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Edited Transcript of HALO earnings conference call or presentation 6-Aug-19 8:30pm GMT

Q2 2019 Halozyme Therapeutics Inc Earnings Call

SAN DIEGO Aug 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Halozyme Therapeutics Inc earnings conference call or presentation Tuesday, August 6, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Albert S. Kildani

Halozyme Therapeutics, Inc. - VP of IR & Corporate Communications

* Alison A. Armour

Halozyme Therapeutics, Inc. - SVP of Research & Development

* Helen I. Torley

Halozyme Therapeutics, Inc. - President, CEO & Director

* Laurie D. Stelzer

Halozyme Therapeutics, Inc. - Senior VP & CFO

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Conference Call Participants

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* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* James William Birchenough

Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst

* Jason Nicholas Butler

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Joel Lawrence Beatty

Citigroup Inc, Research Division - VP & Analyst

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Presentation

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Operator [1]

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Good afternoon, everyone. I would now like to turn the conference over to Al Kildani, Vice President of Investor Relations and Corporate Communications for Halozyme Therapeutics. Mr. Kildani, please begin.

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Albert S. Kildani, Halozyme Therapeutics, Inc. - VP of IR & Corporate Communications [2]

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Good afternoon, and welcome to our second quarter 2019 financial results conference call. In addition to our press release issued today after the close, you can find a supplementary slide presentation that will be referenced on today's call in the Investor Relations section of our website.

Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business; and Laurie Stelzer, our Chief Financial Officer, who will review our financial results for the second quarter 2019.

During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties.

I'll now turn the call over to Helen.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [3]

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Good afternoon, everyone, and thank you for joining us today. I'm pleased to provide an update on the strong progress at Halozyme during the second quarter of 2019. For today's call, we also welcome Dr. Alison Armour, our Senior Vice President of Research and Development, who will join us for the Q&A portion of the call. Alison joined us in May and has over 15 years in practice as a clinical oncologist along with significant experience in leading all stages of oncology drug development and overseeing regulatory submissions.

Let me begin with a summary of all the key recent developments. Firstly, our second quarter total revenue was $39.1 million, up 11% year-over-year, and we finished the quarter in a strong financial position with $287.5 million in cash, cash equivalents and marketable securities. Secondly, we continue to make tremendous progress in executing our ENHANZE strategy, highlighted by the recent regulatory submission by Janssen for the subcutaneous formulation of DARZALEX in the U.S. and in the EU. Our partners continue to make progress in the clinics with argenx recently announcing first patient dosing and a Phase I study of efgartigimod, or ARGX-113. And thirdly, our HALO-301 pivotal Phase III trial evaluating PEGPH20 in metastatic pancreas cancer is on track for the announcement of top line results by this December.

With those key highlights, I will now provide a more detailed review of our recent progress and results beginning with ENHANZE.

Turning to Slide 2 for a review of the long-term potential for royalty revenues from our ENHANZE business. We have licensed our rHuPH20 enzyme to 9 leading pharmaceutical and biotech companies, covering over 50 potential drug targets in total. The potential royalty revenues from our 3 marketed products, plus the 12 products that we expect to be in clinical development in 2019, result in the potential for approximately $1 billion in royalty revenue in 2027. This assumes approval in multiple indications, global launches and, on average, a mid-single-digit royalty on net sales of ENHANZE formulated products.

Also illustrated on this slide with the yellow dotted line is a pro forma ENHANZE business operating expense estimate, which excludes cost of goods sold. As you will note, the estimated operating expenses are similar to the projected royalty revenues. And with the projected royalty revenue inflection associated with the next launch, we project incremental revenues would drop to the bottom line in an ENHANZE-only business.

In addition, between now and the end of 2021, we continue to project potential cumulative milestone payments of $225 million to $300 million that will provide an important source of capital for the company.

And I'd like to just add that this illustration does not reflect any potential contribution from new collaborations. As always, we remain in active dialogue with potential new ENHANZE partners ranging from large pharmaceutical companies to development-stage biotechnology companies.

I'll move now to Slide 3 and provide an update on the currently marketed products utilizing our ENHANZE drug delivery technologies. As you can note on the top row, there are 3 currently marketed products utilizing ENHANZE that are available to patients in most of the major developed markets. These are HYQVIA, the subcutaneous formulation of rituximab and the subcutaneous formulation of trastuzumab. These 3 initial launches have provided important validation of our ENHANZE drug delivery technology across the globe while providing a strong foundation of revenues for Halozyme. Looking ahead, we're very excited about the blockbuster products in our partners' development pipeline.

Moving to the middle row of the slide, you can see some of these exciting pipeline products. We continue to expect that by the end of 2019, there will be 3 ENHANZE-based products in Phase III clinical testing or undergoing regulatory review. These include Janssen's DARZALEX, Roche's fixed-dose combination of Perjeta and Herceptin and a third product which is currently in Phase I testing.

Let me now provide a few more details on these products. DARZALEX is a blockbuster therapy transforming the lives of patients with multiple myeloma. We're delighted that Janssen submitted regulatory applications in the U.S. and EU last month based on data from its COLUMBA study and data from its Phase II (inaudible) study. Data from the COLUMBA study was the subject of an oral presentation at the 2019 American Society of Clinical Oncology Annual Meeting held in early June. The co-primary endpoints of the COLUMBA study were overall response rate and maximum trough concentration on day 1 of the third treatment cycle. The reported results shows noninferior efficacy and pharmacokinetics for the subcutaneous formulation of DARZALEX compared to the intravenous administration on these 2 endpoints. The median duration for each subcutaneous injection was 5 minutes, which compared to more than 3 hours for the IV administration, and we know that for many patients, administration can take 4 to 6 hours or sometimes even longer. The results of the COLUMBA trial demonstrate the value proposition that may be offered by the subcutaneous formulation of DARZALEX. The substantial savings in administration time may have potential benefits for patients, caregivers and the health care system. Janssen has also stated that the availability of the subcutaneous form of DARZALEX will allow expansion even further into earlier lines of therapy and into the community setting, an important potential benefit given the current oncology infusion center capacity constraints.

Janssen is continuing with a broad clinical development program to support the potential commercialization, all of the subcutaneous form of DARZALEX, including 7 already initiated Phase III studies. Importantly, the subcutaneous formulation of DARZALEX could be the first product utilizing ENHANZE to launch by the IV version of the drug is still in the early stages of growth.

For the second quarter of 2019, J&J reported 41% growth of DARZALEX sales globally, and analysts currently projects $2.8 billion in sales for 2019 with the potential to exceed $7 billion of worldwide sales by 2025.

I'll move now to the next ENHANZE-based product in late-stage clinical development, which is Roche's fixed-dose combination of Perjeta and Herceptin. This product candidate is currently being studied in HER2-positive early breast cancer.

As a reminder, patients currently receive Perjeta and Herceptin by sequential intravenous administration, which can take up to 2.5 hours for the loading dose and between 1 and 2.5 hours for subsequent doses. With the subcutaneous fixed-dose combination, the times are substantially shorter, with the loading dose expected to take 7 to 8 minutes and the subsequent doses, 5 minutes. Roche completed enrollment in a Phase III study, evaluating the fixed-dose combination of Perjeta and Herceptin in comparison to the IV form in the fourth quarter of 2018. They recently indicated they expect results from this trial in the second half of this year and hope to file regulatory submission in the first half of 2020.

According to Roche, the market addressed by this combined therapy is approximately 75,000 patients in the U.S. and EU5. Roche, on their most recent quarterly call, commented that the fixed-dose combination may provide an immediate benefit to patients in terms of convenience, and that it also provides an opportunity to consider the value proposition for the 2 drugs combined and what the right price is for that combination. We look forward to further developments with this program in the coming quarters.

And lastly, with regard to our partner's Phase III development programs, we continue to expect 1 additional product that is currently in Phase I to advance into Phase III clinical testing before the end of 2019.

Turning next to the bottom row of Slide 3, I'll now give an update on the Phase I programs utilizing ENHANZE. We continue to expect that by the end of 2019, there will be 9 products in Phase I clinical testing. We currently have 6 products in Phase I development by our partners, argenx, Alexion, Bristol-Myers Squibb, Lilly and Roche. We were pleased to announce last month that argenx had dosed the first patient in a Phase I trial evaluating the safety, pharmacokinetics and pharmacodynamics of efgartigimod, or ARGX-113, utilizing ENHANZE. This achievement marks the fastest time from the signing of an ENHANZE collaboration agreement to first patient dosing in a Phase I study at just over 5 months. This triggered a $5 million payment to Halozyme. And argenx stated on their quarterly call that they expect results from this study by year-end 2019.

During the second quarter, argenx also selected a second target under our collaboration and license agreement, human complement factor C2, which is associated with the product candidate, ARGX-117. Selection of a second target triggered a $10 million milestone payment to Halozyme. The CTA filing for the first patient testing is expected by year-end 2019. We cannot be more delighted with the progress of our collaboration with argenx and look forward to continue to work closely together.

Alexion now has completed their Phase I study of subcutaneous ALXN1210, coadministered with our ENHANZE drug delivery technology and next-generation subcutaneous formulation called ALXN1810. Alexion's strategic planning around its C5 portfolio is ongoing, including its plans for late-stage development for ALXN1810. In addition, Alexion submitted the initial CTA application to the Medicines and Healthcare products Regulatory Agency in the U.K. for the initiation of a Phase I study of ALXN1720, which is a novel anti-C5 albumin-binding bi-specific mini-body that binds and prevents activation of human C5. The planned study is expected to start in late 2019 and will evaluate ALXN1720 with ENHANZE.

Bristol-Myers Squibb is continuing with 2 Phase I studies for anti-CD73 and Opdivo. Eli Lilly is continuing with its Phase I development of an undisclosed target. And Roche continues with the Phase Ib/II study evaluating a subcutaneous formulation of TECENTRIQ in stage IV non-small cell lung cancer patients.

And in addition to the 6 ongoing Phase I trials, we anticipate 3 additional Phase I trial starts in 2019, including ALXN1720, which we just discussed. And there'll be 2 additional starts that remain undisclosed at this time.

As you just heard, our ENHANZE business continues to build momentum in the clinic, and one of our most exciting partner programs in the pipeline, subcutaneous DARZALEX, has now entered the regulatory review process. We look forward to this being followed by regulatory submissions for the Perjeta and Herceptin fixed-dose combination in the first half of 2020.

With our partners' clinical development programs expanding and key regulatory submissions in process and on the horizon, you can see why we have conviction that the ENHANZE platform has the potential to deliver approximately $1 billion in royalty revenue in 2027. And I'll mention again that in addition, we remain in active discussions with potential new ENHANZE partners that could further add to this potential.

Now turning to our oncology pillar, which is shown on Slide 4. This is a very exciting time for our oncology pillar as we near the announcement of top line results for our pivotal Phase III study in metastatic pancreas cancer, HALO-301. The oncology pillar represents Halozyme's second high revenue potential business currently centered around the development of PEGPH20, which is a targeted therapy that temporarily degrades the hyaluronan, or HA, that can accumulate around certain tumors and increase intra-tumor pressure and, as a result, constrict the tumor vasculature and reduce access of cancer therapies. We're setting PEGPH20 with a companion diagnostic developed with our partner, Roche Tissue Diagnostics, formerly Ventana, to identify patients with high levels of HA in their tumors.

As a reminder, Halozyme 301 is a randomized, double-blind, global Phase III study evaluating PEGPH20 in combination with ABRAXANE and gemcitabine in first-line metastatic pancreas cancer patients with high HA tumors. HALO-301 has a single primary endpoint of overall survival. We completed enrollment of HALO-301 in December of 2018 with approximately 500 patients. In mid-June this year, we announced that HALO-301 reached the target number of 330 overall survival events, and that we plan to conduct the final overall survival analysis upon data maturity, which would occur when all patients enrolled have been followed for at least 8.5 months. Based on the timing of data maturity, we expect [indiscernible] top line results for HALO-301 by December of this year.

Let's now turn to Slide 5 and an update on our evaluation of PEGPH20 in other tumor types. Roche's evaluating PEGPH20 combined with TECENTRIQ in their MORPHEUS second-line pancreas cancer Phase Ib/II study. Enrollment in the arm of PEGPH20 is completed. And in the Halozyme-led Phase Ib/II study in cholangiocarcinoma and gall bladder cancer, enrollment for the initial cohorts was completed with a total of 74 patients. The study is ongoing, following patients still on therapy and those who have discontinued. And we're enrolling another cohort of approximately 15 patients to assess a different dosing schedule. We expect to be able to announce initial data from the first cohort for these 2 trials before the end of this year. Without a doubt, this is an exciting time for our oncology pillar, and we look forward to HALO-301 trial results later this year.

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

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Laurie D. Stelzer, Halozyme Therapeutics, Inc. - Senior VP & CFO [4]

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Thank you, and good afternoon, everyone. Turning to Slide 6 for a discussion of our second quarter financial results. Total revenue for the second quarter was $39.1 million compared to $35.2 million in the prior year period. This 11% increase was driven primarily by higher collaboration revenue from our ENHANZE partner, argenx. Royalty revenue for the quarter totaled $18.1 million, a decrease of 10% compared to the second quarter of 2018, with the decrease driven by lower sales of Herceptin SC by Roche due to the continuing impact of biosimilars in Europe, which was partially offset by higher sales of RITUXAN HYCELA by Roche and HYQVIA by Takeda.

Product sales in the quarter, which are comprised mainly of both rHuPH20 and Hylenex, totaled $5.8 million, up 28% (sic) [29%] compared to $4.5 million in the prior year period. Collaboration revenue in the quarter totaled $15.3 million compared to $10.7 million in the prior year period, reflecting licensing fees from argenx of $10 million for the selection of a second target and $5 million for the first patient dosed in a Phase I study.

Turning to Slide 7 for a more detailed breakdown of our P&L. I'll now move on to total operating expenses, which were $53.1 million in the second quarter, down slightly from $55.3 million in the prior year period. Cost of product sales was $1.9 million in the quarter compared to $0.8 million in the prior year period. Research and development expenses for the quarter were $33.9 million compared to $40.1 million in the second quarter of 2018, reflecting reduced clinical trial activity with the completion of enrollment in HALO-301. Selling, general and administrative expenses were $17.3 million compared to $14.4 million in the prior year period. Net loss for the quarter was $14.6 million or $0.10 per share compared to a net loss of $22.9 million or $0.16 per share in the second quarter of 2018, which reflected the impact of higher collaboration revenues. And cash, cash equivalents and marketable securities were $287.5 million at June 30, 2019, compared to $354.5 million at December 31, 2018.

Now turning to Slide 8, I would like to update our 2019 guidance. We continue to expect total revenues to be in the range of $205 million to $215 million, including revenue from royalties of $72 million to $74 million. As discussed last quarter, product sales related to API are expected to fluctuate quarter-to-quarter and be higher in the second half of the year. For the third quarter specifically, we expect API sales in excess of $20 million, followed by API sales in the fourth quarter, similar to the level we reported in the first quarter of this year. We now expect operating expenses of $255 million to $265 million, which is down from our prior guidance of $265 million to $275 million due to lower spending related to a modest reduction in clinical, commercial and people-related expenses as the projected date for our data readout based on events attainment and data maturity became clear. Accordingly, we now expect operating expenses, excluding cost of goods sold, of $215 million to $225 million, down from our prior guidance of $225 million to $235 million. As a result, operating cash burn is now expected to be $40 million to $50 million, down from $45 million to $55 million. Not included in operating cash burn, we expect debt repayment of approximately $90 million in 2019. Furthermore, we expect to pay off the remainder of our royalty-backed debt by the second quarter of 2020. And we now expect our year-end cash balance to range from $220 million to $230 million, up from our prior expectation of $210 million to $220 million as our balance sheet continues to provide the company with great operational flexibility.

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

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [5]

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Thank you, Laurie. We have made strong progress in 2019, and we accomplished multiple key milestones already. And in the remainder of the year, we expect multiple additional events and milestones. For our ENHANZE pillar, these include potential announcement of Phase III results for Roche's fixed-dose combination of Perjeta and Herceptin, potential advancement of a new product candidate into Phase III, potential initiation of 3 additional Phase I studies. And of course, while we can never predict the timing, we are continuing to pursue additional collaborations. And for our oncology pillar, we expect top line data from our HALO-301 pivotal Phase III study by December of this year.

I want to close by expressing my ongoing gratitude and appreciation to the talented Halozyme team for their continued hard work in advancing our programs in support of patients and our partners.

And with that, we're now ready to take your questions. Operator, would you please open up the call?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Charles Duncan from Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [2]

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Congrats on a nice quarter. I had a quick question for you. It seems like your espresso machine has really kicked up this afternoon because, Helen, you're speaking so fast, I missed. I think you said something about estimated milestone payments of a certain amount and over a certain period of time. Can you just state that again and your thoughts behind that?

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [3]

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Happy to, Charles. It's a callout on the slide we have that shows our projection on the royalty revenue potential for ENHANZE, which, as you know, is estimated at a potential of $1 billion by 2027. People often underestimate or forget that we also have substantial revenue potential coming in from milestones. And in the period between 2019 and 2021, we have a projection of milestones of $225 million to $300 million, in addition to the royalty revenue projections that are on that slide. And so it really does reflect the benefit of having multiple partners in development as well as the partners getting into the market and generating those royalty revenues as well.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [4]

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Yes, that's helpful. We may have left that off our recent calculations. It should leverage the balance sheet.

With regard to collaborations, in terms of new collaborations, I guess, how do you see large versus small or very broad versus smaller ones? How do you see earlier-stage use of the technology versus later-stage use? Where is the interest? Where does that seem to come from? Obviously, you've got enough going on, but I'm wondering, kind of get some insights on the future.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [5]

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Charles, I'll pass that over to Laurie just to comment on the range of conversations we're involved in.

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Laurie D. Stelzer, Halozyme Therapeutics, Inc. - Senior VP & CFO [6]

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Yes, Charles. I -- we continue to be in conversations with multiple potential partners. And the beauty of the argenx deal is a great example of more of a biotech versus the larger pharma type of partners that we had -- we've contracted with in the past. And we are seeing our partners not only be interested in already marketed products like Opdivo, for instance, with BMS, but also earlier-stage products like CD73. So we're really starting to see a wide range of type of partners, size of partners as therapeutic areas, as we've seen with the recent Alexion and argenx molecules, as well as different stages in the life cycle. And so there are targets that ENHANZE will benefit across the gamut of those things.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [7]

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Okay, that's helpful. And last question is regarding the timing on 301 data. I know it's an imprecise science because it depends on events, but I'm wondering if your current thoughts with regard to, I think, by end of December. Is that different? Is that new? It seems like that's what you've been saying, but then perhaps, there was some thought that it could be earlier in the second half. Is there any new information in that, that we should maybe read into?

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [8]

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No new information, Charles, since our last update. We have attained the 330 events, and now we're waiting for data maturity. That is all patients followed for 8.5 months. So we do have a very good line of sight that we will have the data by December.

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Operator [9]

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You next question comes from the line of Jim Birchenough from Wells Fargo.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [10]

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Congrats on all the progress. A few questions. I guess, just first, Helen, on the $1 billion in target royalties. It seems that, that target's been available before we had much visibility on argenx progress. And so I'm just wondering, is argenx royalties part of the $1 billion target royalties? Or is that above and beyond?

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [11]

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Yes, let me ask Laurie to just comment on that, Jim.

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Laurie D. Stelzer, Halozyme Therapeutics, Inc. - Senior VP & CFO [12]

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Jim, so when we set that projection for $1 billion by 2027, it was looking at a portfolio of products. And as we have new partnerships or programs move into the clinic, it just increased our conviction around that $1 billion. So we're still projecting $1 billion by 2027.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [13]

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So Jim -- I was going to say, it includes all of the 15 products. We're talking about 3 marketed and the 12 that we project will be in the clinic by the end of this year.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [14]

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Got it. And then a question we get is, we know you're planning for success of 301, but you've alluded to the contingency where it doesn't work and becoming an ENHANZE-only company. And so how [crystally] and timely will be the guidance on what an ENHANZE-only company looks like in the event that 301 doesn't work out? Will it start a clock to studying this further? Or is your thinking along the lines of that contingency, pretty far along as well?

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [15]

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I can say that contingency, as part as prudent business planning, it will be ready to be talked about in the event that we do have negative HALO-301 data. I will stress that is not our base planning assumption for the company, but we do recognize we need to be ready with that. And we will have information as to what the size of the company is and what the past profitability is for that ENHANZE-only company.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [16]

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And then just maybe 1 final question, Helen, just on 301. Just overall, would you say your level of conviction has remained high, has it become higher? How are you feeling just confidence-wise heading into that data? And if there's anything that's either biologically or preclinically or anything that's making you more or less confident going into the 301 data.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [17]

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Jim, my conviction is unchanged from the facts we had when we got the stage 2 202 results, which were reported in December of 2016. If you recall, that was based on a mature data set. And when we look at the HA-high population, we had a very good estimate of the treatment effect in the HA-high population. And that we could define HA-high with a patient cutoff of 50%. And so the true test though, to answer that question, is HALO-301, which is the only study we've done sufficiently sized and powered to address that question. But we do believe strongly in the science. We believe that by having the controlled Phase II data, we got a much better line of sight into the potential treatment effects in many other products that haven't succeeded in pancreas cancer. So those were the facts that gave us our conviction, and my conviction is unchanged based on those facts.

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Operator [18]

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Your next question comes from the line of Jason Butler from JMP Securities.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [19]

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First one, just on the TECENTRIQ, the additional cohort that's being added to the gall bladder trial. Can you speak to the rationale there and, specifically, what you're looking for with the different dosing schedule? And then a second question on TECENTRIQ for both the gall bladder and the pancreatic cancer trial. I think you said data for both later this year. Just any details you can give us around patient numbers or expected maturity of data with that update.

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Alison A. Armour, Halozyme Therapeutics, Inc. - SVP of Research & Development [20]

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Yes. Thanks. I'd like to take this, if I can, Jason. I'm Alison Armour, the new Head of R&D. It's not unusual to explore an alternative regimen in Phase I development. With the cholangiocarcinoma study, we had additional PK information that came from the 202 study during the conduct of the study. Now you will remember that in cholangiocarcinoma, the regimen is slightly different. It's [Gemcitabine plus] platinum, given every 3 weeks. In pancreas, it's (inaudible) which is given every 4 weeks. So the regimens were slightly different. So when we got additional data from the 202 trial, and it showed us that the Ctrough level might be important, then we decided to make the dosing in the cholangio study more similar, in fact, to the pancreatic one. So we're just using that information and doing good science here.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [21]

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And then, Jason, I can pick up on what we might expect to see. The data is still maturing. As we think about what the initial data could be, it would be a response rate. And if the data is mature enough, perhaps even PFS in these populations, but it would be a first look at the initial cohort by the end of this year.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [22]

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Great. And then just maybe a quick one on Herceptin. There was a pretty significant impact of biosimilars in Europe this quarter. Any thoughts going forward about where -- how that franchise looks and how you'd expect biosimilars to impact the market in the U.S. as well?

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [23]

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Yes, let me ask Laurie to address that.

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Laurie D. Stelzer, Halozyme Therapeutics, Inc. - Senior VP & CFO [24]

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Jason, so we continue to watch this closely. We're very confident still in our forecast of $72 million to $74 million for royalties this year. We are continuing to see the impact of biosimilars, you are correct, in Europe on Herceptin, but we still feel confident in the $72 million to $74 million.

As far as biosimilars in the U.S., we did project that there would be biosimilars coming to the U.S. in the second half, and that was part of our plan this year. Now to the extent there are multiple entrants into the market or there are aggressive price actions, we may need to look at that, it may have a greater than anticipated impact on our projection. But we did anticipate biosimilars in the second half. So we're still within that range.

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Operator [25]

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(Operator Instructions) Your next question comes from the line of Joel Beatty from Citi.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [26]

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Question is on the kind of market dynamics of the subcu formulations of ENHANZE; IV and subcu. And some of the products decreased the delivery time by quite a bit, in hours, and then some seems a little bit shorter. Have you identified kind of maybe a threshold where that seems to make a big difference in terms of giving the edge to the ENHANZE-partnered products?

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [27]

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Thanks, Joel. As you point out, we've seen a difference in the products that we've launched to date. Herceptin is a very good example where the IV is anything from usually 60 to 90 minutes and the subcu was 5 to 10. Now with that difference, what we did see in Europe was 60% share of sales volume for the subcu. So that was a -- certainly in Europe, a very attractive value proposition because all of the potential benefits for patients, but also, as Roche had demonstrated, reduce costs for the health care system. You're quite right in pointing out that with DARZALEX, as an example, the value proposition appears even stronger, being able to go from, what, for many patients is 4 to 6 hours, down to just 5 minutes.

And so I think we are still -- would get some 3 products approved, [so 4], DARZALEX with the 5-minute injection. I still think we need to find what is the minimal difference, it would make a difference, but that certainly -- the Roche product, that value propositions, which are our lowest ones to date, certainly seems to be very attractive for health care professionals and patients based on the share adoption.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [28]

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That's great. And then maybe just a question on the milestone payments coming up of $225 million to $300 million. Are you able to provide a breakdown of those? Or just give a sense to -- if they're mostly development milestones or a substantial portion of commercial milestones or a large amount coming from any particular product.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [29]

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Laurie will address that.

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Laurie D. Stelzer, Halozyme Therapeutics, Inc. - Senior VP & CFO [30]

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Joel, well, we haven't provided a breakdown of that $225 million to $300 million. What I can say is that it is primarily development milestones as our partners are moving those by the end of the year, the 9 products in Phase I and the 3 products in Phase III. And as those programs continue to move through the development cycle, I think the majority of those milestones will be associated with development program.

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Operator [31]

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There are no further questions at this time. Dr. Helen Torley, President and CEO, I turn the call back over to you.

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Helen I. Torley, Halozyme Therapeutics, Inc. - President, CEO & Director [32]

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Thank you, operator, and thanks to everyone for joining us today. As you've heard, we're continuing to make very nice progress here at Halozyme, and we look forward to providing you with an update next quarter. Have a great evening.

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Operator [33]

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This concludes today's conference call. You may now disconnect.