Washington Editor

Halozyme Therapeutics Inc., which is focused on developing and commercializing hyaluronidases targeting the extracellular matrix for endocrinology, oncology and dermatology, raised $40 million by selling 6.15 million shares of its common stock for $6.50 per share.

Wall Street, however, was disappointed with the pricing, which was more than a 13 percent discount from Monday's market closing of $7.53. Shares of the San Diego-based firm (NASDAQ:HALO) dropped 14 percent Tuesday, or $1.05, to close at $6.48.

CEO Jonathan Lim said the proceeds, which the firm said was $38.2 million after underwriting discounts and commissions and expenses, would be used to fund the company's development strategy for its insulin, oncology and dermatology programs and other general corporate purposes.

"There's a lot of exciting programs that we believe will create value for shareholders and for patients," Lim told BioWorld Today.

He noted that the company's recombinant human hyaluronidase enzyme PH20 is in Phase II development as a diabetes therapy. The product is intended to be formulated with regular or fast-acting insulins.

Halozyme recently reported Phase II results that demonstrated faster insulin absorption and increased peak insulin concentrations in patients with Type I diabetes after co-administration of PH20 with Eli Lilly and Co.'s Humalog (insulin lispro), a fast-acting analogue insulin.

The study results, which were presented earlier this month at the American Diabetes Association, also showed a significant reduction in postprandial blood glucose levels following administration of a standardized test meal, with improvements in both peak glycemic response and total hyperglycemic exposure compared with Humalog alone. Mean glucose levels after the meal challenge remained within current treatment targets throughout the eight-hour post-meal observation period.

One of the goals of insulin therapy is to replicate a normal physiologic insulin response, Lim explained. After a meal, a diabetic patient's normal physiologically insulin response is a spike of insulin. The role of fast-acting insulin is to try to replicate that insulin spike, or that physiologic insulin response, after the meal.

But even the fast-acting analogues that are on the market today are too slow to accomplish that goal, Lim noted.

"So our target product profile is to demonstrate better glycemic control, which also may lead to potentially better A1c control, which is an indication of how well you are managing diabetes over the long term," Lim said.

PH20's pharmacokinetic data showed the enzyme has a fast-in and fast-out profile, he said.

"So the insulin comes in very quickly and mimics a physiologic response to the meal, but also leaves the bloodstream very quickly, which poses less risk for hypoglycemia after the meal," Lim said.

Fast-acting insulins, such as Humalog, Novo Nordisk's Novolog (aspart) and Sanofi-Aventis Group's Apidra (glulisine), are part of a $3 billion global market, which has doubled from $1.4 billion in just the past five years, he noted. Most of those sales - $2.1 billion - are in the U.S. alone, Lim added.

Halozyme also is testing PH20 with regular insulins, such as Novo Nordisk's Humulin (insulin-human recombinant), he said.

Phase I data reported by the company last year showed that PH20 with Humulin or Humalog yielded pharmacokinetics and glucodynamics that better mimicked physiologic prandial, or mealtime, insulin release and activity than Humulin or Humalog alone.

"What Halozyme is endeavoring to do is to test the combination of PH20 with both fast-acting insulin analogues and regular insulin to see which product has the most attractive profile," Lim said. The Phase II study results have "confirmed and extended the findings that we saw in the Phase I study," he said.

The company is planning to present a full dataset of its Phase II study of PH20 with regular insulin in the fall, Lim said.

"Based on the data that we've seen so far from Phase I and Phase II, the insulin-PH20 could have a best-in-class product profile vs. the standard-of-care analogues," he said

Halozyme signed a deal potentially worth $612 million with Roche AG in 2006 in exchange for licensing rights to PH20, which Roche is using to develop therapies against 13 undisclosed targets, Lim noted. (See BioWorld Today, Dec. 7, 2006.)

The company also has ongoing deals with Baxter International Inc. for the use of its PH20 technology. (See BioWorld Today, Sept. 11, 2007, and Feb. 15, 2007.)

In addition to PH20, Halozyme also is developing a pegylated hyaluronidase enzyme, PEGPH20, as a cancer treatment. The firm in March initiated patient dosing in a multicenter, open-label, dose-escalation Phase I trial evaluating PEGPH20 as a single agent in patients with refractory solid tumors.

The trial is enrolling advanced cancer patients who will receive treatment cycles of intravenous PEGPH20 twice weekly for three weeks followed by one week without dosing. Patients may continue subsequent cycles at their assigned dose as long as there is no tumor progression and no unacceptable toxicity. Groups of four to eight patients will be assigned to each dosage cohort. The primary endpoints are to evaluate safety and tolerability of PEGPH20 and to determine the recommended Phase II dosage. Secondary objectives are determining pharmacokinetics, obtaining dose-limiting toxicities and observing patients for any evidence of antitumor activity. Translational radiologic, biopsy and pharmacodynamic measurements also will be examined.

Halozyme currently markets Hylenex, a human recombinant formulation of rHuPH20 approved in the U.S. in December 2005, which facilitates the absorption and dispersion of other injectable drugs or fluids.

Halozyme also markets Cumulase, a formulation of rHuPH20 approved in the U.S. in April 2005, which replaces the bovine enzyme currently used for the preparation of oocytes prior to in vitro fertilization during the process of intracytoplasmic sperm injection, in which the enzyme is an essential component.

In other financing news:

• Cell Genesys Inc., of South San Francisco, said more than 98 percent or $67 million aggregate principal amount of its 3.125 percent convertible bonds were tendered in its previously announced exchange offer. The company offered to exchange all of the $68.3 million aggregate principal amount of its outstanding 3.125 percent convertible senior notes due in 2011 at a purchase price for each $1,000 principal amount of $500, plus accrued interest, $140 worth of common stock equal to about 221 shares of common stock and $310 of new 3.125 percent convertible senior notes due in May 2013. Upon settlement of the exchange offer, about $1 million of the original 3.125 percent convertible senior notes due in 2011 remain outstanding, and $20.8 million of new 3.125 percent percent convertible senior notes 2013 notes are expected to be issued. Shares of the firm (NASDAQ:CEGE) plunged 28.3 percent Tuesday, or 13 cents, to close at 33 cents.

• ImmunoGen Inc., of Waltham, Mass., said it completed its previously reported public offering of 5.75 million shares of common stock. The company received net proceeds, after underwriting discounts and commissions and estimated expenses, of about $38 million. Oppenheimer & Co. Inc. acted as the sole book-runner for the offering and Morgan Joseph & Co. Inc. acted as co-manager. (See BioWorld Today, June 19, 2009.)

• Zymeworks Inc., of Vancouver, British Columbia, said it closed a financing totaling $3.5 million, which included an institutional investment by CTI Life Sciences Fund and the completion of its existing private financing round. Zymeworks said it plans to use the proceeds to fund ongoing validation and research programs leading to the advancement of its protein therapeutics pipeline. In conjunction with the financing, Shermaine Tilley, of CTI, and Kenneth Galbraith, of Ventures West Management Inc., are joining the board, while Andrew Wright and Amos Michelson are stepping down as directors but are retaining board observer status.