Halozyme Therapeutics, Inc. (NASDAQ:HALO)
Barclays Global Healthcare Conference
March 12, 2013 4:15 pm ET
Kurt A. Gustafson - Chief Financial Officer, Principal Accounting Officer and Vice President
Ying Huang - Barclays Capital, Research Division
Ying Huang - Barclays Capital, Research Division
All right. Let's get started. Good afternoon, everyone. My name is Ying Huang. I'm the U.S. biotechnology analyst here at Barclays. Our next presenting company is Halozyme Therapeutics. And I'm very pleased to introduce Kurt Gustafson, the CFO of Halozyme, here. And with that, let me just turn the podium over to Kurt.
Kurt A. Gustafson
Thanks, Ying. So throughout this presentation, I'll be making certain forward-looking statements. I'd like to remind you that our actual results may differ materially from these statements.
Our industry has made a number of remarkable medicines over the years to help or even cure people. However, some of these medicines have not always been easy to administer. So take a look at this woman about to receive chemotherapy. What if instead of having to sit in that chair for 4 to 5 hours to get that chemotherapy, she could receive a therapy in less than 5 minutes. Or better yet, what if she didn't even have to go to that infusion center and sit there with all those people. What if she could receive her chemotherapy in the comfort of her own home? Or think about other people who actually received an intravenous infusion of a life-saving medicine, and they have to take that medicine twice a week. So they're getting an IV infusion twice a week for the rest of their lives for as long as they're taking that medicine. Instead of doing that, what if they could be trained to give themselves a simple subcutaneous injection of that same medicine?
Well, that's what Halozyme's technology is doing. It's making all of those things possible. Our scientific efforts are focused outside the cell in something called the extracellular matrix. This extracellular matrix is made up of proteins and carbohydrates that surround the cell and is unique to every organ or disease state. Our specialty is developing and commercializing enzymes that modify tissue in the extracellular space to improve either patient convenience or care.
We and our partners use the technology to allow drugs that currently can only be administered as an IV and now can be used or can be administered with our technology as a subcutaneous injection. We can also use the same technology to allow drugs that have to be given with multiple subcu injections to be done with a simple single subcu injection. We can also use the same technology to enhance the effectiveness of drugs, for example, speeding up the absorption profile.
In addition to that core technology, we're also developing other enzymes that target abnormal tissue for clinical benefit. So we've got a business model where parts of our technology we license out to others to either make their drugs more convenient or better. And we're also developing our own proprietary drugs for patient use.
Here's a quick shot of that pipeline broken out between our own proprietary drugs there on the top, as well as partnered products down there at the bottom. And you can see there's a range of various therapeutic areas that we're involved in, endocrinology, oncology, dermatology, as well as the stage of development they're in. And I'll touch on each of these here over the next few minutes. But let's start with the bottom part of the page and our partner programs.
Here's a list of the partners that we're currently working with. All of these companies are using our core technology, which is a recombinant human hyaluronidase, which I'll call PH20, to take their drugs from an IV formulation to a subcu formulation. The PH20 works by temporarily degrading something in the skin called hyaluronidase. It's a gel-like substance in the subcutaneous tissue. And by temporarily degrading that matrix, we open channels in the skin to allow another drug co-injected or administrated immediately, following the administration of PH20, to flow through those channels that have opened up. And it spreads over a greater surface area and allows it to be absorbed in either the capillary bed, in the case of small molecules, or the lymphatic system, in the case of some the of the larger molecules, much more quickly and readily.
In addition to the convenience subcu offers over an IV, it also has the opportunity to reduce infusion reactions. And one additional benefit is it reduces the cost of health care, in the case where you can take infusion times from hours to minutes. Or if you can actually have patients self-administer the drugs rather than having to go to the hospital, we can reduce the cost of health care.
So this first alliance with Roche covers up to 8 different targets. The first 2 and most advanced are listed here, Herceptin and MabThera. The other multi-target deal here is with Pfizer, which covers up to 6 targets. And then we have a number of single-target deals, one with ViroPharma for the product called Cinryze; Baxter, for their product, Gammagard; and Intrexon, who's using it with something called the Alpha 1 antitrypsin.
