What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-07 · 137 added, 80 removed, 328 unchanged (40% of the section changed)

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Additionally, statements concerning future matters such as the development or regulatory approval of new partner products, enhancements of existing products or technologies, timing and success of the launch of new products by us and our partners, third-party performance under key collaboration agreements, the ability of our bulk drug and device part manufacturers to provide adequate supply for our partners, revenue, expense, cash burn levels and our ability to make timely repayments of debt, anticipated amounts and timing of share repurchases, anticipated profitability and expected trends and other statements regarding our plans and matters that are not historical are forward-looking statements.

Such statements reflect management’s current forecast of certain aspects of our future business, are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied in our forward-looking statements due to a number of factors including, but not limited to, those set forth below under the section entitled “Risks Factors” and elsewhere in this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K.

Such statements reflect management’s current forecast of certain aspects of our future business, are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied in our forward-looking statements due to a number of factors including, but not limited to, the Risk Factors set forth in our most recent Annual Report on Form 10-K referred to below under the section entitled “Risks Factors” and elsewhere in this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q.

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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.

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We refer to the application of rHuPH20 to facilitate the delivery of other drugs or fluids as ENHANZE.

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

We license our ENHANZE technology to form collaborations with biopharmaceutical companies that develop and/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.

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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 earn royalties from the sales of seven commercial products including sales of one commercial product from each of the Takeda, Janssen and argenx collaborations and four commercial products from the Roche collaboration.

We currently earn royalties from the sales of eight commercial products including sales of one commercial product from each of the Takeda, Janssen and argenx collaborations and five commercial products from the Roche collaboration.

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

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

Our first quarter of 2024 and recent key events are as follows:

• In May 2024, BMS announced that the U.S.

Food and Drug Administration (“FDA”) accepted its Biologics License Application (“BLA”) for the subcutaneous formulation of Opdivo (nivolumab) co-formulated with ENHANZE, resulting in a $15.0 million milestone payment.

The FDA assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of February 28, 2025.

• In April 2024, Roche announced that European Medicines Agency’s Committee for Medicinal Products for Human Use has recommended the approval of Ocrevus (ocrelizumab) SC for its multiple sclerosis (“MS”) indications.

A final decision on its approval from the European Commission (“EC”) is expected mid-2024.

• In April 2024, Roche announced that the FDA has accepted the submission of orcelizumab SC with potential approval in September 2024.

• In April 2024, Roche’s Mabthera SC was approved by the China National Medical Products Administration (“NMPA”) to treat diffuse large B-cell lymphoma (“DLBCL”).

• In March 2024, ViiV initiated a Phase 1 study of VH4524184 with ENHANZE to evaluate the safety, tolerability, and pharmacokinetics in healthy adults.

• In the first quarter of 2024, argenx initiated two registrational studies evaluating efgartigimod with ENHANZE administered by pre-filled syringe in subjects with thyroid eye disease (“TED”).

• In February 2024, argenx announced that the FDA had accepted for priority review a supplemental Biologics License Application (“sBLA”) for VYVGART Hytrulo (efgartigimod alfa and hyaluronidase-qvfc) for the treatment of chronic inflammatory demyelinating polyneuropathy (“CIDP”).

The application has been granted a PDUFA action date of June 21, 2024.

• In February 2024, Takeda submitted a New Drug Application (“NDA”) in Japan seeking approval for TAK-771, subcutaneous 10% human immunoglobulin with ENHANZE, for treatment of primary immunodeficiency.

• In January 2024, Janssen announced submission of a sBLA to the FDA seeking approval of a new indication for DARZALEX FASPRO in combination with bortezomib, lenalidomide and dexamethasone (“D-VRd”) for induction and consolidation treatment and with lenalidomide (“D-R”) for maintenance treatment of adult patients who are newly diagnosed with multiple myeloma (“NDMM”) and are eligible for autologous stem cell transplant (“ASCT”).

• In January 2024, Roche received EC marketing authorization for Tecentriq SC for all approved indications of Tecentriq IV for multiple cancer types.

• In January 2024, Takeda received FDA and EC approval for HYQVIA for the treatment of CIDP.

• In January 2024, argenx received regulatory approval in Japan for VYVDURA (efgartigimod alfa and hyaluronidase-qvfc) co-formulated with ENHANZE for the treatment of adult patients with generalized myasthenia gravis (“gMG”) including options for self-administration, and in April 2024, VYVDURA was made available to patients resulting in $14.0 million in total milestone payments.

• In February 2024, our Board of Directors authorized our third capital return program to repurchase up to $750.0 million of our outstanding common stock.

Our second quarter of 2024 and recent key events are as follows:

• In July, 2024, Janssen announced that the U.S.

Food and Drug Administration (“FDA”) approved DARZALEX FASPRO for an additional indication in newly diagnosed multiple myeloma patients who are eligible for autologous stem cell transplant in combination with bortezomib, lenalidomide, and dexamethasone.

• In July 2024, argenx announced the National Medical Products Administration (“NMPA”) approved the Biologics License Application (“BLA”) of efgartigimod SC for generalized myasthenia gravis (“gMG”) in China.

• In July 2024, Acumen initiated a Phase 1 study of sabirnetug (“ACU193”) co-formulated with ENHANZE for the treatment of early Alzheimer’s disease, resulting in a $3.0 million milestone payment recognized in June 2024 when it was concluded the development milestone was expected to be achieved.

• In June 2024, argenx announced the FDA approved VYVGART Hytrulo with ENHANZE for the treatment of chronic inflammatory demyelinating polyneuropathy (“CIDP”), and completed the regulatory submissions of VYVGART SC for CIDP in Japan, Europe, and China during the second quarter of 2024.

Submission to Canadian Health Authorities for regulatory approval is expected in 2024.

• In June 2024, Roche announced the European Commission (“EC”) granted marketing authorization in the EU for Ocrevus (ocrelizumab) SC for the treatment of relapsing multiple sclerosis (“RMS”) and primary progressive multiple sclerosis (“PPMS”), and in July 2024, Roche announced the approval in the same indications by the Medicines and Healthcare products Regulatory Agency (“MHRA”) in Great Britain marking our eight approved partner product with ENHANZE.

• In June 2024, Takeda announced that Health Canada approved HyQvia as a replacement therapy for primary humoral immunodeficiency and a secondary humoral immunodeficiency in pediatric patients two years of age and older.

• In May 2024, BMS announced the FDA accepted its BLA for the SC formulation of Opdivo (nivolumab) co-formulated with ENHANZE, resulting in a $15.0 million milestone payment.

The FDA assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of February 28, 2025, and subsequently assigned an updated PDUFA goal date of December 29, 2024.

In June 2024, BMS announced the European Medicines Agency (“EMA”) validated its Extension Application for the SC formulation of Opdivo (nivolumab) co-formulated with ENHANZE, resulting in a $7.0 million milestone payment.

• In May 2024, Janssen announced the submission of a marketing authorization application to the EMA for the SC formulation of RYBREVANT (amivantamab) with ENHANZE for the treatment of patients with epidermal growth factor receptor (“EGFR”) mutated non-small cell lung cancer (“NSCLC”), and in June 2024, Janssen announced the submission of a BLA to the FDA for amivantamab SC co-formulated with ENHANZE also for EGFR-mutated NSCLC.

• In April 2024, Roche announced the FDA accepted its BLA submission of orcelizumab SC with a PDUFA goal date of September 13, 2024.

• In April 2024, Roche’s MabThera SC was approved by China’s NMPA to treat diffuse large B-cell lymphoma (“DLBCL”).

• In June 2024, we announced the issuance of a new European Patent covering the ENHANZE rHuPH20 product obtained from our ENHANZE manufacturing methods that we provide to our licensees.

The newly granted patent maintains the original royalty rate on sales of DARZALEX SC in 37 European countries until expiration of the patent in March 2029.

• In June 2024, we completed the $250 million ASR that was initiated in November of 2023, resulting in a total repurchase of 6.5 million shares at a price of $38.35 per share which concluded our December 2021 share repurchase program resulting in a total of 19.1 million shares repurchased over the three-year period at an average price per share of $39.31.

Product and Product Candidates

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In September 2023, Chugai (a Member of the Roche Group) announced that it had obtained regulatory approval for Phesgo from the Ministry of Health, Labour and Welfare (“MHLW”) in Japan.

We will receive royalties for Phesgo sales in Japan as part of our licensing agreement with Roche.

We receive royalties for Phesgo sales in Japan as part of our licensing agreement with Roche.

In June 2014, Roche launched MabThera ® SC in Europe for the treatment of patients with common forms of non-Hodgkin lymphoma (“NHL”), followed by launches in additional countries.

This formulation utilizes our ENHANZE technology and is administered in approximately five minutes compared to the approximate 1.5 to 4 hour IV infusion.

In May 2016, Roche announced that the European Medicines Agency (“EMA”) approved MabThera SC to treat patients with chronic lymphocytic leukemia (“CLL”).

In May 2016, Roche announced that the EMA approved MabThera SC to treat patients with chronic lymphocytic leukemia (“CLL”).

In June 2017, the FDA-approved Genentech’s RITUXAN HYCELA ® , a combination of rituximab using ENHANZE technology (approved and marketed under the MabThera SC brand in countries outside the U.S.

and Canada), for CLL and two types of NHL, follicular lymphoma and diffuse large B-cell lymphoma.

In March 2018, Health Canada approved a combination of rituximab and ENHANZE (approved and marketed under the brand name RITUXAN ® SC) for patients with CLL.

In March 2018, Health Canada approved a combination of rituximab

and ENHANZE (approved and marketed under the brand name RITUXAN ® SC) for patients with CLL.

In April 2024, Roche’s MabThera SC was approved by the China NMPA to treat DLBCL.

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In addition, Roche will pay royalties to us if products under the collaboration are commercialized.

In December 2018, Roche initiated a Phase 1b/2 study in patients with non-small cell lung cancer (“NSCLC”) for TECENTRIQ ® (atezolizumab) using ENHANZE technology, followed by initiation of a Phase 3 study in December 2020.

In August 2022, Roche announced that the Phase 3 study met its co-primary endpoints showing non-inferior levels of Tecentriq in the blood PK, when injected subcutaneously, compared with IV infusion, in cancer immunotherapy-naïve patients with advanced or metastatic NSCLC for whom prior platinum therapy has failed.

The safety profile of the SC formulation was consistent with that of IV Tecentriq.

In August 2023, Roche announced the approval of Tecentriq SC with ENHANZE by the Medicines and Healthcare products Regulatory Agency (“MHRA”) in Great Britain.

In August 2023, Roche announced the approval of Tecentriq SC with ENHANZE by the MHRA in Great Britain.

In January 2024, Roche received EC marketing authorization for Tecentriq SC for all approved indications of Tecentriq IV.

Roche is expecting Tecentriq SC approval in the U.S.

in September 2024 and is planning to launch soon after.

Based on the PDUFA date, Tecentriq SC approval in the U.S.

is expected on September 15, 2024.

Tecentriq SC enables SC delivery in approximately seven minutes, compared with 30-60 minutes for IV infusion.

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In July 2023, Roche announced that the Phase 3 OCARINA 2 trial evaluating ocrelizumab SC with ENHANZE as a twice a year 10-minute SC injection met its primary and secondary endpoints in patients with relapsing forms of MS or primary progressive MS (“RMS” or “PPMS”).

In April 2024, Roche announced the EMA and FDA have both accepted the submissions for ocrelizumab SC with ENHANZE, with approval anticipated mid-2024 in the EMA and in September 2024 for the FDA.

In April 2024, Roche announced the FDA accepted the BLA submission of ocrelizumab SC with ENHANZE with a PDUFA goal date of September 13, 2024.

In June 2024, Roche announced the EC granted marketing authorization in the EU for ocrelizumab SC.

In July 2024, Roche announced the MHRA approved ocrelizumab SC in Great Britain.

In October 2019, Roche nominated a new undisclosed exclusive target to be studied using ENHANZE technology.

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In January 2024, Takeda received FDA and EC approval for HYQVIA for the treatment of CIDP.

In April 2023, Takeda announced that the FDA-approved the sBLA to expand the use of HYQVIA to treat primary immunodeficiency in children.

In February 2024, Takeda submitted a NDA in Japan seeking approval for TAK-771, subcutaneous 10% human immunoglobulin with ENHANZE, for treatment of primary immunodeficiency.

In April 2023, Takeda announced the FDA approved the Supplemental Biologics License Application (“sBLA”) to expand the use of HYQVIA to treat primary immunodeficiency in children.

In February 2024, Takeda submitted a New Drug Application (“NDA”) in Japan seeking approval for TAK-771, subcutaneous 10% human immunoglobulin with ENHANZE, for treatment of primary immunodeficiency.

In June 2024, Takeda announced Health Canada approved HYQVIA as replacement therapy for primary humoral immunodeficiency and secondary humoral immunodeficiency in pediatric patients two years of age and older.

Pfizer Collaboration

In December 2012, we and Pfizer entered into a collaboration and license agreement, under which Pfizer has the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Pfizer proprietary biologics in primary care and specialty care indications.

Pfizer has elected five targets and has returned two targets.

Pfizer currently has one non-exclusive target.

Janssen Collaboration

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In the EU, Janssen has marketing authorization for DARZALEX SC in combination with D-VCd in newly diagnosed adult patients with AL amyloidosis and in combination with D-Pd in adult patients with relapsed or refractory multiple myeloma.

In Japan, Janssen has marketing authorization for the SC formulation of DARZALEX (known as DARZQURO in Japan) for the treatment of multiple myeloma and systemic AL amyloidosis.

In Japan, Janssen has marketing authorization for the SC formulation of DARZALEX (known as DARZQURO) for the treatment of multiple myeloma and systemic AL amyloidosis.

In China, Janssen has marketing authorization for DARZALEX SC for the treatment of primary light chain amyloidosis, in combination with D-VCd in newly diagnosed patients.

In January 2024, Janssen announced submission of a sBLA to the FDA seeking approval of a new indication for DARZALEX FASPRO in combination with D-VRd for induction and consolidation treatment and with D-R for maintenance treatment of adult patients who are NDMM and are eligible for ASCT.

In December 2019, Janssen elected epidermal growth factor receptor (“EGFR”) and mesenchymal-epithelial transition factor (“cMET”) as a bispecific antibody (amivantamab) target on an exclusive basis, which is being studied in solid tumors.

In July 2024, Janssen announced the FDA approved DARZALEX FASPRO in combination with bortezomib, lenalidomide and dexamethasone (“D-VRd”) for induction and consolidation treatment and with lenalidomide (“D-R”) for maintenance treatment of adult patients who are newly diagnosed with multiple myeloma (“NDMM”) and are eligible for autologous stem cell transplant (“ASCT”).

In December 2019, Janssen elected EGFR and mesenchymal-epithelial transition factor (“cMET”) as a bispecific antibody (amivantamab) target on an exclusive basis, which is being studied in solid tumors.

In September 2022, following a Phase 1 study, Janssen initiated a Phase 3 study of lazertinib and amivantamab with ENHANZE in patients with EGFR-mutated advanced or metastatic non-small cell lung cancer (PALOMA-3).

In November 2022, Janssen initiated a Phase 2 study of amivantamab with ENHANZE in multiple regimens in patients with advanced or metastatic solid tumors including EGFR-mutated non-small cell lung cancer (PALOMA-2).

In January 2024, Janssen noted its intention to submit applications in the U.S.

and EU seeking approval of a SC formulation for amivantamab SC during 2024.

In July 2021, Janssen elected the target human immunodeficiency virus (“HIV”) reverse transcriptase limited to non-nucleoside reverse transcriptase inhibitors.

In December 2021, Janssen initiated a Phase 1 clinical trial combining rilpivirine and ENHANZE.

In 2023, Janssen discontinued the rilpivirine program with ENHANZE.

