Halozyme Reports Third Quarter 2017 Results

SAN DIEGO, Nov. 7, 2017

"During the third quarter, we realized clear benefits from strategies we have been executing against in both the ENHANZE and PEGPH20 pillars of our business," said Dr. Helen Torley, president and chief executive officer. "On ENHANZE we significantly increased 2017 revenue and the potential future value of the technology with the signing of the landmark collaboration agreement with Bristol-Myers Squibb for development of up to 11 immuno-oncology targets, and with the expansion of our collaboration agreement with Roche. In addition, our partner Janssen took an important step towards the commercialization of a subcutaneous formulation of Darzalex^® with the initiation of a Phase 3 study.

"In our PEGPH20 pillar, investigator interest remains strong in our HALO-301 study, resulting in continued progress with enrollment. An interim analysis will be conducted for the first primary endpoint of progression-free survival when we achieve the target number of events, which we project will occur in late Q4 2018."

Third Quarter 2017 and Recent Highlights include:

• Announcing a Global Collaboration and License Agreement with Bristol-Myers Squibb to develop subcutaneously administered Bristol-Myers Squibb immuno-oncology medicines using Halozyme's ENHANZE drug-delivery technology. The agreement is the largest in company history including a $105 million upfront payment and $160 million in potential milestones for each of 11 immuno-oncology targets, including the initial target selection of programmed death 1 (PD-1).
• Roche licensing a new ENHANZE target in exchange for a $30 million upfront payment and up to $160 million in potential development, regulatory and sales-based milestones. The agreement serves as an extension to the original collaboration between the companies, under which Roche has developed two subcutaneous formulations of cancer drugs for markets worldwide.
• Janssen initiating the first of three planned Phase 3 studies of the subcutaneous formulation of DARZALEX^® (daratumumab). Halozyme's ENHANZE technology has the potential to enable a 15 ml injection to be delivered in five minutes or less, with no requirement for an intravenous loading dose. Data informing this decision from the Phase 1 PAVO study in patients with relapsed or refractory multiple myeloma were accepted for presentation at the 2017 American Society of Hematology Annual Meeting and Exposition. Upon the dosing of the third patient in the recently initiated study, Halozyme will earn a $15 million milestone payment.
• Genentech launching RITUXAN HYCELA™ (rituximab/hyaluronidase human) for subcutaneous injection, a combination of rituximab and Halozyme's hyaluronidase human ENHANZE technology, for patients with follicular lymphoma, diffuse large B-cell lymphoma and chronic lymphocytic leukemia.
• Continued progress screening and enrolling patients in the HALO-301 study of PEGPH20 in combination with ABRAXANE^® (nab-paclitaxel) and gemcitabine in first line metastatic pancreas cancer patients with high levels of tumor hyaluronan (HA-High). An interim analysis will be conducted for the first primary endpoint of progression-free survival when the target number of events has been reached, which the company projects will be in late Q4 2018. At that time, Halozyme projects approximately 500 patients will have been enrolled in the study.
• Initiating multiple trials in collaboration with Genentech to evaluate PEGPH20 in combination with TECENTRIQ^® (atezolizumab) in four tumor types. Studies include a Halozyme-sponsored randomized clinical trial in patients with previously untreated, unresectable, locally advanced, or metastatic cholangiocarcinoma and gallbladder adenocarcinoma and two Genentech-funded and operated, Phase 1b/2 multi-arm clinical studies evaluating patients with previously treated metastatic pancreatic ductal adenocarcinoma and previously treated locally advanced unresectable or metastatic gastric cancer. The studies are part of a clinical collaboration agreement announced in 2016 to evaluate PEGPH20 and atezolizumab in up to eight tumor types.

Third Quarter 2017 Financial Highlights

• Revenue for the third quarter was $63.7 million compared to $31.9 million for the third quarter of 2016. The year-over-year increase was driven by a $30 million upfront payment from Roche and growth in royalties from partner sales of Herceptin^® (trastuzumab) SC, MabThera^® (rituximab) SC and HYQVIA^® (Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase) offset by a decrease in research and development reimbursements and license payments from ENHANZE partners. Revenue for the third quarter included $17.1 million in royalties, an increase of 31 percent from the prior-year period, $9.8 million in sales of bulk rHuPH20 primarily for use in manufacturing collaboration products and $3.8 million in HYLENEX^® recombinant (hyaluronidase human injection) product sales.
• Research and development expenses for the third quarter were $34.0 million, compared to $33.9 million for the third quarter of 2016. The increase was primarily due to a ramp in spending associated with the HALO-301 study.
• Selling, general and administrative expenses for the third quarter were $13.3 million, compared to $11.6 million for the third quarter of 2016. The increase was primarily due to personnel expenses, including stock compensation, for the period.
• Net income for the third quarter was $2.7 million, or $0.02 per share, compared to net loss in the third quarter of 2016 of $28.9 million, or $0.23 per share.
• Cash, cash equivalents and marketable securities were $316.9 million at September 30, 2017, compared to $297.5 million at June 30, 2017.

Financial Outlook for 2017

Halozyme updated year-end guidance, now expecting: