Halozyme Therapeutics, Inc. (HALO) Q4 2017 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Halozyme Therapeutics Fourth Quarter 2017 Fiscal Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Jim Mazzola, Vice President of Investor Relations at Halozyme. Mr. Mazzola, you may now begin your conference.

Thank you, Kerry. Good afternoon everyone. Following market close today, we issued a news release with a summary of our results and posted a short slide presentation to accompany this call. You can find both of those at the Investors page at halozyme.com. Leading our call today is Halozyme’s President and Chief Executive Officer, Dr. Helen Torley, who will provide an overview and update on our business; and Laurie Stelzer, our Chief Financial Officer will review financial results for the December quarter and year followed by a Q&A period. Demetrius Chondros, our Chief Medical Officer will also join for Q&A. Before we begin, let me remind you that during the conference call, we will be making forward-looking statements. The Company's actual results may differ materially from those expressed in or indicated by such forward-looking statements. For a description of risks, please refer to our quarterly and annual filings with the Securities and Exchange Commission. Now, let me turn the call over to Helen.

Thank you, Jim, and good afternoon everyone. We entered 2018 with strong momentum based on the results we delivered during 2017 in both our ENHANZE technology pillar and our PEGPH20 oncology pillar. Let me begin with the key takeaways filed in the fourth quarter. Firstly, in 2017, our ENHANZE technology has become established as a go-to option for converting IV therapeutics to subcutaneous administration with the signing of the agreement with Bristol-Myers Squibb and the expansion of the Roche agreement. This position was further reinforced in December with the signing of a collaboration agreement with Alexion, our second new partnership in 2017. Secondly, we continue to advance our PEGPH20 clinical program, wherein our registration study HALO-301, we meet strong enrolment progress with more than 200 sites screening for patients and on ENHANZE, we project, we will achieve the target number of progression-free survival events in late Q4, 2018. And finally, the strength of our business model continues to be same at Halozyme. ENHANZE royalties grew 24% over Q4 2016 and record upfront in milestone payments of $190 million in 2017, enabled us to begin 2018 with $469 million in cash position in company history. With those takeaways, I’ll now provide some additional color on each pillar. In our strategic pillar, we licensed our rHuPH20 enzyme to eight leading companies today, most recently adding Bristol-Myers Squibb and Alexion. Starting on slide 2, 2017 was a transformative year for ENHANZE as we achieved significant accomplishments on several fronts. These include the regulatory approval for our first oncology product in the United States, a critical inflection milestone achievement with one product entering Phase 3 clinical study and expansion of one and signing of two new ENHANZE agreements. I would like to review these accomplishments in greater detail. Firstly, the FDA approval of RITUXAN HYCELA in June of last year represented a significant event for ENHANZE. It is a second US FDA ENHANZE product approval and maintained a 100% high record with to-date 505 US and EU regulatory submissions gaining approval. Secondly, we are pleased that two of our corporate partners Janssen and Roche made substantial progress in their clinical testing of Darzalex SC and the combination of Herceptin SC and Perjeta SC respectively generating data to support proceeding with Phase 3 study. With this data, Janssen initiated multiple Phase 3 studies in the fourth quarter of 2017. And thirdly, following the FDA approval of RITUXAN HYCELA last year we signed two new collaboration agreements with Bristol-Myers Squibb and Alexion. In addition, we expanded our longstanding existing agreement with Roche for additional target. We are very pleased that ENHANZE is being developed with some of the world’s leading products, such as Janssen’s Darzalex and Bristol-Myers’ Opdivo which is projected by analysts to exceed $7 billion and $10 billion respectively in annual peak sales. As illustrated on slide 3, with Halozyme receiving on average a mid single-digit royalty on net product sales, we project that based on the approved ENHANZE products and currently planned with new ENHANZE target development from our existing agreements, that the ENHANZE royalty revenue has the potential to achieve approximately $1 billion in 2027. As always, the actual subcutaneous portion of these sales will depend on a number of indications approved, geographies launched and the degree of market penetration overtime. Turning now to slide 4, our focus in 2018 is to support our partners to advance their target towards commercialization. More specifically, we have two key goals for the advancement of the ENHANZE targets. First is to grow the number of targets in late-stage or Phase 3 clinical testing to support the near-term royalty growth we project. The second goal is to grow the number of targets entering clinical testing to support the future royalty growth we project. I am very pleased to confirm that we project having two separate products in Phase 3 clinical testing in 2018. The first is Darzalex SC. Phase 3 studies were initiated in 2017 and continue to quest in 2018. Let me just take a moment to outline the potential additional value ENHANZE may be able to bring to Halozyme. Last December at ASH, Janssen shared clinical data which allowed them to finalize their development and registration plan for a 15 ml injection of Darzalex SC to be delivered in five minutes or less. Of note, a lower rate of infusion related reaction was reported for the SC formulation when compared to the current multi-hour IV infusion. Janssen is now studying Darzalex SC with ENHANZE in four Phase 3 trials. These trials are evaluating the following population. Relapsed or refractory multiple myeloma, secondly myeloma patients, where we are evaluating DARZALEX SC in combination with pomalidomide and dexamethasone, amyloidosis and Smoldering Myeloma. In addition, Janssen is planning a Phase 2 study of Darzalex SC with various combination therapies, a newly diagnosed and in relapsed or refractory multiple myeloma patients and has initiated a development plan for Darzalex SC in Japan, with a Phase 