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Halozyme Therapeutics, Inc. (NASDAQ:HALO)

Piper Jaffray 2013 Healthcare Conference

December 3, 2013 12:00 PM ET

Executives

Gregory Frost - President, CEO and Director

Analysts

Charles Duncan - Piper Jaffray

Charles Duncan - Piper Jaffray

Welcome to the 25th Annual Piper Jaffray Healthcare Conference. Thank you for joining me this afternoon. I am Charles Duncan. I am a Senior Biotech Analyst and Managing Director for the firm. This is frankly my first time to this rodeo at Piper Jaffray, so we're going to keep this pretty casual. I am not sure I am going to be able to carry too for the full 25 minutes. But if you have any questions just raise your hand or yell at me and I’ll try to grab you.

It's a pleasure to introduce Dr. Gregory Frost, who is one of the Founders and is the CEO of a Company called Halozyme, which we do cover, we rate how it performed and we think it's a pretty interesting broadly applicable platform. Greg also has a couple of the members of his team with him today and I'll start off by saying, Greg what was it that ever possessed you to start a biotech company? And where does kind of the basis of the technology come from?

Gregory Frost - President, CEO and Director

That’s certainly something that would take longer than 25 minutes, but, trying not to be too loquacious, what I would say is with 15 years now kind of Halozyme, since 1998, it's very interesting to watch where we are today and where we started. But for me personally, Halozyme is really a culmination, as I could laughingly say of an extension of work I did back at UC San Francisco in the early 90s. So I suppose you could say this is the longest post-doc on record.

But the fundamentals of the Company I think for me personally was an excitement of studying basic biology and taking a unique approach from a platform perspective and finding a way to go through and make novel medicines, as well as helping transform molecules in the medicine for patients. So for me it's something that you have to love what you do and this is something that's just been a long time passion.

Charles Duncan - Piper Jaffray

Well it's clear to me and we have been out marketing or talking with institutional investors that you really truly do enjoy what you do and are quite good at it, when you fast forward three years or five years from now in terms of Halozyme what would you like to see Halozyme become, because it is really a very differentiated business model with regard to most other biotech companies?

Gregory Frost - President, CEO and Director

Absolutely, and much of this starts with the foundation of how the Company has evolved since the very beginning, but when I look at Halozyme today I think of it's as akid that's just about getting ready to get out of college. So it's done more than just a summer job, but from a roll-forward if you will and a few years down the line, this hybrid revenue model that we’ve developed of having some great partnerships with some very exciting products that I think have a tremendously promising tailwind behind it, as far as market trends and value of both for payors and for patients.

If I were to go three years down the line, while that revenue stream is a very solid foundation as well as our own products to compliment top-line revenue growth. I think as we look three years down the line some of the things that we have in the pipeline will be coming to a point of turning over those cards to where people can really see I think what the potential can be for this Company. Certainly in oncology in other areas where the fundamentals we have today, which are ensuring that we have a sound business that's sustainable, that’s enabled us to go through and drive some of those really exciting pipeline products. So a few years down the road, certainly I think we'd like our child to be covering their own credit card bills so to speak, but on top of that I think being in a line where they have some really exciting things in themselves.

Charles Duncan - Piper Jaffray

Sure, so that implies that maybe if you have some luck and a good fortune and are savvy in terms of developing the technology you may forward integrate to become a fully kind of integrated biotech Company?

Gregory Frost - President, CEO and Director

Well I think our business model that we’ve developed over the years has enabled us to keep an innovative R&D engine going, as well as maturing our own products. And while we’ve taken very cautious steps I think from the forward integration to-date, those steps actually have panned out to work very well. So certainly if we look at the context of where can we have a good footprint from a business, that's something that we look at. And we always take that by perspective which is, if there is a product that we’re developing, is it something that will be better in someone else's hands or ours and ideally you are in a situation where you are agnostic, where you are working on things where it can be as good in your hands as someone else.

