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Halozyme Therapeutics Inc  (NASDAQ:HALO)
Q4 2018 Earnings Conference Call
Feb. 21, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon everyone. We now have Halozyme in conference. (Operator Instructions)

I would now like to turn the conference over to Al Kildani, Vice President of Investor Relations and Corporate Communications for Halozyme Therapeutics. Mr.Kildani, please begin.

Al Kildani -- Vice President of Investor Relations and Corporate Communications

Good afternoon and welcome to our Fourth Quarter and Full Year 2018 Financial Results Conference Call. In addition to our press release issued today after the close, you can find a supplementary slide presentation, there will be referenced on today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme' s President and Chief Executive Officer who will provide an update on our business and Laurie Stelzer, our Chief Financial Officer, who will review our financial results for the fourth quarter and full year 2018.

During the call, we will be making forward-looking statements. I refer you to our SEC filings for a full listing of the risks and uncertainties. I'll now turn the call over to Helen.

Helen Torley -- Chief Executive Officer

Thank you Al. Good afternoon and thank you for joining us today. I'm pleased to provide an update on Halozyme's continuing progress and momentum in the fourth quarter as we look forward to an exciting 2019. I'll begin with the key takeaways since we last reported.

Firstly, we finished 2018 in a strong financial position. After posting 24% full year-on-year growth for enhanced royalties on a reported basis or 14% adjusting for the change in accounting we implemented at the beginning of the year. We finished the year with $355 million in cash, cash equivalents and marketable securities.

Secondly, I am very pleased with the continuing growth of ENHANZE potential. We most recently expanded this with the signing of a new ENHANZE collaboration with argenx. This agreement is for an initial target intended to treat severe autoimmune disease and brought with it an upfront payment of $30 million and the potential for up to two additional milestone bearing target nominations. This follows on the heels of the expansion of our enhanced collaboration agreement with Roche in late October. The expansion was for one additional undisclosed target and the potential for up to two more target nominations. These actions clearly demonstrate the growing momentum of our ENHANZE franchise.

Thirdly, we made significant progress in our HALO-301 registration study during the fourth quarter. We reached agreement with the FDA to change the primary endpoint to a single primary endpoint of overall survival and completed enrollment at the end of December with approximately 500 patients. We're excited to report topline results from this trial currently projected in the second half of 2019.

And finally, we are continuing to make strong progress toward realizing the ENHANZE $1 billion royalty revenue potential in 2027 that I first discussed in early 2018. This potential is based on the performance of our three currently marketed products and the successful development, approval and global launches of additional project -- product.

We have a broad enhanced pipeline with our partners. By the end of 2019, we project this will include three products in Phase 3 clinical testing and nine products in Phase 1 clinical testing. With those key takeaways, let me provide some additional details on our recent progress and results. Earlier this month, we announced a new collaboration with argenx, a development-stage biotechnology company with a focus on severe autoimmune diseases and other therapeutic areas.

This collaboration marks our first with a biotechnology company, demonstrating a new potential avenue of growth for our ENHANZE franchise. Halozyme received an initial payment of $30 million and potential future payments of up to $160 million per target, subject to the achievement of specified development, regulatory and sales-based milestones.

Halozyme will also receive mid-single-digit royalties on sales of commercialized product. The agreement grants argenx exclusive access to ENHANZE for any product targeting the human neonatal Fc receptor FcRn, including argenx's lead asset efgartigimod or ARGX-113. FcRn is recognized as one of the most exciting new drug targets in development with multiple pharmaceutical and biotechnology companies pursuing this target.

In addition, argenx has a right to nominate up to two additional targets. Additional target nominations would each trigger $10 million payments to Halozyme and would each be associated with the potential future payments tied to milestones of $160 million. We're looking forward to working closely with argenx as it develops therapies with the potential for improved administration for patients suffering from severe autoimmune diseases.

Our argenx collaboration follows an expansion of our agreement with Roche in October, licensing our ENHANZE drug delivery technology for exclusive development by Roche of a new undisclosed clinical stage therapeutic target with an option to select two additional targets within four years. This agreement resulted in upfront payment of $25 million. These two agreements illustrate the breadth of the enhanced value proposition. Our collaboration partners now span from world-class pharmaceutical giants to emerging growth biotechnology companies.

Our ENHANZE technology is demonstrating the value it brings not only to products already in the market, but also to those still in development with our growth prospects entirely ahead of them. The wide range of disease indications being targeted include oncology, autoimmune disease and rare diseases and there is potential to expand even further into additional diseases and indications. The common threat for all of our collaboration centers around bringing the potential benefit of subcutaneous administration of medicines to patients, healthcare providers and healthcare systems.

Turning now to slide 2. We continue to project the potential for $1 billion in royalty revenues in 2027. We have now licensed our rHuPH20 enzyme to nine leading pharmaceutical and biotech companies, covering over 50 potential drug targets in total. The potential royalties from our three marketed products, plus the nine products that we expect to be in clinical development in 2019 result in the potential for approximately $1 billion in royalty revenue in 2027.

This assumes approval in multiple indications, global launches and on average, a mid-single-digit royalty on net sales of ENHANZE formulated products. You'll see also illustrated in the slide in the yellow dotted line is the pro forma ENHANZE business operating expense estimate, which excludes cost of goods sold. As you will note, current royalty revenue exceeds and covers the operating expenses today, and with the projected revenue inflection associated with the next launch, we project this would drop to the bottom line in an ENHANZE only business.

Moving now to slide 3, I'll provide you an update on the status of the enhanced development pipeline, beginning with the currently marketed products. There are currently three marketed products based on our ENHANZE drug delivery technology, each demonstrating commercial success in its targeted market. While the subcutaneous formulation of our Herceptin is approved in much of the world, we are currently awaiting a potential approval in the United States later this quarter. This will mean that US patients now have the option to receive their Herceptin as a five minutes or less injection under the skin instead of the current 30- to 90-minute IV infusion. Roche recently confirmed its intention to bring this product to market in the US as quickly as possible once it receives FDA approval.

And as discussed in January, we are projecting flat royalties in 2019 after continued price pressure in subcutaneous products in Europe offset the projected revenue growth from RITUXAN HYCELA and the anticipated launch of subcutaneous Herceptin in the United States. While these three products form the backbone of their royalty revenues today, there are a number of new products in late-stage clinical development that we expect to be substantial growth drivers for our business in the coming years.

By the end of 2019, we expect there to be three ENHANZE based products in Phase 3 clinical testing. These include Janssen DARZALEX, Roche's fixed-dose combination of Perjeta and Herceptin and a third undisclosed product. Let me now provide a few more details on these products. DARZALEX is a blockbuster therapy transforming the lives of patients with multiple myeloma. In 2018, J&J reported worldwide sales of more than $2 billion for DARZALEX. Since its introduction in 2016, DARZALEX has proved to be one of the more successful product ever launched for the treatment of multiple myeloma and analysts project it has the potential to reach $7 billion in worldwide sales by 2025.

Patients today receive DARZALEX by IV infusion. For many patients this can take four to six hours initially as a weekly infusion. The subcutaneous formulation of DARZALEX that's being tested is being administered in just three to five minutes. When you think about what this could mean for patients who may be able to go from a four to six hour IV infusion to just get a three to five minutes subcutaneous injection it really is quite remarkable. Janssen is undertaking a broad clinical trial strategy for subcutaneous DARZALEX with multiple studies initiated that are planned to include approximately 2,000 patients with multiple myeloma at hundreds of clinical sites. We are very gratified to hear recent comments from senior management at J&J at the JPMorgan Healthcare Conference communicating their excitement about the potential for subcutaneous formulation of DARZALEX to facilitate expansion into earlier lines of therapy and also into the community setting where the ability to do longer infusions maybe limited today.

Janssen has indicated it plans to submit regulatory filings for subcutaneous DARZALEX in the second half of 2019. The advancement of this blockbuster product to regulatory submissions will be an important event for future growth in our ENHANZE business. The second ENHANZE based product in Phase 3 studies is a fixed-dose co-formulation of Roche's Herceptin and Perjeta. This product candidate is being developed to cover all of the currently approved Perjeta indications in HER2-positive advanced and early breast cancer patients, representing a total of 95,000 patients in the US and EU5.

The early breast cancer indication of Perjeta and Herceptin is supported by Roche's APHINITY trial, which resulted in a label expansion in late 2017. Recall, the APHINITY based indication represents a large and attractive opportunity targeting an estimated population of 76,000 patients in the US and EU5 and according to their last update Roche has achieved 46% share in this population. Today, patients receive Perjeta IV and Herceptin IV by sequential administration, which can take up to 2.5 hours for the loading dose and between 1 and 2.5 hours for subsequent doses. With the subcutaneous fixed dose combination, the times are substantially shorter with the loading dose expected to take seven to eight minutes and subsequent doses five minutes. Roche initiated a global Phase 3 study in this population for the subcutaneous fixed-dose combination of Perjeta and Herceptin in 2018 and recently reported that recruitment for the trial was completed during the fourth quarter. Roche recently reiterated that upon positive data it expects to submit data from the Phase 3 study for approval in 2020.

And completing our Phase 3 development summary, we expect one additional currently undisclosed product to advance into Phase 3 clinical testing before the end of 2019. I will next turn to an update on the Phase 1 programs for our ENHANZE based products. We are seeing a remarkable expansion in the progress that our collaboration partners are making in the clinic. By the end of 2019, we project having nine products in Phase 1 clinical testing. Of those nine, five are currently in clinical testing and four are anticipated to begin later this year. Beginning with Bristol-Myers Squibb, bearing (ph) there are now Phase 1 trial under way for an anti-CD73 and for OPDIVO. A third BMS Phase I trial that was planned to start in the first quarter of 2019 will be delayed pending further data availability for that molecule. Eli Lilly continues with Phase 1 development of an undisclosed target

and in December Roche dosed our first patient in a Phase 1b/2 study evaluating a subcutaneous formulation of Tecentriq in stage IV non-small cell lung cancer patients, which triggered a $5 million milestone payment to Halozyme.

Alexion also continues with its Phase 1 study with a subcutaneous formulation of ALXN1210 and recently indicated it expects to announce results from this trial during the first quarter of 2019. Our ENHANZE business has never been in a stronger position. We're approaching several key milestones over the next three years that are associated with potential cumulative milestone payments of $225 million to $300 million during that period. With the clinical development programs for ENHANZE based products expected to take stand substantially this year alone, you can see why we have conviction that the ENHANZE platform has the potential to deliver $1 billion in royalty revenues in 2027.

We are delighted to have signed the argenx collaboration a few weeks ago. I'm pleased to report that we are continuing discussions with multiple potential new collaborators. We have many remaining targets and have now demonstrated the appeal of our ENHANZE technology to both pharma and biotech companies seeking competitive differentiation for the development portfolios. While the timing of new ENHANZE collaboration is inherently unpredictable, I am confident in our ability to secure additional partnerships, particularly as companies are seeing the growing evidence of the ENHANZE value proposition.

I'll turn now to a discussion of our oncology pillar on slide 4 .Oncology pillar is our second high revenue potential pillar as we continue development of PEGPH20. This is a targeted therapy that temporarily degrades hyaluronan or HA that can accumulate around certain tumors and constrict the tumor vasculature. We're studying PEGPH20 with a companion diagnostic developed with our partner Ventana to identify patients with high HA tumors. Our pivotal Phase III study HALO-301 is evaluating PEGPH20 in combination with ABRAXANE and gemcitabine in first-line metastatic pancreas cancer patients.

In November, we announced that we have reached agreement with the FDA to change the primary endpoint for Halo-301 to a single primary endpoint of overall survival. We believe this change has incrementally derisked the trial. By moving to a single endpoint -- primary endpoint we will now be able to analyze in more mature data set in what is a well-powered (ph) trial with 93% power for hazard ratio of 0.67 and and a minimal observable median overall survival difference of approximately 2.2 months.

We implemented the changes to the HALO-301 trial design in November based on FASB back at that time, that our proposed change appeared acceptable and then a final determination was made upon completing review of the clinical study protocol amendment and the fiscal analysis plan.

We submitted the protocol and statistical analysis plan to the FDA in December, and I'm pleased to report that in January, the FDA completed their review of these documents with no additional questions or comments.

At the end of December, we completed enrollment and HALO-301 with approximately 500 patients. We currently project we will achieve the target number of 330 overall survival events between August and November of this year, with a high probability of definitive final data from HALO-301 sometimes in the second half of 2019.

Let's turn now to slide 5, and an update on our evaluation of PEGPH20 in other tumor types. Regarding our collaboration studies with Roche, we continue to make progress in the evaluation of PEGPH20 and Tecentriq in pancreas, cholangiocarcinoma and gallbladder cancer. In the Halozyme life study in cholangiocarcinoma and gallbladder bladder cancer, we recently completed enrollment in the expansion cohort. We're pleased to see continued strong interest in the study in a population with high unmet need. We anticipate initial data readout in the study will be available in 2019 and we will seek an appropriate scientific forum for communication once the data is available.

And Roche continues to make strong progress in their Morpheus pancreas cancer study, which includes an evaluation of PEGPH20 in combination with Tecentriq. Earlier this month, (inaudible) closed enrollment in the gastric arm of the study and results will be reported when the data is available. In summary, we are also making strong progress in our oncology pillar and we're excited to be nearing the HALO-301 data readout later this year. With that update. I'll now turn the call over to Laurie to discuss our financial results in greater detail.

Laurie ?

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Thank you and good afternoon everyone. As Helen discussed, we are excited to have signed a new collaboration with argenx our with an initial name target in the area of severe autoimmune disease. Under terms of the agreement, Halozyme received an initial payment of $30 million and they receive a $10 million payment per target for future target nominations and potential milestone payments of up to $160 million per selected target subject to the achievement of specified development, regulatory and sales-based milestones. Halozyme will also receive mid-single-digit royalties on sales of commercialized products. We will recognize the initial $30 million upfront payment in the current quarter.

Now let me turn to a discussion of our fourth quarter financial results, beginning on Slide 6. Total revenue for the fourth quarter was $60.2 million compared to $189.6 million in the prior year period. This decrease was expected due to the $141.4 million in one-time collaboration revenue booked in the fourth quarter of 2017 as a result of the signing of two important new collaboration agreements in 2017. Our collaboration with BMS signed in September 2017, and our collaboration with Alexion signed in December 2017.

This compares to the $25 million booked in Q4 2018, for the expansion of the Roche agreement signed in October 2018. The impact from these new agreements is reflected in our collaboration revenue of $30.2 million for the fourth quarter compared with $159.3 million in the prior-year period, which also includes a $15 million milestone payment from Janssen. Focusing on the key recurring element of our revenue, royalty revenue for the quarter totaled $19.3 million, an increase of 9% on an as reported basis compared to the fourth quarter of 2017.

With the exception of Herceptin SC in Europe, we saw growth in royalties from all three of our ENHANZE based partner products with the largest driver of growth coming from Roche's RITUXAN HYCELA in the US, which was partially offset by the impact of biosimilars in Europe, on Herceptin SC. Product sales in the quarter, which are comprised of bulk rHuPH20 and enhanced drug product sales and Hylenex totaled $10.7 million compared to $12.6 million in the prior year period.

Turning to Slide 7 for a more detailed breakdown of our P&L. Having covered total revenue, I'll begin with total operating expenses, which were $60.3 million in the fourth quarter, down from $63.6 million in the prior year period. Cost of product sales was $5.6 million in the quarter compared to $7.5 million in the prior year period. Research and development expenses for the quarter were $36.7 million compared to $41.4 million in the fourth quarter of 2017. Selling, general, and administrative expenses were $18 million compared to $14.8 million in the prior year period.

Net loss for the quarter was $2.1 million or $0.01 per share compared to net income of $123.9 million or $0.85 per diluted share in the fourth quarter of 2017, which reflected the impact of receiving upfront license fee and milestone payments as mentioned previously. And, cash equivalents and marketable securities were $354.5 million at December 31, 2018 compared to $469.2 million at December 31, 2017. Turning now to Slide 8 for a snapshot of our full year 2018 revenue highlights. Total revenue for 2018 of $151.9 million compared with $316.6 million in 2017, with most of the difference attributable to upfront payments from the new collaboration signed with BMS, Alexion, and the milestone from Janssen all received in 2017.

Again, these are reflected in the full year collaboration revenue of $44.6 million compared with $202.7 million in 2017. Focusing again on the key recurring element of our revenue, royalty revenue for the year totaled $79 million, up 24% from the prior year on an as reported basis with growth from RITUXAN HYCELA being the largest contributor. Product sales for the year totaled $28.2 million as compared to $50.4 million in 2017. The decline was attributable to lower API sales due to two of our partners reducing inventory ahead of planned transition to new manufacturing processes.

Moving to Slide 9, starting in Q1 2018, we implemented a new process related to FASB Topic 606 for how we record royalty revenue. As many of you are aware, prior to January 2018, we recognized royalty revenue one quarter in arrears due to the timing difference between our financial close and when we received royalty reports from our partners. Under the new guidance, we now estimate royalty revenue for the current reporting quarter and will true-up this estimate to actuals in the subsequent period when the royalty reports are received. To explain the impact this transition had on our full year 2018 royalty revenue, two comparisons are shown on the slide.

The first table shows reported royalties for 2018 of $79 million, which included our estimate for Q4 royalties, an increase of 24% from a 63.5 million in royalty revenue we reported for the fourth quarter, 2017. It is important to note that the full year 2000 (ph) guidance we provided initially in January 2018 for 25% to 30% royalty growth was based on and as reported royalties to be consistent with GAAP year-over-year. The second table compares our reported royalties for 2018 $79 million to the actual royalties for partner sales related to 2017 of $69 million. This adjusted view shows an increase of 14%.

As we turn to slide 10 for a snapshot of our full-year P&L for 2018, and having covered total revenue, I'll again begin with full-year total operating expenses, which declined to $221.2 million from $235.6 million in the prior year period. The decline was primarily as a result of lower sales of API and the associated impact on cost of goods sold. And finally, net loss for the year was $80.3 million or $0.56 per share compared with net income of $63 million or $0.45 per share in the prior year period.

Overall, we were very pleased with our financial performance in 2018, highlighted by the strong growth in royalties and the strong financial position and which we were able to end the year. And lastly, I would like to update our 2019 guidance ranges as shown on Slide 11 to reflect the recent signing of the argenx collaboration. For the full year 2019, we now expect net revenue increasing from the prior range of $175 million to $185 million to $205 million to $215 million driven by the $30 million payment from the recent argenx

agreement in the first quarter.

Within the revenue line, as disclosed last month, we are projecting a stable level of royalty revenue in comparison with 2018. In addition, we expect to see product sales increase in 2019 due to our higher demand for API as our partners continue their clinical programs and began preparations for commercialization. We continue to expect operating expenses of $265 million to $275 million. Due to the anticipated increase in API product orders and the related impact on cost of goods sold we are also providing guidance for operating expenses excluding cost of goods sold of $225 million to $235 million.

Operating cash burn of $45 million to $55 million compared to the prior range of $75 million to $85 million for the year. Not included in operating cash burn, we expect debt repayment of approximately $90 million for 2019. Furthermore, we expect to pay off the remainder of our royalty back debt by the first quarter of 2020. And, we are increasing our year-end cash balance to a range of $210 million to $220 million from the previous range of $180 million to $190 million. The increase is driven by the $30 million upfront payment from the recently announced argenx ENHANZE agreement. And with that, let me turn the call back to Helen who will provide closing comments.

Helen Torley -- Chief Executive Officer

Thank you Laurie. After a strong year of execution in 2018, I'm really delighted with how we started 2019 as we look ahead toward several near-term potential value creating catalysts. For our ENHANZE insurance pillar, these include the anticipated FDA approval of Roche's Herceptin SC in the US in the first quarter. Potential regulatory filings for subcutaneous formulation of Janssen blockbuster multiple myeloma drug DARZALEX in the second half of 2019, potential advancement of a new product candidate into Phase 3 and of course, while we can never predict the timing, we are aggressively pursuing additional collaborations.

And for our oncology pillar, we are fast approaching a key event in the history of the Company with topline results from our Halo-301 pivotal study currently projected in the second half of 2019. I want to close by expressing my ongoing gratitude and appreciation for our talented Halozyme team for their continued hard work to advance our programs and in support of our patients and our partners. And we are now ready to take your questions. Operator, would you please provide instructions and open the call. Thank you.

Questions and Answers:

Operator

Thank you. At this time, we will open the floor for questions.

(Operator Instructions)

Our first question will come from Jim Birchenough with Wells Fargo Securities.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Yeah, hi there, thanks for taking the questions and congratulations on all the progress. I guess the first question is Helen, just on the delay in the one Bristol program, could you speak to the nature of the delay and perhaps provide some reassurance that that's not something people need to worry about as a broader platform risk and then I have a couple of follow-ups.

Helen Torley -- Chief Executive Officer

Now -- thanks Jim for the question. What BMS just said is that they the awaiting some additional data before finalizing how we want to proceed with that target. I can tell you, we remain in very active dialog with BMS across multiple targets that are contemplating moving into the clinic. So I can reassure you there is nothing to worry about in that collaboration. BMS is as committed as ever to its vision to change how oncology care is delivered by moving in subcu in more community setting and even potentially in the home setting in the future. So this is just -- let's get some more data and decide what the right steps forward for that particular target are -- is.

Jim Birchenough -- Wells Fargo Securities -- Analyst

And then on DARZALEX subcu, do you have any insight as to what form we might see the data from Janssen, I know it's more of a question for Janssen but just -- if you have any insights on that and then maybe a reminder on what's up around the primary endpoint and what define success and people will focus on response rate. So what's similar enough and you know perhaps referencing your experience with RITUXAN and Herceptin.

Helen Torley -- Chief Executive Officer

Thanks for that question. Now, we do not know what form it will be presented in, you really would have to address that to Janssen, but we do know, with the filing planned in the second half of the year there is a possibility of results coming out in the first half or even in the second half, but I can't provide any more details on that. We also can't provide any specifics as to what the endpoint will be, what we do know is the COLUMBA study is what going to be one of the key studies in the filing. This is in relapsed-refractory patients and response rate would be the endpoint there. But -- they are also studies completing in earlier lines of therapy with different combinations and in those. I would expect progression-free survival will be an endpoint that will be looked at as well. So we are hoping obviously when Janssen provides the filing will be able to discuss it in more detail.

Their commitment as you hear by the fact that we have nine studies now ongoing and 2,000 patients suggest this is going to be a very important product for them, but also a very broad profile and so we're very excited to start seeing the data, later this year.

Jim Birchenough -- Wells Fargo Securities -- Analyst

And maybe one more on just on the guidance or the outlook for royalty revenues of $1 billion by 2027. Could you tell us what that might mean if you think about the assumptions underlying that royalty target, what does that mean for milestone payments over the same period of time and if there is an API sales number associated with that as well? Thanks.

Helen Torley -- Chief Executive Officer

Yeah, let me ask Laurie to address that.

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Hi, there. So as far as milestones that would be associated in that same time frame. I can point you to two things. The first, we have given some projection to the milestones that we would achieve between 2019 and 2021 of about $225 million to $230 million. We've also said that over the life of the products that are in the clinic, we would expect to see about $1 billion and that would be in total lifetime milestones, assuming achievement of all all events as our partners progress their programs in the clinic.

So hopefully that helps frame up kind of the size and shape of the milestones expectation. And then on your question on API, we haven't given longer term API guidance, you know, I know that there is an expectation to tie API with potential royalties. It's just that we sell API in a bit more of a lumpy fashion. And so it's very hard to forecast exactly what would the API be as we look out into the future, because our partners are holding different amounts of inventory at different times, but we would expect that to grow over time.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Great. Well, thanks for taking the questions.

Helen Torley -- Chief Executive Officer

Thanks JIm.

Operator

Thank you. Our next question will come from Jason Butler with JMP Securities.

Roy Buchanan -- JMP Securities -- Analyst

Hi, great, thanks, it's Roy in for Jason, thanks for taking my questions. I had a really quick one on the 301 Phase 3, can you just remind us if you did or did not change the screening criteria for entry during the conduct of the trial?

Helen Torley -- Chief Executive Officer

Thank you Roy for that question. One of our principles in designing the Phase 3 study was to keep the entry criteria and the population as close as possible to the Phase 2 study. As I say that, there may have been some minor changes that would -- I'm just trying to think of them, that would ease the performance for the investigators for example, the screening window was extended from three weeks to four weeks, so that all of the tests could be completed in time, that a type of minor change we made. But anything that would change the population that was being studied, was something we did not do because that was one of our principles was to make sure the population was similar between the two studies.

Roy Buchanan -- JMP Securities -- Analyst

Okay, great. And then in a prior slide deck, you guys mentioned acceleration of the time to the Phase 1 starts for the ENHANZE program to six months, what was the primary driver of that -- or drivers?

Helen Torley -- Chief Executive Officer

Yes, I have to give great kudos and complements to our ENHANZE team. They really have in preparation for expanding the number of partners we have and also the number of targets entering the clinic refined our processes, set up multiple parallel teams to make sure that we are able to support the partners and -- all asking for progress at the same time. In 2015, we introduced something called ENHANZE drug product which our partners were able to mix with their own product to create a co-formulation at the site instead of having to do on the manufacturing work to get to the co-formulation, and that has enabled us to further speed up the start of the Phase 1 study. So a mixture of that process improvement and a really strong team collaborating with them, our partners.

Roy Buchanan -- JMP Securities -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Charles Duncan with Cantor Fitzgerald.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Hi guys. First of all, congrats on the progress in the year. Appreciate all the guidance -- granularity on guidance, and thanks for taking my question. I have a couple of questions, one is on PEGPH20 and pancreatic cancer, Helen, you mentioned August through November in terms of achieving a certain number of OS events. And I guess I'm wondering if -- you know based on today, you know what you see in that ongoing trial, is it -- is that August through November time period, a function of what you've seen in the literature or at least the type of patients that you're (inaudible) or is it just an ongoing evaluation of at least on a blinded basis on how the trial is going?

Helen Torley -- Chief Executive Officer

Yeah. Thank you, Charles. It is the latter our statisticians track the number of overall survival events as you mentioned, it's in a blinded manner, but they're able to track that and project it forward to say, based on the number of overall survival event they see today, when will we hit the target number of 330 overall survival events and that continues to track to a window between August and November and they will keep updating that on a periodic basis to see if there has been anything to narrow or change that projection.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Okay, I appreciate that. And then with regard to the statistical analysis plan and your -- what you presented to the agency and got response back from them recently, I guess I'm wondering if you were surprised that they really didn't have any feedback, it kind of makes sense that you know -- you have reduced risk with the study because you went to OS versus PFS and/or OS. But can you provide any additional color on that -- on that discussion you had with agency?

Helen Torley -- Chief Executive Officer

Yes. Based on the conversations that we had with the agency on their desire to change the primary endpoint, we actually didn't expect them to have any material comment on the protocol or statistical analysis plan because we had discussed very much in principle what we wanted to do. So I'm not surprised there weren't any changes Charles as you know, we'd worked on this with great people like Dr. Thomas Fleming to make sure that everything was done to a very high standard. And so, no we -- we are delighted, but did not expect to see any material changes to the protocol or SEP but we needed to go through the process before we could tell you that everything has been reviewed fully by the FDA.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Yeah, appreciate that ray there (ph). And then just moving over to the ENHANZE side of the business, I'm wondering, and I'm going to ask Laurie a question because I think I missed something that was said earlier. But first of all, regarding the argenx collaboration that you recently signed, first of all, congrats on that, and I guess I'm wondering that's a biotech company and I've for a few years been thinking there is a bevy of opportunities in biotech plan where you could apply the technology. But I'm wondering if the diligence was fundamentally different, more broad or more in-depth or less in-depth relative to some of the diligence process you've run recently including with BMS and Roche, et cetera?

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Hi, Charles, it's Laurie We too are thrilled with the argenx deal and we're thrilled with the ability to demonstrate that in fact the ENHANZE platform has benefits across large pharma players as well as mid-sized biotechs. The process, the negotiation, the diligence all very similar. As you can imagine, it was very collaborative all along the way, but the diligence was as robust as their big pharma brother and so we were very pleased with the process.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Okay that makes sense to maybe, but it would seem to me, their dollars are almost even more precious because they are not adding to them with topline. So last question, Laurie. I guess I'm wondering, I think you said -- what did you say -- $225 million to how much -- $300 million in royalties in the next three years or not royalties, excuse me, milestone payment in or by 2021, end of 2021. I'm wondering if that's driven by any one product or is that spread across several product candidates or programs?

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

It's -- yes, thanks Charles. It's spread across and I think it's safe to say, it's also more back loaded. Obviously, we gave guidance for 2019. But as our as our partners' progress their products into Phase 3 and into launch, those will carry (inaudible) milestones and so I'd say it's a little bit back-loaded and it's weighted more heavily by the products that are moving further along and into commercial.

Charles Duncan -- Cantor Fitzgerald -- Analyst

That makes sense. Okay. Thanks for taking my questions. Congrats on a good year.

Helen Torley -- Chief Executive Officer

Thanks so much Charles.

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Thanks.

Operator

Thank you. Our next question will come from Jessica Fye with JPMorgan.

Daniel G. Wolle -- JP Morgan Chase & Co -- Analyst

Hi, this is Daniel for Jessica. Thanks for taking our question. We appreciate the guidance on the royalty revenue, and the pressure of the older royalty essentially offsetting growth from the newer royalties in 2019. Can you help us understand what those headwinds and tailwinds are on an absolute basis?

Helen Torley -- Chief Executive Officer

I think I understood your question to be, what are the headwinds. And you know -- you are right, we are expecting growth and very excited about the growth from the launch of Herceptin SC in the US, plus continued growth with HYCELA in the US, but that is being offset by the headwinds that Roche is experiencing with biosimilars and these are IV biosimilars launched in Europe. Roche has said that they have seen durable shares of the subcutaneous formulation of those programs, but they are seeing some price pressure. And so we are expecting to see those offset and lead to a flat year-over-year growth.

Daniel G. Wolle -- JP Morgan Chase & Co -- Analyst

Got it. Thanks. And then do you expect this anticipated headwinds to the royalty revenue to be less or greater than the growth of the new royalty streams you could deliver?

Helen Torley -- Chief Executive Officer

That's a great question. We actually expect in our forecast and if you see the chart where we've got the projection to $1 billion, we expect to see fairly flat royalties from our already commercial products with an inflection coming with our new enhanced products that are moving toward commercialization. So DARZALEX is a great example, they intend to file, they stated by the second half of 2019. We would expect that would translate into a launch in 2020.

You'll start to see that inflection and growth with the launch of DARZALEX. And then quickly on the heels the Perjeta Herceptin fixed dose combinations, Roche has said that they expect to file in 2020. And so again, that will start to provide those new products entering commercial stage and provide that momentum in that inflection that we see in that projection to $1 billion.

Daniel G. Wolle -- JP Morgan Chase & Co -- Analyst

Got it. And if I could add one more. In terms of the recent collaboration with argenx maybe I missed it, but should we expect ENHANZE Phase 1 studies with ARGX-113 to initiate in 2019? And is there potential to introduce ENHANZE in the late-stage studies that argenx is initiating?

Helen Torley -- Chief Executive Officer

Yeah, we're delighted to have recently signed a deal with argenx. We are in study kick off, our discussions with them at this point in time, and they haven't provided any detail as to what exactly their development plans are. And so we're going to have to wait till they have finalized and communicating their plans before we can provide additional color on that. But I can say we are already enjoying a very good discussion in collaboration with them.

Daniel G. Wolle -- JP Morgan Chase & Co -- Analyst

Great, thank you very much.

Operator

Thank you. Our next question will come from Arlinda Lee with Canaccord.

Arlinda Lee -- Canaccord -- Analyst

Hi guys, thanks for taking my questions. I had a question on Alexion 1210 and when do you think we might see some data sets from that? And then also, can you give us an update on the the royalty back debt and how much remains there? Thanks.

Helen Torley -- Chief Executive Officer

I'll take the question on the Alexion 1210 data. Ludwig Hantson, the CEO stated at JPMorgan, and I believe he reported on his recent earnings call that the data will be presented in the first quarter. He did not provide any additional information as to where he plans to present or discuss that Phase 1 data. But we do know that it is expected in the first quarter. And I'll ask Laurie to answer the question on royalty back debt.

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Yeah. So our total debt balance as of the end of the year is about $126 million. We'll continue to pay on the royalty back debt and the SVB/Oxford loan. But the good news is by Q1 2020 that royalty back debt will be paid off.

Arlinda Lee -- Canaccord -- Analyst

And then maybe one more follow-up on the the 301 study. Are you guys still -- are you providing any update on -- you initially said that you were going to hit the 330 OS events in August to November. Is that still on track?

Helen Torley -- Chief Executive Officer

It is. That remains a projection at this time Arlinda and we will continue to evaluate that on a periodic basis but that we'll let you know, obviously there is a change to that, but August to November remains the window.

Arlinda Lee -- Canaccord -- Analyst

Okay, great, thanks.

Operator

Thank you. Our next question will come from Joel Beatty with Citi.

Shawn Egan -- Citigroup Inc -- Analyst

This is Shawn calling in for Joel. Thanks for taking my questions. Congrats on the new partnership and on the year. Can you talk maybe on the argenx deal, can you talk a little bit about the type of profile argenx is helping to generate with ENHANZE? Will it provide kind of a quicker administration or maybe a less frequent dosing than their current subcu forms, that's in the clinic for 113?

Helen Torley -- Chief Executive Officer

I believe that argenx has not really made any plans public in that. So, as you know by the conditions of our agreements we can't talk about that, but Laurie, do you have anything to add to that, maybe in general terms about what ENHANZE might do?

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Well, I think it's going to be likely fairly typical program, and so you know they are looking to take an IV administration and make it a subcutaneous version of that drug. So, we'll look forward to it, it's very early and and they're working on, I think they're very early development plans now. So more to come on that.

Shawn Egan -- Citigroup Inc -- Analyst

Perfect. And then I have two quick ones on PEGPH20. What form can we expect the HA status from that investigator sponsored frontline pancreatic study to come (ph) and also has -- have you evaluated the blood-based assay as well for them.

Helen Torley -- Chief Executive Officer

Yeah, I missed the second part of the question, can you just repeat the second part?

Analyst -- -- Analyst

Sure. Yeah, just your blood-based HA, are you evaluating that as well in that study?

Helen Torley -- Chief Executive Officer

Yeah, thank you for the question. This is (inaudible) the tissue samples have been collected and are being analyzed by Ventana working with Dr. Yu as we speak. So Dr, Yu has not informed us as to what forum he plan to provide an update on that. But we can say that the data collection and analysis is now under way. And on the blood-based liquid biomarker, yes we will take a look at that and once we have completed the primary analysis based on the HA. So there may be a future scientific presentation on that.

Analyst -- -- Analyst

Great, thank you. And then just my last question is in the previous slide that you mentioned after you change the end point that PFS could potentially still support marketing application. Can you maybe expand a little bit on that point and maybe what threshold or details were discussed with the regulators?

Helen Torley -- Chief Executive Officer

Yes. In November, where we made the change for the study to have a single primary endpoint of overall survival, that took away the possibility that PFS could ever support a marketing application. So now the single primary endpoint is overall survival. That will be the approval endpoint. The PFS will still be analyzed, it will be an important secondary endpoint, but it cannot form the basis of approval, based on the recent changes we made to our statistical plan.

Analyst -- -- Analyst

Okay, perfect. Thanks guys. Appreciate it.

Unidentified Speaker --

Thank you.

Operator

Thank you. Our next question comes from Gena Wang with Barclays.

Xiaobin Gao -- Barclays Bank PLC -- Analyst

Hi, this is Xiaobin calling for Gena. Thank you so much for taking our questions. Maybe a couple on back page 20. The first question is like have you spent or plan to spend like some money for commercial perhaps in 2019 even before the readout and then the second question is about your Tecentriq combo trialing (inaudible) and another one. So you mentioned that we are going to see some data. So can you sort of frame what should we expect to and what kind of data would encourage you to take forward.

Unidentified Speaker --

Yes certainly. I'll tackle the Tecentriq one and I'll Laurie Just to give an overview of our commercial preparations. For the Tecentriq, we first look at the gastric study that Roche has recently closed enrollment on. They have just provided information that they will analyze the data and provide it in a scientific forum. So I don't have any specific information on that. For the Halozyme led study, which is in cholangiocarcinoma and gallbladder, we just recently finished expansion enrollment, which was 50 patients. What we will do now is follow those patients until we see what the response rate is in that. And so where we present it is really going to be very dependent on when we feel the data is complete enough for it to be a meaningful result.

So we're really a little bit dependent on the ongoing follow up in those patients, but we will look for a forum and once we've got a clearer line of sight as to when we'll have sufficient patients to have a robust result. And then for Laurie, could you like to address the commercial spend in 2019 and what types of activities we're focused on.

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Yeah, absolutely, we are starting to spend in a very modest way out ahead of the data, as you might expect. And where we're placing that spend, it's really around market research, pricing and reimbursement research and some medical affairs. So all of the activities that one would do out ahead of the data and to make sure that we're ready for positive data when it -- when and if it should come.

Operator

Okay, thank you. Our next question will come from Do Kim with BMO Capital Markets.

Keith Tapper -- BMO Capital Markets -- Analyst

Hi, this is Keith Tapper on for Do kim. Just had one quick question about the change from co-primary to primary endpoint. What was your sense of what was gained by foregoing the interim analysis?

Helen Torley -- Chief Executive Officer

Thank you for that question. When we changed from the -- having two primary endpoints which PFS and OS 2 -- just OS, one of the key reasons for that was the recognition that if we move to a single analysis on overall survival and we would have a more mature data set on which to do the analysis. Having completed enrollment with the 500 patients at the end of December and the projection of when we think we'll get to the target number of OS events we predict that all patients will be followed up for at least 8.5 months, and almost every patient will be followed up for at least 13 months.

What's important about that is based on our Phase 2 data, the longer we've seen patients followed up the more chance and probability is they're responding to PEGPH20. And so the key thing is that this more mature data set at gives us, we believe the very best chance to show the impact and efficacy of PEGPH20.

Keith Tapper -- BMO Capital Markets -- Analyst

Okay that makes sense. And have you reached, you said that you're still looking at PFS. Have you reached the previously targeted number of events and does it align with your expectation?

Helen Torley -- Chief Executive Officer

Yes, as you say this is now a secondary endpoint, we'd predicted we would achieve the target number of PFS events between December and February and we did indeed hit the target number of PFS events between December and February obviously when you're longer analyzing that. So it wasn't really relevant to us now. But yes, things did occur according to our projections.

Keith Tapper -- BMO Capital Markets -- Analyst

Okay, perfect, thank you.

Operator

Thank you. And there are no further questions in the queue at this time.

Helen Torley -- Chief Executive Officer

That is terrific. Well I'd like to thank everybody for your attention and for your questions. We really are very pleased with the progress that we continue to show at with our two pillar strategy. Thank you very much and have a good evening.

Operator

Thank you, ladies and gentlemen, this concludes today's teleconference and you may now disconnect. Please, enjoy the rest of your evening.

Duration: 56 minutes

Call participants:

Al Kildani -- Vice President of Investor Relations and Corporate Communications

Helen Torley -- Chief Executive Officer

Laurie D. Stelzer -- Senior Vice President & Chief Financial Officer

Jim Birchenough -- Wells Fargo Securities -- Analyst

Roy Buchanan -- JMP Securities -- Analyst

Charles Duncan -- Cantor Fitzgerald -- Analyst

Daniel G. Wolle -- JP Morgan Chase & Co -- Analyst

Arlinda Lee -- Canaccord -- Analyst

Shawn Egan -- Citigroup Inc -- Analyst

Analyst -- -- Analyst

Unidentified Speaker --

Xiaobin Gao -- Barclays Bank PLC -- Analyst

Keith Tapper -- BMO Capital Markets -- Analyst

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