Halozyme Therapeutics Inc (HALO) 2011 Q3 法說會逐字稿

Greetings, and welcome to the Halozyme Therapeutics third-quarter 2011 financial results conference call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kurt Gustafson, the Chief Financial Officer of Halozyme Therapeutics. Thank you, sir, you may begin your conference.

Thank you, Operator. Thanks also to everyone for participating in today's call. Joining me on the call today is Greg Frost, President and Chief Executive Officer. This afternoon, Halozyme released third-quarter 2011 financial results. If you have not received this news release, or if you would like to be added to the Company's distribution list, please send me an email at kgustafson@halozyme.com. This call is also being webcast live over the Internet at www.halozyme.com, and a replay will be available on the Company's website for the next 7 days.

Before we begin, let me remind you that, during this conference call, we will be making forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. All statements made during this conference call that are not statements of historical fact constitute forward-looking statements. The matters referred to in forward-looking statements could be affected by the risks and uncertainties of Halozyme's business, both known and unknown. Such risks inherent in the Company's business are described in our filings with the securities and exchange commission, as well as in our news releases. The Company's actual results may differ materially from those expressed in or indicated by such forward-looking statements. With that, I would like to turn the call over to Greg Frost, Halozyme's President and CEO.

Thanks, Kurt. Good afternoon, and thank you for joining us on the call today. I'll be providing an update on the major events from the quarter, including some key milestones achieved with our proprietary programs, and our alliance programs, as well. I'd also like to take some time to review our corporate strategy. Finally, Kurt will provide the highlights of our financial results for the third quarter. The third quarter and the last few weeks was an extremely productive time for Halozyme and our partners. We announced positive Herceptin [SC] data, related to you our Roche partnership, as well as positive data from our insulin program in both pens and pumps. We also initiated new clinical trials with 2 of our proprietary programs; PEGPH20, and HTI-501. Finally, this week Baxter presented tolerability and efficacy data from the registration study at ACAAI, which I'll summarize for you.

First, with regards to Herceptin subcu. Earlier today, Roche provided a pipeline update in London, noting that the HANNAH trial met its primary end points, and are on track for filing in 2012. No new safety signals were observed, and adverse events were overall consistent with Herceptin IV. For patients with breast cancer, being able to receive their Herceptin in 5 minutes in an expanded setting of care, instead of establishing intravenous access in a hospital setting, may provide a welcome option for women worldwide living with early breast cancer. Roche is also developing an auto injector device that should further simplify the process. It's also important to note that the HANNAH trial used a fixed dose of Herceptin's SC, which becomes easily transferable to an auto injector, and requires no pre-mixing in a hospital pharmacy. We look forward to the full data set from the study being presented in an upcoming medical meeting next year, and to Roche's first regulatory filing for Europe in 2012.

Last year Roche achieved worldwide sales of approximately $6 billion, 0.66 of which were outside the US for Herceptin. Second, with regard to our proprietary insulin program. Last month we reported positive results from 2 Phase II longer term treatments studies in patients with type 1 and type 2 diabetes. We enrolled over 110 patients in each of these trials that received either insulin analog alone for 12 weeks, and then crossed over to one of the analog PH20 treatments, or who received the PH20 arm first, and then crossed over to analog alone. Both trials met the primary endpoints of non-inferiority for HbA1c, compared to the insulin analog comparator, and demonstrated superior reductions in postprandial glucose excursions in the PH20 insulin analog arms.

The American Association of Clinical Endocrinologists, or ACE, has established treatment guidelines to assist health care professionals in medical decision making. We considered the ACE guidelines when looking at clinically relevant, postprandial glucose targets in this study. Compared to insulin analog alone, PH20 insulin analog use resulted in a greater than 50% increase in the proportion of patients able to consistently achieve the ACE guidelines for postprandial glucose targets at both 1 and 2 hours after meals in both type 1 and type 2 patients. Hypoglycemia events were generally mild, and adverse events with PH20 insulin analog formulations were similar to those observed during the insulin analog comparator phase. We plan to present the detailed data set from these 2 trials at a medical meeting next year. 2 weeks ago, we presented additional data at the Diabetes Technology Society conference from a study in patients with type 1 diabetes using pump therapy. In this study, we investigated whether a single administration of rHuPH20 at the start of 3 days of insulin aspart pump infusion therapy could provide better and more consistent insulin absorption profiles than when insulin aspart was used alone.

