On May 7, 2019 Halozyme Therapeutics, Inc. (NASDAQ: HALO), a biotechnology company developing novel oncology and drug-delivery therapies, reported financial results for the first quarter ended March 31, 2019 and provided an update on recent corporate activities (Press release, Halozyme, MAY 7, 2019, View Source [SID1234535828]).
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"We enjoyed a strong start to 2019 as our first quarter included a new ENHANZE collaboration with argenx, positive phase III data from Janssen’s COLUMBA study evaluating a subcutaneous formulation of DARZALEX, and FDA approval of Herceptin Hylecta," said Dr. Helen Torley, president and chief executive officer. "Looking ahead in 2019, we expect this momentum to continue. On ENHANZE we anticipate regulatory submissions by ENHANZE partner Janssen for the subcutaneous formulation of DARZALEX, a new phase 3 trial initiation by one of our ENHANZE partners and multiple Phase 1 trial initiations. On PEGPH20, we project the announcement of topline results from our HALO-301 pivotal phase 3 trial in pancreas cancer in the second half of the year."
First Quarter 2019 and Recent Highlights Include:
In February 2019, we announced that Genentech, a member of the Roche Group, received approval from the FDA for Herceptin Hylecta, a co-formulation of trastuzumab and rHuPH20. Herceptin Hylecta is approved for the treatment of certain people with HER2-positive early breast cancer. Herceptin Hylecta is a ready-to-use formulation that can be administered in two to five minutes, compared to 30 to 90 minutes for intravenous trastuzumab. In April 2019, Roche made Herceptin Hylecta available in the U.S.
In February 2019, Janssen’s development partner, Genmab, announced positive Phase 3 trial results from the COLUMBA study. The study evaluated subcutaneous DARZALEX in comparison to DARZALEX IV in patients with relapsed and refractory multiple myeloma. DARZALEX SC, using ENHANZE drug delivery technology, was found to be non-inferior to DARZALEX IV with regard the co-primary endpoints of Overall Response Rate and Maximum Trough concentration on day 1 of the third treatment cycle. Additional data from this trial will be presented at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting in Chicago at an oral presentation on Sunday, June 2, 2019.
In February 2019, we entered into a collaboration agreement with argenx for the right to develop and commercialize one exclusive target, the human neonatal Fc receptor FcRn, which includes argenx’s lead asset efgartigimod (ARGX-113), and an option to select two additional targets using our ENHANZE technology for an upfront payment of $30.0 million. We will receive payments of $10.0 million per target for future target nominations and potential milestone payments of up to $160.0 million per target, subject to the achievement of specific development, regulatory and sales-based milestones. We will receive mid-single digit royalties on sales of commercialized products.
With regard to HALO-301, a Phase 3 study evaluating PEGPH20 in metastatic pancreas cancer, the company now expects to achieve the target number of overall survival (OS) events in the third quarter of 2019. The company plans to initiate the database lock process for final analysis after 330 OS events have been achieved with mature data. As a result, the company expects topline results will be available in the second half of 2019.
First Quarter 2019 Financial Highlights
Revenue for the first quarter was $56.9 million compared to $30.9 million for the first quarter of 2018. The year-over-year increase was primarily driven by $30.0 million in upfront license fees for the argenx collaboration. Revenue for the quarter included $18.0 million in royalties and $8.4 million in product sales, which compared to $20.9 million and $6.8 million, respectively, in the prior year period. The decrease in royalties was mainly driven by lower sales of Herceptin SC by Roche, partially offset by higher sales of RITUXAN HYCELA in the U.S. by Roche.
Research and development expenses for the first quarter were $31.3 million, compared to $38.0 million for the first quarter of 2018. The decline in expenses was driven by reduced clinical trial activity due to the completion of enrollment in HALO-301.
Selling, general and administrative expenses for the first quarter were $18.0 million, compared to $13.6 million for the first quarter of 2018. The increase is related to an increase in personnel expenses, including stock based compensation as well as preparations for the potential commercial launch of PEGPH20.
Net income for the first quarter was $1.8 million, or $0.01 per share, compared to a net loss in the first quarter of 2018 of $27.5 million, or $0.19 per share.
Cash, cash equivalents and marketable securities were $328.7 million at March 31, 2019, compared to $354.5 million at December 31, 2018.
Financial Outlook for 2019
Halozyme reiterates its overall 2019 financial guidance while lowering the anticipated contribution from royalties and increasing the anticipated contribution from products sales related to API. For 2019, Halozyme now expects:
Net revenue of $205 million to $215 million;
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Revenue from royalties of $72 million to $74 million, with the decrease primarily attributable to the ongoing impact from biosimilars in Europe and updated expectations for the US launched products;
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Product sales related to API increased to reflect additional customer orders;
Operating expenses of $265 million to $275 million, or $225 million to $235 million excluding an expected increase in cost of goods sold;
Operating cash burn of $45 million to $55 million;
Debt repayment of approximately $90 million, the company expects to pay off the remainder of the royalty-backed debt by the end of the first quarter of 2020;
Year-end cash, cash equivalents and marketable securities balance of $210 million to $220 million.
This guidance continues to exclude revenue from any potential, new ENHANZE global collaboration and licensing agreements.
Webcast and Conference Call
Halozyme will webcast its Quarterly Update Conference Call for the first quarter of 2019 today, Tuesday, May 7, 2019 at 4:30 p.m. ET/1:30 p.m. PT. Dr. Torley will lead the call, which will be webcast live through the "Investors" section of Halozyme’s corporate website and a replay will be available following the close of the call. To access the webcast and additional documents related to the call, please visit halozyme.com approximately fifteen minutes prior to the call to register, download and install any necessary audio software. The call may also be accessed by dialing (866) 393-4306 (domestic callers) or (734) 385-2616 (international callers). A telephone replay will be available after the call by dialing (855) 859-2056 (domestic callers) or (404) 537-3406 (international callers) using replay ID number 3076769.