UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to             
Commission File Number 001-32335
___________________________
HALOZYME THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
___________________________
Delaware 88-0488686
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
11388 Sorrento Valley Road 92121
San Diego(Zip Code)
California
(Address of principal executive offices) 
(858) 794-8889
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueHALOThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”,company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filerAccelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 140,787,020135,213,058 as of October 25, 202131, 2022.




HALOZYME THERAPEUTICS, INC.
INDEX
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2


Summary of Risk Factors
Our business is subject to a number of risks and uncertainties, including those described in the section labeled “Risk Factors” in “Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report. These risks include the following:

Risks Related To Our Business
Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption of the development of our and our partnered product candidates and commercialization of our approved and our partnered products, impede our ability to supply bulk rHuPH20 to our ENHANZE® partners or procure and sell our proprietary products and otherwise adversely impact our business and results of operations.
If our partnered or proprietary product candidates do not receive and maintain regulatory approvals, or if approvals are not obtained in a timely manner, such failure or delay would substantially impair our ability to generate revenues.
Use of our partnered or proprietary products and product candidates could be associated with adverse events or product recalls.
If our contract manufacturers or vendors are unable or elect not to manufacture and supply to us bulk rHuPH20 or other raw materials, reagents, components or devices in the quantity and quality required by us or our partners for use in the production of Hylenex or other proprietary or partnered products and product candidates, our and our partners’ product development or commercialization efforts could be delayed or suspended and our business results of operations and our collaborations could be harmed.
We rely on third parties to perform many necessary services for our products including services related to the distribution, invoicing, rebates and contract administration, co-pay program administration, sample distribution and administration, storage and transportation of our products. If anything should impede their ability to meet their commitments this could impact our business performance.
If we or any party to a key collaboration agreement fail to perform material obligations under such agreement, or if a key collaboration agreement, is terminated for any reason, our business could significantly suffer.
Hylenex and our partners’ ENHANZE products and product candidates rely on the rHuPH20 enzyme, and any adverse development regarding rHuPH20 could substantially impact multiple areas of our business, including current and potential ENHANZE collaborations, as well as any proprietary programs.
Our business strategy is focused on growth of our ENHANZE technology, our autoinjector technology, our commercial products and potential growth through acquisition. Currently, ENHANZE is the largest revenue driver and as a result there is a risk for potential negative impact from adverse developments. Future expansion of our strategic focus to additional applications of our ENHANZE technology or by acquiring new technologies may require the use of additional resources, result in increased expense and ultimately may not be successful.
Our partnered or proprietary product candidates may not receive regulatory approvals or their development may be delayed for a variety of reasons, including delayed or unsuccessful clinical trials, regulatory requirements or safety concerns. If we or our partners fail to obtain, or have delays in obtaining, regulatory approvals for any product candidates, our business, financial condition and results of operations may be materially adversely affected.
Our third-party partners are responsible for providing certain proprietary materials that are essential components of our partnered products and product candidates, and any failure to supply these materials could delay the development and commercialization efforts for these partnered products and product candidates and/or damage our collaborations. Our partners are also responsible for distributing and commercializing their products, and any failure to successfully commercialize their products could materially adversely affect our revenues.
If we or our partners fail to comply with regulatory requirements applicable to promotion, sale and manufacturing of approved products, regulatory agencies may take action against us or them, which could harm our business.
Failure to successfully integrate the Antares business, or failure of the Antares business to perform could adversely impact our stock price and future business and operations.
We may need to raise additional capital in the future and there can be no assurance that we will be able to obtain such funds.
We currently have significant debt and expect to incur additional debt. Failure by us to fulfill our obligations under the applicable debt agreements may cause repayment obligations to accelerate.
3


The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
Conversion of our Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
If proprietary or partnered product candidates are approved for commercialization but do not gain market acceptance resulting in commercial performance below that which was expected or projected, our business may suffer.
Our ability to license our ENHANZE and device technologies to our partners depends on the validity of our patents and other proprietary rights.
Developing, manufacturing and marketing pharmaceutical products for human use involves significant product liability risks for which we may have insufficient insurance coverage.
If our partners do not achieve projected development, clinical, or regulatory goals in the timeframes publicly announced or otherwise expected, the commercialization of our partnered products may be delayed and, as a result, our stock price may decline, and we may face lawsuits relating to such declines.
Future acquisitions could disrupt our business and harm our financial condition.
Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

Risks Related To Ownership of Our Common Stock
Our stock price is subject to significant volatility.
Future transactions where we raise capital may negatively affect our stock price.
Anti-takeover provisions in our charter documents, the Indentures and Delaware law may make an acquisition of us more difficult.

Risks Related to Our Industry
Our or our partnered products must receive regulatory approval before they can be sold, and compliance with the extensive government regulations is expensive and time consuming and may result in the delay or cancellation of our or our partnered product sales, introductions or modifications.
Because some of our and our partners’ products and product candidates are considered to be drug/device combination products, the approval and post-approval requirements that we and they are required to comply with can be more complex.
We may be subject, directly or indirectly, to various broad federal and state healthcare laws. If we are unable to comply, or have not fully complied, with such laws, we could face civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.
We may be required to initiate or defend against legal proceedings related to intellectual property rights, which may result in substantial expense, delay and/or cessation of the development and commercialization of our products.
We may incur significant liability if it is determined that we are promoting or have in the past promoted the “off-label” use of drugs or medical devices, or otherwise promoted or marketed approved products in a manner inconsistent with the FDA’s requirements.
For certain of our products, we and our independent contractors, distributors, prescribers, and dispensers are required to comply with regulatory requirements related to controlled substances, which will require the expenditure of additional time and will incur additional expenses to maintain compliance and may subject us to additional penalties for noncompliance, which could inhibit successful commercialization.
Patent protection for protein-based therapeutic products and other biotechnology inventions is subject to uncertainty, and if patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize products based on our discoveries.
If third-party reimbursement and customer contracts are not available, our proprietary and our partnered products may not be accepted in the market resulting in commercial performance below that which was expected or projected.
4


The rising cost of healthcare and related pharmaceutical product pricing has led to cost containment pressures from third-party payers as well as changes in federal coverage and reimbursement policies and practices that could cause us and our partners to sell our products at lower prices, and impact access to our and our partners’ products, resulting in less revenue to us.
We face competition and rapid technological change that could result in the development of products by others that are competitive with or superior to our proprietary and partnered products, including those under development.

General Risks
If we are unable to attract, hire and retain key management and scientific personnel our business could be negatively affected.
Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic event.
Cyberattacks, security breaches or system breakdowns may disrupt our operations and harm our operating results and reputation.
5


PART I — FINANCIAL INFORMATION
Item 1.     Financial Statements
HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$491,683 $147,703 
Marketable securities, available-for-sale324,237 220,310 
Accounts receivable, net and other contract assets112,099 97,730 
Inventories55,978 60,747 
Prepaid expenses and other assets33,302 28,274 
Total current assets1,017,299 554,764 
Property and equipment, net9,588 10,593 
Prepaid expenses and other assets15,552 14,067 
Deferred tax assets142,481 — 
Restricted cash500 500 
Total assets$1,185,420 $579,924 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$3,322 $1,928 
Accrued expenses18,335 20,483 
Deferred revenue, current portion2,245 1,746 
Current portion of long-term debt, net89,251 397,228 
Total current liabilities113,153 421,385 
Deferred revenue, net of current portion2,530 4,026 
Long-term debt, net786,454 — 
Other long-term liabilities1,609 3,466 
Commitments and contingencies (Note 10)00
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; 140,966 and 135,030 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively141 135 
Additional paid-in capital407,229 625,483 
Accumulated other comprehensive (loss) income(14)22 
Accumulated deficit(125,682)(474,593)
Total stockholders’ equity281,674 151,047 
Total liabilities and stockholders’ equity$1,185,420 $579,924 
See accompanying notes to condensed consolidated financial statements.
3


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

Three Months Ended
 September 30,
Nine Months Ended
September 30,
 2021202020212020
Revenues:
Royalties$58,563 $23,931 $141,264 $56,599 
Product sales, net25,047 9,048 77,173 23,532 
Revenues under collaborative agreements32,220 32,337 122,870 65,760 
Total revenues115,830 65,316 341,307 145,891 
Operating expenses:
Cost of product sales18,589 5,568 59,826 17,095 
Research and development8,486 7,747 25,564 26,856 
Selling, general and administrative13,169 11,702 36,549 35,309 
Total operating expenses40,244 25,017 121,939 79,260 
Operating income75,586 40,299 219,368 66,631 
Other income (expense):
Investment and other income, net274 961 771 4,764 
Inducement expense related to convertible notes— — (20,960)— 
Interest expense(1,754)(4,990)(5,471)(15,342)
Net income before income taxes74,106 36,270 193,708 56,053 
Income tax (benefit) expense(142,481)63 (142,232)132 
Net income$216,587 $36,207 $335,940 $55,921 
Net income per share:
Basic$1.53 $0.27 $2.39 $0.41 
Diluted$1.48 $0.25 $2.28 $0.40 
Shares used in computing net income per share:
Basic142,021 136,578 140,815 136,575 
Diluted146,690 142,081 147,652 139,971 
See accompanying notes to condensed consolidated financial statements.
4


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2021202020212020
Net income$216,587 $36,207 $335,940 $55,921 
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities(640)(76)203 
Foreign currency translation adjustment— (13)15 (8)
Unrealized gain (loss) on foreign currency(7)25 (9)
Total comprehensive income$216,597 $35,547 $335,904 $56,107 
See accompanying notes to condensed consolidated financial statements.
5


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
 20212020
Operating activities:
Net income$335,940 $55,921 
Adjustments to reconcile net income to net cash provided by (used) in operating activities:
Share-based compensation15,694 13,008 
Depreciation and amortization2,224 2,484 
Amortization of debt discount2,674 10,540 
Accretion of discounts on marketable securities, net1,518 477 
Gain on disposal of equipment— (631)
Recognition of deferred revenue(997)(3,870)
Lease payments deferred(568)(759)
Loss on impairment of right-of-use asset— 525 
Induced conversion expense related to convertible notes20,960 — 
Deferred income taxes (benefits from valuation allowance release)(142,481)— 
Other(4)(13)
Changes in operating assets and liabilities:
Accounts receivable, net and other contract assets(14,369)(3,109)
Inventories5,152 (28,338)
Prepaid expenses and other assets(6,513)(1,567)
Accounts payable and accrued expenses(2,306)(40,134)
Net cash provided by operating activities216,924 4,534 
Investing activities:
Purchases of marketable securities(283,354)(161,488)
Proceeds from maturities of marketable securities177,833 181,345 
Purchases of property and equipment(1,299)(805)
Proceeds from disposal of property and equipment— 861 
Net cash (used in) provided by investing activities(106,820)19,913 
Financing activities:
Proceeds from issuance of long-term debt, net784,875 — 
Repayment of long-term debt(369,064)(19,560)
Payment of debt issuance cost(424)— 
Repurchase of common stock(189,737)(109,970)
Proceeds from issuance of common stock under equity incentive plans, net of taxes paid related to net share settlement8,226 50,645 
Net cash provided by (used in) financing activities233,876 (78,885)
Net increase (decrease) in cash, cash equivalents and restricted cash343,980 (54,438)
Cash, cash equivalents and restricted cash at beginning of period148,203 120,679 
Cash, cash equivalents and restricted cash at end of period$492,183 $66,241 
Supplemental disclosure of non-cash investing and financing activities:
Amounts accrued for purchases of property and equipment$102 $531 
Right-of-use assets obtained in exchange for lease obligation$318 $1,661 
Pending settlement of common stock repurchase$— $2,502 
Common stock issued for induced conversion related to convertible notes$7,865 $— 
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$147,159 $118,719 
Marketable securities, available-for-sale118,425 622,203 
Accounts receivable, net and contract assets233,302 90,975 
Inventories, net103,276 53,908 
Prepaid expenses and other current assets51,039 40,482 
Total current assets653,201 926,287 
Property and equipment, net36,674 8,794 
Prepaid expenses and other assets25,783 13,414 
Goodwill199,481 — 
Intangible assets, net948,904 — 
Deferred tax assets, net— 155,434 
Restricted cash500 500 
Total assets$1,864,543 $1,104,429 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$18,166 $1,541 
Accrued expenses74,317 24,441 
Deferred revenue, current portion3,586 1,746 
Current portion of long-term debt, net13,315 89,419 
Total current liabilities109,384 117,147 
Deferred revenue, net of current portion2,833 2,530 
Long-term debt, net1,491,156 787,255 
Other long-term liabilities5,418 544 
Deferred tax liabilities, net28,989 — 
Contingent liability129,772 — 
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; 135,211 and 137,498 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively135 138 
Additional paid-in capital13,177 256,347 
Accumulated other comprehensive loss(1,836)(620)
Retained earnings (accumulated deficit)85,515 (58,912)
Total stockholders’ equity96,991 196,953 
Total liabilities and stockholders’ equity$1,864,543 $1,104,429 
See accompanying notes to condensed consolidated financial statements.
6


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYINCOME
(Unaudited) (in thousands)
Three Months Ended September 30, 2021
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF JUNE 30, 2021142,181 142 461,897 (24)(342,269)119,746 
Share-based compensation expense— — 5,399 — — 5,399 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net348 — 4,648 — — 4,648 
Repurchase of common stock(1,563)(1)(64,715)(64,716)
Other comprehensive income— — — 10 — 10 
Net income— — — — 216,587 216,587 
BALANCE AS OF SEPTEMBER 30, 2021140,966 141 407,229 (14)(125,682)281,674 
Nine Months Ended September 30, 2021
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF DECEMBER 31, 2020135,030 135 625,483 22 (474,593)151,047 
Cumulative adjustment from adoption of ASU 2020-06(65,535)12,971 (52,564)
Share-based compensation expense— — 15,694 — 15,694 
Issuance of common stock for the induced conversion related to convertible notes9,083 13,095 13,104 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net1,229 8,225 — 8,226 
Repurchase of common stock(4,376)(4)(189,733)(189,737)
Other comprehensive loss— — — (36)(36)
Net income— — — — 335,940 335,940 
BALANCE AS OF SEPTEMBER 30, 2021140,966 141 407,229 (14)(125,682)281,674 
Three Months Ended September 30, 2020
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income
Accumulated
Deficit
Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF JUNE 30, 2020136,671 137 688,318 1,086 (583,964)105,577 
Share-based compensation expense— — 4,220 — — 4,220 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net833 — 12,546 — — 12,546 
Cancellation of restricted stock awards, net— — — — — — 
Repurchase of common stock(2,135)(2)(58,900)(58,902)
Other comprehensive loss— — — (660)— (660)
Net income— — — — 36,207 36,207 
BALANCE AS OF SEPTEMBER 30, 2020135,369 135 646,184 426 (547,757)98,988 
Nine Months Ended September 30, 2020
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income
Accumulated
Deficit
Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF DECEMBER 31, 2019136,713 137 695,066 240 (603,678)91,765 
Share-based compensation expense— — 13,008 — — 13,008 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net4,522 50,641 — — 50,645 
Issuance of restricted stock awards, net61 — — — — — 
Repurchase of common stock(5,927)(6)(112,466)(112,472)
Equity Component of convertible notes(65)(65)
Other comprehensive income— — — 186 — 186 
Net income— — — — 55,921 55,921 
BALANCE AS OF SEPTEMBER 30, 2020135,369 135 646,184 426 (547,757)98,988 
(In thousands, except per share amounts)

Three Months Ended
 September 30,
Nine Months Ended
September 30,
 2022202120222021
Revenues:
Royalties$99,551 $58,563 $254,496 $141,264 
Product sales, net61,427 25,047 129,867 77,173 
Revenues under collaborative agreements47,998 32,220 94,257 122,870 
Total revenues208,976 115,830 478,620 341,307 
Operating expenses:
Cost of sales47,319 18,589 97,184 59,826 
Amortization of intangibles27,193 — 38,596 — 
Research and development16,705 8,486 44,041 25,564 
Selling, general and administrative34,467 13,169 105,777 36,549 
Total operating expenses125,684 40,244 285,598 121,939 
Operating income83,292 75,586 193,022 219,368 
Other income (expense):
Investment and other income, net641 274 194 771 
Inducement expense related to convertible notes(2,712)— (2,712)(20,960)
Interest expense(7,514)(1,754)(12,377)(5,471)
Net income before income taxes73,707 74,106 178,127 193,708 
Income tax expense (benefit)12,073 (142,481)33,700 (142,232)
Net income$61,634 $216,587 $144,427 $335,940 
Net income per share:
Basic$0.45 $1.53 $1.05 $2.39 
Diluted$0.44 $1.48 $1.02 $2.28 
Shares used in computing net income per share:
Basic136,527 142,021 137,370 140,815 
Diluted139,387 146,690 141,019 147,652 
See accompanying notes to condensed consolidated financial statements.
7


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2022202120222021
Net income$61,634 $216,587 $144,427 $335,940 
Other comprehensive income:
Unrealized gain (loss) on marketable securities182 (1,257)(76)
Foreign currency translation adjustment(1)— 15 
Unrealized gain on foreign currency— 40 25 
Total comprehensive income$61,815 $216,597 $143,211 $335,904 
See accompanying notes to condensed consolidated financial statements.
8


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
 20222021
Operating activities:
Net income$144,427 $335,940 
Adjustments to reconcile net income to net cash provided by in operating activities:
Share-based compensation17,174 15,694 
Depreciation and amortization3,931 2,224 
Amortization of intangible assets38,596 — 
Amortization of debt discount6,007 2,674 
Accretion of discounts on marketable securities, net985 1,518 
Realized loss on marketable securities1,727 — 
Loss on disposal of equipment80 — 
Recognition of deferred revenue(1,573)(997)
Lease payments deferred(638)(568)
Induced conversion expense related to convertible notes2,712 20,960 
Deferred income taxes25,329 (142,481)
Other(228)(4)
Changes in operating assets and liabilities:
Accounts receivable, net and other contract assets(76,186)(14,369)
Inventories(14,536)5,152 
Prepaid expenses and other assets(14,359)(6,513)
Accounts payable and accrued expenses24,209 (2,306)
Net cash provided by operating activities157,657 216,924 
Investing activities:
Purchases of marketable securities(225,689)(283,354)
Proceeds from sales and maturities of marketable securities725,995 177,833 
Acquisitions of business, net of cash acquired(999,120)— 
Purchases of property and equipment(2,466)(1,299)
Proceeds from the sale of assets16,021 — 
Net cash used in investing activities(485,259)(106,820)
Financing activities:
Proceeds from term loan250,000 — 
Repayment of term loan(250,000)— 
Proceeds from revolving credit facilities120,000 — 
Repayment of revolving credit facilities(120,000)— 
Proceeds from issuance of 2027 Convertible Notes— 784,875 
Repayment of 2024 Convertible Notes(77,453)(369,064)
Proceeds from issuance of 2028 Convertible Notes702,000 — 
Purchase of capped call(69,120)— 
Payment of debt issuance cost(6,465)(424)
Repurchase of common stock(200,001)(189,737)
Proceeds from issuance of common stock under equity incentive plans, net of taxes paid related to net share settlement7,081 8,226 
Net cash provided by financing activities356,042 233,876 
Net increase in cash, cash equivalents and restricted cash28,440 343,980 
Cash, cash equivalents and restricted cash at beginning of period119,219 148,203 
Cash, cash equivalents and restricted cash at end of period$147,659 $492,183 
9


Supplemental disclosure of non-cash investing and financing activities:
Amounts accrued for purchases of property and equipment$319 $102 
Right-of-use assets obtained in exchange for lease obligation$970 $318 
Debt issuances cost included in accounts payable$639 $— 
Common stock issued for induced conversion related to convertible notes$1,019 $7,865 
See accompanying notes to condensed consolidated financial statements.
10


HALOZYME THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited) (in thousands)
Three Months Ended September 30, 2022
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income/(Loss)
Retained EarningsTotal
Stockholders’
Equity
 SharesAmount
BALANCE AS OF JUNE 30, 2022137,681 $138 $271,169 $(2,017)$23,881 $293,171 
Share-based compensation expense— — 6,797 — — 6,797 
Issuance of common stock for the induced conversion related to convertible notes1,512 1,692 — — 1,693 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net and shares issued under the ESPP plan137 2,635 — — 2,636 
Capped call transaction(69,120)(69,120)
Repurchase of common stock(4,119)(5)(199,996)(200,001)
Other comprehensive income— — — 181 — 181 
Net income— — — — 61,634 61,634 
BALANCE AS OF SEPTEMBER 30, 2022135,211 $135 $13,177 $(1,836)$85,515 $96,991 
Nine Months Ended September 30, 2022
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
Retained Earnings (Accumulated Deficit)Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF DECEMBER 31, 2021137,498 $138 $256,347 $(620)$(58,912)$196,953 
Share-based compensation expense— — 17,174 — 17,174 
Issuance of common stock for the induced conversion related to convertible notes1,512 1,692 1,693 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net and shares issued under the ESPP plan753 7,080 — 7,081 
Capped call transaction(69,120)(69,120)
Repurchase of common stock(4,552)(5)(199,996)(200,001)
Other comprehensive loss— — — (1,216)(1,216)
Net income— — — — 144,427 144,427 
BALANCE AS OF SEPTEMBER 30, 2022135,211 $135 $13,177 $(1,836)$85,515 $96,991 
Three Months Ended September 30, 2021
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income/(Loss)
Retained Earnings (Accumulated Deficit)Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF JUNE 30, 2021142,181 $142 $461,897 $(24)$(342,269)$119,746 
Share-based compensation expense— — 5,399 — — 5,399 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net348 — 4,648 — — 4,648 
Repurchase of common stock(1,563)(1)(64,715)(64,716)
Other comprehensive income— — — 10 — 10 
Net income— — — — 216,587 216,587 
BALANCE AS OF SEPTEMBER 30, 2021140,966 $141 $407,229 $(14)$(125,682)$281,674 
Nine Months Ended September 30, 2021
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income (Loss)
Retained Earnings (Accumulated Deficit)Total
Stockholders’
Equity
 SharesAmount
BALANCE AS OF DECEMBER 31, 2020135,030 $135 $625,483 $22 $(474,593)$151,047 
Adjustment to beginning accumulated deficit— — (65,535)— 12,971 (52,564)
Share-based compensation expense— — 15,694 — — 15,694 
Issuance of common stock for the induced conversion related to convertible notes9,083 13,095 13,104 
Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net1,229 8,225 — — 8,226 
Repurchase of common stock(4,376)(4)(189,733)(189,737)
Other comprehensive loss— — — (36)— (36)
Net income— — — — 335,940 335,940 
BALANCE AS OF SEPTEMBER 30, 2021140,966 $141 $407,229 $(14)$(125,682)$281,674 
See accompanying notes to condensed consolidated financial statements.
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HALOZYME THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Business
Halozyme Therapeutics, Inc. is a biopharma technology platform company that provides innovative and disruptive solutions with the goal of improving patient experience and outcomes. Our proprietary enzyme, rHuPH20, is used to facilitate the delivery of injected drugs and fluids. We license our technology to biopharmaceutical companies to collaboratively develop products that combine our ENHANZE® drug delivery technology (“ENHANZE”) with the collaborators’partners’ proprietary compounds.
Our first commercially approved product, Hylenex® recombinant (“Hylenex”), and our collaborators’ENHANZE partners’ approved products and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme. rHuPH20 is the active ingredient in our first commercially approved product, Hylenex® recombinant, (“Hylenex”), and it works by breaking down hyaluronan (or “HA”(“HA”), a naturally occurring carbohydrate that is a major component of the extracellular matrix in tissues throughoutof the body such as skin and cartilage.subcutaneous (“SC”) space. This temporarily increases dispersion and absorptionreduces the barrier to bulk fluid flow allowing for improved subcutaneousSC 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 our ENHANZE® drug delivery technology (“ENHANZE”). We license the ENHANZE technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or benefiting from injection via the subcutaneousSC route of administration. In the development of proprietary intravenous (IV)(“IV”) drugs combined with our ENHANZE technology, data havehas been generated supporting the potential for ENHANZE to reduce patient treatment burden, as a result of shorter duration of subcutaneous (SC)SC administration with ENHANZE compared to IV administration. ENHANZE may enable fixed-dose SC dosing compared to weight-based dosing required for IV administration, 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. Lastly, certain proprietary drugs co-formulated with ENHANZE have been granted additional exclusivity, extending the patent life of the product beyond the onepatent expiry of the proprietary IV drug.
We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (“Roche”), Takeda Pharmaceuticals International AG and Baxalta US Inc. and Baxalta GmbH (members of the Takeda group of companies) (“Baxalta”Takeda”), Pfizer Inc. (“Pfizer”), Janssen Biotech, Inc. (“Janssen”), AbbVie, Inc. (“AbbVie”), Eli Lilly and Company (“Lilly”), Bristol-Myers Squibb Company (“BMS”), Alexion Pharma Holding (AstraZenecaInternational Operations Unlimited Company (an indirect wholly owned subsidiary of AstraZeneca PLC announced the completion of its acquisition of Alexion Pharmaceuticals, Inc. in July 2021) (“Alexion”), argenx BVBA (“argenx”), Horizon Therapeutics plc. (“Horizon”) and, ViiV Healthcare (the global specialist HIV companyCompany majority owned by GlaxoSmithKline) (“ViiV”) and Chugai Pharmaceutical Co., Ltd (“Chugai”). In addition to receiving upfront licensing fees from our ENHANZE collaborations, we are entitled to receive event and sales-based milestone payments, revenues from the sale of bulk rHuPH20 and royalties from commercial sales of approved partner products co-formulated with ENHANZE. We currently receive royalties from 3three of these collaborations, including royalties from sales of 1one product from the BaxaltaTakeda collaboration, 3three products from the Roche collaboration and 1one product from the Janssen collaboration. Future potential revenues from royalties and fees from ENHANZE collaborations and from the sales and/or royalties of our approved products will depend on the ability of Halozyme and our collaboratorspartners to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates.
Through our recent acquisition of Antares Pharma, Inc. (“Antares”), we also develop, manufacture and commercialize, for ourselves or with our partners, drug-device combination products using our advanced auto-injector technologies that are designed to provide commercial or functional advantages such as convenience, improved tolerability, and enhanced patient comfort and adherence. Also, as a result of our acquisition of Antares, our commercial portfolio of proprietary products includes XYOSTED®, TLANDO and NOCDURNA® and ongoing product programs with industry leading pharmaceutical companies including Teva Pharmaceutical Industries, Ltd. (“Teva”), Covis Group S.a.r.l. (“Covis”), Pfizer and Idorsia Pharmaceuticals Ltd. (“Idorsia”).
Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these notes to the condensed consolidated financial statements refer to Halozyme Therapeutics, Inc. and its wholly owned subsidiary,subsidiaries, Halozyme, Inc. and Antares Pharma, Inc., and Halozyme,Antares Pharma, Inc.’s wholly owned subsidiaries Halozyme Switzerland GmbHAntares Pharma IPL AG and Halozyme Switzerland Holdings GmbH.Antares Pharma AG.
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2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for a complete set of financial statements. These interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, filed with the SEC on February 23, 2021.22, 2022. The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operations for the periods presented, with such adjustments consisting only of normal recurring adjustments. Operating results for interim periods are not necessarily indicative of the operating results for an entire fiscal year.
The accompanying interim unaudited condensed consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary,subsidiaries, Halozyme, Inc. and Antares Pharma, Inc., and Halozyme,Antares Pharma, Inc.’s wholly ownedwholly-owned Swiss subsidiaries, Halozyme Switzerland GmbHAntares Pharma IPL AG and Halozyme Switzerland Holdings GmbH.Antares Pharma AG. All intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of interim unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”)GAAP requires management to make estimates and assumptions that affect the amounts reported in our interim unaudited condensed 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 management believes 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 management’s estimates.
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid investments, readily convertible to cash, that mature within ninety90 days or less from the date of purchase. As of September 30, 2021,2022, our cash and cash equivalents consisted of money market funds.funds, bank certificate of deposits and demands deposits at commercial banks.
Marketable securities are investments with original maturities of more than ninety90 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 (loss) and included as a separate component of stockholders’ equity. The cost of marketable securities is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in investment and other income, net in the interim unaudited condensed consolidated statements of operations.income. We use the specific identification method for calculating realized gains and losses on marketable securities sold. None of the realized gains and losses and declines in value that were judged to be as a result of credit loss on marketable securities, if any, are included in investment and other income, net in the interim unaudited condensed consolidated statements of operations.
Restricted Cash
Under the terms of the leases of our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. AtAs of September 30, 20212022 and December 31, 2020,2021, restricted cash of $0.5 million was pledged as collateral for the letters of credit.
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.
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Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, long-term debt and long-term debt.contingent liability. 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 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.
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.
As of September 30, 2021, and December 31, 2020, inventories consisted of $1.6 million and $1.3 million, respectively, of Hylenex inventory, net and $54.4 million and $59.4 million, respectively, of bulk rHuPH20.
Leases

    The Company hasWe have entered into operating leases primarily for real estate and automobiles. These leases have contractual terms which range from 3 years to 612 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 condensed 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 the 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 equipment leases, such as automobiles, we account for the lease and non-lease components as a single lease component.
In March 2022, we entered into an agreement for assignment and assumption of lease with Seismic Software, Inc. pursuant to which effective January 1, 2023, we will assume Seismic’s office lease, as amended with Kilroy Realty L.P. for approximately 72,534 square feet of space in office and research facilities which is expected to commence on January 1, 2023. The premises are intended to serve as our new headquarters.
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 that we incur to complete the 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 the consolidated statements of income.

