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Item 7. Management’s Discussion and Analysis

2025-02-18 compared with 2024-02-20 · 137 added, 141 removed, 189 unchanged (60% of the section changed)

1 unchanged sentence

In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties.

Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the Part I, Item 1A, Risks Factors, and elsewhere in this Annual Report on Form 10-K.

References to “Notes” are Notes included in our Notes to Consolidated Financial Statements.

Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the Part I, Item 1A.

Risks Factors, and elsewhere in this Annual Report on Form 10-K.

References to “Notes” are Notes included in our Notes to Consolidated Financial Statements in Part II, Item 8, in this Annual Report on Form 10-K.

Halozyme Therapeutics, Inc.

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.

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 improving the patient experience with rapid SC delivery and reduced treatment burden.

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

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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.

rHuPH20 works by breaking down hyaluronan, 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.

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

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.

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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(“Janssen”), AbbVie, Inc.

(“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.

(“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 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.

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

We have commercialized auto-injector products with Teva Pharmaceutical Industries, Ltd.

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

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

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

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

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

Our 2024 and recent key events are as follows:

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

• In September 2023, Chugai, a member of the Roche Group, announced that it had obtained regulatory approval for Phesgo from the MHLW in Japan.

We are entitled to receive royalties for Phesgo ® sales in Japan under our agreement with Roche.

• In September 2023, Roche informed us that there will be a delay in the projected launch timing for Tecentriq SC in the U.S.

as a result of Roche’s need to update CMC processes for Tecentriq SC.

Roche expects a potential launch of Tecentriq SC in the U.S.

• In August 2023, Roche announced the approval of Tecentriq SC with ENHANZE by the MHRA in Great Britain, resulting in an $8.0 million milestone payment to us and the right to receive royalties on net product sales.

• In July 2023, Roche announced that the Phase III OCARINA II 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, RMS or PPMS.

Subsequently, Roche filed with regulatory authorities in the EU, UK and U.S.

• 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.

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

The study met its primary endpoint resulting in a 61% reduction in risk of relapse compared to placebo.

• 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 gMG including options for self-administration, resulting in a $5.0 million milestone payment.

• In November 2023, argenx received EC approval of VYVGART SC (efgartigimod alfa and hyaluronidase-qvfc) co-formulated with ENHANZE for the treatment of gMG in adult patients who are AChR antibody positive, and in December 2023 VYVGART SC was made available to patients, resulting in $23.0 million in milestone payments.

The European approval of VYVGART SC provides the option for patient self-administration.

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

The Breakthrough Therapy Designation for efgartigimod SC was supported by data from both global and Chinese patients enrolled in the ADHERE study.

• In June 2023, argenx received U.S.

FDA approval for VYVGART Hytrulo injection with ENHANZE for SC use for the treatment of gMG in adult patients who are AChR antibody positive and in July 2023 VYVGART Hytrulo was made available to patients, resulting in $33.0 million in milestone payments and the right to receive royalties on net product sales.

• 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 August 2023, ViiV initiated a Phase 2b study to evaluate the efficacy, safety, PK and tolerability of VH3810109 (N6LS) administered subcutaneously with ENHANZE in combination with cabotegravir.

• In August 2023, ViiV achieved a development milestone resulting in a $5.0 million milestone payment to us.

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

• In January 2024, Takeda received FDA and EC approval for HYQVIA for the treatment of CIDP as maintenance therapy to prevent the relapse of neuromuscular disability and impairment in adults.

• In October 2023, Takeda initiated a Phase 2/3 study to evaluate PK, safety, and tolerability of subcutaneous administration of TAK-881 in adult and pediatric participants with PIDD.

• In April 2023, Takeda announced that the U.S.

FDA approved a sBLA to expand the use of HYQVIA to treat primary immunodeficiency in children.

• In October 2023, BMS reported positive topline results from the Phase 3 CheckMate-67T trial evaluating a SC formulation of Opdivo (nivolumab) with ENHANZE in patients with ccRCC who have received prior systemic therapy.

The study met its co-primary PK endpoints and a key secondary endpoint.

• 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).

• In November 2023, we and Acumen entered into a global collaboration and non-exclusive license agreement that provides Acumen access to ENHANZE for a single target.

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

• In November 2023, Teva announced FDA approval of the generic version of Forteo, featuring our multi-dose auto-injector pen platform for the treatment of osteoporosis among certain women and men.

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

• During 2023, we repurchased 4.2 million shares of common stock in open market transactions for $150.0 million at an average price per share of $36.01.

In November 2023, we accelerated the initiation of our planned 2024 share repurchases and entered into an ASR agreement with Bank of America to accelerate the remaining $250.0 million of share repurchases under the $750.0 million approved capital return program.

We paid $250.0 million to Bank of America and took initial delivery of 5.5 million shares.

• In August 2023, we announced positive results of a clinical study with our high-volume auto-injector demonstrating SC administration of 10 mL of a representative biologic product co-formulated with our ENHANZE ® drug delivery technology in approximately 30 seconds.

The results were presented at the 13th annual Partnership Opportunities in Drug Delivery (“PODD”) conference in October 2023.

• In January 2023, we elected to redeem all of our remaining outstanding 1.25% convertible senior notes due 2024.

In March 2023, the outstanding amount of the 2024 Convertible Notes converted in full and we paid $13.5 million in cash and issued 288,886 shares.

• In September 2024, Roche announced the U.S.

Food and Drug Administration (“FDA”) approved OCREVUS ZUNOVO with ENHANZE as a twice a year ten-minute SC injection for the treatment of relapsing multiple sclerosis and primary progressive multiple sclerosis, and in July 2024 and June 2024, Roche announced the Medicines and Healthcare products Regulatory Agency and European Commission granted marketing authorization in Great Britain and the European Union (“EU”), respectively, for Ocrevus (ocrelizumab) SC for the same indications marking our eight approved partner product with ENHANZE.

• In September 2024, Roche announced the FDA approved TECENTRIQ HYBREZA with ENHANZE for all approved adult indications of IV TECENTRIQ and was made available to patients, resulting in a $12.0 million milestone payment.

• In April 2024, Roche’s MabThera SC was approved by the China National Medical Products Administration to treat diffuse large B-cell lymphoma.

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

• In December 2024, argenx announced the Ministry of Health, Labour and Welfare in Japan approved VYVDURA for the treatment of patients with chronic inflammatory demyelinating polyneuropathy.

• In November 2024, Zai Lab Limited (argenx commercial partner for China) announced the National Medical Products Administration approval of VYVGART Hytrulo for the treatment of patients with chronic inflammatory demyelinating polyneuropathy.

• In October 2024, argenx initiated two studies evaluating VYVGART Hytrulo with ENHANZE, a Phase 3 study for adult patients with ocular myasthenia gravis and a Phase 2 study for kidney transplant recipients with antibody mediated rejection.

• In September 2024, argenx expanded its global collaboration and license agreement nominating four additional targets that provides them exclusive access to our ENHANZE drug delivery technology for a total of six targets.

Under the terms of the expanded exclusive agreement, we received upfront payments of $7.5 million per target nomination for a total of $30.0 million.

argenx is obligated to make future milestone payments of up to $85.0 million per new nominated target, subject to achievements of specified development, regulatory and sales-based milestones.

We are also entitled to receive royalties on net sales of commercialized products with our ENHANZE technology.

• In July 2024, argenx announced the National Medical Products Administration approved the Biologics License Application of efgartigimod SC for generalized myasthenia gravis in China.

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

Submission to Canadian Health Authorities for regulatory approval is expected in 2025.

• 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.

• 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 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 2025, Janssen received a positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency recommending an extension of marketing authorization for a SC formulation of RYBREVANT (amivantamab) with ENHANZE in combination with LAZCLUZE (lazertinib) for the first-line treatment of adult patients with advanced non-small cell lung cancer with epidermal growth factor receptor exon 19 deletions or exon 21 L858R substitution mutations, and as a monotherapy for the treatment of adult patients with advanced non-small cell lung cancer with activating epidermal growth factor receptor exon 20 insertion mutations after failure of platinum-based therapy.

• In November 2024, Janssen announced the submission of regulatory applications to the FDA and the European Medicines Agency seeking approval of a new indication for DARZALEX FASPRO in the U.S.

and DARZALEX SC in the EU as a monotherapy for the treatment of adult patients with high-risk smoldering multiple myeloma.

• In October 2024, Janssen announced the European Commission approved DARZALEX SC for the treatment of patients newly diagnosed with multiple myeloma who are eligible for autologous stem cell transplant in combination with bortezomib, lenalidomide and dexamethasone.

• In September 2024, Janssen announced the submission of a supplemental Biologics License Application to the FDA for approval of a new indication of DARZALEX FASPRO in combination with bortezomib, lenalidomide and dexamethasone for the treatment of adult patients with newly diagnosed multiple myeloma for whom autologous stem cell transplant is deferred or who are ineligible for autologous stem cell transplant.

• In August 2024, the FDA designated Janssen’s Biologics License Application priority review status for amivantamab SC in combination with LAZCLUZE for currently approved or submitted indication of IV in certain patients with epidermal growth factor receptor-mutated non-small cell lung cancer.

In December 2024, Janssen announced the FDA issued a Complete Response Letter for the Biologics License Application related to observations as part of a standard pre-approval inspection at a manufacturing facility.

Janssen has indicated they are working closely with the FDA to bring SC amivantamab to patients as quickly as possible.

• In July 2024, Janssen announced the 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 May 2024, Janssen announced the submission of a marketing authorization application to the European Medicines Agency for the SC formulation of RYBREVANT (amivantamab) with ENHANZE for the treatment of patients with epidermal growth factor receptor-mutated non-small cell lung cancer, and in June 2024, Janssen announced the submission of a Biologics License Application to the FDA for amivantamab SC co-formulated with ENHANZE also for epidermal growth factor receptor-mutated non-small cell lung cancer.

• In September 2024, ViiV expanded its global collaboration and license agreement providing ViiV the ability to exclusively access our ENHANZE drug delivery technology for one additional undisclosed target.

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

• In December 2024, Takeda announced the Ministry of Health, Labour and Welfare in Japan approved HYQVIA with ENHANZE for patients with agammaglobulinemia or hypogammaglobulinemia disorders characterized by very low or absent levels of antibodies and an increased risk of serious recurring infection caused by Primary Immunodeficiency or secondary immunodeficiency.

• In August 2024, Takeda submitted a New Drug Application in Japan seeking approval for HYQVIA with ENHANZE for the treatment of chronic inflammatory demyelinating polyneuropathy/Multifocal Motor Neuropathy.

• In June 2024, Takeda announced that Health Canada approved HYQVIA as a replacement therapy for Primary Immunodeficiency and secondary immunodeficiencies in pediatric patients two years of age and older.

• In January 2024, Takeda received FDA and European Commission approval for HYQVIA for the treatment of chronic inflammatory demyelinating polyneuropathy.

• In December 2024, BMS announced the FDA approved Opdivo Qvantig (nivolumab and hyaluronidase-nvhy) with ENHANZE for SC use in most previously approved adult, solid tumor IV Opdivo (nivolumab) indications resulting in the recognition of a $20.0 million milestone payment, and in January 2025, Opdivo Qvantig was made available to patients.

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

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

• In July 2024, Acumen initiated a Phase 1 study of sabirnetug (ACU193) co-formulated with ENHANZE for the treatment of early Alzheimer’s disease.

• 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 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.

• 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.

In December 2024, we entered into an ASR agreement with Bank of America to repurchase $250.0 million of our common stock and took initial delivery of 4.2 million shares, representing approximately 80 percent of the total shares that will be repurchased under the ASR agreement measured based on the closing price of our common stock on the transaction trade date.

The final share count will be determined at the transaction settlement date.

Results of Operations

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Year Ended December 31,

2023 2022 Change Percentage Change

Increase / (Decrease)

2024 2023 Dollar

$ 570,991 $ 447,865 $ 123,126 27 %

The increase in royalties was primarily driven by continued sales uptake of DARZALEX SC by Janssen and Phesgo by Roche in all geographies and contributions from new device royalty revenue as a result of the Antares acquisition in May 2022, 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 expected 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 DARZALEX SC by Janssen and Phesgo by Roche in all geographies, and the prior year launch of Vyvgart Hytrulo by argenx.

We expect royalty revenue to further 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, OCREVUS SC and Opdivo Qvantig.

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):

Year Ended December 31,

2023 2022 Dollar Change Percentage Change

Sales of proprietary products $ 130,834 $ 72,849 $ 57,985 80 %

Sales of bulk rHuPH20 115,442 82,084 33,358 41 %

Sales of device partnered products 54,578 36,097 18,481 51 %

Increase / (Decrease)

2024 2023 Dollar

Proprietary product sales

$ 166,620 $ 130,834 $ 35,786 27 %

Bulk rHuPH20 sales

86,334 115,442 (29,108) (25) %

Device partnered product sales

50,538 54,578 (4,040) (7) %

Total product sales, net $ 303,492 $ 300,854 $ 2,638 1 %

The increase in product sales was primarily due to contributions from our proprietary and device partnered products as the result of the Antares acquisition in May 2022 and higher sales of bulk rHuPH20 driven by partner demand.

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 driven by continued market penetration, partially offset by lower sales of bulk rHuPH20 driven by the lower cost of the product which is passed on to partners and the timing of partner demand, and device partnered products driven by the timing of partner demand.

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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Year Ended December 31,

2023 2022 Dollar Change Percentage Change

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:

Increase / (Decrease)

2024 2023 Dollar

Upfront license and target nomination fees $ 27,000 $ 2,000 $ 25,000 1,250 %

$ 2,000 $ 30,000 $ (28,000) (93) %

Event-based development milestones and regulatory milestones and other fees

Event-based development milestones, regulatory milestones and other fees

72,500 69,000 3,500 5 %

Sales-based milestone

Sales-based milestones

30,000 — 30,000 100 %

Device licensing and development revenue 11,341 9,534 1,807 19 %

9,534 9,611 (77) (1) %

Total revenues under collaborative agreements $ 140,841 $ 80,534 $ 60,307 75 %

The decrease in revenue from license fees was primarily due to the timing of milestones driven by partner activities.

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.

We expect these revenues to continue to fluctuate in future periods based on our partners’ ability to meet various clinical and regulatory milestones set forth in such agreements and our ability to obtain new collaborative agreements.

The increase 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, event-based payments, license maintenance and other license fees vary from period to period based on our ENHANZE collaboration activity.

We expect these revenues to continue to fluctuate in future periods based on our partners’ ability to meet various clinical, regulatory and event-based milestones set forth in such agreements and our ability to obtain new collaborative agreements.

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

Year Ended December 31,

2023 2022 Change Percentage Change

Increase / (Decrease)

2024 2023 Dollar

Cost of sales $ 159,417 $ 192,361 $ (32,944) (17) %

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Selling, general and administrative 154,335 149,182 5,153 3 %

Cost of Sales – Cost of sales consists primarily of raw material costs, 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 increase in cost of sales was primarily due to an increase in sales of our proprietary and device partnered products as a result of the Antares acquisition in May 2022 and higher bulk rHuPH20 sales.

Amortization of intangibles – The increase in amortization of intangibles expense was due to the recognition of a full year amortization expense during the current year for our acquired intangible assets and an impairment charge of $2.5 million to fully impair the TLANDO product rights intangible asset as a result of the license agreement termination notice provided to Lipocine in September 2023.

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 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.

The decrease in amortization of intangibles expense was primarily due to an impairment charge of $2.5 million recognized in the prior year to fully impair the TLANDO product rights intangible asset.

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 expenses was primarily due to an increase in compensation expense related to the ongoing combined larger workforce from the Antares acquisition to support the device platform in regulatory, quality and manufacturing, as well as planned investments in ENHANZE, partially offset by one-time transaction costs incurred in the prior 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.

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 increase in SG&A expenses was primarily due to an increase in compensation expense related to the ongoing combined larger workforce, including the addition of commercial resources in sales and marketing for TRT products, partially offset by one-time transaction costs incurred in the prior year.

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

The increase in SG&A expense was primarily due to increased compensation expense and consulting and professional service fees, partially offset by planned reductions in commercial marketing expense.

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

Year Ended December 31,

2023 2022 Change Percentage Change

Increase / (Decrease)

2024 2023 Dollar

Investment and other income, net $ 23,752 $ 16,317 $ 7,435 46 %

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 an increase in the average invested balance, partially offset by lower market interest rates.

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

Year Ended December 31,

2023 2022 Change Percentage Change

Increase / (Decrease)

2024 2023 Dollar

Interest expense $ 18,095 $ 18,762 $ (667) (4) %

The modest increase in interest expense was primarily due to an increase in interest expense related to our 2028 Convertible Notes, partially offset by the repayment of our 2022 Term Facility and outstanding Revolving Credit Facility during the third quarter of 2022 and a reduction in interest expense related to our 2024 Convertible Notes which were converted in the first quarter of 2023.

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

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

Interest expense was relatively flat year over year.

Income Tax Expense – Income tax expense was as follows (in thousands):

Year Ended December 31,

2023 2022 Change Percentage Change

Increase / (Decrease)

2024 2023 Dollar

Income tax expense

$ 113,041 $ 66,735 $ 46,306 69 %

The increase in income tax expense was primarily due to higher income before taxes recognized during the current year, partially offset by federal research and development credits.

The increase in income tax expense was primarily due to higher income before income tax expense and a decrease in tax benefits associated with research and development credits, partially offset by an increase in tax benefits mainly related to a share-based compensation windfall and Foreign Derived Intangible Income deduction recognized during the current period.

Comparison of Years Ended December 31, 2023 and 2022

For discussion related to changes in financial condition and the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II - Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 21, 2023.

For discussion related to changes in financial condition and the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 20, 2024.

Liquidity and Capital Resources

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We believe that our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next 12 months.

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

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

We may raise cash through any one of the following financing vehicles:

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Our long-term debt consists of convertible notes.

The aggregate principal amount of our convertible notes is $1,525.0 million.

Future interest payments associated with our convertible notes total $39.7 million, with $9.2 million payable within 12 months.

As of December 31, 2024, the aggregate principal amount of our convertible notes was $1,525.0 million.

As of December 31, 2024, future interest payments associated with our convertible notes totaled $30.4 million, with $9.2 million payable within 12 months.

We have lease arrangements related to our office and research facilities and certain vehicles under non-cancelable operating leases.

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Year Ended December 31,

(in thousands)

2024 2023 Change

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Net cash used in investing activities (262,723) (96,909) (165,814)

Net cash (used in) provided by financing activities (407,987) 362,371 (770,358)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (116,325) $ 115,476 $ (231,801)

Net cash used in by financing activities

(218,861) (407,987) 189,126

Net decrease in cash, cash equivalents and restricted cash

$ (2,520) $ (116,325) $ 113,805

Operating Activities

The increase in net cash provided by operations was primarily due to an increase in revenue and a decrease 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

The decrease in net cash used in investing activities was primarily due to the acquisition of Antares in the prior year, partially offset by a decrease in cash from the sale and maturity of marketable securities, an increase in purchases of marketable securities as we continue to invest excess cash, a decrease in proceeds from the sale of assets, and an increase in capital spend for the purchase of manufacturing equipment and new facility improvements.

The increase in net cash used in investing activities was primarily due to an increase in net purchases of marketable securities, partially offset by a decrease in capital spend for property and equipment.

Financing Activities

The increase in net cash used in financing activities was primarily due to $702.0 million in cash received in the prior year from the issuance of our 2028 Convertible Notes, $202.5 million increase in the repurchase of common stock and a $6.2 million reduction in net proceeds from the issuance of common stock under equity incentive plans.

The increase was partially offset by $69.1 million cash paid for our Capped Call Transaction in the prior year, $64.0 million reduction in cash paid on the conversion of our 2024 Convertible Notes, and $7.1 million cash paid for debt issuance costs in the prior year.

The decrease in net cash used in financing activities was primarily due to a decrease in share repurchase of common stock by $152.4 million and $13.5 million in cash paid on the conversion of our 2024 Convertible Notes in the prior year, partially offset by an increase in net proceeds from the issuance of common stock under our equity incentive plan.

Share Repurchases

In December 2021, our Board of Directors authorized a share repurchase program to repurchase up to $750.0 million of our outstanding common stock over a three-year period.

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.

Refer to Note 10, Stockholders’ Equity , of our consolidated financial statements for additional information regarding our share repurchases.

Refer to Part I, Item 8, Note 10, Stockholders’ Equity , to the consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our share repurchases.

Long-Term Debt

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The 2028 Convertible Notes pay interest semi-annually in arrears on February 15th and August 15th of each year at an annual rate of 1.00%.

The 2028 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 2028 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.

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 2028 Convertible Notes have a maturity date of August 15, 2028.

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The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued or unpaid interest.

Capped Call Transactions

In connection with the offering of the 2028 Convertible Notes, we entered into capped call transactions with certain counterparties (the “Capped Call Transactions”).

The Capped Call Transactions are expected generally to reduce potential dilution to holders of our common stock upon conversion of the 2028 Convertible Notes or at our election (subject to certain conditions) offset any cash payments we are required to make in excess of the principal amount of such converted 2028 Convertible Notes.

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, 2024, 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 2028 Convertible Notes, and do not affect any holder’s rights under the 2028 Convertible Notes.

Holders of the 2028 Convertible Notes do not have any rights with respect to the Capped Call Transactions.

0.25% Convertible Notes due 2027

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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, 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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(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, 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;

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 2027 Convertible Notes;

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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 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 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.

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

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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)

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 Antares 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.

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”).

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.

The 2022 Facility will mature on November 30, 2026 unless either the Revolving Credit Facility or the Term Facility is extended prior to such date in accordance with the 2022 Credit Agreement.

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Borrowings under the 2022 Facility bear interest, at our option, at a rate equal to an applicable margin plus:

(a) the applicable Term Secured Overnight Financing Rate (“SOFR”) (which includes a SOFR adjustment of 0.10%), or (b) a base rate

determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, (3) the Term SOFR rate for an interest period of one month plus 1.10%, and (4) 1.00%.

(a) the applicable Term Secured Overnight Financing Rate (“SOFR”) (which includes a SOFR adjustment of 0.10%), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, (3) the Term SOFR rate for an interest period of one month plus 1.10%, and (4) 1.00%.

The margin for the 2022 Facility ranges, based on our consolidated total net leverage ratio, from 0.25% to 1.25% in the case of base rate loans and from 1.25% to 2.25% in the case of Term SOFR rate loans.

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

In August 2022, we entered into Amendment No.

1 to the Credit Agreement (the “Amendment”) among the Company, the Guarantors (as defined in the Credit Agreement), each L/C Issuer from time to time party thereto, Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and swing line lender (in such capacity, the “Swing Line Lender”), and each lender party thereto, which amends the Credit Agreement dated as of May 24, 2022 (the “Credit Agreement”) among the Company, the Guarantors, the Administrative Agent, the Swing Line Lender, each Lender and the L/C Issuers.

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 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, 2024, the revolving credit facility was undrawn.

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Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are outlined in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Annual Report on Form 10-K.

Our significant accounting policies are outlined in Part II, Item 8, Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in this Annual Report on Form 10-K.

We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

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This reversal may be material.

For collaborative agreements, royalty revenue is recognized in the period the underlying sales occur, but we do not receive final royalty reports from our collaboration partners until after we complete our financial statements for a prior quarter.

Royalty revenue is recognized in the period the underlying sales occur, but we do not receive final royalty reports from our collaboration partners until after we complete our financial statements for a prior quarter.

Therefore, we recognize revenue based on estimates of the royalty earned, which are based on preliminary reports provided by our collaboration partners.

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To date, the true-up entries have not been material.

For collaborative arrangements, when necessary, we perform an allocation of the upfront amount based on relative stand-alone selling prices (“SSP”) of licenses for individual targets.

license SSP using an income-based valuation approach utilizing risk-adjusted discounted cash flow projections.

The inputs used in the valuation model to determine SSP are based on estimates utilizing market data and information provided by our collaboration partners.

For collaborative arrangements, when necessary, we perform an allocation of the upfront amount based on relative standalone selling prices (“SSP”) of licenses for individual targets.

license SSP using an income-based valuation approach utilizing risk-adjusted discounted cash flow projections of the estimated return a licensor would receive where applicable, or an alternative valuation method as indicative value from historical transactions.

The inputs used in the valuation model to determine SSP are based on estimates utilizing market data, information provided by our collaboration partners and data from historical transactions.

Differences in the allocation of the transaction price between delivered and undelivered performance obligations can impact the timing of revenue recognition but do not change the total revenue recognized under any agreement.

Share-Based Payments

Methodology Judgment and Uncertainties Effect if Actual Results Differ From Assumptions

We maintain a Stock Incentive Plan, which provides for share-based payment awards, including stock options, restricted stock and performance awards.

We determine the fair value of our stock option awards at the date of grant using a Black-Scholes model.

We determine the fair value of our restricted stock unit awards at the date of grant using the closing market value of our common stock on the date of grant.

We determine the grant date fair value for the PSU awards using a Monte Carlo simulation pricing model.

Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of our awards.

These assumptions and judgments include estimating the future volatility of our stock price, expected dividend yield and future employee stock option exercise behaviors.

Changes in these assumptions can materially affect the fair value estimate.

Our performance awards require management to make assumptions regarding the likelihood of achieving long-term Company goals.

We do not currently believe there is a reasonable likelihood that there will be a material change in estimates or assumptions we used to determine stock-based compensation expense.

However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in share-based compensation expense that could be material.

If actual results are not consistent with the assumptions used, the share-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the share-based compensation.

A 10% change in our share-based compensation expense for the year ended December 31, 2023 would have affected pre-tax earnings by approximately $3.7 million in 2023.

Goodwill and Intangibles

Methodology Judgment and Uncertainties Effect if Actual Results Differ From Assumptions

We estimate the fair value of acquired intangible assets that have finite useful lives whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable.

Goodwill and in-process research and development are not amortized;

however, they are reviewed for impairment at least annually.

We test for potential impairment of goodwill and other intangible assets that have indefinite useful lives annually in the second fiscal quarter or whenever indicators of impairment arise.

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Recent Accounting Pronouncements

Refer to Note 2, Summary of Significant Accounting Policies , of our consolidated financial statements for a discussion of recent accounting pronouncements and their effect, if any, on us.

Refer to Part II, Item 8, Note 2, Summary of Significant Accounting Policies , to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements and their effect, if any, on us.

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 7. Management’s Discussion and Analysis