What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-20 compared with 2023-02-21 · 484 added, 444 removed, 1227 unchanged (43% of the section changed)

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Changes in Internal Control Over Financial Reporting

On May 24, 2022, we completed the acquisition of Antares.

Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company.

In conducting our evaluation of the effectiveness of our internal control over financial reporting, we excluded the internal control activities of Antares from our evaluation for the period ended December 31, 2022.

We are in the process of integrating Antares into our system of internal control over financial reporting.

Except as noted above, there have been no significant changes in our internal control over financial reporting that occurred during the period ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no significant changes in our internal control over financial reporting that occurred during the period ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We have included the financial results of Antares in the consolidated financial statements from the date of acquisition.

Antares represented approximately 9% of total assets as of December 31, 2022 and 17% of total revenues, for the year ended December 31, 2022.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

In conducting its assessment of the effectiveness of our internal control over financial reporting, our management excluded the internal control activities of Antares from its evaluation for the period ended December 31, 2022.

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013 framework) (the “COSO criteria”).

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

To the Stockholders and Board of Directors of

Halozyme Therapeutics, Inc.

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria .

As indicated in the accompanying Management’s Report On Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Antares Pharma, Inc., which is included in the 2022 consolidated financial statements of the Company and constituted 9% of total assets as of December 31, 2022 and 17% of total revenues, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Antares Pharma, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) and our report dated February 21, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2023, and the related notes the financial statement schedule listed in the Index at Item 15(a) and our report dated February 20, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Other Information

During the three months ended December 31, 2023, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-rule 10b5-1 trading arrangement (as such terms are defined pursuant to Item 408(a) of Regulation S-K).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance

The information required by this item regarding directors is incorporated by reference to our definitive Proxy Statement (the Proxy Statement) to be filed with the Securities and Exchange Commission in connection with our 2023 Annual Meeting of Stockholders under the heading “Election of Directors.” The information required by this item regarding our code of ethics is incorporated by reference to the information under the caption “Code of Conduct and Ethics and Corporate Governance Guidelines” to be contained in the Proxy Statement.

The information required by this item regarding directors is incorporated by reference to our definitive Proxy Statement (the “Proxy Statement”) to be filed with the Securities and Exchange Commission in connection with our 2024 Annual Meeting of Stockholders no later than 120 days after December 31, 2023 under the heading “ Election of Directors .” The information required by this item regarding our code of ethics is incorporated by reference to the information under the caption “Code of Conduct and Ethics and Corporate Governance Guidelines” to be contained in the Proxy Statement.

The information required by this item regarding our Audit Committee is incorporated by reference to the information under the caption “ Board Meetings and Committees—Audit Committee ” to be contained in the Proxy Statement.

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launch of Kyprolis ® .

She was responsible for the development of Onyx's commercial capabilities in ex-US markets and in particular, in Europe.

She was responsible for the development of Onyx's commercial capabilities in ex-U.S.

markets and in particular, in Europe.

Prior to Onyx, Dr.

Torley spent 10 years in management positions at Amgen Inc., most recently serving as Vice President and General Manager of the US Nephrology Business Unit from 2003 to 2009 and the U.S.

Torley spent 10 years in management positions at Amgen Inc., most recently serving as Vice President and General Manager of the U.S.

Nephrology Business Unit from 2003 to 2009 and the U.S.

Bone Health Business Unit from 2009 to 2011.

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Snyder joined Halozyme in January 2022 as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary.

Snyder has over 30 years of experience in legal and business management roles.

over 30 years of experience in legal and business management roles.

Prior to joining Halozyme, from January 2008 to December 2021, Mr.

Snyder served in various senior positions in the legal department at Qualcomm Incorporated, a wireless communications company, including his most recent positions as Senior Vice President & Deputy General Counsel, Litigation, from April 2016 to December 2021 and Vice President, Patent Counsel, from October 2010 to April 2016.

Before Qualcomm,

Before Qualcomm, Mr.

Snyder served as Lead Intellectual Property Counsel at Kyocera Wireless Corp., a wireless communications company, and has held legal and business management roles in two smaller companies.

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7,804,728 $ 30.50 14,681,908

_____________________

(1) Represents stock options, restricted stock units, and performance stock units under the Amended and Restated 2021 Stock Plan.

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Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to the information under the caption “ Certain Relationships and Related Transactions ” and “Corporate Governance - Director Independence” to be contained in the Proxy Statement.

The information required by this item is incorporated by reference to the information under the captions “ Certain Relationships and Related Transactions ” and “Corporate Governance - Director Independence” to be contained in the Proxy Statement.

Principal Accounting Fees and Services

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Report of Independent Registered Public Accounting Firm ID 42

Consolidated Balance Sheets at December 31, 2022 and 2021 F- 4

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Income for Each of the Years Ended December 31, 2023, 2022 and 2021 F- 4

Consolidated Statements of Comprehensive Income for Each of the Years Ended December 31, 2022,

2021 and 2020 F- 6

Consolidated Statements of Comprehensive Income for Each of the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for Each of the Years Ended December 31, 2023, 2022 and 2021 F- 6

Consolidated Statements of Stockholders’ Equity for Each of the Years Ended December 31, 2022,

2021 and 2020 F- 9

Consolidated Statements of Stockholders’ Equity for Each of the Years Ended December 31, 2023, 2022 and 2021

Notes to the Consolidated Financial Statements F- 8

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is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements of Halozyme Therapeutics, Inc.

Valuation and Qualifying Accounts F- 45

Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.

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Number Exhibit Title Herewith Form Date Filed

3.1 Amended and Restated Certification of Incorporation

3.2 Bylaws, as amended

8-K 12/10/2021

4.1 Indenture, dated November 18, 2019, between The Bank of New York Mellon Trust Company, N.A., as trustee, and the Registrant

8-K 11/18/2019

4.2 Form of Note, dated November 18, 2019, between the Bank of New York Mellon Trust Company, N.A., as trustee, and the Registrant

3.1 Amended and Restated Certification of Incorporation of Halozyme Therapeutics, Inc.

3.2 The Company's Bylaws, as amended

8-K 12/10/2021

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8-K 8/19/2022

10.5 A mendment No.

2 to the Credit Agreement

10.6 Agreement for Assignment and Assumption of Lease, Del Mar Corporate Centre I Office Lease and First Amendment to Office Lease

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2021 Stock Plan

10.9# Form of Stock Option Agreement (2021 Stock Plan)

Form of Stock Option Agreement (2021 Plan updated May 2023)

Form of Restricted Stock Units Agreement for Officers (2021 Plan updated May 2023)

Form of Restricted Stock Units Agreement (2021 Plan Sell-to-Cover updated May 2023)

Letter Agreement Amending Exercise Period for Employee Option

Form of Performance Stock Units (2021 Stock Plan)

Incorporated by Reference

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Number Exhibit Title Herewith Form Date Filed

10.10# Form of Restricted Stock Units Agreement for Officers (2021 Stock Plan)

10.11# Form of Restricted Stock Units Agreement (2021 Stock Plan)

10.12# Form of Restricted Stock Award Agreement (2021 Stock Plan)

10.13# Form of Performance Stock Units (2021 Stock Plan)

Form of Directors Restricted Stock Units Agreement (2021 Stock Plan)

F orm of Director Stock Option Agreement (2021 Plan)

Halozyme Therapeutics, Inc.

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Severance Policy

10-Q 11/8/2022

Form of Amended and Restated Change In Control Agreement with Officer

10-Q 11/9/2015

Incorporated by Reference

Exhibit Filed

Number Exhibit Title Herewith Form Date Filed

Halozyme Therapeutics, Inc.

Executive Incentive Plan

DEF-14A 3/23/2016

10.29# Halozyme Therapeutics, Inc.

Non Qualified Deferred Compensation Plan Adoption Agreement

10-K 2/22/2022

Incorporated by Reference

Exhibit Filed

Number Exhibit Title Herewith Form Date Filed

Halozyme Therapeutics, Inc Directors Deferred Equity Compensation Plan

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1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Halozyme Therapeutics, Inc.

Incentive Compensation Recoupment Policy

101.INS XBRL Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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President and Chief Executive Officer

(Principal Executive Officer)

POWER OF ATTORNEY

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Ch.B., M.R.C.P.

President and Chief Executive Officer February 21, 2023

President and Chief Executive Officer, Director

February 20, 2024

Ch.B., M.R.C.P.

(Principal Executive Officer), Director

/s/ Nicole LaBrosse Senior Vice President and Chief Financial Officer February 21, 2023

Nicole LaBrosse (Principal Financial and Accounting Officer)

(Principal Executive Officer)

/s/ Nicole LaBrosse

Senior Vice President and Chief Financial Officer February 20, 2024

Nicole LaBrosse

(Principal Financial and Accounting Officer)

/s/ Jeffrey W.

Henderson Chair of the Board of Directors February 21, 2023

/s/ Connie L.

Matsui Director February 21, 2023

/s/ Jean-Pierre Bizzari Director February 21, 2023

Chair of the Board of Directors February 20, 2024

/s/ Jean-Pierre Bizzari

Director February 20, 2024

Jean-Pierre Bizzari

/s/ Bernadette Connaughton Director February 21, 2023

/s/ Bernadette Connaughton

Director February 20, 2024

Bernadette Connaughton

Daly Director February 21, 2023

/s/ Barbara Duncan Director February 21, 2023

/s/ Barbara Duncan

Director February 20, 2024

Barbara Duncan

/s/ Matthew L.

Posard Director February 21, 2023

/s/ Moni Miyashita Director February 21, 2023

/s/ Connie L.

Director February 20, 2024

/s/ Moni Miyashita

Director February 20, 2024

Moni Miyashita

/s/ Matthew L.

Director February 20, 2024

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

To the Stockholders and Board of Directors of

Halozyme Therapeutics, Inc.

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We have audited the accompanying consolidated balance sheets of Halozyme Therapeutics, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of these critical audit matters do not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating these critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Determination of Overall Transaction Price for Collaboration Agreements

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During 2023, the Company recognized $ 69.0 million of variable consideration in the transaction price under their collaboration arrangements.

Auditing management’s conclusions related to determining the probability of achievement of milestones is complex and highly judgmental as a result of the uncertainties given the progression of developing and commercializing the combined targets is completed by the collaboration partners.

Auditing management’s conclusions related to determining the probability of achievement of milestones is complex and highly judgmental given the progression of developing and commercializing the combined targets is completed by the collaboration partners.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the Company’s process to routinely evaluate the probability of achievement of milestones and any related constraint for each collaboration, in addition to the controls over the completeness and accuracy of determining the population of agreements and potential milestone payments.

To test the milestone amounts included, or excluded, from the transaction price, we performed audit procedures that included, among others, observing the meetings of the Company’s accounting and alliance managers discussing the status of each collaboration agreement.

To test the milestone amounts included, or excluded, from the transaction price, we performed audit procedures that included, among others, inspecting evidence to support management’s assessment of the probability of achievement.

For each milestone, we examined evidence including correspondence with the collaboration partner and evaluated management’s conclusions on the probabilities of achievement.

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We performed a lookback analysis to validate the Company’s accuracy of determining the probability of achieving these milestones.

Valuation of intangible assets acquired in connection with the Antares Pharma, Inc.

Description of the Matter As disclosed in Note 3 of the consolidated financial statements, the Company completed the acquisition of Antares Pharma, Inc.

(“Antares”) on May 24, 2022 for total consideration of approximately $1,045.7 million.

The transaction was accounted for as a business combination.

The Company recorded intangible assets of $589.8 million, which includes in-process research and development (“IPR&D”) of $48.7 million.

Auditing the Company’s accounting for its acquisition of Antares was complex due to the significant estimation uncertainty in determining the fair value of the intangible assets.

A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the acquired intangible assets due to sensitivity of the respective fair values to the underlying assumptions.

The Company used an income approach to measure the intangible assets.

The significant assumptions used to estimate the value of the intangible assets included discount rates and revenue growth rates.

These significant assumptions related to the intangible assets are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of intangible assets acquired in connection with the Antares acquisition.

This included controls over management’s development of the above-described assumptions used in the valuation models applied.

To test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the Company’s use of the income approach and testing the significant assumptions used in the valuation model, as described above.

We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates.

We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry trends, and other market information.

In addition, we involved valuation specialists to assist in assessing the significant assumptions and methodologies used by the Company.

/s/ Ernst & Young LLP

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Accounts receivable, net and other contract assets 234,210 231,072

Inventories 100,123 53,908

Inventories, net

127,601 100,123

Prepaid expenses and other current assets 48,613 45,024

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Accrued expenses 100,678 99,762

Deferred revenue, current portion 3,246 1,746

Current portion of long-term debt, net — 13,334

Total current liabilities 112,494 130,789

Deferred revenue, net of current portion 2,253 2,530

Long-term debt, net 1,499,248 1,492,766

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Contingent liability — 15,472

Total liabilities

1,649,462 1,671,713

Commitments and contingencies (Note 12)

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20,000 shares authorized;

issued and outstanding

no shares issued and outstanding

Common stock - $ 0.001 par value;

300,000 shares authorized;

137,498 shares issued and outstanding at December 31, 2022 and 2021,

126,770 and 135,154 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital 2,409 27,368

Accumulated other comprehensive loss

Retained earnings (Accumulated deficit) 143,217 ( 58,912 )

( 9,278 ) ( 922 )

Retained earnings

90,550 143,217

Total stockholders’ equity 83,808 169,798

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Inducement expense related to convertible notes — ( 2,712 ) ( 20,960 )

Contingent liability fair value measurement gain

Interest expense ( 18,762 ) ( 16,947 ) ( 7,526 )

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Net income $ 281,594 $ 202,129 $ 402,710

Net income per share:

Earnings per share

Basic $ 2.13 $ 1.48 $ 2.86

Diluted $ 2.10 $ 1.44 $ 2.74

Shares used in computing net income per share:

Weighted average common shares outstanding

Basic 131,927 136,844 140,646

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Other comprehensive income

Unrealized loss on marketable securities ( 349 ) ( 683 ) ( 164 )

Unrealized gain (loss) on marketable securities

1,097 ( 349 ) ( 683 )

Foreign currency translation adjustment 24 8 15

Unrealized gain (loss) on foreign currency 39 26 ( 22 )

Total comprehensive income $ 201,827 $ 402,068 $ 128,867

Unrealized gain on foreign currency

Unrealized loss on derivative instruments, net

( 9,406 ) — —

Realized gain on derivative instruments, net

Comprehensive income

$ 273,238 $ 201,827 $ 402,068

See accompanying notes to consolidated financial statements.

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Amortization of debt discount 7,304 7,839 3,642

Amortization of (accretion of discounts) premiums on marketable securities 1,106 2,257 839

Amortization of (premium) discounts on marketable securities, net

( 6,319 ) 1,106 2,257

Realized loss on marketable securities — 1,727 —

Loss (gain) on disposal of equipment 129 — ( 772 )

Deferral of unearned revenue — — 4,632

Loss on disposal of equipment

Contingent liability fair value measurement adjustment

( 13,200 ) — —

Recognition of deferred revenue — ( 2,494 ) ( 1,496 )

Lease payments deferred 1,270 ( 903 ) ( 751 )

Loss on impairment of right-of-use asset — — 577

Induced conversion expense related to convertible notes — 2,712 20,960

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Changes in operating assets and liabilities

Accounts receivable, net ( 83,941 ) 6,755 ( 38,288 )

Inventories ( 17,481 ) 7,371 ( 31,388 )

Accounts receivable, net and other contract assets

( 3,339 ) ( 83,941 ) 6,755

Inventories, net

( 26,884 ) ( 17,481 ) 7,371

Prepaid expenses and other assets 4,098 ( 9,064 ) ( 11,555 )

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Net cash provided by operating activities

388,571 240,110 299,440

Investing activities

Purchases of marketable securities ( 292,911 ) ( 255,208 ) ( 652,515 )

Proceeds from maturities of marketable securities 746,127 247,683 305,967

Proceeds from sales and maturities of marketable securities

211,296 746,127 247,683

Acquisitions of business, net of cash acquired — ( 999,120 ) —

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Proceeds from sale of assets — 26,006 —

Net cash (used in) provided by investing activities ( 487,005 ) ( 406,289 ) 78,354

Net cash used in investing activities

( 96,909 ) ( 487,005 ) ( 406,289 )

Financing activities

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Proceeds from issuance of 2027 Convertible Notes, net — — 784,875

Repayment of long-term debt ( 77,453 ) ( 369,064 ) ( 19,560 )

Proceeds from issuance of 2028 Convertible Notes 702,000 — —

Repayment of 2024 Convertible Notes

( 13,483 ) ( 77,453 ) ( 369,064 )

Proceeds from issuance of 2028 Convertible Notes, net

Purchase of capped call — ( 69,120 ) —

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Proceeds from issuance of common stock under equity incentive plans, net of taxes paid related to net share settlement 7,879 14,050 12,536

Net cash provided by (used in) financing activities 362,371 77,865 ( 106,284 )

Net increase (decrease) in cash, cash equivalents and restricted cash 115,476 ( 28,984 ) 27,524

Net cash (used in) provided by financing activities

( 407,987 ) 362,371 77,865

Net (decrease) increase in cash, cash equivalents and restricted cash

( 116,325 ) 115,476 ( 28,984 )

Cash, cash equivalents and restricted cash at beginning of period 234,695 119,219 148,203

Cash, cash equivalents and restricted cash at end of period $ 118,370 $ 234,695 $ 119,219

Year Ended December 31,

2022 2021 2020

Supplemental disclosure of cash flow information

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Right-of-use assets obtained in exchange for lease obligation $ 2,572 $ 34,435 $ 318

Common stock issued for induced conversion related to convertible notes $ 1,018 $ 7,865 $ —

Common stock issued for conversion of 2024 Convertible Notes

$ 125 $ 1,018 $ 7,865

See accompanying notes to consolidated financial statements.

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Income (Loss) Retained Earnings (Accumulated

Deficit) Total

Stockholders’

Shares Amount

BALANCE AT DECEMBER 31, 2019

BALANCE AS OF DECEMBER 31, 2020

135,030 $ 135 $ 625,483 $ 22 $ ( 474,593 ) $ 151,047

Cumulative adjustment from adoption of ASU 2020-06 — — ( 65,535 ) — 12,971 ( 52,564 )

Share-based compensation expense — — 20,820 — — 20,820

Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net 5,278 5 63,388 — — 63,393

Issuance of restricted stock awards, net 61 — — — — —

Issuance of common stock for the induced conversion of 2024 Convertible Notes

9,083 9 13,095 — — 13,104

Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock and performance stock units, net and shares issued under the ESPP plan

1,497 2 12,534 — — 12,536

Repurchase of common stock ( 8,112 ) ( 8 ) ( 350,050 ) ( 350,058 )

Equity component of convertible notes ( 65 ) ( 65 )

Other comprehensive loss — — — ( 642 ) — ( 642 )

Net lncome — — — — 129,085 129,085

BALANCE AT DECEMBER 31, 2020

— — — — 402,710 402,710

Cumulative adjustment from adoption of ASU 2020-06 ( 65,535 ) 12,971 ( 52,564 )

BALANCE AS OF DECEMBER 31, 2021

137,498 138 256,347 ( 620 ) ( 58,912 ) 196,953

Share-based compensation expense — — 24,397 — — 24,397

Issuance of common stock for the induced conversion related to convertible notes 9,083 9 13,095 13,104

Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units and performance stock units, net and shares issued under ESPP plan 1,497 2 12,534 — — 12,536

Issuance of common stock for the induced conversion of 2024 Convertible Notes

1,512 1 1,692 1,693

Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock and performance stock units, net and shares issued under the ESPP plan

1,077 1 14,049 — — 14,050

Capped call transaction — — ( 69,120 ) — — ( 69,120 )

Repurchase of common stock ( 4,933 ) ( 5 ) ( 199,997 ) — — ( 200,002 )

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Net income — — — — 202,129 202,129

BALANCE AT DECEMBER 31, 2021

BALANCE AS OF DECEMBER 31, 2022

135,154 135 27,368 ( 922 ) 143,217 169,798

Share-based compensation expense — — 36,620 — — 36,620

Issuance of common stock for the induced conversion related to convertible notes 1,512 1 1,692 1,693

Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units and performance stock units, net and shares issued under the ESPP plan 1,077 1 14,049 — — 14,050

Capped call transaction ( 69,120 ) ( 69,120 )

Issuance of common stock for the conversion of 2024 Convertible Notes

289 — ( 126 ) — — ( 126 )

Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock and performance stock units, net and shares issued under the ESPP plan

945 2 7,877 — — 7,879

Repurchase of common stock ( 9,618 ) ( 10 ) ( 69,330 ) ( 334,261 ) ( 403,601 )

Other comprehensive loss — — — ( 302 ) ( 302 )

Other comprehensive income

— — — ( 8,356 ) — ( 8,356 )

Net income — — — — 281,594 281,594

BALANCE AT DECEMBER 31, 2022

BALANCE AS OF DECEMBER 31, 2023

126,770 $ 127 $ 2,409 $ ( 9,278 ) $ 90,550 $ 83,808

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Halozyme Therapeutics, Inc.

is a biopharma technology platform company that provides innovative and disruptive solutions with the goal of improving the patient experience and potentially outcomes.

Our proprietary enzyme, rHuPH20, is used to facilitate the subcutaneous (“SC”) delivery of injected drugs and fluids.

We license our technology to biopharmaceutical companies to collaboratively develop products that combine our ENHANZE ® drug delivery technology (“ENHANZE”) with the partners’ proprietary compounds.

Our first commercially approved product Hylenex ® recombinant (“Hylenex”), and our ENHANZE partners’ approved products and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme.

rHuPH20 is the active ingredient in Hylenex, that works by breaking down hyaluronan (“HA”), a naturally occurring carbohydrate that is a major component of the extracellular matrix of the SC space.

is a biopharmaceutical company advancing disruptive solutions to improve patient experiences and outcomes for emerging and established therapies.

As the innovators of ENHANZE ® drug delivery technology (“ENHANZE”) with our proprietary enzyme, rHuPH20, our commercially validated solution is used to facilitate the subcutaneous (“SC”) delivery of injected drugs and fluids with the goal of reducing the treatment burden for patients.

We license our technology to biopharmaceutical companies to collaboratively develop products that combine ENHANZE ® with our partners’ proprietary compounds.

We also develop, manufacture and commercialize, for ourselves or with our partners, drug-device combination products using our advanced auto-injector technologies that are designed to provide commercial or functional advantages such as improved convenience, reliability and tolerability, and enhanced patient comfort and adherence.

Our ENHANZE partners’ approved products and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme.

rHuPH20 works by breaking down hyaluronan (“HA”), a naturally occurring carbohydrate that is a major component of the extracellular matrix of the SC space.

This temporarily reduces the barrier to bulk fluid flow allowing for improved and more rapid SC delivery of high dose, high volume injectable biologics, such as monoclonal antibodies and other large therapeutic molecules, as well as small molecules and fluids.

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We license the ENHANZE technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or benefiting from injection via the SC route of administration.

In the development of proprietary intravenous (“IV”) drugs combined with our ENHANZE technology, data have been generated supporting the potential for ENHANZE to reduce patient treatment burden, as a result of shorter duration of SC administration with ENHANZE compared to IV administration.

In the development of proprietary intravenous (“IV”) drugs combined with our ENHANZE technology, data has been generated supporting the potential for ENHANZE to reduce patient treatment burden, as a result of shorter duration of SC administration with ENHANZE compared to IV administration.

ENHANZE may enable fixed-dose SC dosing compared to weight-based dosing typically required for IV administration, extend the dosing interval for drugs that are already administered subcutaneously and potentially allow for lower rates of infusion-related reactions.

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(“Janssen”), AbbVie, Inc.

(“AbbVie”), Eli Lilly and Company (“Lilly”), Bristol-Myers Squibb Company (“BMS”), Alexion Pharma (International Operations Unlimited Company (an indirect wholly owned subsidiary of AstraZeneca PLC)(“Alexion”), argenx BVBA (“argenx”), Horizon Therapeutics plc.

(“Horizon”), ViiV Healthcare (the global specialist HIV Company majority owned by GlaxoSmithKline) (“ViiV”) and Chugai Pharmaceutical Co., Ltd (“Chugai”).

(“AbbVie”), Eli Lilly and Company (“Lilly”), Bristol-Myers Squibb Company (“BMS”), argenx BVBA (“argenx”), ViiV Healthcare (the global specialist HIV Company majority owned by GlaxoSmithKline) (“ViiV”), Chugai Pharmaceutical Co., Ltd (“Chugai”) and Acumen Pharmaceuticals, Inc.

In addition to receiving upfront licensing fees from our ENHANZE collaborations, we are entitled to receive event and sales-based milestone payments, revenues from the sale of bulk rHuPH20 and royalties from commercial sales of approved partner products co-formulated with ENHANZE.

We currently receive royalties from three of these collaborations, including royalties from sales of one product from the Takeda collaboration, three products from the Roche collaboration and one product from the Janssen collaboration.

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

Through our recent acquisition of Antares Pharma, Inc.

(“Antares”), we also develop, manufacture and commercialize, for ourselves or with our partners, drug-device combination products using our advanced auto-injector technologies.

Also as a result of our acquisition of Antares, our commercial portfolio of proprietary products includes XYOSTED ® , TLANDO ® and NOCDURNA ® .

We currently earn royalties from four of these collaborations, including royalties from sales of one product from the Takeda collaboration, four products from the Roche collaboration, one product from the Janssen collaboration and one product from the argenx collaboration.

We have commercialized auto-injector products with several pharmaceutical companies including Teva Pharmaceutical Industries, Ltd.

(“Teva”), Covis Group S.a.r.l.

(“Covis”) and Otter Pharmaceuticals, LLC (“Otter”).

(“Teva”) and Otter Pharmaceuticals, LLC (“Otter”).

We have development programs including auto-injectors with Idorsia Pharmaceuticals Ltd.

(“Idorsia”) and Pfizer.

Our commercial portfolio of proprietary products includes Hylenex®, utilizing rHuPH20, and our specialty product XYOSTED ® , utilizing our auto-injector technology.

Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these notes to consolidated financial statements refer to Halozyme Therapeutics, Inc.

and each of its directly and indirectly wholly owned subsidiaries disclosed in Note 2.

and each of its directly and indirectly wholly owned subsidiaries as disclosed in Note 2, Summary of Significant Accounting Policies .

Halozyme Therapeutics, Inc.

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Cash Equivalents and Marketable Securities

Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within 90 days or less from the date of purchase.

As of December 31, 2022, our cash and cash equivalents consisted of money market funds, bank certificate of deposits and demand deposits at commercial banks.

Cash equivalents consist of highly liquid investments, readily convertible to cash, which mature within 90 days or less from the date of purchase.

As of December 31, 2023, our cash and cash equivalents consisted of money market funds, bank certificate of deposits, U.S.

treasury securities and demand deposits at commercial banks.

Marketable securities are investments with original maturities of more than 90 days from the date of purchase that are specifically identified to fund current operations.

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Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive income (loss) and included as a separate component of stockholders’ equity.

The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in the consolidated statements of income.

We use the specific identification method for calculating realized gains and losses on marketable securities sold.

None of the realized gains and losses and declines in value that were judged to be as a result of credit loss on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations.

Restricted Cash

Under the terms of the leases of our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases.

At December 31, 2022 and 2021, restricted cash of $ 0.5 million was pledged as collateral for the letters of credit.

Under the lease terms of our facilities, we may be required to maintain letters of credit as security deposits during the terms of such leases.

As of December 31, 2023, no restricted cash remained pledged as collateral for the letters of credit as the associated lease was terminated.

As of December 31, 2022, restricted cash of $ 0.5 million was pledged as collateral for the letters of credit.

Fair Value of Financial Instruments

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and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, long-term debt and contingent liability.

Fair value estimates of these instruments are made at a specific point in time based on relevant market information.

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The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Available-for-sale marketable securities consist of asset-backed securities, corporate debt securities, U.S.

Treasury securities and commercial paper, and are measured at fair value using Level 1 and Level 2 inputs.

Treasury securities, agency bonds and commercial paper, and are measured at fair value using Level 1 and Level 2 inputs.

Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data.

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We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Concentrations of Credit Risk, Sources of Supply and Significant Customers

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The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk.

We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution.

We maintain our cash and cash equivalent balances with two major commercial banks and marketable securities with one other financial institution.

Deposits held with the financial institutions exceed the amount of insurance provided on such deposits.

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We have license and collaborative agreements with pharmaceutical companies under which we receive payments for royalties, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20.

In addition, we sell proprietary products in the United States to a limited number of established wholesale distributors in the pharmaceutical industry.

In addition, we sell proprietary products in the United States (“U.S.”) to a limited number of established wholesale distributors in the pharmaceutical industry.

Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required.

Management monitors our exposure to accounts receivable by periodically evaluating the collectability of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience.

Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2022 and 2021.

Approximately 52 % of the accounts receivable balance at December 31, 2022 represents amounts due from Janssen and Roche.

Approximately 90 % of the accounts receivable balance at December 31, 2021 represents amounts due from Janssen, Roche and Takeda.

Based upon the review of these factors, we recorded no allowance for doubtful accounts as of December 31, 2023 and 2022.

Approximately 69 % of the accounts receivable balance as of December 31, 2023 represents amounts due from Janssen, Roche and Teva.

Approximately 52 % of the accounts receivable balance as of December 31, 2022 represents amounts due from Janssen and Roche.

The following table indicates the percentage of total revenues in excess of 10% with any single customer:

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2023 2022 2021

Partner A 20 % 25 % 35 %

Partner B 46 % 48 % 26 %

Partner C — % — % 11 %

Partner D — % 10 % — %

44 % 46 % 48 %

19 % 20 % 25 %

We attribute revenues under collaborative agreements, including royalties, to the individual countries where the customer is headquartered.

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Switzerland 149,024 166,836 134,117

Ireland 3 14 30,552

Belgium 58,354 2,088 199

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Total revenues $ 829,253 $ 660,116 $ 443,310

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Accounts Receivable, net

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Accounts receivable is recorded net of cash discounts for prompt payment, distribution fees and chargebacks.

We recorded no allowance for doubtful accounts at December 31, 2022 and 2021 as the collectability of accounts receivable was reasonably assured.

We recorded no allowance for doubtful accounts as of December 31, 2023 and 2022 as the collectability of accounts receivable was reasonably assured.

Inventories are stated at lower of cost or net realizable value.

Cost is determined on a first-in, first-out basis.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal,

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

and transportation.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Inventories are reviewed periodically for potential excess, dated or obsolete status.

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We have lease agreements with lease and non-lease components, which are generally accounted for separately.

For certain equipment leases, such as automobiles, we account for the lease and non-lease components as a single lease component.

For certain leases, such as automobiles, we account for the lease and non-lease components as a single lease component.

Property and Equipment, Net

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Comprehensive income is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources.

Convertible Notes

The 2024 Convertible Notes, the 2027 Convertible Notes and the 2028 Convertible Notes (collectively, the “Convertible Notes”) are accounted for in accordance with authoritative guidance for debt and derivatives.

We evaluate all the embedded conversion options contained in the Convertible Notes to determine if there are embedded features that require bifurcation as a derivative as required by U.S.

Based on our analysis, we account for each of our Convertible Notes as single units of accounting, a liability, because we concluded that the conversion features do not require bifurcation as a derivative under embedded derivative authoritative guidance.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Cash Flow Hedges - Currency Risks

Beginning in the second quarter of 2023, we entered into a cash flow hedging program to mitigate foreign currency exchange risk associated with forecasted royalty revenue denominated in Swiss francs.

Under the program, we can hedge these forecasted royalties up to a maximum of four years into the future.

We hedge these cash flow exposures to reduce the risk of our earnings and cash flows being adversely affected by fluctuations in exchange rates.

In accordance with the hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and are highly effective in offsetting changes to future cash flows on hedged transactions.

Both at inception of the hedge and on an ongoing basis, we assess whether the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a prospective and retrospective basis.

If we determine a (i) foreign currency forward contract is not highly effective as a cash flow hedge, (ii) foreign currency forward contract has ceased to be a highly effective hedge or (iii) forecasted transaction is no longer probable of occurring, we would discontinue hedge accounting treatment prospectively.

We measure effectiveness based on the change in fair value of the forward currency forward contract and the fair value of the hypothetical foreign currency forward contract with terms that match the critical terms of the risk being hedged.

No portion of our foreign currency forward contracts were excluded from the assessment of hedge effectiveness.

As of December 31, 2023, all hedges were determined to be highly effective.

The assets or liabilities associated with our hedging contracts are recorded at fair market value in prepaid expense and other current assets, accrued expenses, or other long-term liabilities, respectively, in our consolidated balance sheets.

Gains and losses related to changes in the fair market value of these hedging contracts are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) within stockholder’s equity in our consolidated balance sheets and reclassified to royalty revenue in our consolidated statements of income in the same period as the recognition of the underlying hedged transaction.

In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, within the defined hedge period, we reclassify the gains or losses on the related cash flow hedge from AOCI to royalties revenue in our consolidated statements of income.

Settlements from the cash flow hedge are included in operating activities on the Consolidated Statements of Cash Flows.

Since the fair market value of these hedging contracts is derived from current market rates, the hedging contracts are classified as derivative financial instruments.

We do not use derivatives for speculative or trading purposes.

As of December 31, 2023, amounts expected to be recognized as a net gain out of AOCI into our consolidated statements of income during the next 12 months, are not material.

Business Combinations

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We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill.

Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as incurred.

Costs incurred to complete a business combination, such as legal and other professional fees, are expensed as incurred.

If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements.

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We record these adjustments to the provisional amounts with a corresponding offset to goodwill.

Any adjustments identified after the measurement period are recorded in the consolidated statements of income.

Any adjustments identified after the measurement period are recorded in our consolidated statements of income.

Goodwill, Intangible Assets and Other Long-Lived Asset

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If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Goodwill and IPR&D are not amortized;

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Goodwill and IPR&D are considered to be impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective fair value.

We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting structure and availability of discrete financial information.

During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than the carrying amounts, including goodwill.

We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting and operating segment structure and availability of discrete financial information.

During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting unit is less than the

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

carrying amount, including goodwill.

The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance.

If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting units are less than the carrying amounts, then no additional assessment is deemed necessary.

Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill.

If the carrying amounts of the reporting units exceed the fair values, we record an impairment loss based on the difference.

If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of our reporting unit is less than the carrying amounts, then no additional assessment is deemed necessary.

Otherwise, we proceed to compare the estimated fair value of the reporting unit with the carrying value, including goodwill.

If the carrying amount of the reporting unit exceeds the fair value, we record an impairment loss based on the difference.

We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.

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The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives.

We perform regular reviews to determine if any event has occurred that may indicate that intangible assets with finite useful lives and other long-lived assets are potentially impaired.

We perform regular reviews to determine if any event has occurred that may indicate intangible assets with finite useful lives and other long-lived assets are potentially impaired.

If indicators of impairment exist, an impairment test is performed to assess the recoverability of the affected assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows.

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All amounts owed to us are noncancelable after the underlying triggering event occurs, and nonrefundable once paid.

Unless terminated earlier in accordance with its terms, collaborations generally continue in effect until the last to expire royalty payment term, as determined on a product by product and on a country by country basis, with each royalty term starting on the first commercial sale of that product and ending the later of:

Unless terminated earlier in accordance with its terms, collaborations generally continue in effect until the last to expire royalty payment term, as determined on a product by product and country by country basis, with each royalty term starting on the first commercial sale of that product and ending the later of:

(i) a specified period or term set forth in the agreement or (ii) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration.

When there are no valid claims during the applicable royalty term in a given country, the royalty rate is reduced for those sales.

In general, when there are no valid claims of a specified patent developed under the collaboration covering the product in a given country, the royalty rate is reduced for those sales in that country upon the expiration of our patents covering rHuPH20.

Janssen’s patents covering DARZALEX SC do not impact the timing for this royalty reduction.

Partners may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis generally upon 90 days prior written notice to us.

Upon any such termination, the license granted to partners (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement (as opposed to a termination), the on-going licenses granted will become perpetual, non-exclusive and fully paid.

Upon any such termination, the license granted to partners (in total or with respect to the terminated target, as applicable) will terminate provided;

however, that in the event of expiration of the agreement (as opposed to a termination), the on-going licenses granted will become perpetual, non-exclusive and fully paid.

Sales-based milestones and royalties are recognized in the period the underlying sales or milestones occur.

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To date, we have not recorded any material adjustments.

In addition to the royalties received from licensing our ENHANZE technology, we also earn royalties in connection with licenses granted under license and development arrangements with our device partners as a result of our acquisition of Antares.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

We also earn royalties in connection with several of our licenses granted under license and development arrangements with our device partners.

These royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid-single digits to low double digits and are tiered based on levels of net sales.

These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur.

The royalties are generally reported and payable to us within 45 to 60 days of the end of the period in which the commercial sales are made.

We base our estimates of royalties earned on actual sales information from our partners when available or estimated, prescription sales from external sources and estimated net selling price.

The royalties are generally reported and payable to us within 45 to 60 days after the end of the period in which the commercial sales are made.

We base our estimates of royalties earned on actual sales information from our partners when available or estimated, prescription sales from external sources and estimated net selling

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

We will record adjustments in the following quarter, if necessary, when final royalty reports are received.

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Targets are usually licensed on an exclusive, global basis.

Targets selected subsequent to inception of the arrangement require payment of an additional license fee.

Targets selected subsequent to inception of the arrangement generally require payment of an additional license fee.

The collaboration partner is responsible for all development, manufacturing, clinical, regulatory, sales and marketing costs for any products developed under the agreement.

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Under these collaborative agreements, our partners lead development of assets, and we do not share in significant financial risks of their development or commercialization activities.

Accordingly, we concluded our collaborative agreements are appropriately accounted for pursuant to ASC Topic 606, Revenue from Contracts with Customers.

Accordingly, we concluded our collaborative agreements are appropriately accounted for pursuant to U.S.

Under all of our ENHANZE collaborative agreements, we have identified licenses to use functional intellectual property as the only performance obligation.

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We also fulfill purchase orders for supply of bulk rHuPH20 and perform research and development services pursuant to projects authorization forms for our partners, which represent separate contracts.

In addition to our licenses, we price our supply of bulk rHuPH20 and research and development services at our regular selling prices, called standalone selling price or (“SSP”).

In addition to our licenses, we price our supply of bulk rHuPH20 and research and development services at our regular selling prices, called standalone selling prices (“SSP”).

Therefore, our partners do not have material rights to order these items at prices not reflective of SSP.

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Transaction price does not include amounts subject to uncertainties unless it is probable that there will be no significant reversal of revenue when the uncertainty is resolved.

Apart from the upfront license payment (or target selection fees in the target selection contracts), all other fees we may earn under our collaborative agreements are subject to

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

significant uncertainties of product development.

Apart from the upfront license payment (or target selection fees in the target selection contracts), all other fees we may earn under our collaborative agreements are subject to significant uncertainties of product development.

Achievement of many of the event-based development and regulatory milestones may not be probable until such milestones are actually achieved.

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With respect to other development milestones, e.g., dosing of a first patient in a clinical trial, achievement could be considered probable prior to its actual occurrence, based on the progress towards commencement of the trial.

In order to evaluate progress towards commencement of a trial, we assess the status of activities leading up to our partner’s initiation of a trial such as feedback received from the applicable regulatory authorities, completion of IND or equivalent filings, readiness and availability of drug, readiness of study sites and our partner’s commitment of resources to the program.

In order to evaluate progress towards commencement of a trial, we assess the status of activities

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

leading up to our partner’s initiation of a trial such as feedback received from the applicable regulatory authorities, completion of Investigational New Drug (“IND”) or equivalent filings, readiness and availability of drug, readiness of study sites and our partner’s commitment of resources to the program.

We do not include any amounts subject to uncertainties in the transaction price until it is probable that the amount will not result in a significant reversal of revenue in the future.

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We also estimate SSP of bulk rHuPH20 and research and development services, to determine that our partners do not have material rights to order them at discounted prices.

For supplies of bulk rHuPH20, because we effectively act as a contract manufacturer to our partners, we estimate and charge SSP based on the typical contract manufacturer margins consistently with all of our partners.

We determine SSP of research and development services based on a fully-burdened labor rate.

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Device License, Development and Supply Arrangements

We have several license, development and supply arrangements with pharmaceutical partners as a result of our acquisition of Antares, under which we grant a license to our device technology and provide research and development services that often involve multiple performance obligations and highly-customized deliverables.

We have several license, development and supply arrangements with pharmaceutical partners, under which we grant a license to our device technology and provide research and development services that often involve multiple performance obligations and highly-customized deliverables.

For such arrangements, we identify each of the promised goods and services within the contract and the distinct performance obligations at inception of the contract and allocate consideration to each performance obligation based on relative SSP, which is generally determined based on the expected cost plus mark-up.

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For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control of the product is transferred to the customer.

Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and we have a present right to payment.

Our typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction

Factors that may indicate transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets, and we have a present right to payment.

We record a contract liability for cash received in advance of performance, which is presented within deferred revenue and deferred revenue, long-term in our consolidated balance sheets and recognized as revenue in our consolidated statements of income when the associated performance obligations have been satisfied.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

of the individual performance obligations.

We record a contract liability for cash received in advance of performance, which is presented within deferred revenue and deferred revenue, long-term in the condensed consolidated balance sheets and recognized as revenue in the condensed consolidated statements of income when the associated performance obligations have been satisfied.

License fees and milestones received in exchange for the grant of a license to our functional intellectual property, such as patented technology and know-how in connection with a partnered development arrangement, are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract.

Milestone payments that are contingent upon the occurrence of future events are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.

inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract.

Milestone payments that are contingent upon the occurrence of future events are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal of revenue will not occur when the associated uncertainty is resolved.

Refer to Note 5, Revenue , for further discussion on our collaborative arrangements.

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Proprietary Product Sales

Hylenex Recombinant

We sell Hylenex recombinant in the U.S.

to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers.

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual packages of Hylenex recombinant represent performance obligations under each purchase order.

We use a contract manufacturer to produce Hylenex recombinant and a third-party logistics (3PL) vendor to process and fulfill orders .

Our commercial portfolio of proprietary products includes XYOSTED and Hylenex recombinant which we sell primarily to wholesale pharmaceutical distributors and specialty pharmacies, who sell the products to hospitals, retail chain drug stores and other end-user customers.

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual packages of products represents performance obligations under each purchase order.

We use contract manufacturers to produce our proprietary products and third-party logistics (“3PL”) vendors to process and fulfill orders .

We concluded we are the principal in the sales to wholesalers because we control access to services rendered by both vendors and direct their activities.

We have no significant obligations to wholesalers to generate pull-through sales.

Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when wholesalers sell Hylenex recombinant at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs.

We also pay quarterly distribution fees to certain wholesalers for inventory reporting and chargeback processing, and to GPOs as administrative fees for services and for access to GPO members.

We concluded the benefits received in exchange for these fees are not distinct from our sales of Hylenex recombinant, and accordingly we apply these amounts to reduce revenues.

Wholesalers also have rights to return unsold product nearing or past the expiration date.

Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product.

We estimate the transaction price when we receive each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler arising from all of the above factors.

We have compiled historical experience and data to estimate future returns and chargebacks of Hylenex recombinant and the impact of the other discounts and fees we pay.

When estimating these adjustments to the transaction price, we reduce it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known.

Each purchase order contains only one type of product, and is usually shipped to the wholesaler in a single shipment.

Therefore, allocation of the transaction price to individual packages is not required.

We recognize revenue from Hylenex recombinant product sales and related cost of sales upon product delivery to the wholesaler location.

Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs.

We recognize revenue from product sales and related cost of sales upon product delivery to the wholesaler location.

At that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership, and have an enforceable obligation to pay us.

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Although wholesalers have product return rights, we do not believe they have a significant incentive to return the product to us.

Upon recognition of revenue from product sales of Hylenex recombinant, the estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, and GPO fees are included in accrued liabilities and net of accounts receivable in the consolidated balance sheet.

The determination of certain reserves and sales allowances requires us to make a number of judgements and estimates to reflect our best estimate of the transaction price and the amount of consideration to which we believe we would be ultimately entitled to receive.

The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and estimated future percentage of rebates incurred on sales, historical and future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel.

The estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, rebates and customer co-pay support programs are included in accrued expenses and accounts receivable, net in our consolidated balance sheets upon recognition of revenue from product sales.

We monitor actual product returns, chargebacks, discounts and fees subsequent to the sale.

If these amounts differ from our estimates, we make adjustments to these allowances, which are applied to increase or reduce product sales revenue and earnings in the period of adjustment.

Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when wholesalers sell our products at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”), Pharmacy Benefit Managers (“PBMs”) and government programs.

We also pay quarterly distribution fees to certain wholesalers for inventory reporting and chargeback processing, and to PBMs and GPOs as administrative fees for services and for access to their members.

We concluded the benefits received in exchange for these fees are not distinct from our sales of our products, and accordingly we apply these amounts to reduce revenues.

Wholesalers also have rights to return unsold product nearing or past the expiration date.

Because of the shelf life of our products and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product.

We have compiled historical experience and data to estimate future returns and chargebacks of our products and the impact of the other discounts and fees we pay.

Each purchase order contains only one type of product, and is usually shipped to the wholesaler in a single shipment.

Therefore, allocation of the transaction price to individual packages is not required.

In connection with the orders placed by wholesalers, we incur costs such as commissions to our sales representatives.

However, as revenue from product sales is recognized upon delivery to the wholesaler, which occurs shortly after we receive a purchase order, we do not capitalize these commissions and other costs, based on application of the practical expedient allowed within the applicable guidance.

Other Proprietary Product Sale s

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

As a result of our acquisition of Antares, our commercial portfolio of proprietary products includes XYOSTED, TLANDO and NOCDURNA, which we sell primarily to wholesale and specialty distributors.

The estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, rebates and customer co-pay support programs are included in accrued liabilities and net of accounts receivable in the condensed consolidated balance sheets.

Partnered Product Sales

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At that time, the partners take control of the product, bear the risk of loss of ownership, and have an enforceable obligation to pay us.

As a result of our acquisition of Antares, we are party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which we produce and are the exclusive supplier of certain products, devices and/or components.

We are party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which we produce and are the exclusive supplier of certain products, devices and/or components.

Revenue is recognized when or as control of the goods transfers to the customer as discussed below.

We are the exclusive supplier of the Makena ® subcutaneous auto-injector product to Covis and the exclusive supplier of OTREXUP ® to Otter Pharmaceuticals, LLC (“Otter”).

Because these products are custom manufactured for each customer with no alternative use and we have a contractual right to payment for performance completed to date, control is continuously transferred to the customer as the product is produced pursuant to firm purchase orders.

We are the exclusive supplier of OTREXUP ® to Otter.

Because this product is custom manufactured with no alternative use and we have a contractual right to payment for performance completed to date, control is continuously transferred to the customer as the product is produced pursuant to firm purchase orders.

Revenue is recognized over time using the output method based on the contractual selling price and number of units produced.

The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets in the condensed consolidated balance sheets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.

The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets in our consolidated balance sheets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.

All other device partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment.

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We recognize revenue, including the estimated variable consideration we expect to receive for contract margin on future commercial sales, upon shipment of the goods to our partner.

The estimated variable consideration is recognized at an amount we believe is not subject to significant reversal based on historical experience and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.

The estimated variable consideration is recognized at an amount we believe is not subject to significant reversal of revenue based on historical experience and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.

Revenue Presentation

In our consolidated statements of income, we report as revenues under collaborative agreements the upfront payments, event-based development and regulatory milestones and sales milestones.

In our consolidated statements of income, we report the upfront payments, event-based development and regulatory milestones and sales milestones as revenues under collaborative agreements.

We also include in this category revenues from separate research and development contracts pursuant to project authorization forms.

We report royalties received from partners as a separate line in our consolidated statements of income.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Revenues from sales of our proprietary and partnered products are included in product sales, net in our consolidated statements of income.

In the footnotes to our consolidated financial statements, we provide disaggregated revenue information by type of arrangement (product sales, net, collaborative agreements and research and device licensing, and development revenues), and additionally, by type of payment stream received under collaborative agreements (upfront license and target nomination fees, event-based development and regulatory milestones and other fees, sales milestones and royalties).

In the footnotes to our consolidated financial statements, we provide disaggregated revenue information by type of arrangement (royalties;

product sales, net;

and collaborative agreements), and additionally, by type of payment stream received under collaborative agreements (upfront license and target nomination fees;

event-based development and regulatory milestones and other fees;

sales-based milestones;

and device licensing and development revenue).

Cost of Sales

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Cost of sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of inventories that do not meet certain product specifications, if any.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Research and Development Expenses

Research and development expenses include salaries and benefits, facilities and other overhead expenses, research related manufacturing services, contract services and other outside expenses.

Research and development expenses include salaries and benefits, allocation of facilities and other overhead expenses, research related manufacturing services, contract services, and other outside expenses related to manufacturing, preclinical and regulatory activities and our partner development platforms.

Research and development expenses are charged to operating expenses as incurred when these expenditures relate to our research and development efforts and have no alternative future uses.

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Share-Based Compensation

We record compensation expense associated with stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”) and shares issued under our employee stock purchase plan (“ESPP”) in accordance with the authoritative guidance for stock-based compensation.

The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of the award.

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Segment Information

As a result of the acquisition of Antares, we assessed the organization of our business and concluded that we continue to operate our business in one operating segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes and devices.

This segment also includes revenues and expenses related to (i) research and development and manufacturing activities conducted under our collaborative agreements with third parties, and (ii) product sales of proprietary and products.

The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment .

We operate our business in one operating segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes and devices.

The chief operating decision-maker (“CODM”), our Chief Executive Officer (“CEO”), reviews the operating results on an aggregate basis and manages the operations as a single operating segment .

Halozyme Therapeutics, Inc.

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The following table provides a brief description of recently issued accounting standards, those adopted in the current period and those not yet adopted:

Standard Description Effective Date Effect on the Financial

Standard Description Effective Date Adoption Method

Effect on the Financial

Statements or Other Significant Matters

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from contracts with customers

The new guidance requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts.

January 1, 2023

(Early adoption is permitted, including adoption in an interim period)

We early adopted ASU 2021-08 on April 1, 2022.

The adoption did not have a material impact on our condensed consolidated financial position or results of operations.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The new standard is intended to improve annual and interim reportable segment disclosure requirements regardless of number of reporting units, primarily through enhanced disclosures of significant expenses.

The amendment requires public entities to disclose significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit and loss.

Annual periods beginning after December 15, 2023 (our 2024 Form 10-K), and interim periods within fiscal years beginning after December 15, 2024 (our Q1 2025 Form 10-Q) - Early adoption is permitted, including adoption in an interim period

Retrospective

We are currently evaluating the impact of the standard on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The new guidance includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

Annual periods beginning after December 15, 2024 (our 2025 Form 10-K) - Early adoption is permitted

Prospective or Retrospective

We are currently evaluating the impact of the standard on our consolidated financial statements and related disclosures.

Halozyme Therapeutics, Inc.

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On May 24, 2022, we acquired all outstanding equity interests of Antares Pharma, Inc.

according to the terms and conditions of the Agreement and Plan of Merger, dated as of April 12, 2022 (the “Merger Agreement”).

(“Antares”) according to the terms and conditions of the Agreement and Plan of Merger, dated as of April 12, 2022 (the “Merger Agreement”).

Antares is a specialty pharmaceutical company focused primarily on the development and commercialization of pharmaceutical products and technologies that address patient needs in targeted therapeutic areas.

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The acquisition of Antares was funded by cash on hand and borrowings under the new credit agreement with Bank of America, N.A.

(“BofA”) and other lenders that provides for (i) a $ 350 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $ 250 million term loan facility (the “Term Facility”, collectively with the Revolving Credit Facility, the “2022 Facility”) as described in Note 8.

We recognized transaction costs of $ 21.9 million in the twelve months ended December 31, 2022.

These costs are reported in selling, general and administrative expenses in our condensed consolidated statements of income.

These costs are reported in selling, general and administrative expenses in our consolidated statements of income.

Transaction costs include, but are not limited to, investment banker, advisory, legal, and other professional fees.

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(a) Consideration for Antares equity compensation awards consists of $ 32.2 million paid for vested equity awards as well as $ 13.6 million paid for the pre-combination portion of unvested equity awards that were accelerated as part of the Merger Agreement.

The fair value of the unvested equity awards attributable to the post-combination period of $ 8.7 million is included in our consolidated statements of income in twelve months ended December 31, 2022.

The fair value of the unvested equity awards attributable to the post-combination period of $ 8.7 million is included in our consolidated statements of income during the year ended December 31, 2022.

Fair Value of Assets Acquired and Liabilities Assumed

The acquisition of Antares has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Halozyme treated as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value on the acquisition date.

Acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement.

The process for estimating the fair values of identifiable intangible assets and certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.

The table below presents the preliminary estimated fair values of assets acquired and liabilities assumed on the acquisition date based on valuations and management estimates.

The acquisition of Antares has been accounted for using the acquisition method of accounting in accordance with authoritative guidance for business combinations, with Halozyme treated as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value on the acquisition date.

The table below presents the estimated fair values of assets acquired and liabilities assumed on the acquisition date based on valuations and management estimates (in thousands).

Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.

We are still finalizing the allocation of the purchase price, therefore, the fair value estimates assigned to intangible assets, goodwill and the related tax impacts of the acquisition, among other items, are subject to change as additional information is received to complete our analysis and certain tax returns are finalized.

As a result, the preliminary estimates may be revised during the measurement period.

These differences could change the value of the intangible assets acquired, the contingent liability assumed, and the tax impacts related to the acquisition and could have a material impact on our results of operations and financial position.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Amounts (in thousands)

Amounts recognized as of Acquisition date (as initially reported) Measurement period adjustment Amounts recognized as of Acquisition date (as adjusted )

Amounts recognized as of 12/31/2022

Measurement period adjustment Amounts recognized as of 12/31/2023 (as adjusted )

Total purchase consideration, net of $ 46,548 cash acquired

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Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce.

Goodwill will be allocated entirely to the single reportable unit.

Goodwill was allocated entirely to the single reportable unit.

Goodwill recognized as a result of the acquisition is not deductible for tax purposes.

A contingent liability with a preliminary value of $ 130.0 million was assumed related to TLANDO.

We assumed an obligation to pay development milestone payments as well as commercial milestone payments and minimum tiered royalty payments based on TLANDO net sales which are contingent upon future events.

The acquisition date fair value was measured using the income approach, specifically the probability weighted expected return method for the development milestone payments and the option pricing methodology using the Monte Carlo simulation for commercial milestone payments and royalty payments.

We recorded measurement period adjustments in fourth quarter of 2022 to decrease intangible assets as a result of revised future cash flow estimates from the initial purchase price allocation and adjustments to accrued expenses.

These measurement period adjustments were made to reflect facts and circumstances that existed as of the acquisition date.

We also recorded a measurement period adjustment in the fourth quarter of 2022 to reduce the acquisition-date fair value of contingent liability by $ 114.3 million as a result of revised future cash flow estimates.

The measurement period adjustment has been recorded to reflect facts and circumstances that existed as of the acquisition date.

In the first six months of 2023, we recorded measurement period adjustments to increase accrued expenses by $ 2.0 million, increase deferred tax liabilities by $ 5.5 million and reduce accounts receivable by $ 0.2 million.

The measurement period adjustments were recorded to reflect facts and circumstances that existed as of the acquisition date.

During the second quarter of 2023, we finalized the estimates impacting the allocation of the purchase price consideration.

Identifiable Intangible Assets

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As such, the ATRS-1902 IPR&D will be tested annually for impairment and will not be amortized.

Useful lives and preliminary values are presented in the table below.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Useful lives and final values are presented in the table below.

Amount (in thousands) Useful life (years)

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ATRS-1902 (IPR&D) 48,700 Indefinite

Estimated fair value of intangible assets acquired $ 589,800

Fair value of intangible assets acquired $ 589,800

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Unaudited Pro Forma Results

Our consolidated financial statements include Antares’ results of operations from the date of acquisition on May 24, 2022 through December 31, 2022.

Our prior year consolidated financial statements include Antares’ results of operations from the date of acquisition on May 24, 2022 through December 31, 2022.

Total revenues and net loss after taxes attributable to Antares during this period and included in our consolidated financial statements for the twelve months ended December 31, 2022 total $ 112.7 million and $ 67.6 million, respectively.

The following unaudited pro forma financial information summarizes combined results of operations of Halozyme and Antares as if the companies had been combined as of the beginning of our fiscal year 2021.

Twelve Months Ended

Twelve Months Ended December 31,

Total revenues

$ 712,683 $ 627,292

Net income 218,723 295,634

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treasury securities

175,996 200 ( 12 ) 176,184

Agency bonds 16,119 — ( 16 ) 16,103

Commercial paper 15,826 — — 15,826

$ 129,541 $ 2 $ ( 944 ) $ 128,599

Total marketable securities, available-for-sale $ 217,475 $ 201 $ ( 46 ) $ 217,630

December 31, 2022

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treasury securities

Government Securities 17,232 — ( 12 ) 17,220

Commercial paper 282,731 — — 282,731

111,469 — ( 934 ) 110,535

As of December 31, 2022, 20 available-for-sale marketable securities with a fair market value of $ 117.2 million were in a gross unrealized loss position of $ 0.9 million.

Agency bonds 2,783 2 ( 1 ) 2,784

Commercial paper 7,004 — — 7,004

Total marketable securities, available-for-sale $ 129,541 $ 2 $ ( 944 ) $ 128,599

As of December 31, 2023, 20 available-for-sale marketable securities with a fair market value of $ 29.1 million were in a gross unrealized loss position of $ 46.3 thousand.

Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of December 31, 2023 because we do not intend to sell these securities and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.

The estimated fair value of our contractual maturities of available-for-sale debt securities are as follows (in thousands):

The estimated fair value of our contractual maturities of available-for-sale debt securities were as follows (in thousands):

December 31, 2023 December 31, 2022

Due within one year $ 197,633 $ 114,353

After one but within five years 14,246 121,238

Due after one year but within five years

19,997 14,246

Total estimated fair value of contractual maturities, available-for-sale $ 217,630 $ 128,599

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

December 31, 2023 December 31, 2022

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Money market funds $ 22,142 $ — $ 22,142 $ 191,704 $ — $ 191,704

treasury securities

2,000 — 2,000 — — —

Corporate debt securities — — — — — —

Available-for-sale marketable

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treasury securities

Non-US Government securities — — — — 17,220 17,220

176,184 — 176,184 110,535 — 110,535

Agency bonds 16,103 — 16,103 2,784 2,784

Commercial paper — 15,826 15,826 — 7,004 7,004

Total assets $ 216,429 $ 25,343 $ 241,772 $ 305,023 $ 15,280 $ 320,303

Derivative instruments

Currency hedging contracts (1)

$ — $ 9,480 $ — $ — $ — $ —

(1) Based on observable market transactions of spot currency rates, forward currency rates or equivalently-termed instruments.

Carrying amounts of the financial assets and liabilities are equal to the fair value.

As of December 31, 2023, the derivative liabilities recorded within accrued expenses and other long-term liabilities were $ 2.9 million and $ 6.6 million , respectively.

We had no available for sale securities that were classified within Level 3 as of December 31, 2023 and 2022.

A contingent liability with a value of $ 15.7 million was assumed related to TLANDO.

A contingent liability was assumed as part of the Antares acquisition related to TLANDO.

We will remeasure the fair value of the contingent liability on a quarterly basis.

Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues, cost of debt, risk free rate, weighted average cost of capital, revenue market price risk and revenue volatility.

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Changes in the fair value subsequent to the acquisition date is recognized in our consolidated statements of income.

In September 2023, we provided Lipocine notice of termination of the TLANDO license agreement effective January 31, 2024.

Based on the fair value remeasurement performed, we recognized a gain on change in fair value of the contingent liability of $ 13.2 million for the twelve months ended December 31, 2023 in our consolidated statements of income.

Halozyme Therapeutics, Inc.

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Sales of bulk rHuPH20

115,442 82,084 80,960

Sale of proprietary products 130,834 72,849 23,264

Sale of device partnered products

54,578 36,097 —

Total product sales, net 300,854 191,030 104,224

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Upfront license and target nomination fees

Event-based development milestones and regulatory milestone and other fees 59,000 42,000 69,500

2,000 30,000 42,000

Event-based development and regulatory milestones and other fees

69,000 59,000 42,000

Sales-based milestones

— 10,000 50,000

Device licensing and development revenue

9,534 9,611 1,186

Total revenues under collaborative agreements 80,534 108,611 135,186

Total revenue $ 660,116 $ 443,310 $ 267,594

During the year ended December 31, 2022 we recognized revenue related to licenses granted to collaboration partners in prior periods in the amount of $ 429.5 million.

This amount represents royalties and sales milestone earned in the current period, as well as $ 59.0 million of variable consideration in the contracts where uncertainties have been resolved and the development milestones are probable of being achieved or were achieved.

We also recognized revenue of $ 2.0 million during the year ended December 31, 2022 that had been included in deferred revenues at December 31, 2021.

We did not recognize any adjustments to reduce sales reserves and allowances liability related to Hylenex recombinant sales in prior periods.

Accounts receivable, other contract assets and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):

Total revenues

$ 829,253 $ 660,116 $ 443,310

During the year ended December 31, 2023 we recognized revenue related to licenses granted to partners in prior periods in the amount of $ 516.9 million.

This amount represents royalties earned in the current period, in addition to $ 69.0 million of variable consideration in the contracts where uncertainties were resolved and the development milestones are expected to be achieved or were achieved.

We also recognized revenue of $ 3.2 million during the year ended December 31, 2023 that had been included in deferred revenues in our consolidated balance sheets as of December 31, 2022.

Accounts receivable, other contract assets and deferred revenues (contract liabilities) from contracts with customers, including partners, consisted of the following (in thousands):

December 31, 2023 December 31, 2022

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Deferred revenues 4,048 —

As of December 31, 2022, the amounts included in the transaction price of our contracts with customers, including collaboration partners, and allocated to goods and services not yet provided were $ 80.7 million of which $ 75.2 million relates to unfulfilled product purchase orders and $ 5.5 million has been collected and reported as deferred revenues.

The unfulfilled product purchase orders are estimated to be delivered in 2023.

As of December 31, 2023, the amounts included in the transaction price of our contracts with customers, including partners, and allocated to goods and services not yet provided were $ 80.8 million of which $ 76.8 million relates to unfulfilled product purchase orders and $ 4.0 million has been collected and is reported as deferred revenues in our Consolidated Balance Sheets.

The unfulfilled product purchase orders are estimated to be delivered by the end of 2024.

Of the total deferred revenues of $ 4.0 million, $ 0.6 million is expected to be used by our customers within the next 12 months.

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Certain Balance Sheet Items

Accounts receivable consisted of the following (in thousands):

Accounts receivable, net and contract assets consisted of the following (in thousands):

2023 December 31,

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Contract assets 956 44,102

Subtotal $ 232,986 $ 92,115

Total accounts receivable and contract assets

240,957 232,986

Allowance for distribution fees and discounts ( 6,747 ) ( 1,914 )

Total accounts receivable $ 231,072 $ 90,975

Total accounts receivable, net and contract assets

$ 234,210 $ 231,072

Inventories consisted of the following (in thousands):

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Finished goods 69,930 45,970

Total inventories $ 100,123 $ 53,908

Total inventories, net

$ 127,601 $ 100,123

Prepaid expenses and other assets consisted of the following (in thousands):

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Total prepaid expenses and other assets

Less long-term portion ( 26,301 ) ( 13,414 )

66,429 71,325

Long-term portion

( 17,816 ) ( 26,301 )

Total prepaid expenses and other assets, current

$ 48,613 $ 45,024

Prepaid manufacturing expenses include raw materials, slot reservation fees and other amounts paid to contract manufacturing organizations.

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Leasehold improvements 6,987 6,729

Subtotal $ 49,857 $ 19,891

57,769 49,857

Accumulated depreciation and amortization ( 19,661 ) ( 14,756 )

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Property and equipment, net

$ 74,944 $ 75,570

Depreciation and amortization expense was approximately $ 11.1 million, $ 6.5 million, and $ 3.0 million, inclusive of ROU asset amortization of $ 5.5 million, $ 3.0 million and $ 1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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Total accrued expenses

138,398 132,448

Less long-term portion ( 37,720 ) ( 32,686 )

Total accrued expenses, current

$ 100,678 $ 99,762

Expense associated with the accretion of the lease liabilities was approximately $ 2.5 million, $ 0.5 million and $ 0.3 million for the twelve months ended December 31, 2023, 2022 and 2021, respectively.

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Goodwill and Intangible Assets

On May 24, 2022, we acquired all outstanding equity interests of Antares.

A Goodwill balance of $ 409.0 million was recognized for the excess of the consideration transferred over the net assets acquired and represents the expected revenue and cost synergies of the combined company and assembled workforce.

A summary of the activity impacting goodwill is presented below (in thousands):

Balance as of December 31, 2022

Goodwill acquired 409,049

Measurement period adjustments (1)

Balance as of December 31, 2023

(1) Refer to Note 3, Business Combination , for further discussion on the measurement period adjustments.

Intangible Assets

Our acquired intangible assets are amortized using the straight-line method over their estimated useful lives of seven to ten years .

The following table shows the cost, accumulated amortization and weighted average remaining life in years for our acquired intangible assets as of December 31, 2022 (in thousands).

Weighted average remaining life (in years) Gross Carrying Value Accumulated Amortization Net Carrying Value

The following table shows the cost, accumulated amortization and weighted average useful life in years for our acquired intangible assets as of December 31, 2023 (in thousands).

Weighted average useful life (in years)

Gross Carrying Value Accumulated Amortization Net Carrying Value

Auto-Injector technology platform 7 $ 402,000 $ 92,163 $ 309,837

XYOSTED proprietary product 10 136,200 21,858 114,342

TLANDO product rights 10 2,900 175 2,725

Total definite-lived intangibles, net $ 541,100 $ 43,148 $ 497,952

Total finite-lived intangibles, net (1)

$ 538,200 $ 114,021 $ 424,179

ATRS-1902 (IPR&D) Indefinite 48,700

Total intangibles, net

The estimated future annual amortization of finite-lived intangible assets is shown in the following table.

(1) An impairment charge of $ 2.5 million was recognized during the year ended December 31, 2023 resulting in the full impairment of the TLANDO product rights intangible asset.

The impairment charge resulted from the notice of termination of the TLANDO license agreement provided to Lipocine in September 2023, effective January 31, 2024, and is included in amortization of intangibles in our consolidated statements of income.

Estimated future annual amortization of finite-lived intangible assets is shown in the following table (in thousands).

Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors.

Amortization (in thousands)

Amortization Expense

2024 $ 71,049

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1.00 % Convertible Notes due 2028

In August 2022, we completed the sale of $ 720.0 million in aggregate principal amount of 1.00 % Convertible Senior Notes due 2028 (the “2028 Convertible Notes” and collectively with the 2024 and the 2027 Convertible Notes the “Convertible Notes”).

In August 2022, we completed the sale of $ 720.0 million in aggregate principal amount of 1.00 % Convertible Senior Notes due 2028 (the “2028 Convertible Notes” and collectively with the 2024 Convertible Notes and 2027 Convertible Notes the “Convertible Notes”).

The net proceeds in connection with the issuance of the 2028 Convertible Notes, after deducting the initial purchasers’ fee of $ 18.0 million, was approximately $ 702.0 million.

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and (5) at any time from, and including, February 15, 2028 until the close of business on the second scheduled trading day immediately before the maturity date.

As of December 31, 2022, the 2028 Convertible Notes are not convertible.

As of December 31, 2023, the 2028 Convertible Notes were not convertible.

Upon conversion, we will pay cash for the settlement of principal, and for the premium, if applicable, we will pay cash, deliver shares of common stock or a combination of cash and shares of common stock, at our election.

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The cap price of the Capped Call Transactions is initially $ 75.4075 per share of common stock, representing a premium of 75 % above the last reported sale price of $ 43.09 per share of common stock on August 15, 2022, and is subject to certain adjustments under the terms of the Capped Call Transactions.

As of December 31, 2022, no capped calls have been exercised.

Pursuant to their terms, the capped calls qualify for classification within stockholders’ equity in the condensed consolidated balance sheets, and their fair value is not remeasured and adjusted as long as they continue to qualify for stockholders’ equity classification.

We paid approximately $ 69.1 million for the Capped Calls, including applicable transaction costs, which was recorded as a reduction to additional paid-in capital in the Condensed Consolidated Balance Sheets.

As of December 31, 2023, no capped calls had been exercised.

Pursuant to their terms, the capped calls qualify for classification within stockholders’ equity in our consolidated balance sheets, and their fair value is not remeasured and adjusted as long as they continue to qualify for stockholders’ equity classification.

We paid approximately $ 69.1 million for the Capped Calls, including applicable transaction costs, which was recorded as a reduction to additional paid-in capital in the consolidated balance sheets.

The Capped Call Transactions are separate transactions entered into by us with the capped call Counterparties, are not part of the terms of the Convertible Notes, and do not affect any holder’s rights under the Convertible Notes.

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0.25 % Convertible Notes due 2027

In March 2021, we completed the sale of $ 805.0 million in aggregate principal amount of 0.25 % Convertible Senior Notes due 2027 (the “2027 Convertible Notes” and collectively with the 2024 Convertible Notes the “Convertible Notes”).

The net proceeds in connection with the issuance of the 2027 Convertible Notes, after deducting the initial purchasers’ fee of

In March 2021, we completed the sale of $ 805.0 million in aggregate principal amount of 0.25 % Convertible Senior Notes due 2027 (the “2027 Convertible Notes”).

The net proceeds in connection with the issuance of the 2027 Convertible Notes,

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

$ 20.1 million, was approximately $ 784.9 million.

after deducting the initial purchasers’ fee of $ 20.1 million, was approximately $ 784.9 million.

We also incurred additional debt issuance costs totaling $ 0.4 million.

1 unchanged sentence

The 2027 Convertible Notes pay interest semi-annually in arrears on March 1st and September 1st of each year at an annual rate of 0.25 %.

The 2027 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 2027 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.

The 2027 Convertible Notes are general unsecured obligations and rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the 2027 Convertible Notes, rank equally in right of payment with all existing and future liabilities that are not so subordinated, are effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries.

The 2027 Convertible Notes have a maturity date of March 1, 2027.

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and (5) at any time from, and including, September 1, 2026 until the close of business on the scheduled trading day immediately before the maturity date.

The Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, September 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date.

As of December 31, 2022, the 2027 Convertible Notes are not convertible.

As of December 31, 2023, the 2027 Convertible Notes were not convertible.

Upon conversion, we will pay cash for the settlement of principal and for the premium, if applicable, we will pay cash, deliver shares of common stock or a combination of cash and shares of common stock, at our election.

The initial conversion rate for the 2027 Convertible Notes will be 12.9576 shares of common stock per $1,000 in principal amount of 2027 Convertible Notes, equivalent to a conversion price of approximately $ 77.17 per share of our common stock.

The initial conversion rate for the 2027 Convertible Notes is 12.9576 shares of common stock per $1,000 in principal amount of 2027 Convertible Notes, equivalent to a conversion price of approximately $ 77.17 per share of our common stock.

The conversion rate is subject to adjustment.

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1.25 % Convertible Notes due 2024

In November 2019, we completed the sale of $ 460.0 million in aggregate principal amount of 1.25 % Convertible Senior Notes due 2024 (“2024 Convertible Notes”).

The net proceeds in connection with 2024 Convertible Notes, after deducting the initial purchases’ fee of $ 12.7 million, was approximately $ 447.3 million.

In November 2019, we completed the sale of $ 460.0 million in aggregate principal amount of 1.25 % Convertible Senior Notes due 2024 (the “2024 Convertible Notes”).

The net proceeds in connection with the issuance of the 2024 Convertible Notes, after deducting the initial purchasers’ fee of $ 12.7 million, was approximately $ 447.3 million.

We also incurred debt issuance cost totaling $ 0.3 million.

Debt issuance costs and the initial purchasers’ fee are presented as a debt discount.

The 2024 Convertible Notes 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 %.

The 2024 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 2024 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 the our current or future subsidiaries.

The 2024 Convertible Notes have a maturity date of December 1, 2024.

Holders may convert their 2024 Convertible Notes at their option only in the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020, if the last reported sale price per share of common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on our common stock, as described in the offering memorandum for the 2024 Convertible Notes;

(4) if we call such notes for redemption;

and (5) at any time from, and including, June 1, 2024 until the close of business on the scheduled trading day immediately before the maturity date.

As of December 31, 2022, the 2024 Convertible Notes are convertible and are classified as a current liability

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

In January 2021 we notified the note holders of our irrevocable election to settle the principal of the 2024 Convertible Notes in cash and for the premium, if applicable, to deliver shares of common stock.

The conversion rate for the 2024 Convertible Notes will be 41.9208 shares of common stock per $1,000 in principal amount of 2024 Convertible Notes, equivalent to a conversion price of approximately $ 23.85 per share of our common stock.

The conversion rate is subject to adjustment.

Debt issuance costs and the initial purchasers’ fee were presented as a debt discount.

In January 2021, we notified the note holders of our irrevocable election to settle the principal of the 2024 Convertible Notes in cash and for the premium, to deliver shares of common stock.

The conversion rate for the 2024 Convertible Notes was 41.9208 shares of common stock per $1,000 in principal amount of 2024 Convertible Notes, equivalent to a conversion price of approximately $ 23.85 per share of our common stock.

The conversion rate was subject to adjustment.

In March 2021, we completed a privately negotiated, induced conversion of $ 369.1 million principal amount of the 2024 Convertible Notes (“2021 Note Repurchases” or the “2021 Induced Conversion”).

In connection with the 2021 Induced Conversion, we paid approximately $ 370.2 million in cash, which includes principal and accrued interest, and issued approximately 9.08 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion.

As a result of the 2021 Induced Conversion, we recorded $ 21.0 million in induced conversion expense which is included in Other income (expense) of the Condensed Consolidated Statements of Operations for the twelve months ended December 31, 2022.

The induced conversion expense represents the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.

In connection with the 2021 Induced Conversion, we paid approximately $ 370.2 million in cash, which included principal and accrued interest, and issued approximately 9.08 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion.

As a result of the 2021 Induced Conversion, we recorded $ 21.0 million in induced conversion expense which was included in other income (expense) of our consolidated statements of income in 2021.

The induced conversion expense represented the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.

In August 2022, we completed a privately negotiated induced conversion of $ 77.4 million principal amount of the 2024 Convertible Notes (“2022 Note Repurchases” or the “2022 Induced Conversion”).

In connection with the 2022 Induced Conversion, we paid approximately $ 77.6 million in cash, which includes principal and accrued interest, and issued approximately 1.51 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion.

As a result of the 2022 Induced Conversion, we recorded $ 2.7 million in induced conversion expense which is included in other income (expense) of the consolidated statements of income.

The induced conversion expense represents the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.

In January 2023, we issued a notice for the redemption of 2024 Convertible Notes, and we expect to make cash payment of $ 13.5 million to effect the redemption in March 2023.

As of December 31, 2022, we were in compliance with all covenants and there was no material adverse change in our business, operations or financial condition.

In connection with the 2022 Induced Conversion, we paid approximately $ 77.6 million in cash, which included principal and accrued interest, and issued approximately 1.51 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion.

As a result of the 2022 Induced Conversion, we recorded $ 2.7 million in induced conversion expense which was included in other income (expense) of our consolidated statements of income in 2022.

The induced conversion expense represented the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Net Carrying Amounts of the Convertible Notes

The carrying amount and fair value of our Convertible Notes were as follows as of the dates indicated (amount in thousands).

In January 2023, we issued a notice for the redemption of 2024 Convertible Notes.

Holders of the notes could convert their notes at any time prior to the close of the business day prior to the redemption date.

In March 2023, holders of the notes elected to convert the 2024 Convertible Notes in full.

In connection with the conversion, we paid approximately $ 13.5 million in cash which included principal and accrued interest, and issued 288,886 shares of our common stock representing the intrinsic value based on the contractual conversion rate.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Net Carrying Amounts of our Convertible Notes

The carrying amount and fair value of our Convertible Notes were as follows (in thousands).

2023 December 31,

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Total principal amount

$ 1,525,000 $ 1,538,483

Unamortized debt discount

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2027 Convertible Notes 3.2 4.2

2028 Convertible Notes 5.6 n/a

2028 Convertible Notes 4.6 5.6

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes the components of interest expense and the effective interest rates for each of our Convertible Notes for the periods shown (in thousands).

Twelve Months Ended

The following table summarizes the components of interest expense and the effective interest rates for each of our Convertible Notes (in thousands).

Twelve Months Ended December 31,

2023 2022 2021

Coupon interest

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Total coupon interest

$ 9,249 $ 5,444 $ 3,583

Amortization of debt discount

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In May 2022, in connection with the closing of the Antares acquisition, we entered into a credit agreement, which was subsequently amended, with Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders and L/C Issuers party thereto (the “2022 Credit Agreement), evidencing a credit facility (the “2022 Facility”) that provides for (i) a $ 350 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $ 250 million term loan facility (the “Term Facility”).

Proceeds from a $ 120 million draw on the Revolving Credit Facility and the $ 250 million Term Facility were used to fund a portion of the Antares acquisition, repay Antares’ existing debt and pay fees and expenses in connection with the acquisition.

The 2022 Credit Agreement contains an expansion feature, which allows us, subject to certain conditions, to increase the aggregate principal amount of the 2022 Facility, provided we remain in compliance with underlying financial covenants on a pro forma basis including the consolidated interest coverage ratio and the consolidated net leverage ratio covenants set forth in the 2022 Credit Agreement.

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The Amendment, among other things, increased the size of the revolving credit facility from $ 350 million to $ 575 million.

The terms of the Revolving Credit Facility are otherwise unchanged.

The terms of the Revolving Credit Facility were otherwise unchanged.

Concurrently with the entry into the Amendment, we repaid the entire outstanding Term Loan Facility and repaid all outstanding loans under the Revolving Credit Facility under the 2022 Credit Agreement.

As of December 31, 2023, the Revolving Credit Facility was undrawn.

We incurred a total of $ 3.6 million in third-party costs related to the 2022 Credit Agreement which is recorded as debt issuance cost within prepaid expenses and other assets in the condensed consolidated balance sheets.

We incurred a total of $ 3.6 million in third-party costs related to the 2022 Credit Agreement which are recorded as debt issuance cost within prepaid expenses and other assets in our consolidated balance sheets.

As of December 31, 2023, the unamortized debt issuance cost related to the revolving credit facility was $ 2.3 million.

Future maturities and interest payments of long-term debt as of December 31, 2023, are as follows (in thousands):

2023 $ 22,745

Thereafter 724,480

Total minimum payments 1,564,654

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Share-based Compensation

We currently grant stock options, restricted stock awards, performance stock units and restricted stock units under the Amended and Restated 2021 Stock Plan (“2021 Stock Plan”), which was approved by the stockholders on May 5, 2021 an d provides for the grant of up to 17.8 million shares of common stock to selected employees, consultants and non-employee members of our Board of Directors as stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards.

We currently grant stock options, RSUs and PSUs under the Amended and Restated 2021 Stock Plan (“2021 Stock Plan”), which was approved by the stockholders on May 5, 2021 an d provides for the grant of up to 17.8 million shares of common stock to selected employees, consultants and non-employee members of our Board of Directors as stock options, stock appreciation rights (“SARs”), RSAs, RSUs and PSUs.

Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors.

During the year ended December 31, 2023, we granted share-based awards under the 2021 Stock Plan.

At December 31, 2022, 6,550,075 shares were subject to outstanding awards and 14,764,481 shares were available for future grants of share-based awards.

Total share-based compensation expense related to share-based awards excluding the acceleration of Antares equity awards was comprised of the following (in thousands):

As of December 31, 2023, $ 7.8 million shares were subject to outstanding awards and $ 12.1 million shares were available for future grants of share-based awards.

Total share-based compensation expense related to share-based awards was comprised of the following (in thousands):

Year Ended December 31,

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Selling, general and administrative 23,275 14,494 13,828

Share-based compensation expense $ 24,397 $ 20,820 $ 17,204

Total share-based compensation expense

$ 36,620 $ 24,397 $ 20,820

Share-based compensation expense by type of share-based award (in thousands):

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RSAs, RSUs, PSUs and ESPP 20,269 13,424 10,568

Total share-based compensation expense

$ 36,620 $ 24,397 $ 20,820

Total unrecognized estimated compensation cost by type of award and the weighted-average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):

December 31, 2023

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As of December 31, 2023, 2,604,222 shares were available for future purchase.

The offering period is generally for a six-months period and the first offering period commenced on June 16, 2021.

The offering period is generally for a six-month period and the first offering period commenced on June 16, 2021.

Offering periods shall commence on or about the sixteenth day of June and December of each year and end on or about the fifteenth day of the next December and June respectively, occurring thereafter.

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Stock Options.

Options granted under the Plans must have an exercise price equal to at least 100 % of the fair market value of our common stock on the date of grant.

Options granted under the 2021 Stock Plan must have an exercise price equal to at least 100 % of the fair market value of our common stock on the date of grant.

The options generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter.

Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans).

Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2021 Stock Plan).

A summary of our stock option award activity as of and for the year ended December 31, 2023 is as follows:

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Price per Share Weighted

Term (years) Aggregate

Term ( in years)

Value (in millions)

Outstanding at December 31, 2021

Outstanding as of December 31, 2022

5,368,225 $ 24.99

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Canceled/forfeited ( 359,331 ) 42.33

Outstanding at December 31, 2022

Outstanding as of December 31, 2023

6,422,837 30.50 6.64 $ 64.0

Vested and expected to vest at December 31, 2022

Vested and expected to vest as of December 31, 2023

6,422,837 30.50 6.64 64.0

Exercisable at December 31, 2022

Exercisable as of December 31, 2023

3,620,251 $ 21.67 4.96 $ 60.0

The weighted average grant date fair values of options granted during the years ended December 31, 2022, 2021 and 2020 were $ 14.22 per share, $ 18.21 per share and $ 20.74 per share, respectively.

The weighted average grant date fair value of options granted during the years ended December 31, 2023, 2022 and 2021 was $ 17.72 per share, $ 14.22 per share and $ 18.21 per share, respectively.

The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was approximately $ 13.7 million, $ 21.6 million and $ 33.5 million, respectively.

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A RSU is a promise by us to issue a share of our common stock upon vesting of the unit.

The RSUs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant.

RSUs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant.

The following table summarizes our RSU activity during the year ended December 31, 2023:

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Fair Value Weighted

Term (yrs) Aggregate

Term (in years)

Value (in millions)

Outstanding at December 31, 2021

Outstanding as of December 31, 2022

1,039,381 $ 35.76

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Forfeited ( 146,529 ) 43.50

Outstanding at December 31, 2022

Outstanding as of December 31, 2023

1,139,336 $ 41.38 1.27 $ 42.1

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Shares Weighted

Outstanding at December 31, 2021

Outstanding as of December 31, 2022

142,844 $ 46.01

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Forfeited ( 2,660 ) 52.79

Outstanding at December 31, 2022

Outstanding as of December 31, 2023

242,555 $ 51.72

The estimated fair value of the PSUs was based on the closing market value of our common stock on the date of grant.

The fair value of PSUs vested during the years ended December 31, 2022 and 2021 was $ 0.2 million and $ 0.1 million, respectively.

The fair value of PSUs vested during the years ended December 31, 2023, 2022 and 2021 was $ 0.2 million, $ 0.2 million and $ 0.1 million, respectively.

Stockholders’ Equity

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Share Repurchases

In November 2019, the Board of Directors authorized a capital return program to repurchase up to $ 550.0 million of outstanding common stock over a three -year period.

During 2020, we repurchased 6.5 million shares of common stock for $ 150.0 million at an average price of $ 23.05 .

During 2021, we repurchased 4.6 million shares of common stock for $ 200.0 million at an average price of $ 43.02 under the program.

The shares were purchased through open market transactions and through an ASR agreement.

The $ 550.0 million share repurchase program was completed in October 2021 having repurchased a total of 22.3 million shares at an average price of $ 24.72 .

In December 2021, the Board of Directors authorized a second capital return program to repurchase up to $ 750.0 million of outstanding stock over a three -year period.

Also in December 2021, as part of the second capital return program, we entered into an ASR agreement to repurchase $ 150.0 million of common stock.

At inception pursuant to the agreement, we paid $ 150.0 million and took initial delivery of 3.5 million shares.

In June 2022, we finalized the transaction and received an additional 0.4 million shares.

In August 2022, concurrent with the sale of 2028 Convertible Notes and the 2022 Induced Conversion, we repurchased 2.1 million shares of common stock in open market purchases for $ 90.2 million.

Also, in August 2022, we entered into an ASR agreement to repurchase $ 109.8 million of our common stock.

At inception, pursuant to the agreement, we paid $ 109.8 million and took an initial delivery of 2.0 million shares.

In December 2022, we finalized the transaction and received an additional 0.4 million shares.

We retired the repurchased shares and they resumed their status of authorized and unissued shares.

During 2021, we repurchased 3.9 million shares of common stock for $ 150.0 million at an average price of $ 38.51 .

During 2022, we repurchased 4.5 million shares of common stock for $ 200.0 million at an average price of $ 44.44 .

We accelerated the initiation of our planned 2024 share repurchases and in November 2023, we entered into an Accelerated Share Repurchase (“ASR”) agreement with Bank of America to accelerate the remaining $ 250.0 million of share repurchases under the approved capital return program.

Pursuant to the agreement, at the inception of the ASR, we paid $ 250.0 million to Bank of America and took initial delivery of 5.5 million shares.

All shares repurchased under our capital return programs have been retired and have resumed their status of authorized and unissued shares.

As of December 31, 2023, excluding the shares we received under the ASR, we have repurchased a total of 12.6 million shares for $ 500.0 million at an average price per share of $ 39.81 under our $ 750 million 3-year share repurchase plan.

We had the following activity under the approved share repurchase programs (dollars in thousands, except share and per share data)

Total Number of Shares Purchased Weighted Average Price paid Per Share Total Cost (1)

Total Number of Shares Purchased Weighted Average Price Paid Per Share

Total Cost (1)

First quarter 4,165,258 $ 36.01 $ 150,083

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Third quarter

4,500,216 $ 44.44 $ 200,000

Fourth quarter — — —

4,165,258 36.01 $ 150,083

Accelerated share repurchase (2)

5,452,563 $ — $ 250,000

(1) Included in the total cost of shares purchased is a commission fee of $ 0.02 per share.

(2) Included is 0.4 million shares delivered in December 2022 upon completion of the ASR.

Net Income per share

Basic net income per common share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents.

Outstanding stock options, unvested RSAs, unvested RSUs, unvested PSUs, common shares expected to be issued under our ESPP and the Convertible Notes are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive.

Potentially dilutive common shares issuable upon vesting of stock options, RSAs, RSUs and PSUs are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares issuable upon conversion of our Convertible Notes are determined using the if-converted method.

(2) Purchased through an ASR agreement executed to repurchase $ 250.0 million of common stock.

In November 2023, we took initial delivery of 5.5 million shares in accordance with the ASR.

Final shares will be delivered on or before June 10, 2024.

Earnings per share

Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents.

Outstanding stock options, unvested RSUs, unvested PSUs, common shares expected to be issued under our ESPP and the Convertible Notes are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive.

Potentially dilutive common shares issuable upon vesting of stock options, RSUs and PSUs are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares issuable upon conversion of the Convertible Notes are determined using the if-converted method.

Since we have committed to settle the principal amount of the Convertible Notes in cash upon conversion only, the number of shares for the conversion spread will be included as a dilutive common stock equivalent.

A reconciliation of the numerators and the denominators of the basic and diluted net income per common share computations is as follows (in thousands, except per share amounts):

Twelve Months Ended

A reconciliation of the numerators and the denominators of the basic and diluted earnings per share computations is as follows (in thousands, except per share amounts):

Twelve Months Ended December 31,

2023 2022 2021

Net income $ 281,594 $ 202,129 $ 402,710

Weighted average common shares outstanding for basic net income per share 136,844 140,646 136,206

Weighted average common shares outstanding for basic earnings per share

131,927 136,844 140,646

Dilutive potential common stock outstanding

Stock options

RSAs, RSUs, PSUs and ESPP 422 555 627

1,824 2,265 2,737

RSUs, PSUs and ESPP

Convertible Notes 58 1,077 2,858

Weighted average common shares outstanding for diluted net income per share 140,608 146,796 141,463

Net income per share:

Weighted average common shares outstanding for diluted earnings per share

134,197 140,608 146,796

Earnings per share

Basic $ 2.13 $ 1.48 $ 2.86

Diluted $ 2.10 $ 1.44 $ 2.74

Shares which have been excluded from the calculation of diluted net income per common share because their effect was anti-dilutive, include the following (shares in millions):

Twelve Months Ended

Shares which have been excluded from the calculation of diluted earnings per common share because their effect was anti-dilutive, include the following (shares in millions):

Twelve Months Ended December 31,

2023 2022 2021

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Operating Leases

Our properties consist of leased office, laboratory, warehouse and manufacturing facilities.

Our properties consist of leased office, laboratory, warehouse and assembly facilities.

Our administrative offices and research facilities are located in San Diego, California.

In addition, we have an office in Ewing, New Jersey.

We also lease a building in Minnetonka, Minnesota consisting of office, laboratory, manufacturing and warehousing space.

We also lease a building in Minnetonka, Minnesota consisting of office, assembly operations, and warehousing space, and have a small administrative office in Ewing, New Jersey.

We lease an aggregate of approximately 162,000 square feet of space.

In March 2022, we entered into an agreement for assignment and assumption of lease with Seismic Software, Inc.

pursuant to which effective January 1, 2023, we assumed Seismic’s office lease, as amended with Kilroy Realty L.P.

for approximately 73,238 square feet of space in office and research facilities which commenced on December 1, 2022.

We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes.

We pay a pro rata share of operating costs, insurance costs, utilities and real property taxes.

Additionally, we lease certain office equipment under operating leases.

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Additionally, any such claims, whether or not successful, could damage our reputation and business.

We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.

We currently are not a party to any legal proceedings, the adverse outcome of which, in our opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Total income (loss) before income taxes summarized by region were as follows (in thousands):

Total income (loss) before income taxes summarized by region was as follows (in thousands):

Year Ended December 31,

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Inventory related reserves 13,561 18,395

Interest expense limitation — —

Other, net 6,715 3,054

Total deferred tax assets

123,077 172,661

4 unchanged sentences

Depreciation ( 3,522 ) ( 2,559 )

Convertible note — ( 17 )

ASC 842 right of use asset ( 8,259 ) ( 9,061 )

2 unchanged sentences

Net deferred tax asset $ 4,386 $ 44,426

A valuation allowance of $ 0.7 million and $ 0.5 million has been established to offset the net deferred tax assets as of December 31, 2022 and 2021, respectively, as realization of such assets is uncertain.

A valuation allowance of $ 2.6 million and $ 0.7 million has been established to offset the net DTAs as of December 31, 2023 and 2022, respectively, as realization of such assets is uncertain.

On a periodic basis, we reassess the valuation allowance of our DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all of our DTAs will be realized.

In 2021, we have demonstrated profitability and cumulative pretax income and are forecasting income growth.

In 2021, we demonstrated profitability and cumulative pretax income and are forecasting income growth in future tax years.

After assessing both the positive and negative evidence, we determined that it was more likely than not that our DTAs would be realized and released the valuation allowance in 2021.

On May 24, 2022, we acquired the outstanding shares of Antares.

This transaction was treated as a non-taxable acquisition.

We have increased our DTLs by approximately $ 119.7 million related to the acquired intellectual property and a step-up to the value of the inventory, the amortization of which will not be tax deductible.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

On May 24, 2022, we acquired the outstanding shares of Antares Pharma Inc.

This transaction was treated as a non-taxable acquisition, we have increased our deferred tax liabilities by approximately $ 119.7 million related to acquired intellectual property and a step-up to the value of inventory the amortization of which will not be tax deductible.

Income tax (benefit) expense was comprised of the following components (in thousands):

Income tax expense (benefit) was comprised of the following components (in thousands):

Year Ended December 31,

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Deferred - state 2,018 ( 6,650 ) ( 37,509 )

Total income tax expense (benefit)

$ 66,735 $ 46,789 $ ( 154,192 )

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2023 2022 2021

Federal income tax expense (benefit) at 21% 21.00 % 21.00 % 21.00 %

State income tax expense (benefit), net of federal income tax impact 0.82 % 2.67 % ( 1.59 ) %

(Decrease) increase in valuation allowance ( 0.39 ) % ( 84.92 ) % 34.59 %

Worthless stock deduction of international subsidiary — % — % ( 52.07 ) %

Federal income tax expense

21.00 % 21.00 % 21.00 %

State income tax expense, net of federal income tax impact

2.76 % 0.82 % 2.67 %

Decrease in valuation allowance

— % ( 0.39 ) % ( 84.92 ) %

Foreign income subject to tax at other than federal statutory rate 0.03 % — % 0.02 %

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Transaction costs — % 0.88 % — %

Research and development credits, net ( 2.71 ) % — % — %

Effective income tax rate

19.13 % 18.80 % ( 62.05 ) %

At December 31, 2022, our unrecognized tax benefit and uncertain tax positions were $ 19.5 million, which will impact the effective tax rate when resolved.

As of December 31, 2023, our unrecognized tax benefit and uncertain tax positions were $ 21.9 million, which will impact the effective tax rate when resolved.

Of the unrecognized tax benefits, we do not expect any significant changes to occur in the next 12 months.

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For the years ended December 31, 2023, 2022 and 2021, we recognized an immaterial amount of interest and penalties.

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

1 unchanged sentence

2023 2022 2021

Gross unrecognized tax benefits at beginning of period $ 17,692 $ 19,167 $ 21,483

Gross unrecognized tax benefits, beginning of period

$ 19,482 $ 17,692 $ 19,167

Increases in tax positions for prior years 1,645 — 21

Decreases in tax positions for prior years and lapse in statue of limitations ( 1,148 ) ( 1,496 ) ( 2,357 )

Decreases in tax positions for prior years and lapse in statute of limitations

— ( 1,148 ) ( 1,496 )

Increases in tax positions related to business acquisition — 2,151 —

Increases in tax positions for current year 791 787 —

Gross unrecognized tax benefits at end of period $ 19,482 $ 17,692 $ 19,167

At December 31, 2022, we had federal, California and other state tax net operating loss carryforwards of approximately $ 31.2 million, $ 237.4 million and $ 63.4 million, respectively.

Gross unrecognized tax benefits, end of period $ 21,918 $ 19,482 $ 17,692

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

As of December 31, 2023, we had federal, California and other state tax net operating loss carryforwards of approximately $ 46.8 million, $ 235.8 million and $ 66.8 million, respectively.

The California and Minnesota net operating loss carryforwards begin to expire in 2037 and 2028, respectively.

As a result of the acquisition of Antares, we acquired federal and Minnesota research and development credits of approximately $ 7.4 million and $ 0.72 million, respectively.

We expect to be able to fully utilize these attributes without limitation.

At December 31, 2022, we had federal, California and Minnesota research and development tax credit carryforwards of approximately $ 30.8 million, $ 17.0 million and $ 0.7 million, respectively.

As of December 31, 2023, we had federal and California research and development tax credit carryforwards of approximately $ 38.4 million, and $ 24.8 million, respectively.

The federal research and development tax credits will begin to expire in 2030 unless previously utilized.

The California research and development tax credits will carryforward indefinitely until utilized.

The Minnesota research and development credit will begin to expire in 2023 unless previously utilized.

Additionally, we had Orphan Drug Credit carryforwards of $ 70.0 million which will begin to expire in 2034.

Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period.

As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations.

We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of December 31, 2020.

We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of the acquisition of Antares.

Based upon the analysis, we determined that ownership changes occurred in prior years;

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income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time.

At December 31, 2022 and 2021, there were no undistributed earnings in foreign subsidiaries.

As of December 31, 2023 and 2022, there were no undistributed earnings in foreign subsidiaries.

We are subject to taxation in the U.S.

and in various state and foreign jurisdictions.

Our tax years for 2008 and forward are subject to examination by the U.S.

and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.

Our tax years for 2008 and forward are subject to examination by the U.S., California, and Minnesota tax authorities due to the carryforward of unutilized net operating losses and research and development credits.

Halozyme Therapeutics, Inc.

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$ 1,003 $ — $ 8,131 $ ( 7,994 ) $ 1,140

_______________

(1) Allowances are for chargebacks, prompt payment discounts and distribution fees related to proprietary product sales.

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-K

Item 9A. Controls and Procedures