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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 structure and availability of discrete financial information. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than the carrying amounts, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting units are less than the carrying amounts, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill. If the carrying amounts of the reporting units exceed the fair values, we record an impairment loss based on the difference. 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 that 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 product sales.(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.
Revenues under Collaborative Agreements
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ENHANZE and Device Royalties
Under these agreements, we grant the collaboration partner a worldwide license to develop and commercialize products usingterms of our ENHANZE technology to combinecollaboration and license agreements, 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 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 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. In addition, collaboration 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 on a country by country basis, with each royalty term starting on the first commercial sale of that product and ending the later of: (i) a specified period or term set forth in the agreement or (ii) expiration of the last to expire of the valid claims of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the collaboration. When there are no valid claims during the applicable royalty term in a given country, the royalty rate is reduced for those sales. Collaboration partnersPartners 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 collaboration partners (in total or with respect to the terminated target, as applicable) will terminate provided,provided; however, that in the event of expiration of the agreement (as opposed to a termination), the on-going licenses granted will become perpetual, non-exclusive and fully paid. Sales-based milestones and royalties are recognized in the period the underlying sales or milestones occur. 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.
In addition to the royalties received from licensing our ENHANZE technology, we also earn royalties in connection with licenses granted under license and development arrangements with our device partners as a result of our acquisition of Antares. These royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid-single digits to low double digits and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to us within 45 to 60 days of the end of the period in which the commercial sales are made. We base our estimates of royalties earned on actual sales information from our partners when available or estimated, prescription sales from external sources and estimated net selling price. 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.
Revenue under ENHANZE and Device Collaborative Agreements
ENHANZE Collaboration and License Agreements
Under the terms of our ENHANZE collaboration agreements, we grant the partner a worldwide license to our ENHANZE technology to develop and commercialize products that 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 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 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, in general, collect an upfront license payment from partners and are also entitled to receive event-based payments subject to partners’ achievement of specified development, regulatory and sales-based milestones. In several agreements, 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 collaboration 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, we do not developour partners lead development of assets, jointly with collaboration partners, and we do not share in significant financial risks of their development or commercialization activities. Accordingly, we concluded our collaborative agreements are appropriately accounted for pursuant to ASC Topic 606, Revenue from Contracts with Customers.
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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 ENHANZEtechnology which represents application of rHuPH20 to facilitate delivery of drugs or fluids.drugs. Each of the licenses grants the collaboration 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 collaboration partner has received access to our intellectual property, usually at the inception of the agreement.
When collaboration 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 collaboration 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
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right, and we consider grants of additional licensing rights upon option exercises to be separate contracts (target selection contracts).
WeGenerally, we provide customary 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 projects authorization forms for our collaboration partners, which represent separate contracts. Additionally,In addition to our licenses, we price our supply of bulk rHuPH20 and research and development services at our regular selling prices, called standalone selling price or “SSP”(“SSP”). Therefore, our collaboration 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 collaboration partner’s initiation of a trial such as feedback received from the applicable regulatory authorities, completion of IND or equivalent filings, readiness and availability of drug, readiness of study sites and our collaboration partner’s commitment of resources to the program. We do not include any amounts subject to uncertainties intoin 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 collaboration 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. WeWhen 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. 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 collaboration 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 collaboration partners, we estimate and charge SSP based on the typical contract manufacturer margins consistently with all of our collaborative 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 collaboration partners.
Upfront amounts allocated to licenses to individual targets are recognized as revenue when the license is transferred to the collaboration partner, as discussed above, if the license is not subject to exchange rights, or when the exchange right expires or is exercised.
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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 collaboration partner.
Sales-based milestones and royalties cannot be recognized until the underlying sales occur. We do not receive final royalty reports from our collaboration partners until after we complete our financial statements for a prior quarter. Therefore, we recognize revenue based on estimates of the royalty earned, which are based on internal estimates and available preliminary reports provided by our collaboration partners. We will record a true-up in the following quarter if necessary, when final royalty reports are received. To date, we have not recorded any material true-ups.
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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 collaboration 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 as a result of our acquisition of Antares, under which we grant a license to our device technology and provide research and development services that often involve multiple performance obligations and highly-customized deliverables. 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 that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and we have a present right to payment.
Our typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. We record a contract liability for cash received in advance of performance, which is presented within deferred revenue and deferred revenue, long-term in the condensed consolidated balance sheets and recognized as revenue in the condensed consolidated statements of income when the associated performance obligations have been satisfied.
License fees and milestones received in exchange for the grant of a license to our functional intellectual property, such as patented technology and know-how in connection with a partnered development arrangement, are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.
Refer to Note 45, Revenue, for further discussion on our collaborative arrangements.
Product Sales, Net
Proprietary Product Sales
Hylenex Recombinant
We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual packages of Hylenex recombinant represent performance obligations under each purchase order. We use a contract manufacturer to produce Hylenex recombinant and a third-party logistics (3PL) vendor to process and fulfill orders. We concluded we are the principal in the sales to wholesalers because we control access to services rendered by both vendors and direct their activities. We have no significant obligations to wholesalers to generate pull-through sales.
Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when wholesalers sell Hylenex recombinant at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs. We also pay quarterly distribution fees to certain wholesalers for inventory reporting and chargeback processing, and to GPOs as administrative fees for services and for access to GPO members. We concluded the benefits received in exchange for these fees are not distinct from our sales of Hylenex recombinant, and accordingly we apply these amounts to reduce revenues. Wholesalers also have rights to return unsold product nearing or past the expiration date. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant period of time between when the product is shipped and when we issue credits on returned product.
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We estimate the transaction price when we receive each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler arising from all of the above factors. We have compiled historical experience and data to estimate future returns and chargebacks of Hylenex recombinant and the impact of the other discounts and fees we pay. When estimating these adjustments to the transaction price, we reduce it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known.
Each purchase order contains only one type of product and is usually shipped to the wholesaler in a single shipment. Therefore, allocation of the transaction price to individual packages is not required.
We recognize revenue from Hylenex recombinant product sales and related cost of sales upon product delivery to the wholesaler location. 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.
Upon recognition of revenue from product sales of Hylenex recombinant, the estimated amounts of credit for product returns, chargebacks, distribution fees, prompt payment discounts, and GPO fees are included in sales reserves, accrued liabilities and net of accounts receivable.receivable in the condensed consolidated balance sheets. 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.
In connection with the orders placed by wholesalers, we incur costs such as commissions to our sales representatives. However, as revenue from product sales is recognized upon delivery to the wholesaler, which occurs shortly after we receive a purchase order, we do not capitalize these commissions and other costs, based on application of the practical expedient allowed within the applicable guidance.
Other Proprietary Product Sales
As a result of our acquisition of Antares, our commercial portfolio of proprietary products includes XYOSTED, TLANDO and NOCDURNA, which we sell primarily to wholesale and specialty distributors. 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.
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 liabilities and net of accounts receivable in the condensed consolidated balance sheets.
Partnered Product Sales
Bulk rHuPH20
We sell bulk rHuPH20 to collaboration partners for use in research and development;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 collaboration 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
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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.
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Devices
As a result of our acquisition of Antares, we are party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which we produce and are the exclusive supplier of certain products, devices and/or components. Revenue is recognized when or as control of the goods transfers to the customer as discussed below.
We are the exclusive supplier of the Makena® subcutaneous auto-injector product to Covis and the exclusive supplier of OTREXUP® to Otter Pharmaceuticals, LLC (“Otter”). Because these products are custom manufactured for each customer with no alternative use and we have a contractual right to payment for performance completed to date, control is continuously transferred to the customer as the product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced. The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets in the condensed consolidated balance sheets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.
All other device partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, such as volume-based pricing arrangements or profit-sharing arrangements, if any. We recognize revenue, including the estimated variable consideration we expect to receive for contract margin on future commercial sales, upon shipment of the goods to our partner. The estimated variable consideration is recognized at an amount we believe is not subject to significant reversal based on historical experience and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.
Revenue Presentation
In our condensed consolidated statements of operations,income, we report as revenues under collaborative agreements the upfront payments, event-based development and regulatory milestones and sales milestones. We also include in this category revenues from separate research and development contracts pursuant to project authorization forms. We report royalties received from collaboration partners as a separate line in our condensed consolidated statements of operations.income.
Revenues from sales of Hylenex recombinant, bulk rHuPH20 that has alternative future useour proprietary and ENHANZE drug productpartnered products are included in product sales, net.net in our condensed consolidated statements of income.
In the footnotes to our condensed consolidated financial statements, we provide disaggregated revenue information by type of arrangement (product sales, net, collaborative agreements and research and device licensing and development services)revenues), and additionally, by type of payment stream received under collaborative agreements (upfront license and target nomination fees, event-based development and regulatory milestones and other fees, sales milestones and royalties).
Cost of Product Sales
Cost of product 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 Hylenex recombinantproprietary and bulk rHuPH20 and ENHANZE drug product.partnered products. Cost of product 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, facilities and other overhead expenses, research related manufacturing services, contract services and other outside expenses. 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.
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Share-Based Compensation
We record compensation expense associated with stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and shares issued under our employee stock purchase plan (“ESPP”) in accordance with the authoritative guidance for stock-based compensation. The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of the award. 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.
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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 at each year end and their respective tax bases at each reporting period. We measure deferred tax assets and are measuredliabilities using enacted tax rates in effect 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 theany associated valuation allowance to recordallowances recorded against our net deferred tax assets, which are based on complex and evolving tax regulations throughout the world.regulations. Deferred tax assets (“DTA”) and other tax benefits are recorded when they are more likely than not to be realized. We maintainOn a fullquarterly basis, we assess the need for valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. On a periodic basis, we reassess the valuation allowance of our DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all of our DTAs will be realized. As of the third quarter of 2021, we have demonstrated profitability and cumulative pretax income and are forecasting income growth. After assessing both the positive and negative evidence, we determined that it was more likely than not that our DTAs would be realized and released the valuation allowance related to federal and state DTAs as of September 30, 2021, resulting inWe recorded a benefit fromprovision for income taxes of $142.5 million. We estimated that our annual$12.1 million and $33.7 million using an effective income tax rate to be (57.63)% for 2021 compared toof 6.8% and 18.7% the 0.17%three and nine months ended September 30, 2022, respectively. The difference between our effective income tax rate for 2020. The primary difference relatesand the U.S. federal statutory rate of 21% is primarily due to the release of our valuation allowance. We will continuetax benefits on Foreign Derived Intangible Income Deduction (FDII), and tax detriments on 162(m), other share-based compensation and non-deductible transaction costs related to evaluate the need for valuation allowances for our DTAs.

Antares acquisition.
Segment Information
WeAs a result of the acquisition of Antares, we assessed the organization of our business and concluded that we continue to operate our business in 1one operating segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes.enzymes and devices. This segment also includes revenues and expenses related to (i) research and development and bulk rHuPH20 manufacturing activities conducted under our collaborative agreements with third parties and (ii) product sales of Hylenex recombinant.proprietary and partnered products. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.

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21



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:
StandardDescriptionEffective DateEffect on the Financial
Statements or Other Significant Matters
In August 2020,October 2021, the FASB issued ASU 2020-06, Debt2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from contracts with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)
customers.
The new guidance eliminatesrequires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contractscontracts.
January 1, 2023
(Early adoption is permitted, including adoption in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.
interim period)
January 1, 2022
(Early adoption permitted effective January 1, 2021)
We early adopted ASU 2020-06 as2021-08 on April 1, 2022. The adoption did not have a material impact on our condensed consolidated financial position or results of January 1, 2021 on a modified retrospective basis, which resulted in an approximately $65.5 million decrease in additional paid in capital from the derecognition of the bifurcated equity component, $52.6 million increase in debt from the derecognition of the discount associated with the bifurcated equity component and $13.0 million decrease to the opening balance of accumulated deficit, representing the cumulative non-cash interest expense recognized related to the amortization of the bifurcated conversion option related to the 2024 Convertible Notes. We derecognized the related deferred tax liabilities of $11.8 million with a corresponding adjustment to the valuation allowance, resulting in no net impact to the cumulative adjustment to retained earnings. As we committed to settle the principal amount of the convertible notes in cash upon conversion, shares used for diluted EPS will continue to be limited to the excess conversion value over the principal amount of the convertible note. Diluted earnings per share is also impacted due to the elimination of non-cash interest expense associated with the amortization of the equity component.operations.

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3. Business Combination
On May 24, 2022, we acquired all outstanding equity interests of Antares Pharma, Inc. according to the terms and conditions of the Agreement and Plan of Merger, dated as of April 12, 2022 (the “Merger Agreement”). Antares 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. (“BofA”) and other lenders that provides for (i) a $350 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $250 million term loan facility (the “Term Facility”, collectively with the Revolving Credit Facility, the “2022 Facility”) as described in Note 8. We recognized transaction costs of $0.4 million and $20.5 million in the three and nine months ended September 30, 2022, respectively. These costs are reported in selling, general and administrative expenses in our condensed 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 (a)
45,828 
Consideration for seller transaction costs paid by Halozyme22,906 
Consideration related to Antares closing indebtedness settled by Halozyme19,683 
Cash consideration related to cash bonus awards paid by Halozyme365 
Total purchase consideration$1,045,668
(a) Consideration for Antares equity compensation awards consists of $32.2 million paid for vested equity awards as well as $13.6 million paid for the pre-combination portion of unvested equity awards that were accelerated as part of the Merger Agreement. The fair value of the unvested equity awards attributable to the post-combination period of $8.7 million is included in our condensed consolidated statements of income in Q2 2022 and the nine months ended September 30, 2022.

Fair Value of Assets Acquired and Liabilities Assumed
The acquisition of Antares has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Halozyme treated as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value on the acquisition date. Acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. The process for estimating the fair values of identifiable intangible assets and certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.
The table below presents the preliminary estimated fair values of assets acquired and liabilities assumed on the acquisition date based on preliminary valuations and management estimates that are subject to change when formal valuations and other studies are finalized. 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. These preliminary estimates may be revised during the measurement period as third-party valuations are finalized, additional information becomes available, and as additional analyses are performed. These differences could change the value of the intangible assets acquired, the contingent liability assumed, and the tax impacts related to the acquisition and could have a material impact on our results of operations and financial position.
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Amount (in thousands)
Total purchase consideration, net of $46,548 cash acquired$999,120 
Assets:
Short-term investments498 
Accounts receivable, net82,160 
Inventories, net34,379 
Prepaid expenses and other assets5,241 
Property and equipment, net28,661 
Intangibles, net987,500 
Liabilities:
Accounts Payable7,197 
Accrued expenses33,705 
Deferred revenue, current portion2,509 
Deferred revenue, net of current portion1,207 
Deferred tax liabilities, net159,094 
Other long-term liabilities135,088 
Net assets acquired, excluding goodwill$799,639 
Goodwill199,481 
Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill will be allocated entirely to the single reportable segment. Goodwill recognized as a result of the acquisition is not deductible for tax purposes.

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 preliminary values are presented in the table below.
Amount (in thousands)Useful life (years)
Auto Injector technology platform$372,900 7
XYOSTED proprietary product277,400 10
TLANDO product rights277,600 10
ATRS-1902 (IPR&D)59,600 Indefinite
Estimated fair value of intangible assets acquired987,500 

A contingent liability with a preliminary value of $130.0 million was assumed related to TLANDO. We assumed an obligation to pay development milestone payments as well as commercial milestone payments and minimum tiered royalty payments based on TLANDO net sales which are contingent upon future events. The acquisition date fair value was measured using the income approach, specifically the probability weighted expected return method for the development milestone payments and the option pricing methodology using the Monte Carlo simulation for commercial milestone payments and royalty payments.

Unaudited Pro Forma Results
Our condensed consolidated financial statements include Antares’ results of operations from the date of acquisition on May 24, 2022 through September 30, 2022. Total revenues and net loss before taxes attributable to Antares during this period and included in our condensed consolidated financial statements for the three months ended September 30, 2022 total
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$50.4 million and $35.5 million, respectively and $69.1 million and $75.3 million for and nine months ended September 30, 2022, 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.
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2022202120222021
Total Revenues$208,976 $164,021 $531,189 $476,559 
Net income (loss)$66,771 $198,280 $163,795 $221,426 
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.