In previous studies conducted by both Halozyme and others, it has been observed that insulin absorption from a pump is highly variable over the 3 days that a pump is warn with a single infusion site. This study demonstrated that pre-administration of 150 units of rHuPH20 was at approximately 1.3 micrograms of enzymes led to consistent insulin exposure over the infusion set life, and superior glucose control following meals, relative to the way people are using pump therapy today. We also didn't see any difference in side effects between the 2 groups.

Let me give you some examples to demonstrate the consistent and ultrafast profile we saw in this trial. When not using rHuPH20, the average onset varied anywhere from 30 minutes after bolus infusion to an hour after the infusion, depending on how long the infusion set had been in place. This is a pretty wide range. It provides challenges for patients trying to tightly control their glucose levels after a meal. The pre-administration of rHuPH20 reduces variability considerably, with the average onset of action consistently happening between 32 and 34 minutes after infusion over 3 days of use.

Simply speaking, if patients use rHuPH20 with their pump, they're going to know from the first to the last bolus of insulin, they're going to get that response about 30 minutes later. In addition, without rHuPH20, the duration of insulin action varied from 156 to 180 minutes, whereas a single injection of enzyme reduced this time, and tightened the window to 139 to 146 minutes. During the 3 days people were on one of these therapies, we also performed normal meal studies. Once again, this better insulin absorption and action profile led to consistently reduced post-meal excursions. About a 67% reduction in 2 hour excursions, for example. About half of the patients, 7 of 15 that used rHuPH20 were able to achieve a target at the 2 hour time point for all 3 test meals, while only 20%, or 3 of 15 patients not receiving PH20 achieved this same result.

The learnings from last week's study in type 1 patients with diabetes using insulin pumps, combined with the ultrafast insulin data from at week earlier, has us more excited than ever about what this program could mean for patients. The ultrafast profile could offer a distinct advantage to the insulins on the market today in terms of post-meal glucose control. We're enabling more patients consistently to hit their ACE guidelines by using rHuPH20. In addition, for patients using a pump, rHuPH20 offers the additional advantage of more consistent insulin absorption from the beginning to the end of the infusion set use, and this might be a great tool, in the end, to help improve patient safety.

So everything that we have seen thus far points to a product candidate that would have successful commercial product attributes. Strategically speaking, we continue to view insulin pens and pumps as distinct product opportunities that don't conflict from a channel perspective. The science suggests that pre-administration of rHuPH20 in pumps seems to offer the most consistent ultrafast benefit over infusion set life to patients on pumps today, while the [co-mix] formulation would be the best offering for the pen market. From a strategy perspective, it's helpful to clarify our approach on pens first.

So we've completed our clinical trials in patients with insulin injections, established the repeat dose safety, and we've reproduced the profile in the target patient populations. But a biopharma company with a global access to primary care markets would be the best positioned to maximize value to patients here. Also, as the profile of Basel influence continue to improve, we think the value of a truly ultrafast meal time insulin will become yet even more important. The pen market would require a global primary care sales force to commercialize, and would require large investments to successfully capture this. So we're currently compiling the data from our treatment studies, and will have these available to share with some potential partners. When we think about the pump market, being best served by pre-administration of rHuPH20, this is an interesting area where we think we can add additional value. Everything we've seen thus far suggests that this product would have the attributes that would be desired by patients and be reimbursed by payers. We certainly haven't exhausted all the research we need to do, but nothing we've seen, thus far, gives us pause to not want to pursue this opportunity further.

The next step to evaluate this opportunity would include using Hylenex pre-administration in a treatment setting, along with some additional market research. But here's what I can tell you today about the market dynamics for the pump market. The market consists of approximately 400,000 primary type 1 patients with diabetes using pumps in the US, about 350,000 or so that use infusion sets with tubings that would allow pre-administration, so the target market is indeed attractive. In terms of reaching these patients, the majority of pump patients are treated by less than 1,000 physicians, almost all of whom are endocrinologists. Therefore, in the US, physicians could be targeted by a relatively small sales force. From a market potential, each of these patients would use a vial of Hylenex at every 3 days, when they switched the location of their infusion set. This translates into approximately 120 vials of Hylenex per year per patient.

Thus, I think you can see why we're rather interested in continuing to evaluate this opportunity. Regarding the question of how we intend to capture this market, there are a number of different options available. If a partner wanted to come in and do a deal on the pen market as well as the pump market, we could evaluate such an offer, we could find a partner just to help market Hylenex in the pump market, or we could look at launching it ourselves.

