Halozyme CEO Helen Torley has always been frank about what would happen if the company’s foray into drug development failed: The two-pillar company would ditch its internal pipeline and focus solely on providing its drug delivery technology to pharma partners.
Now, nine months after its pancreatic cancer program foundered in phase 3, that transparency, along with lots of planning and quick decision-making, have turned out to be key in keeping the company alive—and profitable.
With the second quarter of 2020, Halozyme delivered its first profitable quarter of what it expects to be many, with earnings per share of $0.19. The company reeled in $25.8 million in income, compared with a loss of $14.6 million during the same quarter last year.
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Part of that gain comes from canning its R&D work. In November 2019, the company announced that its lead program, a PEGylated version of its hyaluronidase enzyme, in tandem with Celgene’s Abraxane and the chemo drug gemcitabine, did not extend the lives of patients with pancreatic cancer compared with Abraxane and chemo alone.
Halozyme, which had two plans in its pocket—one for an FDA approval and one for a trial failure—pulled the trigger on a pivot. It started a reorganization that would lay off more than half of its staffers—about 160—and worked to expand its drug delivery business with the 120 employees that remained.
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“The hardest part was the town hall, where we had to talk about the results being negative. To see almost 300 faces looking at you trying to understand what happened,” Torley said. “Because we had such conviction; opinion leaders had such a conviction we had a good shot at it.”
All told, winding down its development pipeline dropped its R&D spend to $9 million from $33.9 million the same quarter last year.
But saving on R&D costs isn’t the whole story. Halozyme’s revenue jumped to $55.2 million from $39.1 million year over year, largely thanks to payments from partners Janssen and Bristol Myers Squibb totaling $32.3 million.
The company’s partnerships are based on Enhanze, its drug delivery technology that uses the enzyme hyaluronidase to break down hyaluronan, a natural sugar chain that forms a gel in the innermost layer of the skin. This allows drugs, like Janssen’s multiple myeloma med, Darzalex, to be injected just under the skin, saving patients from hours-long intravenous infusions.
In the second quarter alone, Halozyme has seen three new approvals for its partnered drugs: nods from the FDA and European Medicines Agency for the subcutaneous version of Darzalex, and an FDA green light for Roche’s Phesgo, a combination of breast-cancer drugs Perjeta and Herceptin using the Enhanze technology.
Halozyme now has five partnered drugs on the market, including subcutaneous versions of Roche’s Herceptin and Rituxan, as well as of Baxalta’s HYQVIA, a treatment for primary immunodeficiency. And more are in the works. Janssen is also testing subcutaneous Darzalex in in a protein-folding disorder called light-chain amyloidosis, while Bristol Myers is testing a subcutaneous form of Yervoy in combination with its PD-1 blocker Opdivo in multiple cancers.
“This year is mostly about milestones… It was important we didn’t take the eye off the ball with Enhanze and continued to support our partners with trial initiations and the regulatory back-and-forth as we get ready for approvals,” Torley said. “If everything like that could go well, we knew we would be profitable in the second quarter.”
Between 2020 and 2022, the company expects to pick up $350 million to $450 million in milestone payments as its partnered programs move through the clinic.
“We expect three phase 3 starts this year, all of which are associated with milestones,” Torley said. The company expects to see nine new studies this year, including one new phase 2 study and five new phase 1 studies.
In 2021, Halozyme expects to add some royalty income, too: “Once all the reimbursement is in place for Darzalex in the U.S. and Europe, and for Phesgo in the U.S., we see the opportunity for robust uptake,” Torley said. “2020 is a bit of a setup year—we will see revenues this year, but they will be substantial in 2021.”
Although the COVID-19 pandemic threw a wrench in the plan, Halozyme’s partners have stayed on track. Despite seeing delays of one to two quarters in some partnered programs, its partners have managed to start trials on time. Based on its partners’ latest updates, Halozyme anticipates $230 million to $245 million in sales this year.
And to keep growing, Halozyme plans to add new partners to the mix.
“Things slowed down certainly in Q2, but we’re definitely seeing an uptake in the pace of discussions,” Torley said. “We’ve never had as broad an array of conversations as we have at the moment, with both biotech and pharma.”
Torley believes the Janssen and Roche approvals have driven this interest.
“We had two recent approvals with products early in their life cycle with a lot of growth ahead of them… What Enhanze has allowed to happen has grabbed people’s attention: turning a four- to six-hour IV into a three- to -five-minute [subcutaneous injection.] People marvel at that,” she said.
Beyond supporting its partners and signing new ones, any growth will come from M&A. It’s not an immediate priority, “but if at the right time, we find the right platform,” the company would acquire a technology that complements Enhanze and that is “partly or substantially derisked.”