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3.4. Fair Value Measurement
Available-for-sale marketable securities consisted of the following (in thousands):
September 30, 2021September 30, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Asset-backed securitiesAsset-backed securities$27,827 $$(12)$27,817 Asset-backed securities$— $— $— $— 
Corporate debt securitiesCorporate debt securities75,686 (9)75,683 Corporate debt securities— — — — 
U.S. Treasury securitiesU.S. Treasury securities60,178 29 — 60,207 U.S. Treasury securities120,275 — (1,850)118,425 
Non-US Government securities17,291 — (2)17,289 
Non-U.S Government securitiesNon-U.S Government securities— — — — 
Commercial paperCommercial paper143,241 — — 143,241 Commercial paper— — — — 
$324,223 $37 $(23)$324,237 $120,275 $— $(1,850)$118,425 
December 31, 2020December 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Asset-backed securitiesAsset-backed securities$17,013 $49 $— $17,062 Asset-backed securities$32,745 $— $(53)$32,692 
Corporate debt securitiesCorporate debt securities69,755 42 (8)69,789 Corporate debt securities58,885 — (86)58,799 
U.S. Treasury securitiesU.S. Treasury securities45,110 — 45,117 U.S. Treasury securities231,230 — (469)230,761 
Non-U.S Government securitiesNon-U.S Government securities17,232 — (12)17,220 
Commercial paperCommercial paper88,342 — — 88,342 Commercial paper282,731 — — 282,731 
$220,220 $98 $(8)$220,310 $622,823 $— $(620)$622,203 
As of September 30, 2021, 112022, six available-for-sale marketable securities with a fair market value of $66.0$118.4 million were in a gross unrealized loss position of $23 thousand.$1.85 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 September 30, 2021,2022, 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.
ContractualThe estimated fair value of our contractual maturities of available-for-sale debt securities arewere as follows (in thousands):
September 30, 2021December 31, 2020
Estimated Fair Value
Due within one year$286,672 $220,310 
After one but within five years37,565 — 
$324,237 $220,310 
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September 30, 2022December 31, 2021
Due within one year$118,425 $500,965 
After one but within five years— 121,238 
$118,425 $622,203 
The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Level 1Level 2Total estimated fair valueLevel 1Level 2Total estimated fair valueLevel 1Level 2Total estimated fair valueLevel 1Level 2Total estimated fair value
Cash equivalents:Cash equivalents:Cash equivalents:
Money market fundsMoney market funds$491,661 $— $491,661 $140,571 $— $140,571 Money market funds$117,698 $— $117,698 $118,707 $— $118,707 
Commercial paper— — — — 7,000 7,000 
Available-for-sale marketable
securities:
Available-for-sale marketable
securities:
Available-for-sale marketable
securities:
Asset-backed securitiesAsset-backed securities— 27,817 27,817 — 17,062 17,062 Asset-backed securities— — — — 32,692 32,692 
Corporate debt securitiesCorporate debt securities— 75,683 75,683 — 69,789 69,789 Corporate debt securities— — — — 58,799 58,799 
U.S. Treasury securitiesU.S. Treasury securities60,207 — 60,207 45,117 — 45,117 U.S. Treasury securities118,425 — 118,425 230,761 — 230,761 
Non-US Government securities— 17,289 17,289 — — — 
Non-U.S Government securitiesNon-U.S Government securities— — — — 17,220 17,220 
Commercial paperCommercial paper— 143,241 143,241 — 88,342 88,342 Commercial paper— — — — 282,731 282,731 
$551,868 $264,030 $815,898 $185,688 $182,193 $367,881 $236,123 $— $236,123 $349,468 $391,442 $740,910 
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We had no instrumentsavailable for sale securities that were classified within Level 3 as of September 30, 20212022 and December 31, 2020.2021.
A contingent liability with a preliminary value of $129.8 million was assumed 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. We will remeasure the fair value of the contingent liability on a quarterly basis. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues, cost of debt, risk free rate, weighted average cost of capital, revenue market price risk and revenue volatility. 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 will be recognized in our condensed consolidated statements of income.
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4.5. Revenue
Our disaggregated revenues were as follows (in thousands):
Three Months Ended
 September 30,
Nine Months Ended
September 30,
Three Months Ended
 September 30,
Nine Months Ended
September 30,
20212020202120202022202120222021
RoyaltiesRoyalties$58,563 $23,931 $141,264 $56,599 Royalties$99,551 $58,563 $254,496 $141,264 
Product sales, net
Product sales, net:Product sales, net:
Sales of bulk rHuPH20 Sales of bulk rHuPH20$18,862 $4,104 $59,719 $11,963  Sales of bulk rHuPH20$19,259 $18,862 $60,764 $59,719 
Sales of Hylenex6,185 4,944 17,454 11,569 
Sales of proprietary productsSales of proprietary products24,180 6,185 44,559 17,454 
Sales of device partnered productsSales of device partnered products17,988 — 24,544 — 
Total product sales, netTotal product sales, net$25,047 $9,048 $77,173 $23,532 Total product sales, net$61,427 $25,047 $129,867 $77,173 
Revenues under collaborative agreements:Revenues under collaborative agreements:Revenues under collaborative agreements:
Upfront license and target nomination fees Upfront license and target nomination fees$2,000 $— $42,000 $7,264  Upfront license and target nomination fees$— $2,000 $30,000 $42,000 
Event-based development and regulatory milestones and other fees Event-based development and regulatory milestones and other fees— 32,000 30,000 57,500  Event-based development and regulatory milestones and other fees44,000 — 59,000 30,000 
Sales-based milestones Sales-based milestones30,000 — 50,000 —  Sales-based milestones— 30,000 — 50,000 
Research and development services220 337 870 996 
Device Licensing and development revenue Device Licensing and development revenue3,998 220 5,257 870 
Total revenues under collaborative agreementsTotal revenues under collaborative agreements$32,220 $32,337 $122,870 $65,760 Total revenues under collaborative agreements$47,998 $32,220 $94,257 $122,870 
Total revenueTotal revenue$115,830 $65,316 $341,307 $145,891 Total revenue$208,976 $115,830 $478,620 $341,307 
During the three months ended September 30, 20212022 we recognized revenue related to licenses granted to collaboration partners in prior periods in the amount of $88.6$143.6 million. This amount represents royalties and a sales milestone earned in the current period. We recognized revenue of $0.5 million during the three months ended September 30, 2021 that had been included in deferred revenues at December 31, 2020.
During the nine months ended September 30, 2021 we recognized revenue related to licenses granted to collaboration partners in prior periods in the amount of $221.3 million. This amount represents royalties and sales milestone earned in the current period in addition to $30.0$44.0 million of variable consideration in the contracts where uncertainties have been resolved and the development milestones wereare expected to be achieved or were achieved. We also recognized revenue of $1.0$0.5 million during the three months ended September 30, 2022 that had been included in deferred revenues in the condensed consolidated balance sheets as of December 31, 2021.
During the nine months ended September 30, 2022 we recognized revenue related to licenses granted to partners in prior periods in the amount of $313.5 million. This amount represents royalties earned in the current period in addition to $59.0 million of variable consideration in the contracts where uncertainties have been resolved and the development milestones are expected to be achieved or were achieved. We also recognized revenue of $1.5 million during the nine months ended September 30, 20212022 that had been included in deferred revenues atin the condensed consolidated balance sheets as of December 31, 2020.2021. We did not recognize any adjustments to reduce sales reserves and allowances liability related to Hylenex recombinant sales in prior periods
Accounts receivable, net, and deferred revenues (contract liabilities) from contracts with customers, including collaboration partners, consisted of the following (in thousands):
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Accounts receivable, netAccounts receivable, net$112,099 $90,730 Accounts receivable, net$164,135 $90,975 
Other contract assets— 7,000 
Contract assetsContract assets69,167 — 
Deferred revenuesDeferred revenues4,775 5,772 Deferred revenues6,419 4,276 
As of September 30, 2021,2022, the amounts included in the transaction price of our contracts with customers including collaboration partners, and allocated to goods and services not yet provided were $69.8$97.2 million, of which $65.0$90.8 million relates to unfulfilled purchase commitments and $4.8$6.4 million has been collected and is reported as deferred revenues.revenues in the condensed consolidated balance sheets. The unfulfilled purchase commitments are estimated to be delivered by the end of the third quarter of 2022.2023. Of the total deferred revenues of $4.8$6.4 million, $2.2$3.6 million is expected to be used by our customers within the next 12 months.
There were noWe recognized contract assets related to collaborative agreements atof $69.2 million as of September 30, 2021. While we may become entitled to receive additional event-based development and regulatory milestones and other fees under our collaborative agreements,2022, which relaterelated to development milestones deemed probable of receipt for intellectual property licenses granted to collaboration partners in prior periods no amounts were deemed probable.and for goods or services when control has transferred to the customer, and corresponding revenue is recognized on an over time basis but is not yet billable to the customer in accordance with the terms of the contract.
1928


5.6. Certain Balance Sheet Items
Accounts receivable, net consisted of the following (in thousands):
September 30,
2021
December 31,
2020
September 30,
2022
December 31,
2021
Accounts receivable from product sales to collaborators$18,172 $25,198 
Accounts receivable from product sales to partnersAccounts receivable from product sales to partners$51,067 $18,504 
Accounts receivable from revenues under collaborative agreementsAccounts receivable from revenues under collaborative agreements30,407 30,404 Accounts receivable from revenues under collaborative agreements3,550 5,422 
Accounts receivable from royalty paymentsAccounts receivable from royalty payments59,095 32,098 Accounts receivable from royalty payments95,281 63,555 
Accounts receivable from other product salesAccounts receivable from other product sales5,621 4,033 Accounts receivable from other product sales6,023 4,634 
Other contract assets— 7,000 
Other receivableOther receivable9,985 — 
Contract assetsContract assets69,167 — 
Subtotal Subtotal113,295 98,733  Subtotal235,073 92,115 
Allowance for distribution fees and discountsAllowance for distribution fees and discounts(1,196)(1,003)Allowance for distribution fees and discounts(1,771)(1,140)
Total accounts receivable, net Total accounts receivable, net$112,099 $97,730  Total accounts receivable, net$233,302 $90,975 
Inventories consisted of the following (in thousands):
September 30,
2021
December 31,
2020
September 30,
2022
December 31,
2021
Raw materialsRaw materials$8,109 $5,813 Raw materials$11,957 $10,672 
Work-in-processWork-in-process21,722 33,738 Work-in-process56,245 17,451 
Finished goodsFinished goods26,147 21,196 Finished goods35,074 25,785 
Total inventories Total inventories$55,978 $60,747  Total inventories$103,276 $53,908 
Prepaid expenses and other assets consisted of the following (in thousands):
September 30,
2021
December 31,
2020
September 30,
2022
December 31,
2021
Prepaid manufacturing expensesPrepaid manufacturing expenses$43,324 $35,048 Prepaid manufacturing expenses$47,783 $47,991 
Other prepaid expensesOther prepaid expenses3,156 2,510 Other prepaid expenses18,695 3,809 
Other assetsOther assets2,374 4,783 Other assets10,344 2,096 
Total prepaid expenses and other assets Total prepaid expenses and other assets48,854 42,341  Total prepaid expenses and other assets76,822 53,896 
Less long-term portionLess long-term portion(15,552)(14,067)Less long-term portion(25,783)(13,414)
Total prepaid expenses and other assets, current Total prepaid expenses and other assets, current$33,302 $28,274  Total prepaid expenses and other assets, current$51,039 $40,482 
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.
Property and equipment, net consisted of the following (in thousands):
September 30,
2021
December 31,
2020
September 30,
2022
December 31,
2021
Research equipmentResearch equipment$7,195 $7,085 Research equipment$6,965 $7,174 
Manufacturing equipmentManufacturing equipment5,719 5,336 Manufacturing equipment22,930 5,719 
Computer and office equipmentComputer and office equipment5,221 4,826 Computer and office equipment6,667 5,370 
Leasehold improvementsLeasehold improvements1,628 1,628 Leasehold improvements9,586 1,628 
Subtotal Subtotal19,763 18,875  Subtotal46,148 19,891 
Accumulated depreciation and amortizationAccumulated depreciation and amortization(12,600)(11,582)Accumulated depreciation and amortization(15,080)(13,100)
Subtotal Subtotal7,163 7,293  Subtotal31,068 6,791 
Right of use assets2,425 3,300 
Right of use of assetsRight of use of assets5,606 2,003 
Property and equipment, net Property and equipment, net$9,588 $10,593  Property and equipment, net$36,674 $8,794 
Depreciation and amortization expense was approximately $0.7$2.0 million and $0.8$0.7 million, inclusive of ROU asset amortization of $0.4$0.7 million and $0.4 million for the three months ended September 30, 20212022 and 20202021, respectively.
2029


Depreciation and amortization expense was approximately $2.2$3.9 million and $2.5$2.2 million, inclusive of ROU asset amortization of $1.2$1.7 million and $1.3$1.2 million, for the nine months ended September 30, 20212022 and 20202021, respectively.
Accrued expenses consisted of the following (in thousands):
September 30,
2021
December 31,
2020
September 30,
2022
December 31,
2021
Accrued compensation and payroll taxesAccrued compensation and payroll taxes$7,652 $8,078 Accrued compensation and payroll taxes$17,904 $9,858 
Accrued outsourced manufacturing expensesAccrued outsourced manufacturing expenses2,839 4,535 Accrued outsourced manufacturing expenses6,382 6,514 
Income taxes payableIncome taxes payable9,409 1,439 
Product returns and sales allowanceProduct returns and sales allowance23,310 706 
Other accrued expensesOther accrued expenses6,029 6,468 Other accrued expenses15,323 3,648 
Lease liabilityLease liability3,424 4,868 Lease liability7,407 2,820 
Total accrued expenses Total accrued expenses19,944 23,949  Total accrued expenses79,735 24,985 
Less long-term portionLess long-term portion(1,609)(3,466)Less long-term portion(5,418)(544)
Total accrued expenses, current Total accrued expenses, current18,335 $20,483  Total accrued expenses, current$74,317 $24,441 
Expense associated with the accretion of the lease liabilities was approximately $0.1 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively and 2020$0.3 million and $0.3 million for the nine months ended September 30, 2022 and 2021, respectively. Total lease expense for the three months ended September 30, 2022 and 2021 and 2020 was $0.5$0.9 million and $0.5 million, respectively.
Expense associated with the accretion of the lease liabilities was approximately $0.3respectively and $2.0 million and $0.4$1.5 million for the nine months ended September 30, 20212022 and 2020 respectively. Total lease expense for the nine months ended September 30, 2021, and 2020 was $1.5 million and $1.7 million respectively.
Cash paid for amounts related to leases for the three months ended September 30, 2022 and 2021 was $1.1 million and 2020 was $0.6 million, respectively and $0.8$2.7 million and $2.0 million and $2.5 million for the nine months ended September 30, 20212022 and 20202021, respectively.


2130


6.7. Goodwill and Intangible Assets
Goodwill
On May 24, 2022, we acquired all outstanding equity interests of Antares. A Goodwill balance of $199.5 million was recognized for the excess of the consideration transferred over the net assets acquired and represents the expected revenue and cost synergies of the combined company and assembled workforce.
A summary of the activity impacting goodwill is presented below (in thousands):
Balance as of December 31, 2021$— 
Goodwill acquired199,481 
Balance as of September 30, 2022$199,481 
Intangible Assets
Our acquired intangible assets are amortized using the straight-line method over their estimated useful lives of seven to ten years. The following table shows the cost, accumulated amortization and weighted average remaining life in years for our acquired intangible assets as of September 30, 2022 (in thousands).
Weighted average remaining life (in years)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Auto Injector technology platform7$372,900 $18,903 $353,997 
XYOSTED proprietary product10277,400 9,843 267,557 
TLANDO product rights10277,600 9,850 267,750 
Total definite-lived intangibles, net$927,900 $38,596 $889,304 
ATRS-1902 (IPR&D)Indefinite59,600 
Total Intangibles, net$948,904 

The estimated future annual amortization of finite-lived intangible assets is shown in the following table. 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 (in thousands)
Remainder of 2022$27,194 
2023108,771 
2024108,771 
2025108,771 
2026108,771 
Thereafter427,026 
Total$889,304 
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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” and collectively with the 2024 and the 2027 Convertible Notes the “Convertible Notes”). The net proceeds in connection with the issuance of the 2028 Convertible Notes, after deducting the initial purchasers’ fee of $18.0 million, was approximately $702.0 million. 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 September 30, 2022, the 2028 Convertible Notes are 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 September 30, 2022, we were in compliance with all covenants and there was no material adverse change in our business, operations or financial condition.
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 September 30, 2022, no capped calls have been exercised.
Pursuant to their terms, the capped calls qualify for classification within stockholders’ equity in the condensed consolidated balance sheets, and their fair value is not remeasured and adjusted as long as they continue to qualify for stockholders’ equity classification. We paid approximately $69.1 million for the Capped Calls, including applicable transaction costs, which was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheets. The Capped Call Transactions are separate transactions entered into by us with the Capped Call Counterparties, are not part of the terms of the Convertible Notes, and do not affect any holder’s rights under the Convertible Notes. Holders of the Convertible Notes do not have any rights with respect to the Capped Call Transactions.


32



0.25% Convertible Notes due 2027
In March 2021, we completed the sale of $805.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2027 (the “2027 Convertible Notes” and collectively with the 2024 Convertible Notes the “Convertible Notes”). The net proceeds in connection with the issuance of the 2027 Convertible Notes, after deducting the initial purchasers’ fee of $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.
The 2027 Convertible Notes pay interest semi-annually in arrears on March 1st and September 1st of each year at an annual rate of 0.25%. The 2027 Convertible Notes are general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the 2027 Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries. The 2027 Convertible Notes 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 5five consecutive business days immediately after any 5five consecutive trading day period (such 5five 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. The 2027 Convertible Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, September 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date. As of September 30, 2021,2022, the 2027 Convertible Notes are not convertible.
Upon conversion, we will pay cash for the settlement of principal and for the premium, if applicable, we will pay cash, deliver shares of common stock or a combination of cash and shares of common stock, at our election. The initial conversion rate for the 2027 Convertible Notes will be 12.9576 shares of common stock per $1,000 in principal amount of 2027 Convertible Notes, equivalent to a conversion price of approximately $77.17 per share of our common stock. The conversion rate is subject to adjustment.
As of September 30, 2021,2022, we were in compliance with all covenants and there was no material adverse change in our business, operations or financial condition.
1.25% Convertible Notes due 2024
In November 2019, we completed the sale of $460.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due 2024 (“2024 Convertible Notes”). The net proceeds in connection with the 2024 Convertible Notes, after deducting the initial purchasers’ fee of $12.7 million, was approximately $447.3 million. We also incurred debt issuance cost totaling $0.3 million. Debt issuance costs and the initial purchasers’ fee are presented as a debt discount.
The 2024 Convertible Notes pay interest semi-annually in arrears on June 1st and December 1st of each year, beginning on June 1, 2020, at an annual rate of 1.25%. The 2024 Convertible Notes are general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the 2024 Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of the our current or future subsidiaries. The 2024 Convertible Notes have a maturity date of December 1, 2024.
33


Holders may convert their 2024 Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020, if the last reported sale price per share of common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the 5five consecutive business days immediately after any 5five consecutive trading day period (such 5five 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
22


stock, as described in the offering memorandum for the 2024 Convertible Notes; (4) if we call such notes for redemption; and (5) at any time from, and including, June 1, 2024 until the close of business on the scheduled trading day immediately before the maturity date. As of September 30, 2021,2022, the 2024 Convertible Notes are convertible and are classified as a current liability.liability in the condensed consolidated balance sheets.
In January 2021 we notified the note holders of our irrevocable election to settle the principal of the 2024 Convertible Notes in cash and for the premium, if applicable, to deliver shares of common stock. The conversion rate for the 2024 Convertible Notes will beis 41.9208 shares of common stock per $1,000 in principal amount of 2024 Convertible Notes, equivalent to a conversion price of approximately $23.85 per share of our common stock. The conversion rate is subject to adjustment.
In March 2021, we completed a privately negotiated induced conversion of $369.1 million principal amount of the 2024 Convertible Notes (“2021 Note Repurchases” or the “Induced“2021 Induced Conversion”). In connection with the 2021 Induced Conversion, we paid approximately $370.2 million in cash, which includes principal and accrued interest, and issued approximately 9.08 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion. As a result of the 2021 Induced Conversion, we recorded $21.0 million in induced conversion expense which is included in Otherother income (expense) of the Condensed Consolidated Statementscondensed consolidated statements of Operationsincome in 2021. The induced conversion expense represents the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.
In August 2022, we completed a privately negotiated induced conversion of $77.4 million principal amount of the 2024 Convertible Notes (“2022 Note Repurchases” or the “2022 Induced Conversion”). In connection with the 2022 Induced Conversion, we paid approximately $77.6 million in cash, which includes principal and accrued interest, and issued approximately 1.51 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion. As a result of the nine months ended September 30, 2021.2022 Induced Conversion, we recorded $2.7 million in induced conversion expense which is included in other income (expense) of the condensed consolidated statements of income. The induced conversion expense represents the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.
As of September 30, 2021,2022, we were in compliance with all covenants and there was no material adverse change in our business, operations or financial condition.

34



Net Carrying Amounts of theour Convertible Notes
The carrying amount and fair value of our Convertible Notes were as follows as of the dates indicated. As disclosed in Note 2, we early adopted ASU 2020-06 as of January 1, 2021 on a modified retrospective basis which adoption is reflected in the following table (in thousands).
September 30,
2021
January 1,
2021
September 30,
2022
December 31,
2021
Principal amount:Principal amount:Principal amount:
2024 Convertible Notes2024 Convertible Notes$90,936 $460,000 2024 Convertible Notes$13,483 $90,936 
2027 Convertible Notes2027 Convertible Notes805,000 — 2027 Convertible Notes805,000 805,000 
2028 Convertible Notes2028 Convertible Notes720,000 — 
Total Principal AmountTotal Principal Amount$895,936 $460,000 Total Principal Amount$1,538,483 $895,936 
Unamortized debt discount:Unamortized debt discount:Unamortized debt discount:
2024 Convertible Notes2024 Convertible Notes$(1,685)$(10,211)2024 Convertible Notes$(168)$(1,517)
2027 Convertible Notes2027 Convertible Notes(18,546)— 2027 Convertible Notes(15,208)(17,745)
2028 Convertible Notes2028 Convertible Notes(18,636)— 
Total unamortized debt discountTotal unamortized debt discount$(20,231)$(10,211)Total unamortized debt discount$(34,012)$(19,262)
Carrying amount:Carrying amount:Carrying amount:
2024 Convertible Notes2024 Convertible Notes$89,251 $449,789 2024 Convertible Notes$13,315 $89,419 
2027 Convertible Notes2027 Convertible Notes786,454 — 2027 Convertible Notes789,792 787,255 
2028 Convertible Notes2028 Convertible Notes701,364 — 
Total carrying amountTotal carrying amount$875,705 $449,789 Total carrying amount$1,504,471 $876,674 
Fair value based on trading levels (Level 2):Fair value based on trading levels (Level 2):Fair value based on trading levels (Level 2):
2024 Convertible Notes2024 Convertible Notes$162,068 $861,738 2024 Convertible Notes$23,138 $159,678 
2027 Convertible Notes2027 Convertible Notes731,351 — 2027 Convertible Notes684,226 718,889 
2028 Convertible Notes2028 Convertible Notes678,218 — 
Total fair value of outstanding notesTotal fair value of outstanding notes$893,419 $861,738 Total fair value of outstanding notes$1,385,582 $878,567 
Remaining amortization per period of debt discount (in years):Remaining amortization per period of debt discount (in years):Remaining amortization per period of debt discount (in years):
2024 Convertible Notes2024 Convertible Notes3.23.92024 Convertible Notes2.22.9
2027 Convertible Notes2027 Convertible Notes5.4n/a2027 Convertible Notes4.45.2
2028 Convertible Notes2028 Convertible Notes5.9N/A



2335



The following table summarizes the components of interest expense and the effective interest rates for each of our Convertible Notes for the periods shown (in thousands).
Three Months Ended
 September 30,
Nine Months Ended
September 30,
Three Months Ended
 September 30,
Nine Months Ended
September 30,
20212020202120202022202120222021
Coupon Interest:
Coupon interest:Coupon interest:
2024 Convertible Notes2024 Convertible Notes$284 $1,438 $1,621 $4,313 2024 Convertible Notes$161 $284 $729 $1,621 
2027 Convertible Notes2027 Convertible Notes$503 $— $1,174 $— 2027 Convertible Notes503 503 1,509 1,174 
Total Coupon Interest$787 $1,438 $2,795 $4,313 
2028 Convertible Notes2028 Convertible Notes860 — 860 — 
Total coupon interestTotal coupon interest$1,524 $787 $3,098 $2,795 
Amortization of debt discount:Amortization of debt discount:Amortization of debt discount:
2024 Convertible Notes2024 Convertible Notes$126 $3,552 $712 $10,522 2024 Convertible Notes$84 $126 $338 $712 
2027 Convertible Notes2027 Convertible Notes$842 $— $1,962 $— 2027 Convertible Notes847 842 2,537 1,962 
2028 Convertible Notes2028 Convertible Notes363 — 363 — 
Total amortization of debt discountTotal amortization of debt discount$968 $3,552 $2,674 $10,522 Total amortization of debt discount$1,294 $968 $3,238 $2,674 
Interest expense:Interest expense:Interest expense:
2024 Convertible Notes2024 Convertible Notes$410 $4,990 $2,333 $14,835 2024 Convertible Notes$245 $410 $1,067 $2,333 
2027 Convertible Notes2027 Convertible Notes$1,345 $— $3,136 $— 2027 Convertible Notes1,350 1,345 4,046 3,136 
2028 Convertible Notes2028 Convertible Notes1,223 — 1,223 — 
Total interest expenseTotal interest expense$1,755 $4,990 $5,469 $14,835 Total interest expense$2,818 $1,755 $6,336 $5,469 
Effective interest rates:Effective interest rates:Effective interest rates:
2024 Convertible Notes2024 Convertible Notes1.8 %5.1 %1.8 %5.1 %2024 Convertible Notes1.8 %1.8 %1.8 %1.8 %
2027 Convertible Notes2027 Convertible Notes0.7 %n/a0.7 %n/a2027 Convertible Notes0.7 %0.7 %0.7 %0.7 %
2028 Convertible Notes2028 Convertible Notes1.5 %N/A1.5 %N/A
Royalty-backed
Revolving Credit and Term Loan Facilities (May 2022)
In January 2016, through our wholly-owned subsidiary Halozyme Royalty LLC (“Halozyme Royalty”),May 2022, in connection with the closing of Antares acquisition, we received a $150 million loan (the “Royalty-backed Loan”) pursuant toentered into a credit agreement, which was subsequently amended, with Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders and L/C Issuers party thereto (the “2022 Credit Agreement), evidencing a credit facility (the “2022 Facility”) that provides for (i) a $350 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $250 million term loan facility (the “Term Facility”). Proceeds from a $120 million draw on the Revolving Credit Facility and the $250 million Term Facility were used to fund a portion of the Antares acquisition, repay Antares’ existing debt and pay fees and expenses in connection with the acquisition. The 2022 Credit Agreement contains an expansion feature, which allows us, subject to certain conditions, to increase the aggregate principal amount of the 2022 Facility, provided we remain in compliance with underlying financial covenants on a pro forma basis including the consolidated interest coverage ratio and the consolidated net leverage ratio covenants set forth in the 2022 Credit Agreement. 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.
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Borrowings under the 2022 Facility bear interest, at our option, at a rate equal to an applicable margin plus: (a) the applicable Term Secured Overnight Financing Rate (SOFR) (which includes a SOFR adjustment of 0.10%), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, (3) the Term SOFR rate for an interest period of one month plus 1.10%, and (4) 1.00%. 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.
In August 2022, we entered into Amendment No. 1 to the Credit Agreement (the “Amendment”) among the Company, the Guarantors (as defined in the Credit Agreement), each L/C Issuer from time to time party thereto, Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and swing line lender (in such capacity, the “Swing Line Lender”), and each lender party thereto, which amends the Credit Agreement dated as of May 24, 2022 (the “Credit Agreement”) with BioPharma Credit Investments IV Sub, LPamong the Company, the Guarantors, the Administrative Agent, the Swing Line Lender, each Lender and Athyrium Opportunities II Acquisition LP (the “Royalty-backed Lenders”). Under the L/C Issuers. The Amendment, among other things, increased the size of the revolving credit facility from $350 million to $575 million. The terms of the Revolving Credit Facility are otherwise unchanged. Concurrently with the entry into the Amendment, we repaid the entire outstanding Term Loan Facility and repaid all outstanding loans under the Revolving Credit Facility under the 2022 Credit Agreement.
As of September 30, 2022, the Revolving Credit Facility was undrawn. We incurred a total of $3.6 million in third-party costs related to the 2022 Credit Agreement Halozyme Therapeutics, Inc. transferredwhich is recorded as debt issuance cost within prepaid expenses and other assets in the condensed consolidated balance sheets. As of September 30, 2022, the unamortized debt issuance cost related to Halozyme Royalty the right to receive royalty payments from the commercial sales of ENHANZE products owed under the Roche Collaboration and Baxalta Collaboration (“Collaboration Agreements”). The royalty payments from the Collaboration Agreements were used to repay the principal and interest on the loan (the “Royalty Payments”).  The Royalty-backed Loan bore interest at a per annum rate of 8.75% plus the three-month LIBOR rate. The three-month LIBOR raterevolving credit facility was subject to a floor of 0.7% and a cap of 1.5%. In June 2020, we paid the full remaining balance and final payment of $2.93 million thereby satisfying and discharging all obligations under, and terminating, the Royalty-backed Loan.$3.3 million.

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7.9. Share-based Compensation
Total share-based compensation expense related to share-based awards excluding the acceleration of Antares unvested equity awardswas comprised of the following (in thousands):
Three Months Ended
 September 30,
Nine Months Ended
September 30,
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2021202020212020 2022202120222021
Research and developmentResearch and development$1,842 $1,262 $5,254 $4,115 Research and development$2,695 $1,842 $7,168 $5,254 
Selling, general and administrativeSelling, general and administrative3,557 2,958 10,440 8,893 Selling, general and administrative4,102 3,557 10,006 10,440 
Share-based compensation expenseShare-based compensation expense$5,399 $4,220 $15,694 $13,008 Share-based compensation expense$6,797 $5,399 $17,174 $15,694 
Share-based compensation expense by type of share-based award (in thousands):
Three Months Ended
 September 30,
Nine Months Ended
September 30,
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2021202020212020 2022202120222021
Stock optionsStock options$2,629 $2,182 $7,747 $6,766 Stock options$2,801 $2,629 $7,924 $7,747 
RSAs, RSUs, PSUs and ESPPRSAs, RSUs, PSUs and ESPP2,770 2,038 7,947 6,242 RSAs, RSUs, PSUs and ESPP3,996 2,770 9,250 7,947 
$5,399 $4,220 $15,694 $13,008 $6,797 $5,399 $17,174 $15,694 
We granted stock options to purchase approximately 32.5 thousand0.1 million and 34.732.5 thousand shares of common stock during the three months ended September 30, 20212022 and 2020,2021, respectively and $0.71.6 million and $1.50.7 million shares of common stock during the nine months ended September 30, 20212022 and 2020,2021, 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:
Three Months Ended
 September 30,
Nine Months Ended
September 30,
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2021202020212020 2022202120222021
Expected volatilityExpected volatility42.90-44.73%50.58-51.82%42.90-46.45%50.58-51.82%Expected volatility40.37-50.80%42.90-44.73%40.37-50.80%42.90-46.45%
Average expected term (in years)Average expected term (in years)4.74.94.75.2Average expected term (in years)4.74.74.74.7
Risk-free interest rateRisk-free interest rate0.66-0.89%0.22-0.31%0.36-0.89%0.22-1.67%Risk-free interest rate2.66-3.39%0.66-0.89%1.37-3.39%0.36-0.89%
Expected dividend yieldExpected dividend yield— — — — Expected dividend yield— — — — 
In February 2021, our Board of Directors approved our 2021 ESPP and our stockholders approved the plan in May 2021. The 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 ESPP that exceeds $25,000 worth of our common stock for a calendar year. As of September 30, 2021, 2,700,0002022, 2,665,369 shares were available for future purchase. The offering period is generally for a six-months period and the first offering period commenced on June 16, 2021. Offering periods shall commence on or about the sixteenth day of June and December of each year and end on or about the fifteenth day of the next December and June, respectively, occurring thereafter.
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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 was as follows (in thousands, unless otherwise noted):
September 30, 2021September 30, 2022
Unrecognized
Expense
Remaining
Weighted-Average
Recognition Period
(years)
Unrecognized
Expense
Remaining
Weighted-Average
Recognition Period
(years)
Stock optionsStock options$22,361 2.42Stock options$27,500 2.73
RSUsRSUs$20,211 2.28RSUs$30,791 2.58
PSUsPSUs$2,234 2.00PSUs$4,530 2.16
ESPPESPP$78 0.21ESPP$77 0.21

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8.10. Stockholders’ Equity
During the nine months ended September 30, 20212022 and 2020,2021, we issued an aggregate of 931,749483,385 and 3,952,311931,749 shares of common stock, respectively, in connection with the exercises of stock options at a weighted average exercise price of $13.81$18.45 and $13.54$13.81 per share, respectively, for net proceeds of approximately $12.9$8.9 million and $53.5$12.9 million, respectively. For the nine months ended September 30, 20212022 and 2020,2021, we issued 297,696252,063 and 569,701297,696 shares of common stock, respectively, upon vesting of certain RSUs and PSUs for which 94,79568,425 and 142,90594,795 RSUs were withheld from the RSU holders, respectively, to pay for minimum withholding taxes totaling approximately $8.2$4.3 million and $5.4$8.2 million, respectively. Stock options and unvested restricted units totaling approximately 6.36.8 million shares and 6.75.9 million shares of our common stock were outstanding as of September 30, 20212022 and December 31, 2020,2021, respectively.
Share Repurchases
In November 2019, we announced that the Board of Directors has authorized the initiation of a capital return program to repurchase up to $550.0 million of outstanding common stock over a three-year period. We may utilize a variety of methods including open market purchases, privately negotiated transactions, accelerated share repurchase programs or any combination of such methods. The Board will regularly review this capital return program in connection with a balanced capital allocation strategy. During 2019, we repurchased approximately 11.1 million shares of common stock for $200.0 million at an average price of $18.03.
During 2020, we repurchased 6.5 million shares of common stock for $150.0 million at an average price of $23.05. During 2021, we repurchased 4.6 million shares of common stock for $200.0 million at an average price of $43.02 under the program. The shares were purchased through open market transactions and through an Accelerated Share Repurchase (ASR)(“ASR”) agreement. The $550.0 million share repurchase program was completed in October 2021 having repurchased a total of 22.3 million shares at an average price of $24.72.
In December 2021, the Board of Directors authorized a second capital return program to repurchase up to $750.0 million of outstanding stock over a three-year period. Also in December 2021, as part of the second capital return program, we entered into an ASR agreement withto repurchase $150.0 million of common stock. At inception pursuant to the agreement, we paid $150.0 million to Bank of America in December 2020, for whichand took initial delivery of 3.5 million shares. In June 2022, we finalized the transaction and received an additional 0.4 million shares.
In August 2022, concurrent with the sale of 2028 Convertible Notes and the 2022 Induced Conversion, we repurchased $21.72.1 million shares of common stock and received 0.5 million shares.
In February 2021,in open market purchases for $90.2 million. Also, in August 2022, we entered into an ASR agreement with Bank of America to repurchase $75.0$109.8 million of our common stock. At inception, pursuant to the agreement, we paid $75.0$109.8 million to Bank of America and took an initial delivery of 1.3 million shares. In April 2021, we finalized the transaction and received an additional 0.52.0 million shares. We retired the repurchased shares, and they resumed the status of authorized and unissued shares.
We had the following activity under the approved share repurchase programs (dollars in thousands, except share and per share data):
20212022
Total Number of Shares PurchasedWeighted-Average Price paid Per Share
Total Cost(1)
Total Number of Shares PurchasedWeighted Average Price paid Per Share
Total Cost(1)
First quarter (2)
First quarter (2)
1,775,945 $42.89 $76,179 
First quarter (2)
— — — 
Second quarterSecond quarter1,037,547 47.05 48,842 Second quarter— — — 
Third quarterThird quarter1,562,613 41.40 64,717 Third quarter2,093,584 $43.09 $90,207 
4,376,105 $43.35 $189,738 2,093,584 $43.09 $90,207 
Accelerated share repurchase(2)
Accelerated share repurchase(2)
2,025,000 $109,793 

(1) Included in the total cost of shares purchased is a commission fee of $0.02 per share.
(2) This includes 0.5 million shares deliveredPurchased through an ASR agreement with Bank of America in April upon completion of the ASR.August 2022.




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9.11. Net Income per share
Basic net income per common share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Outstanding stock options, unvested RSAs, unvested RSUs, unvested PSUs, common shares expected to be issued under our ESPP and the Convertible Notes are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive.
Potentially dilutive common shares issuable upon vesting of stock options, RSAs, RSUs and PSUs are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of our Convertible Notes are determined using the if-converted method. Since we have committed to settle the principal amount of the Convertible Notes in cash upon conversion only, the number of shares for the conversion spread will be included as a dilutive common stock equivalent.
A reconciliation of the numerators and the denominators of the basic and diluted net income per common share computations is as follows (in thousands, except per share amounts):
Three Months Ended
 September 30,
Nine Months Ended
September 30,
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2021202020212020 2022202120222021
Numerator:Numerator:Numerator:
Net incomeNet income$216,587 $36,207 $335,940 $55,921 Net income$61,634 $216,587 $144,427 $335,940 
Denominator:Denominator:Denominator:
Weighted average common shares outstanding for basic net income per shareWeighted average common shares outstanding for basic net income per share142,021 136,578 140,815 136,575 Weighted average common shares outstanding for basic net income per share136,527 142,021 137,370 140,815 
Dilutive potential common stock outstanding:Dilutive potential common stock outstanding:Dilutive potential common stock outstanding:
Stock OptionsStock Options2,595 2,182 2,913 1,936 Stock Options2,237 2,595 2,211 2,913 
RSAs, RSUs, PSUs and ESPPRSAs, RSUs, PSUs and ESPP437 553 571 538 RSAs, RSUs, PSUs and ESPP363 437 362 571 
Convertible NotesConvertible Notes1,637 2,768 3,353 922 Convertible Notes260 1,637 1,076 3,353 
Weighted average common shares outstanding for diluted net income per shareWeighted average common shares outstanding for diluted net income per share146,690 142,081 147,652 139,971 Weighted average common shares outstanding for diluted net income per share139,387 146,690 141,019 147,652 
Net income per share:Net income per share:Net income per share:
BasicBasic$1.53 $0.27 $2.39 $0.41 Basic$0.45 $1.53 $1.05 $2.39 
DilutedDiluted$1.48 $0.25 $2.28 $0.40 Diluted$0.44 $1.48 $1.02 $2.28 
Shares which have been excluded from the calculation of diluted net income per common share because their effect was anti-dilutive, include the following (shares in millions):
Three Months Ended
 September 30,
Nine Months Ended
September 30,
 2021202020212020
Anti-dilutive securities (1)
13.6 17.6 13.5 9.1 
Three Months Ended
 September 30,
Nine Months Ended
September 30,
 2022202120222021
Anti-dilutive securities (1)
25.6 13.6 19.0 13.5 
(1). The anti-dilutive securities include outstanding stock options, unvested RSAs, unvested RSUs, unvested PSUs, common shares expected to be issued under our ESPP and Convertible Notes.
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10.12. Commitments and 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 management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.
Our commitments include payments related to our commenced operating leases. Approximate annual future minimum operating lease payments as of September 30, 2021 are as follows (in thousands; excluding the nine months ended September 30, 2021):
Year:Operating
Leases
2021$664 
20222,711 
2023215 
202418 
2025— 
Total minimum lease payments$3,608 
Less imputed interest$(184)
Total$3,424 
The weighted-average remaining lease term of our operating leases is approximately 1.4 years.
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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used in this report, unless the context suggests otherwise, references to “Halozyme,” “the Company,” “we,” “our,” “ours,” and “us” refer to Halozyme Therapeutics, Inc., its wholly owned subsidiary,subsidiaries, Halozyme, Inc. Antares Pharma Inc., and Halozyme Inc.’s wholly ownedAntares Pharma Inc.s’ wholly-owned subsidiaries, Halozyme Switzerland GmbHAntares Pharma IPL AG and Halozyme Switzerland Holdings GmbH.Antares Pharma AG. References to “Notes” refer to the Notes to Condensed Consolidated Financial Statements included herein (refer to Item 1 of Part I).
The following information should be read in conjunction with the interim unaudited condensed consolidated financial statements and Notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, as well as the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2020,2021, included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. Past financial or operating performance is not necessarily a reliable indicator of future performance, and our historical performance should not be used to anticipate results or future period trends.
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this report other than statements of historical fact are, or may be deemed to be, forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,” “continue,” “potential,” “likely,” “opportunity,” “project” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. Additionally, statements concerning future matters such as the development or regulatory approval of new partner products, enhancements of existing products or technologies, timing and success of the launch of new products by us and our collaborators,partners, third party performance under key collaboration agreements, the ability to successfully integrate Antares Pharma, Inc, into our business, the ability of our bulk drug manufacturers to provide adequate supply for our collaboration partners, revenue, expense, and cash burn levels and our ability to make timely repayments of debt, anticipated amounts and timing of share repurchases, anticipated profitability and expected trends, the potential impact of the COVID-19 global pandemic on our business and trends and other statements regarding matters that are not historical are forward-looking statements. Such statements reflect management’s current forecast of certain aspects of our future, are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied in our forward-looking statements due to a number of factors including, but not limited to, those set forth below under the section entitled “Risks Factors” and elsewhere in this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report.
Overview
Halozyme Therapeutics, Inc. is a biopharma technology platform company that provides innovative and disruptive solutions with the goal of improving patient experience and outcomes. Our proprietary enzyme, rHuPH20, is used to facilitate the delivery of injected drugs and fluids. We license our technology to biopharmaceutical companies to collaboratively develop products that combine our ENHANZE® drug delivery technology (“ENHANZE”) with the collaborators’partners’ proprietary compounds.
Our first commercially approved product, Hylenex® recombinant, (“Hylenex”), and our collaborators’ENHANZE partners’ approved products and product candidates are based on rHuPH20, our patented recombinant human hyaluronidase enzyme. rHuPH20 is the active ingredient in our first commercially approved product, Hylenex® recombinant,, and it works by breaking down hyaluronan (or HA)(“HA”), a naturally occurring carbohydrate that is a major component of the extracellular matrix in tissues throughoutof the body such as skin and cartilage.subcutaneous (“SC”) space. This temporarily increases dispersion and absorptionreduces the barrier to bulk fluid flow allowing for improved subcutaneousSC 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 our ENHANZE® drug delivery technology (ENHANZE).ENHANZE. We license the ENHANZE technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or benefiting from injection via the subcutaneous route of administration. In the development of proprietary intravenous (IV)(“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 subcutaneous (SC)SC administration with ENHANZE compared to IV administration. ENHANZE may enable fixed-dose SC dosing compared to weight-based dosing required for IV administration, 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. Lastly, certain proprietary drugs co-formulated with ENHANZE have been granted additional exclusivity, extending the patent life of the product beyond the onepatent expiry of of the proprietary IV drug.
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We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Takeda Pharmaceuticals International AG and Baxalta US Inc. and Baxalta GmbH (members of the Takeda group of companies) (Baxalta)(Takeda), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), Eli Lilly and Company (Lilly), Bristol Myers Squibb Company (BMS), Alexion Pharma Holding (AstraZeneca PLC announced the completionInternational Operations Unlimited Company (an indirect wholly owned subsidiary of its acquisition of Alexion Pharmaceuticals, Inc. in July 2021)AstraZeneca PLC) (Alexion), argenx BVBA (argenx), Horizon Therapeutics plc. (Horizon) and, ViiV Healthcare (the global specialist HIV company majority owned by GlaxoSmithKline) (ViiV) and Chugai Pharmaceutical Co., Ltd (Chugai). In addition to receiving upfront licensing fees from our ENHANZE collaborations, we are entitled to receive event and sales-based milestone payments, revenues from the sale of bulk rHuPH20 and royalties from commercial sales of approved partner products co-formulated with ENHANZE. We currently receive royalties from three of these collaborations, including royalties from sales of one product from the BaxaltaTakeda collaboration, three products from the Roche collaboration and one product from the Janssen collaboration. Future potential revenues from royalties and fees from ENHANZE collaborations and from the sales and/or royalties of our approved products will depend on the ability of Halozyme and our collaboratorspartners to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates.
Through our recent acquisition of Antares Pharma, Inc. (“Antares”), we also develop, manufacture and commercialize, for ourselves or with our partners, drug-device combination products using our advanced auto-injector technologies that are designed to seek to provide commercial or functional advantages such as convenience, improved tolerability, and enhanced patient comfort and adherence. Also as a result of our acquisition of Antares, our commercial portfolio of proprietary products includes XYOSTED®, TLANDO and NOCDURNA® andongoing product programs with industry leading pharmaceutical companies including Teva Pharmaceutical Industries, Ltd. (“Teva”), Covis Group S.a.r.l. (“Covis”), Pfizer and Idorsia Pharmaceuticals Ltd. (“Indorsia”).
Our third quarter of 20212022 and recent key events are as follows:
CollaboratorsPartners

In October 2021, Janssen’s DARZALEX FASPRO® was approved by2022, Roche Pharmaceuticals China announced the approval of Herceptin (trastuzumab injection subcutaneous with ENHANZE) in China National Medical Products Administration (NMPA) for the treatment of primary light chain amyloidosis,patients with early-stage and metastatic HER2-positive breast cancer.
In September 2022, Janssen initiated a Phase 3 study of lazertinib and amivantamab with ENHANZE in combinationpatients with bortezomib, cyclophosphamide and dexamethasone (D-VCd) in newly diagnosed patients. This followedepidermal growth factor receptor (EGFR)-mutated advanced or metastatic non-small cell lung cancer (PALOMA-3).
In September 2022, argenx announced the submission of a similar approval Janssen Pharmaceutical K.K. received in August 2021 from Japan’s Ministry of Health, Labour and Welfarebiologics license application to the US FDA for DARZQURO® (Daratumumab SC)subcutaneous (SC) efgartigimod for the additional indicationtreatment of systemic AL amyloidosis.adults with generalized myasthenia gravis.
In September 2022, Chugai Pharmaceutical Co., Ltd. (a Member of the Roche Group) announced the submission of a New Drug Application in Japan for fixed-dose subcutaneous combination of pertuzumab and trastuzumab (same monoclonal antibodies as in Perjeta and Herceptin) with ENHANZE®.
In August 2022, BMS initiated a Phase 3 trial to compare the drug levels of nivolumab with ENHANZE administered subcutaneously versus intravenous administration in participants with melanoma following complete resection (CheckMate-6GE).
In August 2022, Roche announced that the Phase III IMscin001 study evaluating a subcutaneous formulation of Tecentriq® (atezolizumab) with ENHANZE met its co-primary endpoints. The study showed non-inferior levels of Tecentriq in the blood (pharmacokinetics), when injected subcutaneously, compared with intravenous (IV) infusion, in cancer immunotherapy-naïve patients with advanced or metastatic non-small cell lung cancer for whom prior platinum therapy has failed. The safety profile of the SC formulation was consistent with that of IV Tecentriq. Roche announced they will submit the data for regulatory approval to health authorities globally, including the U.S. Food and Drug Administration and the European Medicines Agency, resulting in the revenue recognition of $19 million for associated milestones.
In July 2021, Janssen elected2022, Takeda announced positive topline results from pivotal Phase 3 trial evaluating HYQVIA® (Immunoglobulin infusion 10% (Human) with rHuPH20), for maintenance treatment of chronic inflammatory demyelinating polyradiculoneuropathy (CIDP).





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Corporate
In August 2022, we completed the target HIV reverse transcriptase, resultingsale of $720.0 million aggregate principal amount of the 2028 Convertible Senior Note. We used a portion of the net proceeds to facilitate an induced conversion of a portion of the 2024 Convertible Senior Notes. In connection with the Induced Conversion, we paid the holders $77.6 million in cash and issued 1.51 million shares. We also used a $2.0portions of the net proceeds to repay the $250.0 million milestone fee.term loan facility due 2026 and the $120.0 million revolving credit facility.
In July 2021,August 2022, we announcedentered into an amendment to our credit agreement that Janssen received FDA approval for DARZALEX FASPROincreased the size of our revolving credit facility from $350 million to $575 million.® in combination with pomalidomide and dexamethasone (D-Pd) for patients with multiple myeloma after first or subsequent relapse.
Corporate
In the third quarter of 20212022, we accelerated $100 million share repurchase from 2023 into 2022. We repurchased 1.62.1 million shares of common stock in open market purchases for $64.7$90.2 million at an average price per share of $41.40. In October 2021, we repurchased$43.09 and entered into an additional 0.3ASR agreement to repurchase $109.8 million shares of our common stock for $10.3which we took an initial delivery 2.0 million completing our capital return program that began in November 2019 to repurchase up to $550.0 million of outstanding common stock over a three-year period. Under the program we repurchased a total of 22.3 million shares for $550.0 million at an average price per share of $24.72.

shares.


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Product and Product Candidates
We currently have one marketed proprietary product and five marketed partnered products. The following table summarizes our marketed proprietary products and product candidates under development and our marketed partnered products and product candidates under development with our collaborators:partners:
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Proprietary Products and Product Candidates
Hylenex Recombinant (hyaluronidase human injection)
We market and sell Hylenex recombinant which is a formulation of rHuPH20 that facilitates subcutaneous fluid administration for achieving hydration, to increaseincreases the dispersion and absorption of other injected drugs and, in subcutaneous urography, to improve resorption of radiopaque agents. Hylenex recombinant is currently the number one prescribed branded hyaluronidase.
XYOSTED® (testosterone enanthate) Injection
We market and sell in the U.S. our proprietary product XYOSTED® injection for subcutaneous administration of testosterone replacement therapy (“TRT”) in adult males for conditions associated with a deficiency or absence of endogenous testosterone (primary or hypogonadism). Safety and efficacy of XYOSTED® in males less than 18 years old have not been established. XYOSTED® is the only FDA approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration and is approved and marketed in three dosage strengths, 50 mg, 75 mg and 100 mg. XYOSTED® provides a virtually pain-free administration and the ability to achieve and maintain steady target levels of testosterone.
NOCDURNA® (desmopressin acetate) Sublingual Tablets
We market and sell NOCDURNA® in the U.S., which is the first and only sublingual tablet indicated for the treatment of nocturia due to nocturnal polyuria (“NP”) in adults who awaken at least two times per night to urinate. In the NOCDURNA® clinical trials, NP was defined as night-time urine production exceeding one-third of the 24-hour urine production. NOCDURNA® is a sublingual tablet, marketed in two dosage strengths, that dissolves quickly under the tongue without water and has been shown in clinical studies to reduce nighttime urination by nearly one-half (in patients who average three nighttime bathroom visits.) We license NOCDURNA® from Ferring. In October 2022, we sent a notice to Ferring that we are terminating the NOCDURNA® license agreement with an effective termination date in October 2023.
TLANDO® (testosterone undecanoate) Oral Formulation
TLANDO® is a twice daily oral formulation of testosterone indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone (primary or hypogonadotropic hypogonadism). Safety and efficacy of TLANDO® in males less than 18 years old have not been established. TLANDO® was granted FDA approval on March 28, 2022. In June 2022, we announced the commercial launch of TLANDO®.
ATRS - 1902
We have an ongoing program to develop a proprietary drug device combination product for the endocrinology market, for patients who require additional supplemental hydrocortisone, identified as ATRS-1902. The development program uses a novel proprietary auto-injector platform to deliver a liquid stable formulation of hydrocortisone. We have conducted initial formulation work and developed a working prototype of a new device to support this program.
In June 2021, we submitted an IND application with the FDA for the initiation of a Phase 1 clinical study of ATRS-1902 for adrenal crisis rescue. The IND application includes the protocol for an initial clinical study to compare the pharmacokinetic profile of our novel formulation of hydrocortisone versus Solu-Cortef®, which is an anti-inflammatory glucocorticoid and is the current standard of care for the management of acute adrenal crises.
In July 2021, the FDA accepted our IND for ATRS-1902 enabling us to initiate our Phase 1 clinical study. The Phase 1 clinical study, designed to evaluate the safety, tolerability and pharmacokinetics (“PK”) of a liquid stable formulation of hydrocortisone, was initiated in September 2021. The study was a cross-over design to establish the PK profile of ATRS-1902 (100 mg) compared to Solu-Cortef® (100 mg), the reference-listed drug, in 32 healthy adults.
In January 2022, we announced the positive results from the Phase 1 clinical study and were granted Fast Track designation by the FDA. The positive results support the advancement of our ATRS-1902 development program to a pivotal study for the treatment of acute adrenal insufficiency, known as adrenal crisis, using our Vai™ novel proprietary rescue pen platform to deliver a liquid stable formulation of hydrocortisone. The pivotal study in adults is on target to commenced in the July 2022 and we expect to submit a 505(b)(2) NDA with the FDA by the end of 2022 pending the success of the study, the completion of a summative human factors study and confirmation of the product stability from our ongoing stability program.
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Partnered Products
ENHANZE Collaborations
Roche Collaboration
In December 2006, we and Roche entered into a collaboration and license agreement under which Roche obtained a worldwide license to develop and commercialize product combinations of rHuPH20 and up to thirteentwelve Roche target compounds (the Roche Collaboration). Under this agreement, Roche elected a total of eight targets, two of which are exclusive.
In September 2013, Roche launched a subcutaneous (SC) formulation of Herceptin (trastuzumab) (Herceptin® SC) in Europe for the treatment of patients with HER2-positive breast cancer followed by launches in additional countries. This formulation utilizes our ENHANZE technology and is administered in two to five minutes, compared to 30 to 90 minutes with the standard intravenous form. In September 2018, we announced that Roche received approval from Health Canada for Herceptin SC for the treatment of patients with HER2-positive breast cancer. In February 2019, we announced that Roche received approval from the FDAU.S. Food and Drug Administration (“FDA”) for Herceptin SC under the brand name Herceptin Hylecta™ (trastuzumab and hyaluronidase-oysk). In April 2019, Roche made Herceptin Hylecta available in the U.S. In June 2020, the FDA approved athe fixed-dose combination of Perjeta® (pertuzumab) and Herceptin for subcutaneous injection (Phesgo®(Phesgo™) utilizing ENHANZE technology for the treatment of patients with HER2-positive breast cancer. In December 2020, the European Commission (EC) also approved Phesgo for the treatment of patients with early and metastatic HER2-positive breast cancer. In September 2022, Chugai Pharmaceutical Co., Ltd. (a Member of the Roche Group) announced the submission of a new drug application in Japan for fixed-dose subcutaneous (SC) combination of pertuzumab and trastuzumab (same monoclonal antibodies as in Perjeta and Herceptin) with ENHANZE. This application is based on data from two clinical studies including the results from the global phase III FeDeriCa study in patients with HER2-positive breast cancer. In October 2022, Roche Pharmaceuticals China announced the approval of Herceptin (trastuzumab injection subcutaneous with ENHANZE) in China for the treatment of patients with early-stage and metastatic HER2-positive breast cancer.
In June 2014, Roche launched MabThera® SC in Europe for the treatment of patients with common forms of non-Hodgkin lymphoma (NHL) followed by launches in additional countries. This formulation utilizes our ENHANZE technology and is administered in approximately five minutes compared to the approximately 1.5 to 4 hour intravenous infusion. In May 2016, Roche announced that the European Medicines Agency (EMA) approved Mabthera SC to treat patients with chronic lymphocytic leukemia (CLL). In June 2017, the FDA approved Genentech’s RITUXAN HYCELA™HYCELA®, a combination of rituximab using ENHANZE technology (approved and marketed under the MabThera SC brand in countries outside the U.S. and Canada), for CLL and two types of NHL, follicular lymphoma and diffuse large B-cell lymphoma. In March 2018, Health Canada approved a combination of rituximab and rHuPH20 (approved and marketed under the brand name RITUXAN® SC) for patients with CLL.
In September 2017, we and Roche entered into an agreement providing Roche the right to develop and commercialize one additional exclusive target using ENHANZE technology. The upfront license payment may be followed by event-based payments subject to Roche’s achievement of specified development, regulatory and sales-based milestones. In addition, Roche will pay royalties to us if products under the collaboration are commercialized.
In October 2018, we entered into an agreement with Roche for the right to develop and commercialize one additional exclusive target and an option to select two additional targets within four years using ENHANZE technology. The upfront license payment may be followed by event-based payments subject to Roche’s achievement of specified development, regulatory and sales-based milestones. In addition, Roche will pay royalties to us if products under the collaboration are commercialized. Roche subsequently returned the rights for the first exclusive target.
In December 2018, Roche initiated a Phase 1b/2 study in patients with non-small cell lung cancer for TECENTRIQ® (atezolizumab) using ENHANZE technology. In September 2020, Roche presented a poster with data from Part 1 of its Phase 1b study (IMscin001) evaluating TECENTRIQ for subcutaneous administration utilizing ENHANZE technology in patients with locally advanced or metastatic non-small cell lung cancer at the ESMO Virtual Congress 2020. The poster concluded that atezolizumab utilizing ENHANZE technology provided similar exposure as atezolizumab IV and that results support further development of subcutaneous atezolizumab in IMscin001 Part 2, a confirmatory Phase 3 study. In December 2020, Roche initiated a Phase 3 study in patients with non-small cell lung cancer for TECENTRIQ using ENHANZE technology. In August 2022, Roche announced that the Phase III IMscin001 study evaluating a subcutaneous (SC) formulation of Tecentriq (atezolizumab) met its co-primary endpoints. The study showed non-inferior levels of Tecentriq in the blood (pharmacokinetics), when injected subcutaneously, compared with intravenous (IV) infusion, in cancer immunotherapy-naïve patients with advanced or metastatic non-small cell lung cancer (NSCLC) for whom prior platinum therapy has failed. The safety profile of the SC formulation was consistent with that of IV Tecentriq.
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In August 2019, Roche initiated a Phase 1 study evaluating OCREVUS® (ocrelizumab) with ENHANZE technology in subjects with multiple sclerosis. In April 2022, Roche initiated a phase 3 study evaluating OCREVUS with ENHANZE technology in subjects with multiple sclerosis.
In October 2019, Roche nominated a new undisclosed exclusive target to be studied using ENHANZE technology, triggeringtechnology. In November 2021, Roche initiated a $10 million milestone payment.Phase 1 study with the undisclosed target and ENHANZE.
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BaxaltaTakeda Collaboration
In September 2007, we and BaxaltaTakeda entered into a collaboration and license agreement under which BaxaltaTakeda obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 with GAMMAGARD LIQUID (HYQVIA®) (the BaxaltaTakeda Collaboration). HYQVIA is indicated for the treatment of primary immunodeficiency disorders associated with defects in the immune system.
In May 2013, the European CommissionEC granted BaxaltaTakeda marketing authorization in all EU Member States for the use of HYQVIA (solution for subcutaneous use) as replacement therapy for adult patients with primary and secondary immunodeficiencies. BaxaltaTakeda launched HYQVIA in the first EU country in July 2013 and has continued to launch in additional countries.
In September 2014, HYQVIA was approved by the FDA for treatment of adult patients with primary immunodeficiency in the U.S. HYQVIA is the first subcutaneous immune globulin (IG) treatment approved for adult primary immunodeficiency patients with a dosing regimen requiring only one infusion up to once per month (every three to four weeks) and one injection site per infusion in most patients, to deliver a full therapeutic dose of IG. The FDA’s approval of HYQVIA was a significant milestone for us as it represented the first U.S. approved BLA which utilizes our rHuPH20 platform.
In May 2016, BaxaltaTakeda announced that HYQVIA received a marketing authorization from the European CommissionEC for a pediatric indication, which was launched in Europe to treat primary and certain secondary immunodeficiencies. In September 2020, Takeda announced that the EMA approved a label update for HYQVIA broadening its use and making it the first and only facilitated subcutaneous immunoglobulin replacement therapy in adults, adolescents and children with an expanded range of secondary immunodeficiencies (SID).
In October 2021, Takeda initiated a Phase 1 single-dose, single-center, open-label, three-arm study to assess the tolerability and safety of immune globulin subcutaneous (human), 20% solution with ENHANZE (TAK-881) at various infusion rates in healthy adult subjects.
In July 2022, Takeda announced positive topline results from pivotal Phase 3 trial evaluating HYQVIA, for maintenance treatment of chronic inflammatory demyelinating polyradiculoneuropathy (CIDP)
Pfizer Collaboration
In December 2012, we and Pfizer entered into a collaboration and license agreement, under which Pfizer has the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Pfizer proprietary biologics in primary care and specialty care indications. Pfizer has elected five targets and has returned two targets.
Janssen Collaboration
In December 2014, we and Janssen entered into a collaboration and license agreement, under which Janssen has the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Janssen proprietary biologics directed to up to five targets. Targets may be selected on an exclusive basis. Janssen has elected CD38 as the first target on an exclusive basis. Janssen has initiated several Phase 3 studies, Phase 2 studies and Phase 1 studies of DARZALEX® (daratumumab), directed at CD38, using ENHANZE technology in patients with amyloidosis, smoldering myeloma and multiple myeloma.
In February 2019, Janssen’s development partner, Genmab, announced positive Phase 3 trial results from the COLUMBA study evaluating subcutaneous DARZALEX in comparison to intravenous DARZALEX in patients with relapsed or refractory multiple myeloma. DARZALEX SC® (utilizing ENHANZE technology) was found to be non-inferior to DARZALEX IV with regard the co-primary endpoints of Overall Response Rate and Maximum Trough concentration. In May 2020, we announced that Janssen received US FDA approval and launched the commercial sale of DARZALEX FASPRO® in four regimens across five indications in multiple myeloma patients, including newly diagnosed, transplant-ineligible patients as well as relapsed or refractory patients. As a fixed-dose formulation, DARZALEX FASPRO can be administered over three to five minutes, significantly less time than DARZALEX IV which requires multi-hour infusions. In June 2020, we announced that Janssen received European marketing authorization and launched the commercial sale of DARZALEX SC utilizing ENHANZE in the European Union. In March 2021, Janssen announced approval from Japan's Ministry of Health, Labour and Welfare (MHLW) for the subcutaneous formulation of DARZALEX (known as DARZQURO in Japan) for the treatment of multiple myeloma, and in May 2021 Janssen commenced commercial sale in Japan. In July 2021,Subsequent to these approvals, Janssen received FDA approvalseveral additional regulatory approvals for DARZALEX FASPROadditional indications and patient populations in combinationUS, EU, Japan and China. Beginning with pomalidomide and dexamethasone (D-Pd) for patients with multiple myeloma after first or subsequent relapse. Inthe US, in January 2021, Janssen received FDA approval for DARZALEX FASPRO in combination with bortezomib, thalidomide, and dexamethasone in newly diagnosed multiple myeloma patients who are eligible for autologous stem cell transplant. In January 2021, Janssen received accelerated approval from the FDA for DARZALEX FASPRO in combination with bortezomib, cyclophosphamide and
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dexamethasone (D-VCd) for the treatment of adult patients with newly diagnosed AL amyloidosis (not recommended for the treatment of patients with AL amyloidosis who have NYHA Class IIIB or Class IV cardiac disease or Mayo Stage IIIB outside of controlled clinical trials). In July 2021, Janssen received FDA approval for DARZALEX FASPRO in combination with pomalidomide and dexamethasone (D-Pd) for patients with multiple myeloma after first or subsequent relapse. In July 2021, Janssen received FDA approval for DARZALEX FASPRO in combination with D-Pd for patients with multiple myeloma after first or subsequent relapse. In November 2021, Janssen received FDA approval for DARZALEX FASPRO in combination with Kyprolis® (carfilzomib) and dexamethasone for patients with relapsed or refractory multiple myeloma who have received one to three prior lines of therapy. In the EU, in June 2021, we announced that Janssen received marketing authorization from the EC for DARZALEX SC in two new indications, in combination with D-VCd in newly diagnosed adult patients with AL amyloidosis and in combination with D-Pd in adult patients with relapsed or refractory multiple myeloma. In JulyJapan in March 2021, Janssen received FDAannounced approval from Japan’s Ministry of Health, Labour and Welfare (MHLW) for subcutaneous formulation of DARZALEX FASPRO(known as DARZQURO in combination with D-PdJapan) for patients withthe treatment of multiple myeloma, after first or subsequent relapse.and in May 2021 Janssen commenced commercial sale in Japan. In August 2021, Janssen received approval of DARZQURO (Daratumumab SC) for systemic AL amyloidosis in Japan. In China in October 2021, Janssen’s DARZALEX FASPRO was approved by the China National Medical Products Administration (NMPA) for the treatment of primary light chain amyloidosis, in combination with bortezomib, cyclophosphamide and dexamethasone (D-VCd)D-VCd in newly diagnosed patients.
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In December 2019, Janssen elected EGFR and cMET as a bispecific antibody (amivantamab) target on an exclusive basis, which is being studied in solid tumors. In November 2020, Janssen initiated a Phase 1 study of amivantamab and ENHANZE. In September 2022, Janssen initiated a Phase 3 study of lazertinib and amivantamab with ENHANZE in patients with epidermal growth factor receptor (EGFR)-mutated advanced or metastatic non-small cell lung cancer (PALOMA-3).
In July 2021, Janssen elected the target HIV reverse transcriptase.transcriptase limited to non-nucleoside reverse transcriptase inhibitors. In December 2021, Janssen initiated a Phase 1 clinical trial combining rilpivirine and ENHANZE. Janssen and ViiV are exploring the possibility of an ultra-long acting version of CABENUVA using ENHANZE.
AbbVie Collaboration
In June 2015, we and AbbVie entered into a collaboration and license agreement, under which AbbVie has the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with AbbVie proprietary biologics directed to up to nine targets. Targets may be selected on an exclusive basis. AbbVie elected one target on an exclusive basis, TNF alpha, for which it has discontinued development and returned the target.
Lilly Collaboration
In December 2015, we and Lilly entered into a collaboration and license agreement, under which Lilly has the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Lilly proprietary biologics directed to up to five targets. Targets may be selected on an exclusive basis. Lilly has elected two targets on an exclusive basis and one target on a semi-exclusive basis. In August 2017, Lilly initiated a Phase 1 study of an investigational therapy in combination with rHuPH20.
BMS Collaboration
In September 2017, we and BMS entered into a collaboration and license agreement, which became effective in November 2017, under which BMS hashad the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with BMS products directed at up to eleven targets. Targets may be selected on an exclusive basis; BMS has selected eight targets to-date.or non-exclusive basis. BMS has designated multiple immuno-oncology targets including programmed death 1 (PD-1) and has an option to select 3 additional targets by November 2022. In October 2018, BMS dosed the first patient in a Phase 1/2a study of BMS-986179, an anti-CD-73 antibody, alone and in combination with nivolumab, using ENHANZE technology.2024. In October 2019, BMS initiated a Phase 1 study of relatlimab, an anti-LAG-3 antibody, in combination with nivolumab using ENHANZE technology. In April 2021, BMS initiated a Phase 1/2 study of BMS-986258, an anti-TIM-3 antibody, alone and in combination with nivolumab in advanced malignant tumors. In JuneMay 2021, BMS initiated a Phase 3 study of nivolumab using ENHANZE technology for patients with advanced or metastatic clear cell renal cell carcinoma (CheckMate-67T), leveraging data and insights from Phase 1/2 CA209-8KX study in patients with solid tumors. In June 2022, BMS nominated a new undisclosed target. In August 2022, BMS initiated a Phase 3 trial to compare the drug levels of nivolumab with ENHANZE administered subcutaneously vs intravenous administration in participants with melanoma following complete resection (CheckMate-6GE).
Alexion Collaboration
In December 2017, we and Alexion entered into a collaboration and license agreement, under which Alexion has the worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Alexion’s portfolio of products directed at up to four targets. Targets may be selected on an exclusive basis. Alexion elected two targets on an exclusive basis, including a C5 complement inhibitor and has an optionaccess to select two additional targets within five years from the effective date. In August 2018, Alexion announced that it initiated a Phase 1 trial to study a next-generation subcutaneous formulation of ALXN1210 using ENHANZE technology (ALXN1810). Following a portfolio prioritization, Alexion has made the decision to discontinue the further development of ALXN1810. In addition, Alexion has initiated a Phase I study of ALXN1720, a novel anti-C5 albumin-binding bispecific mini-body, in combination with ENHANZE technology.three targets.


