What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-02 compared with 2020-08-10 · 100 added, 72 removed, 675 unchanged (20% of the section changed)

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Future potential revenues from the sales and/or royalties of our approved products, product candidates, and ENHANZE collaborations will depend on the ability of Halozyme and our collaborators to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates.

Our second quarter of 2020 and recent key events include:

In June 2020, we announced that Roche received FDA approval of Phesgo™ (pertuzumab, trastuzumab, and hyaluronidase-zzxf) (fixed-dose combination of Perjeta ® and Herceptin ® for subcutaneous injection) utilizing ENHANZE technology for the treatment of patients with HER2-positive breast cancer.

In June 2020, we announced that Janssen received European marketing authorization and launched the commercial sale of the subcutaneous formulation of DARZALEX ® (daratumumab) utilizing ENHANZE in the European Union, triggering a $10 million milestone payment.

The approval applies to all current daratumumab indications in frontline and relapsed/refractory settings.

In June 2020, we announced findings from Janssen’s phase 3 ANDROMEDA (AMY3001) study evaluating subcutaneous daratumumab utilizing ENHANZE in light-chain Amyloidosis were presented at the European Hematology Association 25th Annual Congress.

Janssen reported that the study met the primary endpoint of percentage of patients with hematologic complete response.

In June 2020, BMS selected 3 targets on an exclusive basis and exercised their option to convert a co-exclusive license to an exclusive license, triggering a $5 million payment.

BMS has selected eight targets on an exclusive basis to-date.

In May 2020, we announced that Janssen received US FDA approval of DARZALEX FASPRO TM in four of six regimens approved for the intravenous form in multiple myeloma patients, including newly diagnosed, transplant-ineligible patients as well as relapsed or refractory patients and launched the commercial sale, triggering a $15 million milestone payment.

In April 2020, we announced the submission of a New Drug Application (NDA) to Japan's Ministry of Health, Labour and Welfare (MHLW) by Janssen seeking approval of a new SC formulation of daratumumab, an intravenous (IV) treatment approved for patients with multiple myeloma.

Our third quarter of 2020 and recent key events include:

In October 2020, we announced that argenx expanded the existing global collaboration and license agreement that was signed in February 2019.

Under the newly announced expansion, argenx gained the ability to exclusively access our ENHANZE drug delivery technology for three additional targets upon nomination, for a total of up to six targets under the existing and newly expanded collaboration.

To date, argenx has nominated two targets including the human neonatal Fc receptor FcRn and complement component C2.

In September 2020, we announced that Roche presented a poster with data from Part 1 of its Phase 1b study (IMscin001) evaluating atezolizumab (Tecentriq ® ) for subcutaneous administration utilizing ENHANZE technology in patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) at the European Society for Medical Oncology (ESMO) Virtual Congress 2020.

The poster concluded that atezolizumab utilizing ENHANZE provided similar exposure as atezolizumab IV and that results support further development of subcutaneous atezolizumab in IMscin001 Part 2, a confirmatory Phase 3 study.

In September 2020,Takeda announced that the European Medicines Agency (EMA) approved a label update for HYQVIA broadening its use and making it the first and only facilitated subcutaneous immunoglobulin replacement therapy in adults, adolescents and children with an expanded range of secondary immunodeficiencies (SID).

In September 2020, we announced that Janssen submitted a supplemental BLA for FDA approval of DARZALEX FASPRO™ (daratumumab and hyaluronidase-fihj) to be approved for a new indication, light chain (AL) amyloidosis.

AL amyloidosis is a rare and potentially fatal disease that develops when plasma cells in the bone marrow generate abnormal light chains, which form amyloid deposits in vital organs and lead to organ deterioration.

There are currently no approved therapies for the disease.

In August 2020, Janssen announced that Health Canada approved DARZALEX ® SC (daratumumab) in four regimens across five indications in patients with multiple myeloma, most notably newly diagnosed, transplant-ineligible patients as well as relapsed or refractory patients.

In the third quarter of 2020 we repurchased 2.1 million shares of common stock in open market purchases for $58.9 million at an average price per share of $27.57.

For the nine months ended September 30, 2020 we repurchased 5.4 million shares of common stock for $112.4 million at an average price per share of $20.76.

Since the inception of our capital return program in November 2019 to repurchase up to $550.0 million of outstanding common stock over a three-year period, we have repurchased a total of 16.5 million shares for $312.4 million at an average price per share of $18.92 as of September 30, 2020.

Product and Product Candidates

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In December 2018, Roche initiated a Phase 1b/2 study in patients with non-small cell lung cancer for Tecentriq (atezolizumab) using ENHANZE technology.

In September 2020, Roche presented a poster with data from Part 1 of its Phase 1b study (IMscin001) evaluating atezolizumab (Tecentriq) for subcutaneous administration utilizing ENHANZE technology in patients with locally advanced or metastatic non-small cell lung cancer at the ESMO Virtual Congress 2020.

In August 2019, Roche initiated a Phase 1 study evaluating OCREVUS (ocrelizumab) with ENHANZE technology in subjects with multiple sclerosis.

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In May 2016, Baxalta announced that HYQVIA received a marketing authorization from the European Commission for a pediatric indication, which was launched in Europe to treat primary and certain secondary immunodeficiencies.

In September 2020, Takeda announced that the EMA approved a label update for HYQVIA broadening its use and making it the first and only facilitated subcutaneous immunoglobulin replacement therapy in adults, adolescents and children with an expanded range of secondary immunodeficiencies (SID).

Pfizer Collaboration

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In April 2020, we announced the submission of a New Drug Application (NDA) to Japan's Ministry of Health, Labour and Welfare (MHLW) by Janssen seeking approval of daratumumab SC.

In September 2020, Janssen submitted a supplemental BLA to the FDA seeking approval of DARZALEX FASPRO for the treatment of patients with AL amyloidosis, a rare and potentially fatal disease for which there are no currently approved therapies.

In August 2020, Janssen announced that Health Canada approved DARZALEX SC (daratumumab) in four regimens across five indications in patients with multiple myeloma, most notably newly diagnosed, transplant-ineligible patients as well as relapsed or refractory patients.

In December 2019, Janssen elected targets EGFR and cMET on an exclusive basis as part of the bispecific antibody (amivantamab), which is being studied in solid tumors.

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In April 2020 Alexion announced it would no longer proceed with a study of ALXN1810 in renal disease.

Following a portfolio prioritization, Alexion has made the decision to not proceed with further development of ALXN1810, subcutaneous ULTOMIRIS co-administered with ENHANZE drug delivery technology.

Alexion is evaluating additional development options for ENHANZE.

argenx Collaboration

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The Phase 2 efgartigimod clinical trial has been initiated and is enrolling chronic inflammatory demyelinating polyneuropathy (CIDP) patients.

In October 2020, we and argenx entered into agreement to expand the collaboration relationship.

Under the newly announced expansion, argenx gained the ability to exclusively access our ENHANZE drug delivery technology for three additional targets upon nomination for a total of up to six targets under the existing and newly expanded collaboration.

In June 2019, we announced a Cooperative Research and Development Agreement (CRADA) with the National Institute of Allergy and Infectious Diseases’ Vaccine Research Center (VRC), part of National Institute of Health (NIH), enabling the VRC’s use of ENHANZE technology to develop subcutaneous formulations of broadly neutralizing antibodies (bnAbs) against HIV for HIV treatment.

The initiation of this study has been impacted by COVID-19 and is delayed.

In September 2020, we entered into a collaboration with the Centre for the AIDS Programme of Research in South Africa (CAPRISA), a non-profit company, to evaluate safety, tolerability and pharmacokinetics of a human monoclonal antibody (CAP256V2LS) in HIV-negative and HIV-positive women in South Africa.

In October 2020, we were notified that the first patient was dosed with PH20 in a Phase I Dose-Escalation Study for CAP256V2LS.

For a further discussion of the collaboration agreements, refer to Note 4, Revenue .

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We anticipate that the global health crisis caused by COVID-19 will continue to have an impact across the globe.

As an organization we continue to effectively operate with the majority of our employees working from home, which we expect will continue for the foreseeable future.

As an organization we continue to effectively operate with the majority of our employees working from home and not traveling, which we expect will continue for the foreseeable future.

Importantly, our suppliers continue to operate without interruption related to COVID-19.

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Results of Operations

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Royalties – Royalty revenue was $15.8 million for the three months ended June 30, 2020 compared to $18.1 million for the three months ended June 30, 2019 .

The decrease was mainly driven by lower sales of Herceptin SC by Roche.

We expect royalty revenue to grow as a result of our recent ENHANZE partner product launches, offsetting the ongoing impact from biosimilars in Europe and COVID-19 related to our mature ENHANZE partner products.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Royalties – Royalty revenue was $23.9 million for the three months ended September 30, 2020 compared to $16.6 million for the three months ended September 30, 2019 .

The increase was mainly driven by sales of DARZALEX FASPRO by Janssen in the U.S.

due to the product launch in the second quarter of 2020, partially offset by slightly lower sales of MabThera SC and Herceptin SC by Roche.

In general, we expect royalty revenue to grow as a result of our recent ENHANZE partner product launches, offsetting the ongoing impact from biosimilars in Europe and COVID-19 related to our mature ENHANZE partner products.

Product Sales, Net – Product sales, net were as follows (in thousands):

Three Months Ended

September 30,

Sales of bulk rHuPH20:

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Total product sales, net

Product sales, net increased $0.6 million in the three months ended June 30, 2020 compared to the same period in 2019 , due to an increase in the sale of bulk rHuPH20 to Roche and Baxalta, partially offset by an a decrease in the sale of rHuPH20 to other partners and a decrease in sales of Hylenex.

Product sales, net was lower by $20.2 million in the three months ended September 30, 2020 compared to the same period in 2019 , due to lower sales of rHUPH20 as a result of a one-off large partner order in 2019, partially offset by higher sales of Hylenex.

We expect that product sales of bulk rHuPH20 and ENHANZE drug product will fluctuate in future periods based on the needs of our collaborators.

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Hylenex is used in cataract surgery and other ophthalmologic surgeries, and therefore the advisory resulted in a decrease in sales of Hylenex in the second quarter of 2020.

Most states resumed elective surgeries in April and May of 2020, but the restrictions in place during the COVID-19 pandemic may continue to have a negative impact on the sale of Hylenex in additional quarters.

Most states resumed elective surgeries in April and May of 2020 which supported an increase in sales in the third quarter of 2020.

We currently do not expect an interruption in our ability to manufacture our products as a results of COVID-19.

Our contract manufacturers continue to operate as an essential business during the pandemic and have communicated that they have not identified any significant risk, delay, or concern that may have a substantial effect on delivery of any product.

Our contract manufacturers continue to operate as essential businesses during the pandemic and have communicated that they have not identified any significant risk, delay, or concern that may have a substantial effect on delivery of any product.

We will continue to monitor the operations of our contract manufacturers and their ability to continue to provide us with products.

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Three Months Ended

September 30,

Upfront license fees, license fees for the election of additional targets,

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Total revenues under collaborative agreements

Revenue from license fees increased in the three months ended June 30, 2020 , compared to the same period in 2019 mainly due to $32.3 million recognized in connection with the Janssen and BMS collaborations in the second quarter of 2020.

Revenue from license fees increased in the three months ended September 30, 2020 , compared to the same period in 2019 mainly due to $32.0 million recognized for development milestones in connection with the Roche and argenx collaborations in the third quarter of 2020,that were concluded to be probable of being achieved.

Revenue from upfront licenses fees, license fees for the election of additional targets, license maintenance fees and other license fees and event-based payments vary from period to period based on our ENHANZE collaboration activity.

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To date, based on current partner communications, we have not identified any COVID-19 related delays that will materially impact our ENHANZE milestone revenue.

continue to monitor the ENHANZE development activities of our partners and the impact of their plans on our milestone revenue, as there may be potential for COVID-19 related delays.

Cost of Product Sales – Cost of product sales were $5.7 million for the three months ended June 30, 2020 compared to $1.9 million for the three months ended June 30, 2019 .

The increase of $3.8 million in cost of product sales was mainly due to an increase in sales of bulk rHuPH20 to Roche and Baxalta and an increase in period costs to support our product platform, partially offset by a decrease in the sales of Hylenex.

We will continue to monitor the ENHANZE development activities of our partners and the impact of their plans on our milestone revenue, as there may be potential for COVID-19 related delays.

Cost of Product Sales – Cost of product sales were $5.6 million for the three months ended September 30, 2020 compared to $22.3 million for the three months ended September 30, 2019 .

The decrease of $16.7 million in cost of product sales was mainly due to a decrease in sales of bulk rHuPH20 to Janssen, partially offset by an increase in the sales of Hylenex.

Research and Development – Research and development expenses consist of external costs, salaries and benefits and allocation of facilities and other overhead expenses related to research manufacturing, clinical trials, preclinical and regulatory activities.

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Three Months Ended

September 30,

ENHANZE collaborations and rHuPH20 platform

Total research and development expenses

Research and development expenses relating to our PEGPH20 programs for the three months ended June 30, 2020 decreased by 92% , compared to the same period in 2019 , primarily due to decreased clinical trial activities.

Research and development expenses relating to our PEGPH20 programs for the three months ended September 30, 2020 decreased by 100% , compared to the same period in 2019 , primarily due to the discontinuation of clinical trial activities.

On November 4, 2019, we announced that the HALO-301 clinical study failed to reach the primary endpoint of overall survival.

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We implemented an organizational restructuring to focus our operations solely on ENHANZE, which was completed in the second quarter of 2020 and resulted in a reduction in research and development expenses.

Research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform for the three months ended June 30, 2020 increased by 33% , compared to the same period in 2019 , primarily due to increased costs to support additional ENHANZE targets.

We expect research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform to increase in the near term as the rHuPH20 platform is burdened with a higher allocation of overhead costs.

Research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform for the three months ended September 30, 2020 increased by 72% , compared to the same period in 2019 , primarily due to increased costs to support additional ENHANZE targets and a higher allocation of overhead costs.

We expect research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform to increase based on the needs of our partners and their development programs..

The rHuPH20 platform includes research, development and manufacturing expenses related to our proprietary rHuPH20 enzyme.

These expenses were not designated to a specific program at the time the expenses were incurred.

Selling, General and Administrative – Selling, general and administrative (SG&A) expenses were $11.0 million for the three months ended June 30, 2020 compared to $17.3 million for the three months ended June 30, 2019 .

The decrease of $6.3 million , or 37% , was primarily due to a decrease in compensation expense and discontinuation of commercial expenses related to market research and educational activities as we prepared for a potential commercial launch of PEGPH20.

Selling, General and Administrative – Selling, general and administrative (SG&A) expenses were $11.7 million for the three months ended September 30, 2020 compared to $18.0 million for the three months ended September 30, 2019 .

The decrease of $6.3 million , or 35% , was primarily due to a decrease in compensation expense, discontinuation of commercial expenses related to market research and educational activities as we prepared for a potential commercial launch of PEGPH20.

The discontinuation of our development activities for PEGPH20 and closure of our oncology operations resulted in a reduction in commercialization activities and compensation expense.

Interest Expense – Interest expense was $5.0 million for the three months ended June 30, 2020 compared to $2.6 million for the three months ended June 30, 2019 .

The increase of $2.4 million was primarily due to interest expense related to the Convertible Notes, offset by a decrease in interest expense for the Royalty-backed Loan and the Oxford and SVB Loan.

Income Tax Expense – Income tax expense was $58.0 thousand for the three months ended June 30, 2020 , compared to $17.0 thousand for the three months ended June 30, 2019 due to an increase in estimated state taxes.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Royalties – Royalty revenue was $32.7 million for the six months ended June 30, 2020 compared to $36.1 million for the six months ended June 30, 2019 .

The decrease was mainly driven by lower sales of Herceptin SC by Roche.

Interest Expense – Interest expense was $5.0 million for the three months ended September 30, 2020 compared to $2.1 million for the three months ended September 30, 2019 .

The increase of $2.9 million was primarily due to interest expense related to the Convertible Notes, offset by a discontinuation in interest expense for the Royalty-backed Loan and the Oxford and SVB Loan following the repayment of those obligations.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Royalties – Royalty revenue was $56.6 million for the nine months ended September 30, 2020 compared to $52.7 million for the nine months ended September 30, 2019 .

The increase was mainly driven by sales of DARZALEX FASPRO in the U.S.

by Janssen due to the product launch in the second quarter of 2020, partially offset by slightly lower sales of Herceptin SC and MabThera SC by Roche.

Product Sales, Net – Product sales, net were as follows (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Sales of bulk rHuPH20:

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Total product sales, net

Product sales, net increased $0.3 million in the six months ended June 30, 2020 compared to the same period in 2019 , due to an increase in the sale of rHuPH20 to Baxalta, partially offset by a decrease in the sale of bulk rHuPH20 to Roche and other partners and a decrease in sales of Hylenex.

Product sales, net was lower by $19.8 million in the nine months ended September 30, 2020 compared to the same period in 2019 , due to lower sales of rHUPH20 as a result of a one-off large partner order in 2019.

Revenues Under Collaborative Agreements – Revenues under collaborative agreements were as follows (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Upfront license fees, license fees for the election of additional targets,

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Total revenues under collaborative agreements

Revenue from license fees decreased $12.2 million in the six months ended June 30, 2020 , compared to the same period in 2019 mainly due to the recognition of $32.3 million related to the Janssen and BMS collaborations in the current year, as compared to $45.0 million recognized in connection with the argenx Collaboration in 2019 ,

Cost of Product Sales – Cost of product sales were $11.5 million for the six months ended June 30, 2020 compared to $6.5 million for the six months ended June 30, 2019 .

The increase of $5.0 million in cost of product sales was mainly due to an increase in sales of bulk rHuPH20 to Baxalta and an increase in period costs to support our product platform, partially offset by a decrease in sales of bulk rHuPH20 to Roche.

Revenue from license fees increased $19.8 million in the nine months ended September 30, 2020 , compared to the same period in 2019 mainly due to the recognition of $64.3 million related to the Janssen, Roche, argenx and BMS collaborations in the current year, as compared to $45.0 million recognized in connection with the argenx Collaboration in 2019 .

Cost of Product Sales – Cost of product sales were $17.1 million for the nine months ended September 30, 2020 compared to $28.9 million for the nine months ended September 30, 2019 .

The decrease of $11.8 million in cost of product sales was mainly due to a decrease in sales of bulk rHuPH20 to Janssen, Roche and other partners, partially offset by an increase in sales of bulk rHuPH20 to Baxalta.

Research and development expenses incurred were as follows (in thousands):

Six Months Ended

Nine Months Ended

September 30,

ENHANZE collaborations and rHuPH20 platform

Total research and development expenses

Research and development expenses relating to our PEGPH20 programs for the six months ended June 30, 2020 decreased by 87% , compared to the same period in 2019 , primarily due to decreased clinical trial activities.

Research and development expenses relating to our PEGPH20 programs for the nine months ended September 30, 2020 decreased by 91% , compared to the same period in 2019 , primarily due to decreased clinical trial activities.

On November 4, 2019, we announced that the HALO-301 clinical study failed to reach the primary endpoint of overall survival.

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Research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform for the six months ended June 30, 2020 increased by 19% , compared to the same period in 2019 , primarily due to increased costs to support additional ENHANZE targets.

The rHuPH20 platform includes research, development and manufacturing expenses related to our proprietary rHuPH20 enzyme.

These expenses were not designated to a specific program at the time the expenses were incurred.

Selling, General and Administrative – Selling, general and administrative (SG&A) expenses were $23.6 million for the six months ended June 30, 2020 compared to $35.3 million for the six months ended June 30, 2019 .

Research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform for the nine months ended September 30, 2020 increased by 36% , compared to the same period in 2019 , primarily due to increased costs to support additional ENHANZE targets and a higher allocation of overhead costs.

The rHuPH20 platform includes research and development expenses related to our proprietary rHuPH20 enzyme that were not designated to a specific program at the time the expenses were incurred.

Selling, General and Administrative – Selling, general and administrative (SG&A) expenses were $35.3 million for the nine months ended September 30, 2020 compared to $53.3 million for the nine months ended September 30, 2019 .

The decrease of $18.0 million , or 34% , was primarily due to a decrease in compensation expense and discontinuation of commercial expenses related to market research and educational activities as we prepared for a potential commercial launch of PEGPH20.

The discontinuation of our development activities for PEGPH20 and closure of our oncology operations resulted in a reduction in commercialization activities and compensation expense.

Interest Expense – Interest expense was $10.4 million for the six months ended June 30, 2020 compared to $5.8 million for the six months ended June 30, 2019 .

The increase of $4.6 million was primarily due to interest expense related to the Convertible Notes, offset by a decrease in interest expense for the Royalty-backed Loan and the Oxford and SVB Loan.

Income Tax Expense – Income tax expense was $69.0 thousand for the six months ended June 30, 2020 , compared to $39.0 thousand for the six months ended June 30, 2019 due to an increase in estimated state taxes.

Interest Expense – Interest expense was $15.3 million for the nine months ended September 30, 2020 compared to $7.9 million for the nine months ended September 30, 2019 .

The increase of $7.4 million was primarily due to interest expense related to the Convertible Notes, offset by a discontinuation in interest expense for the Royalty-backed Loan and the Oxford and SVB Loan following the repayment of those obligations.

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale marketable securities.

As of June 30, 2020 , we had cash, cash equivalents and marketable securities of $385.4 million .We believe that our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months.

As of September 30, 2020 , we had cash, cash equivalents and marketable securities of $346.7 million .We believe that our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months.

We expect to fund our operations going forward with existing cash resources, anticipated revenues from our existing collaborations and cash that we may raise through future transactions.

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Operating Activities

Net cash used in operations was $1.6 million for the six months ended June 30, 2020 compared to $29.2 million for the six months ended June 30, 2019 .

The $27.6 million decrease in utilization of cash in operations was mainly due to a decrease in cash received related to the argenx license fees of $45.0 million in the prior year period, offset by $30.0 million owed from Janssen and BMS for license fees and a decrease in working capital spend for the six months ended June 30, 2020 compared to the corresponding period in the prior year.

Net cash provided by operations was $4.5 million for the nine months ended September 30, 2020 compared to $58.8 million cash used in the nine months ended September 30, 2019 .

The $63.3 million increase in cash provided by operations was mainly due to an increase in cash received related to collaboration partner license and royalty payments of $62.7 million during the current year, offset by $45.0 million owed from argenx for license fees in the prior year, and an increase in working capital spend for the nine months ended September 30, 2020 compared to the corresponding period in the prior year.

Investing Activities

Net cash provided by investing activities was $50.0 million for the six months ended June 30, 2020 compared to $76.3 million for the six months ended June 30, 2019 .

The decrease in net cash provided by investing activities was primarily due to a decrease in proceeds from maturities of marketable securities for the six months ended June 30, 2020 , a decrease in purchases of property and equipment and an increase in cash proceeds from the disposal pf property and equipment.

Net cash provided by investing activities was $19.9 million for the nine months ended September 30, 2020 compared to $117.3 million for the nine months ended September 30, 2019 .

The decrease in net cash provided by investing activities was primarily due to a decrease in proceeds from maturities of marketable securities for the nine months ended September 30, 2020 , offset by a decrease in purchases of property and equipment and an increase in cash proceeds from the disposal of property and equipment.

Financing Activities

Net cash used in financing activities was $35.0 million for the six months ended June 30, 2020 , compared to $38.0 million for the six months ended June 30, 2019 , mainly due to a $53.6 million in repurchase of common stock, offset by a $34.1 million increase in net proceeds from the issuance of common stock under equity incentive plans and a decrease in the amount of repayments of long-term debt of $22.4 million in the six months ended June 30, 2020 .

Net cash used in financing activities was $78.9 million for the nine months ended September 30, 2020 , compared to $57.2 million for the nine months ended September 30, 2019 , mainly due to $110.0 million in repurchase of common stock, offset by a $44.6 million increase in net proceeds from the issuance of common stock under equity incentive plans and a decrease in the amount of repayments of long-term debt of $43.7 million in the nine months ended September 30, 2020 .

Share Repurchases

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We used approximately $26.1 million of the net proceeds from the offering to repay all outstanding amounts under our loan agreement with Oxford Finance and Silicon Valley Bank and intend to use the remainder of the net proceeds for general corporate purposes, including additional share repurchases subsequent to the offering, and working capital.

The Convertible Notes will pay interest semi-annually in arrears on June 1st and December 1st of each year, beginning on June 1, 2020, at an annual rate of 1.25% and will be convertible into cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on the applicable conversion rate at such time.

The Convertible Notes are

general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries.

and shares of common stock, at our election, based on the applicable conversion rate at such time.

The Convertible Notes are general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries.

Holders may convert their Convertible Notes at their option only in the following circumstances:

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Off-Balance Sheet Arrangements

As of June 30, 2020 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of September 30, 2020 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

In addition, we did not engage in trading activities involving non-exchange traded contracts.

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As described in our 2019 Form 10-K, the most critical accounting policies and estimates upon which our condensed consolidated financial statements were prepared were those relating to revenue recognition, debt classification, stock compensation and research and development expenses - clinical trials.

We have reviewed our policies and estimates and determined that these remain the most critical accounting policies and estimates for the six months ended June 30, 2020 .

We have reviewed our policies and estimates and determined that these remain the most critical accounting policies and estimates for the nine months ended September 30, 2020 .

Readers should refer to our 2019 Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” and Note 1 to the accompanying financial statements for descriptions of these policies and estimates.

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Relative to expenses incurred in our operations, we have generated only limited revenues from product sales, royalties, licensing fees, milestone payments, bulk rHuPH20 supply payments and research reimbursements to date.

Through June 30, 2020 , we have incurred aggregate net losses of $584.0 million .

Through September 30, 2020 , we have incurred aggregate net losses of $547.8 million .

Although we expect to achieve sustainable profitability going forward, unexpected declines in revenues and increases in expenses could inhibit our ability to achieve and sustain profitability.

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Additionally, we rely on third parties to manufacture, prepare, fill, finish, package, store and ship our product and partners’ product candidates on our behalf.

If the third parties we identify fail to perform their obligations, the progress of partners’ clinical trials could be delayed or even suspended and the commercialization of approved product candidates could be delayed or prevented.

If the third parties we identify fail to perform their obligations, the progress of partners’ clinical trials could be delayed or even suspended and the commercialization of our product and approved partner products could be delayed or prevented.

If we or any party to a key collaboration agreement fail to perform material obligations under such agreement, or if a key collaboration agreement, is terminated for any reason, our business could significantly suffer.

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If we raise additional capital through a public offering of securities or equity, a substantial number of additional shares may be issued, which may negatively affect our stock price and these additional shares will dilute the ownership interest of our current investors.

We currently have significant debt and failure by us to fulfill our obligations under the applicable loan agreements may cause the repayment obligations to accelerate.

The aggregate amount of our consolidated indebtedness, net of debt discount, as of June 30, 2020 was $390.1 million , which includes $460.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due 2024 (Convertible Notes), net of unamortized debt discount of $69.9 million .

We currently have significant debt and failure by us to fulfill our obligations under the applicable debt agreements may cause the repayment obligations to accelerate.

The aggregate amount of our consolidated indebtedness, net of debt discount, as of September 30, 2020 was $393.6 million , which includes $460.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due 2024 (Convertible Notes), net of unamortized debt discount of $66.4 million .

We also may incur additional indebtedness in the future.

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If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the notes, then our diluted earnings per share would be adversely affected.

For example, the FASB recently published an accounting standard update to limit the use of the treasury stock method for convertible instruments and instead require application of the ‘‘if-converted’’ method.

Under that method, when it is adopted, diluted net income (loss) per share would generally be calculated assuming that all the notes were converted solely into shares of common stock at the beginning of the reporting period.

The application of the ‘‘if-converted’’ method may reduce our reported diluted net income per share.

For example, in August 2020, the FASB issued ASU 2020-06, Debt with Conversion and other Options (Subtopic 470-20).

The new ASU amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions.

In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

Entities will be required to assume share settlement when an instrument can be settled in cash or shares at the entity’s option.

In many cases, this will result in a reduction of reported diluted EPS compared to current guidance in which an entity’s past practice or substantive stated policy may have permitted a rebuttal of the presumption of share settlement.

If collaboration product candidates are approved for marketing but do not gain market acceptance resulting in commercial performance below that which was expected or projected, our business may suffer and we may not be able to fund future operations.

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We participate in a highly dynamic industry which often results in significant volatility in the market price of common stock irrespective of company performance.

The high and low sales prices of our common stock during the twelve months ended June 30, 2020 were $27.22 and $12.71 , respectively.

The high and low sales prices of our common stock during the twelve months ended September 30, 2020 were $29.77 and $12.71 , respectively.

We expect our stock price to continue to be subject to significant volatility and, in addition to the other risks and uncertainties described elsewhere in this Quarterly Report on Form 10-Q and all other risks and uncertainties that are either not known to us at this time or which we deem to be immaterial, any of the following factors may lead to a significant drop in our stock price:

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general negative conditions in the healthcare industry;

pandemic or other global crises;

pandemics or other global crises;

general negative conditions in the financial markets;

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If, for example, Hylenex is compared to animal-derived hyaluronidases by these entities, it is possible that neither of these conditions will be met, which could limit market acceptance and result in a material adverse effect on our revenues and financial condition.

