Halozyme said today it will eliminate more than half (55%) of its workforce—approximately 160 positions—halt development of its lead candidate PEGPH20 (pegvorhyaluronidase alfa), and shut down its oncology pipeline, in a restructuring intended to refocus the company solely on its Enhanze® drug delivery technology.

Halozyme swung its proverbial axe the same day it acknowledged the failure of PEGPH20 in the Phase III HALO-301 trial (NCT01839487) assessing the PEGylated version of Halozyme’s proprietary recombinant human hyaluronidase rHuPH20 as a first-line therapy for treating patients with metastatic pancreatic cancer.

The treatment arm of PEGPH20 in combination with gemcitabine and nab-paclitaxel (Abraxane®) failed to show improvement in median overall survival compared to gemcitabine and nab-paclitaxel alone—11.2 months compared to 11.5 months.

Halozyme noted that patients in both treatment arms of the HALO-301 trial surpassed the published median overall survival rates from the pivotal registration study of Abraxane plus gemcitabine as first-line therapy for metastatic pancreas cancer, published in 2013. However, the company also admitted that the higher response rate in the PEGPH20 treatment arm did not translate into an improvement in duration of response, Progression Free Survival, or Overall Survival.

“The results of the well-designed and well-executed HALO-301 study were not what we wanted or expected,” Halozyme president and CEO Helen Torley, MBChB, said in a statement. “Based on the lack of benefit over standard-of-care in this study, which performed well versus published data, we will be discontinuing PEGPH20 clinical development.”

The restructured Halozyme will consist of 132 employees—of which 12 employees will promote Halozyme’s marketed drug Hylenex® recombinant (hyaluronidase human injection), indicated as an adjuvant to increase the dispersion and absorption of other injected drugs. The other approximately 120 employees will focus on continuing the growth of Enhanze, specifically in areas that are critical to supporting partners such as manufacturing, quality, regulatory, and product development.

Reducing need for multiple injections

Enhanze is based on Halozyme’s patented recombinant human hyaluronidase PH20 enzyme, rHuPH20, which is designed to locally degrade hyaluronan (HA) in the subcutaneous (SC) space. This enables increased dispersion and absorption of co-administered therapies, allowing large volumes (up to 300–600 mL and beyond) to be delivered in a single subcutaneous injection, potentially providing an improved patient experience by decreasing infusion times or reducing the need for multiple injections, according to Halozyme.

Halozyme said its Enhanze business continues to grow with three approved commercial products: Roche’s Herceptin® (trastuzumab) for breast cancer; Roche’s MabThera® (rituximab) for multiple blood cancers, and Baxalta’s Hyqvia® [Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase]—as well as a pipeline of 11 products currently in clinical trials.

Among companies partnering with Halozyme in developing Enhanze-based treatments is argenx, which in February gained rights to the drug delivery technology to develop autoimmune disease treatments for up to three targets, through a collaboration and license agreement that could generate more than $530 million for Halozyme.

“Our Enhanze business is well-positioned for this growth, supported by strong partnerships with leading brands and a promising development pipeline. As a result, Halozyme now has a clear path to near-term, sustainable profitability with strong cash flows and high growth prospects. In addition, our share repurchase program reflects our continued commitment to creating value for our shareholders and to implementing a capital return philosophy aligned with our new company profile.”

Further details of Halozyme’s Enhanze business will be shared during the third quarter 2019 financial results webcast and conference call on November 12, the company said.

Up to $140M in savings

Halozyme plans to complete over 80% of its workforce reduction in early January 2020. The company said the restructuring and other cost-saving efforts will save it between $130 and $140 million in 2020 compared with Halozyme’s most recent guidance for 2019 operating expenses, excluding cost of goods sold.

In that guidance, released August 6 along with second-quarter results, Halozyme lowered its projected range of operating excluding cost of goods sold to between $215 million to $225 million, down from between $225 million to $235 million.

After completing the restructuring and booking all related one-time charges, Halozyme said it anticipated becoming a sustainably profitable company beginning in the second quarter of 2020, with projected annualized operating expenses excluding cost of goods sold of between $65 million and $75 million to be realized by the fourth quarter of 2020.

Halozyme said it expects to book separation and contract termination fees in the fourth quarter of this year, and will provide further details during its third quarter conference call.

The company’s board also agreed to repurchase up to $350 million of outstanding Halozyme common stock over the next three years, by authorizing a capital return program, with repurchases to be made through both public market and private transactions. The timing of share repurchases and the number of shares of common stock that are repurchased will depend on market conditions and other factors, Halozyme said.

Investors showed little initial reaction to Halozyme’s Phase III failure or resulting restructuring: The company’s share price on the Nasdaq Global Select Market dipped about 1% in early trading this morning, declining 12 cents from Friday’s close of $15.55 as of 10:05 a.m.

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