In May 2024, Janssen announced positive data from the Phase 3 PALOMA-3 study which supported the submission of a marketing authorization application to the EMA for SC formulation of RYBREVANT (amivantamab) with ENHANZE for the treatment of patients with EGFR-mutated NSCLC.

In June 2024, Janssen announced the submission of a BLA to the FDA for amivantamab SC co-formulated with ENHANZE also for patients with EGFR-mutated NSCLC.

The administration time for SC amivantamab was reduced to approximately five minutes from five hours for the first IV amivantamab infusion (across two days) and showed a five-fold reduction in infusion-related reactions.

SC amivantamab also demonstrated longer overall survival, progression-free survival and duration of response.

AbbVie Collaboration

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In May 2024, BMS announced that the FDA accepted its BLA for the subcutaneous formulation of Opdivo (nivolumab) co-formulated with ENHANZE and assigned a PDUFA goal date of February 28, 2025.

In May 2024, BMS announced the FDA assigned an updated PDUFA goal date of December 29, 2024 for the subcutaneous formulation of Opdivo (nivolumab) co-formulated with ENHANZE.

In June 2024, BMS announced the EMA validated its Extension Application for the subcutaneous formulation of Opdivo (nivolumab) co-formulated with ENHANZE.

In March 2023, BMS initiated a Phase 3 trial to demonstrate the drug exposure levels of nivolumab and relatlimab fixed-dose combination with ENHANZE is not inferior to IV administration in participants with previously untreated metastatic or unresectable melanoma (RELATIVITY-127).

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In October 2020, we and argenx entered into an agreement to expand the collaboration relationship, adding three targets for a total of up to six targets under the collaboration.

In December 2021, argenx announced the FDA approval of efgartigimod (VYVGART TM ) for the treatment of gMG for the IV dosing regimen.

In March 2022, argenx announced that data from argenx’s phase 3 ADAPT-SC study evaluating SC efgartigimod utilizing ENHANZE (1000mg efgartigimod-PH20) for the treatment of gMG achieved the primary endpoint of total IgG reduction from baseline at day 29, demonstrating statistical non-inferiority to VYVGART (efgartigimod alfa-fcab) IV formulation in gMG patients.

In June 2023, argenx received FDA approval under the brand name VYVGART ® Hytrulo for the injection with ENHANZE for SC use of treatment of gMG in adult patients who are anti-acetylcholine receptor (“AChR”) antibody positive.

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In January 2024, argenx received Japan approval for VYVDURA ® (efgartigimod alfa and hyaluronidase-qvfc) co-formulated with ENHANZE for the treatment of adult patients with gMG including options for self-administration.

argenx also expects the regulatory decision on approval of VYVGART SC for gMG in China through Zai Lab by the end of 2024.

In July 2024, argenx announced the NMPA approved the BLA of efgartigimod alfa SC (efgartigimod SC) for gMG patients in China.

In July 2023, argenx reported positive data from the ADHERE study evaluating VYVGART ® Hytrulo with ENHANZE in adults with CIDP.

In February 2024, argenx announced that the FDA had accepted for priority review a sBLA for VYVGART Hytrulo for the treatment of CIDP.

The application has been granted a PDUFA action date of June 21, 2024.

argenx also expects to submit VYVGART SC for CIDP for regulatory approval in Japan, Europe, China and Canada in 2024.

In September 2023, Zai Lab limited (argenx commercial partner for China) announced the CDE of the National Medical Products Administration (“NMPA”) granted Breakthrough Therapy Designation for efgartigimod SC for the treatment of patients with CIDP.

In June 2024, argenx announced the FDA approved VYVGART Hytrulo with ENHANZE for the treatment of CIDP.

In the second quarter of 2024, argenx completed the regulatory submissions of VYVGART SC for CIDP for regulatory approval in Japan, Europe, and China.

Submission to Canadian Health Authorities for regulatory approval is expected in 2024.

In September 2023, Zai Lab limited (argenx commercial partner for China) announced the CDE of the NMPA granted Breakthrough Therapy Designation for efgartigimod SC for the treatment of patients with CIDP.

argenx is currently conducting the following studies with the goal of expanding approved indications for efgartigimod with ENHANZE:

Phase 2/3 (ALKIVIA) study in active idiopathic inflammatory myopathy (Myositis) and two registrational studies in TED.

Phase 2/3 (ALKIVIA) study in active idiopathic inflammatory myopathy (Myositis) and two registrational studies in thyroid eye disease (“TED”).

Evaluation is ongoing to determine the path forward in BALLAD study evaluating efgartigimod in bullous pemphigoid (“BP”) with an update expected in 2024.

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Chugai intends to explore the potential use of ENHANZE for a Chugai drug candidate.

In May 2022, Chugai initiated a Phase 1 study to evaluate the PKs, pharmacodynamics, and safety of targeted antibody administered subcutaneously with ENHANZE.

In May 2022, Chugai initiated a Phase 1 study to evaluate the PKs, pharmacodynamics, and safety of a targeted antibody administered subcutaneously with ENHANZE.

Acumen Collaboration

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Acumen intends to explore the potential use of ENHANZE for ACU193, Acumen’s clinical stage monoclonal antibody candidate to target Amyloid-β Oligomers for the treatment of early Alzheimer’s disease.

In March 2024, Acumen announced plans to initiate a Phase 2 IV study for ACU193 in the first half of 2024 and a Phase 1 SC study for ACU193 in mid-2024.

In May 2024, Acumen initiated a Phase 2 IV study for ACU193.

In July 2024, Acumen initiated a Phase 1 study of sabirnetug (ACU193) with ENHANZE to compare the PK between SC and IV administrations in healthy volunteers.

Device and Other Drug Product Collaborations

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Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Royalties – Royalties were as follows (in thousands):

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Royalties $ 124,918 $ 111,740 $ 13,178 12 %

The increase in royalties was primarily driven by continued sales uptake of DARZALEX SC by Janssen and Phesgo by Roche in all geographies and the launch of Vyvgart by argenx, partially offset by slightly lower sales of Herceptin SC and MabThera SC by Roche.

We expect royalty revenue to continue to grow as a result of our 2020 and 2023 ENHANZE partner product launches, offsetting the ongoing impact from IV biosimilars on pricing of mature partner products delivered SC with ENHANZE and the impact of a royalty rate reduction in March of 2024 for certain sales of DARZALEX SC outside of the U.S.

The increase in royalties was primarily driven by continued sales uptake of Phesgo by Roche in all geographies and the recent launches of VYVGART Hytrulo by argenx and Teriparatide by Teva in the U.S.

We expect royalty revenue to grow as a result of anticipated increasing partner product sales of DARZALEX SC and Phesgo and sales of recently launched ENHANZE partner products, VYVGART Hytrulo, Tecentriq SC and Ocrevus SC.

An EU patent covering the rHuPH20 product issued in June 2024, resulted in a return of DARZALEX SC royalties to the original royalty rate through March 6, 2029, following a step down in the royalty rate from March 2024 through June 2024.

We expect modest price erosion to continue on earlier launched ENHANZE partner products, Herceptin and MabThera.

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

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Total product sales, net $ 78,886 $ 73,889 $ 4,997 7 %

The decrease in product sales, net was primarily due to lower sales of bulk rHuPH20 due to the timing of shipment to our partners, partially offset by contributions from our proprietary and device partnered products.

We expect sales of our proprietary products will grow in future years as we continue to gain market share in the TRT market.

The increase in product sales, net was primarily due to contributions from our proprietary products, partially offset by lower sales of device partner products and bulk rHuPH20 driven by the timing of partner demand.

We expect sales of our proprietary products will continue to grow in future years as we continue to gain market share in the TRT market.

We expect product sales of bulk rHuPH20 and device partnered products to fluctuate in future periods based on the needs of our partners.

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Total revenues under collaborative agreements $ 27,549 $ 35,409 $ (7,860) (22) %

The increase in revenues under collaborative agreements was primarily due to the timing of milestones driven by partner activities.

The decrease in revenues under collaborative agreements was primarily due to the timing of milestones achieved.

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

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Cost of Sales – Cost of sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight costs, internal costs and manufacturing overhead associated with the production of our proprietary products, device partnered products and bulk rHuPH20.

The decrease in cost of sales was primarily due to lower bulk rHuPH20 sales, partially offset by higher proprietary product sales.

The decrease in cost of sales was primarily due to lower device and bulk rHuPH20 sales, partially offset by higher proprietary product sales.

Amortization of intangibles – Amortization of intangibles consists primarily of expense associated with the amortization of acquired device technologies and product rights.

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

The increase in research and development expense was primarily due to planned investments in ENHANZE.

The increase in research and development expense was primarily due to planned investments in ENHANZE related to the development of our new high yield rHuPH20 manufacturing processes.

Selling, General and Administrative – Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and related costs for personnel in executive, selling and administrative functions as well as professional fees for legal and accounting, business development, commercial operations support for proprietary products and alliance management and marketing support for our collaborations.

The decrease in SG&A expense was primarily due to reductions in commercial marketing expense, partially offset by increased compensation expense.

Investment and other income (expense) , net - Investment and other income (expense), net was as follows (in thousands):

The decrease in SG&A expense was primarily due to planned reductions in commercial marketing expense.

Investment and other income , net – investment and other income, net was as follows (in thousands):

Three Months Ended Increase / (Decrease)

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Investment and other income, net $ 5,032 $ 3,192 $ 1,840 58 %

Investment and other income (expense), net consists primarily of interest income on our cash, cash-equivalent and marketable securities.

The increase in investment and other income, net was primarily due to a significant increase in market interest rates as well as an increase in the average invested balance.

Investment and other income, net consists primarily of interest income on our cash, cash-equivalent and marketable securities.

The increase in investment and other income, net was primarily due to higher market interest rates as well as an increase in the average invested balance.

Interest Expense – Interest expense was as follows (in thousands):

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federal statutory rate due to state income taxes, nondeductible executive compensation, research and development credit generation and the reduced rate on foreign export sales.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Royalties – Royalties were as follows (in thousands):

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Royalties $ 245,511 $ 211,380 $ 34,131 16 %

The increase in royalties was primarily driven by continued sales uptake of DARZALEX SC by Janssen and Phesgo by Roche in all geographies, and the recent launches of Vyvgart Hytrulo by argenx and Teriparatide by Teva in the U.S.

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

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Sales of proprietary products $ 79,394 $ 60,254 $ 19,140 32 %

Sales of bulk rHuPH20 35,144 49,202 (14,058) (29) %

Sales of device partnered product 22,931 25,227 (2,296) (9) %

Total product sales, net $ 137,469 $ 134,683 $ 2,786 2 %

The increase in product sales, net was primarily due to contributions from our proprietary products, partially offset by lower sales of bulk rHuPH20 and device partnered products driven by the timing of partner demand.

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

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Upfront license fees, license fees for the election of additional targets, event-based payments, license maintenance fees and amortization of deferred upfront and other license fees:

Event-based development milestones and regulatory milestones and other fees $ 39,500 $ 33,000 $ 6,500 20 %

Device licensing and development revenue 4,752 4,118 634 15 %

Total revenues under collaborative agreements $ 44,252 $ 37,118 $ 7,134 19 %

The increase in revenues under collaborative agreements was primarily due to the timing of milestones achieved.

Operating expenses - Operating expenses were as follows (in thousands):

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Cost of sales $ 67,936 $ 85,240 $ (17,304) (20) %

Amortization of intangibles 35,525 35,670 (145) — %

Research and development 40,149 37,706 2,443 6 %

Selling, general and administrative 70,845 76,305 (5,460) (7) %

The decrease in cost of sales was primarily due to lower bulk rHuPH20 and device sales, partially offset by higher proprietary product sales.

Amortization of intangibles – Amortization of intangibles consists primarily of expense associated with the amortization of acquired device technologies and product rights.

Amortization of intangibles expense remained relatively flat year over year.

The increase in research and development expense was primarily due to planned investments in ENHANZE related to the development of our new high-yield rHuPH20 manufacturing processes.

The decrease in SG&A expense was primarily due to planned reductions in commercial marketing expense, partially offset by increased compensation expense.

Investment and other income , net - Investment and other income, net was as follows (in thousands):

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Investment and other income, net $ 10,025 $ 6,171 $ 3,854 62 %

Investment and other income, net consists primarily of interest income on our cash, cash-equivalent and marketable securities.

The increase in investment and other income, net was primarily due to an increase in market interest rates as well as an increase in the average invested balance.

Interest Expense – Interest expense was as follows (in thousands):

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Interest expense $ 9,031 $ 9,037 $ (6) — %

Interest expense consists primarily of costs related to our convertible notes and revolving credit facility.

Interest expense remained flat year over year.

Income Taxes – Income taxes were as follows (in thousands):

Six Months Ended Increase / (Decrease)

2024 2023 Dollar

Income tax expense $ 43,703 $ 31,025 $ 12,678 41 %

The increase in income tax expense was primarily due to higher income before taxes recognized during the current quarter.

Liquidity and Capital Resources

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

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $463.5 million.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $529.0 million.

We believe that our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months.

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We may, in the future, draw on our existing line of credit or offer and sell additional equity, debt securities and warrants to purchase any of such securities, either individually or in units to raise capital for additional working capital, capital expenditures, share repurchases, acquisitions or for other general corporate purposes.

Three Months Ended March 31,

Six Months Ended June 30,

2024 2023 Change

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Net cash used in investing activities (124,720) (5,168) (119,552)

Net cash used in financing activities (489) (164,614) 164,125

Net cash provided by (used in) financing activities 8,993 (162,168) 171,161

Net increase (decrease) in cash, cash equivalents and restricted cash $ 69,494 $ (13,530) $ 83,024

Operating Activities

The increase in net cash provided by operations was primarily due to an increase in revenue and a reduction in working capital spend.

The increase in net cash provided by operations was primarily due to an increase in revenue, partially offset by higher working capital spend.

Investing Activities

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Financing Activities

The decrease in net cash used in financing activities was primarily due to the repurchase of $150.1 million in common stock in the prior year and $13.5 million in cash paid on the conversion of our 2024 Convertible Notes in the prior year, partially offset by the increase in net proceeds during the current year from the issuance of common stock under our equity incentive plan.

Share Repurchases

In December 2021, our Board of Directors approved a share repurchase program to repurchase up to $750.0 million of our outstanding common stock which is expected to be completed in the second quarter of 2024.

In December 2021, our Board of Directors approved a share repurchase program to repurchase up to $750.0 million of our outstanding common stock which we completed in June 2024.

In February 2024, our Board of Directors authorized a new capital return program to repurchase up to $750.0 million of our outstanding common stock.

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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 March 31, 2024, the 2028 Convertible Notes were not convertible.

As of June 30, 2024, 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 March 31, 2024, no capped calls had been exercised.

As of June 30, 2024, no capped calls had been exercised.

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

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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 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, 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 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, will 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.

As of March 31, 2024, the 2027 Convertible Notes were not convertible.

As of June 30, 2024, the 2027 Convertible Notes were not convertible.

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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.

Revolving Credit and Term Loan Facilities (May 2022)

Revolving Credit and Term Loan Facilities

In May 2022, we entered into a credit agreement, which was subsequently amended in August 2022 (the “Amendment”), 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 $575 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $250 million term loan facility (the “Term Facility”).

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The commitment fees range from 0.15% to 0.35% per annum based on our consolidated net leverage ratio.

As of March 31, 2024, the revolving credit facility was undrawn.

As of June 30, 2024, the revolving credit facility was undrawn.

Additional Capital Requirements .

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2024, there have been no material changes to our expected working capital and other capital requirements described in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of June 30, 2024, there have been no material changes to our expected working capital and other capital requirements described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

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The accounting policies and estimates that are most critical to a full understanding and evaluation of our reported financial results are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023.

There were no material changes to our critical accounting policies or estimates during the three months ended March 31, 2024.

There were no material changes to our critical accounting policies or estimates during the six months ended June 30, 2024.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis