is exactly when we sign deals, Jim. So what I will say is we will sign more ENHANZE deals. I don't know if we'll sign them in '18. We will try our best. But more deals are coming because there are a lot of molecules out there that would continue to benefit from the ENHANZE platform.

And then maybe just one final question. It might be harder to answer. But Perjeta/Herceptin, do you know whether Roche will be evaluating both the coformulated combination in each individual component and if each individual component will have to be compared to the IV? Or is it really just coformulated combination compared to the current brand combinations?

The Phase I study that was reported out at San Antonio Breast did exactly what you're talking about and allowed them to determine what dose will be taken to Phase III study, all with a fixed dose combination. So Roche has not discussed or posted yet what the Phase III design will be, so I can't specifically talk about that. But I do know the whole goal of Phase I was to answer the questions that would allow them to have a single fixed dose possibly to take into their Phase III study.

And sorry, one final, final. You gave a nice metric from time to clinical development to product approval. Do you have a similar metric based on prior program development on how quickly from signing a deal do we see these products moving into clinical development if you look at -- just trying to get a sort of a benchmark of how quickly Opdivo subcu can move in to development based on what we've seen previously with things like Herceptin and MabThera.

Yes, I think a good one to look at is DARZALEX. DARZALEX, from signing to entering the clinic, was in the range of 8 to 9 months. And that certainly would be a good target that we would hope to be able to achieve with future product entry to the clinic as well if that is -- the company has got that as a priority and is focused on that. So I think you can start thinking in those terms.

Our next question will be from Arlinda Lee with Canaccord.

I have maybe a couple questions on ENHANZE. One, can you maybe help us understand when we might get additional clarity or visibility on what these additional products that are entering the clinic might be?

That is a challenge because the, obviously for a variety of reasons including competitive reasons, the owner companies are choosing not to make them public at this point in time. So we, as you know, as part of the confidentiality agreement, only make public statements that are in line with the statements our partners have made. So I can't give you a timing because they haven't indicated when they would do that. Sorry about that, Arlinda.

That's okay. And then maybe on the last couple of -- over the last few deals that you've done, there've been quite a few things that have been going on. Can you maybe provide additional information on how maybe some of these deals came about? Were they something that you had gone out to, Alexion for example, to talk about? Or was it more like an inbound inquiry?

Over the last 10 years since we started working on the platform, we have, I think, met with just about every company at one point or another. So I think there's a good background degree of familiarity. What we've been doing more recently over the last 2 or 3 years is assessing people's portfolio and going to companies, saying, "We believe ENHANZE could help your competitiveness in this way." And so it's a little bit of a push and pull. Some people are familiar with us and they phone us up and say, "Hey, we've been thinking about this." Other times, it's because the business development team have done an analysis of the portfolio and go and say, "We think we can help you in this way." So it's a very dynamic process. Alexion is a company that we have spoken to for many years. But obviously, the leadership team, moving from the Baxalta team over to Alexion, was very helpful because we work with Ludwig and John very closely on the HYQVIA approval. So they came in with a great deal of familiarity and enthusiasm for the platform, and I think that obviously helped speed things through to the signing that we had in December. But it's a very active back dialogue that, frankly, goes both ways.

Great. And then maybe lastly on PEGPH20. We saw additional data at ASCO GI. And I'm wondering, the prophylaxis is now in place for the ongoing Phase III. Might we -- might you be able to talk a little bit about how docs -- what was the color from the docs on Dr. Yu's paper? And how are your discussions going forward in talking to other pancreatic docs?

Yes, thanks for that. Obviously, in our Phase III study, we're using low-molecular-weight heparin, and we plan to commercialize PEGPH20 with low-molecular-weight heparin. But we're constantly looking to ease the burden for patients, and that's where their desire to look at rivaroxaban came in. So I think doctors, based on the feedback they gave us, were intrigued, did recognize it was still a small number of patients, 28 patients that we've reported out so far, but a lot of enthusiasm for us to continue to evaluate that and identify as our pathway to getting a label update and what it would take to get a label update for the use of rivaroxaban as well. So I think doctors are very focused on easing the patient burden wherever they can. Low-molecular-weight heparin is very well accepted. This would just be a little easier for patients. And so there is support for us to continue to explore that pathway.

[At this time], I'd like to turn it back over to you for closing comments.

That's great. Well, thank you, everyone, for joining us today. We really are excited to begin 2018 with such great momentum, and we look forward to speaking with you and give you an update on our next call. Thank you and have a great evening.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.