HALOZYME THERAPEUTICS, INC. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There have been no significant changes in our internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013 framework) (the “COSO criteria”). Based on our assessment, management concluded that, as of December 31, 2024, our internal control over financial reporting is effective based on the COSO criteria. The independent registered public accounting firm that audited the consolidated financial statements that are included in this Annual Report on Form 10-K has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2024. The report appears below. 61 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Halozyme Therapeutics, Inc. Opinion on Internal Control Over Financial Reporting We have audited Halozyme Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Halozyme Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria . We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2024, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (2) and our report dated February 18, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Diego, California February 18, 2025 62 Table of Contents Item 9B. Other Information During the three months ended December 31, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-rule 10b5-1 trading arrangement (as such terms are defined pursuant to Item 408 of Regulation S-K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item regarding directors is incorporated by reference to our definitive Proxy Statement (the “Proxy Statement”) to be filed with the Securities and Exchange Commission in connection with our 2025 Annual Meeting of Stockholders no later than 120 days after December 31, 2024 under the heading “Election of Directors.” Our Code of Conduct and Ethics applies to all of our employees, officers and directors and is available on our website at www.halozyme.com. Amendments to or waivers of our Code of Conduct and Ethics granted to any of our directors or executive officers will be published promptly within four business days on our website, www.halozyme.com. Please note that the information on our website is not incorporated by reference in this Annual Report on Form 10-K. The information required by this item regarding our Audit Committee is incorporated by reference to the information under the caption “Board Meetings and Committees—Audit Committee” to be contained in the Proxy Statement. The information required by this item regarding material changes, if any, to the process by which stockholders may recommend nominees to our Board of Directors is incorporated by reference to the information under the caption “Board Meetings and Committees—Nominating and Governance Committee” to be contained in the Proxy Statement. The information required by this item regarding our insider trading policies and procedures is incorporated by reference to the information under the caption “Insider Trading Policies and Procedures” to be contained in our Proxy Statement. Executive Officers Helen I. Torley, M.B. Ch. B., M.R.C.P. (62), President, Chief Executive Officer and Director. Dr. Torley joined Halozyme in January 2014 as President and Chief Executive Officer and as a member of Halozyme’s Board of Directors. Throughout her career, Dr. Torley has led several successful product launches, including Kyprolis ® , Prolia ® , Sensipar ® , and Miacalcin ® . Prior to joining Halozyme, Dr. Torley served as Executive Vice President and Chief Commercial Officer for Onyx Pharmaceuticals (“Onyx”) from August 2011 to December 2013 overseeing the collaboration with Bayer on Nexavar ® and Stivarga ® and the U.S. launch of Kyprolis ® . She was responsible for the development of Onyx's commercial capabilities in ex-U.S. markets and in particular, in Europe. Prior to Onyx, Dr. Torley spent 10 years in management positions at Amgen Inc., most recently serving as Vice President and General Manager of the U.S. Nephrology Business Unit from 2003 to 2009 and the U.S. Bone Health Business Unit from 2009 to 2011. From 1997 to 2002, she held various senior management positions at Bristol-Myers Squibb, including Regional Vice President of Cardiovascular and Metabolic Sales and Head of Cardiovascular Global Marketing. She began her career at Sandoz/Novartis, where she ultimately served as Vice President of Medical Affairs, developing and conducting post-marketing clinical studies across all therapeutic areas, including oncology. Within the past five years, Dr. Torley served on the Board of Directors of Quest Diagnostics Incorporated, a diagnostic information services company. Before joining the industry, Dr. Torley was in medical practice as a senior registrar in rheumatology at the Royal Infirmary in Glasgow, Scotland. Dr. Torley received her Bachelor of Medicine and Bachelor of Surgery degrees (M.B. Ch.B.) from the University of Glasgow and is a Member of the Royal College of Physicians (M.R.C.P). Nicole LaBrosse (42), Senior Vice President, Chief Financial Officer. Ms. LaBrosse has served as the Senior Vice President, Chief Financial Officer since February 2022 and has over 20 years of public accounting and corporate finance experience. She previously served as the Company’s Vice President, Finance and Accounting from January 2020 to February 2022 and as the Company’s Executive Director, Controller from July 2017 to December 2019. From June 2015 to June 2017, she was the Company’s Senior Director, Financial Reporting. Prior to joining the Company, Ms. LaBrosse was an auditor with 63 Table of Contents PricewaterhouseCoopers, LLP from 2004 to 2015. She received a certified public accounting license after receiving a B.S. degree in corporate finance and accounting and her M.S. degree in accounting from Bentley College. Mark Snyder (58), Senior Vice President, General Counsel, Chief Compliance Officer and Secretary. Mr. Snyder joined Halozyme in January 2022 as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary. Mr. Snyder has over 30 years of experience in legal and business management roles. Prior to joining Halozyme, from January 2008 to December 2021, Mr. Snyder served in various senior positions in the legal department at Qualcomm Incorporated, a wireless communications company, including his most recent positions as Senior Vice President & Deputy General Counsel, Litigation, from April 2016 to December 2021 and Vice President, Patent Counsel, from October 2010 to April 2016. Before Qualcomm, Mr. Snyder served as Lead Intellectual Property Counsel at Kyocera Wireless Corp., a wireless communications company, and has held legal and business management roles in two smaller companies. Mr. Snyder began his legal career as a patent attorney at the law firm of Sheridan Ross & McIntosh. Mr. Snyder received his B.S. degree in chemical engineering at the University of Rochester and his M.B.A. degree from Boston College Carroll School of Business. He received his J.D. from Boston College Law School. Michael J. LaBarre (61), Senior Vice President, Chief Technical Officer. Dr. LaBarre joined Halozyme in June 2008 as Vice President, Product Development and has served in various officer positions most recently as Senior Vice President, Chief Technical Officer since January 2020. Prior to joining Halozyme, Dr. LaBarre served as Vice President, Product Development at Paramount BioSciences, a pharmaceutical company, from April 2006 to June 2008. Prior to that he served as Director, Analytical and Protein Biochemistry, Discovery Research at Biogen Idec, a pharmaceutical company, from December 2003 to April 2006. He also served in various research and development roles at IDEC Pharmaceuticals Corporation, a pharmaceutical company, from November 1995 to December 2003 most recently as Director, Analytical and Formulation Sciences, R&D. Prior to joining IDEC, Dr. LaBarre held research and development positions at various pharmaceutical companies from July 1992 to November 1995. Dr. LaBarre received his Ph.D. in Chemistry from the University of Arizona and his B.S. in Chemistry from Southampton College of Long Island University. Item 11. Executive Compensation The information required by this item is incorporated by reference to the information under the captions “ Executive Compensation and Related Information ” and “ Compensation Committee Interlocks and Insider Participation ” to be contained in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Other than as set forth below, the information required by this item is incorporated by reference to the information under the caption “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” to be contained in the Proxy Statement. 64 Table of Contents Equity Compensation Plan Information The following table summarizes our compensation plans under which our equity securities are authorized for issuance as of December 31, 2024: Plan Category Number of Shares to be Issued upon Exercise of Outstanding Options, Restricted Stock Units and Performance Stock Units (a) Weighted Average Exercise Price of Outstanding Options (2) (b) Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) (c) Equity compensation plans approved by stockholders (1) 7,357,385 $ 31.83 12,651,111 Equity compensation plans not approved by stockholders — — — 7,357,385 $ 31.83 12,651,111 (1) Represents stock options, restricted stock units, and performance stock units under the Amended and Restated 2021 Stock Plan. This includes 2,559,594 shares available for future purchase under our ESPP plan. (2) This amount does not include performance stock units as there is no exercise price for such units. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the information under the captions “ Certain Relationships and Related Transactions ” and “Corporate Governance - Director Independence” to be contained in the Proxy Statement. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to the information under the caption “ Principal Accounting Fees and Services ” to be contained in the Proxy Statement. 65 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of this report. 1. Financial Statements Page Report of Independent Registered Public Accounting Firm ID 42 F- 1 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 3 Consolidated Statements of Income for Each of the Years Ended December 31, 2024, 2023 and 2022 F- 4 Consolidated Statements of Comprehensive Income for Each of the Years Ended December 31, 2024, 2023 and 2022 F- 5 Consolidated Statements of Cash Flows for Each of the Years Ended December 31, 2024, 2023 and 2022 F- 6 Consolidated Statements of Stockholders’ Equity for Each of the Years Ended December 31, 2024, 2023 and 2022 F- 7 Notes to the Consolidated Financial Statements F- 8 2. List of all Financial Statement schedules. The following financial statement schedule of Halozyme Therapeutics, Inc. is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements of Halozyme Therapeutics, Inc. Page Schedule II: Valuation and Qualifying Accounts F- 44 All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto. 3. List of Exhibits required by Item 601 of Regulation S-K. See part (b) below. 66 Table of Contents (b) Exhibits. Incorporated by Reference Exhibit Filed Number Exhibit Title Herewith Form Date Filed 3.1 Amended and Restated Certification of Incorporation of Halozyme Therapeutics, Inc. 8-K 4/26/2024 3.2 The Company's Bylaws, as amended 8-K 12/10/2021 4.1 Indenture, dated March 1, 2021, between Halozyme Therapeutics, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 3/1/2021 4.2 Form of Note, dated March 1, 2021, between Halozyme Therapeutics, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 3/1/2021 4.3 Indenture, dated August 18, 2022, between Halozyme Therapeutics, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee 8-K 8/18/2022 4.4 Form of Note, dated August 18, 2022, between Halozyme Therapeutics, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (included within Exhibit 4.3) 8-K 8/18/2022 4.5 Description of Securities 10-K 2/22/2022 10.1 Form of Capped Call Confirmation 8-K 8/18/2022 10.2 Credit Agreement, dated as of May 24, 2022, by and among Halozyme Therapeutics, Inc., the Guarantors, Bank of America N.A. and each of those additional Lenders that are a party to such agreement. 8-K 5/24/2022 10.3 Security Agreement, dated as of May 24, 2022, by and among Halozyme Therapeutics, Inc., the Guarantors and Bank of America N.A 8-K 5/24/2022 10.4 Amendment No. 1 to the Credit Agreement 8-K 8/19/2022 10.5 Amendment No. 2 to the Credit Agreement 10-Q 5/9/2023 10.6 Agreement for Assignment and Assumption of Lease, Del Mar Corporate Centre I Office Lease and First Amendment to Office Lease 10-Q 5/10/2022 10.7 Lease Agreement, dated July 1, 2019, by and between Antares Pharma, Inc. and Whitewater Properties I, LLC. 8-K 7/5/2019 10.8# Halozyme Therapeutics, Inc. 2021 Employee Stock Purchase Plan 10-Q 11/8/2022 10.9# Halozyme Therapeutics, Inc. 2021 Stock Plan 8-K 5/5/2021 10.10# Form of Stock Option Agreement (2021 Plan updated May 2023) 10-Q 8/8/2023 10.11# Form of Restricted Stock Units Agreement for Officers (2021 Plan updated May 2023) 10-Q 8/8/2023 10.12# Form of Restricted Stock Units Agreement (2021 Plan Sell-to-Cover updated June 2024) 10-Q 8/6/2024 10.13# Letter Agreement Amending Exercise Period for Employee Option 10-Q 8/8/2023 10.14# Form of Performance Stock Units (2021 Stock Plan) 8-K 5/5/2021 67 Table of Contents Incorporated by Reference Exhibit Filed Number Exhibit Title Herewith Form Date Filed 10.15# Form of Directors Restricted Stock Units Agreement (2021 Stock Plan) 8-K 5/5/2021 10.16# Form of Director Stock Option Agreement (2021 Plan) 10-Q 8/8/2023 10.17# Halozyme Therapeutics, Inc. 2011 Stock Plan (as amended through May 2, 2018) 8-K 4/6/2018 10.18# Form of Stock Option Agreement (2011 Stock Plan) 8-K 5/6/2011 10.19# Form of Stock Option Agreement for Executive Officers (2011 Stock Plan) 8-K 5/6/2011 10.20# Form of Restricted Stock Units Agreement for Officers (2011 Stock Plan) 10-Q 8/10/2015 10.21# Form of Restricted Stock Award Agreement for Officers (2011 Stock Plan) 10-Q 8/10/2015 10.22# Form of Stock Option Agreement (2011 Stock Plan - grants made on or after 11/4/2015) 10-Q 11/9/2015 10.23# Form of Restricted Stock Units Agreement (2011 Stock Plan - grants made on or after 11/4/2015) 10-Q 11/9/2015 10.24# Form of Restricted Stock Units Agreement (2011 Plan - grants made on or after 2/22/2017) 10-K 2/28/2017 10.25# Form of Indemnity Agreement for Directors and Executive Officers 8-K 12/20/2007 10.26# Form of PSU Agreement (2011 Stock Plan) 10-Q 8/10/2020 10.27# Form of PSU Agreement (2011 Stock Plan) 10-K 2/23/2021 10.28# Severance Policy 10-K 2/20/2024 10.29# Form of Amended and Restated Change In Control Agreement with Officer 10-Q 11/9/2015 10.30# Halozyme Therapeutics, Inc. Non Qualified Deferred Compensation Plan Adoption Agreement 10-K 2/22/2022 68 Table of Contents Incorporated by Reference Exhibit Filed Number Exhibit Title Herewith Form Date Filed 10.31# Halozyme Therapeutics, Inc Directors Deferred Equity Compensation Plan 10-K 2/22/2022 19.1 H alozyme Therapeutics, Inc. Insider Trading Policy X 21.1 Subsidiaries of Registrant X 23.1 Consent of Independent Registered Public Accounting Firm X 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended X 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended X 32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 97# Halozyme Therapeutics, Inc. Incentive Compensation Recoupment Policy 10-K 2/20/2024 101.INS XBRL Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X 101.SCH XBRL Taxonomy Extension Schema X 101.CAL XBRL Taxonomy Extension Calculation Linkbase X 101.DEF XBRL Taxonomy Extension Definition Linkbase X 101.LAB XBRL Taxonomy Extension Label Linkbase X 101.PRE XBRL Taxonomy Presentation Linkbase X 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) X _______________ # Indicates management contract or compensatory plan or arrangement. (c) Financial Statement Schedules. See Item 15(a) (2) above. 69 Table of Contents Item 16. Form 10-K Summary None. 70 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Halozyme Therapeutics, Inc., (Registrant) Dated: February 18, 2025 By: /s/ Helen I. Torley, M.B. Ch.B., M.R.C.P. Helen I. Torley, M.B. Ch.B., M.R.C.P. President and Chief Executive Officer (Principal Executive Officer) 71 Table of Contents POWER OF ATTORNEY Know all persons by these presents, that each person whose signature appears below constitutes and appoints Helen I. Torley and Nicole LaBrosse, and each of them, as his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his/her substitute or substituted, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Helen I. Torley, M.B. Ch.B., M.R.C.P. President and Chief Executive Officer, Director February 18, 2025 Helen I. Torley, M.B. Ch.B., M.R.C.P. (Principal Executive Officer) /s/ Nicole LaBrosse Senior Vice President and Chief Financial Officer February 18, 2025 Nicole LaBrosse (Principal Financial and Accounting Officer) /s/ Jeffrey W. Henderson Chair of the Board of Directors February 18, 2025 Jeffrey W. Henderson /s/ Bernadette Connaughton Director February 18, 2025 Bernadette Connaughton /s/ Barbara Duncan Director February 18, 2025 Barbara Duncan /s/ Mahesh Krishnan, M.D. Director February 18, 2025 Mahesh Krishnan, M.D. /s/ Connie L. Matsui Director February 18, 2025 Connie L. Matsui /s/ Moni Miyashita Director February 18, 2025 Moni Miyashita /s/ Matthew L. Posard Director February 18, 2025 Matthew L. Posard 72 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Halozyme Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Halozyme Therapeutics, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) (2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F-1 Table of Contents Determination of Overall Transaction Price for Collaboration Agreements Description of the Matter At December 31, 2024, the Company has eleven collaboration agreements. As discussed in Notes 2 and 5 of the financial statements, amounts are included in the transaction price when management determines that it is probable that the amount will not result in a significant reversal of revenue in the future. During 2024, the Company recognized $ 72.5 million of variable consideration in the transaction price under their collaboration arrangements. Auditing management’s conclusions related to determining the probability of achievement of milestones is complex and highly judgmental given the progression of developing and commercializing the combined targets is completed by the collaboration partners. How We Addressed the Matter in Our Audit We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the Company’s process to routinely evaluate the probability of achievement of milestones and any related constraint for each collaboration, in addition to the controls over the completeness and accuracy of determining the population of agreements and potential milestone payments. To test the milestone amounts included, or excluded, from the transaction price, we performed audit procedures that included, among others, inspecting evidence to support management’s assessment of the probability of achievement. For each milestone, we examined evidence including correspondence with the collaboration partner and evaluated management’s conclusions on the probabilities of achievement. We reviewed supporting documentation to corroborate that milestones were included in the transaction price when determined to be probable of achievement. We reviewed the collaboration agreements and related amendments to validate the completeness of the list of targets and potential milestone payments that management considered in their analysis. We performed a lookback analysis to validate the Company’s accuracy of determining the probability of achieving these milestones. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2006. San Diego, California February 18, 2025 F-2 Table of Contents HALOZYME THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) December 31, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 115,850 $ 118,370 Marketable securities, available-for-sale 480,224 217,630 Accounts receivable, net and contract assets 308,455 234,210 Inventories 141,860 127,601 Prepaid expenses and other current assets 38,951 48,613 Total current assets 1,085,340 746,424 Property and equipment, net 75,035 74,944 Prepaid expenses and other assets 80,596 17,816 Goodwill 416,821 416,821 Intangible assets, net 401,830 472,879 Deferred tax assets, net 3,855 4,386 Total assets $ 2,063,477 $ 1,733,270 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 10,249 $ 11,816 Accrued expenses 128,851 100,678 Total current liabilities 139,100 112,494 Long-term debt, net 1,505,798 1,499,248 Other long-term liabilities 54,758 37,720 Total liabilities 1,699,656 1,649,462 Commitments and contingencies (Note 12) Stockholders’ equity Preferred stock - $ 0.001 par value; 20,000 shares authorized; no shares issued and outstanding — — Common stock - $ 0.001 par value; 300,000 shares authorized; 123,138 and 126,770 shares issued and outstanding as of December 31, 2024 and 2023, respectively 123 127 Additional paid-in capital — 2,409 Accumulated other comprehensive income (loss) 3,829 ( 9,278 ) Retained earnings 359,869 90,550 Total stockholders’ equity 363,821 83,808 Total liabilities and stockholders’ equity $ 2,063,477 $ 1,733,270 See accompanying notes to consolidated financial statements. F-3 Table of Contents HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 Revenues Royalties $ 570,991 $ 447,865 $ 360,475 Product sales, net 303,492 300,854 191,030 Revenues under collaborative agreements 140,841 80,534 108,611 Total revenues 1,015,324 829,253 660,116 Operating expenses Cost of sales 159,417 192,361 139,304 Amortization of intangibles 71,049 73,773 43,148 Research and development 79,048 76,363 66,607 Selling, general and administrative 154,335 149,182 143,526 Total operating expenses 463,849 491,679 392,585 Operating income 551,475 337,574 267,531 Other income (expense) Investment and other income, net 23,752 16,317 1,046 Inducement expense related to convertible notes — — ( 2,712 ) Contingent liability fair value measurement gain — 13,200 — Interest expense ( 18,095 ) ( 18,762 ) ( 16,947 ) Income before income tax expense 557,132 348,329 248,918 Income tax expense 113,041 66,735 46,789 Net income $ 444,091 $ 281,594 $ 202,129 Earnings per share Basic $ 3.50 $ 2.13 $ 1.48 Diluted $ 3.43 $ 2.10 $ 1.44 Weighted average common shares outstanding Basic 126,827 131,927 136,844 Diluted 129,424 134,197 140,608 See accompanying notes to consolidated financial statements. F-4 Table of Contents HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2024 2023 2022 Net income $ 444,091 $ 281,594 $ 202,129 Other comprehensive income Unrealized (loss) gain on marketable securities, net ( 358 ) 1,097 ( 349 ) Foreign currency translation adjustment ( 4 ) 24 8 Unrealized gain on foreign currency — 3 39 Unrealized gain (loss) on derivative instruments, net 14,693 ( 9,406 ) — Realized gain on derivative instruments, net ( 1,224 ) ( 74 ) — Comprehensive income $ 457,198 $ 273,238 $ 201,827 See accompanying notes to consolidated financial statements. F-5 Table of Contents HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 Operating activities Net income $ 444,091 $ 281,594 $ 202,129 Adjustments to reconcile net income to net cash provided by operating activities: Share-based compensation 43,385 36,620 24,397 Depreciation and amortization 10,263 11,083 6,493 Amortization of intangible assets 71,049 73,773 43,148 Amortization of debt discount 7,350 7,304 7,839 Accretion of (premium) discount on marketable securities, net ( 10,918 ) ( 6,319 ) 1,106 Realized gain (loss) on marketable securities ( 7 ) — 1,727 Loss on disposal of equipment 1,529 611 129 Contingent liability fair value measurement adjustment — ( 13,200 ) — Recognition of deferred revenue — — ( 2,494 ) Lease payments recognized (deferred) 1,067 1,270 ( 903 ) Induced conversion expense related to convertible notes — — 2,712 Deferred income taxes 532 34,506 40,005 Other — — ( 227 ) Changes in operating assets and liabilities Accounts receivable, net and other contract assets ( 74,245 ) ( 3,339 ) ( 83,941 ) Inventories ( 67,381 ) ( 26,884 ) ( 17,481 ) Prepaid expenses and other assets 5,356 4,098 ( 9,064 ) Accounts payable and accrued expenses 46,993 ( 12,546 ) 24,535 Net cash provided by operating activities 479,064 388,571 240,110 Investing activities Purchases of marketable securities ( 647,601 ) ( 292,911 ) ( 255,208 ) Proceeds from sales and maturities of marketable securities 395,574 211,296 746,127 Acquisitions of business, net of cash acquired — — ( 999,120 ) Purchases of property and equipment ( 10,696 ) ( 15,294 ) ( 4,810 ) Proceeds from sale of assets — — 26,006 Net cash used in investing activities ( 262,723 ) ( 96,909 ) ( 487,005 ) Financing activities Proceeds from term loan — — 250,000 Repayment of term loan — — ( 250,000 ) Proceeds from revolving credit facilities — — 120,000 Repayment of revolving credit facilities — — ( 120,000 ) Repayment of 2024 Convertible Notes — ( 13,483 ) ( 77,453 ) Proceeds from issuance of 2028 Convertible Notes, net — — 702,000 Purchase of capped call — — ( 69,120 ) Payment of debt issuance cost — — ( 7,104 ) Repurchase of common stock ( 250,000 ) ( 402,383 ) ( 200,002 ) Proceeds from issuance of common stock under equity incentive plans, net of taxes paid related to net share settlement 31,139 7,879 14,050 Net cash (used in) provided by financing activities ( 218,861 ) ( 407,987 ) 362,371 Net (decrease) increase in cash, cash equivalents and restricted cash ( 2,520 ) ( 116,325 ) 115,476 Cash, cash equivalents and restricted cash at beginning of period 118,370 234,695 119,219 Cash, cash equivalents and restricted cash at end of period $ 115,850 $ 118,370 $ 234,695 Supplemental disclosure of cash flow information Interest paid $ 10,565 $ 11,410 $ 6,107 Income taxes paid, net $ 80,618 $ 31,756 $ 16,224 Supplemental disclosure of non-cash investing and financing activities Amounts accrued for purchases of property and equipment $ 280 $ 25 $ 6,229 Right-of-use assets obtained in exchange for lease obligation $ 3,078 $ 2,572 $ 34,435 Common stock issued for conversion of 2024 Convertible Notes $ — $ 125 $ 1,018 See accompanying notes to consolidated financial statements. F-6 Table of Contents HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity Shares Amount BALANCE AS OF DECEMBER 31, 2021 137,498 $ 138 $ 256,347 $ ( 620 ) $ ( 58,912 ) $ 196,953 Share-based compensation expense — — 24,397 — — 24,397 Issuance of common stock for the induced conversion of 2024 Convertible Notes 1,512 1 1,692 — — 1,693 Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock and performance stock units, net and shares issued under the ESPP plan 1,077 1 14,049 — — 14,050 Capped call transaction — — ( 69,120 ) — — ( 69,120 ) Repurchase of common stock ( 4,933 ) ( 5 ) ( 199,997 ) — — ( 200,002 ) Other comprehensive loss — — — ( 302 ) — ( 302 ) Net income — — — — 202,129 202,129 BALANCE AS OF DECEMBER 31, 2022 135,154 135 27,368 ( 922 ) 143,217 169,798 Share-based compensation expense — — 36,620 — — 36,620 Issuance of common stock for the conversion of 2024 Convertible Notes 289 — ( 126 ) — — ( 126 ) Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock and performance stock units, net and shares issued under the ESPP plan 945 2 7,877 — — 7,879 Repurchase of common stock ( 9,618 ) ( 10 ) ( 69,330 ) — ( 334,261 ) ( 403,601 ) Other comprehensive loss — — — ( 8,356 ) — ( 8,356 ) Net income — — — — 281,594 281,594 BALANCE AS OF DECEMBER 31, 2023 126,770 127 2,409 ( 9,278 ) 90,550 83,808 Share-based compensation expense — — 43,385 — — 43,385 Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock and performance stock units, net and shares issued under the ESPP plan 1,615 1 31,138 — — 31,139 Repurchase of common stock ( 5,247 ) ( 5 ) ( 76,932 ) ( 174,772 ) ( 251,709 ) Other comprehensive income — — — 13,107 — 13,107 Net income — — — — 444,091 444,091 BALANCE AS OF DECEMBER 31, 2024 123,138 $ 123 $ — $ 3,829 $ 359,869 $ 363,821 See accompanying notes to consolidated financial statements. F-7 Table of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements 1. Organization and Business 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 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. We also develop, manufacture and commercialize, for ourselves or with our partners, drug-device combination products using our advanced auto-injector technologies that are designed to provide commercial or functional advantages such as improved convenience, reliability and tolerability, and enhanced patient comfort and adherence. Our ENHANZE partners’ approved products and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme. rHuPH20 works by breaking down hyaluronan, 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 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. ENHANZE may enable fixed-dose SC dosing compared to weight-based dosing typically required for IV administration, extend the dosing interval for drugs that are already administered subcutaneously and potentially allow for lower rates of infusion-related reactions. ENHANZE may enable more flexible treatment options such as home administration by a healthcare professional or potentially the patient or caregiver. Lastly, certain proprietary drugs co-formulated with ENHANZE have been granted additional exclusivity, extending the patent life of the product beyond the patent expiry of the proprietary IV drug. We currently have ENHANZE collaborations and licensing agreements with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (“Roche”), Takeda Pharmaceuticals International AG and Baxalta US Inc. (“Takeda”), Pfizer Inc. (“Pfizer”), Janssen Biotech, Inc. (“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. (“Acumen”). 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 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 our auto-injectors with Idorsia Pharmaceuticals Ltd. (“Idorsia”). Our commercial portfolio of proprietary products includes Hylenex ® , utilizing rHuPH20, and XYOSTED ® , utilizing our auto-injector technology. Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these notes to consolidated financial statements refer to Halozyme Therapeutics, Inc. and each of its directly and indirectly wholly owned subsidiaries as disclosed in Note 2, Summary of Significant Accounting Policies . F-8 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiaries, Halozyme, Inc. and Antares Pharma, Inc., and Antares Pharma, Inc.’s wholly owned Swiss subsidiaries, Antares Pharma IPL AG and Antares Pharma AG. All intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that we believe to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from our estimates. Cash Equivalents and Marketable Securities Cash equivalents consist of highly liquid investments, readily convertible to cash, which mature within 90 days or less from the date of purchase. As of December 31, 2024, our cash and cash equivalents consisted of money market funds, bank certificate of deposits and demand deposits at commercial banks. Marketable securities are investments with original maturities of more than 90 days from the date of purchase that are specifically identified to fund current operations. Marketable securities are considered available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date which reflects management’s intention to use the proceeds from the sale of these investments to fund our operations, as necessary. Such available-for-sale investments are carried at fair value with unrealized gains and losses recorded in other comprehensive income and included as a separate component of stockholders’ equity. The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in our consolidated statements of income. We use the specific identification method for calculating realized gains and losses on marketable securities sold. None of the realized gains and losses and declines in value that were judged to be as a result of credit loss on marketable securities, if any, are included in investment and other income, net in our consolidated statements of income. Fair Value of Financial Instruments The authoritative guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Available-for-sale marketable securities consist of asset-backed securities, corporate debt securities, U.S. Treasury securities, agency bonds and commercial paper, and are measured at fair value using Level 1 and Level 2 inputs. Level 2 financial instruments are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs, including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment manager, who obtains these fair values from a third-party pricing source. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source. F-9 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Concentrations of Credit Risk, Sources of Supply and Significant Customers We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with two major commercial banks and marketable securities with one other financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the consolidated balance sheets. We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for royalties, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services, and supply of bulk formulation of rHuPH20 and auto-injector devices. In addition, we sell proprietary products in the United States (“U.S.”) to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectability of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no significant allowance for doubtful accounts as of December 31, 2024 and 2023. Approximately 60 % of the accounts receivable balance as of December 31, 2024 represents amounts due from Janssen and Roche. Approximately 69 % of the accounts receivable balance as of December 31, 2023 represents amounts due from Janssen, Roche and Teva. The following table indicates the percentage of total revenues in excess of 10% with any single customer: Year Ended December 31, 2024 2023 2022 Partner A 41 % 44 % 46 % Partner B 17 % 19 % 20 % Partner C 8 % 10 % — % We attribute revenues under collaborative agreements, including royalties, to the individual countries where the customer is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. Worldwide revenues from external customers are summarized by geographic location in the following table (in thousands): Year Ended December 31, 2024 2023 2022 United States $ 690,461 $ 587,196 $ 437,989 Switzerland 212,391 149,024 166,836 Belgium 84,005 58,354 2,088 Japan 18,939 15,096 47,939 All other foreign 9,528 19,583 5,264 Total revenues $ 1,015,324 $ 829,253 $ 660,116 Accounts Receivable, net and Contract Assets Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of estimated prompt pay discounts, distribution fees and chargebacks. Contract assets are recorded when revenue is earned but an invoice has not been issued for payment. Contract assets relate to development milestones deemed probable of receipt for intellectual property licenses granted to partners in prior periods and for goods or services when control has transferred to the customer, and corresponding revenue is recognized but is not yet billable to the customer in accordance with the terms of the contract. F-10 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Inventories Inventories are stated at lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventories are reviewed periodically for potential excess, dated or obsolete status. We evaluate the carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods on hand. Leases We have entered into operating leases primarily for real estate and automobiles. These leases have contractual terms which range from three years to twelve years . We determine if an arrangement contains a lease at inception. Right of use (“ROU”) assets and liabilities resulting from operating leases are included in property and equipment, accrued expenses and other long-term liabilities on our consolidated balance sheets. Operating lease ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the discount rate to calculate the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our leases often include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that we will exercise that option. Short-term leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases, such as automobiles, we account for the lease and non-lease components as a single lease component. Property and Equipment, Net Property and equipment, including ROU assets are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over its estimated useful life ranging from three years to ten years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Impairment of Long-Lived Assets We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate their carrying value may not be recoverable. Comprehensive Income Comprehensive income is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources. Convertible Notes The 2024 Convertible Notes, the 2027 Convertible Notes and the 2028 Convertible Notes (collectively, the “Convertible Notes”) are accounted for in accordance with authoritative guidance for debt and derivatives. We evaluate all the embedded conversion options contained in the Convertible Notes to determine if there are embedded features that require bifurcation as a derivative as required by U.S. GAAP. Based on our analysis, we account for each of our Convertible Notes as single units of accounting, a liability, because we concluded that the conversion features do not require bifurcation as a derivative under embedded derivative authoritative guidance. Cash Flow Hedges - Currency Risks Beginning in the second quarter of 2023, we entered into a cash flow hedging program to mitigate foreign currency exchange risk associated with forecasted royalty revenue denominated in Swiss francs. Under the program, we can hedge these forecasted royalties up to a maximum of four years into the future. We hedge these cash flow exposures to reduce the risk of our earnings and cash flows being adversely affected by fluctuations in exchange rates. F-11 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) In accordance with the hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and are highly effective in offsetting changes to future cash flows on hedged transactions. Both at inception of the hedge and on an ongoing basis, we assess whether the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a prospective and retrospective basis. If we determine a (i) foreign currency forward contract is not highly effective as a cash flow hedge, (ii) foreign currency forward contract has ceased to be a highly effective hedge or (iii) forecasted transaction is no longer probable of occurring, we would discontinue hedge accounting treatment prospectively. We measure effectiveness based on the change in fair value of the forward currency forward contract and the fair value of the hypothetical foreign currency forward contract with terms that match the critical terms of the risk being hedged. No portion of our foreign currency forward contracts were excluded from the assessment of hedge effectiveness. As of December 31, 2024, all hedges were determined to be highly effective. The assets or liabilities associated with our hedging contracts are recorded at fair market value in prepaid expense and other current assets, prepaid expenses and other assets, accrued expenses, or other long-term liabilities, respectively, in our consolidated balance sheets. Gains and losses related to changes in the fair market value of these hedging contracts are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”) within stockholder’s equity in our consolidated balance sheets and reclassified to royalty revenue in our consolidated statements of income in the same period as the recognition of the underlying hedged transaction. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, within the defined hedge period, we reclassify the gains or losses on the related cash flow hedge from AOCI to royalties revenue in our consolidated statements of income. Settlements from the cash flow hedge are included in operating activities on the consolidated statements of cash flows. Since the fair market value of these hedging contracts is derived from current market rates, the hedging contracts are classified as derivative financial instruments. We do not use derivatives for speculative or trading purposes. As of December 31, 2024, amounts expected to be recognized as a net gain out of AOCI into our consolidated statements of income during the next 12 months are not material. Business Combinations Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. Costs incurred to complete a business combination, such as legal and other professional fees, are expensed as incurred. If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. Any adjustments identified after the measurement period are recorded in our consolidated statements of income. Goodwill, Intangible Assets and Other Long-Lived Asset Assets acquired, including intangible assets and in-process research and development (“IPR&D”), and liabilities assumed are measured at fair value as of the acquisition date. Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of the net assets acquired. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment. Goodwill and IPR&D are not amortized; however, they are reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. Goodwill and IPR&D are considered to be impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective fair value. We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting and operating segment structure and availability of discrete financial information. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting unit is less than the carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of our reporting unit is less than the carrying amounts, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the reporting unit with the carrying value, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, we record an F-12 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) impairment loss based on the difference. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test. Our identifiable intangible assets with finite useful lives are typically comprised of acquired device technologies and product rights. The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives. We perform regular reviews to determine if any event has occurred that may indicate intangible assets with finite useful lives and other long-lived assets are potentially impaired. If indicators of impairment exist, an impairment test is performed to assess the recoverability of the affected assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows. If the affected assets are not recoverable, we estimate the fair value of the assets and record an impairment loss if the carrying value of the assets exceeds the fair value. Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to the net book value, significant changes in the ability of a particular asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset. Revenue Recognition We generate revenues from payments received (i) as royalties from licensing our ENHANZE technology and other royalty arrangements, (ii) under collaborative agreements and (iii) from sales of our proprietary and partnered products. We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, we perform the following five steps: (i) identify the promised goods or services in the contract; (ii) identify the performance obligations in the contract, including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. ENHANZE and Device Royalties Under the terms of our ENHANZE collaboration and license agreements, our partners will pay us royalties at an on average mid-single digit percent rate of their sales if products under the collaboration are commercialized. All amounts owed to us are noncancelable after the underlying triggering event occurs, and nonrefundable once paid. Unless terminated earlier in accordance with its terms, collaborations generally continue in effect until the last to expire royalty payment term, as determined on a product by product and country by country basis, with each royalty term starting on the first commercial sale of that product and ending the later of: (i) a specified period or term set forth in the agreement or (ii) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration. In general, when there are no valid claims of a specified patent developed under the collaboration covering the product in a given country, the royalty rate is reduced for those sales in that country upon the expiration of our patents covering rHuPH20. Janssen’s patents covering DARZALEX SC do not impact the timing for this royalty reduction. Partners may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis generally upon 90 days prior written notice to us. Upon any such termination, the license granted to partners (in total or with respect to the terminated target, as applicable) will terminate provided; however, that in the event of expiration of the agreement (as opposed to a termination), the on-going licenses granted may become perpetual, non-exclusive and fully paid. Sales-based milestones and royalties are recognized in the period the underlying sales or milestones occur. We do not receive final royalty reports from our ENHANZE 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 internal estimates and available preliminary reports provided by our partners. We will record adjustments in the following quarter, if necessary, when final royalty reports are received. To date, we have not recorded any material adjustments. We also earn royalties in connection with several of our licenses granted under license and development arrangements with our device partners. These royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid-single digits to low double digits and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to us within 45 to 60 days after the end of the period in which the commercial sales are made. We base our estimates of royalties earned on actual sales information from our partners when available or estimated prescription sales from external sources and estimated net selling price. We will record adjustments in the following quarter, if necessary, when final royalty reports are received. To date, we have not recorded any material adjustments. F-13 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Revenue under ENHANZE and Device Collaborative Agreements ENHANZE Collaboration and License Agreements Under these agreements, we grant the collaboration partner a worldwide license to develop and commercialize products using our ENHANZE technology to combine our patented rHuPH20 enzyme with their proprietary biologics directed at up to a specified number of targets. Targets are usually licensed on an exclusive, global basis. Targets selected subsequent to inception of the arrangement generally require payment of an additional license fee. The collaboration partner is responsible for all development, manufacturing, clinical, regulatory, sales and marketing costs for any products developed under the agreement. We are responsible for supply of bulk rHuPH20 based on the collaboration partner’s purchase orders, and may also be separately engaged to perform research and development services. While these collaboration agreements are similar in that they originate from the same framework, each one is the result of an arms-length negotiation and thus may vary from one to the other. We generally collect an upfront license payment from collaboration partners, and are also entitled to receive event-based payments subject to collaboration partners’ achievement of specified development, regulatory and sales-based milestones. In several agreements, collaboration partners pay us annual fees to maintain their exclusive license rights if they are unable to advance product development to specified stages. We earn separate fees for bulk rHuPH20 supplies and research and development services. Although these agreements are in form identified as collaborative agreements, we concluded for accounting purposes they represent contracts with customers and are not subject to accounting literature on collaborative arrangements. This is because we grant to partners licenses to our intellectual property and provide supply of bulk rHuPH20 and research and development services which are all outputs of our ongoing activities, in exchange for respective consideration. Under these collaborative agreements, our partners lead development of assets, and we do not share in significant financial risks of their development or commercialization activities. Accordingly, we concluded our collaborative agreements are appropriately accounted for pursuant to U.S. GAAP. Under all of our ENHANZE collaborative agreements, we have identified licenses to use functional intellectual property as the only performance obligation. The intellectual property underlying the license is our proprietary ENHANZE technology which represents application of rHuPH20 to facilitate delivery of drugs. Each of the licenses grants the partners rights to use our intellectual property as it exists and is identified on the effective date of the license, because there is no ongoing development of the ENHANZE technology required. Therefore, we recognize revenue from licenses at the point when the license becomes effective and the partner has received access to our intellectual property, usually at the inception of the agreement. When partners can select additional targets to add to the licenses granted, we consider these rights to be options. We evaluate whether such options contain material rights, i.e. have exercise prices that are discounted compared to what we would charge for a similar license to a new partner. The exercise price of these options includes a combination of the target selection fees, event-based milestone payments and royalties. When these amounts in aggregate are not offered at a discount that exceeds discounts available to other customers, we conclude the option does not contain a material right, and we consider grants of additional licensing rights upon option exercises to be separate contracts (target selection contracts). Generally, we provide indemnification and protection of licensed intellectual property for our customers. These provisions are part of assurance that the licenses meet the agreements’ representations and are not obligations to provide goods or services. We also fulfill purchase orders for supply of bulk rHuPH20 and perform research and development services pursuant to project authorization forms for our partners, which represent separate contracts. In addition to our licenses, we price our supply of bulk rHuPH20 and research and development services at our regular selling prices, called standalone selling prices (“SSP”). Therefore, our partners do not have material rights to order these items at prices not reflective of SSP. Refer to the discussion below regarding recognition of revenue for these separate contracts. Transaction price for a contract represents the amount to which we are entitled in exchange for providing goods and services to the customer. Transaction price does not include amounts subject to uncertainties unless it is probable that there will be no significant reversal of revenue when the uncertainty is resolved. Apart from the upfront license payment (or target selection fees in the target selection contracts), all other fees we may earn under our collaborative agreements are subject to significant uncertainties of product development. Achievement of many of the event-based development and regulatory milestones may not be probable until such milestones are actually achieved. This generally relates to milestones such as obtaining marketing authorization approvals. With respect to other development milestones, e.g., dosing of a first patient in a clinical trial, achievement could be considered probable prior to its actual occurrence, based on the progress towards commencement of the trial. In order to evaluate progress towards commencement of a trial, we assess the status of activities leading up to our partner’s initiation of a trial such as feedback received from the applicable regulatory authorities, completion of investigational new drug or equivalent filings, readiness and availability of drug, readiness of study sites and our partner’s F-14 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) commitment of resources to the program. We do not include any amounts subject to uncertainties in the transaction price until it is probable that the amount will not result in a significant reversal of revenue in the future. At the end of each reporting period, we re-evaluate the probability of achievement of such milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. When target exchange rights are held by partners, and the amounts attributed to these rights are not refundable, they are included in the transaction price. However, they are recorded as deferred revenues because we have a potential performance obligation to provide a new target upon an exchange right being exercised. These amounts are recognized in revenue when the right of exchange expires or is exercised. Because our agreements have one type of performance obligation (licenses) which are typically all transferred at the same time at agreement inception, allocation of transaction price often is not required. However, allocation is required when licenses for some of the individual targets are subject to rights of exchange, because revenue associated with these targets cannot be recognized. When allocation is needed, we perform an allocation of the upfront amount based on relative SSP of licenses for individual targets. We determine 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 such as indicative value from historical transactions. When amounts subject to uncertainties, such as milestones and royalties, are included in the transaction price, we attribute them to the specific individual target licenses which generate such milestone or royalty amounts. We also estimate SSP of bulk rHuPH20 and research and development services, to determine that our partners do not have material rights to order them at discounted prices. For supplies of bulk rHuPH20, because we effectively act as a contract manufacturer to our partners, we estimate and charge SSP based on the typical contract manufacturer margins consistent with all of our partners. We determine SSP of research and development services based on a fully-burdened labor rate. Our rates are comparable to those we observe in other collaborative agreements. We also have a history of charging similar rates to all of our partners. Upfront amounts allocated to licenses to individual targets are recognized as revenue when the license is transferred to the partner, as discussed above, if the license is not subject to exchange rights, or when the exchange right expires or is exercised. Development milestones and other fees are recognized in revenue when they are included in the transaction price, because by that time, we have already transferred the related license to the partner. In contracts to provide research and development services, such services represent the only performance obligation. The fees are charged based on hours worked by our employees and the fixed contractual rate per hour, plus third-party pass-through costs, on a monthly basis. We recognize revenues as the related services are performed based on the amounts billed, as the partner consumes the benefit of research and development work simultaneously as we perform these services, and the amounts billed reflect the value of these services to the customer. Device License, Development and Supply Arrangements We have several license, development and supply arrangements with pharmaceutical partners, under which we grant a license to our device technology and provide research and development services that often involve multiple performance obligations and highly-customized deliverables. For such arrangements, we identify each of the promised goods and services within the contract and the distinct performance obligations at inception of the contract and allocate consideration to each performance obligation based on relative SSP, which is generally determined based on the expected cost plus mark-up. If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, we recognize revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control of the product is transferred to the customer. Factors that may indicate transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets, and we have a present right to payment. Our payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. We record a contract liability for cash received in advance of performance, which is presented as deferred revenue within accrued expense and other long-term liabilities in our consolidated balance sheets and recognized as revenue in our consolidated statements of income when the associated performance obligations have been satisfied. License fees and milestones received in exchange for the grant of a license to our functional intellectual property, such as patented technology and know-how in connection with a partnered development arrangement, are generally recognized at F-15 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal of revenue will not occur when the associated uncertainty is resolved. Refer to Note 5, Revenue , for further discussion on our collaborative arrangements. Product Sales, Net Proprietary Product Sales Our commercial portfolio of proprietary products includes XYOSTED and Hylenex recombinant which we sell primarily to wholesale pharmaceutical distributors and specialty pharmacies, who sell the products to hospitals, retail chain drug stores and other end-user customers. Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual packages of products represents performance obligations under each purchase order. We use contract manufacturers to produce our proprietary products and third-party logistic vendors to process and fulfill orders . We concluded we are the principal in the sales to wholesalers because we control access to services rendered by both vendors and direct their activities. We have no obligations to wholesalers to generate pull-through sales. Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs. We recognize revenue from product sales and related cost of sales upon product delivery to the wholesaler location. At that time, the wholesalers take control of the product as they take title, bear the risk of loss of ownership, and have an enforceable obligation to pay us. They also have the ability to direct sales of product to their customers on terms and at prices they negotiate. Although wholesalers have product return rights, we do not believe they have a significant incentive to return the product to us. The determination of certain reserves and sales allowances requires us to make a number of judgements and estimates to reflect our best estimate of the transaction price and the amount of consideration to which we believe we would be ultimately entitled to receive. The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and estimated future percentage of rebates incurred on sales, historical and future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel. The estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, rebates and customer co-pay support programs are included in accrued expenses and accounts receivable, net in our consolidated balance sheets upon recognition of revenue from product sales. We monitor actual product returns, chargebacks, discounts and fees subsequent to the sale. If these amounts differ from our estimates, we make adjustments to these allowances, which are applied to increase or reduce product sales revenue and earnings in the period of adjustment. Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when wholesalers sell our products at negotiated discounted prices to members of certain group purchasing organizations, pharmacy benefit managers and government programs. We also pay quarterly distribution fees to certain wholesalers for inventory reporting and chargeback processing, and to pharmacy benefit managers and group purchasing organizations as administrative fees for services and for access to their members. We concluded the benefits received in exchange for these fees are not distinct from our sales of our products, and accordingly we apply these amounts to reduce revenues. Wholesalers also have rights to return unsold product nearing or past the expiration date. Because of the shelf life of our products and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product. We estimate the transaction price when we receive each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler arising from all of the above factors. We have compiled historical experience and data to estimate future returns and chargebacks of our products and the impact of the other discounts and fees we pay. When estimating these adjustments to the transaction price, we reduce it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known. Each purchase order contains only one type of product, and is usually shipped to the wholesaler in a single shipment. Therefore, allocation of the transaction price to individual packages is not required. In connection with the orders placed by wholesalers, we incur costs such as commissions to our sales representatives. However, as revenue from product sales is recognized upon delivery to the wholesaler, which occurs shortly after we receive a purchase order, we do not capitalize these commissions and other costs, based on application of the practical expedient allowed within the applicable guidance. F-16 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Partnered Product Sales Bulk rHuPH20 We sell bulk rHuPH20 to partners for use in research and development and, subsequent to receiving marketing approval, we sell it for use in collaboration commercial products. Sales are made pursuant to purchase orders subject to the terms of the collaborative agreement or a supply agreement, and delivery of units of bulk rHuPH20 represent performance obligations under each purchase order. We provide a standard warranty that the product conforms to specifications. We use contract manufacturers to produce bulk rHuPH20 and have concluded we are the principal in the sales to partners. The transaction price for each purchase order of bulk rHuPH20 is fixed based on the cost of production plus a contractual markup, and is not subject to adjustments. Allocation of the transaction price to individual quantities of the product is usually not required because each order contains only one type of product. We recognize revenue from the sale of bulk rHuPH20 as product sales and related cost of sales upon transfer of title to our partners. At that time, the partners take control of the product, bear the risk of loss of ownership, and have an enforceable obligation to pay us. Devices We are party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which we produce and are the exclusive supplier of certain products, devices and/or components. We recognize revenue from the sale of certain products, devices and/or components as product sales and related cost of sales at the point in time in which control is transferred to the customer, which is typically upon shipment of the goods to our partner. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no right of return. We provide a standard warranty that the product conforms to specifications. We use contract manufacturers to produce certain products, devices and/or components, and have concluded we are the principal in the sales to partners. Revenue is recognized at the transaction price, which includes the contractual per unit selling price. Allocation of the transaction price to individual quantities of the product is usually not required because each order contains only one type of product. 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 proprietary and partnered products. Cost of sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of inventories that do not meet certain product specifications, if any. Research and Development Expenses Research and development expenses include salaries and benefits, allocation of facilities and other overhead expenses, research related manufacturing services, contract services, and other outside expenses related to manufacturing, preclinical and regulatory activities and our partner development platforms. Research and development expenses are charged to operating expenses as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. We are obligated to make upfront payments upon execution of certain research and development agreements. Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred. Such amounts are recognized as expense as the related goods are delivered or the related services are performed or such time when we do not expect the goods to be delivered or services to be performed. Share-Based Compensation We record compensation expense associated with stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”) and shares issued under our employee stock purchase plan (“ESPP”) in accordance with the authoritative guidance for share-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of the award. Share-based compensation expense for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of share-based compensation expense as they occur. F-17 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Income Taxes We provide for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases at each reporting period. We measure deferred tax assets and liabilities using enacted tax rates for the year in which the differences are expected to reverse. Significant judgment is required by management to determine our provision for income taxes, our deferred tax assets and liabilities, and any associated valuation allowances recorded against our net deferred tax assets. Deferred tax assets (“DTA”) and other tax benefits are recorded when they are more likely than not to be realized. On a quarterly basis, we assess the need for valuation allowance on our DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all our DTAs will be realized. Segment Information We generate revenues from payments received (i) as royalties from licensing our EHHANZE technology and other royalty arrangements, (ii) under collaborative agreements with our partners and (iii) from sales of our proprietary and partnered products. There are no intra-entity sales or transfers. We operate our business in one operating segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes and devices. This operating segment also includes revenues and expenses related to (i) research and development and manufacturing activities conducted under our collaborative agreements with third parties, (ii) product sales of proprietary and partnered products, and (iii) associated selling, general and administrative expenses. The chief operating decision-maker (“CODM”), our Chief Executive Officer, reviews the operating results on an aggregate basis and manages the operations as a single operating segment. The CODM assesses the segment’s performance and decides how to allocate resources based on consolidated net income that is reported in our consolidated statements of income. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets. The significant expense categories regularly provided to the CODM include cost of sales, research and development, amortization of intangibles, and selling, general and administrative expenses. These expense categories are reported as separate line items in our consolidated statements of income. F-18 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Adoption and Pending Adoption of Recent Accounting Pronouncements The following table provides a brief description of recently issued accounting standards, those adopted in the current period and those not yet adopted: Standard Description Effective Date Adoption Method Effect on the Financial Statements or Other Significant Matters In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new guidance is intended to improve annual and interim reportable segment disclosure requirements regardless of number of reporting units, primarily through enhanced disclosures of significant expenses. The amendment requires public entities to disclose significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit and loss. Annual periods beginning after December 15, 2023 (our 2024 Form 10-K), and interim periods within fiscal years beginning after December 15, 2024 (our Q1 2025 Form 10-Q) - Early adoption is permitted, including adoption in an interim period. Retrospective We adopted the new guidance on January 1, 2024. The adoption resulted in expanded disclosures within our notes to the consolidated financial statements for our Annual Report on the Form 10-K and our future Form 10-Qs. There was no other impact on our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. Annual periods beginning after December 15, 2024 (our 2025 Form 10-K) - Early adoption is permitted. Prospective or Retrospective We are currently evaluating the impact of the standard on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses The new guidance is intended to enhance expense disclosures by requiring disaggregation of certain expenses included in the consolidated statements of income into specified expense categories in the notes to the consolidated financial statements. Annual periods beginning after December 15, 2026 (our 2027 Form 10-K), and interim reporting periods beginning after December 15, 2027 (our Q1 2028 Form 10-Q) - Early adoption is permitted. Prospective or Retrospective We are currently evaluating the impact of the standard on our consolidated financial statements and related disclosures. F-19 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 3. Business Combination On May 24, 2022, we acquired all outstanding equity interests of Antares Pharma, Inc. (“Antares”) according to the terms and conditions of the Agreement and Plan of Merger, dated as of April 12, 2022 (the “Merger Agreement”). Antares is a specialty pharmaceutical company focused primarily on the development and commercialization of pharmaceutical products and technologies that address patient needs in targeted therapeutic areas. We acquired Antares as a part of our strategy to expand as a drug delivery company and include specialty products. The total purchase consideration of Antares was $ 1,045.7 million. Each share of Antares common stock issued and outstanding was converted into the right to receive $ 5.60 in cash without interest, less any applicable withholding taxes (“Merger Consideration”). Additionally, in connection with the transaction, each Antares equity award granted and outstanding as of May 24, 2022 under the Antares’ equity compensation plans was converted into the right to receive Merger Consideration. Other components of purchase consideration include cash paid at closing to settle Antares’ existing debt of $ 19.7 million and seller transaction costs paid by us on behalf of Antares of $ 22.9 million. The acquisition of Antares was funded by cash on hand and borrowings under the new credit agreement with Bank of America, N.A. and other lenders that provided for (i) a $ 350 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $ 250 million term loan facility (the “Term Facility”, collectively with the Revolving Credit Facility, the “2022 Facility”) as described in Note 8, Long-Term Debt, Net . We recognized transaction costs of $ 21.9 million in the twelve months ended December 31, 2022. These costs are reported in selling, general and administrative expenses in our consolidated statements of income. Transaction costs include, but are not limited to, investment banker, advisory, legal, and other professional fees. Purchase Consideration The total purchase consideration was comprised of the following (in thousands): Cash consideration for Antares shares outstanding as of May 24, 2022 $ 956,886 Consideration for Antares equity compensation awards (1) 45,828 Consideration for seller transaction costs paid by Halozyme 22,906 Consideration related to Antares closing indebtedness settled by Halozyme 19,683 Cash consideration related to cash bonus awards paid by Halozyme 365 Total purchase consideration $ 1,045,668 (1) Consideration for Antares equity compensation awards consists of $ 32.2 million paid for vested equity awards as well as $ 13.6 million paid for the pre-combination portion of unvested equity awards that were accelerated as part of the Merger Agreement. The fair value of the unvested equity awards attributable to the post-combination period of $ 8.7 million is included in our consolidated statements of income during the year ended December 31, 2022. Fair Value of Assets Acquired and Liabilities Assumed The acquisition of Antares has been accounted for using the acquisition method of accounting in accordance with authoritative guidance for business combinations, with Halozyme treated as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value on the acquisition date. The table below presents the estimated fair values of assets acquired and liabilities assumed on the acquisition date based on valuations and management estimates (in thousands). Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. F-20 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Amounts recognized as of 12/31/2023 Total purchase consideration, net of $ 46,548 cash acquired $ 999,120 Assets Short-term investments 498 Accounts receivable, net 81,960 Inventories 28,068 Prepaid expenses and other assets 5,241 Property and equipment, net 28,661 Intangibles, net 589,800 Liabilities Accounts Payable 7,197 Accrued expenses 43,692 Deferred revenue, current portion 2,509 Deferred revenue, net of current portion 1,207 Deferred tax liabilities, net 76,536 Other long-term liabilities 20,788 Net assets acquired, excluding goodwill 582,299 Goodwill $ 416,821 Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill was allocated entirely to the single reportable unit. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. In the first six months of 2023, we recorded measurement period adjustments to increase accrued expenses by $ 2.0 million, increase deferred tax liabilities by $ 5.5 million and reduce accounts receivable by $ 0.2 million. The measurement period adjustments were recorded to reflect facts and circumstances that existed as of the acquisition date. During the second quarter of 2023, we finalized the estimates impacting the allocation of the purchase price consideration. Identifiable Intangible Assets The estimated fair values of identifiable intangible assets were prepared using the excess earnings method which calculates the present value of the incremental after-tax cash flows attributable solely to each intangible asset. The estimated useful lives are based on forecasted periods of benefit for each intangible asset which consider commercialization dates, the estimated revenue cycle based on the products’ competitiveness in the market, and the loss of exclusivity timing with subsequent trending down of revenue. For the ATRS-1902 IPR&D, the useful life is considered indefinite as the asset has not been placed into service. As such, the ATRS-1902 IPR&D will be tested annually for impairment and will not be amortized. Useful lives and final values are presented in the table below. Amount (in thousands) Useful life (years) Auto-Injector technology platform $ 402,000 7 XYOSTED proprietary product 136,200 10 TLANDO product rights 2,900 10 ATRS-1902 (IPR&D) 48,700 Indefinite Fair value of intangible assets acquired $ 589,800 F-21 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Unaudited Pro Forma Results Our prior year consolidated financial statements include Antares’ results of operations from the date of acquisition on May 24, 2022 through December 31, 2022. Total revenues and net loss after taxes attributable to Antares during this period and included in our consolidated financial statements for the twelve months ended December 31, 2022 total $ 112.7 million and $ 67.6 million, respectively. The following unaudited pro forma financial information summarizes combined results of operations of Halozyme and Antares as if the companies had been combined as of the beginning of our fiscal year 2021 (in thousands). Year Ended December 31, 2022 2021 Total revenues $ 712,683 $ 627,292 Net income 218,723 295,634 The unaudited pro forma financial information for all periods presented includes the business combination accounting effects resulting from this acquisition. The unaudited pro forma results include adjustments to reflect the amortization of the inventory step-up and the incremental intangible asset amortization to be incurred based on preliminary valuations of assets as well as certain material non-recurring transaction adjustments related to the acquisition. Adjustments to interest expense, financing costs and investment income were made to reflect the capital structure of the combined entity. Adjustments to income tax expense also were made to reflect the anticipated effective tax rate of the combined entity. The unaudited pro forma financial information as presented is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2021, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. F-22 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 4. Fair Value Measurement Available-for-sale marketable securities consisted of the following (in thousands): December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Asset-backed securities $ 251 $ — $ — $ 251 Corporate debt securities 102,632 150 ( 207 ) 102,575 U.S. treasury securities 367,700 442 ( 572 ) 367,570 Agency bonds 9,844 — ( 16 ) 9,828 Total marketable securities, available-for-sale $ 480,427 $ 592 $ ( 795 ) $ 480,224 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Asset-backed securities $ 3,512 $ — $ ( 8 ) $ 3,504 Corporate debt securities 6,022 1 ( 10 ) 6,013 U.S. treasury securities 175,996 200 ( 12 ) 176,184 Agency bonds 16,119 — ( 16 ) 16,103 Commercial paper 15,826 — — 15,826 Total marketable securities, available-for-sale $ 217,475 $ 201 $ ( 46 ) $ 217,630 As of December 31, 2024, twenty-seven available-for-sale marketable securities with a fair market value of $ 250.3 million were in a gross unrealized loss position of $ 0.8 million. Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of December 31, 2024 because we do not intend to sell these securities and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis. The estimated fair value of our contractual maturities of available-for-sale debt securities were as follows (in thousands): December 31, 2024 December 31, 2023 Due within one year $ 314,978 $ 197,633 Due after one year but within five years (1) 165,246 19,997 Total estimated fair value of contractual maturities, available-for-sale $ 480,224 $ 217,630 (1) These investments are classified as current assets which reflects management’s intention to use the proceeds from the sale of these investments to fund operations, as necessary. F-23 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): December 31, 2024 December 31, 2023 Level 1 Level 2 Total Estimated Fair Value Level 1 Level 2 Total Estimated Fair Value Assets Cash equivalents Money market funds $ 55,182 $ — $ 55,182 $ 22,142 $ — $ 22,142 U.S. treasury securities — — — 2,000 — 2,000 Available-for-sale marketable securities Asset-backed securities — 251 251 — 3,504 3,504 Corporate debt securities — 102,575 102,575 — 6,013 6,013 U.S. treasury securities 367,570 — 367,570 176,184 — 176,184 Agency bonds 9,828 — 9,828 16,103 — 16,103 Commercial paper — — — — 15,826 15,826 Derivative instruments Currency hedging contracts (1) — 4,006 4,006 — — — Total assets $ 432,580 $ 106,832 $ 539,412 $ 216,429 $ 25,343 $ 241,772 Liabilities Derivative instruments Currency hedging contracts (1) $ — $ 17 $ 17 $ — $ 9,480 $ 9,480 (1) Based on observable market transactions of spot currency rates, forward currency rates or equivalently-termed instruments. Carrying amounts of the financial assets and liabilities are equal to the fair value. As of December 31, 2024, the derivative assets recorded within prepaid expenses and other current assets and prepaid expenses and other assets in our consolidated balance sheets were $ 2.4 million and $ 1.6 million , respectively. The derivative liabilities recorded within other long-term liabilities in our consolidated balance sheets as of December 31, 2024 were not material. We had no available-for-sale securities that were classified within Level 3 as of December 31, 2024 and 2023. A contingent liability was assumed as part of the Antares acquisition related to TLANDO. The acquisition date fair value was measured using the income approach, specifically the probability weighted expected return method for the development milestone payments and the option pricing methodology using the Monte Carlo simulation for commercial milestone payments and royalty payments. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues, cost of debt, risk free rate, weighted average cost of capital, revenue market price risk and revenue volatility. Estimates and assumptions used in the income approach include the probability of achieving certain milestones and a discount rate. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Changes in the fair value subsequent to the acquisition date is recognized in our consolidated statements of income. In September 2023, we provided Lipocine notice of termination of the TLANDO license agreement effective January 31, 2024. Based on the fair value remeasurement performed, we recognized a gain on change in fair value of the contingent liability of $ 13.2 million for the twelve months ended December 31, 2023 in our consolidated statements of income. F-24 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 5. Revenue Our disaggregated revenues were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Royalties $ 570,991 $ 447,865 $ 360,475 Product sales, net Proprietary product sales 166,620 130,834 72,849 Bulk rHuPH20 sales 86,334 115,442 82,084 Device partnered product sales 50,538 54,578 36,097 Total product sales, net 303,492 300,854 191,030 Revenues under collaborative agreements Upfront license and target nomination fees 27,000 2,000 30,000 Event-based development and regulatory milestones and other fees 72,500 69,000 59,000 Sales-based milestones 30,000 — 10,000 Device licensing and development revenue 11,341 9,534 9,611 Total revenues under collaborative agreements 140,841 80,534 108,611 Total revenues $ 1,015,324 $ 829,253 $ 660,116 During the year ended December 31, 2024, we recognized revenue related to licenses granted to partners in prior periods in the amount of $ 673.5 million. This amount represents royalties and sales milestone earned in the current period, in addition to $ 72.5 million of variable consideration in the contracts where uncertainties were resolved and the development milestones are expected to be achieved or were achieved. We also recognized revenue of $ 0.6 million during the year ended December 31, 2024 that had been included in accrued expense and other long-term liabilities in our consolidated balance sheets as of December 31, 2023. Accounts receivable, net, other contract assets and deferred revenues (contract liabilities) from contracts with customers, including partners, consisted of the following (in thousands): December 31, 2024 December 31, 2023 Accounts receivable, net $ 288,204 $ 233,254 Other contract assets 20,251 956 Deferred revenues 10,343 4,048 As of December 31, 2024, the amounts included in the transaction price of our contracts with customers, including collaboration partners, and allocated to goods and services not yet provided were $ 110.2 million, of which $ 99.9 million relates to unfulfilled product purchase orders and $ 10.3 million has been collected and is reported as accrued expense and other long-term liabilities in our consolidated balance sheets. The unfulfilled product purchase orders are estimated to be delivered by the end of 2026. Of the total deferred revenues of $ 10.3 million, $ 2.0 million is expected to be used by our customers within the next 12 months. We recognized contract assets of $ 20.3 million as of December 31, 2024, which related to development milestones deemed probable of receipt for intellectual property licenses granted to partners in prior periods and for goods or services when control has transferred to the customer, and corresponding revenue is recognized but is not yet billable to the customer in accordance with the terms of the contract. F-25 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 6. Certain Balance Sheet Items Accounts receivable, net and contract assets consisted of the following (in thousands): December 31, 2024 December 31, 2023 Accounts receivable, net and contract assets Product sales to partners $ 37,599 $ 58,588 Revenues under collaborative agreements 29,452 16,183 Royalty payments 164,348 118,170 Other product sales 65,542 47,060 Contract assets 20,251 956 Total accounts receivable and contract assets 317,192 240,957 Allowance for distribution fees and discounts ( 8,737 ) ( 6,747 ) Total accounts receivable, net and contract assets $ 308,455 $ 234,210 Inventories consisted of the following (in thousands): December 31, 2024 December 31, 2023 Raw materials $ 24,015 $ 23,646 Work-in-process 30,169 34,025 Finished goods 142,944 69,930 Total inventories 197,128 127,601 Less long-term portion (1) ( 55,268 ) — Total inventories, current $ 141,860 $ 127,601 (1) Long-term portion of inventories represents inventory expected to remain on hand beyond one year and therefore is included in prepaid expenses and other assets in the consolidated balance sheets. Prepaid expenses and other assets consisted of the following (in thousands): December 31, 2024 December 31, 2023 Prepaid manufacturing expenses $ 36,317 $ 36,850 Other prepaid expenses 10,562 12,902 Long-term inventories 55,268 — Other assets 17,400 16,677 Total prepaid expenses and other assets 119,547 66,429 Less long-term portion ( 80,596 ) ( 17,816 ) Total prepaid expenses and other assets, current $ 38,951 $ 48,613 Prepaid manufacturing expenses include raw materials, slot reservation fees and other amounts paid to contract manufacturing organizations. Such amounts are reclassified to work-in-process inventory as materials are used or the contract manufacturing organization services are complete. F-26 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Property and equipment, net consisted of the following (in thousands): December 31, 2024 December 31, 2023 Research equipment $ 9,811 $ 8,588 Manufacturing equipment 39,760 32,472 Computer and office equipment 9,710 9,722 Leasehold improvements 7,012 6,987 Subtotal 66,293 57,769 Accumulated depreciation and amortization ( 25,429 ) ( 19,661 ) Subtotal 40,864 38,108 Right of use of assets 34,171 36,836 Total property and equipment, net $ 75,035 $ 74,944 Depreciation and amortization expense was approximately $ 10.3 million, $ 11.1 million, and $ 6.5 million, inclusive of ROU asset amortization of $ 5.7 million, $ 5.5 million and $ 3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Accrued expenses consisted of the following (in thousands): December 31, 2024 December 31, 2023 Accrued compensation and payroll taxes $ 24,400 $ 17,361 Accrued outsourced manufacturing expenses 16,682 12,361 Taxes payable 30,995 963 Product returns and sales allowance 54,588 41,932 Other accrued expenses 26,239 33,584 Lease liability 30,705 32,197 Total accrued expenses 183,609 138,398 Less long-term portion ( 54,758 ) ( 37,720 ) Total accrued expenses, current $ 128,851 $ 100,678 Expense associated with the accretion of the lease liabilities was approximately $ 2.2 million, $ 2.5 million and $ 0.5 million for the twelve months ended December 31, 2024, 2023 and 2022, respectively. Total lease expense for the twelve months ended December 31, 2024, 2023 and 2022 was $ 7.9 million, $ 8.0 million and $ 3.3 million, respectively. Cash paid for amounts related to leases for the twelve months ended December 31, 2024, 2023 and 2022 was $ 6.9 million, $ 6.7 million and $ 4.2 million, respectively. F-27 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 7. Goodwill and Intangible Assets, net Goodwill A summary of the activity impacting goodwill is presented below (in thousands): Balance as of December 31, 2023 $ 416,821 Adjustment — Balance as of December 31, 2024 $ 416,821 Intangible Assets, net Our acquired intangible assets are amortized using the straight-line method over their estimated useful lives of seven to ten years . The following table shows the cost, accumulated amortization and weighted average useful life in years for our acquired intangible assets as of December 31, 2024 (in thousands). Weighted Average Useful Life (in years) Gross Carrying Value Accumulated Amortization Net Carrying Value Auto-Injector technology platform 7 $ 402,000 $ 149,592 $ 252,408 XYOSTED proprietary product 10 136,200 35,478 100,722 Total finite-lived intangibles, net (1) $ 538,200 $ 185,070 $ 353,130 ATRS-1902 (IPR&D) Indefinite 48,700 Total intangibles, net $ 401,830 (1) An impairment charge of $ 2.5 million was recognized during the year ended December 31, 2023 resulting in the full impairment of the TLANDO product rights intangible asset. The impairment charge resulted from the notice of termination of the TLANDO license agreement provided to Lipocine in September 2023, effective January 31, 2024, and is included in amortization of intangibles in our consolidated statements of income. Estimated future annual amortization of finite-lived intangible assets is shown in the following table (in thousands). Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors. Year Amortization Expense 2025 $ 71,049 2026 71,049 2027 71,049 2028 71,049 2029 36,313 Thereafter 32,621 Total $ 353,130 F-28 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 8. Long-Term Debt, Net 1.00 % Convertible Notes due 2028 In August 2022, we completed the sale of $ 720.0 million in aggregate principal amount of 1.00 % Convertible Senior Notes due 2028 (the “2028 Convertible Notes”). The net proceeds in connection with the issuance of the 2028 Convertible Notes, after deducting the initial purchasers’ fee of $ 18.0 million, was approximately $ 702.0 million. We also incurred additional debt issuance costs totaling $ 1.0 million. Debt issuance costs and the initial purchasers’ fee are presented as a debt discount. 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. The 2028 Convertible Notes have a maturity date of August 15, 2028. Holders may convert their 2028 Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2022, if the last reported sale price per share of common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on our common stock, as described in the offering memorandum for the 2028 Convertible Notes; (4) if we call such notes for redemption; and (5) at any time from, and including, February 15, 2028 until the close of business on the second scheduled trading day immediately before the maturity date. As of December 31, 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. The initial conversion rate for the 2028 Convertible Notes is 17.8517 shares of common stock per $1,000 in principal amount of 2028 Convertible Notes, equivalent to a conversion price of approximately $ 56.02 per share of our common stock. The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued or unpaid interest. As of December 31, 2024, we were in compliance with all covenants. 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 our 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 In March 2021, we completed the sale of $ 805.0 million in aggregate principal amount of 0.25 % Convertible Senior Notes due 2027 (the “2027 Convertible Notes”). The net proceeds in connection with the issuance of the 2027 Convertible Notes, after deducting the initial purchasers’ fee of $ 20.1 million, was approximately $ 784.9 million. We also incurred additional debt issuance costs totaling $ 0.4 million. Debt issuance costs and the initial purchasers’ fee are presented as a debt discount. F-29 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 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 have a maturity date of March 1, 2027. Holders may convert their 2027 Convertible Notes at their option only in the following circumstances: (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; (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; (4) if we call such notes for redemption; 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 December 31, 2024, the 2027 Convertible Notes were not convertible. Upon conversion, we will pay cash for the settlement of principal and for the premium, if applicable, we will pay cash, deliver shares of common stock or a combination of cash and shares of common stock, at our election. The initial conversion rate for the 2027 Convertible Notes is 12.9576 shares of common stock per $1,000 in principal amount of 2027 Convertible Notes, equivalent to a conversion price of approximately $ 77.17 per share of our common stock. The conversion rate is subject to adjustment. As of December 31, 2024, we were in compliance with all covenants. 1.25 % Convertible Notes due 2024 In November 2019, we completed the sale of $ 460.0 million in aggregate principal amount of 1.25 % Convertible Senior Notes due 2024 (the “2024 Convertible Notes”). The net proceeds in connection with the issuance of the 2024 Convertible Notes, after deducting the initial purchasers’ fee of $ 12.7 million, was approximately $ 447.3 million. We also incurred debt issuance cost totaling $ 0.3 million. Debt issuance costs and the initial purchasers’ fee were presented as a debt discount. In January 2021, we notified the note holders of our irrevocable election to settle the principal of the 2024 Convertible Notes in cash and for the premium, to deliver shares of common stock. The conversion rate for the 2024 Convertible Notes was 41.9208 shares of common stock per $1,000 in principal amount of 2024 Convertible Notes, equivalent to a conversion price of approximately $ 23.85 per share of our common stock. The conversion rate was subject to adjustment. In January 2023, we issued a notice for the redemption of 2024 Convertible Notes. Holders of the notes could convert their notes at any time prior to the close of the business day prior to the redemption date. In March 2023, holders of the notes elected to convert the 2024 Convertible Notes in full. In connection with the conversion, we paid approximately $ 13.5 million in cash which included principal and accrued interest, and issued 288,886 shares of our common stock representing the intrinsic value based on the contractual conversion rate. F-30 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Net Carrying Amounts of our Convertible Notes The carrying amount and fair value of our Convertible Notes were as follows (in thousands). December 31, 2024 December 31, 2023 Principal amount 2027 Convertible Notes $ 805,000 $ 805,000 2028 Convertible Notes 720,000 720,000 Total principal amount $ 1,525,000 $ 1,525,000 Unamortized debt discount 2027 Convertible Notes $ ( 7,518 ) $ ( 10,950 ) 2028 Convertible Notes ( 11,684 ) ( 14,802 ) Total unamortized debt discount $ ( 19,202 ) $ ( 25,752 ) Carrying amount 2027 Convertible Notes $ 797,482 $ 794,050 2028 Convertible Notes 708,316 705,198 Total carrying amount $ 1,505,798 $ 1,499,248 Fair value based on trading levels (Level 2) 2027 Convertible Notes $ 769,218 $ 695,826 2028 Convertible Notes 779,882 670,522 Total fair value of outstanding notes $ 1,549,100 $ 1,366,348 Remaining amortization per period of debt discount (in years) 2027 Convertible Notes 2.2 3.2 2028 Convertible Notes 3.6 4.6 F-31 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) The following table summarizes the components of interest expense and the effective interest rates for each of our Convertible Notes (in thousands). Year Ended December 31, 2024 2023 2022 Coupon interest 2024 Convertible Notes $ — $ 36 $ 771 2027 Convertible Notes 2,013 2,013 2,013 2028 Convertible Notes 7,200 7,200 2,660 Total coupon interest $ 9,213 $ 9,249 $ 5,444 Amortization of debt discount 2024 Convertible Notes $ — $ 24 $ 357 2027 Convertible Notes 3,432 3,409 3,386 2028 Convertible Notes 3,118 3,073 1,124 Total amortization of debt discount $ 6,550 $ 6,506 $ 4,867 Interest expense 2024 Convertible Notes $ — $ 60 $ 1,128 2027 Convertible Notes 5,445 5,422 5,399 2028 Convertible Notes 10,318 10,273 3,784 Total interest expense $ 15,763 $ 15,755 $ 10,311 Effective interest rates 2024 Convertible Notes — % — % 1.8 % 2027 Convertible Notes 0.7 % 0.7 % 0.7 % 2028 Convertible Notes 1.5 % 1.5 % 1.5 % 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. The Term Facility requires quarterly scheduled repayments of the term loans in each of the first, second, third and fourth years following the closing in annual amounts equal to 2.50 %, 5.00 %, 7.50 % and 10.00 % of the initial principal amount of the term loans, respectively. The term loans are also subject to mandatory prepayments from the proceeds of certain asset sales, subject to our right to reinvest the proceeds thereof. 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 %. 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. In addition to paying interest on the outstanding principal under the Facility, we will pay (i) a commitment fee in respect of the unutilized commitments thereunder and (ii) customary letter of credit fees and agency fees. The commitment fees range from 0.15 % to 0.35 % per annum based on our consolidated net leverage ratio. F-32 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) As of December 31, 2024, the Revolving Credit Facility was undrawn. We incurred a total of $ 3.6 million in third-party costs related to the 2022 Credit Agreement which are recorded as debt issuance cost within prepaid expenses and other assets in our consolidated balance sheets. As of December 31, 2024, the unamortized debt issuance cost related to the revolving credit facility was $ 1.5 million. Future maturities and interest payments of long-term debt as of December 31, 2024, are as follows (in thousands): 2025 $ 9,213 2026 9,213 2027 812,535 2028 724,480 2029 — Thereafter — Total minimum payments 1,555,441 Less amount representing coupon interest ( 30,441 ) Gross balance of long-term debt 1,525,000 Less unamortized debt discount ( 19,202 ) Carrying value of long-term debt 1,505,798 Less current portion of long-term debt — Long-term debt, less current portion and unamortized debt discount $ 1,505,798 F-33 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 9. Share-based Compensation We currently grant stock options, RSUs and PSUs under our Amended and Restated 2021 Stock Plan (“2021 Stock Plan”), which was approved by the stockholders on May 5, 2021 an d provides for the grant of up to 17.8 million shares of common stock to selected employees, consultants and non-employee members of our Board of Directors as stock options, stock appreciation rights, RSUs and PSUs. Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors. During the year ended December 31, 2024, we granted share-based awards under the 2021 Stock Plan. As of December 31, 2024, 7.4 million shares were subject to outstanding awards and 10.1 million shares were available for future grants of share-based awards. The following table summarized share-based compensation expense included in our consolidated statements of income related to share-based awards (in thousands): Year Ended December 31, 2024 2023 2022 Research and development $ 12,985 $ 13,345 $ 9,903 Selling, general and administrative 30,400 23,275 14,494 Total share-based compensation expense $ 43,385 $ 36,620 $ 24,397 Share-based compensation expense by type of share-based award was as follows (in thousands): Year Ended December 31, 2024 2023 2022 Stock options $ 16,078 $ 16,351 $ 10,973 RSUs, PSUs and ESPP 27,307 20,269 13,424 Total share-based compensation expense $ 43,385 $ 36,620 $ 24,397 Total unrecognized estimated compensation cost by type of award and the weighted-average remaining requisite service period over which such expense is expected to be recognized as of December 31, 2024 (in thousands, unless otherwise noted): December 31, 2024 Unrecognized Expense Remaining Weighted-Average Recognition Period ( in years) Stock options $ 29,046 2.25 RSUs 42,361 2.50 PSUs 15,285 1.55 ESPP 303 0.37 ESPP. In February 2021, our Board of Directors approved our 2021 ESPP and our stockholders approved the plan in May 2021. The 2021 ESPP enables eligible employees to purchase shares of our common stock at the end of each offering period at a price equal to 85 % of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower. Share purchases are funded through payroll deduction of at least 1 % and up to 15 % of an employee’s compensation for each payroll period, and no employee may purchase shares under the 2021 ESPP that exceeds $ 25,000 worth of our common stock for a calendar year. As of December 31, 2024, 2,559,594 shares were available for future purchase. The offering period is generally for a six-month period and the first offering period commenced on June 16, 2021. Offering periods shall commence on or about the sixteenth day of June and December of each year and end on or about the fifteenth day of the next December and June, respectively, occurring thereafter. During the twelve months ended December 31, 2024, 44,628 shares were issued pursuant to the 2021 ESPP. F-34 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Stock Options. Options granted under the 2021 Stock Plan must have an exercise price equal to at least 100 % of the fair market value of our common stock on the date of grant. The options generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2021 Stock Plan). A summary of our stock option award activity as of and for the year ended December 31, 2024 is as follows: Shares Underlying Stock Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term ( in years) Aggregate Intrinsic Value (in millions) Outstanding as of December 31, 2023 6,422,837 $ 30.50 Granted 675,412 42.77 Exercised ( 1,207,914 ) 27.06 Canceled/forfeited ( 414,129 ) 42.86 Outstanding as of December 31, 2024 5,476,206 31.83 6.16 $ 90.5 Vested and expected to vest as of December 31, 2024 5,476,206 31.83 6.16 90.5 Exercisable as of December 31, 2024 3,592,590 $ 26.38 4.97 $ 78.1 The weighted average grant date fair value of options granted during the years ended December 31, 2024, 2023 and 2022 was $ 17.75 per share, $ 17.72 per share and $ 14.22 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 was approximately $ 31.4 million, $ 13.7 million and $ 21.6 million, respectively. Cash received from stock option exercises for the years ended December 31, 2024, 2023 and 2022 was approximately $ 32.7 million, $ 10.0 million and $ 15.3 million, respectively. The exercise price of stock options granted is equal to the closing price of the common stock on the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model (“Black-Scholes Model”). Expected volatility is based on historical volatility of our common stock. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The dividend yield assumption is based on the expectation of no future dividend payments. The assumptions used in the Black-Scholes Model were as follows: Year Ended December 31, 2024 2023 2022 Expected volatility 40.01 - 42.13 % 39.68 - 40.82 % 39.91 - 50.81 % Average expected term (in years) 5.0 4.8 4.7 Risk-free interest rate 3.65 - 4.70 % 3.37 - 4.72 % 1.37 - 4.27 % Expected dividend yield — — — F-35 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Restricted Stock Units . A RSU is a promise by us to issue a share of our common stock upon vesting of the unit. RSUs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. The following table summarizes our RSU activity during the year ended December 31, 2024: Number of Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) Outstanding as of December 31, 2023 1,139,336 $ 41.38 Granted 882,672 41.84 Vested ( 408,025 ) 37.92 Forfeited ( 215,207 ) 43.03 Outstanding as of December 31, 2024 1,398,776 $ 42.43 1.33 $ 66.9 The estimated fair value of the RSUs was based on the closing market value of our common stock on the date of grant. The total grant date fair value of RSUs vested during the years ended December 31, 2024, 2023 and 2022 was approximately $ 15.5 million, $ 12.9 million and $ 8.6 million, respectively. The fair value of RSUs vested during the years ended December 31, 2024, 2023 and 2022 was approximately $ 16.5 million, $ 18.3 million and $ 11.3 million, respectively. Performance Stock Units . A PSU is a promise by us to issue a share of our common stock upon achievement of a specific performance condition. The following table summarizes our PSU activity during the year ended December 31, 2024: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of December 31, 2023 242,555 $ 51.72 Granted 332,400 45.06 Vested ( 43,955 ) 62.51 Forfeited ( 48,597 ) 46.82 Outstanding as of December 31, 2024 482,403 $ 46.64 The estimated fair value of the PSUs was based on the closing market value of our common stock on the date of grant. The fair value of PSUs vested during the years ended December 31, 2024, 2023 and 2022 was $ 1.6 million, $ 0.2 million and $ 0.2 million, respectively. F-36 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 10. Stockholders’ Equity During the years ended December 31, 2024, 2023 and 2022, we issued an aggregate of 1,207,914 , 565,343 and 789,870 shares of common stock, respectively, in connection with the exercises of stock options, for net proceeds of approximately $ 32.7 million, $ 10.0 million and $ 15.3 million, respectively. For the years ended December 31, 2024, 2023 and 2022, we issued 363,155 , 333,379 and 254,907 shares of common stock, respectively, upon vesting of certain RSUs and PSUs for which the RSU and PSU holders surrendered 88,825 , 70,733 and 68,425 RSUs and PSUs, respectively. Stock options and unvested restricted units totaling approximately 7.4 million, 7.8 million and 6.6 million shares of our common stock were outstanding as of December 31, 2024, 2023 and 2022, respectively. Share Repurchases In December 2021, the Board of Directors authorized a second capital return program to repurchase up to $ 750.0 million of outstanding stock over a three -year period which we completed in June 2024. A total of 19.1 million shares were repurchased over the three -year period at an average price per share of $ 39.31 . 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. In December 2024, we entered into an Accelerated Share Repurchase (“ASR”) agreement with Bank of America to repurchase $ 250.0 million of our common stock. Pursuant to the agreement, at the inception of the ASR, we paid $ 250.0 million to Bank of America 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. All shares repurchased under our capital return programs have been retired and have resumed their status of authorized and unissued shares. F-37 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 11. Earnings per share Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Outstanding stock options, unvested RSUs, unvested PSUs, common shares expected to be issued under our ESPP and the Convertible Notes are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive. Potentially dilutive common shares issuable upon vesting of stock options, RSUs and PSUs are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of the Convertible Notes are determined using the if-converted method. Since we have committed to settle the principal amount of the Convertible Notes in cash upon conversion only, the number of shares for the conversion spread will be included as a dilutive common stock equivalent. A reconciliation of the numerators and the denominators of the basic and diluted earnings per share computations is as follows (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Numerator Net income $ 444,091 $ 281,594 $ 202,129 Denominator Weighted average common shares outstanding for basic earnings per share 126,827 131,927 136,844 Dilutive potential common stock outstanding Stock options 1,827 1,824 2,265 RSUs, PSUs and ESPP 696 388 422 Convertible Notes 74 58 1,077 Weighted average common shares outstanding for diluted earnings per share 129,424 134,197 140,608 Earnings per share Basic $ 3.50 $ 2.13 $ 1.48 Diluted $ 3.43 $ 2.10 $ 1.44 Shares which have been excluded from the calculation of diluted earnings per common share because their effect was anti-dilutive include the following (shares in millions): Year Ended December 31, 2024 2023 2022 Anti-dilutive securities (1) 26.1 27.8 20.7 (1) The anti-dilutive securities include outstanding stock options, unvested RSUs, unvested PSUs, common shares expected to be issued under our ESPP and Convertible Notes. F-38 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 12. Commitments and Contingencies Operating Leases Our properties consist of leased office, laboratory, warehouse and assembly facilities. Our administrative offices and research facilities are located in San Diego, California. We also lease a building in Minnetonka, Minnesota consisting of office, assembly operations, and warehousing space, and have a small administrative office in Ewing, New Jersey. We lease an aggregate of approximately 162,000 square feet of space. We pay a pro rata share of operating costs, insurance costs, utilities and real property taxes. Additionally, we lease certain office equipment and vehicles under operating leases. Total rent expense was approximately $ 8.6 million, $ 9.3 million and $ 3.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. Approximate annual future minimum operating lease payments as of December 31, 2024 are as follows (in thousands): Year Operating Leases 2025 $ 7,052 2026 7,051 2027 6,191 2028 5,447 2029 5,604 Thereafter 6,081 Total minimum lease payments 37,426 Less imputed interest ( 6,721 ) Total $ 30,705 The weighted-average remaining lease term of our operating leases is approximately 5.54 years. Legal Contingencies From time to time, we may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of our business. Any of these claims could subject us to costly legal expenses and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We currently are not a party to any legal proceedings, the adverse outcome of which, in our opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position. F-39 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 13. Income Taxes Total income before income tax expense summarized by region was as follows (in thousands): Year Ended December 31, 2024 2023 2022 United States $ 557,852 $ 348,828 $ 248,918 Foreign ( 720 ) ( 499 ) — Income before income tax expense $ 557,132 $ 348,329 $ 248,918 Significant components of our net deferred tax assets (liabilities) were as follows (in thousands). December 31, 2024 2023 Deferred tax assets Net operating loss carryforwards $ 20,736 $ 32,753 Research and development and orphan drug credits 17,868 38,192 Share-based compensation 6,567 5,024 ASC 842 lease liability 7,126 7,258 Capitalized research expense 30,253 19,543 Inventory related reserves 19,867 13,561 Other, net 4,206 6,746 Total deferred tax assets 106,623 123,077 Valuation allowance for deferred tax assets ( 2,363 ) ( 2,588 ) Deferred tax assets, net of valuation allowance 104,260 120,489 Deferred tax liabilities Non-deductible book amortization ( 89,247 ) ( 103,492 ) ASC 842 right of use asset ( 7,882 ) ( 8,259 ) Other, net ( 3,276 ) ( 4,352 ) Total deferred tax liabilities ( 100,405 ) ( 116,103 ) Net deferred tax asset $ 3,855 $ 4,386 A valuation allowance of $ 2.4 million and $ 2.6 million has been established to offset the net DTAs as of December 31, 2024 and 2023, respectively, as realization of such assets is uncertain. On a periodic basis, we reassess the valuation allowance of our DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all our DTAs will be realized. After assessing both positive and negative evidence, we determined that it was more likely than not that our DTAs would be realized except for certain deferred tax assets associated with unrealized cash flow hedge and net operating losses in foreign jurisdictions where we do not expect benefit. F-40 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Income tax expense (benefit) was comprised of the following components (in thousands): Year Ended December 31, 2024 2023 2022 Current - federal $ 98,139 $ 24,963 $ 6,157 Current - state 13,762 5,717 2,525 Deferred - federal 1,815 34,037 44,757 Deferred - state ( 675 ) 2,018 ( 6,650 ) Total income tax expense $ 113,041 $ 66,735 $ 46,789 The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following: Year Ended December 31, 2024 2023 2022 Federal income tax expense 21.00 % 21.00 % 21.00 % State income tax expense, net of federal income tax impact 2.25 % 2.76 % 0.82 % Executive compensation limitation 0.58 % 0.90 % 2.61 % Foreign-derived intangible income ( 3.81 ) % ( 3.44 ) % ( 5.06 ) % Research and development credits, net ( 0.39 ) % ( 2.71 ) % — % Non-deductible expenses and other 0.66 % 0.62 % ( 0.57 ) % Effective income tax rate 20.29 % 19.13 % 18.80 % As of December 31, 2024, our unrecognized tax benefit and uncertain tax positions were $ 24.5 million, of which $ 23.6 million will impact the effective tax rate when resolved. Of the unrecognized tax benefits, we do not expect any significant changes to occur in the next 12 months. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2024, 2023 and 2022, we recognized an immaterial amount of interest and penalties. The following table summarizes the activity related to our unrecognized tax benefits (in thousands): Year Ended December 31, 2024 2023 2022 Gross unrecognized tax benefits, beginning of period $ 21,918 $ 19,482 $ 17,692 Increases in tax positions for prior years 2,181 1,645 — Decreases in tax positions for prior years and lapse in statute of limitations ( 192 ) — ( 1,148 ) Increases in tax positions related to business acquisition — — 2,151 Increases in tax positions for current year 612 791 787 Gross unrecognized tax benefits, end of period $ 24,519 $ 21,918 $ 19,482 As of December 31, 2024, we had California and other state net operating loss carryforwards of approximately $ 236.9 million and $ 63.1 million, respectively. The California and other state net operating loss carryforwards begin to expire in 2029. As of December 31, 2024, we had federal and California research and development tax credit carryforwards of approximately $ 1.1 million, and $ 25.2 million, respectively. The federal research and development tax credits will begin to expire in 2040 unless previously utilized. The California research and development tax credits will carryforward indefinitely until utilized. F-41 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of the acquisition of Antares. Based upon the analysis, we determined that ownership changes occurred in prior years; however, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards. We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. As of December 31, 2024 and 2023, there were no undistributed earnings in foreign subsidiaries. We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 2008 and forward are subject to examination by the U.S. federal and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits. F-42 T able of Contents Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements — (Continued) 14. Employee Savings Plan We have an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to participate, provided they meet the requirements of the plan. We are not required to make matching contributions under the plan. However, we voluntarily contributed to the plan approximately $ 3.3 million, $ 3.3 million and $ 2.6 million for the years ended December 31, 2024, 2023 and 2022, respectively. F-43 Table of Contents Halozyme Therapeutics, Inc. Schedule II - Valuation and Qualifying Accounts (in thousands) Balance at Beginning of Period Acquired Additions Deductions Balance at End of Period For the year ended December 31, 2024 Accounts receivable allowances (1) $ 6,747 $ — $ 54,090 $ ( 52,100 ) $ 8,737 For the year ended December 31, 2023 Accounts receivable allowances (1) $ 1,914 $ — $ 49,596 $ ( 44,763 ) $ 6,747 For the year ended December 31, 2022 Accounts receivable allowances (1) $ 1,140 $ 924 $ 5,946 $ ( 6,096 ) $ 1,914 (1) Allowances are for chargebacks, prompt payment discounts and distribution fees related to proprietary product sales. F-44