1 study in relapsed or refractory multiple myeloma patients. With six plans of ongoing studies, including four Phase 3 studies for Darzalex SC, Janssen is clearly commited to the program and its potential to reduce the treatment burden for patients. The second enhance [ph] enabled program, we expect to initiate Phase 3 study in 2018, is a fixed-dose combination of Herceptin SC and Perjeta SC. Based on the Phase 1 results, shared at the 2017 San Antonio Breast Cancer Symposium, for the fixed dose combination of Perjeta SC and Herceptin SC and the recent approval by FDA of the combination of the IV formulation in adjuvant [HER] breast cancer, Roche has confirmed plans to advance clinical development of our Perjeta/Herceptin fixed dose combination product using enhance with the Phase 3 study to start later this year. In addition to the two products in Phase 3 studies, we project four separate ENHANZE enabled SC products to enter or to be in Phase 1 clinical testing in 2018. Bristol-Myers Squibb's Opdivo. Alexion's ALX1210, Lilly's investigational target and a new unnamed Roche target. And turning to our other programs of Roche. Roche is making good progress in the RITUXAN in the United States, following approval by the FDA in June of last year. With a strong focus on the many hospitals and infusion centers, that we are experiencing capacity constrains, Roche has projected treatment duration time, is expected to be due to the benefit for both patient and for those delivering care. And finally, we are delighted to have already made strong progress in our startup activities following the December signing of the new collaboration agreement with Alexion. On its most recent earnings call, Alexion noted signs to initiate a Phase 1 study this year, of the subcutaneous formulation of ALX1210 with ENHANZE, with the goal of further expanding the dosing interval to once every two weeks, or once per month. To close on ENHANZE, our focus in 2018 is an unlocking the value that exists in our current eight partnerships, by supporting our partners moving product into and through the clinic. In parallel, we will continue to seek additional collaborations with new partners and believe many targets are still available that may benefit from our technology. Our pipeline of active partners discussed remains robust and we continue to pursue opportunities to maximize the value of ENHANZE. I will now turn on quality color and our investigational Drug PEGPH20. PEGPH20 is a targeted therapy, that temporarily degrades HALO roll-in or HA, that cumulates around certain tumors and can strict the tumor vasculature. We are studying PEGPH20 with a companion diagnostic, developed with our partner Ventana to identify patients with HA high tumors and predict an approximately $1 billion potential global opportunity in pancreas cancer alone. I am pleased to share that results from our Phase 2 study and first-line metastatic pancreas cancer HALO 202 were published and peer reviewed Journal of Clinical Oncology in December of 2017. Turning to Slide 5. There’s an overview of our Phase 3 study evaluating PEGPH20 in combination with ABRAXANE and gemcitabine in first line pancreatic cancer patients. Investigator interest remains strong in the study resulting in continued progress with enrollment. Recall an interim analysis will be conducted for our first primary endpoint when we achieve the target number of progression free survival events. We continue to project the target number of PFS [ph] events will be achieved late in the fourth quarter of 2018. HALO-202 study, patients receive a daily injection of low-molecular-weight heparin. Recently Dr. Kenneth Yu reported results from his ongoing investigator sponsored trial conducted at Memorial Sloan Kettering Cancer Center examining the use of an oral anticoagulants, rivaroxaban events in place of low-molecular-weight heparin injection. The trail has been conducted with the same chemotherapy backbone at HALO-202, as HALO-301 of PEGPH20 in combination with ABRAXANE and gemcitabine. Part of Dr. Yu's study included 28 patients, irrespective of HA status. And data reported today shows no cases of grade 3 or grade 4 thromboembolism. In addition, this study showed a 57% overall response rate in an all-comer population. Dr. Yu's conducting a retrospect of analysis to determine patient HA status to evaluate the response rate in HA high patients, and evaluation is now underway to against by the feasibility and the best against future regulatory labeling for the use of rivaroxaban event with PEGPH20. Turning now to slide 6, I'd like to provide an update on our clinical development progress to assess the potential of PEGPH20 in other tumor types. Beginning with our trial in combination with checkpoint inhibitors, we are studying PEGPH20 plus KEYTRUDA or pembrolizumab in non-small cell lung and gastric cancer patients. Pending continued enrolment progress and a sufficient number of PD-L1 positive and negative patients in tumor cohort, we project we’ll be able to share response rate data from this study in the second half of 2018. Moving to our clinical collaboration with [indiscernible] has made a portfolio decision not to proceed with further clinical developments of PEGPH20 plus eribulin. In January enrollment in the Phase 1b portion of the study was closed and a total of 14 patients were enrolled. Initial investigator report of response data from the study is encouraging and we've initiated collection and cleaning to fully evaluate this data. We’ve planned to submit the data for presentation at the Scientific Forum in 2018. And continuing with our collaboration study, we and Roche are making good progress in the dose finding portion of our studies of PEGPH20 and atezolizumab in pancreas cancer, gastric cancer, cholangiocarcinoma and gallbladder cancer. Closing on PEGPH20, our focus in 2018 is to continue to make strong progress in all of our clinical studies, examining the pan-tumor potential of PEGPH20 and patients with high HA tumors. The pancreatic cancer indication has successfully cleared several de-risking events, with a projected timeline to start data analysis just months away at the end of this year. Success in pancreatic cancer represents a large opportunity for Halozyme and this maybe only the beginning with multiple other tumors we're evaluating, representing additional significant opportunity. And with that I’d now like to turn the call over to Laurie to discuss the financial results in greater detail. Laurie?

Thank you, Helen. I will begin on Slide 7 where you will see that revenue for you will see that revenue for the fourth quarter was $189.6 million compared to $39 million in the prior year period driven by the recognition of $101.4 million of the upfront payment from Bristol-Myers Squibb and a $40 million upfront payment from Alexion. Royalty revenue totaled $17.7 million, an increase of 24% from the fourth quarter of 2016. Both sales of rHuPH20 totaled $8.4 million, HYLENEX product sales totaled $4.2 million and other collaboration revenue totaled $159.3 million which includes the upfront payments from BMS and Alexion. Turning to slide 8 for a more detailed breakdown of our P&L. Cost of product sales was $7.5 million in the quarter compared to $8 million in the prior year period. Research and development expenses for the quarter were $41.4 million, which was flat to the fourth quarter of 2016. Selling, general and administrative expenses were $14.8 million compared to $12.2 million for the fourth quarter of 2016. The increase was primarily due to personal expenses including stock-based compensation for the period. Net income for the quarter was $123.9 million or $0.85 per share compared to a net loss of $27.4 million or $0.21 per share in the fourth quarter of 2016. Cash, cash equivalents and marketable securities were $469.2 million at December 31, 2017 compared to $205 million at December 31, 2016. 2017 was also noteworthy due to our financial performance as shown on slide 9. Revenue for the full year totaled $316.6 million, a $169.9 million increase from 2016 after disciplined expense management we ended the year with operating expenses of $235.6 million, a 2% increase from 2016. Net income for the full year was $63 million or $0.45 per share compared to a net loss of $103 million in 2016 or $0.81 per share. I would now like to move on to our guidance for 2018 as shown on slide 10 which is unchanged from the guidance we provided at the start of 2018. For the full year 2018, we continue to expect net revenue of $115 million to $125 million which does not include the potential for new ENHANZE deals. Within the revenue line, we anticipate royalty growth of 25% to 30% from 2017, largely driven by RITUXAN HYCELA. Offsetting this royalty growth and as we have shared we are forecasting a decline in API product orders as our partners complete manufacturing transition. Recall partners currently have sufficient API and safety stock to support their near-term plans and we project API orders will remain low until our partners gain FDA approval of the manufacturing changes which is expected in 2020. We continue to expect operating expenses for 2018 of $230 million to $240 million, flat to both 2017 and 2016. Operating cash burn of $75 million to $85 million, debt repayment of approximately $95 million which includes principal and interest payments related to our royalty-backed and SVB, Oxford loans and year end cash balance of $305 million to $315 million which we project will take us into 2020. Finally, I would like to share additional details around the upcoming impact to our financial statements following our adoption in January of FASB Topic 606 as it applies to how we record royalty revenue. Historically, we have recognized royalty revenue one quarter in arrears, due to the timing difference between our financial close and when we receive payment from our partners. Under the new revenue recognition guidance, starting in Q1 2018, we will be recording an estimate for royalty revenue for the current reporting quarter and will reflect the difference between the actual payments and the estimate in the subsequent period. For a reference, applying this approach in Q4 2017, would have resulted in royalty revenue of $19.4 million a sequential increase of $1.7 million from the $17.4 of royalties reported this quarter based on our Q3 partner sales. With that, let me turn the call back to Helen, who will provide closing comments.

Thank you Laurie, in summary, 2017 was a transformative year for Halozyme and we entered 2018 with strong momentum. Specifically, we entered 2018 with the strongest cash position in our company's history with $469 million in cash. We've got great momentum in our ENHANZE pillar, highlights include Janssen’s plans for six studies, including four ongoing Phase 3 studies of DARZALEX SC, and Roche planning to initiate a Phase 3 study of Herceptin SC and Perjeta with ENHANZE. Roche recently initiated Phase 1 study and Alexion and DMS planning to initiate Phase 1 studies later this year and finally our currently approved and marketed products projected to deliver another year of robust 25% to 30% royalty growth. In our oncology pillar we will continue to make strong progress with our Halo-301 study and project the paving [ph] the target number of PFS events in the fourth quarter of this year. In addition, based on continued progress, we have with the potential to report response rate data from two pan-tumor studies in the second half of the year. Above all, we remain confident that the investments we're making in both pillars of our strategy will generate near and long-term value for patients, shareholders and partners. And as ever, I want to close by expressing my ongoing gratitude and appreciation to our talented Halozyme team for their continued hard work to advance our programs and in support of our partners and patients. We are now ready to take your calls. Operator, would you please open the call.

Thank you [Operator Instructions] Our first question will be from Andrew Peters with Deutsche Bank.

Hi, thanks for taking my questions and congrats on all the progress. Just a question on the ENHANZE royalty outlook. When you think about the billion dollar number that you talked about, just wanted to get a sense of if you can break out kind of the biggest components or the biggest drivers of those assumptions. Then as you think about the number, are there potential areas of upside to that outlook, and how does that factor into the potential for revising that number upwards or downwards as you continue to book new enhanced collaborations? And then just on the ruble and decision. Can you provide a little bit more color on kind of what you've learned from Eisai around that portfolio decision? And as you went into the study, if there was a target profile in mind and to the data failed to live up to that. Thank you.

Great. Thanks Andrew. Let me address the ENHANZE question first and we have a nice chart I think in the presentation where you can see there is a period of time where we have growth on our ENHANZE royalties and then there is an inflection point and really what’s driving the pattern you see there is, the near-term growth is coming from our already marketed products where we project continued nice growth there, but then with the anticipated launch of the products including, products like DARZALEX and Opdivo, which have substantial revenue projections based on analysts projection that's where you really see the inflection point in that curve, in terms of making the key step towards getting to that $1 billion potential sales by 2027. Now you raised a good point, Andrew in that, what's included in that chart just a steady start that we anticipate in 2018 based on current plans that we know from our partners. So this does not include the potential for new start of exciting products in 2019 and 2020. And so we do see the potential for upside to this, based on additional targets entering the clinic. So with that let me turn to Eisai question. The feedback we got from our counterparts, the Eisai was just, there was a portfolio evaluation and proceeding with them, our study with them Halaven and PEGPH20 did not make the cut in that evaluation. We didn't get any additional color, I can say that this decision was taken before, the final data from the study had been seen. So there was a go no go target profile to be specific nor has the final data been fully assessed by which Eisai, I believe this was really a portfolio decision in their part.

