Halozyme Therapeutics's CEO Hosts Analyst/Investor Day Conference Call (Transcript)

| About: Halozyme Therapeutics, (HALO)

Halozyme Therapeutics, Inc. (NASDAQ:HALO)

Shareholder Analyst Call

October 2, 2012 10:30 am ET


Gregory I. Frost – President and Chief Executive Officer

James Shaffer – Chief Commercial Officer

Jesper Jensen - Vice President Sales and Marketing, Endocrinology

H. Michael Shepard – Chief Scientific Officer

Kurt Gustafson – Chief Financial Officer

Sunil Hingorani – Associate Member, Fred Hutchinson Cancer Research Center


John Sonnier – William Blair & Company

Ying Huang – Barclays Capital

Eun Yang - Jefferies & Company

Jason Butler - JMP Securities

Gregory Frost

Good morning everyone. Welcome to Halozyme's 2012 Analyst Investor Day. It's a pleasure to see so many of you here and I'm excited to give you an update on all of the opportunities we have to build near-term value through many of our late stage programs, as well as share our strategic vision for Halozyme's long-term growth. For those of you present today, you'll also find this presentation on your key thumb drive provided in your packet.

Before we get started, I'd like to remind you we'll be making some forward-looking statements in this presentation today. Actual results may differ from what we project in these statements and for discussion of associated risk factors, please see our periodic SEC filings.

Now today, you're going to have a chance to hear from many speakers that are internal to Halozyme as well as some speakers external to the Company who are key advisors on some of our most exciting programs. In addition, we have management that are joining us here and have of course others which are still in Europe, both for EASD, the diabetes meeting, as well as ESMO, European Society for Medical Oncology.

Presenting with us today, we have Jim Shaffer, Chief Commercial Officer, Jesper Jensen, Sales and Marketing, Endocrinology, as well as Sunil Hingorani, who will be presenting today from The Hutch, as well as Michael Shepard, Chief Scientific Officer and Kurt Gustafson, CFO.

Now before we jump into this, I really want to orient everyone here to Halozyme's mission and vision. And hopefully, this will help you understand what we're trying to achieve, as well as why we're pursuing some of the activities you're going to hear about later today.

Halozyme is a science-driven biopharmaceutical company that's passionate about making molecules into medicines for patients in need. And what makes Halozyme unique? First and foremost is our approach to the science. We look outside of the cell and we see the patient, which brings focus on delivering the medicine over just the molecule.

Now, we're also a biopharmaceutical company that's brought its first platform technology from inception to commercialization, through its first products. But I think you'll see that we're maturing to an inflection point with a strong tailwind and some very exciting opportunities ahead of us. We're proud also of the scientific innovation that has brought us to this point, but we look forward to future breakthroughs that I think can carry us even further. But just underscoring the passion, this is why we come to work every day, it's the patients. This is what motivates Halozyme employees to come to work and give 120%.

You know the biotechnology revolution is, and continues to deliver some amazing molecules to treat life threatening diseases but in many cases, frankly these medicines were designed with a blood plasma concentration in mind without thinking much about how to get the medicine to the patient or the costs and challenges associated with it.

But when you look whether or not it be a patient sitting in an infusion chair for several hours a month or injecting yourself many times a day, followed by blood sticks to try and see if you got it right, you realize actually that we ask a lot of our patients for the lifesaving therapies that we've developed. So making it easier for patients to get therapy or improving the overall outcome is really all about what we do.

But, while science itself is certainly what played a crucial role in the inception of this company, we of course don't engage in science, just for the sake of science. And the strategy of Halozyme is to complement revenue streams that we receive from our partnered programs, with our own products, in order to drive sustained growth for the long-term.

And this can I think put the Company on to a growth trajectory that's well beyond what it could achieve if it was only focused on proprietary or partnered programs alone. And we're confident that guiding these key proprietary programs through approval and on to commercial success, is going to be the best way to transform innovations into reality that I think can result in the maximize shareholder returns.

So if you actually look at Halozyme as an organization, in order for us I think to successfully make that transition from an R&D focused organization to one with commercial capabilities, we balanced our structure between partnered and proprietary programs. It's a structure I think which more evenly distributes risk and reward.

The enhanced technology platform that most people are familiar with Halozyme uses our Recombinant Human PH20 enzyme with the injection in microgram quantities to generate nano channels under the skin. And this can facilitate absorption and dispersion of large volumes of therapies that would traditionally require intravenous infusions and help to kind of convert those over to a simplified subcutaneous injection or a shot.

And this platform I think has forged some key partnerships that will continue to drive revenue, but I think what you'll also hear about today is that we're a company that knows how to build a pipeline from the platform.

With some of the greatest value I think that we see in the next horizons is going to be coming from product revenues from our own products that will be bolstered by our partnerships. And that our innovative programs as a drive to those clinical inflection points will help take us to that second and third horizon.

Finally, I think if you were to look at Halozyme as a company and what we've done well over many years, as we've actually have been very good at developing new platforms. When we think about making a new molecule, we don't ask ourselves is there one question to ask with this molecule because it's very costly to take one molecule all the way through development, all the testing. And if you have only one question to ask by the time you're ready to go in the clinic, there is a side that many people will say well perhaps you shouldn't be asking the question.

So this perspective that we have as far as looking at each molecule in this perspective, I think is important for us, as a company and actually highlights one of our strengths. But when we actually look at this core technology and the value and benefit, I think that it brings to stakeholders across the healthcare system, it's important to note that for the patient, depending on the agent that we're using, getting more options available for patients to manage their disease in different settings of care is important.

And having a less invasive route of administration for chronic therapies can be very, very valuable for some individuals. In other cases, actually improving the performance of existing therapies, making them better to overcome their intrinsic challenges, can be achieved. But obviously for the healthcare provider and the payer, the important elements of being able to produce, potentially reduce complications. Getting intravenous access without establishing venous access, in essence being able to go through and take IV infusions and increase that footprint is very important, we can't put a hospital on every corner.

But the patients can't necessarily travel to get to each place. So when you have patients that need to go through and actually get medication, the ability to expand that access has advantages also to the payer in reducing overall cost for delivering therapy. And in the end whether or not it would be the potential for improving outcomes or going through and reducing the barriers to compliance, everyone has something to benefit in these settings.

Now, getting a little bit more granular to the pipeline, both internally as well as externally, I think what you can see number one is that Halozyme has a large number of short term goals, both by geography, by therapeutic area and molecule that we're looking, coupling our core technology, as well as new molecules that we're developing. And you'll be hearing a lot about our key proprietary products and programs in greater detail in this presentation, but let me take you a few minutes just to walk through what we're doing with our partners.

But before I do that, I would like to go through and highlight that there is a lot of things that go through in our R&D engine that a lot of folks may not be quite as aware off. And so, when we look for example at each molecule that we develop whether or not it be looking at PEGPH20 in oncology, we have very deep academic relationships with others to look at exploring new uses, so whether or not it be for examples things like insulin resistance, the PEGPH20 with collaborations getting a molecule and understanding the pharmacology is important, but also understanding its applicability in different areas. And this recycling value of understanding different areas of utility is important for us, as well as looking at new platform technologies.

So if we actually dive down into just some of the first compounds that we're focused on as a company with our partnerships. It's important to remember that there's nearly 15 billion worth of the intravenous forms of these compounds, today. So when we think about enabling a subcutaneous form of these agents, you can go through and take any slice that you want as far as market penetration or rate of penetration, there's some very large numbers.

And as a company, we see mid single-digit royalties for some of these and up to 10% on others. So just taking a look between MabThera, Herceptin and HyQ, these are some important products. Certainly MabThera and Herceptin which are some anchors of the Roche platform, you will be certainly hearing more about today as well as later this year. But even to agents like alpha 1-antitrypsin inhibitor, which today is a plasma-derived product, is about $0.5 billion in sales, but by having a recombinant human version and being able to develop that subcutaneously, the opportunity could be much larger.

Now, if we take a look at Herceptin subcu and MabThera subcu in a bit more detail. Now, I'd like to start with these as the latest stage programs that we have and working our way back. And Herceptin subcutaneous is really has a number of folds of innovation in to it. One of which is taking a variable dose to biomass IV infusion and converting that to a fixed subcutaneous dose that can be administered in less than five minutes.

So there's a number of advantages of that. Number one is the amount of time it takes of compounding that product down in the pharmacy, bring it back up establishing venous access and then the chair time that that patients sees which can be 30 to 90 minutes, being able to take that to a simple fixed subcutaneous dose of 600 milligrams is impactful both for patient as well as reducing the complexity of healthcare delivery.

This is the product which was filed in MAA in Europe earlier this year, and Roche presented six abstracts on this, this year at ESMO, just over the last few days. And we have in the case of MabThera, you'll obviously be hearing more about this at ASH in December. But in the case of Herceptin subcu, you have presentations, both on efficacy looking at immunogenicity, safety, device and bridging and expanded trials. And I think what you find is that Roche has focused on this opportunity from the standpoint of the benefits as well as filling all the potential gaps.

In the case of MabThera subcutaneous, the opportunities for patients of actually getting that infusion time down yet even shorter of what can be up to four to six hours, bringing that down to a simple subcutaneous fixed dose injection again as a product, which is ready to use, can be very valuable I think both from the standpoint of patients as well as for healthcare providers.

Now these programs, which represents the antibodies direct against the first two targets, which Roche has exclusivity towards, which doesn't include obviously follow on antibodies, which they have exclusivity for these specific areas. What you can see is that Roche has continued to make large investments into their ENHANZE programs. With just on the first two antibodies alone with nearly 5,000 patients dosed were in the queue between HannaH, SafeHer, PrefHer, SparkThera, SABRINA and others to look both on the basis of safety, utility, efficacy and health economics and patient preference.

Now, if we actually dive a little deeper into Herceptin subcu, the most advanced program in the ENHANZE programs with Roche, there were two co-primary endpoints for this trial, looking at pathologic complete response with the percentage of women achieving of no histologic evidence of disease, accurate cycles with Herceptin, as well as trough levels of antibody and circulation and non-inferiority has been established on this both on the basis of the point estimates for these patients between PCR and plasma levels.

And as you've seen from additional of the six abstracts presented on this that you have a safety profile consistent with that of IV administration. And these data were submitted with regulators and we're pleased to see these progressed, furthermore, excited from the standpoint of a potential launch of this product in 2013.