Charles Duncan - Piper Jaffray

Okay. Got you, so if you add value and someone wants it you might out-license it?

Gregory Frost - President, CEO and Director

Well, I think we’ve demonstrated being pretty good at that from our platform of technology. But I think top-line revenue growth in the end on top of very lucrative royalty streams is an important thing to do as, we built I think a biotech which is close to, it’s not asabot, it’s a ship I think that’s fully rigged for the big biotech trajectory down the road.

Charles Duncan - Piper Jaffray

I am looking at a chart here, and what a difference a year makes, or not even a year, a half year makes, so clearly the market is starting to applaud what’s going on. Before we start to dive into some of the details, what do you think is the primary driver of the increased interest in your shares in the last six months?

Gregory Frost - President, CEO and Director

Well, I think certainly it’s not the strategic change or anything from that perspective, but just the maturity of many of these programs that as a Company we’re now starting to that pipeline where everything is moving from left to right. Certainly we’ve been fortunate that our internal products, normally we start with the assumption that maybe one out of three things would work. We’ve been fortunate so far that all of them had worked, and I think that speaks to the rigor about the process by which we select candidates to go into development of everything that’s organic.

But certainly a big piece of that is the observation the maturation of our Company. And as we start rolling forward now having three products on the cusp of getting into launch mode on the partner side and our own products, that maturation from a upfront and milestone based Company than folding over into a royalty generating and income generating Company is certainly something that makes the Company easier for people to understand because it is a very complex business as you know.

Charles Duncan - Piper Jaffray

It is a complex business. There are lots of questions to ask about that, but before we dive into some of the assets, are there any kind of strategic top level questions any one has they want to ask at this point?

I’ll ask a question about a partner product that had some success in terms of approval of subcutaneous Herceptin this year for Roche, your partner Roche. Now, surely Roche knows something about partnering with technology companies, they’ve been your partner for a long time. But what was required to get the European agency comfortable with subcutaneous Herceptin what was it that you did tohelp out in that process?

Gregory Frost - President, CEO and Director

Well, to explain I think the way that our partnerships work in general and most of them are relatively similar whether it ought to be Pfizer or Baxter or Roche and the levels by which each side contributes, varies subtly but it’s generally the same. So our responsibilities with Roche collaboration were principally from the manufacturing, toxicology and safety, and regulatory assistance for things related to the enzyme.

So on our side scaling up manufacturing, getting to a scale where we could supply the globe and, as I like to say, to be able to meet regulatory standards for manufacturing on biologics, that’s been a tremendous amount of work. And it’s something that’s always quiet and I like to note for our manufacturing and CMC colleagues, because they’re often the unspoken heroes that do so much of the work, and they’re not the ones that get a lot of air time from the street.

So the process with Roche I think, you say what were the key things that enabled Herceptin subcutaneous to be approved. First and foremost, I think it’s the power of them, Roche is an absolute leader when it comes to clinical development strategy and really understanding their existing patient populations and how to design trials in a way that can bracket all of the intended uses. So if you look -- they have nearly 15 trials with Herceptin subcu and different settings and those even ongoing today. So I think that’s principally developing very good data, understanding your molecule and then how to go through and make that bridge from IV to subcu enable that.

Charles Duncan - Piper Jaffray

Well, I think that safety component that you mentioned was the key consideration. So, do you believe that some of the work that you’ve done with them may be able to carryover, or does some of the work that you’ve done for some other products that are in development?

Gregory Frost - President, CEO and Director

Well, there is certainly from the context of the core technology and what we develop. I still try and advise people that every product has to be looked at on a product-by-product basis from a regulatory perspective. But the database that we’ve built, both internally and with our partners, continues to grow overtime. And so the efficiency of leveraging that information in the future certainly reduces certain time constraints that otherwise would need to be worked on in a serial basis.

Charles Duncan - Piper Jaffray

So the good news is you have subcutaneous Herceptin approved, Roche did in Europe, the bad news is it’s in Europe. And things -- no offense intended, but Europe typically takes a while for drugs to be adopted. Why do you think that there is a potential for upside surprise on the adaption rate of subcu Herceptin and thereby the royalties that could come to you?

Gregory Frost - President, CEO and Director

Well, I think it certainly is -- we even have I think between two distinct examples of two products launched with different strategies within Europe to look at using our technology as an example. So as an example to that perspective, HyQvia which was approved in Europe, this is a product which was filed under a new marketing authorization application, new MAA like a BLA to that regard. And to that regard it’s very traditional where each country requires establishing pricing and reimbursement and all of the aspects and individual rollout in Europe.

Charles Duncan - Piper Jaffray

That takes a while.

Gregory Frost - President, CEO and Director

In the case of Herceptin I look simply upon what Roche has done with that particular product and that is been; a, from the standpoint because it was a line extension application. So, the SmPC or label of Herceptin in Europe is effectively the existing Herceptin brand, the existing label and the subcutaneous product is incorporated within that label. So, that’s one key advantage.

The second of course is that they came out with pricing with parity to IV. So, from a resistance perspective the ability I think to capture less headwinds with payors, as well as having the advantage where still nine out of 10 women preferring it. And they did some very good time in motion studies within every country, within Europe as well to help establish what were the true cost savings to the payor, so I think that’s from a careful planning perspective, from their strategy which I think reduces perhaps some of the traditional barriers that might be viewed to a European rollout.

Charles Duncan - Piper Jaffray

And as I understand that NHS’s or the National Healthcare System and in the UK recognizes those cost savings and have actually talked about it?

Gregory Frost - President, CEO and Director

They have in fact back in March there was a preliminary review that was done of the trastuzumab subcutaneous product within the NHS based upon the data from Hana and some additional materials where some estimates of cost savings where provided. But in addition to that I think within a few weeks of UK authorization the NHS came out with an endorsement for the subcutaneous product as well. And I think aligning both with the mandates in the UK for decentralization of healthcare as well as the time and cost savings is something that is compelling in and itself.

Charles Duncan - Piper Jaffray

So, are you involved in any of the discussions for any of the other products that are undergoing review such as MabThera or is that totally someone else’s caliber?

Gregory Frost - President, CEO and Director

Well I think Roche is certainly very independent from the context of the development of these programs, they are their programs, it’s their clinical strategy. What we have done traditionally is we align with them, number one, when there are questions related to manufacturing. If there are questions specific to the PH20 enzyme, our regulatory experts and teams work with them very closely and we’ve done that since the early days from scientific advice.

So, typically it’s a very simple delineation of responsibilities if it’s a PH20 question, we assist and if it’s manufacturing for enzyme, that’s another area where we work very closely with them. The clinical development programs are things which Roche as full responsibility over.

Charles Duncan - Piper Jaffray

So, before we hop into some of the rest of the pipeline, I had a question on safety but I wanted to ask are there any questions on subcu Herceptin or anything having to do with Roche?

Question-and-Answer Session

Unidentified Analyst

Regarding the cost savings, is it because of the lower drug price or is it because of better compliance and less complications therefore that needs to be lower cost to the healthcare system...?

Gregory Frost - President, CEO and Director

It’s, well actually there is some very good studies which Roche ran specifically to the source of cost saving. So, if you work on the analysis, they did a time and motion study, it was published in Lancet Oncology I believe The PrefHer Trial. And in each country they were looking at the time savings both by different healthcare providers, pharmacists as well as chair time. So, it’s principally from an efficiency driven process, I think much of the efficiencies if you look at those studies are directed to pharmacy tech time. So, from busy hospitals it allows patients to get treated and spending less time on the administration, but for the healthcare providers to be able to spend time focusing on other issues of importance in the hospital and making it more efficient in use.

Unidentified Analyst

And have they quantified how much savings?

Gregory Frost - President, CEO and Director

Well, the NHS did an evaluation, an estimate of that specifically for the UK and that’s published from March and on average the savings on these vary by country based upon the overall time. But it is a significant savings I think certainly was a strong driver for the UK from the NHS perspective, outside of the mandate and the patient benefit.

Charles Duncan - Piper Jaffray

Excuse me, any other questions on this particular product?

I wanted to ask you kind of a general question about the technology platform and safety. I know there has been a point of debate about the potential for neutralizing antibodies and surely that debate actually kicked up into high gear and now it’s obviously stock has responded nicely to that. But with the announcement by ViroPharma, and ViroPharma is not here to defend themselves, so I’m not going to ask you about their logic there. But what is it that that they could be missing in terms of their subcutaneous Cinryze and why could there have been some challenges there?

Gregory Frost - President, CEO and Director

Well, I think that’s, if you look broadly, obviously the first point bio-analytic testing is a mainstay I tell people that it’s not wise to go into biotechnology industry unless you have those competencies and it’s a core of what’s done and the reason is that antibodies are obviously something that we study because there are safety things that can happen. For example, allergy, pure red-cell aplasia with neutralizing antibodies in case of erythropoietin, and these are the reasons that we do these things.

In the case of laboratory findings without clinical sequelae, there is additional laboratory investigations that are typically done. So in the case of ViroPharma, most products that we’ve worked with have an immunologic profile where the population that’s receiving enzyme and those that are not, it’s very hard to distinguish which one is receiving the test article, despite using very sensitive methods.

In the case of ViroPharma, some of the laboratory findings that came up were very suggestive of an immunologic response of the protein, and a root cause analysis needed to be done of that. The timeframe to do that, and I think to the extent of which it was done, for example with HyQvia which was very extensive. We spent a tremendous amount of work on that. But that is something that needs to be done specifically for each patient population and for those specific antibodies. So I think to that regard when you look from a time perspective that’s simply an issue from an assessment that needs to be done.

And certainly if you see a response with a particular product, you have to ask the question, is it the drug substance, the drug product or the patient population. Some of those are not advantageous if you can't change the drug substance for example.

Charles Duncan - Piper Jaffray

And there is a changing dynamic within that population as well. Any questions generally on safety; do you still expect Baxter to resubmit the HyQvia NDA by the end of the year? I know you are not.

Gregory Frost - President, CEO and Director

I guess you didn’t get the press release yesterday.

Charles Duncan - Piper Jaffray

I was busy doing…

Gregory Frost - President, CEO and Director

No, we actually, that’s I suppose we could talk about that from that perspective. So we did, we resubmitted the serial response, the resubmission was to the men of DLA by Baxter was made, it was announced yesterday before market. So there's some additional details I think from Baxter on that, but they expect a traditional Type 2 I think six month review on it.

Charles Duncan - Piper Jaffray

Excellent, very good.

Unidentified Analyst

In terms of hyaluronidase, at one time I don’t know is still in the pipeline that's an indication, produces cellulite treatment? How far are you with that?

Greg Frost

Great question, so that’s actually not hyaluronidase, there's another enzyme in our platform. So we have a number of -- our basic R&D focus has been on extracellular matrix or things outside the cell and enzymes that modify them. In that case what we’ve looked at is for collagen based structures, we’ve developed what’s call the conditionally active biological enzyme. It’s a member of what’s called the cathepsin family of enzymes rather than hyaluronidase. That study we had a 36 patient randomized Phase 2 trial, that had a 28 day primary endpoint with independent panel review. We have three and six month endpoints on that that will be wrapped up the first quarter of next year. So it’s an exciting I think upcoming catalyst from that perspective of getting that data read out.

Charles Duncan - Piper Jaffray

So two other areas I want to chat about; oncology and then diabetes. But before I do, are there any other questions along those lines, it’s not really your plan to treat cellulite, right?

Greg Frost

No.

Charles Duncan - Piper Jaffray

Any other…?

Unidentified Analyst

It pays a lot of bills

Charles Duncan - Piper Jaffray

Yes. It could may do… any other questions? So PH20, PEGPH20 in pancreatic cancer. Pancreatic cancer seems to me be a tough place to play and the treatment paradigm has changed a little bit at least with the data from Abraxane. How do you see the clinical need there evolving and why do you think that you may have a play within pancreatic cancer?

Greg Frost

Those are great questions, and pancreas cancer is unquestionably one of the most challenging diseases to treat. The late diagnosis the stage of disease at which it’s typically diagnosed, more than 80% have disseminated cancer at the time that it’s found making surgery really unfeasible for most patients.

So I would start by saying if one goes about testing pancreas cancer with a novel agent, just in a shotgun fashion, you are almost inevitably going to fail because it is a disease which requires very careful study. We were driven to pancreas cancer number one from the biology, which was of surveying multiple different types of cancers for the presence of target that PEGPH20 depletes, as well as some of the underlying biology as far as the natural history of the disease and how it relates to the presence of that target. So that’s always a strong point is if the biology tells you that this target correlates with poor prognosis and it’s naturally enriched, was a great place to start.

The companion diagnostic that we developed and integrated with that particular program, however, is something which we believe will be most valuable for doing enrichment studies which we plan to start next year, we can go on to that in a minute. But, specifically with regard to pancreas cancer, gemcitabine with Abraxane is what we believe to be an evolving standard of care and certainly we believe is a great backbone for which to test PEGPH20. The preclinical studies that we’ve used in multiple different models have suggested that the three agents together outweigh any other combination that we’ve tested.

And we see that that set we did a safety check where we -- first we’re testing gemcitabine with PEGPH20, we’ve presented some of those data at ESMO. But, you’re still looking with gemcitabine and Abraxane of a medium PFS around 5.5 months, so it’s advancement from the context of gemcitabine alone but tremendous room for improvement. So, that really form the basis of the randomized Phase 2 we’re running today of gem-peg-Abraxane versus gem-abraxane, and from a design this is something whereby what we’re both looking at the HA status in all patients enrolling progression free survival we think will give a very rapid read from an efficacy perspective. So I think that Abraxane is a new backbone for some of those patients is important.

The secondary piece of course that we have through a cooperative group with the Southwest Oncology Group or SWOG is with the modified FOLFIRINOX regimen. These two regimens are perhaps the two most commonly used regimens today are FOLFIRINOX space regimen for patients with high performance status and those on gem-Abraxane. So collectively we think that we’re asking the right question from the context of patients with significant unmet medical need. We also believe the biology is behind us from the standpoint of why we should be going after pancreas cancer and we’re testing it with the two agents where we know with high confidence that if we move the mark with both of those agents we will test against the agents with -- that are the most advanced therapies available to patients.

Charles Duncan - Piper Jaffray

It sounds like a very savvy targeted development approach. Unfortunately we only have 40 seconds, so I’ll be quick. Tell me what to expect out of diabetes data in the Spring?

Greg Frost

So we have a trial, the largest I think one of the large is kind of analog insulin pump patients. These are adult type 1 patients, people with diabetes looking at all insulin analogs most of the pumps and infusion sets they use. This study we started it in April of this year, it enrolled very-very rapidly so the primary endpoint of that will be wrapping up towards the end of this year, so we’ll have top line on that the first quarter of next year and obviously there is a lot of other activities going in but there is some key pieces from that trial that’s going to I think determine the prospects for it. Certainly, severe hypo, A1C, and other things, so.

Charles Duncan - Piper Jaffray

Okay, very good. Thank you for sharing that Halozyme story with us Greg. Thank you to everyone else for your interest.

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