Those tactical decisions will be based upon what creates the most value for shareholders and patients. Now, concerning some of our other proprietary programs, Halozyme has 2 additional first-in-class new molecular entities, PEGPH20, and HTI 501. Both of these provide a great opportunity to explore, in very relevant clinical trials, their potential commercial viability. We initiated a Phase II trial with PEGPH20 in patients with stage 4, previously untreated pancreatic ductal adenocarcinoma. The phase II design will look at standard of care, gemcitabine plus PEGPH20, or placebo versus gemcitabine. The primary end point is overall survival. We believe that we're going after the right biology here. By dismantling the hyaluronan tumor architecture, we may be able to open previously constricted vasculature that may, in turn, increase blood flow to the tumor, and may allow gemcitabine to be more effectively delivered to the tumor, and be more effective than gem alone. This is indeed a unique approach to targeting the tumor architecture.

We also initiated a Phase I-II trial with HTI-501 in women with moderate to severe edematous fibrosclerotic panniculopathy, with cellulite. We expect top-line results from the Phase I portion of this study in the first half of next year, which would potentially yield the decision to continue with the Phase II portion of this study. And finally, with regard to HyQ, this morning Baxter presented the full data set from the HyQ Phase III registration trial at the annual meeting of ACAAI, the American College of Allergy, Asthma, and Immunology.

I'd like to point out, really, what was new from these data. First, subcutaneous infusions of immune globulin were faster than IV in both children and adults. Secondly, HyQ had very good bio-availability, essentially the same or similar to IV, in contrast to other subcutaneous offerings. And finally, as you know, infusion reactions tend to be the main limitation to infusion time, and these results demonstrated infusion reactions, systemically, were 0.33 of those seen in the IV setting. So the temporally associated systemic AEs occurred with 8.3% of the HyQ infusions, compared to 25% of IV infusions.

We believe the body of data around this product supports the product profile that differentiates it from currently available IV immunoglobulin products. Based on this unique product profile, we believe that this product could have the potential to be a market leader in the IGSC markets. Regarding the potential market for HyQ, the global market for immunoglobulins is approximately $5 billion to $6 billion, annually, about 6% annual growth, of which subcu is relatively small, but growing. We believe that HyQ may further catalyze growth, because once monthly subcu as an offering may prove much more attractive than the existing once weekly subcutaneous offerings, and we look forward to a potential launch of this product in the second half of 2012. So while it is indeed proven to be a notably volatile year for the markets, we're confident in Halozyme's diversified approach to value creation, and feel well-positioned to bring benefit to patients and shareholders over multiple horizons of growth. To this regard, let me take a brief moment to put some of these recent developments into the context of Halozyme overarching strategy.

Since inception, Halozyme has pursued a 3 horizon model that grows, really, in continuum. With the first horizon, we've coupled our enzyme platform to high volume biologics, with biopharmaceutical companies that are established leaders in their respective fields, whether it be Roche's global leadership with antibody therapeutics, or ViroPharma's leadership with specific orphan biologics. In the second horizon, we've applied this platform technology towards other products, where we have more control over the programs, and can monetize them through multiple inflection points. Finally, the third horizon is driven by applying our fundamental understanding of matrix biology into first-in-class, innovative biologics that can propel the Company into the future as a fully integrated biopharmaceutical company. Notably, I think you can see how each horizon provides the financial base and experience foundation for the other horizons of growth in a measured fashion.

With our partners making plans today to potentially launch 3 new subcu biologic blockbusters with our enzyme technology over the next few years, and with additional partners in products and development, we have an increasing level of confidence that the royalties and milestone payments from this first horizon will help the Company reach profitability and beyond. The deep relationships we've built with these organizations have been critical to making these programs successful. It starts with the people and the science, and obviously builds from there. Secondly, by leveraging this core technology into products where the Company can monetize the assets at any point along the value creation chain, such as Hylenex, insulin pumps or pens, the opportunity to develop commercial competencies that can supplements revenue streams from partnerships becomes an additional possibility over the next few years. One of the foundations of this strategy is the concept that Halozyme should only continue to develop a drug where we can increase the intrinsic value of the asset, and, more importantly, add more value than someone else could.

Finally, with truly innovative first in class biologics, like PEGPH20 and HTI 501, we're driving through well-designed, clinical inflection points that may allow us to bring these programs through registration and commercialization on the foundation of growing revenue from our other income sources, rather than undue shareholder dilution. These programs could enable us to realize significant value creation over the next 3 to 5 years. The recent additions to our team, including Jim Shaffer, our Chief Commercial Officer; Jean Liu, our General Counsel; and Joy Zhu, VP Oncology and Clinical Development; will help us reach these objectives, and bring diverse new strengths to the Management team. All of them bring significant tenure from large and entrepreneurial organizations, where they can bring the best of both worlds to Halozyme.

As the Company evolves, we believe that all 3 horizons are important for the Company to achieve its full potential. We'll be prudent with our finances, and recognize that we must generate a return for shareholders, but our model is built on taking a portion of the economics from the first horizon to invest in the products that we believe can have truly break out value. And with regard to our execution against this strategy, I can't think of any time over the Company's history where I've been more optimistic, passionate, or excited about the prospects. We're more proud of the execution by our scientists, clinicians, and staff, but continued execution against this strategy should enable us to repeat that statement in the near future. So these are the latest updates on the proprietary programs in our development partnerships. Now, I'll turn the call over to Kurt for his financial commentary on the third quarter.

Thanks Greg, and good afternoon to everyone on the call. Net income for the third quarter of 2011 was $5.2 million, or $0.05 per share, compared with a net loss for the third quarter in 2010 of $12.4 million, or $0.13 per share. Revenue for the third quarter of 2011 was $22.9 million, compared to $3.4 million for the third quarter of 2010. Upon the signing of the transition agreement with Baxter in July, we recognized $18 million of deferred revenue as revenue in the third quarter of 2011. This did not impact cash, as it was just a shift from deferred revenue to revenue. This is a one-time item, and just to be clear, we don't have any other items on the balance sheet relating to Hylenex relationship that we had with Baxter.

In addition, Viropharma initiated a Phase II study of Cinryze, in combination with enhanced technology, which triggered a $3 million milestone, which was also recognized as revenue during the third quarter. And finally, we also had the normal revenue from the reimbursement of R&D expenses from our partners, as well the amortization of upfront payments received from Baxter and Roche. Research and development expenses for the third quarter were $13.5 million, compared to $12.4 million for the third quarter 2010. The increase is primarily driven by an increase in clinical activities in manufacturing costs, partly offset by lower compensation costs.

SG&A costs for the third quarter of 2011 were $4.3 million, compared to $3.4 million last year. The increase is related to higher marketing and legal expenses during the quarter. We ended the third quarter with a cash balance of approximately $66 million, and we had a net decrease in cash for the quarter of $12.8 million. With regards to our 2011 financial guidance, while we are not adjusting the guidance ranges we previously communicated of a 15% to 20% increase in the operating expense, and net cash burn of $30 million to $35 million, we now expect to be at the low end of these ranges.

And with that, I'll turn the call back over to Greg.

Thanks, Kurt. Now let's open it up for questions. Operator?

Thank you. We'll now be conducting a question and answer session.

(Operator Instructions)

One moment please, while we poll for questions. Our first question comes from the line of Jim Birchenough with BMO Capital Markets. Please proceed with your question.

Hi, guys, congrats on all the progress during the quarter. Question on insulin pump opportunity. I wonder if you can give us some detail on how you're thinking about the pharmaco-economics of Hylenex in this setting. What's the cost every three days of insulin pump therapy? What would you see as incremental cost to add Hylenex to that as pre-treatment, and what kind of pricing are you thinking about here that would makes sense from a payer perspective? Thanks, and then I have a follow-up for Kurt.

All right. Thanks Jim. So at a high level insulin pumps are something that's really broken out between the device benefit and pharmacy benefit there. So what you find on patients that are using insulin pumps, typically, is that the device side is typically much more heavily impacted than the pharmacy benefit side, where it's just the insulin. But as far as -- generalized as far as the pharmaco-economics that we're looking at on this, specifically, we'd have to go through, I think, and take a look, number one, at the glycemic response in this setting in a relatively small Phase IV trial first. But essentially, we think that this is something -- what we've done of the initial setting at this point has not seemed to appear as a burden for payers. As far as the pricing, that's something which we've not publicly articulated on that, obviously, for a number of reasons.

And just in terms of a confirmatory study with Hylenex itself, has that started? When might we see that data?

Yes, so that's a trial that's really necessary using commercial product. So we'll be starting that, literally, before year-end, and it's something which we think we'll have wrapped up in the first quarter.

And then maybe just one housekeeping item. I know you're not giving guidance today for 2012, but when we look at the R&D expense of around $13 million, $13.5 million, where should we see that going over the next 12 months or so? Is that a stable base? Or if you can't say quantitatively, just qualitatively, what are sort of the ups and downs around that spend in terms of different programs?

Kurt, do you want to cover that?

Jim, I appreciate the effort in asking the question, but I think that I'm going to defer my response until we release earnings in the fourth quarter, and provide our official 2012 guidance.

Okay. Thanks, guys. I'll wait until then.

All right. Thanks, Jim. Sorry about that.

Thanks Jim.

Thank you. Our next question comes from line the Greg Wade with Wedbush. Please proceed with your question.

Thanks for taking my question this afternoon. A few more about the insulin pump opportunity. Greg, have you had a chance to discuss this opportunity with the FDA to confirm that this is on label for Hylenex?

Our regulatory group has gone through, actually, from a discussion line, looking at the use of Hylenex with a number of different products, so this is something that is a continual process, and I think it really gets down to number one, which is looking very carefully at the label claim itself as an adjuvant to increase the absorption and dispersion of other injected drugs. Number one is not going from the basis that this is not a product that is to treat diabetes and things of that nature, so it starts, I think, just from the basic science, and goes from there. As far as long-term outcomes, or making claims, for example, of components that would need to be built out from long-term outcome studies, that's, I think, what we're matching up between market research and the label claims and looking at that very carefully.

Okay. Can you put a little more granularity around the Phase IV study you plan on getting underway? Is there a subset of the pump patients that you'll be doing that study in? What data might you develop? If you can maybe go through, if your market research and that study is successful, some of the other key things you'll be working on in 2012, and when you might be able to be market ready for the product. Thanks.

Sure. Thanks Greg. So, the study that we'll be performing, essentially, is, number one, is just establishing the reproducibility of the profile set in patients, in type 1 patients, specifically, with Hylenex using a commercial product. And that's essentially a study that will be wrapped up in the first quarter of next year. And looking at it, what we're initially thinking in the patient population are the patients that are on insulin pumps that use sensor augmented pump therapy. But beyond that, I think, when you look at kind of tiered sets on that, the first stage of this, I think, from a readiness is something that we look upon as a second half of 2012 when we'd be in a position, I think, as far as looking at entry. Essentially this is kind of a tiered group of different patient populations, and I don't think we're in a position to kind of talk about the multiple segments at this point in time.

Thanks, Greg.

Sure.

Thank you. Our next question from the line of Chris Holterhoff with Oppenheimer and Company. Please proceed with your question.

Hi, guys thanks for taking the question. Just one the Phase I-II study of 501 in cellulite. Can you talk a bit more about the type of results that you'll need to see to consider that study a success, and what the next steps would be, and what your longer term goals are for this program, in terms of partnering or going it alone?

The first point, obviously, the single dose escalation is really looking at two different activator concentrations, and doing a traditional dose escalation in two different activator settings. So, the first component, of course, is safety, number one. And this is essentially driven by these products, which is to establish that there is no unacceptable local tolerability issues, specifically bruising, or things, for example, the most extreme sense would be, for example, haematoma. So that's the first point, which is safety, on that escalation. The second component, though, is that in each case, we've also incorporated a volumetric assessment, using a tool that we've used historically in some other trials. And it's basically a 3 dimensional imaging, and that's done either at the placebo injection or at the test article injection. So we'll be looking from that as well, that we have a safe dose, and also one where we see signs of pharmacologic activity. Those are the two key points that dictate transition over into the second stage, where it will be a multiple site injection. From a long-term development strategy, having that in place, there's kind of some opportunities strategically where we've looked at both ex-US opportunities of time to commercialization, and ones where, potentially, we might able to keep the US opportunity for partnering at a later point in time. So the strategy will be to look at, initially, strategies where we can partner the outside, or OUS strategies to offset some development costs.

Okay. Great. Thanks for taking the question and congratulations on the progress.

Thanks.

Thanks.

Thank you. Our next question is from Jason Butler with JMP Securities. Please proceed with your question.

Hi, thanks for taking the questions. I guess a quick one on the use of Hylenex with pump patients. Could you just remind us what the Hylenex pricing was previously, and if you have any thought about how you might reintroduce it in general?

That's another more eloquent way of asking the question, Jason. But, what I can say is that Baxter had previously had priced the product around $90, animal product safe are less than that. And so we look at that, as far as the pricing, we certainly will not be going out with a pricing model that's higher than that, that's about all I would say.

Okay. Got it. Then, could you talk about how you see a subcutaneous mabthera fitting into the commercial space, what the potential points of differentiation would be in terms of safety, tolerability, infusion timelines, and pharmaco-economics, just very broad, big picture.

Yes, sure. Obviously, the trials that are underway right now are focused OUS, so we kind of have to take a look there. But the time frame that folks spend in the chair with intravenous access with mabthera can be three to four hours. Number one, getting that down to a 10 minute injection, really the first point is, establish safety. So that's what Roche, I think, is focused upon. Which is to say, what's the tolerability of that product and efficacy? And the second stage that they're looking at with induction. If you look on the basis of how much of mabthera sales today are induction versus maintenance, there's a similar sort of model what you see with trastuzamab, for example. But number one is people have looked at developing new anti-CD 20 antibodies with the specific objective of trying to increase their tolerability so they could be infused faster, so we -- you can take as a target product profile that others have looked at, with speed being a key differentiating factor. So for us, I think, if we can go through an get this in less than 10 minutes and be well tolerated, I think the advantage for patients, and being a similar model to what you have with trastuzamab, that it's a fixed dose, it has a lot of efficiencies when you have a large patient population on maintenance therapy.

Okay. Great. Thanks a lot.

Sure.

Thank you.

(Operator Instructions)

Our next question comes from the line of David Moskowitz with Ross Capital Partners, please proceed with your question.

Thank you. Good afternoon guys.

Good afternoon.

Could you guys provide us with a little bit of color on the discussions that you will be having with potential partners for the insulin PH20 product, particularly after the 12 weeks Phase II data has been announced on a top line basis? And in particular I'm looking for whether or not these data were impressive to those partners, or just simply as expected?

No. Great questions, David, all I will say is that, number one, the package, first, number one, has to be completed and put together, and essentially from the data set, there's a lot of material for people to evaluate, and everything from safety to efficacy, I feel very good that we have a great profile on our hands, but I certainly wouldn't go out and target anything beyond that on a discussion point of anything about partnerships and timing and things of that nature.

I guess what I'm trying to get is we've talked to you over the years about this product, and what the partners need to see --

Yes.

Out of the product, and that these, these studies were sort of longer term studies.

Yes.

These were kind of the last box that needed to be checked for what partners were looking at. Again, do you think that this is just a box being checked, or is it a little bit more than that, based on the data you saw?

Yes. Well all I will say is that I feel very comfortable that there's not any other studies that we need to run based upon this, as we've kind of said before. And the secondary line is the type of information that's needed, for example, of someone that's not currently in the diabetes space, versus those that are in it currently. Their needs are often going to be different, as far as their familiarity with these products in general. But as far as the data set, definitely not something on a check the box, I think, for anyone.

You talked about, Greg, about the lower systemic side effects of HyQ earlier on the call. It looks very impressive, actually. Can you talk about why you think this phenomenon exists, and was this consistent across all the clinical data that you saw, when looking at HyQ versus Gammagard?

Yes. We've actually done a lot of models looking at this, and it's not in any way unexpected. Think of it this way, when you put something under the skin, subcutaneously, and infuse it, it's a relatively long journey for those molecules to get into the vascular compartment for the blood stream. So, if you look at the pharmaco-kinetics, what you find is it takes anywhere from two to three days, on average, for an antibody injected under the skin to get into the blood stream. So you can think about it as it's almost like giving a two day infusion. We know with most antibody based therapies that when they're put directly into the blood stream, we can actually reduce their infusion reaction rate by slowing them down. So I think the biology in what you see there is actually the pharmaco-kinetics, and the response, you could probably get a similar effect if you were to slow down the infusion rate of a plasma product, but giving it over several days.

Okay. Thanks for that.

Sure.

Last question for Kurt. Kurt, we saw a little bit of revenue in quarter, about $1.5 million, not that meaningful. But could you tell us where that's from.

I thought you might ask that question, David. Yes, so I apologize if this is going to get a little complicated, but what that relates to was some Hylenex inventory that we had sold to Baxter under the old agreement. And essentially we were not able to book that as a revenue, because they had the right to return that during this period of time. But with the signing of transition services agreement, we were finally able to move that into product sales, so there was close to $1 million that was recorded that way. Does that makes sense?

Yes. Absolutely fair. And in terms of seeing new Hylenex revenues show up, would we expect that this quarter?

No. So I think that we expect to reintroduce Hylenex by the end of the year, and that's probably December, which means we probably won't see anything significant until we get into Q1.

All right. Thanks.

Hey, David, just this would probably be a good time just to remind folks that we will be booking that based on sales that will go through to the hospitals, as opposed to booking sales when we ship it to wholesalers.

Got it. Makes sense. Okay. Thanks a lot.

Thank you.

Thank you, David.

Thank you. We have a follow up question from the line of Greg Wade with Wedbush, please proceed with your question.

Thanks. Just a follow-up question. Greg, you indicated that you were planning on doing some market research around the pump opportunity. What questions do you want to ask in the marketplace? Are you trying to get to some sort of dollar value that would lead you to decide whether to do it yourself or with a partner? Maybe give us a little more granularity, thanks.

Look Greg, the key thing is these are just some standard things that people go about doing, from the standpoint of assessing opportunities, going through and understanding the segmentation, so it's part of what our commercial team is going through and just building that out.

Thanks

Yes.

Thank you, our next question come from the line much Eun Yang with Jefferies and Company. Please proceed with your question.

Thanks very much. I want to ask you about Herceptin. So the timeline plasma data came out and met the primary end point. What is your pathologic complete response?

Pathologic complete response is one of the co-primary endpoints.

Right.

So obviously pharmaco-kinetics is one, which is to establish that the molecule is in the blood stream with a similar exposure. Pathologic complete response is designed for efficacy. So I can explain kind of the way this works for you. So when you take patients on chemotherapy alone, you give them eight cycles of chemotherapy. When you go in for surgery, you have a certain percentage of patients that will have what is called a pathologic complete response. When they do surgery to look at the lesion on under the microscope, a certain percentage of patients will have no evidence of disease microscopically. When you add Herceptin to that chemotherapy, the percentage of patients achieving what's called a pathologic complete response increases. It just about doubles, and so essentially what you're looking at there is to ensure that the activity of the Herceptin given with chemotherapy is not in any way compromised when it's given subcutaneously with our technology.

I see. That's clear. My other question is, obviously I'm sure that you guys have gotten a lot of questions, given the fact that Genentech and ImmunoGen regarding T-DM1, and I think they also trying in running clinical trials in neo-adjuvant and adjuvant setting for early breast cancer, so do you have any comment on how Roche is thinking about positioning of Herceptin subcu versus T-DM1?

Yes, I certainly wouldn't go through and talk about Roche's strategy on it. Simply to say that there's multiple segments of this particular market. There's lots of different molecules of Herceptin, Pertuzumab, and T-DM1, and really I think that Roche and Genentech are working on how to go through and optimize patients in all of those settings. So there's certain areas where, I think, there's tremendous room for growth, and there's others where I think the bar is quite high. But I think from that perspective, Roche is looking at all of those options of how to go through and maximize efficacy for patients and safety.

Okay. Thank you.

Sure.

Thank you. We have a follow-up question from the line of dine of David Moskowitz. Please proceed with your question

Hi, thanks for the follow up. Do you want to comment on what's happening with the platform with respect to any new deals? Is there any way to quantify discussions that you guys are having with other companies, perhaps studies that are in feasibility, and any sense of timing for when we could start to see new business development activity?

Yes. David, all I will say is kind of back on the same line there is that these all mature at different rates and our folks are always very busy.

Got it. And just to cap that off. Your sense of optimism, Greg, on getting a new deal in, let's say, the next six months?

I go back to the same comment. I've seen deals that we've put together in 30 days, and there's deals that have been done in 18 months. But there's, I think, from the standpoint of the value and the rest of it, I haven't seen anything of a concern with people not seeing the value in the technology.

Okay. I appreciate it. Thanks.

Sure.

Thank you. There are no further questions at this time. I would now like to turn the floor back over to Management for any closing comments.

Well, thank you for joining us on our third quarter conference call. I hope it see many of you at various financial conferences in the future that we'll be attending later this winter. Take care everyone.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.