Your next question is from Dana Flanders from Goldman Sachs.

Hi, thank you very much for the questions. My first one here, just maybe follow-up on ENHANZE. I know you have a couple of maybe longer dated partnerships where we haven't seen as much activity from the innovator. How should we think about your ability to just reengage and push them towards maybe using the ENHANZE platform on a go forward basis?

Yeah, thanks for the question, Dana. This is something our alliance teams do on a regular basis with longer standing partners and it’s generally is a question of their portfolio and their portfolio priority, sometimes there isn't a product, at this moment in time, the development where they want to contemplate going subcutaneously or sometimes this is not part of their plans to go subcutaneously but there is no stone left unturned by our team in bring your ideas forward to partners and ENHANZE could help their products to become more competitive and differentiated.

Okay, great. And my quick follow-up here, I know you reiterated that you expect the interim data by Q4 -- sorry the study by Q4. We actually see the data in Q4 or could that come in early 2019?

Yeah. Thanks for asking that clarifying question because what we anticipate is that we will achieve te target number of PFS events late in the fourth quarter, that will start the final data cleaning and data analysis. So you're absolutely right, the actual data will be available to the DMC in 2019.

Our next question comes from Charles Duncan with Piper Jaffray.

Hi. This is Sarah on for Charles. Just a couple of questions on ENHANZE. Can you remind us what updates on the BMS collaboration we should look for this year? And then can you may be also provide some color on why you believe Roche is choosing to move to Herceptin, Perjeta fixed [ph]combo to Phase 3 at this stage of its cycle?

Thank you, Sarah. Yes, on the BMS collaboration, as you know we signed the agreement for up to 11 targets last year. At this point in time, the only plan that is public is that they will move into clinical testing with Opdivo but I can’t say that we are in discussions with BMS on their entire portfolio and identifying what if any additional steps would be taken. But the firm thing is to list at the start all the Opdivo SC study in 2018. With Roche and Herceptin Perjeta, the data that was presented earlier this last year did show the potential benefit for patients. And I believe that will be the motivation from Roche of operating this forward with certainly the recent support from the FDA for the IV formulations. If you think about these patients, they tend to be moving well with their cancer on therapy for a long time. So the ability to free these patients up from having filled infusion centers for IVs, I imagine that is what is in Roche’s mind by seeking to get a fixed dose subcu single injection, how much easier that is for patients who are wanting just to get back to their everyday life and not think about being in hospitals or infusion centers.

Great, thank you. And just one follow-up. So for the Phase 2 combo study of PEGPH20 with KEYTRUDA, it sounds as though the enrollment rate has picked somewhat. Any color why that’s been the case and then anything beyond enrollment that we should think about driving timelines, first data during second half?

Alright, let me ask Demetrius to comment on that.

Sure. Thank you very much, Helen. So with our reach with enrollment in our KEYTRUDA study, it is, recall at our last update we said that approximately 20 patients enrolled by the end of last year and if enrollment continues in the current trajectory, we want to be in a position to share initial response data of that study in the second half of this year. So overall it’s going very well and according to our anticipation, particularly get cohorts is going very well.

Your next question will be from Jason Butler with JMP Securities.

Hi. Thanks for taking the question. Just another one on the PEGPH20 KEYTRUDA combo study. Based on what your current plans are, can you talk about what we should expect from that data readout in terms of median duration of therapy and the specifics around the patient population, biomarkers et cetera?

Yes let me ask Demetrius to address. I think it’s quite useful to think about what the growing response rate might be in the PDL-1 positive and negative but we’re really looking at and ask Demetrius to give some comment on duration of therapy 2.

Sure. So as you recall, the study is enrolling two cohorts in cohorts gastric cancer, as well as lung cancer, we're rolling a PD-L1 all-comers population and analyzing the PD-L1 status retrospectively. The objective of the study is, you know, to really look into both cohorts to both subgroups the PD-L1 positive as well as the PD-L1 negative, whether -- and we would analyze overall response data and compare them to the most recent historical available data for Keytruda in that specific disease cohorts.

Duration of therapy that we might expect, we have seen perhaps in the Keytruda studies. Jason we might, we'll get back to you on that. It certainly is long later line patients, in the range of a couple of three cycles, from my recollection, but we can get you the exact information.

Great, and then I just had a follow-up on the change in royalty revenue recognition. Sorry, if I missed this but, as you changed this quarter from reporting from a lag to, to a real time estimate, is there going to be some kind of true up, where you have two quarters that are being reflected in the same reporting period?

Hi, Jason its Laurie. No, actually, the way the rule is going to play out the fourth quarter sales for the royalties from our partners. Fourth quarter sales, it will go to retained earnings in Q1, we will book only one quarter we’ll book Q1 sales and as it relates to royalties in that quarter so there won't be a doubling up, it'll go to retained earnings.

Our next question will be from Gina Wang with Barclays.

Thank you for taking my questions. Just one quick question, regarding the royalty. Can you use the enhanced technology platform. Can you remind us, general timeline for Phase 3 readout from the time it starts?

Thanks. The heuristic we usually give, is it tends to be about five years from first in human to long-term approval. So obviously the duration of the Phase 3 study will be very dependent on the end point being studied and the number of enrollments. But what we tended to see is a year to get through Phase 1 testing and agree on the design of the Phase 3 with the FDA, perhaps a year for enrollment, half a year to a year to get to the actual endpoint of the study and then time to file and get approval. So if you're asking the question specifically, for example, for Darzalex, again as I commented on is the expectation that there will be launching in the 2020 timeframe, which is very consistent with that five year timeframe overall.

Thank you. Another question about the PEGPH20. I know the ASCO GI data, they're different efficacy profile when combined with FOLFIRINOX versus gemcitabine ABRAXANE, so anything you can learn from these data for the PEGPH20, for the other oncology programs?

Thanks for that question. You bring up a great point. What we learned from that studying, referring to the small data is that when PEG is combined with FOLFIRINOX. which is four different chemotherapy agents, we saw poor tolerability and a limited ability for patients to be able to dose the FOLFIRINOX dose or at all. And so that, that was an important finding for us about that particular combination. So we will take those thoughts if we were ever going to contemplate a multiple chemo combination, particularly one which have got a very strong track record of having challenges of patients being able to tolerate it. Obviously we're excited we’ve gone forward with them, our combination with gemcitabine ABRAXANE where we studied 270 patients overall in our Phase 2 study. We didn’t see similar tolerability issues or are dosing problems. So, it certainly did give us some information about FOLFIRINOX but no impact on our registration program 301.

Thank you and last question regarding the use of low-molecular-weight heparin. It seems like several different drugs have been tested. Going forward, do you have any thoughts regarding oral or IV version for prophylactic treatment for the thrombotic risk?

Yes. We were quite encouraged by the results Dr. Hugh reported at from his IST earlier this year where he actually is doing a study of PEGPH20 with ABRAXANE and gemcitabine and using rivaroxaban one of the oral anticoagulant factor Xa inhibitor for his prevention of thrombotic events. He studied 28 patients, the initial data showed no grade 3 or 4 CE events. And so our next step there is to continue to study more patients, but also to evaluate what would be the path and what would be the feasibility to gain labeling for PEGPH20 with the oral anticoagulant rivaroxaban. So for that we do need to be a bit more work to identify what the path is.

Your next question will be from Joel Beatty with Citigroup.

Hi, thanks for taking the questions. The first is on the Phase 3 programs, we’ve seen the Phase 3 from DARZALEX underway and then we'll have additional Phase 3s over time, is there potential for those to shorten as we get additional enhanced products approved on such as being relying a little bit more on PKPD data as opposed to larger studies? And then the second question is related to PEGPH20 and if you go over what the possible outcomes are of the decision that will be announced in early 2019?

All right. I’ll take the DARZALEX question and Demetrius will address the PEGPH20 question. For DARZALEX, you bring up a very good point because the FDA with the RITUXAN HYCELA approval laid out a pathway, which included PK bridging and then the generation of data that shows that there was not a difference in the safety or efficacy. So I do think that as companies are taking a look and doing their development plans using ENHANZE then certainly a question they will be asking themselves. Where Janssen is choosing to do is to generate data with the different drug combinations that are available for patients of multiple myeloma because at the later life of therapy tend to be mono-therapy DARZALEX, the second like population is DARZALEX plus pomalidomide. And so I think they are wanting to generate that data, so physicians know with respect in terms of safety and efficacy with all of those combinations, but it certainly is great question, Joel and very possible that over time, companies may be able to talk with the FDA and do lesser studies.

Sure. So as Helen outlined towards the end of the year we expect the final number PFS events to occur and that will trigger the interim analysis and the interim analysis will be conducted by the independent Data Monitoring Committee and they will do a final analysis for PFS. They will look at the interim at the overall survival and obviously they will look at over safety and make an assessment of the overall benefit risk assessments of the study. And based on this outcome they will provide recommendation as well as that we include filing based on the PFS data or continuing the study until the final work analysis.

Our next question will be from Jessica Fye with JPMorgan.

Great. Thanks for taking my question. It seems like most investors we speak on the stock for the ENHANZE pillar and have more mixed use on PEGPH20. So if the Phase 3 study does not hit the PFS ratio you are targeting or kind of have sub optimal OS, would you stop investing R&D dollars behind that product? And how much of the 2018 R&D spend is at Phase 3 study alone versus other R&D activities?

Thanks Jessica. Certainly some investors we do hear a great enthusiasm for the ENHANZE platform. We do have people recognize that a pancreatic cancer with PEGPH20 is a huge upside to the stock and there is some enthusiasm for that. But because of pancreas cancer I think what you are reflecting is a little bit more hesitation about the upside of the pillar. We believe we’ve developed a product in a way that has de-risked it, but in the event you are saying if PEGPH20 is not successful in pancreas or other cancers what would the company look like, and then I have been saying for the last year or so that the most likely scenario is that then we would become an ENHANZE only company if PEGPH20 does not have possibility to be a meaningful product for patients. And then I will ask Laurie to address the question on the expense investment.

Sure. Hi, Jess. As you know the vast majority of our spend is on PEG versus ENHANZE and our R&D line about 80% of our spend is on PEGPH20. Your question specifically around the Phase 3, we don’t really break that out. But what I can say is that the majority of that spend is on our Phase 3 study, the smaller Phase 1 plus 2, they don’t have near the cost or cash burn that our Phase 3 study does. So without giving the exact number, just the majority of that PEG spend is on Phase 3.

Our next question will be from Jim Birchenough with Wells Fargo.

Hey, guys. Thanks for taking question and congrats on the progress. Just wondering first if you might be willing to characterize how you are seeing the trajectory for the RITUXAN HYCELA launch in the US versus what you saw with MabThera in Europe may be as a guide to differences in reimbursement might impact adoption? And I have a couple of follow up. Thanks.

So on RITUXAN HYCELA Roche has not provided any updates from that, so I can’t specifically say. But you can kind of think about some of the specifics in the US marketplace that we know Roche was anticipating or working through which includes getting on the hospital formulary, getting all of the IT systems updated for the orders, from everything we’ve heard from Roche they’ve made comments that they are pleased with the progress that they were making with those particular steps. But we don't have any data we can share about comparing the US and the EU. The value proposition remains strong in the US when we think about what this can mean for patients to be spending less time in the infusion centers and was so many overcrowded, Roche has made comments, that we do expect that the value proposition will be well received by both patients and by the healthcare providers, but no specific numeric updates we can give at this time.

Yes, and in just in terms of additional deals, you've had great success in accelerating the pace of deals and the economics you are getting on each deal, should we expect additional deals in 2018 and are there particular areas that you're focused on. Maybe talk a bit about the process for consummating these deals?

The beauty of ENHANZE is that it can work with some products in any therapeutic area. Specifically companies are looking to get a large volume infused or they have a large molecules that they want get infused subcutaneously. So we have a very broad look at what molecules are available and I can say we're in active discussion with a number of companies as of this time in some interesting therapeutic areas. With regard to specifically another deal in 2018. We certainly are working to try towards that, what is not in our control is exactly when we signed deals Jim. So, what I will see is we will find more ENHANZE deals. I don't know if we'll sign them in 2018, we will try our best, but more deals are coming because there are a lot of molecules out there that would continue to benefit from the ENHANZE platform.

And then maybe just one final question. It might be harder to answer, but for PERJETA herceptin you know, whether Roche will be evaluating both the co-formulated combination in each individual component and each individual component will have to be compared to the ID, or is it really just co-formulated combination compared to the current brand combinations.

The Phase 1 study that was reported out at San Antonio breast did exactly what you're talking about, and allows them to determine what those would be taken into a Phase 3 study all with the fixed dose combination. So Roche is not discussed or posted yet what the Phase 3 design would be, so I can't specifically talk about that, but I do know the whole goal of Phase 1 was to answer the questions that would allow them to have a single fix dose possibly to take into their Phase 3 study.

And sorry, one final, final, you gave a nice metric from time to clinical development to product approval. Do you have a similar metric based on prior program development on how quickly from signing a deal do we see these products moving into clinical development, if you look at, just trying to get a sort of a benchmark of how quickly Opdivo subcu could move in to development based on what we've seen previously with things like herceptin map Sarah?

Yeah. I think you did want to look at is DARZALEX, DARZALEX from signing to entering the clinic was in the range of eight to nine months and that certainly would be a good, a good target that we would hope to be able to achieve with future product entry of clinic as well, if that is, the company has got that as a priority and is focused on that. So, I think you can start thinking in those terms.

Thank you. Our next question will be from Orlando Lee [ph].

Hi guys, thanks for taking my questions and congratulations on the progress. I have maybe a couple of questions on ENHANZE. Can you maybe help us understand when we might get additional clarity or visibility on what these additional products that are entering the clinic might be?

It's a challenge, because obviously, for a variety of variety of reasons including competitive reasons, the owner companies are choosing not to make them public at this point in time. So, it’s part of the confidentiality agreement, only make public statements that are in line with the statements, our partners have made. So I can’t give you a timing, because they haven't indicated when they would do that. So I’m sorry about that Orlando [ph].

That’s okay. And then maybe on the last couple of - or the last few deals that you’ve done. There has been a quiet of few things that have been going on. Can you maybe provide additional information on how maybe some of these deals came about where they something that you had gone out to Alexion for example to talk about or was it more like an inbound inquiry?

Yeah. Over the last 10 years since we started working on the platform we have I think met with just about every company at one point or another. So I think there’s a good background degree of familiarity, wat we've been doing more recently over the last two or three years is assessing people portfolio and going to companies saying we believe ENHANZE could help your competitiveness in this way. And so it’s a little bit of a push and a pull, some people are familiar with those, and they phone us up and say, hey, we've been thinking about this, other times because of the business development team have done analysis of the portfolio and go and say, we think we can help you in this way. So it’s a very dynamic process. Alexion is a company that we have spoken to for many years, but obviously the leadership team moving from the Baxalta team over to Alexion was very helpful because we work with Ludwig and John very closely on the HYQVIA approval. So they came in with a very great deal of familiarity and enthusiasm for the platform, and I think that obviously helps speak think through for the signing when we have it in December. But it’s a very active dialogue, but that frankly goes both ways.

Great. Thanks very much. And then maybe and lastly on PEGPH20, we saw additional data ASCO GI and I'm wondering the prophylaxis is now in place for the ongoing Phase 3, might you be able to talk a little bit about how docs what was the color from the docs on Dr. Yu's paper and how are your discussions going forward within talking to other pancreatic doctors? Thanks.

Yeah. Thanks for that. Obviously, in our Phase 3 study, we’re using low molecular heparin and we plan to commercialize PEGPH20 with low molecular heparin, but we’re constantly looking to ease the burden for patients and that's where the desire to look at rivaroxaban came in. So I think doctors based on the feedback they gave us were intrigued. They recognize there’s still a small number of patients that 28 patients that we reported so far, but a lot of enthusiasm for us to continue to evaluate that and identify their pathways to getting a label and update and what it would take to get a label update for these [indiscernible] as well. So I think doctors are very focused on using the patients burden wherever they can, low molecular heparin is very well accepted, it would just be a little easier for patients, so there is support for us to continue to explore that pathway.

Got it. Thank you very much.

Thanks, Orlando. Operator, are there any more questions?

I'll turn it back over to you for closing comments.

That’s great. Well thank you everyone for joining us today. We really are excited to begin 2018 with such great momentum and we look forward to speaking with you and give you an update on our next call. Thank you and have a great evening.

Ladies and gentlemen, this concludes today’s teleconference. You may now disconnect.