Halozyme (NASDAQ:HALO) is a biotechnology company that develops and commercializes human enzymes. Its lead product is rHuPH20, a recombinant hyaluronidase enzyme that degrades hyaluronan, a poylsaccaride that is prevalent in many solid tumors. Hyaluronan (also called hyaluronic acid, or HA) reduces blood flow in these tumors, and corresponds to reduced efficacy of chemotherapy agents.
Halozyme has three products based on rHuPH20: HYLENEX recombinant (hyaluronidase human injection), Enhanze and PEGPH20. HYLENEX and Enhanze are FDA approved products that are currently generating royalty revenue for the Company.
PEGPH20, a pegulated form of rHuPH20, is being studied in combination with a variety of commercialized cancer therapies. The most advanced of these studies is a combination of PEGPH20 with gemcitabine and Abraxane in pancreas cancer, where Halozyme estimates that 35-40% of patients express high-HA. Halozyme was expected to release Progression Free Survival results of a phase 2 clinical trial in the 4th quarter, and dosing in a phase 3 trial has already started.
Enrollment of the Phase 2 study began in 2013 and was targeted to include 124 patients. The primary outcome was PFS, comparing patients administered PEGPH20 in combination with gemcitabine and Abraxane (PAG arm) to those who received only gencitabine and Abraxane (AG arm). The trial was interrupted by a clinical hold in April, 2014 when a higher incidence of thromboembolic events was noted in the treatment arm. The hold was lifted 2 months later and the trial continued with a target enrollment of another 114 patients and the addition of low-molecular weight heparin. The study results were divided into 2 stages, before and after the clinical hold.
Halozyme presented the results of stage 1 at ASCO in May 2015. Stage 1 included 135 patients, of whom a total of 44 patients were identified as HA high. 23 patients received PEGPH20 (PAG treatment arm), and 21 were in the AG arm. In the 44 patient HA high subset, the overall response rate was 52% in the PAG arm, compared to 24% in the AG arm (P = .038), and median duration of response was 8.1 months vs. 3.7 months, respectively.
Notably, the stage 1 data was contaminated by the hold, as PEGPH20 was discontinued for more than 40% of the patients in the PAG arm. The effect of this crossover is demonstrated by the response rate. The response rate for all of stage 1 was 52% in the PAG arm vs. 24% in the AG arm. However, restricting the evaluation to patients treated before the clinical hold (and therefore not contaminated by crossover), the investigators observed a much larger difference, with response rates of 73% and 27%, respectively (P = .01).
The Company expected to release stage 2 results in the 4th quarter of 2016, based on the dosing of the last patient in early February and the 9.2 months of PFS indicated by the stage 1 data. But, CEO Helen Torley revealed during the November 7, 2016 earnings conference call that they were informed by the independent statistician for the Data Monitoring Committee that the PFS data was not yet mature. During the Q/A portion of the call, she added:
"..Obviously when we get that information, we'll move rapidly to get the data out, but meanwhile, I think we just have to wait for the data to mature and it could be any number of things.
Analysis of Torley's remark points to 2 possibilities: Either the PFS of the PAG arm was not mature at the 9 month mark, or the PFS of the AG arm was not mature. Given that Celgene's (NASDAQ:CELG) pivotal study of Abraxane/Gemcitabine in pancreas cancer dosed 431 patients to a 5.5 month PFS with a 95% confidence interval, the overwhelming likelihood is that it's the PAG arm that is not mature.
Investors now have the opportunity to conflate two items:
- PFS of stage 2 is at least 10 months and still maturing; and
- 40% of the patients in the stage 1 PAG arm discontinued PEGPH20 at the clinical hold but they were still counted in the 9.2 month PFS result.
The Company did not provide PFS results that were limited to patients unaffected by the hold, but an investor could speculate that the effect would parallel the improvement in response rate, which was elevated from 52% to 73% upon such an evaluation.
This speculation is validated by the fact that PFS data for stage 2 is still not mature more than 10 months after the last patient was enrolled. If the stage 1 response rate comparison is used as a predictor of the "hold effect", investors could look for PFS in stage 2 to approach 13 months.
Announcement of 10 months PFS could alone be enough to propel the share price to much higher levels. But, if PFS continues to build to 12 months or more, investors will begin to weigh the likelihood that Halozyme will file a NDA on the Phase 2 study, which would be a transformative event. The possibility has been discussed on numerous conference calls with the Company, notably in the February 29, 2016 (Q4'16) earnings call, where CEO Torley said:
"..So for the stage 2, it actually is still an all-comer study. But our plan is to analyze the data and we're blinded to efficacy at this point in time. The database that FDA would want to look at if this data would seem to be supportive would include all of the patients in study 202, as the FDA will want to understand the overall risk benefit.
But if there is, I think, any potential path [to filing on the phase 2 study], it would be based on these stage 2 patients, the high HA patients in stage 2. And the other data, however, would all have to be supportive towards the risk-benefit profile of PEGPH20. We will be ready for it, but as you said at the start of the question it still remains a very remote possibility that this data would support an accelerated approval, but we'll be ready for it in the event that the data does turn out to be supportive."
Investors should measure Halozyme's Phase 2 results against the outcome of the Celgene pivotal study of Abraxane/Gemcitabine. That study found that the AG combination delivered only 5.5 months of PFS and 8.5 months of overall survival, with no distinction to high or low HA. Given this comparison, investors may soon begin to contemplate the possibility that 10 months of PFS for the harder to treat high HA cohort is enough to support an accelerated filing on Phase 2. As time continues to pass without release of mature data, the likelihood of accelerated approval will grow, and the market should reward the stock price accordingly.
Disclosure: I am/we are long HALO.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.