Memorandum

Halozyme 2Q14 – CONSISTENT 1 data shows non-inferior A1c reduction and potential hypoglycemia benefit; FDA path unclear – August 15, 2014

Executive Highlights

  • Halozyme’s late-breaking ADA 2014 poster (85-LB) shared six-month data from CONSISTENT 1, which compared Hylenex pretreatment vs. standard pump therapy; results showed non-inferiority in A1c reduction and a possible hypoglycemia benefit.
  • Halozyme remains in discussions with the FDA regarding an updated label for Hylenex that would indicate use in patients on insulin pumps.

Halozyme reported 2Q14 financial results earlier this week in a call led by CEO Dr. Helen Torley. Below, we include the top five highlights from the 2Q14 call, followed by Q&A.

1. Halozyme looks to have sufficient financial resources on hand for at least the next couple of years. As of June 30, Halozyme had $148 million in cash, cash equivalents, and marketable securities, down from $165 million as of March 31.

2. Consistent with previous statements, Halozyme plans to commercialize Hylenex for insulin pumps using a “relatively modest” sales force.

3. Halozyme remains in discussions with the Agency regarding an updated label for Hylenex that would include an indication for use with insulin pumps. Management admitted that the company does “not yet have a clear path for achieving this goal,” reflecting no update from the 1Q14 call in May. The slow progress stems from lack of an FDA precedent for this type of product in diabetes.

4. Management shared that Halozyme’s late-breaking ADA 2014 poster (85-LB) shared full data from the CONSISTENT 1 trial testing Hylenex pretreatment in insulin pumpers (n=342) vs. standard pump therapy with rapid-acting insulin alone (n=113; topline data was released in April). The trial met its primary endpoint: non-inferior A1c reduction at six months between the treatment and control groups. Disappointingly, there was no difference in mean postprandial glucose excursions or glycemic variability.

5. However, the CONSISTENT 1 results did suggest that Hylenex pretreatment may reduce the risk of hypoglycemia in insulin pump users, particularly severe hypoglycemia; it remains uncertain whether the FDA will be convinced of a hypoglycemia advantage.

Top Five Highlights

1. As of June 30, Halozyme had cash, cash equivalents, and marketable securities of $148 million, down from $165 million as of March 31 and reflecting a cash burn of ~$17 million in 2Q14. Assuming the 1Q14 estimate of a net cash burn of $45-55 million in 2014 is still accurate, the company appears to have ample financial resources for at least the next couple of years.

2. In line with previous calls, Halozyme plans to commercialize Hylenex for insulin pumps using a “relatively modest” sales force. Management declined to provide a specific estimate of how many reps would be needed, but commented that as only a small subset of endocrinologists sees patients on insulin pumps, the number would likely be fairly small. Halozyme is currently conducting market research with physicians, peers, and patients in order to gain a better sense of the potential market for Hylenex and formulate a final commercial strategy.

3. Halozyme remains in discussions with the FDA regarding a label update for Hylenex, but the company does “not yet have a clear path for achieving this goal.” This dialogue has been in progress for some time, and in Q&A, several analysts pressed management for more specifics on their strategy. CEO Dr. Helen Torley explained that much of the delay is due to a lack of precedent; the FDA does not have specific guidance for products like Hylenex, and it is unclear (possibly even within the Agency) what the expectations would be for a label update. Given the data from CONSISTENT 1, we wonder if the Agency will require additional studies, particularly to secure a hypoglycemia advantage in the label. Even still, we assume that the regulatory pathway could be easier for the already-approved Hylenex than for a novel insulin.

  • As a reminder, Hylenex is already approved to “increase the dispersion and absorption” of injected drugs, and Halozyme initiated CONSISTENT 1 on its own volition (not at the FDA’s request). Halozyme’s goal is to obtain an indication for Hylenex pretreatment in patients with type 1 diabetes using insulin pumps, and to add data from CONSISTENT 1 (see below) to the package insert.

4. During the call, management mentioned Halozyme’s late-breaking ADA 2014 poster (85-LB), which shared six-month data from the CONSISTENT 1 trial testing Hylenex pretreatment in insulin pumpers vs. standard pump therapy with rapid-acting insulin alone (we first reported on the topline data that was released in April). The trial (ClinicalTrials.gov Identifier: NCT01848990) enrolled 455 patients with type 1 diabetes on insulin pump therapy, who were randomized 3:1 to receive either Hylenex pretreatment (n=342) or standard pump therapy (n=113). The trial met its primary endpoint of a non-inferior A1c reduction (0.4% margin) at six months between the treatment and control groups; A1c fell 0.14% with Hylenex pretreatment vs. 0.18% with standard pump therapy, both from a baseline of 7.7%.

  • Disappointingly, there was no difference in mean 90-minute postprandial glucose excursions between the Hylenex and control groups (+19 mg/dl with Hylenex and +20 mg/dl with standard pump therapy). Hylenex also did not confer any glycemic variability advantages. Both parameters would be expected with a more-rapid-acting insulin/approach, and we were somewhat surprised to see no benefit here. The most frequent adverse event with Hylenex pretreatment was mild infusion site discomfort; with that exception, adverse events were similar between the treatment and control groups.

5. Encouragingly, CONSISTENT 1 results did suggest that Hylenex pretreatment may lead to reduced rates of hypoglycemia. The rate of overall hypoglycemic events (≤70 mg/dl) dropped a modest 12% with Hylenex pretreatment (p=0.11; 13.8 events/patient-month with standard pump therapy to 12.1 events/patient-month with Hylenex). More notably, hypoglycemic events <56 mg/dl dropped by 23% (p=0.02; 4 events/patient-month vs. 3.1); nocturnal hypoglycemic events (≤70 mg/dl) declined by 21% (p=0.02); and the rate of severe hypoglycemic events (requiring assistance) dropped by a notable 61% (p=0.08). While only the nocturnal and <56 mg/dl results were statistically significant (the others were borderline), they do represent encouraging signs that Hylenex pretreatment may help reduce the risk of hypoglycemia among pump users. The key question is whether the data is strong enough to substantiate a hypoglycemia claim in the product’s label, and even further down the road, if it would support reimbursement.

  • Halozyme’s 1Q14 update suggested that a hypoglycemia advantage for Hylenex would be the product’s key selling point for insulin pumpers. We are unsure as to how the FDA will interpret the hypoglycemia results from CONSISTENT 1, particularly given comments by the Agency’s Dr. Jean-Marc Guettier (Acting Division Director, Division of Metabolism and Endocrinology Products) at the Advisory Committee for MannKind’s Afrezza – at the time, he said it would be “very, very challenging for any sponsor to claim a hypoglycemia benefit for any product.” To do so, the Agency would want to see a dedicated hypoglycemia study where A1c was matched between the two groups. Technically speaking, CONSISTENT 1 was such a study, though hypoglycemia was not the primary endpoint, and thus, the study was likely not powered to show an advantage.  
  • We believe pricing and hassle factor are the main potential downsides to market success of Hylenex pretreatment for pump users. To our knowledge, management has not commented on pricing since the company’s 2012 Analyst Day, where the stated goal was to use copay programs to make using Hylenex in insulin pumps cost-neutral. However, the out-of-pocket cost was expected to be $52 per vial, which would add up to at least $6,240 per year. Regarding hassle factor, patients will use an infusion set connector/syringe to administer Hylenex at each infusion set change, which we add ~three minutes to the process (based on the CONSISTENT 1 data). The trial also reported that >98% of study participants reported that the infusion site change process was either “very easy” or “easy” for both treatment groups.

Questions and Answers

Q: Can you comment on your commercial strategy for Hylenex for insulin pump users and how you plan to position this product?

A: I think you’ve heard that at this point in time, we’re engaged in an active dialogue with the FDA to understand what the path is going to be for approval of that product. Our focus will be on type 1 patients and particularly those patients who want to get tighter glycemic control. So our strategy is going to be getting to agreement with the FDA of what it’s going to take to give us a label update. We’re in the process, as I mentioned, of assessing our commercial profile in market research with physicians, peers, and patients. And now we’re going to be continuing to review that data and decide on our final commercial strategy.

Q: If we could come back to the question on Hylenex, regarding your commercial strategy and maybe your regulatory strategy. Do you have a goal in mind as to when you may be ready to update that plan?

A: We continue in an active dialogue with the FDA, and just to bring a little color as to why it’s not as straightforward as we might be hoping, when you think about Hylenex, it’s a pretreatment of patients who are receiving insulin. The metabolism division has guidance for insulins, mixes of insulins, and oral hypoglycemic agents. We’re a little bit different and unique. There hasn’t been anything quite like this, and so that’s why we’re having such an active and productive dialogue with the FDA. It’s just, what are the expectations for this type of approval? So given that there is no clear precedent for it, it’s hard to pin down an exact time of clarity, but what I can say is, we’re working very hard and are actively engaged with the FDA to get that clarity as soon as possible.

Q: Another follow-up on the Hylenex diabetes opportunity, could you give us a little bit more color on what your target indication would be or what label claims you would view as necessary to make this commercial opportunity attractive? Conversely, is there a scenario here where you think that there is not an attractive label opportunity to make you move forward?

A: In terms of the indication, we want an indication that says Hylenex can be used in pretreatment of type 1 diabetes using CSII. So it can be used with any of the commonly used prandial insulin, and what we’d really like to get is data into the Hylenex package insert that allows our representatives to have a dialogue with the physicians about the efficacy data seen and also the safety data seen, because clearly it’s important that we are able to articulate the risk/benefit of our drug to physicians. And it’s important that data is in the label to allow that type of dialogue that we need to happen. It’s our goal to pursue the dialogue with the FDA to understand what it is going to take to get the indication we want and the data in the label. And at this point in time, we’re continuing in a productive dialogue so that really is where we’re focused at this time.

Q: When you talk about the efficacy data, is that relative to standard of care or is that a placebo comparator?

A: In the one clinical study we’ve done, CONSISTENT 1, which is in 455 patients, we compared Hylenex on top of continuous infusion vs. continuous infusion alone. So the data would be relative to no treatment, so just the standard of care.

Q: Assuming you get the label update that you want for Hylenex in insulin pumps, how should we think about the number of reps needed for commercial launch?

A: That’s part of the work we’re doing at the moment, really seeking to understand the patient segment, who we will be going after with the clinical profile that we have, and identify how many endocrinologists are going to be looking after this type of patient, as you realize not every endocrinologist is looking after pump patients. We do think this is a small segment of endocrinologists, but that’s work that we’re still doing to refine that information, so it would be premature to comment. I think in terms of rep field force size, it will be a relatively modest one because it’s a small specialist group of endocrinologists who would be looking after this indication.

-- by Emily Regier, Adam Brown, and Kelly Close