Halozyme: Exploring The Potential Of PEGPH20

| About: Halozyme Therapeutics, (HALO)

Summary

PEGPH20 has great potential in Hyaluronan (HA) positive Metastatic Pancreatic Cancer.

There are ongoing and upcoming trials of PEGPH20.

The market potential for PEGPH20 is huge.

Halozyme (NASDAQ:HALO) started studying PEGPH20 way back in 2009 when it began the first clinical trial to assess the safety and tolerability of PEGPH20; and today, PEGPH20 is in an ongoing Phase 3 clinical trial for the treatment of advanced, unresectable pancreatic cancer. PEGPH20 is the lead product candidate in Halozyme's pipeline. PEGPH20 is designed to treat patients with advanced pancreatic cancer with high expression of a substance named Hyaluronan (NASDAQ:HA) in the tumor.

Hyaluronan

Hyaluronan is a glycosaminoglycan or a chain of natural sugars that accumulate around certain solid tumors. High levels of Hyaluronan in patients with metastatic pancreatic cancer develop a unique microenvironment fostering the growth of the solid tumor. This microenvironment acts as a barrier and prevents anti cancer agents from reaching the tumor cells. PEGPH20 breaks through the HA barrier and delivers the immunotherapies or chemotherapies to the tumor and restricts its growth.

PEGPH20

PEGPH20 is currently in development for metastatic pancreatic cancer, metastatic breast cancer and gastric cancer in combination with different types of cancer therapies. PEGPH20 is being studied in combination with at least 5 various marketed product for the treatment of malignant tumors.

  1. PEGPH20 in combination with Gemcitabine and nab-Paclitaxel (Abraxane®) for the treatment of Pancreatic Cancer is in the Phase 3 clinical trial.
  2. PEGPH20 in combination with Pembrolizumab (Keytruda®) for the treatment of Gastric Cancer, NSCLC is in the Phase 1 Dose expansion clinical trial.
  3. PEGPH20 in combination with Eribulin (Halaven®) for the treatment of Breast Cancer is in a Dose finding Phase 1 clinical trial.
  4. PEGPH20 in combination with Atezolizumab (Tecentriq®) for the treatment of Gall Bladder tumor has completed pre clinical studies and expected to start the Phase 1 clinical trial by the second half of 2017.
  5. Roche partnered with Halozyme to sponsor and study PEGPH20 in combination with Atezolizumab (Tecentriq®) for the treatment of various malignant sloid tumors including Pancreatic, Gastric.

PEGPH20 in combination with Gemcitabine and nab-Paclitaxel (Abraxane®)

HALO-202

Patients suffering from advance stage pancreas cancer are being studied with PEGPH20 in combination with ABRAXANE® (nab-paclitaxel) and gemcitabine in the Phase 2 clinical trial of PEGPH20, named HALO-202.

In January 2017, Halozyme reported topline results from the combined analysis of Stages 1 and 2 and Stage 2 alone of its HALO-202 study as of December 2016. HALO-202 is a Phase 2 randomized, multi-center clinical trial of lead investigational drug PEGPH20 in combination with ABRAXANE® (nab-paclitaxel) and gemcitabine in stage IV pancreas cancer patients. Among the findings, the primary endpoints were achieved, showing a statistically significant increase in progression-free survival (NYSE:PFS) for the efficacy evaluable population and by demonstrating a reduction in the rate of thromboembolic events in Stage 2 of the study in the PEGPH20 arm.

The combined study population showed a statistically significant increase in PFS in the targeted HA-High patient population. These were patients with high levels of hyaluronan (HA-High) treated with PEGPH20 plus ABRAXANE and gemcitabine (PAG arm) when compared to HA-High patients receiving ABRAXANE and gemcitabine (AG arm) alone.

Stage 2 of the study, which completed enrollment in February 2016, showed a 91% improvement in median PFS for HA-High patients. PFS in the PAG arm was 8.6 months vs. 4.5 months in the AG arm, hazard ratio with a 95% confidence interval of 0.63 (0.21, 1.93).

In Stage 2, the overall survival (OS), an exploratory endpoint, showing a 50% improvement in HA-High patients in the PAG arm was 11.7 months vs. 7.8 months in the AG arm, hazard ratio with a 95% confidence interval of 0.52 (0.22, 1.23).

HALO-301

The Phase 2 HALO-202 result supported the Phase 3 HALO-301 trial. HALO-301 dosed its first patient in March 2016.

Primary end point of this Phase 3 clinical trial is to improve the PFS and OS among the 420 patients with HA -High metastatic pancreatic cancer. HALO-301 is a 2:1 randomized placebo controlled Phase 3 clinical trial. Patients are treated with PEGPH20 plus ABRAXANE and gemcitabine compared with Placebo plus ABRAXANE and gemcitabine in 2:1 ratio. Results should be out in early 2018.

Market Potential for PEGPH20

In HALO's estimation there are approximately 65,000 Annual Incidence of Metastatic Pancreatic Cancer globally. Among this patient population it is estimated that 35% to 40% patients with primary indication have High level of Hyaluronan , which adds up to 25,000 patients annually. There are additional indications of high HA tumors where there are approximately 50,000 more .

The average Cost of Care for metastatic pancreatic cancer is approximately $50,000. Some assumptions make 10% of that cost attributable to the PEGPH20 part of the combo drug. Given that assumption, the price potential is $5000 per patient. So, PEGPH20 has the potential market of $125 million per year on approval just for pancreatic cancer.

Company Financials

Halozyme has a market cap of $1.86 billion and its stock is trading around $14.

Halozyme Therapeutics, Inc. reported financial results for the quarter ended December 31, 2016. Highlights from the Halozyme's financial results are:

• Revenue for the fourth quarter was $39 million compared to $52.2 million for the fourth quarter of 2015. Revenue for 2016 totaled $146.7 million, an increase of 9 percent from 2015, including royalty revenue of $51 million, an increase of 65 percent from 2015.

• Research and development expenses for the fourth quarter were $41.3 million, compared to $27.7 million for the fourth quarter of 2015. The planned increases were primarily due to a ramp in spending associated with the HALO-301.

• Operating expenses for 2016 totaled $229.9 million, an increase of 41 percent from 2015.

• Net loss for the fourth quarter was $27.4 million, or $0.21 per share, compared to net income in the fourth quarter of 2015 of $4.3 million, or $0.03 per share. Net loss for 2016 totaled $103 million, or $0.81 per share.

Conclusion

HALO-301 topline data, which is expected by next year, is going to be the greatest catalyst for HALO. However, if data isn't as good as what we saw in phase 2 - this is not uncommon - then the stock is going to flounder. Other than that, and the slightly lowered guidance which forced the stock to go down recently, I see no other impediment to this investment.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.

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