The rising cost of healthcare and related pharmaceutical product pricing has led to cost containment pressures as well as changes in federal coverage and reimbursement policies and practices that could cause us and our partners to sell our products at lower prices, and impact access to our and our partners’ products, resulting in less revenue to us.

The rising cost of healthcare and related pharmaceutical product pricing has led to cost containment pressures from third-party payers as well as changes in federal coverage and reimbursement policies and practices that could cause us and our partners to sell our products at lower prices, and impact access to our and our partners’ products, resulting in less revenue to us.

Any of our proprietary or collaboration products that have been, or in the future are, approved by the FDA may be purchased or reimbursed by state and federal government authorities, private health insurers and other organizations, such as health maintenance organizations and managed care organizations.

Such third party payors increasingly challenge pharmaceutical product pricing.

The trend toward managed healthcare in the U.S., the growth of such organizations, and various legislative proposals and enactments to reform healthcare and government insurance programs, including the Medicare Prescription Drug Modernization Act of 2003, could significantly influence the manner in which pharmaceutical products are prescribed and purchased, resulting in lower prices and/or a reduction in demand.

The trend toward managed healthcare in the U.S., the growth of such organizations, and various legislative proposals and enactments to reform healthcare and government insurance programs, including the Medicare Prescription Drug Modernization Act of 2003 and the Affordable Care Act of 2010 (ACA), could significantly influence the manner in which pharmaceutical products are prescribed and purchased, resulting in lower prices and/or a reduction in demand.

Such cost containment measures and healthcare reforms could adversely affect our ability to sell our product and our partners’ ability to sell their products.

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CMS, the federal agency responsible for administering Medicare and overseeing state Medicaid programs and Health Insurance Marketplaces, has substantial power to implement policy changes or demonstration projects that can quickly and significantly affect how drugs, including our products, are covered and reimbursed.

For example, in October 2018, President Trump announced that CMS was evaluating a pilot program proposed to initially cover fifty percent of spending on Part B single-source drugs referred to as the “International

Price Index” that would, among other things, set the Medicare payment amount for such single-source drugs to more closely align with international drug prices.

Additionally, a number of Congressional committees have also held hearings and evaluated proposed legislation on drug pricing and payment policy which may affect our business.

For example, in July 2019, the Senate

Finance Committee advanced a bill that in part would penalize pharmaceutical manufacturers for increasing drug list prices covered by Medicare Part B and Part D, faster than the rate of inflation, and cap out-of-pocket expenses for Medicare Part D beneficiaries.

Several other proposals have been introduced that, if enacted and implemented, could affect access to and sales of our and our partners’ products, including but not limited to proposals to overhaul portions of the ACA, allow the federal government to engage in price negotiations on certain drugs, to allow importation of prescription medication from Canada or other countries and to base Medicare payment rates on an international index price.

In this dynamic environment, we are unable to predict which or how many federal policy, legislative or regulatory changes may ultimately be enacted, to the extent federal government initiatives decrease or modify the coverage or reimbursement available for our or our partners’ products, limit or impact our decisions regarding the pricing of biopharmaceutical products or otherwise reduce the use of our or our partners’ U.S.

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We anticipate that we will encounter similar regulatory and legislative issues in most other countries outside the U.S.

In addition, private payers in the US, including insurers, pharmacy benefit managers (PBMs), integrated healthcare delivery systems, and group purchasing organizations, are continuously seeking ways to reduce drug costs.

Many payers have developed and continue to develop ways to shift a greater portion of drug costs to patients through, for example, limited benefit plan designs, high deductible plans and higher co-pay or coinsurance obligations.

Consolidation in the payer space has also resulted in a few large PBMs and insurers which place greater pressure on pricing and utilization negotiations for our and our partners’ products in the U.S., increasing the need for higher discounts and rebates and limiting patient access and utilization.

Ultimately, additional discounts, rebates and other price reductions, fees, coverage and plan changes, or exclusions imposed by these private payers on our and our partners’ products could have an adverse event on product sales, our business and results of operations.

We also face risks relating to the reporting of pricing data that affects the reimbursement of and discounts provided for our products.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis