Halozyme Therapeutics Inc (HALO) 2013 Q2 法說會逐字稿

Greetings and welcome to the Halozyme Therapeutics Second Quarter 2013 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, David Ramsay, Chief Financial Officer at Halozyme Therapeutics. Thank you Mr. Ramsay, you may begin your conference.

Good afternoon everyone and welcome to Halozyme's quarterly update conference call. Joining me on the call today is Gregory Frost, President and Chief Executive Officer. This afternoon, Halozyme released financial results for the second quarter of 2013. If you have not received this news release or would like to be added to the company's distribution list, please email Temre Johnson at tjohnson@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 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 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 now turn the call over to Gregory Frost, Halozyme's President and CEO.

Thanks, David and good afternoon to everyone. We're glad to have you all here on Halozyme's Second Quarter 2013 Earnings Call. Let me start by saying that David Ramsay may be a new name and voice to some of you, but for me one of the many highlights of last quarter was reappointing David as CFO. David has a long and distinguished tenure here at Halozyme, joining in 2003 as Chief Financial Officer before serving as Vice President of Corporate Development. He's played an important role in many of our major milestones over the years and over the last four years, gained valuable commercial and operational experience as he resumes the role as CFO. Now, I'd like to provide you additional color on the items from the news release issued earlier today, including exciting updates on the status of our key clinical programs and partnership collaborations. So let's start with our partner programs.

While we are now approaching nearly a decade of clinical and commercial experience with our recombinant human enzyme in the United States, we are very pleased to see the regulatory progress of our partners in Europe last quarter. First, with the approval of HyQvia, and second, with a positive recommendation for Herceptin SC. The European Medicines Agency granted Baxter marketing authorization for all European Union members' states for the use of HyQvia as replacement therapy for adult patients with primary and secondary immunodeficiencies. HyQvia is a combination of immunoglobulin, 10% and Halozyme's recombinant human hyaluronidase, rHuPH20, to facilitate the dispersion and absorption of the immunoglobulin subcutaneously. HyQvia provides patients an opportunity to subcutaneously administer immunoglobulin therapy at the same dose and frequency as their previous intravenous administrations. This may offer patients a new option with enhanced convenience over the currently available products for patients managing their PID. We continue to work closely with Baxter to provide necessary supply of bulk rHuPH20 enzyme to support the rollout of HyQvia in select EU countries in the third quarter this year, with additional territories going into next year. The launch of HyQvia in Europe and first commercial sale last month has triggered a $4 million milestone payment to Halozyme.

With regard to us the status of HyQvia in the US, Baxter noted on their recent earnings call that ongoing dialogue with (Sieber) regarding HyQvia has been both productive and encouraging. As a result, Baxter stated that they remain on track for a BLA resubmission to FDA before the end of the year for their CRL response.

Our Roche collaborative programs also achieved some very noteworthy progress last quarter in the EU. In June, the European CHMP granted Roche a positive opinion for a line extension application to add their subcutaneous formulation to the Herceptin label as treatment for patients with HER2-positive breast cancer in the EU. On their second quarter conference call with investors, Roche stated that upon marketing authorization, they expect to introduce Herceptin SC in Europe and other markets outside the US in the second half of this year. Roche's pivotal phase 3 HannaH trial, conducted at 102 sites outside the US demonstrated that Herceptin SC can significantly reduce the administration time, compared to IV, with similar efficacy and safety. While a typical intravenous infusion of Herceptin can take 30 to 90 minutes every 3 weeks, the same dose delivered subcutaneously can be given in just 2 to 5 minutes by injection under the skin with a convenient, ready to use product.

This subcu formulation of Herceptin may enhance the convenience of treatment for patients, shortening administration times, and improve efficiency for healthcare providers, which may prove helpful in this increasingly cost constrained environment. Before Herceptin SC product launch in EU can get underway, the European Commission must provide marketing authorization, which we believe could be forthcoming soon. In the meantime, we continue to work closely with Roche on the manufacture of the necessary rHuPH20 supply to support the launch and rollout of Herceptin SC in numerous territories around the globe.

Our second relevant program with Roche, MabThera SC, is also under review by European regulators. As a reminder, Roche filed its MAA for MabThera SC in December of last year and we look forward to updates on the regulatory status of this program.

With our first product launch and collaboration with Baxter now underway, and the anticipated launch of Herceptin SC, and the potential for a third with MabThera SC in the coming months, we're certainly excited about things coming together and the applications of our rHuPH20 technology entering a new and expanded commercial stage of its life cycle.

Now recently, ViroPharma announced the discontinuation of a Phase 2 clinical trial with a subcutaneous Cinryze in combination with rHuPH20. This discontinuation was driven by the emergence of an unexpected incidence and titer of non-neutralizing our rHuPH20 antibodies in a number of patients with the clinical formulation being used in the study. With the exception of HyQvia, we've not observed these high titers in any of our other programs but we have a very large and detailed database from over nine different our rHuPH20-containing products and INDs in various patient populations with dosing durations longer than that tested in the ViroPharma trial is a historical comparison data set. In most of these trials, it's difficult to see, frankly, the difference between the control subjects and the treated subjects with regard to antibody titers. ViroPharma reached its decision to discontinue these studies following discussions with the Centers for Biologics Evaluation and Research by FDA.

Based upon the additional timelines required to fully characterize the immunological response in this patient population, similar to the detailed analysis we and Baxter performed for the HyQvia studies, we support ViroPharma's business decision as we frankly did not consider this clinical formulation to be appropriate for further development until the root cause analysis could be completed. At Halozyme, we always maintain active dialogue and real-time data exchange with other divisions of FDA responsible for our other ongoing clinical trials and products and they remain unconcerned.

Last but not least, I'd like to mention that we continue to make excellent progress in our partnership with Pfizer that began late last year. The teams are making good progress on preclinical CMC development work. So now, let's move to our proprietary products and programs, beginning with PEGPH20.

We presented some encouraging early Phase 1B clinical data at ASCO this past June. Results showed that our investigational biologic, PEGPH20, in combination with gemcitabine in patients with stage IV metastatic cancer of the pancreas, demonstrated an impressive 42% overall response rate for the 24 patients treated at the therapeutic dose levels. Further supporting the proposed mechanism of action, we also found that in patients with tumors containing high levels of the PEGPH20 target hyaluronan, a matrix component enriched in some solid tumors which we and others believe create a protective environment surrounding many pancreas cancers. This overall response rate was 64%. There was no evidence of new toxicities of PEGPH20 when used in combination with gemcitabine.

Our collaborators and other pancreatic cancer investigators have found that many pancreatic ductal adenocarcinomas, a notoriously challenging malignancy to treat, produce a hyaluronan-enriched matrix environment that seems to correlate with poor prognosis, so we are encouraged that we're seeing somewhat higher overall response rates in those subjects that may also have the poorest prognosis due to the high hyaluronan content in their tumors.

Treatment with systemic PEGPH20 has indicated the ability to alter the tumor microenvironment by targeting this protective tumor matrix. Depleting tumor cell hyaluronan with PEGPH20 may enable chemotherapy agents to be more effective in addition to slowing tumor growth independently. From an antitumor activity perspective, this type of response has not been observed with gemcitabine alone, which historically has been a very low response rate of only 5% to 10%. Moreover, we believe that with a companion diagnostic, PEGPH20 could be effective and many other solid tumor malignancies, with evolving preclinical data suggesting that it's unique mechanism of action may also be well-suited for combining with new regimens, including immune checkpoint inhibitors and antibody drug conjugates.

So we are very encouraged by these early-stage clinical data and look forward to additional studies with PEGPH20 in the randomized trials in combination with the most active regimens available to patients today. In April, we initiated a Phase 2 multicenter trial in 124 patients who receive nab-paclitaxel and gemcitabine with and without PEGPH20 for the treatment of histologically-confirmed stage for metastatic pancreatic cancer. We're excited that we've now completed the initial safety call and a run-in phase of patients with a PEG gem-Abraxane regimen and are now opening up all sites to enrollment. The primary outcome measure will be progression-free survival at 12 months and once all 45 sites are actively enrolling, we'll provide for the projections as to the completion of enrollment for the study.

Also, we are very pleased to announce that more complete data sets from our Phase 1B clinical trial has been accepted for post or presentation at the upcoming 2013 European Multidisciplinary Cancer Congress on September 30 in Amsterdam, where progression-free and overall survival data, along with biomarkers status will be presented.

Lastly, Southwest Oncology Group has received feedback from FDA approving their randomized Phase 2 protocol testing modified folfirinox with and without PEGPH20 in 140 stage IV metastatic cancer patients with high performance status. We're hopeful that this study can open by the end of this quarter.

Now, we'll switch gears to the HYLENEX brand, as well as insulin pump studies. Market share for our first FDA approved product, HYLENEX in the US, exceeds 50% in a market with approximately $20 million in annual revenues, it continues to show solid growth within the target customer segments. As we continue to develop and expand this brand, let me share with you some of the exciting progress we've made with the development of HYLENEX for the type I diabetes insulin pump market.

In our Phase 4 clinical study, CONSISTENT 1, which began in early Q2 of this year, is designed to evaluate HYLENEX pre-administration in conjunction with rapid analog insulins for adults with type I diabetes on insulin pump therapy. People with type I diabetes on insulin pumps face a number of challenges in maintaining good metabolic control, such as inconsistent insulin absorption and action, and reaching targets for postprandial glucose control. The hypothesis is that HYLENEX pre-administration may increase the absorption, resulting in faster insulin action. I'm very pleased to report that we now have enrolled over 400 patients in the CONSISTENT 1 trial and will likely over enroll to approximately 440 total patients this month, across 40 sites. The primary endpoints are metabolic and safety outcomes at four months. We expect to have topline results for the four-month primary endpoint in the beginning of 2014. Results from two other trials we've recently completed with HYLENEX support the findings that pre-administration of HYLENEX significantly increases the rate of insulin absorption in pumps.

Studying this broader population in a Phase 4 trial will help ensure that clinicians understand HYLENEX in adults with type I diabetes in all of these settings. Additionally, we believe this study will help expand the continued safety of exposure in the specific patient population when used across various insulins, pumps, and infusion sets. These studies, like all of our other trials, have real-time immunogenicity testing that we expect to show similar profile as other repeat dose insulin-based trials we've performed previously.

We also intend to conduct additional smaller studies to support the type I diabetes community and continued commercialization of the brand. In June, at the American Diabetes Association Scientific Sessions, we presented Phase 4 data in the scientific meeting from a euglycemic clamp study, examining several pharmacokinetic and pharmacodynamic measures across infusion set changes. The data presented demonstrated that pre-administration of HYLENEX at infusion set change significantly accelerated insulin absorption.

For Halozyme to continue to support the HYLENEX brand, we need to be prepared in three important areas. First, we need to have adequate manufacturing capacity to ensure consistent supply in the multiple markets where HYLENEX is used. To this regard, we recently filed a prior approval supplement to FDA for an additional high-speed fill finish site. Second, we need to test HYLENEX with the most frequently used disposable infusion sets that deliver insulin analogs from the pump to the patient, typically, over a three-day period. We anticipate completing this work by the end of September.

And finally, we have additional post-marketing studies in relevant patient populations to demonstrate a high level of safety for patients. To this regard, our CONSISTENT 1 Phase 4 study is a big step forward in testing HYLENEX. Finally, we'll touch on our HTI-501 program and aesthetic dermatology.

HTI-501 is being explored as a potential treatment for both aesthetic and connective tissue disorders. This program's making progress and we recently presented interim results World Congress of Cosmetic Dermatology conference in Athens from a proof of concept clinical trial. The results from 12 of the 34 planned patients indicate pharmacologic activity for this investigational biologic of the cathepsin family of enzymes at the planned 28 day observation period. The study is now fully enrolled in the last patient was dosed in July. The trial is being conducted outside the US and healthy adult females with fibrous sclerotic panniculopathy. The HTI-501 enzyme and its formulation have been well tolerated so far and clinical studies at all doses and formulations tested, with no serious or severe adverse events. So we are encouraged by the early data and look forward to additional three- and six-month observations for a thorough analysis.

With that, I'll now turn the call over to David Ramsey, who can provide more detail on our financial results released this afternoon.

Thanks, Greg. Earlier today, we announced our financial results for the second quarter of 2013. The net loss for the second quarter of 2013 was $22.9 million or $0.20 per share, compared with a net loss for the second quarter of 2012 of $14 million or $0.13 per share. Revenues for the second quarter of 2013 word $14.5 million, compared to $7.8 million for the same period last year.

R&D expenses for the second quarter of 2013 four $28 million, compared with $16.1 million for the second quarter of 2012. Similar to R&D expenses for the first quarter this year, a significant portion of it is going towards the manufacture of launch inventory for our collaboration partners. This is material for which we have firm orders. It has the effect of grossing up our R&D line as the material is made, but you'll see offsetting revenue contributions in the collaborative agreement line of our income statement.

SG&A expenses for the second quarter of 2013 were $7.3 million, compared to $5.6 million for the same quarter of 2012 and cash, cash equivalents, and marketable securities were $76 million, as of June 30, 2013, compared with $87.4 million at March 31, and $99.5 million at December 31, 2012. Net cash used in the second quarter 2013 was approximately $11.4 million.

Financial guidance for 2013, which we announced earlier this year on January 7, remains unchanged with net cash burn expected to be between $45 million and $50 million for the year.

Now, I'll turn the call back over to Greg, who will provide some additional comments.

Thanks, David. Before the close of this part of today's call, I want to say that I'm particularly pleased by the broad-based progress we're making on our partner programs within the EU regulatory arena, with HyQvia commercialization under way, and two products from Roche, Herceptin SC nearing launch, and MabThera SC expected to receive CHMP opinion in the coming months. This is truly an important and exciting transitional period for the company.

We're getting closer to achieving and delivering on several important milestones that could have a significant effect on our financial results in the coming years. Realizing our goal of advancing patient care with truly innovative therapies will be a significant accomplishment for Halozyme.

I'll now ask the operator to open up the lines for questions.

Thank you. We would now be conducting a question-and-answer session. (Operator Instructions). Our next question comes from the line of Jason Butler with JMP securities. Please proceed with your question.

So just on the antibody titers, you've now had two programs that are essentially blood derived products that you've seen increased antibody titers from. Is there anything that you can see or say about a mechanism here or anything you can say that gives you confidence that this is something that specific to blood derived products and you won't see a non-blood derived product, other than the fact you haven't seen it in any of your non-blood derived programs?

You know Jason, obviously, you can start on the basis that obviously with nine product formulations and multiple different patient populations, we've got a pretty good database from the standpoint of other products to work from, but the fact of the matter is we can certainly speculate on these things but until you've done a root cause analysis to really address between the patient population, the specific formulation, or the product it's being combined with, you really need to do that analysis, I think, before we would go through and make any conclusions on it. And obviously, in the case of ViroPharma's product, they need to do additional characterization to really understand that.

Okay, great and then on HYLENEX, the manufacturing capacity expansion -- can you talk about what the timelines are there and when you will really feel comfortable that you have a diverse supply of HYLENEX?

I think the safest thing and what we say right now, Jason, is when we get a better perspective of the different finish lines that we have, obviously this is something which ensuring supply is one of the most important things to do in our industry, and so we take that very seriously. From the existing line we have right now and the others that are coming online, I think that will have a good perspective, probably, of how that's coming together towards the end of the year.

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

First of all, Greg, in terms of the path forward for the 501, for satellite, what's your plan here? And then secondly, can you outline the commercial opportunity for subcu Herceptin here, now that hopefully, it will get approved pretty soon by EC.

As far as the first one is concerned, this is an early program, Ying, so I went to obviously caution people on the basis that this isn't something that jumps in from here into registration trials. So what we're going to do is take a look at the data when it comes out and will make, obviously, from a portfolio assessment to see how the data look and the path from essentially development from there. As far as the data is concerned, we think that so far it's got a very favorable profile, but there's still a lot of work to be done to scale up and get manufacturing and other things together before we talk about next steps, and what we partner keep, etc.

As far as the commercial Herceptin SC opportunity's concerned, obviously that's Roche's program. I'd go through and direct you to their presentation. I think they gave a decent additional set of color on that at their most recent investor call. So if you take a look on that, you can probably get a better perspective of how one can look at it.

Thanks. And then I just have one follow up on the timing for PEGPH20 data in (inaudible) here?

Yes. So what I can tell you, number one, obviously we'll give some update from the 1B from the perspective of the additional clinical data that'll be at ESMO in Amsterdam. We're obviously very encouraged by the program from a development perspective in the different areas of inquiry. With regard to the gem-PEG-Abraxane study that we've got, that obviously just completed a safety check study in the initial set of patients to ensure that that triplet combination's well-tolerated. So until we've got all of the sites, the 45 sites there that are in active enrollment role, where we can get a sense of the overall ramp, will give a perspective of where we think in 2014 that should complete enrollment. And then, obviously, as far as the folfirinox study is concerned, it's being looked at with SWOG, that's a program which we'd love to see that get the sites open by the end of the quarter.

Thank you. Our next question is from the line of Charles Duncan with Piper Jaffray. Please proceed with your question.

I wanted to follow up on perhaps the PEGPH20 and pancreatic cancer -- understand that enrollment is going to be governed by site but it sounds like you're expecting 2014 to have enrollment complete and then data in roughly mid-'15?

Yes, I think obviously from the perspective of the exact quarter where we can see things coming together, that would be a safe assumption. Obviously, our Clinical Operations team has in really busy. Once they completed the safety check, getting all of the sites and their spending most of their time around the country getting through the rest of the remaining site activations, but I think that we certainly look forward to seeing the additional data set of mature material from the 1B, and then obviously getting back into enrollment from there.

Thanks, and then Greg, can you give us a little bit more color -- I know you can't talk about the actual data -- but what would you like to see out of ASMO from the 1B in terms of encouraging to invest in this program?

Well, obviously this is something, as you know, when abstracts go and we don't like to position on anything from things that are embargoed on a presentation, but I think what people would like to see, number one, is more mature data set of all the patients in, and then secondly, from the standpoint of understanding better the kind of intersection of analyses with the companion diagnostic that we've been putting together. So that would be, I think, very helpful information for a lot of folks.

And then final thing on that, Greg, in terms of the endpoints for the Phase 2, I read them to say one year progression. What are your expectations in terms of the control arm on that?

Well, we're going through and using the exact same enrollment criteria that was used for the impact study that was run most recently, so that's obviously, with 800 patients, is probably the most recent reliable data that's available there, based upon enrollment criteria and performance status. So I think from that perspective, when you look at it, if you take an assumption of thinking that something that could have five months on PFS in the gem-Abraxane arm, that gives you a really good metric to look from a comparison.

Thank you. Our next question comes from the line of Jim Birchenough of BMO Capital Markets. Please proceed with your question.

Good afternoon, Gentlemen, it's Nick phoning in for Jim this afternoon. Just a couple of quick questions. The first one is, following the very positive, has there been interest, either from cooperative groups or investigators, to look at this in a neoadjuvant setting for helping downsize tumors? And second question, as you think about other solid tumors, is there an obvious go to solid tumor next which has high levels of hyaluronan or are you going to be surveying tumors, looking for subsets of patients that have high levels of hyaluronan? Thanks.

Sure, Nick. So first, let me bring you to the first question, which, if I get this straight, was specifically regarding neoadjuvant therapy, and I think you're talking about a downside. You mean, they could get patients that are unresectable to respectability --

Correct, yes.

-- this is something, we have some folks that have actually gone through. Obviously, from our IST programs, we have a large number of applications that come in for supply of studied drug in collaboration. There is actually two different groups that have been looking at that and they're actually seeking funding to do it. The excitement, of course, for this is you have patients which if you could get them to surgical respectability, you can dramatically change their overall outcomes and this is, I think, in the end will be one of the most transformative things that can happen. So I think to that regard, will stay tuned on that to take a look, and it's certainly a part of the overall package that comes together as we think about trying to help people with pancreas cancer that we're really passionate about.

Secondly, with regards to other solid tumor malignancies, we do have a number of other IST that our review committee has been going over and other types of cancers. I would tell you that those are things which we think from the science and the biology that we really spend a lot of time being kind of disciplined as far as surveying the landscape, starting with the biopsies and really understanding the disease and looking for those where the biology supports it. So as an example, there's certain areas, for example, in triple negative breast cancer where we're very interested, just because of the unmet need there, as well as the biology and a good intersecting component. The second, of course, is in the context of things like bronchogenic non-small cell lung carcinoma. So essentially, what we're taking a look at in some of these different malignancies is one, first to say where does the biology match up from the diagnostic, but the second, of course, being where there's the unmet need.

So what we're doing right now with those in looking at different investigator based queries, is trying to help them out from the standpoint of really understanding the data and what we're doing today is getting the diagnostic squared off so that it can be used for actual enrichment designs and some of these other malignancies from a support line. Of course you know that's still a bit more work, and you have to do each one individually.

It sounds like, then, you will use the IST network to try and help you identify where, perhaps, the next HALO-sponsored study would be?

That's right. So what we've got, I think, of being able to use the diagnostic -- right now it's being used in both trials, the SWOG design and our own, from essentially an end-of-study analysis, but it goal is trying to get some of these set up where we can use this for actual screening upfront for doing what we would call partial enrichment with stratification. And so that's something which won't be online until the early part of next year, for some of these.

(Operator Instructions). Our next question is a follow-up question from the line of Charles Duncan. Please proceed with your question.

Thanks for taking the follow-up. It was related to HYLENEX and wondering if there's any interest from third parties for that program at this point.

You know, obviously what I would tell you is HYLENEX is a product which we've looked at and is a brand that's doing quite well and our commercial infrastructure is already paying for itself and obviously, the foundation we put in place really focused in the type I diabetes population and pumps is where we think we can make a big difference and our own footprint, if you will. But certainly, from a context of interest of others on the larger MDI type opportunity, that's something where we always have good dialogue with the folks in the larger diabetes space where it would be outside of our footprint. So we keep those sorts of discussions alive, but we certainly think all the material that we're putting forth, as far as the initial thin edge of the ledge in the pump opportunity is something that line things up very nicely in the future.

Okay and last question is regarding the Pfizer program. I doubt you can say much, but can you say anything?

I think I've said everything I can, except for the fact that it's a great partnership and the teams are working really actively well together and that it's a good mix from the standpoint of the biologics, that folks are working together and getting all of the good formulation and preclinical work out of the way that can line things up for the clinic.

Thank you our next question comes from the line of Richard Reznick with William Blair. Please proceed with your question.

This is Rich Reznick for John Sonnier, William Blair. Just a quick one on HYLENEX. You mentioned that you see topline data toward the beginning of 2014. I was wondering if you could just talk about what you think your regulatory strategy might be, assuming that you had positive topline data. For example, would you have to submit a separate application or could you actually go ahead and do compendia listing or something a little bit more abbreviated because HYLENEX is already an approved product?

No, it would be in the format of the latter. We're obviously going through and the key things are number one, I think this trial that we put in place for the 400 patient exposure -- we work very close with advisors and have obviously gone through, we think that's an important anchor to make sure that we've looked at the product and the right patient population, but that's effectively one of the key pieces that is gating, I think, from the context of introduction obviously, keeping in mind the others from the context of the (finished) supply and things of that nature.

Dr. Frost, there are no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Well, I want to thank everyone for listening to our call today and obviously, if you have questions or need additional information, always feel free to contact me or David Ramsay. Have a great evening, everyone.

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