So I'll talk a little bit more detail about Roche in these first 2 compounds. Both of these compounds have been filed and are awaiting regulatory approval in Europe. The first one is Herceptin. We'll call it Herceptin subcutaneous, and it met its noninferiority point in its registration trial and was filed in Europe in March of last year.
From a patient-convenient standpoint, the administration of Herceptin subcu takes less than 5 minutes versus the IV formulation, which in its loading dose takes maybe 90 minutes and its subsequent doses take somewhere around 30 minutes.
Roche has also switched to a fixed dose in the subcu version, which simplifies the mixing and preparation time. So instead of the pharmacist mixing it up the order and dose by weight, they can have a simple injection prefilled and ready to go for patients when they show up.
Roche has indicated that they expect CHMP opinion for this drug in the second quarter of this year.
Turning it over to MabThera. Roche filed this program in Europe in December of 2012. Roche presented some data from this program on 3 different trials at the American Society of Hematology Conference in December of last year, which is when they filed or right around that time.
MabThera is also given as a fixed dose, but the reduction infusion time is even greater here. MabThera is the code name -- or I should not say codename, is the marketing name for Rituxan over in Europe. And when it's delivered, it's delivered over the course of, on average, 4 to 6 hours. In the subcu version in the Phase III study, they delivered the drug in 5 to 7 minutes. So this is a big difference in infusion time. Instead of spending the day at the clinic getting MabThera or Rituxan, you're talking about a 5- to 7-minute injection.
Now Roche is continuing to invest in these programs. Even after the Phase III program, Roche has started additional trials, both in MabThera and Herceptin. Here's an example of one with Herceptin. SafeHer is a 2,500-patient subcu Herceptin study being conducted in over 60 countries around the world. The study is designed to test the safety and ease-of-use for patient self-administration. And I think it should be apparent from this map how broadly Roche is looking at this program.
Switching over to Baxter. Baxter calls the combination of PH20 and Gammagard Liquid, HyQ. The IV administration of this product is given once per month and takes a couple of hours to infuse.
Now certain companies have come up with their own subcutaneous version of this drug. The challenge is instead of dosing monthly, because of the volume that has to be administered, they have to dose it weekly. And even then, it's still too much volume so they have to break it down to multiple injection sites. So people who want to go subcu, they have to do multiple injection sites once a week.
HyQ actually offers the best of both worlds. It still is able to be dosed monthly. It's dosed subcutaneously, so it's convenient in a single administration site. So HyQ offers potentially the best of both worlds here.
Now Baxter had a successful Phase III trial and filed in both U.S. and Europe last year. However, in August last year, Baxter received a complete response letter asking for some additional preclinical data. They recently announced that they expect to have a follow-up meeting with the FDA in the second quarter of this year to present some preliminary preclinical data and discuss the path forward. In addition, they said that they're expecting a decision in Europe on this filing in the first half of this year.
The third program I'll mention is with ViroPharma for a product called Cinryze. Cinryze is approved to treat hereditary angioedema. Hereditary angioedema causes uncontrolled slowing in the body. And if this happens, for example, in the neck area, it could be fatal. Cinryze is the only drug approved for prophylactic treatment of hereditary angioedema.
It's administered every 3 to 4 days intravenously, so this means that you're getting an IV twice a week for the rest of your life for as long as you're on this medicine. Now with PH20, dosing can happen with a simple subcutaneous injection. So they ran a Phase II study, where they demonstrated they could achieve relevant bioavailability using PH20. And they're now running a Phase IIb study that they started in December of last year, both in Europe and the U.S., and this study is expected to complete later this year.
So I think it should be clear that we're working with some major partners here and some fairly large products in terms of global sales. We enjoy the economics of these through various milestone payments when they hit various clinical and regulatory milestones, as well as royalties on the sales when the drugs are approved. And those royalties range anywhere from the mid-single digits to 10%, depending on the deal that we signed.
So switching gears over to our proprietary programs. There's 3 that I would like to highlight for you today. The first is Hylenex. It's an FDA-approved drug. The same enzyme that we partner out, although this is a low-unit dose of that. So it's 150 units of the enzyme relative to what Roche and Baxter are using, which is thousands of units.
The second one I want to touch on is PEGPH20, which is a pegylated version of the same enzyme that we're using to treat cancer.
And the third is HTI-501, which breaks down collagen and has applications in anesthetics and scarring.
So let's start with Hylenex. As I said, it's a low-unit dose of PH20, and it's indicated to increase the dispersion and absorption of other drugs and fluids. The initial focus on -- for us on this program has been targeting hospitals and switching over from an animal-based product to this recombinant human version of Hylenex. This class of drug is primarily used to -- as a spreading agent for anesthesia when they do back of the eye surgery. It can also be used in the emergency room for extravasation and to administer fluids when they have a difficult time finding a vein, such as with small infants.
As we look to expand this brand, the next opportunity for Hylenex is to use it in conjunction with insulin in an insulin pump. In this particular setting, we use Hylenex to hasten the onset of the insulin, as well as shorten the duration of its effect. This gives it a more natural or more physiologic profile.
So take a look at this graph of insulin secretion from a person who doesn't have diabetes. A healthy pancreas secretes insulin in response to a meal. So you see these 3 spikes if the insulin is absorbed into the body over 3 different times: breakfast, lunch and dinner.
People living with diabetes try to replicate this by giving themselves an extra dose of insulin at each of these time points. However, one of the challenges, it doesn't get in the body as quickly because it's going in the subcutaneous tissue and it takes a while for it to get into the bloodstream. It also sticks around a little too long, which can cause other problems. By giving Hylenex in advance, we can give -- we can cause the insulin absorption profile to look more like a person who doesn't have diabetes or more physiologic. And by getting insulin into the body faster, patients are getting better control over their glucose levels.
So how do they use it? Well, once every 3 days, people who wear an insulin pump move that insulin infusion site from one area of their body to another. What we do is just before they load their pump with insulin and inject it, we have them inject Hylenex into that same site and then use their pump like they normally would. And that Hylenex opens that channel in the skin there and allows for a faster absorption of insulin over the course of those 3 days.
So where are we with this program? As I mentioned, Hylenex is an approved drug today. However, there's a couple of things that we need to do before it can be commercially available. First, we need to expand our manufacturing. We have plenty of drug -- of both drugs but we need some additional fill finish capabilities.
We also have to get device approved. And when I say device, that sounds complicated. The device in this case is just a -- it's a little piece of tubing in a connecting set that will attach to that place where people wear their pump. So it's not a complicated device.
But maybe the most important thing is that we need to conduct some Phase IV studies to provide health care providers with the exposure data in this relevant patient population before they can prescribe.
We think this all comes together and starts to become meaningful to top line by the time we end 2014.
Let me switch over to PEGPH20, what we're doing in pancreatic cancer. If you think about some of the more aggressive tumor types, breast, prostate, pancreatic cancer, these tumors over-express hyaluronan. And one of the things that, that does is it creates a great deal of pressure on the tumor, compresses the tumor and compresses the blood vessels in that tumor.
If you take a look at the diagram over there on the left-hand side, you'll see when the blood vessels are constricted, you have a very difficult time getting things into the tumor, like chemotherapy. What PEGPH20 does is it degrades hyaluronan in that tumor, and it opens it up. And it opens the blood vessels up. So the idea here is you give PEGPH20 in advance of giving chemotherapy, you degrade the hyaluronan in the tumor, opening up the blood vessels, which will allow the chemotherapy to get in and do what it was intended to do, which is kill the cancer cells.
Here's an example in a patient using some imaging agents. So what we do here pretreatment is we put imaging agent and we're looking to see and try to light up the tumor. You can see on the left-hand side, not much imaging agent is getting into the tumor because it's constricted. The blood vessels -- there's not a lot of blood flow in there. But 24 hours posttreatment with PEGPH20, we have increased perfusion or increased blood flow into the tumor, and you can see the imaging agents then light up in the pancreatic tumor. We think that this program has broad applications for lots of different cancers, and we think 20% to 30% of all solid tumors over-express hyaluronan.
Why have we chosen pancreatic cancer? Well, 90% or so of pancreatic tumors over-express hyaluronan and have their tumors under a great deal of pressure. We think this is one of the reasons why so many compounds have not been successful in pancreatic cancer. It's not that they were a -- or were not a good cytotoxic, it's just that they never saw the inside of the tumor. And so we think PEGPH20 could represent a breakthrough not only for the compounds that are being looked at today, but for maybe some compounds that failed in the past.
And so what are we doing right now? You're going to see some data later on this year from a run-in phase of a Phase II program, with a combination of PEGPH20 plus gemcitabine. However, when we went and talked to a number of our key opinion leaders, they told us we needed to wait for the Abraxane data. And so Celgene presented that data earlier this year, where a combination of gemcitabine plus Abraxane had some really nice efficacy. So what we intend to do in our Phase II program, which will start later this year, is to combine PEGPH20 with a combo of gemcitabine and Abraxane. So that's a Phase II that we'll start later on this year.
The last program is HTI-501. It's a conditionally active recombinant human cathepsin that degrades collagen. This is the first program to enter the clinic out of our conditionally active biologics program. So these are enzymes that are only active under certain conditions. And in this case, the condition is low pH. So we mix HTI-501 with a buffer, a low pH buffer. So it's active at this low pH, and it's injected in its on-state. And as the body brings the pH back up to neutral, the enzyme is permanently deactivated.
What we're doing here is we're targeting a collagen fiber that we believe is causing cellulites. We have a Phase II study going on in cellulite right now. People associate cellulite with fat. But what we actually think causes the dimple is a collagen fiber that comes from the subcutaneous tissue up to the surface of the skin and pulls the skin down, kind of like a pin cushion. If you can go sever that fiber, you can actually create a more smooth appearance of the skin.
And so what this Phase II study does is we're doing single injections into the dimple. The drug goes into its active state. The HTI-501 eats away at the collagen fiber until it's severed. The dimple's relieved, creating that smooth appearance. And as the body brings the pH back up to neutral, that enzyme is permanently deactivated. It's not going to go somewhere else and degrade that collagen.
We completed a Phase I study to establish the drug's safety, and we're in the midst of a Phase II study where we expect to report out results sometime later in the first half of this year.
A couple of brief comments about our financial position. We started the year with $100 million in cash. We expect to use somewhere between $45 million and $50 million of that cash in our operations this year. And as I've indicated, we're close to a number of regulatory decisions with our partners that we believe will start royalty streams to us. These royalty streams grow in 2014 such that we believe that we can turn the corner and become cash flow positive as early as 2014.
When we take a look at 2013, there's 4 things that we're focused on. First, we want to make sure that we secure this revenue. So this means doing everything we possibly can to help Roche and Baxter gain approvals, as well as continue to fund the Hylenex program and these additional applications that we're looking at.
Second, we're looking to sign additional partnerships. This PH20 compound can help a lot of different drugs out there. There's lots of different drugs that are IV that could move over to subcu, and this plays in perfect with what's going on in the environment as far as looking for ways to lower the cost of health care.
Third, we're planning for the future by advancing our own proprietary compounds, things like PEGPH20 and HTI-501.
And finally, while we plan to take a portion of the royalty stream and invest in our programs, we're committed to becoming profitable and returning money to shareholders in the terms of becoming profitable, not plowing all of that money back in R&D.
And one final thought for you, as you think about this year, actually the next 3.5 months, we'll have 5 major events, which should be big inflection points for the company. So we're looking at an EMA decision for Herceptin, an EMA decision for Baxter and their HyQ program. Baxter will have their FDA meeting in the second quarter. And you're going to have clinical data from 2 of our lead programs, PEGPH20 and HTI-501. So there's going to be a big year or actually a big next 3 months for us.
And with that, I want to thank you for your attention and coming out.
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