In addition, I think the SafeHer study which is enrolling up to 2,500 patients, over 60 countries, Roche is looking at multiple countries around the world, and this is looking at both administrations by healthcare providers, as well as self administration for selected patients. And really in that context as we work our way back and look at Herceptin where I think the data that's been out over the last 24 hours, between PHARE and HERA2 that one year of Herceptin therapy and maintenance is the right answer for patients.

But being able to do that once the porter cap has come out and the chemotherapy is done, that being able to get the biological alone and its simplified administration setting can be very, very valuable. But they're setting this carefully both for patients that could self administer as well as for healthcare providers.

In addition, Roche is paying attention, I think to the potential impact on the healthcare system, so they have a study of PrefHer looking at the post chemotherapy phase, that adjuvant setting looking at IV versus subcutaneous administration, where they're focused both on the patient from the standpoint of preference between the two as well as collecting time, and motion and some pharmacoeconomic outputs, which will go through and be valuable for understanding the impact to the payer and the healthcare system as a whole.

So really from the innovation of putting all this together, between the developments, devices, fixed dose, ready-to-use preparations, these incremental additions plus change in the route of administration, we think collectively can be a win-win for both patients and for payers.

Now turning our attention to MabThera, this is again a model where we think the subcutaneous formulation could provide an even more significant benefit for patients, given the fact that the timeframes that are required for IV infusions with this product, being able to get this down in just five to seven minutes with the subcutaneous formulation.

Roche has run trials with SABRINA, [SAWYER], SparkThera looking at non-Hodgkin's lymphoma and chronic lymphocytic leukemia in both the induction and the maintenance phase. And while on that, the top line data we've seen from the standpoint that the pharmacokinetic end points were met, we certainly look forward to seeing the data which will be presented from these at ASH this year.

Now moving on to the Baxter HyQ program, this is a product which for patients I think that represented an important new option for managing their primary immunodeficiency. In essence, these are patients that are unable to produce an immunologic response that require supplementation with a plasma derived antibody therapy. And the therapies available today are either IV every three to four weeks or require weekly dosing at multiple injection sites.

So with HyQ, the objective is to be able to take this therapy which is a relatively large volume to a single site of administration once a month. In addition to that from the absorption benefits as a plasma limited supply, this could also have benefits I think from the overall supply to the plasma products.

Now as many of you know, the primary endpoints were met for this trial, but Baxter received the complete response in August and this is specifically driven on the basis of observations of elevated titers against PH20 that were absorbed in this trial.

So in essence what the agency has requested are some additional preclinical evaluations to establish the safety of these elevated titers and at this point in time the Company is going through working with Baxter to evaluate this, both on the basis of the gap analysis of the existing preclinical data sets and meet with the agency to go through and essentially design any additional preclinical studies to fill the gap.

But in essence, this is something we'll give an update on obviously once we had an opportunity to meet with the agency and have better clarity around the timing when this product can be resubmitted.

Now in addition, I'd like to give you an update obviously on another program, Cinryze subcutaneous. And obviously most people know we've received some positive news because this was a product which at the time of the CRL received from Baxter, the agency has placed this product on temporary clinical hold. And given the fact that I think that the patients in this trial were close to dosing initiation of a protocol that have been given that this was put on essentially as a temporary hold but it has been released simply with some request for some amendments to the protocol.

And after this news obviously ViroPharma has announced that they prioritized the subcutaneous form of this program with PH20, over other subcutaneous strategies and have a plan to resume clinical trials on this.

I think this is great news for patients Halozyme and ViroPharma, but I think importantly the release of that temporary hold helps folks I think understand number one on the basis that the value number one to the platform that when we had an opportunity perhaps to look at the individual components that there was a unique element with the CRL that was received, that was not broadly implicated to other products. But for patients obviously subcutaneously dosing could be a big win, being able to go from twice weekly IV to subcu could provide I think some additional benefits for patients that they can't get today.

And this really gets down to the issues that IV administration. You have trough levels, which has really developed the hypothesis that by going subcutaneous by using the enzyme you may be able to go through and actually achieve uniform exposure that may have clinical benefit for patients as well.

But I think just coming back to this, when we take a look at this first set of programs that Halozyme as a company is developing as a platform that this program has broad applications with its current partnerships and others that will continue to do. And with the existing IV opportunities that exists on this was nearly 15 billion and others if we look at is something which for us as a company, the royalties of these partnerships can help go through and drive us turning the corner.

But as we move over to our proprietary products, this is something which obviously I want to spend a lot of time on today to introduce folks to what we've been looking at. And I'd like to introduce you to members of our commercial team that will be talking about our strategy for Hylenex as well as the work that we're doing with our insulin program.

And first up for this is Jim Shaffer, Halozyme's Chief Commercial Officer. Jim has been with the Halozyme for just over a year, comes to us most recently from clinical data which built sales force for Viibryd for MDD which in its first year of launch, probably do about $185 million to $190 million. Prior to that Jim was Head of Sales and Marketing at New River Pharmaceuticals, which developed Vyvanse for ADHD, which will do over a $1 billion this year. And prior to that Jim served various roles in small and large pharmas such as GSK where he had roles for hospital and oncology brands such as Zofran, a blockbuster ancillary support of oncology product.

So with that, I would like to go through and invite Jim to talk about the commercial strategy at Halozyme and really go through I think, and introduce the overall program himself. Jim.

James Shaffer

Well, thanks Greg. Again I'm Jim Shaffer. It's a pleasure to be with you this morning. We'd like to turn our focus down to really the commercial opportunities with Hylenex. I'd like to start by just having you review briefly the ISI or the Important Safety Information on Hylenex because during our presentation we're going to review some clinical data that provides some background to the molecule, it's not meant for promotional use in anyway.

As we talk about Hylenex, it's a recombinant human enzyme that's indicated to increase the dispersion and absorption of other injected drugs and fluids. As we put a sales team in place this year, we launched it 10 months ago in December of last year. So we really focused on hospitals, ambulatory surgery centers and emergency departments. Our area of focus is primarily around regional anesthesia, all right. So we're promoting Hylenex to be used as a spreading agent for lidocaine and ropivacaine, for example in a cataract procedure for ophthalmologist, okay.

So that's probably the number one area for use today for Hylenex and hyaluronidases. Number two is for drug and fluid extravasation or infiltration. And then number three for fluid administration in patients with difficult venous access where you could utilize Hylenex to augment the ability to actually hydrate patients subcutaneously by utilizing Hylenex to open up that space, very similar to what we do with some of our partner programs.

Over the last year, we've worked to build a very strong commercial organization, right, so we build a small team that has a seasoned management team. So we’ve got seasoned managers, Head of Marketing, Sales, Manage Care, we build a small sales team that's very experienced and very focused in their efforts, so we've taken a very efficient approach to this.

We've built out our contracting area. So for a hospital product, we've negotiated our contracts with the primary group purchasing organizations. So now we have contracts that give us access to 95% of all hospitals in the US.

We've also worked out and signed all needed agreements with the government as it relates to CMS, FSS and PHS. And so that really opens us up to do business today and do business in the future as we expand our commercial efforts.

On the distribution side, we selected a 3PL and what they do is they store our product and they ship it into the market place for us. And we signed all the needed agreements with all the key distributors and wholesalers in the marketplace. So with this again, we've created a very efficient commercial organization that currently supports Hylenex and will support it in the future as we expand in other uses and areas.

So as you look at our current opportunity, right, this is a current hyaluronidases market. It's currently made up of let's say about 320 units are sold in the current hyaluronidases market in a given year. So this is a market share performance of our current sales team, it's really phenomenal performance for being out there now just 10 months, we have a 22% share of that market as we end in September and we're forecasting that we'll be at about a 50% share for the month of December. So our team has done a fantastic job of taking a product like Hylenex and competing very aggressively in this market over the last year.

So again very excited about our performance, very excited about the team we have in the future of what we'll do and building Hylenex itself in the current marketplace.

Now, we'd like to shift gears a bit and we'd like to focus on two distinct insulin market opportunities that are in front of us. The first one is one that the Company has talked about historically and you probably have built into some of your models and understand and that's this market for multiple daily injections, some people refer to as the Pen market. It's the market that contains Humalog, NovoLog, Apidra, right?

Well, we've done numerous studies that we've published at past medical meetings with the co-formulation of PH20 with Humalog, NovoLog, Apidra and we've shown that very consistent faster in, faster out profile that's more physiologic and that provides patients additional benefits than what they're getting with their current insulins. Now to be able to compete or launch a product in this market, again our product is a co-formulation of PH20 with one of these analog insulins, you need a large primary care sales team, right. So you're going to go after 50,000 to 70,000 physicians out there.

Number two, you need access to Pen technology, you want to put that co-formulation into a Pen, so it's very easy to give multiple daily injections. And three you need the ability to have large scale insulin manufacturing. So again that really defines one of our short-term options, it's right in front of us. We have a Phase III ready asset. We've completed our Phase II trials with our co-formulation. So that again, they've been published at past meetings.

Now, the next opportunity and this is one that we really want to define today. The Company, we've talked about it very briefly, but this is one that we want you to understand, it's distinctly different than the MDI co-form opportunity. This is the opportunity where we can actually use Hylenex, the product that we have on the market today in a pre-administration with insulin pump patients, right.

So again in this particular area, we've done several PK/PD studies with Hylenex pre-administered to pump patients where they actually pre-administer it into the cannula site, every time they move that cannula, so let's say every three days. So you'd give 10 Hylenex injections a month, every time you move that cannula site.

And then we've monitored the PK and the PD of these patients and we've seen a very similar profile, faster in, faster out. In addition, we've seen added consistency across the three days of the infusion set life. But again, we're going to talk more about that in our presentation.

Now, what you need to go to market in this particular pump market, right. Well it's a niche market in comparison to the larger MDI market we just talked about, but this is a niche market. 2,000 doctors treat the large majority of these 400,000 or so pump patients, right. So it's clearly a market that with a small specialty team, not unlike we have in hospitals that we could build and apply to endocrinology and do quite well in.

The second thing is that there's not a lot of competition in this market, right. So what we're doing in terms of what Hylenex provides to these patients, it's really complementary to what the insulin is doing, it's complementary to what the pump is doing. So we're not going to directly compete with anybody in this particular market.

And then lastly, barrier for let's say a company like us as large scale insulin manufacturing and that's a big step up, but in this market all we have do is scale up our existing Hylenex manufacturing, so we've got a great process, we've got great partners, we just have to scale that up, so that we can produce the volumes necessary to be able to launch and support this marketplace.

So from a strategic perspective, the best way that we feel that we can drive value for shareholders in these two distinct market opportunities in insulin is to partner our co-formulated program. Again a Phase III ready asset, let's partner that with the right diabetes player, right, that has the resources to go do that. And over on the insulin pump market, which we talked about is a niche market, it's going to take a small specialty sales team to go take advantage of this that we actually go commercialize that ourselves, utilize the skill sets that I bring and the skill sets that the other folks on our team bring and commercialize that opportunity ourselves.

So let's drill just a bit deeper into the pump opportunity right. So just to kind of tee it up and I'm going to turn it over to our Vice President of Sales and Marketing in this area, but why are we ready to go and do this, well one Hylenex is approved today for the pre-administration to products that are delivered subcutaneously to increase the absorption and dispersion. So we're approved today in terms of Hylenex current label, there's a clear market need. We've done a lot of qualitative and quantitative market research, where we've talked to docs, we've talked to patients, we've talked to payers, there's a clear market need for better, faster insulin.

Thirdly, the clinical data are quite compelling, the data that we have in pumps and again we'll show it to you here in just a few minutes. It's very compelling in terms of why this added benefit would be a value to the market place. Third and fourth, we have the basic infrastructure in place, right. We have built it over the last year, it's an easy add to go to market in this area and again in this niche market where we can create significant revenue for our company and value for shareholders. And it compliments what's going on in the market place today. We're not going to compete with the insulin manufacturers, we're not going to compete with the pump manufacturers, instead we're going to be working with them to be able to promote this and do it successfully.

So again to really tee up our go to market strategy and the things that we're doing in a prelaunch perspective, I'd like to introduce Jesper Jensen.

Jesper joined us about six months ago. He most recently worked for Boehringer Ingelheim. He was the Executive Director of Marketing for the Diabetes Program in the Lily Partnership, prior to that he was at Novo Nordisk for six years in a number of different marketing roles in the diabetes organization as well as sales management roles. And then prior to that, he was in the consulting industry with McKinsey for five or six years. So again, we are extremely excited to have Jesper on board. He brings to us current, accurate background in the diabetes area and is a great resource. You'll really enjoy hearing our plan and his thoughts about how we do this at Halozyme.

Jesper Jensen

So good morning everybody. I'm Jesper Jensen. And I'm excited to walk you through our integrated pump plan. So for me there are three sections that you want to highlight there's obviously the clinical need as it pertains the benefit to patients. Two, it's the market potential and how large do we think this could be and what's the revenue potential and then three, what's our plan to pursue this marketplace.

So and I'm going to start with the clinical need. And in order to introduce that to you properly, I'm going to actually have a video of Dr. Bruce Bode, who is one of the pre-eminent diabetes key opinion leaders in the pump space, as well as Neesha Ramchandani, who is a nurse practitioner and certified diabetes educator who also has a very personal relationship with the disease as she has Type 1diabetes and uses the pump. So I'm going to have a short video run where you can get their perspective on the disease.


Jesper Jensen: So that was Dr. Bruce Bode and Neesha Ramchandani. And Dr. Bode would have loved to be here himself today but obviously as you all know the European Association of Science and Diabetes is going on right now and probably all the top KOLs in the industry are there. But I can tell you that the three things or the five things that he said that are really important for faster prandial insulin, are on the page. First of all when we talk about that onset of that insulin analog today it is slower than the physiologic insulin, so typically 15 minutes as eeisha also highlighted in the video.

Two that insulin tail is around for a longer period of time than physiologic insulin would be and that has the potential for too much insulin too late in the cycle and might drive the patient, into hypoglycemia. Three, that insulin infusion is inconsistent over the life of an infusion set. So day one, their insulin acts one way and day two different and day three a different thing, different way. And that makes it for patients very frustrating to treat their diabetes.

And four because of this delay that you see with the insulin, patients actually need to take their insulin up to 15 minutes or sometimes longer in advance of a meal. And if you had to imagine before you go to have a lunch today, 15 minutes before, dosing your insulin not knowing necessarily how much you're going to eat, what you're going to be served that could be quite difficult and create some challenges.

And finally four, the close loop or artificial pancreas which is this system which will react to higher blood glucose with immediately releasing insulin and therefore adjusting it back down is a reactive system. And when you have the reactive system that fast on and fast off actions becomes even more important to make that a reality for the patient.

So there are really five reasons why we think a faster prandial insulin actually has the place in the marketplace and why I joined Halozyme to help commercialize this to serve the best with patients. So Dr. Bode did walk us through a very high level of the illustrative curve here which is adopted from Polonsky's New England Journal of Medicine publication.

And this really shows out over the time course of a day what are insulin levels in your blood are like. And what you really can see is at breakfast, lunch and dinner you have this very high bolus secretion of kind of, if you will prandial insulin and it happens very fast that onset is very, very quick.

And when we overlay this to our pump data for just the prandial component if you will where the basal background can be handled differently. What you see is that if you adjust not the time axis, because you can't change the time axis, put it on the same time axis, but adjust the dose, you can see that the curve, which is blue here, which is analog plus recombinant human PH20 are similar to Hylenex is virtually superimposable by the physiologic insulin. While the red curve which illustrates the analog alone has a delayed onset and also a delayed tail. And that is why we think that we are potentially much more physiologic for patient.

Now, if you walk this thorough the current patients who are on the multiple daily injections, which is what we talk about the co-formulation opportunity being most opportune for they will typically take half of their insulin in day as a purple background base on either one shot or two shots and that would be an NPH or a Lantus or a Levemir or potentially [gludex] down the line. And then they will take their three or maybe even more injections a day of prandial insulin, Aspart, Lispro or Glulisine which are Novolog, Humalog or Apidra.

And you see that same curve that we just spoke about, this is that curve that you see from analog alone. And when patients go like Neesha to a pump, they do so for more flexibility to have less needle shots, to be able to dose every time they take a meal or eat a snack or whatever anything else. But what they really see is their insulin in the blood is not much different because the insulin is the same insulin, it doesn't come any faster because you put it into the pump.

So what they're trying to achieve is this better glucose control but many patients who go to pumps, they have a lot of benefits from it and they love it like Neesha does but they're still chasing that faster-on and faster-off insulin.

What we have the potential to do by adding Hylenex to pump treatment once a day every third day, is really make that treatment much more physiologic and resemble much more closely that need that a patient has. So we think in comparison to the current pump treatment, which involved analog insulin adding Hylenex with pre-administration really has an opportunity to give better physiologic treatment for the patient.

So taking just the prandial component or just the mealtime dose of that, you'll look at our dark gray shade here that's the same Polonsky curve that we looked at before, overlaying with our data where recombinant human PH20 is used in conjunction with analog versus analog alone.

Again, you see that very tight overlay on what physiologic insulin looks like and what our PH20 will make that analog insulin look like. But more than that there's an important difference that when you take analog alone, and this is what Dr. Bode spoke about in the video, is that patients one day will see one action from that insulin and another day they'll see something totally different. And that's at the top right hand corner, the red curves that you see analog will have some variability in the absorption over the life of the infusion set which is typically 48 to 72 hours.

While on the bottom right hand corner, we can see that when you take Hylenex onetime pre-administration, you get virtually super imposable curves in terms of the insulin action over the infusion set life. And that takes that consistency of the absorption of the insulin. And this is one of the things that key opinion leaders believe can be a very important message and a very important outcome for patients.

Now, when we talk about the changes and how we think about we're different than analog alone, if you think back to when Humalog was introduced in to the diabetes marketplace back in 1996 and then later Novolog, there was a change from regular human insulin, which is the gray line here to the analog insulin. And that was a significant change and that resulted in a very rapid uptick of that product. And what we see with our data is the changes at least as significant in terms of the dynamics of the insulin. And then we see going from the red curve to the blue curve is a very significant change as well. And this is human data, so other people may show you, pig data or other versions of data but this is really important for patients and this is actually human data.

Now, if you take this and now apply it to a patient and the goal of using insulin is really to reduce your blood glucose and your blood glucose is what you typically will have for normal healthy individuals in a range of 80 to 110 or 120 during the course of the day. Now Type 1 and Type 2 diabetes patients, their primary dysfunction is, their blood glucose levels got very high. And what you can see here on the Y-axis is that blood glucose level as associated with a meal and time after the meal.

And what we've done here is in a blinded version used Hylenex plus analog versus Hylenex alone in a double-blind fashion. And what we can see is, here you want to stay lower because this is what your blood glucose is and the AACE range, The American Association of Clinical Endocrinologists range for postprandial glucose peak is in that range of 100 to 140, what they would like to see.

In a clinical trial setting, you typically get better results than you would in real life but what we see is even in a clinical trial setting analog alone results in this postprandial peak, which is above 180, which is even above the American Diabetes Association, the highest level that they would like to have.

While Hylenex pretreatment for that same patient with analog will result in a peak, which is far lower, 40 points lower closer to 140 the range that American Association of Clinical Endocrinologists suggests. So we think that this actually has the potential to take patients much closer to normal physiology in terms of outcomes for glucose control.

So here is an illustration of how patients would get this drug because one thing is what your data tells you, another question entirely is well how does this practically work for patient? And what patients who are using pumps today really use as is they have an infusion set. And this is for the 90% who aren't on disposable pumps there's about 10% or a little bit more than 10% who would probably be on an insulate or a pod pump, but for 90% they have an infusion site and then they have a tubing sets that they would run to their pump which would then be infusing that insulin over the course of their 48 to 72 hours if they would use that site.

Now, this is an easy thing to do, patients are going to be able to disconnect and reconnect, they do so when they go for exercise or showers or swims or for other activities if you will and what you can see is here is the patient who has disconnected that site.

Now that allows for us to actually access the site and be able to administer Hylenex. So when they change their site, there is a potential to disconnect their insulin tubing and connect a tubing that's been attached to a syringe that would have Hylenex in it and therefore pre-administer that into the patient site. And that was what Neesha spoke about that she presented our administration solution to certified diabetes educators and they said that's really very easy.

And we're working obviously with Unomedical which is a Danish company owned by ConvaTec to get that tubing supply and be able to commercialize that using their existing production and that's the same company that produces pretty much all of the infusion sets that you see in the marketplace today.

So just in summary of the clinical section of why we think there is a need and what we hope to be able to deliver to patients. We really think that the same five things. First of all, we hope that we can make that short acting insulin mimic much more closely that physiologic insulin profile and therefore reduce the prandial excursions with patient's experience.

Two, we hope to reduce that late insulin absorption and therefore reduce potentially that late post-meal hypoglycemia. And we've seen some of this in our data already in the co-form but we hope that it will translate very well into the pump studies that we're doing.

Three, we think that we can eliminate up to 80% of that variability I showed you with those two red curves at different set times in the infusion set life versus the two blue curves and actually provide for patients a more consistent absorption and more predictable outcomes when they use their insulin.

Four, we think we have this opportunity because of our faster on, our onset is probably closer to seven to 15 minutes or 15 minutes compared to 30 minutes for insulin that exists today that you may actually allow patients in particular, some group of patient for post meal dosing. So you could actually wait until after your meal to dose your insulin and get as good coverage as the patient who's sitting next to you who dosed before the meal.

And that really allows a lot of flexibility in terms of mimicking and matching your insulin to your needs for insulin and some potential less risk for hypoglycemia late if you do mismatch that.

And finally as we think that we actually can contribute to the important part of that closed loop artificial pancreatic system if you will. And that's also important thing for down line as we see pumps evolving and insulin care for patients with diabetes evolving. We think that faster-on, faster-off profile is going to enable a lot better care for patients.

So that's kind of in the broad strokes, the high level picture of our clinical potential. Why we think this is important for patients. Why we think physicians are going to use it. Now, I'm going to walk you through the market potential as we see it as well as some of the details as far as why we believe this is going to be successful.

So although there are about 26 million people in United States who have diabetes, only about 19 million, 18.8 million are diagnosed today. If you cut that down further, it's about 7 million potential who get insulin of some kind, but only 2 million or less than 2 million get prandial or mealtime insulin if you will.

Now in that 2 million who are getting prandial insulin which includes the pump patient, the pump patients represent a quarter of those patients and they're getting all of their insulin needs from that prandial insulin. And 440,000 is what we think roughly right now today there exists in terms of patients on pumps today and it's a growing market place. This is not a small orphan drug, this is a very major population, 440,000 patients.

I spoke about it earlier, how that infusion site. Now 90% of patients today get their drug or get their insulin infused through a site that we would potentially be able to access. So we believe that with our current plan for distribution and for access to patients that we can get to almost 90% of the pump patients who can use our planned administration solution. Some of them may need to change the type of sites for the type of infusion sets they're using because there are many of them out there, but over 90% would be able to use Hylenex, if they should so choose.

So if we talk about the market potential in terms of dollars, the simple math that I like to do is just, say, how many patients do we have? And we have about 440,000 and of which 90% we can access, so that gets you around 400,000. Then we say every third day you change your site and that's the way typically with patients today they're told by the CDC that they should do so every 48 to 72 hours, but we know that patients are probably closer to three days in terms of their infusion site changes and that gets you to 120 changes a year.

Now our current Hylenex WAC pricing or the wholesale acquisition cost of Hylenex is $52 a vial. So the simple math on this says that for every market share point, every percentage point penetration in this marketplace represents $25 million in revenue, gross revenue for our company. Now obviously that would be discounted in some reasonable way to make sure that we have the access to the patients, get on formularies et cetera, but this is without a doubt a very large short-term business opportunity for us.

Now, how quick can we expect these patients to adopt things? And obviously there aren't a lot of great analogs for us to look at, but we will look at an analog. And the analog is Humulin or that was changed to Humalog back in 1996 and then later Novolog was launched. And what we saw six years after launch that there was 50% penetration among the overall segment of short acting or prandial insulins.

Well that's pretty fast pick up when you consider that physicians will typically not change their patients unless they're not well controled. But we also saw and what we know and I've worked in this space for a long time are that pump patients adopted far more rapidly and far more completely than the overall market segment did, the pump patients because they're almost exclusively commercially insured because they're followed and treated by leading endocrinologist and diabetologists. And because it takes a very involved role, they play a very important role in their own care, they look for these new treatments and they will pursue them and pick them up very rapidly.

So when we then have to go in and say is this a business opportunity we're willing to pursue, we obviously don't just do it based upon my experience and the experience of the wonderful team that we have here and great clinical data, we do a lot of real market research around this. And this company has been doing research going back to 2008 on the diabetes opportunity. And we're going to give you the high level summaries of some of these research pieces.

So in 2008 and 2009, we worked with GSK, a market research company, to look at physician needs for this drug. Again in 2011 another market research company, TDR Data and again early this year with Campbell Alliance. And what we really saw were the attributes of our product that we should be calling out and developing in our clinical trials to make this very relevant, so that faster-on, faster-off profile. What does it mean? What should we be looking for? Are we looking for hypoglycemia, postprandial? And what's the prioritization and how we develop our drugs?

And also we asked with our product profile as it exists, what's our likely preference share among pump patients that you're treating today. And we always do our factoring or we take the number that they give you and you divide it by some other number to get you what you really think, but even factoring that research indicated to share likely above 20% for peak penetration.

Moving on to patient market research, we also did the same thing and asked patients what their needs were for newer, faster insulin analogs. And typically, it's not the first thing they talk about, patients typically talk about -- will talk first about less needles, I don't want to have to test my blood glucose, but they also didn't talk about faster insulin analogs back in 1996 and 1995, when Humalog was launched.

But what we do see is that patients do understand that there is variability in absorption that they do have a different experience day one or day two or day three at different times and there is a need there. It also was very clear that patients who measure their postprandial glucose, see very low -- percentage of them see, excuse me, they get to range, they get to the goals that they'd like to see. So up to 90% say I don't get good postprandial control even though I do everything right and that's a daunting statistic, but it is however consistent with data that we see that less than 75% or less than 25% of pump patients are at the 7% HbA1C, blood glucose average goal.

Moving on to pricing, it's important how you price a drug to make sure that you can actually realize that price and a lot of research was done before the launch of Hylenex to optimize the balance between optimal revenue and minimum prior-authorizationand issues with approval.

So the price that we fix for our WAC price for launch was not done so in a box, but it was done with very detailed research from GSK and LEK in 2011. Also this research was able to take a look at the patients who have current pump use and what kind of insurance they have and what we see is commercial insurance dominate. About 80% of patients who are on pump to maybe even more are using commercial insurance, so not Medicaid and Medicare which typically has caused some issues.

When we go on to our discussions with key opinion leaders like Dr. Bruce Bode, you saw earlier, we really actually had advisory board at the ADA this year with endocrinologists, but also we saw a number of them probably at the ADA present data on Hylenex on recombinant human PH20, as well as other presentations where we were mentioned.

And what you really see is that these opinion leaders believe that our profile is differentiated and very meaningful to patients. We also were able to solicit input to our clinical trial design for Phase IV as to how can we be most effective in getting the benefits out of this for patients, so that we can market it effectively down the line. And finally like I mentioned, you can actually see a lot of very important key opinion leaders either presenting Halozyme data or in other sessions referring to our data as a real step forward for patients and prandial insulin in general.

Now, anyone who has worked in diabetes for a long time in particular with pump patients who have some of the best care available, many of them see diabetes nurse educators. And we've also had research done as well as advisory boards with some of the very top diabetes nurse educators in the country.

And really what we did with them where we won confirmed our chosen delivery system. We made sure that the delivery solution that we were providing for patients was one that was going to feasibly work, make sense for patients that we'd be able to train it and that they said hey this makes sense and the likelihood for errors is very low. We also worked with Group IV which is a research company to scan up the overall marketplace to find many different alternatives than we had before we choose, the administration solution that we're going forward with.

And finally at our advisory board, we also asked and given our product profile what percentage of pump patients do you believe would benefit from Hylenex? And pretty much universally they added and said 90% of patients would benefit from this drug, in this innovation, but then realistically given that added five in a time which is very easy, your peak market share penetration would probably be 25% or even higher. So that's kind of what our advisory board, what the nurses told us.

And then finally I mentioned before the artificial pancreas or closed loop systems, what we can actually see it as a very large non-profit patient efficacy group that has funded some research including recombinant human PH20 in both the co-formulation and a pre-administration with Hylenex in comparison to analog alone to demonstrate how that faster-on and faster-off profile will facilitate better closed loop artificial pancreas results. And that's very exciting for us because it will give us external support that we're obviously not paying for, but we'll earn a lot of mileage out as we expect.

So overall, we think we've done a lot of steps to confirm the value both from the perspective of clinicians, patients, payers, nurse educators, and outside agencies before we went out and took under this opportunity to launch Hylenex for pre-administration for pump patients.

So now I'd walk you through the clinical need, I will walk you through why we think this market potential is really exciting and could be transformative for us in a short-term. And now I'm going to walk you through a couple of slides on how we believe that we can pursue this with our integrated plan.

So first of all, it's important for us all to note that with our supplemental new drug application that was accepted by the FDA on March 21st of this year that we are on label for pre-administration with Hylenex. So using Hylenex to treat a site to treat some location and then treating with a drug afterwards is approved by the FDA.

The next thing that's important to realize is that when we had the complete response letter was given to the HyQ BLA, no action was taken by the FDA on Hylenex. We even called the FDA and said do you intend any actions, have any concerns as it pertains to Hylenex in our current form and the answer was they had no issues and they are not planning on and taking any action on Hylenex. And Don Kennard, Regulatory, VP can tell you on more of those details as you need.

Second, we had an ongoing pump trial at this point in time. I've shown you some of the data, the interim data from that study, but we actually had patients in a pre-administration trial and pump setting, when the complete response letter came down. And we said, are there any amendments or changes that you would like to have for that protocol? And again the answer was no action was taken on that open IND study that was filed for Hylenex IND.

Third, we have filed in September 11 of this year, a new study to the FDA under our existing Hylenex IND. And we've gotten since then from our institutional review board has actually dialogued with the FDA around it and the FDA said, that study is okay to enroll, and we've got an approval from the institutional review board to enroll into a large Phase IV study looking at both efficacy and safety of pre-administration with Hylenex in a pump setting.

So overall, we really think that we're in a very good place from a regulatory perspective and are able to move forward with that.

So when you then translate into how we plan on and commercializing and its important question when, how, what are the details and when you're going to get there. I would just like to start with why we do this and why I do this is that I start by thinking what's the need for the patient and what's the current way that they get their care delivered. And you take this patient who is in the middle of our circle, there're a lot of people and a lot of components that go into that care for that diabetes pump patient.

Now, she has a physician and she has obviously nurses, she has a pharmacist who is making sure that she is getting the right drug at the right time, there are no drug interactions. She has insurance who pays for it, and then she often times will have a mail order or a local pharmacy that she gets her drug at. And as we think about commercializing, we really need to think about that whole circle around the patient as far as how we plan on commercializing to fit into that.

So what I'm going to walk you through first are the elements of how we want to fit into that and then our launched checklist. So first of all obviously, you need representatives and medical science liaisons to promote your data for the representatives to physicians and nurses, to tell the physicians and nurses what's in it for them, what's in it for their patients, where are the safety side effect profiles, what's the important aspects of the drug.

And we're also going to need obviously medical science liaisons to handle off-label unsolicited inquiries but also to work with sites on investigational trials and other kind of uses of the drug as it pertains to this.

If you move forward in the pump world, it is very common that you have a hub or approval services hub. So a pump is an expensive therapy about $6,000 for some of the raw materials. But on in an on-going basis, very expensive on a daily basis as well. So it's very typical that physicians would fill out statements of medical necessity and send them to the pump manufacturer, who then would ensure that the insurance is going to pay for that before giving the patients the product. And we would want to work in the same way, so our intention is to have an approval services hub that we will work with to get approval for our drug on behalf of patients, physicians and nurses.

So once that’s approved and they've gotten the drug into their hands, we realized that there are a lot of patients in the US who need training and nurses. And we obviously need to give them some kind of support, so our intention is to contract with local nurses, not higher nurses, but contract locally with nurses who are expected in the local community to train on our behalf.

Now the trainings wouldn't be very difficult, as we mentioned it's a very easy process to use the Hylenex pre-treatment, but there would be some training associated with now that your insulin is going to act differentially, you might want to treat yourself differently. And that portion we don't want to underestimate how important it is and we're going to make sure that this is an offer for our physicians and our nurses in the marketplace to get our third-party assistance, so that they don't have to put more in their busy day that they wouldn't perhaps be reimbursed for.

Now, we spoke about infusing into that site on that illustration of the ad them and you saw earlier. But there are really different sets that are used by patients. There are probably are about three to four sets that would cover about 80% of the existing sets. So we're going to probably need to have three or maybe more sets of tubing, if you will, that will go to different sets. And we're working with Unomedical to get those tubes and validate and make sure that we have our 510K approvals for those tubes.

But we also once we have a prescription for patient they can't just go to their local pharmacy and expect to get the right tubing. So this where your approval services which just garnered your approval should be refer them to closed or semi closed distribution network to get to the patients the right tube that matches to their infusion sets.

Again, this is not any different than what they do today because today they typically will buy their pump as well as their monthly requirements for infusion sets through the pump manufacturer and they were ordered in groups of 10. So they would maybe order three packages a month or four packages a month. And what we would do is work with them to give them four packages 10 vials, plus, four packages of 10 tubes with connectors and syringes.

Now, it's not lost upon me or anyone on our team that patients who have diabetes, who have other drugs that they're paying for as well as it's an expensive therapy. They have co-pays and it's a quite expensive for them. So our intention is to offer a co-pay support program, which will make it as close cost neutral for the patients as we possibly can, so if that does not become the barrier for adoption of that patient’s ability to pay.

So if you think about the whole loop how the patient gets their care, we really think we're surrounding that patient and working with that network of care to make it as minimally invasive, but naturally fitting into how they do things already today. And I'm pretty excited about the opportunity to commercialize towards this opportunity, again, $25 million per gross sales per percentage point penetration.

But it all comes back to the patient. So we always do it, and I always do my job, so that I can help that patient to get better. And if we keep ourselves in mind that that's why we're doing things that's what is central, putting them central to what we're achieving, we're doing well.

So we have a pre-launch checklist, and I pretty much walked you through some of the details. And I'll tell you why we're not launching tomorrow as well when it gets to the back end of this list. But first of all, we've updated our label for the proposed use.

We have generated clinical proof-of-concept data, and I've illustrated and showed you some of it there, and a lot of it published that you could find at ADA and other conferences.

We've been able to validate via , extensive market research the potential and the need for this in the market place. We've also selected our delivery solution as it pertains to getting our product to the patient and we make sure that in the long-term as we go from vial solution to prefilled syringe solution that it would be viable and a very simple change for the patient.

We've gained broad key opinion leaders support. This is obviously going to always be an on-going need in diabetes. It's a very key opinion leader driven industry. But I know many of the people here and we're already doing very, very well in this area as well. And I think we've created a commercialization plan and very detailed plan. I'm only showing you the tip of the iceberg to give you a feel for the direction that we're going and why this is something that we're pretty excited about as a company.

Finally, Jim mentioned that we've built the commercial infrastructure. We've already commercialized Hylenex, which makes it easier for us to go out and do anything else that with all of the systems in place to allow us to be successful that we have all the back office things setup that nothing is going to be new that we're not going to be learning when we go into our first major commercial launch.

So overall, there are three reasons why we're not launching tomorrow. Although, we've planned the Phase IV trials that we want to run, and as I mentioned earlier, we've even filed one to the FDA, we do want to make sure that we have the adequate data to support effective commercialization.

Two, we want to make sure that our administration solution is approved by the FDA. This is not a long cumbersome process but involves running a handling study with patients that involves validating in actual use, and then it involves filing your 510K. There will maybe a note to file because we're just taking existing tubing from the existing sets today and making a specific application for us.

And then finally, because this is 440,000 patients that we're targeting, potentially use of a 120 vials a year, this requires our production to be scaled up significantly beyond where we are today. And therefore, we can't go out and launch if we're not able to supply the market place. So we need to make sure that we have the product supply to be able to do well, and once we pickup in commercialization that we're able to supply the market place.

So those are kind of the overall reasons why I think that we're pretty excited about the commercialization plan as it pertains to Hylenex in the insulin pumps. And thank you all for engaging with me. Greg?

Gregory Frost

Thanks, Jesper. So I think you folks got a flavor of the near-term commercial opportunities that Halozyme is looking at, preparing for. But what I would like to do is take a look at a slightly different part of the pancreas, moving our way over to pancreatic ductal adenocarcinoma and our PEGPH20 program.

And with me today, we have both Dr. Hingorani from the Hutch. We're talking about -- who's also the lead investigator on the 201 trial, talk a little bit about the science behind PEGPH20 and the challenge, and what we're hoping to solve in the case of PDA. As well as Mike Shepard, CSO to talk a little bit about activities that we've taken on the companion diagnostic strategy to help find both tumor classes that may profile similar to pancreatic cancer but are not present relatively ubiquitously.

So in addition to Sunil, I'll just give you an introduction for Mike Shepard. As many of you may know Mike first started working with Halozyme back in 2002, but joined full time as Chief Scientific Officer three years ago. Most people also don't know Mike was also the team leader for Herceptin back when he was at Genentech and shared the Warren Alpert Prize with Dennis Slamon on that.

So from an innovation line and things that we have in this company, I think folks will get a sense, you guys have a very, very innovative R&D organization behind us.

Now as we look at PEGPH20 and the program that we're developing today, there was significant unmet medical need with pancreatic cancer, but we also think that the backbone is evolving. Now, it's important to remember that for patients today their early stage of resectable surgery is the best option is there. But this is actually for a very small percentage of patients.

And those presenting with metastatic disease unfortunately gemcitabine has been the only tool available for many years. And from the perspective of unmet needs, these agents have only been able to deliver median survival that just aren't getting us for a year. But there are potentials for the future standard of care. FOLFIRINOX is proven to be an agent, which does demonstrate superior activity but it's been limited to patients that can tolerate an aggressive regimen.

And GEM Abraxane many of you are, as we are watching very, very carefully to see the results of the randomized Phase II trial on this. Now, we have a program underway currently, which is targeting a very different approach to pancreatic ductal adenocarcinoma and its thinking about this trauma. And PEGPH20 has got through a Phase 1 single-agent trial where we have our recommended Phase II dose, and is in a run-in phase currently into a randomized Phase II.

But as we look at the horizons in front of us, we're monitoring this very carefully for consideration in 2013, first and for most, to see the standard of care of whether or not Abraxane with gemcitabine is going to become the backbone for most of those patients that cannot tolerate FOLFIRINOX.

Secondly, we have under consideration right now is an IST randomized Phase II of looking at FOLFIRINOX and PEGPH20 as long as looking at which start 2013. And in addition to that another IST is under consideration looking at the locally advanced non-resectable patients to ask the fundamental question, can we actually get patients that are surgically unresectable to this action.

So with that, I would like to go through and bring up Dr. Hingorani just to talk a little bit about the disease, the challenge and why we think this might be the right approach to take. Sunil?

Sunil Hingorani

Thank you, Greg. And thank you to all of you for attending. As Greg mentioned, we're going to turn to another part of the pancreas now. And if cancer is the Emperor of Maladies, then pancreas cancer is the Emperor of Emperors. It's the King of Kings when it comes to cancer. It has the lowest one-year and five-year survival of any cancer out there, and not only is it essentially uniformly lethal it’s incredibly rapidly lethal.

So the median survival for most patients is about six months, and that means they essentially get one shot at therapy. If that therapy fails, they are likely too ill to receive another therapy. As Greg mentioned, more than 80% of patients at the time of diagnosis, at the time that I meet them have inoperable disease, so curative intent is not possible for them.

And finally, except for some notable improvements really very recently, which we're still trying to evaluate in terms of how to apply these regimens to patients, there really has not been any significant improvement in survival for the last 15 years. And in terms of the clinical challenges for this disease, and these clinical challenges really define the problems with survival and mortality, it's an incredibly difficult disease to detect.

Pancreas cancer does not declare itself, its presence is really not known, again until it's too late. The symptoms that do develop are vague and non-localized, and actually can often direct you away from the diagnosis rather than to it. It spreads extremely rapidly and very early in the course of disease progression. So another one of the challenges to pancreas cancer is that it doesn't have these well-defined chronological periods of time between stages. Pancreas cancer very early in its course will actually spread throughout the body. And currently, it's very resistant to essentially all forms of chemotherapy and radiotherapy.

I'm showing here two different kinds of imaging mortalities that we use routinely in the clinic to try and make the diagnosis. The CT scan on the left and an MRI scan on the right and both of these used contrast agents in order to help you visualize structures. And importantly the pathognomonic description of the pancreas cancer is a hypodense lesion by these modalities.

So what the radiologist means when her or she says that is that the tumor in the pancreas actually takes up less of a contrast material than the surrounding tissues, which show again in both modalities. And so, a pancreas ductal adenocarcinoma is actually identified as a negative image whereas the dark spot on your scan.

And that really is a result of the fact that it has a dramatically decreased blood supply. And so, even though from a clinical standpoint, we've used this kind of information for a few decades. Really, the implications of that in terms of therapy are only just now beginning to be realized and hopefully reversed.

And so why is that, why are these tumors so poorly perfused, so hypovascular? Well, the answer to that really exists in the architecture of these tumors. So we tend to think of cancers and we think about the tumor epithelial cells, a cell that we think is driving the process and that really is the target of our therapies.

One of the additional ways that a pancreas cancer distinguishes itself is in the intensity and complexity of what we call a stromal reaction. So this is a response to these tumor epithelial cells. And importantly, and something also that we're really just realizing over the last few years, is that this response is opposed to being the bodies attempt to try to contain the tumor, which is what we believe for about a 150 years going back to the very early descriptions histopathology of these tumors.

The reality is that the tumor epithelium, the cancer cells are driving this process. They're recruiting in the various cells that comprised this fibril inflammatory reaction. And in addition, they're orchestrating the deposition of a very intense extracellular matrix, so matrix proteins and other kinds of molecules that are creating, really, a shield around the tumor.

And so, as we think about of a variety of approaches and the expanding understanding of this disease, the reality is that in order to be able to hit some of these other targets, in order to be able to take advantage of our evolving understanding of all the various components that really comprise the pancreas cancer, we need to be able to get drugs in.

So we won't be able to modify or alter the immune reaction. We won't be able to modify the vessels themselves. We won't be able to really hit targets even within the tumor epithelium itself unless the drugs are penetrating. And what we've realized is that one of the primary determinants limiting that penetration is hyaluronic acid or hyaluronin.

And so, what I've shown in this slide is just a schematic of the fluid mechanics that exists within a pancreas cancer. And the physics, the intratumoral physics and the hemodynamic of this tumor are really distinct. And they're stunning in terms of the extremes to which they go.

So, here's basically a cartoon schematic of your pancreas tumor. You can see the tumor cells here embedded within this matrix that include some fibroblast we call them as well as this dense extracellular matrix. What this causes basically are pressures that are so high within this tumor because hyaluronan, which is probably one of the major constituent of this thermal reaction actually embibes water. It sucks it up and holds onto it and it creates a gel and that gel exerts a pressure and that pressure collapses blood vessels.

So the reality is that blood vessels are present within this tumor. They are just completely crushed. And what that means is you can't even deliver a chemotherapy agent beyond this, even if you could deliver it, it's very difficult for it to penetrate across the tumor bed for all the same reasons because of this dense metrics. Now, what we've learned is that by targeting HA and degrading it, you can dramatically lower these pressures and you can watch vessels expand.

So the blood vessels will open as you drop the surrounding pressures. Now you have conduits that are freely accessible and you can deliver agents that will, and these are the cytotoxic agents that will then go and start killing some of those cells out for you. Once you start to penetrate and get the process going, it starts to become a self-fulfilling process.

So what I'm going to show you in these next couple of pictures are experiments that we've done in a genetically engineered model of the disease. And these models are not your grandfathers' mouse model, this are the whole new generation. So this is a model of a tumor that arises spontaneously within the organ of the mammal from the earliest precursor lesions, and again, spontaneously progresses to invasive and metastatic disease with an identical clinical syndrome of diseases, as well as identical histopathologic manifestation such that you can fool human pancreas cancer pathologist with tissues that are taking from this model system.

And what you can see here is very much the same thing that my surgical colleagues describe to me, namely a tumor that's incredibly hard and fibrotic, cutting through a pancreas cancer like cutting through Grisel. And so, what you see here as we bisected it. And you will notice the tumor doesn't bleed. There is no blood loss from the surface of that tumor because those vessels are completely crushed. This is an extraordinary challenge to conquer.

However if you change it, you also change your prospects, I think, for treating the disease. So this is now a tumor after having digested the Hyaluronan within it. And you see that in fact there are vessels that were present all along. They are now open, which is why you can see them as a bloody surface here. This is a soft tumor that has three accesses to the vasculature, and within which it's incredibly easy to actually deliver drugs and get them to defuse across the tumor bed.

And in these particular images, I am showing the proof of that at the molecular level. So now in green what we have here is a drug that will fluoresce that will light up for you when it hits this target cell, when it's the nucleus of the cell of interest. And in red are the vessels themselves being outlined, so the vessel wall.

And you can see the normal pancreas as you might expect is extremely well perfused. We have vessels scattered throughout that have open lines to them, and you can get drug in at will. Here is what the resulting image looks like in a pancreas cancer. With even a very small molecular therapeutic in terms of its size, it's very difficult to penetrate this tumor.

However, remove again the hyaluronan from this, lower those pressures, this is now your pancreas cancer after that. Now that drug gets in again extremely well, these are vessels that actually are probably larger than the normal vessels you might see in the pancreas of baseline because these vessels over the course of that disease progression, we're trying to grow, we're trying to open but were remained again completely crushed flat.

And so now you have three accesses to this tumor. Interestingly this also points out the problems, one of the problems that as a clinical oncologist I faced, which is that the chemotherapy agents that I guess the patients get it incredibly well into all of the normal organs in the patient. They get in everywhere in fact except into the tumor.

So what I am left with is trying to manage significant toxicities and getting a very little therapeutic benefit. So my therapeutic window, if you will, is very narrow within which to work. And here in a human patient now as opposed to the mouse patient I showed you previously, you can see evidence of that increased perfusion as well.

This is a functional imaging study dynamic contrast enhanced MRI, which now with colored signals will show you the extent of blood flow within the tumor. You can see it at baseline there is incredibly little blood flow, as we talked about, and you can also see that the tumors identified by that negative image.

Here's what happens after treating with the enzymatic agent as a single agent, you can see now that you're getting dramatically increased perfusion within this tumor. So, we now have access. We can gain access to this tumor.

And interestingly, what tends to happen with the hemodynamics is that normal tissues will recover their base line level of hemodynamics after a transient increase in perfusion as well, whereas the perfusion maintains at an elevated level in the tumor. So what we've actually done is widen that therapeutic window that I spoke about before. Namely, I can get much more drug into the tumor now and the normal tissues will reconstitute their baseline hemodynamics.

And so, what does that mean? So I'm trained initially as a GI oncologist, a gastrointestinal oncologist, which means I take care of cancers of the entire GI tract. And we have an armamentarium for other cancers of the GI tract, colon cancer for example, that is wide and long.

So I have a long menu of things that I can choose from. I also have an opportunity in those patients because they have a much longer survival to switch as I need to, as resistance develops to one regimen or another. I don't have any of those opportunities for the most part with pancreas cancer. But the possibility now exists to reclaim that armamentarium to take it from those other cancers and apply it to a pancreas cancer in much the same way.

So now that we can get chemotherapy agents in, there is an entire list of agents that have potential efficacy. As excited as we are over the last 6 to 12 months over FOLFIRINOX and Abraxane, as new approaches, new ways to try to tackle this diseases, I'm not yet convinced that is even the best that we can do. There is again an entire list of FDA approved agents that we adhere and believed are not effective in pancreas cancer. But I would argue that we never did the experiment we thought we were doing. If we didn't get the drug in, we didn't ask the question of whether a pancreas cancer is sensitive or not.

Radiotherapy is another area which has been incredibly frustrating for pancreas cancer. These tumors, again, are pretty resistant to radiation, the kinds of radiation that we can use effectively in other cancers. And one of the main mechanisms of action by which we believe radiation exerts its effect is through oxygen. So creating oxygen radicals that actually then damage the tumor cell as how we believe radiation exerts itself.

Well, these tumors aren't getting very much oxygen because they're not getting very much blood flow. Increase the blood flow and you likely potentiate the effects of radiation as well. These are hypotheses that remained to be tested, but they're very firmly rooted in the scientific rational.

We talked about the immune system just very briefly. There is an expanding array of molecules that are now being developed to perturb the immune system in ways that might benefit the patient. Again, now we have the ability to potentially get those drugs in and actually see what they might do in a pancreas cancer.

I've showed you some images of chemotherapeutic agents that are actually very small molecule therapeutics. And even those are challenged in terms of trying to get into a tumor. A monoclonal antibody is an enormously large molecule in comparison. And monoclonal antibodies again have also been used in a number of other cancers. I've used them in other cancers. That's the molecule that frankly is just not going to get in at all in a baseline pancreas cancer, unless we increase access.

And similarly for nanoparticles, although they're less challenged perhaps than a monoclonal antibody, again it's much easier to deliver any of these things for the rest of the body, it's just a resistance problem, if you will. The blood flow will take the path of least resistance. And we'd like to reverse that so that we can take advantage of emerging technologies as well. And so for all of these reasons we think that there is a tremendous opportunity by regaining and reclaiming access to this tumor in terms of our approaches to how we might treat it.

Gregory Frost

Thank you, Sunil.

Sunil Hingorani

My pleasure.

Gregory Frost

So at this point, I'd like to invite Mike Shepard to come on up and talk a bit about some of the things in the pipeline.

Michael Shepard

Thanks, Greg. And thank you, Sunil, that was a fantastic description of pancreatic cancer and its difficulties and how we might solve them with PEGPH20. And thank you all for being here. So for the next couple of minutes, I'll just give you a quick peak at our early stage and discovery pipeline.

And as Greg mentioned earlier, what we'd like to do is just take molecules and turn them into medicines, take those medicines and make them into platforms. So you will see here that with PEGPH20 program, we're looking at pancreatic cancer Sunil just described. We're looking into other cancers about 25% of which become pancreatic cancer like because of their high HA content.

We're developing a companion diagnostic to select patients that will particularly benefit from PEGPH20. All together about 25% of all solid cancers over express HA to this very high extent. We're looking at PEGPH20 and insulin resistance

Earlier in the pipeline, we're developing a set of molecules called conditionally active biologics. And there are really two classes of these kinds of molecules. There is a class that we make in the laboratory high throughput immunogenesis and then there is a class of very specialized enzymes that occur within certain kinds of cells that we can clone, express. And they'll only be active under a very specialized condition, which we can organize by creating specialized excipients for their activity, excipients that will defuse away and leave the enzyme inactive, only active for a short period of time.

Finally, building out the PH20 platform is a big job. PH20 can be applied to a number of different diseases, including chemonucleolysis, lymphedema that results from surgical treatment of breast cancer patients as well as other diseases.

For now, I just want to tell you a little bit about the companion diagnostic for PEGPH20. This molecule allows us to do two things, it allows us to pick out the candidates from any cancer, which are most likely to respond to regimens containing PEGPH20. So this includes lung cancer, triple negative breast cancer as well as other diseases.

This region also allows us to monitor the activity of PEGPH20 within a patient. So, in the bottom frame here, what you see is what happens within HA Plus 3 patient, biopsy before treatment on the left, the brown is the HA color, and following one cycle of treatment the HA depletion that occurs following PEGPH20.

So the same companion diagnostic can be used to select patients from any number of diseases who have a high HA content, and also ask the question whether or not the drug is getting to the tumor and hitting the target.

From the family of conditionally active biologics which are in our early pipeline, I'm going to talk about one which is called HTI-501, and I'll come to it in just a minute. Like I said, there are really two ways to discover conditionally active biologics. The one that we're emphasizing in the lab has to do with taking therapeutics that has off-target toxicities unacceptable to most patients.

We take these proteins suggesting high immunogenesis, we select them in vitro in a very simple mimic of the physiological conditions such as what exist inside the tumor and these are our top candidates. An example would be an EGF receptor and taken as antibody that does not have skin toxicity because it only binds in a tumor.

HTI-501 is recombinant human cathepsin. Cathepsin exists within a specialized compartment in the cell, and it's only active in low pH. So cathepsin can be administered locally in conditions such as cellulite. It will breakdown collagen but only locally because it's injected in the presence of a buffer. The enzyme is active only at the low pH, the buffer disappears and the activity of the enzyme will stop.

It also obviously has applications in many other diseases, some of which are listed here and include Dupuytren's contracture. So we initiated our trial in cellulite in the third quarter of 2011 and we expect to have proof of concept clinical data by the beginning of next year. And just as we do with PEGPH20 in our other clinical trials, we have developed imaging capabilities to look for efficacy of HTI-501 in cellulite.

So, that was quick. It was fast. I hope you enjoyed it. I'm happy to answer any more questions about our discovery pipeline during lunch or during the question-and-answer period. And now I would like to introduce our Chief Financial Officer, Kurt Gustafson.

Kurt Gustafson

Thank you, Mike. We have always tried to deploy our resources wisely at Halozyme. And I think both Greg and I firmly believe in having a strong portfolio management process. And I think if you take a look historically, we've been disciplined in our approach. When products don't meet our hurdle rate of return, they don't get funded.

I think if you take a look over the last 10 quarters at our operating expense, we certainly have seen some growth. But I want to show you that all the investments we've made during this timeframe have gone through that bidding process.

And I think I want to put that also in perspective of what we've been able to accomplish during this time period. So during this last 10 quarters, we've moved three programs into later stage clinical development. We've also prepared for at least on the manufacturing and regulatory side, the launch of three major products with the Herceptin subcu, MabThera subcu as well as the HyQ program.

In addition, we prepared or setup the infrastructure for the commercial group, and the infrastructure that was required to re-launch Hylenex. And most importantly, that infrastructure that's there is scalable for this pump opportunity that we've talked with you about today.

So we understand the cash is valuable and we're going to be careful and be prudent on how we continue to make those investment choices. The other thing that I wanted to point out is that much of this growth has been funded by partner revenue. In fact, if you take a look at the total revenue that we booked over the last 10 quarters, it represents 45% of our operating expenses.

Essentially, revenues have funded about half of the projects that we've undertaken during this time period. Now a lot of this revenue comes from our existing partners, and that's going to continue in the future and we obviously expect it to grow in the future as the milestones turn into royalty income and our business development group is actively looking for additional partnerships to add to that.

So I want to talk a little bit about 2012 in a little bit more detail. One of the most significant items driving our operating expense in 2012 is manufacturing.

Close to one-third of our research and development expenses in 2012 is to build inventory for our partner’s launches. And until those products are approved, the building of inventory is booked in this research and development line. After approval, that will go in the cost of goods sold line.

Now, this is not us speculating on how much our partners are going to need. We're building this inventory based on firm orders from these partners. So one of the challenge that we have though is we have to pay or we book the R&D expense, for example, right now as we build the product and we don't book the revenue until we ship the product to our partners. And more importantly, from a cash flow standpoint, we have to pay our contract manufacturers for this work along the way and we won't get final payments from our partners until the product is actually shipped.

So if we think about our sources and uses of cash in 2012, this activity is representing a use of cash as we pay our suppliers along the way and aren't going to receive payment from our partners until it's shipped. As we look out in the future, for example in 2013 and 2014, we would expect this trend continues as we anticipate continuing to need to build inventory for our partners.

The other thing that I wanted to go through for 2012 is we're going to revise our full year cash burn guidance upwards by $5 million. So as the year has progressed and we've gotten more clarity from our partner's activities, we now expect to receive a payment next year for a milestone that will still be hit this year.

So let me make sure that I'm really clear on that. We still continue to expect that our partner is going to hit the milestone this year. But based on the payment terms that exist in that contract, the actual cash flow now looks like it's going to happen in calendar year 2013. So this is just a timing difference on the actual payment for that milestone.

If we take a look at today the longer-term horizon, we're still looking at turning the corner and becoming cash flow positive in 2014. And it's the new product launches that drive that. Obviously, Hylenex is already launched in the hospital space and one would expect to see revenue coming in from the pump indication in this timeframe. But it's really the Roche programs the drive this, given the size of both Herceptin and MabThera products.

So if you think about a normal sort of EMA timeline being about 12 to 14 months from filing to approval and you back up and say when was Herceptin filed, one would expect to see a launch of Herceptin sometime in 2013 with the launch of MabThera in either the late 2013 or 2014 timeframe.

And with regards to the Gammagard program, I left off this chart until we have that meeting with the FDA. It's a bit too early to speculate on when we might be able to -- what year we should put that in or put that on. But obviously, after we have that meeting with the FDA, it's very reasonable to think that that program comes back in one of years on this chart as well.

So I think I'll turn it back over to Greg.

Gregory Frost

Thanks, Kurt. So just putting all this together, what I think before going to Q&A, is that we've got some very interesting, I think, milestones this year. So, as we wrap things up it could be quite transformative.

So additional information on HTI-501, getting the full data sets presented at ASH, for MabThera subcu, getting marketing application, and also potentially getting a Phase II dose rating study going with Cinryze subcu. And I'll also add on, as we mentioned in the case Hylenex in the diabetes, applications and insulin pumps, we noted, in percentage, we've got IRB clearance on that Phase IV protocol that is reviewed by CDER.

And we're getting manufacturing scaled up for a launch there on the drug product and vialing side to gain the devices and infrastructures of these pieces that we want to get all those together. And as I think we've mentioned, the Company has the ability to drive both current and new platform technologies into the future that I think have that multiple horizons of growth.

So bringing this back, I think to where we started here, as far as giving a little bit more color today, Halozyme is the Company that's focusing both on some very important partnerships and programs moving forward. But we're also going firm and being mindful of how to go through and be in a position of looking at that glass ceiling of just doing partnered programs, and that the top line revenue growth that we are looking at for our own products and what the focus have done as well as driving innovation for the future will come into play.

But I think it's also important as we look at those multiple horizons, we always ask that fundamental question, is there something that would be more for patients in our hands versus someone else. We always ask that question. And that continues throughout the continuum of each platform that we develop in areas that we go into.

But I think on the horizon of growth, some of the therapies like PEGPH20 and 501, will go through and continue to have innovation and we'll have new platforms, I think, that can fuel the pipeline as well as partnerships that were appropriate in the future.

So, that portfolio analysis that we do is a continual process of strategy fed in. And we are excited by what we have in front of us.

So at this point I'd like to invite folks for Q&A, and we will have management here as well, I think with the mics available for response respectively.

Question-and-Answer Session

John Sonnier – William Blair & Company

Hi, it's John Sonnier from William Blair.

Gregory Frost

Hi, John.

John Sonnier – William Blair & Company

I apologize I came in a little bit late. But on the pre-administration program, on the Phase IV, did you guys provide any clarity on what that looks like? What are the primary endpoints that you need to try out with your analogue, you mentioned these different tubing configurations, you need to test all those? What do you think the FDA wants to see?

Gregory Frost

Well, this is as I mentioned, is a Phase IV design. And we love, I think, more detail. Doug, obviously, is at EASD in Berlin right now and they've got presentations going on. So, we're juggling things a little bit across.

But at a very high level, this is looking at exposure study to go through and really developing what the market need came back as far as information for patients, what they want to know, and for clinician. So this is something from an exposure perspective. We can give a little bit more detail on later, but we'll affectively have both, an exposure period as well as getting some long-term follow-up. But this is principally on a Phase IV design.

John Sonnier – William Blair & Company

Okay. Incurred capital deployment, maybe you can talk a little bit about the Gammagard calculus. I mean you are still building inventory, how do you even think about the return on invested capital at with that program? Thanks.

Kurt Gustafson

All right. Is this on? Yes. Good. So, as I said, the way the contracts work with our partners is, we build inventory based on firm orders. So, we have orders from our partners and we continue to fill those. And they have obligations to pay, so I hope, we remain confident that we can get through these questions with the FDA and that's all products that's going to be used by them.

But, John, just to be clear, there is not a risk for us, right, we get a return on that investment capital no matter what. Dr. Frost?

John Sonnier – William Blair & Company

With respect to the Phase IV in the pump setting, is that gating item to begin commercialization? If so, would you expect you need just data or data in the label? When do you expect the data from that study? I have a few other ones as well?

Gregory Frost

It's a great question. If we kind of went back, there are three things that I think are necessary for introduction. One is the Phase IV study, the second is supply of drug product, and the third is, of course, the device from a review. So having the infusion devices is one of the key pieces.

As far as the information itself, we don't anticipate that we need to change the label itself at this point in time. There's always a possibility that we would get unexpected results that would require us, I think, to go through and get a label submission. But in that sort of a scenario, that would be outside of our base case. That would be an upside.

But from a timeline to go through and complete those, we'll give more clarity as far as the timeframe on enrollment. But that will probably be something in the middle of next year will give more clarity as far as that enrollment coming forward.

John Sonnier – William Blair & Company

Jesper, with respect to launching a product with the broad label, without the utilization or dataset within the actual label sort of a novel commercialization approach, but not completely unique, do you have a predicate product that has been launched like this that we could refer to? And then with respect to your discussions with FDA about what you will be able to put in front of physicians with respect to data, but it's not in the label, can you provide us more granularity there as well?

Gregory Frost

Jesper, you want to --.

Jesper Jensen

Yes. I think pretty much any product in the market would be a predicate in terms of communicating data that's consistent with your label, but not physically on your label. So, I think the intention here is to discuss how Hylenex would make the absorption and dispersion of the other infused drug, in this case insulin, to make it faster. And that is consistent with our label as it is today.

Now, if we were to show a significant A1C reduction or kind of broader things like that, that would probably beyond the label cells and beyond what the insulin label says.

John Sonnier – William Blair & Company

And then lastly, Greg, with respect to the platform.

Gregory Frost


John Sonnier – William Blair & Company

Are you comfortable with the phase of new partnerships? And if not, what do you think are the barriers to more broadly deploying the technology beyond the last due to biopharma? It seems to us from our conversations with pharmaceutical people that there is dramatic absence of awareness of your technology. Could you address any market research you've done on awareness and just let us have a better understanding what you are doing to fix what seems to be a broken platform in terms of partnering? Thanks.

Gregory Frost

Well, I'd say the first point with regards to awareness, I'd be very surprised if anyone in the product development space and biologics that doesn't have awareness of some of our folks, anyone that I think in the stage of evaluation of looking at biologics for subcutaneous delivery. There's very few that I can think of that aren't aware of the technology or haven't had the chance to look at it in different settings.

Secondly, with regards to, I think, interest, obviously when it comes to looking at partnerships, we never go through and signal from that standpoint or put a point out on a deal, you will hear about them when we file an 8-K on it from that perspective. But I would say from the relative interest and awareness, I think folks have a pretty good understanding of it.

And certainly from the perspective of looking at the technology, understanding it, working with it across the board that people have been quite comfortable with that, as well as even through kind of the regulatory and certainly in the short-term, people have had an ability to see the depth, I think, of data that's been presented at Roche from the standpoint of Herceptin subcu and coming up also with MabThera subcu. And I think that information just this year volume, and obviously the transparency of the depth of the data has been helpful for them there.

John Sonnier – William Blair & Company


Gregory Frost

I'm sorry?

John Sonnier – William Blair & Company

(Inaudible) are you happy with that level of performance?

Gregory Frost

Well, I think that I'm actually quite happy with how folks are doing internally from the R&D side. They’ve been doing a good job on it.

Ying Huang – Barclays Capital

This is Ying Huang from Barclays. I know it's one thing that you stated on the label, but in terms of satisfying the payer's requirement, what do you think you need to see from the Phase IV study, what can end point -- would justify that?

And then secondly, it sounds like you pretty much decided you are going to go alone in the pump market for insulin. So I guess you are no longer seeking partnership in that [program], right?

Gregory Frost

Well, the first point with regards to looking at partnership, depends on the pump, as I think we've explained, is very distinct opportunities. And I think as you have hopefully seen from the opportunity set, we've got a labeled product and it's probably from the standpoint of pump opportunity and the footprint continues to capture it.

It's kind of hard for us to envision why we give away that economics if there's no asymmetry on. But specifically back to your question as far as the claims, reimbursement, other, we've done some very in-depth studies on this. And really, the two elements are that physiologic PK/PD response and the second is consistency.

And so, for patients on pump settings, that specifically what we've looked at on the payer side. And we've done a good deal of research with many of them specifically looking prior authorizations of the things and proof of services. But I think Jesper has highlighted that we feel we're quite good about from that perspective as far as the reimbursement that in formulary access.

Eun Yang - Jefferies & Company

So in terms of Hylenex launch in the insulin market, I am not clear on when you expect to launch the product in the markets. Can you give us some timeline on that?

Gregory Frost

Sure. Thanks, Eun. So there are three things specifically, as we mentioned, so the first is from the market research that we've done, which is completion of the Phase IV study. Getting with that, its product supply, which is scaling up fill and finish. The fill and finish operations that we're doing right now we're in the process of getting validation batches completed. And those are from stability and filing review by high speed production. And then the third is having an infusion set the patients can use.

So as we mentioned, the focus of what they've done in the hospital and the AFC side, they've taken about 25% in nine months of the existing market that's out there. But obviously, this opportunity there are some specific things about making sure you've got the supply. You don't stock out with patients in diabetes and have a second shot at it.

The second is from the device side having that available so that it's easy for patients and from the designs. So at this point in time, which one of those three is going to be the long leg, I think we will have better clarity the early part of next year as far as drug product availability and setting on that as well the device, and then we'll give more clarity as well on the timing.

So I think as far as the absolute timing at this point, I couldn't go through it and call it by a quarter to give it you at this point. But hopefully it's something that we'll have more clarity on early in the year.

Eun Yang - Jefferies & Company

Okay. And then [2.5] -- so in terms of the market projections and market side for Hylenex in the insulin market.

Gregory Frost


Eun Yang - Jefferies & Company

It will stimulate about 2.5 a billion based on the number of patients, eligible patients. So internally do you have a projection to what your revenue expectation for Hylenex is on the market?

Gregory Frost

From the market opportunity, obviously, when you take -- and our folks can talk to this. But when you take an analysis of preference here and other things, we obviously go into, as anyone else would from that standpoint. You take a haircut of what preference here says from the standpoint of putting a factor into it.

But I think from the actual opportunity and what we can capture on this from the size, we look at this and say, again, it's 25 million per basis point that you're looking at. So you don't need quite a few percentage points for us to do well. But I think until we've actually got the other datasets aligned, we're not going to go through it and give kind of the forecast on Hylenex at this point until we've got, I think, launch timing setup in the insulin space.

Eun Yang - Jefferies & Company

Okay. Two quick questions, one is on (inaudible). So you said that there are milestones of this year and you could get cash next year, that there are some timing in terms of receiving the cash. And so, could you kind of talk about the specific milestone you are expecting from the partners? And then second question is the FDA meeting with the meeting for HyQ, could you remind us when then may take place? Thank you.

Gregory Frost

So, let's have Kurt cover the first one there on the finance side and I'll cover on the HyQ.

Kurt Gustafson

Yes. So, Eun, I'd rather not be more specific on which milestone from which partner is going to happen. I guess the thing that I would point out from a contractual standpoint is the way a lot of these milestones work in the contract is that there can be period of time -- lag times and when in a notice period of when a partner has to notify us as to when they hit the milestone, then there is a period of time when we have to invoice, and when they have to pay.

And so, those were the sort of logistical things that we’ll get a little bit more clarity on as we move through the end of the year, and why we had to make this change. But I'd rather not go talk about specifically, which partner we're talking about here.

Gregory Frost

And then with regards to the HyQ side, the teams are very focused working together, I think, to try and get a meeting before the end of the year. We can get a path forward to go through and establish what work needs to be done. There's a lot of planning work as far as GAAP analysis that the teams are working together on.

But I think internally all of us like to go through and have a meeting done by the end of the year. And once we've had an opportunity to do that, and I think get current to that point and talk kind of timeframes and what we think the strategy looks like going forward from there.

Jason Butler - JMP Securities

Jason Butler, JMP Securities. Could I switch over to your pipeline in HTI-501? Could you give us a little bit of an idea from this proof-of-concept trial what data we would see and how you're thinking about making a go, no go decision on the program?

Gregory Frost

Sure. So there are two points, obviously, in any of these, one, which is safety and the other one is pharmacology. And so, this study, has -- in its second stage, there was a dose escalation that was done, in the first stage, which we announced. And from the tolerability side, we feel very good about that from the single agent set.

And where it is right now, it is a multi-field injection of placebo versus test article. And there's kind of three pharmacology endpoints, one, which is purely a physician or global assessment and patient assessment, the others are more pharmacology based which we think will also be very useful, everything from MRI to obviously Canfield three dimensional photographs.

So, that dataset were going through and hoping to get the complete dataset I believe at the end of this year or early next as far all the patients enrolled at that dose that we select that are based on the Phase I. So, if you take it on the basis of safety in pharmacology, you can basically say we're halfway there. We've get the safety side and from the pharmacology where this is a blind and steady set from the standpoint of physicians.

You've actually heard it's important for this. We make sure we have that, and we'll go through and look at it and see essentially everything from volume metric assessment, very precise MRI, looking at fibrils update, mechanism-based questions. And then on the basis of obviously what do the physicians think, what does the patient think on that side. So that's from a five field injection that they're looking at.

Jason Butler - JMP Securities

And then when you think about the rest of the development program and then commercialization infrastructure, what might be needed to get this product successful -- how do you think about when the right time, or if it all to partner this product?

Gregory Frost

That's a great question. So this is one that obviously we've had lot of interest from DD and other things from. We want to get the information to the right inflection point. We designed the system, and I think expression, which is a pilot scale production through this clinical proof-of-concept study, as well as the safety package. So, that's kind of the first step point, if you will, which is we'll get that data.

And then obviously there's international markets and there's domestic markets. They have different timeframes, but essentially that data set and deciding partnering strategies, domestic and internationally will be done at that time.

Kurt Gustafson

I think we'll wrap it up.

Gregory Frost

We're overtime? Yes. Well, I very much appreciate everyone staying with us this morning through it and for all the questions. And look forward, we'll have management with you during lunch today. And I'd like to thank everyone again for being on the call and for joining us in the journey of Halozyme. Thanks so much.

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