Halozyme Therapeutics Inc (HALO) 2013 Q1 法說會逐字稿

Greetings and welcome to the Halozyme Therapeutics first quarter 2013 financial results conference call. (Operator Instructions) This conference is being recorded. It's my pleasure to introduce your host, Kurt Gustafson, Chief Financial Officer at Halozyme Therapeutics. Thank you, Mr. Gustafson, you may begin your conference.

Thank you and good afternoon. Welcome to Halozyme's quarterly update conference call. Joining me today is Gregory Frost, President and Chief Executive Officer.

This afternoon, Halozyme released financial results for the first quarter of 2013. If you have not received this news release or if you would like to be added to our Company's distribution list, e-mail [Temarie] Johnson at TJohnson@Halozyme.comThis call is also being webcast live at the internet at www.Halozyme.com and a replay will be available on the Company's website for the next 14 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 SEC, as well as our own 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 Gregory Frost, Halozyme's President and CEO.

Thanks, Kurt, good afternoon to everyone. We appreciate you joining us on Halozyme's first quarter 2013 earnings call. This afternoon, we'll be providing further detail on the items in the press release issued earlier today, I'll provide an update on the status of our key clinical programs, including significant progress made with our wholly-owned programs as well as some updates on our collaborations. Kurt will then provide additional detail on our financial results.

At our 4Q earnings call in February, I indicated that 2013 would be a pivotal year for Halozyme, with a number of near-term catalysts. In Q1, we saw significant momentum toward key milestones with important developments in both our partnered and propriety programs.

Let's start with our partnered programs. We're encouraged by the progress we've seen by all of our partners. We now have the potential for up to three product launches over the next 12 months based on our rHuPH20 platform. As reported in the first quarter, CHMP adopted a positive opinion, recommending marketing authorization for Baxter's HyQvia product for replacement therapy for adult patients with primary and secondary immuno-deficiencies.

This product could represent the second product approval in our portfolio and first regulatory approval in Europe for our partnered programs. As many of you know, we have two other partnered programs currently under EMA review, Herceptin SC and MabThera SC. At the development stage, ViroPharma reported on their quarterly call that Cinryze is enrolled in their phase2b trial. And finally we're very pleased with our initial interactions with our newest partner, Pfizer, and the speed which the teams are moving forward towards clinical development. We look forward to providing you additional updates on these programs as they become available.

Now, with our proprietary products and programs, I would like to start with Hylenex. First, I want to congratulate our commercial team as Hylenex achieved 50% market share in the 16th month after our launch. And while this initial market is modest, I think this milestone serves as a testament to the quality of our commercial team and their ability to successfully execute with customers across broad markets.

As we continue to develop and grow this brand, let me share with you some additional progress we've made with the development of Hylenex for the insulin pump market. At the end of last quarter, we initiated a phase4 clinical trial called CONSISTENT 1, which evaluates the use of Hylenex in conjunction with rapid analog insulins for people with type one diabetes on insulin pump therapy.

People with type one diabetes on insulin pumps face many challenges to maintain good metabolic control. Everything from pump occlusions to carbohydrate counting to name a few, but the data suggest that an additional challenge comes from insulin absorption from the subcutaneous tissue, which is sub-optimal for many patients and can lead to a challenging balance between hypo and hyper glycemia. Our goal is to see if Hylenex can deliver a more physiologic insulin profile for patients on pumps, which could help some people better manage their diabetes.

This trial is designed to capture more real world results, taking into account the various challenges and variables this population faces. For example, some people with type one diabetes struggle to bring down their A1c. Others have challenges with glucose excursions, while for some the biggest challenge is hypoglycemia.

Studying this broader population in a phase4 setting will ensure clinicians understand how Hylenex works in all of these settings. Additionally, this study will help support the continued safety of exposure in this specific patient population when used across various insulins, pumps and infusion sets.

CONSISTENT 1 is a multi-center, randomized, phase4 trial that includes approximately 400 subjects in 40 centers across the country. This study is designed to evaluate treatment differences in safety and key outcomes, with end points at 4 and 12 months measuring A1c, post-prandial glucose, and rates of hypoglycemia among many other safety parameters. And while the primary analysis is at four months, this study will continue to monitor patients for up to two years.

As discussed previously we planned to run some additional, smaller studies in the future to support the type one diabetes community and continued commercialization of the brand. CONSISTENT 1 represents the largest of those studies but we'll provide more details on the others as they mature. To-date, CONSISTENT 1 is enrolling very well, with nearly 30 sites activated.

As I mentioned, this study will enroll up to 400 adults with type one diabetes on insulin pumps, but I'm very pleased to say that we've all ready enrolled over 25% of the planned 400 subjects, with 160 patients screened as of today. This enrollment rate has greatly exceeded our internal expectations and we're looking forward to evaluate this therapeutic option for a representative patient population in a real world setting, and testing the impact of Hylenex activity in combination with all types of rapid-acting insulins for type one diabetes on various insulin pumps.

In addition to the CONSISTENT 1 study, I'm also very excited that investigators at Yale have now received FDA clearance to begin a new clinical trial of the artificial pancreas, incorporating hyaluronidase into the system. This investigator-initiated study is being funded by a non-profit organization, but the artificial pancreas project represents the persistent innovation in diabetes research whereby scientists have attempted to close the loop, by fully integrating continuous glucose monitoring with subcutaneous insulin delivery, using a sophisticated algorithm that is intended to automatically dose insulin in response to a patient's changing blood glucose levels.

One technical challenge that has plagued the progress towards closing the loop with the artificial pancreas has been the variable delay between systematic delivery and the glucose response. By shortening that time period, reducing variability of absorption, the goal is that by tightening this feedback mechanism between the insulin pump and the glucose monitor the closed loop algorithm may be able to more quickly respond real time to a patient's changing blood glucose levels. The study protocols have recently received FDA clearance and more details will follow.

We're very pleased about this innovative development as it certainly reflects the growing enthusiasm among the diabetes thought leaders about the potential of hyaluronidase to contribute towards the goal of closing the loop for patients in the future. Of course, as we look at opportunities to advance insulin pump therapy for the management of type one diabetes, these programs will significantly contribute to the growing body of clinical research on Hylenex.

Now, switching gears to a very different part of the pancreas, with our PEGPH20 in oncology, we recently announced the initiation of a 124-patient randomized phase2 trial evaluating PEGPH20 as a first line therapy for stage 4 metastatic pancreatic cancer in combination with gemcitabine and Abraxane.

We all know how terrible pancreatic cancer can be. Its tendency to metastasize prior to diagnosis makes it the fourth deadliest cancer with less than a 6% 5-year relative survival rate and more than 38,000 people succumbing to this disease each year. We, and many of our academic collaborators, have been carefully studying the micro environment these tumor cells generate for some time, and have consistently found that these tumors produce a hyaluronan-rich matrix environment. In fact, in earlier stages of disease, the presence of this matrix component appears to be a indicator of poor prognosis after surgery.

While the underlying pathways are still not completely understood, this hyaluronan-rich matrix appears to influence the biology of these tumors making them both more hypoxic and resistant to therapy. So the underlying hypothesis has been that by depleting this component of the tumor matrix with our systematically acting enzyme, PEGPH20, the tumor environment is rapidly altered, rendering these tumors both more vulnerable and accessible to many types of anti-cancer therapies. As this pegylated enzyme is most potent in a mildly acidic environment, such as these hypoxic tumors, the ability of PEGPH20 to remove substrate from these cancers is remarkably efficient.

The pharmco-dynamic activity from initial studies of this enzyme alone as a single agent in patients with very advanced solid tumors were recently presented at AACR, but earlier this year we completed enrollment of 28 patients in a single-arm phase1b trial, in patients with stage 4, metastatic pancreatic ductal adenocarcinoma, treated with PEGPH20, in combination with gemcitabine. So the context of this study is to establish the safety of PEGPH20 when used in combination with chemotherapy, and to evaluate the overall response to therapy and the relationship to the status of the HA target in evaluable biopsies of these patients.

To put this in perspective, the response rate in this patient population to gemcitabine alone has historically been quite consistent, with an objective response rate of only 5% to 10%. So despite being a single-arm study, this very low response rate makes this study and size quite useful to assess the relative activity of PEGPH20 and pancreas cancer. Two abstracts have been submitted from this study and an oral discussion session has been selected for presentation at ASCO June 3rd. As many of you know, these embargos lift in just a few days.

With the recent success of gemcitabine and Abraxane in their phase3 impact study reported earlier this year, we anticipate that the combination gemcitabine with Abraxane chemotherapy of will likely become a standard of care over gemcitabine in metastatic stage four pancreatic cancer. It's currently in the NCCN treatment guidelines for PDA, which we feel would make gemcitabine-only arm difficult to justify for patients.

So based upon extensive discussions with our collaborators and rather impressive findings in pre-clinical pharmacology models that compare PEGPH20 as a triplet therapy with both gemcitabine and Abraxane, compared to these agents used alone, we initiated last month a randomized phase2 trial in 124 patients that will receive gemcitabine and Abraxane with and without PEGPH20. The primary outcome will be to measure progression-free survival between patients administered PEGPH20 and those who are not. Additionally, all patients will have biopsies evaluated for scoring the HAtarget in these tumors, using a new recombinant diagnostic reagent we developed to establish relevance to response in therapy.

We look forward to seeing many of you at ASCO for a first look at the activity of PEGPH20 in combination with gemcitabine, and we're very excited about getting this new trial underway. In addition to our studies, SWOG, one of the five cooperative groups that together comprise the National Cancer Institute's trial network, has informed us of their intent to run a 140-patient, randomized phase2 trial of modified folfirinox with and without PEGPH20 in pancreatic ductal adenocarcinomas in the second half of 2013.

SWOG will be funding this study and we're in the process of finalizing protocols and drug supply for them. We believe this underscores the excitement among the pancreatic cancer community to the emerging data, as a leading group putting their resources behind testing PEGPH20. As we've talked about previously, this folfirinox regimen is recommended for a more narrow patient population than the gem-abraxane regimen. But with completion of the SWOG study and our own randomized phase2 with gem-abraxane, we will have tested PEGPH20 against the most effective standards of care available to patients with stage four metastatic pancreatic carcinoma. And we think that's the right thing to do for patients and for the molecule.

Finally, for our HTI-501 program, it is progressingwell and we're happy to announce that we're targeting the World Congress of Cosmetic Dermatology conference in Athens, Greece in June to present preliminary results of the randomized clinical trial of our HTI-501 program in aesthetic dermatology. This presentation scheduled for June 29th and the lead investigator Dr. Perez will be presenting. With that, I'll turn the call back over to Kurt Gustafson who can provide more detail on our financial results released earlier this morning.

Thanks, Greg. Earlier today we announced our financial results for the first quarter of 2013. The net loss for the first quarter of 2013 was $19.3 million or $0.17 per share compared with a net loss for the first quarter of 2012 of $15.1 million or $0.14 per share.

Revenues for the first quarter of 2013 were $11.8 million compared to $7.4 millions for the first quarter of 2012. Research and development expenses for the first quarter of 2013 were $22 million compared to $15.9 million for the first quarter of 2012.

I want to make one additional point about our R&D expenses. Just as in 2012, approximately 25% of our R&D expense for the year is expected to go towards the manufacturer of launch inventory for our partners. This is material for which we have firm orders, so not material that we are building at risk. This has the effect of grossing up our P&L as we report the R&D expense for this material as it's made. And then you'll see offsetting revenues under our collaboration agreements. However, one additional point to note is that the revenue and expense may not always be in the same period as revenue will typically lag the expenses.

Moving on. SG&A expenses for the first quarter of 2013 were $7.6 million, compared to $6.6 million for the first quarter of 2012, and our cash plus marketable securities were $87.4 million at the end of the quarter, and net cash used in the quarter was approximately $12 million. Finally, our financial guidance for 2013, which was announced on January 7th, remains unchanged, with net cash burn expected to be between $45 million and $50 million for the year.

I will now turn the call back over to Greg who will provide some parting thoughts.

Thanks, Kurt. Before the close of this part of today's call, I just want to again take a moment to acknowledges and thank all the employees at Halozyme. It's hard work and dedication enabled the numerous accomplishments in the first quarter. We've delivered on several important milestones that position us for significant achievements this year and will help us build long-term shareholder value as we advance patient care through truly innovative therapies. On that, I'll ask the operator to open up the lines for questions.

Thank you. (Operator Instructions). Our first question comes from the line of Jason Butler of JMP Securities. Please proceed with your question.

Hi, thanks for taking the questions. First one on the insulin study. Can you talk about any statistical parameters for the endpoints that you're looking at, or how we should interpret the results given that this is a phase4 study?

Sure, Jason. Unfortunately, this is a study which has been enrolling very, very quickly, but it should be up on clintrials.gov hopefully within the next 24 hours or so. What you've got obviously for the HbA1c you're look at a non-[imperiority] margin of, I believe 0.4, Then the other components from our [power] as far as hypoglycemia, PPG, etcetera are similar to our other trial designs we've run in the past. Perhaps what would be best to do is we could follow up after that clintrials.gov posting is up there.

Okay, great. Thanks. Then on the PEGPH20 datawe're going to see at ASCO,can you tell us what data will be included in the abstract next week? Is there actually response rate data in there? Is it from all of the patients, some of the patients? Just any color you can give us.

Obviously, with embargoed abstracts, there's not much detail I can give beyond what's in there, but of course as the safety and response rates, I don't actually have a good sense. I would have to check with the folks as far as the exact number that went into the abstract. It's not the complete set, but I think it will give folks some good color of that.

Great.

Then of course all of the other parameters.

Great. Thank you. And then just last question briefly. The 501 results, are you planning on putting out a release with the data, or top line data before the 29th of June? Or is the 29th of June the first time we'll see the data?

I think it's probably, we'd go through and we'll be talking about it when the data are presented. That's something we like to do is let the science get out there and let everyone to look at it.

Okay, great, thanks for taking my questions.

Sure.

Our next question comes from the line of Ying Huang of Barclays. Please proceed with your question.

Great. Congratulations on getting that insulin program started. I have two questions. First of all, on PEGPH20, is it safe for us to assume that you have seen (Inaudible - background noise) results rate data before you roll over that trial into the PEGPH20 plus gemcitabine plus Abraxane trial. Then secondly on the insulin program, I know you have talked to FDA about this, but can you clarify whether the 400 patients 12 months (Inaudible) should be sufficient for safety purposes? Thanks.

Sure. Letme start with the PEGPH20. Of course, to put this in context, the rationale of what we did in this trial was to expand out the recommended phase2 dose. We had 24 patients at that dose. The thought process that went into that, of course, is knowing that the historical response rate of gemcitabine in pancreatic ductal adenocarcinoma in that Stage 4 population has been very solid in the 5% to 10% range, so what we get from those numbers essentially put us in a position of having confidence, if you will, that on a response rate alone that you have something that you know is hitting the activity mark.

Beyond that from the standpoint of any other details, that's something we would have to wait till after up with ASCO would be good. In the context of your questions regarding the insulin program, first was, number one, the agency has not requested this study. It was a study that's been initiated based on our own assessment of the needs of the patient population and detailed discussions with all of the thought leaders in this space. The study protocols, of course, have been submitted and there will (Inaudible) be dialogue with the agency to confirm the use of the product in that phase4 design.

Okay, great. Thanks very much.

Sure.

Thanks, Ying.

(Operator Instructions). The next question comes from the line of Don Greco, a private investor. Please proceed with your question.

Pretty much all of my questions are answered, The PH20 and the cosmetic. I'm just wondering when maybe that might be able to go on to the market?

Thanks for calling. Just to be clear, HTI-501 is a different enzyme. It's a collagen degrading enzyme of the cathepsin family. From a timeframe on this, I think after this particular proof of concept study, there are a large number of studies that would be necessary before that's ready for commercial introduction.

Thanks for the response.

(Operator Instructions). Dr. Frost there are no further questions at this time. I would like to turn the floor back over to you for closing comments.

I'd like to thank everyone for joining us today and look forward to seeing you at conferences coming up.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.