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argenx Collaboration
In February 2019, we and argenx entered into an agreement for the right to develop and commercialize one exclusive target, the human neonatal Fc receptor FcRn, which includes argenx's lead asset efgartigimod (ARGX-113), and an option to select two additional targets using ENHANZE technology. In May 2019, argenx nominated a second target to be studied using ENHANZE technology, a human complement factor C2 associated with the product candidate ARGX-117, which is being developed to treat severe autoimmune diseases in Multifocal Motor Neuropathy (MMN).
In July 2019, argenx dosed the first subject in a phase 1 clinical trial evaluating the safety, pharmacokinetics and pharmacodynamics of efgartigimod (ARGX-113), using ENHANZE technology. In December 2019, argenx reported that based on data from the phase 1 study and internal company analysis, a one minute injection administered every 2 weeks may be possible. In December 2020, argenx initiated a Phase 3 study of ARGX-113 using ENHANZE technology for patients with immune thrombocytopenia (ITP), an immune disorder in which the blood does not clot normally. In January 2021, argenx initiated a Phase 3 study of ARGX-113 using ENHANZE technology in pemphigus vulgaris and foliaceus (PV), a rare autoimmune disease that causes painful blisters on the skin and mucous membranes. In February 2021, argenx initiated a Phase 3 study of ARGX-113 using ENHANZE technology for patients with chronic inflammatory demyelinating polyneuropathy (CIDP) and initiated a Phase 3 study of ARGX-113 using ENHANZE technology in myasthenia gravis (MG), an autoimmune disorder of the musculoskeletal system caused by IgG autoantibodies.
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In December 2021, argenx announced the FDA approval of efgartigimod (VYVGART
TM
) for the treatment of generalized myasthenia gravis for the IV dosing regimen. In March 2022, argenx announced that data from argenx’s phase 3 ADAPT-SC study evaluating SC efgartigimod (1000mg efgartigimod-PH20) for the treatment of generalized myasthenia gravis (gMG) achieved the primary endpoint of total IgG reduction from baseline at day 29, demonstrating statistical non-inferiority to VYVGART (efgartigimod alfa-fcab) IV formulation in gMG patients. In June 2022, argenx initiated a study, BALLAD, evaluating Efgartigimod with ENHANZE in bullous pemphigoid. In September 2022, argenx announced the submission of a biologics license application to the US FDA for subcutaneous (SC) efgartigimod for the treatment of adults with generalized myasthenia gravis. SC efgartigimod is co-formulated with ENHANZE.
In October 2020, we and argenx entered into agreement to expand the collaboration relationship. Under the newly announced expansion, argenx gained the ability to exclusively access our ENHANZE technology for three additional targets upon nomination for a total of up to six targets under the existing and newly expanded collaboration.
Horizon Collaboration
In November 2020, we and Horizon entered into a global collaboration and license agreement that gives Horizon exclusive access to ENHANZE technology for subcutaneous formulation of medicines targeting IGF-1R. Horizon intends to use ENHANZE to develop a SC formulation of TEPEZZA®TEPEZZA® (teprotumumab-trbw), indicated for the treatment of thyroid eye disease, a serious, progressive and vision-threatening rare autoimmune disease, potentially shortening drug administration time, reducing healthcare practitioner time and offering additional flexibility and convenience for patients. In March 2021, Horizon completed dosing in a Phase 1 study exploring the SC formulation of TEPEZZA. The trial iswas a small, single-dose Phase 1 pharmacokinetic trial which includes evaluatingincluded evaluation of ENHANZE technology for a SC formulation. In March 2022, Horizon announced the completion of a Phase 1 trial for the TEPEZZA subcutaneous program.
ViiV Healthcare Collaboration
In June 2021, we entered into a global collaboration and license agreement with ViiV. The license gives ViiV exclusive access to our ENHANZE technology for four specific small and large molecule targets for the treatment and prevention of HIV. These targets are integrase inhibitors, reverse transcriptase inhibitors limited to nucleoside reverse transcriptase inhibitors (NRTI) and nucleoside reverse transcriptase translocation inhibitors (NRTTIs), capsid inhibitors and broadly neutralising monoclonal antibodies (bNAbs), that bind to the gp120 CD4 binding site. In December 2021, ViiV initiated enrollment of a Phase 1 study to evaluate cabotegravir administered subcutaneously with ENHANZE. In February 2022, ViiV initiated enrollment of a Phase 1 study to evaluate the safety and pharmacokinetics of N6LS, a broadly neutralizing antibody, administered subcutaneously with ENHANZE technology. In June 2022, ViiV initiated enrollment of a Phase 1 single dose escalation study to evaluate pharmacokinetics, safety and tolerability of long-acting cabotegravir administered subcutaneously with ENHANZE technology.
Chugai Collaboration
In March 2022, we entered into a global collaboration and license agreement with Chugai Pharmaceutical Co., Ltd. The license gives Chugai exclusive access to ENHANZE drug delivery technology for an undisclosed target. Chugai intends to explore the potential use of ENHANZE for a Chugai drug candidate. In May 2022, Chugai initiated a Phase 1 study to evaluate the pharmacokinetics, pharmacodynamics, and safety of targeted antibody administered subcutaneously with ENHANZE.

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NIH CRADA
In June 2019, we announced a Cooperative Research and Development Agreement (CRADA) with the National Institute of Allergy and Infectious Diseases’ Vaccine Research Center (VRC), part of National Institute of Health (NIH), enabling the VRC’s use of ENHANZE technology to develop subcutaneous formulations of VRC07-523LS and N6LS broadly neutralizing antibodies (bnAbs) against HIV for HIV treatment. In MarchApril 2021, we were notified that the first patient was dosed with N6LS and rHuPH20 in VRC 609 Phase 1 dose-escalation study to evaluate safety, tolerability, and pharmacokinetics of N6LS using ENHANZE technology.
CAPRISA
In September 2020, we entered into a collaboration with the Centre for the AIDS Programme of Research in South Africa (CAPRISA), a non-profit company, to evaluate safety, tolerability and pharmacokinetics of a human monoclonal antibody (CAP256V2LS) in HIV-negative and HIV-positive women in South Africa. In October 2020, we were notified that the first patient was dosed with CAP256V2LS and rHuPH20 in CAPRISA 012B Phase 1 dose-escalation study to evaluate safety, tolerability, and pharmacokinetics of CAPR256V2LS alone and in combination with VRC07-523LS using ENHANZE technology. In January 2021, we were notified the first patient was dosed with CAP256V2LS and rHuPH20 in combination with VRC07-523LS and rHuPH20 in CAPRISA 012B Phase 1 study. VRC07-523LS broadly neutralizing antibody was supplied by the NIH/VRC under a research collaboration with CAPRISA.
Device and Other Drug Product Collaborations
Teva License, Development and Supply Agreements
In July 2006, we entered into an exclusive license, development and supply agreement with Teva for an epinephrine auto- injector product to be marketed in the U.S. and Canada. Pursuant to the agreement, Teva is obligated to purchase all of its delivery device requirements from us. We received an upfront cash payment and a milestone payment upon FDA product approval. We also receive a negotiated purchase price for each device sold, as well as royalties on Teva’s commercial sales of the product. The agreement will continue until the expiration of the last to expire patent that is filed no later than 12 months after FDA approval. We have multiple patents that have been granted by the United States Patent and Trademark Office (“USPTO”) that cover this product, the latest of which will expire in 2033. We have and plan to continue to file patent applications covering this product. We are the exclusive supplier of the device, which we developed, for Teva’s generic Epinephrine Injection USP products, indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients. Teva’s Epinephrine Injection, utilizing our patented VIBEX® injection technology, was approved by the FDA as a generic drug product with an AB rating, meaning that it is therapeutically equivalent to the branded products EpiPen® and EpiPen Jr® and therefore, subject to state law, substitutable at the pharmacy. We supply the device and Teva is responsible for the drug, assembly and packaging, distribution and commercialization of the finished product, for which we also receive royalties on Teva’s net sales.
In December 2007, we entered into a license, development and supply agreement with Teva under which we developed and will supply a disposable pen injector for two therapeutic products: exenatide and teriparatide. Under the agreement, we received an upfront payment and development milestones, and may receive royalties on future product sales. This agreement will continue until the expiration date of the last to expire patent covering the device or product that is filed no later than 12 months after FDA approval and will be automatically renewed for successive periods of two years each. Currently, the expiration date of the last to expire patent is 2035. On February 25, 2022, Teva notified us that it was terminating the exenatide program and related agreement due to a lack of commercial viability. The termination was effective August 23, 2022.
We are the exclusive supplier of the multi-dose pen, which we developed, used in Teva’s generic teriparatide injection product. In 2020, our partner Teva launched Teriparatide Injection, the generic version of Eli Lilly’s branded product Forsteo® featuring the Antares multi-dose pen platform, for commercial sale in several countries outside of the U.S. Under an exclusive development, license and supply agreement with Teva, we are responsible for the manufacturing and supply of the multi-dose pen used in Teva’s generic teriparatide product and Teva is responsible for the sale and distribution of the product. We are compensated for devices sold to Teva and we are entitled to receive royalties on net product sales by Teva in the territories.
In November 2012, we entered into a license, supply and distribution agreement with Teva for an auto-injector product containing sumatriptan for the treatment of migraines. Teva is responsible for the manufacture, supply, commercialization and distribution of the drug, and we are responsible for the manufacture and supply of the device and assembly and packaging of the finished product. We are compensated at cost for product shipment to Teva and Teva distributes the product in the U.S. Teva also received an option for distribution rights in other territories. In addition, net profits are split 50/50 between us and Teva. The term of the agreement continues seven years from commercial launch, which was in June 2016, with automatic one-year renewals unless terminated sooner by either party in accordance with the terms of the agreement.

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Covis Agreements
In September 2014, we entered into a development and license agreement with Lumara Health, Inc., which was subsequently acquired by AMAG, which was subsequently acquired by Covis, to develop and supply an auto-injector system for use with Makena®, a progestin drug (hydroxyprogesterone caproate) indicated to reduce the risk of preterm birth. Under the agreement, we granted an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, and received an upfront payment for our license and development activities. We are also entitled to milestone payments upon the achievement of pre-determined amounts of net sales of the product.
Covis was responsible for the clinical development and preparation, submission and maintenance of all regulatory applications, and is responsible for the manufacture and supply of the drug to be used in the product, and to market, distribute and sell the product. We are the exclusive supplier of the auto injection system devices for the product and are responsible for the manufacture and supply of the devices and final assembly and packaging of the finished product. Under the arrangement, we receive payment for each device, and royalties based on net sales of products commencing on product launch in a particular country until the product is no longer developed, marketed, sold or offered for sale in such country. The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of products and decrease after the expiration of licensed patents or where there are generic equivalents to the auto-injector product being sold in a particular country.
In March 2018, we entered into a manufacturing agreement with Covis for the exclusive supply of the devices and fully assembled and packaged final finished product of the Makena® subcutaneous auto-injector. The term of the agreement is concurrent with the term of the development and license agreement and will continue until such time as commercialization of the product is halted. We receive a contracted price per unit on each product manufactured. We are the exclusive supplier of the device, a variation of our VIBEX® QuickShot® subcutaneous auto injector developed by us, for the progestin hormone drug Makena (hydroxyprogesterone caproate injection). The Makena subcutaneous auto injector drug-device combination product is a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past. The product was approved by the FDA under the accelerated approval pathway. We are the exclusive supplier of the devices and the final assembled and packaged commercial product.
In October 2019, Covis announced that the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee met to better understand and interpret the PROLONG (Progestin’s Role in Optimizing Neonatal Gestation) confirmatory clinical trial for Makena (hydroxyprogesterone caproate) injection. Nine advisory committee members voted to recommend that the FDA pursue withdrawal of approval for Makena® and seven committee members voted to leave the product on the market under accelerated approval and require a new confirmatory trial. In October 2020, Covis received notice that the FDA is proposing to withdraw approval of Makena (hydroxyprogesterone caproate injection). Covis then formally requested a public hearing in response to the FDA’s proposal to withdraw its approval and has stated that it remains committed to working with the FDA to maintain patient access to Makena as a treatment option to reduce pre-term birth. In October 2022 the hearing resulted in the FDA Committee recommending that Makena should not be allowed to remain on the market.
Pfizer Agreement
In August 2018, we entered into a development agreement with Pfizer to jointly develop a combination drug device rescue pen. This rescue pen will use the Antares QuickShot auto-injector and an undisclosed Pfizer drug. In 2022, we continued to work on this development program, and we expect to continue development of this product candidate.
Idorsia Agreement
In November 2019, we entered into a new global agreement with Idorsia to develop a novel, drug-device product containing selatogrel. A new chemical entity selatogrel is being developed for the treatment of a suspected acute myocardial infarction (AMI) in adult patients with a history of AMI. Idorsia will pay for the development of the combination product and will be responsible for applying for and obtaining global regulatory approvals for the product. The parties intend to enter into a separate commercial license and supply agreement pursuant to which Antares will provide fully assembled and labelled product to Idorsia at cost plus mark-up. Idorsia will then be responsible for global commercialization of the product, pending FDA or foreign approval we will be entitled to receive royalties on net sales of the commercial product.
Ferring Agreement
In October 2020, we entered into an exclusive license and commercial supply agreement with Ferring for the marketed product NOCDURNA® (desmopressin acetate) in the U.S., Under the terms of the license agreement, we paid Ferring an upfront payment of $5.0 million upon execution and paid an additional $2.5 million on October 1, 2021. Ferring is eligible for tiered royalties and additional commercial milestone payments potentially totaling up to $17.5 million based on our net sales of NOCDURNA® in the U.S. In October 2022, we sent a notice to Ferring that we are terminating the NOCDURNA® license agreement with an effective termination date in October 2023.
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Lipocine Agreement

In October 2021, we entered into an exclusive license agreement with Lipocine for the product TLANDO® (testosterone undecanoate) in the U.S. TLANDO® was granted tentative approval from the FDA in December 2020. On February 3, 2022, we announced the FDA’s acceptance of our NDA resubmission for TLANDO® with a target action date set for March 28, 2022. In June 2022, we announced the commercial launch of TLANDO. Under the terms of the license agreement, we paid Lipocine an upfront payment of $11.0 million. Lipocine is eligible for additional milestone payments up to $10.0 million and tiered royalty and commercial milestones based on net sales of TLANDO® in the U.S. We will be responsible for the manufacturing and commercialization of TLANDO®. The license agreement also granted us the option to license and develop LPCN 1111 (TLANDO XR) in the U.S., a potential once daily oral testosterone product containing testosterone tridecanoate in development for the treatment of hypogonadism in adult males. Following a review of our product portfolio, we decided not to exercise the option which expired on June 30, 2022.
Otter Agreement

In December 2021, we entered into an Asset Purchase Agreement with Otter to sell certain worldwide assets used in the operation of the OTREXUP® product line for $44.0 million, subject to finalization of changes in closing inventory to be transferred, and a license agreement for rights to commercialize OTREXUP®. Simultaneously, we entered into a supply agreement with Otter to manufacture the VIBEX® auto-injection system device, designed and developed to incorporate a pre-filled syringe for delivery of methotrexate, assemble, package, label and supply the final OTREXUP® product and related samples to Otter at cost plus mark-up. Otter is responsible for manufacturing, formulation and testing of methotrexate and the corresponding pre-filled syringe for assembly with the device manufactured by us, along with the commercialization and distribution of OTREXUP®. OTREXUP® is a subcutaneous methotrexate injection for once weekly self-administration with an easy-to-use, single dose, disposable auto injector, indicated for adults with severe active rheumatoid arthritis (“RA”), children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis. Further, we entered into a license agreement with Otter in which we granted Otter a worldwide, exclusive, fully paid-up license to certain patents relating to OTREXUP® that may also relate to our other products for Otter to commercialize and otherwise exploit OTREXUP® in the field as defined in the license agreement.
For a further discussion of the collaboration agreements, refer to Note 4,5, Revenue.

Impact of COVID-19 to our Business
In March 2020, the World Health Organization declared a disease caused by a strain of novel coronavirus (“COVID-19”) to be a pandemic. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. In an effort to protect the health and safety of our employees and in compliance with state regulations, we instituted working from home, limited the number of people that work on site at any one time, and suspended employee travel. As an organization we have returned to the office and continue to effectively operate with the majoritya combination of our employees working from homeremote and not traveling.office work utilizing a hybrid model. Importantly, our suppliers continue to operate without interruption related to COVID-19. We recognize that the duration of the pandemic and its continued impact on the global economy as a whole remains unknown at this time. We are not clear the extent to which long term operational and economic impacts of COVID-19, if any, will have on our business, including the effects on our suppliers, collaborators,partners, proprietary product sales. customers, employees, and prospects. We will continue to monitor the COVID-19 situation closely.
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Results of Operations
Three Months Ended September 30, 20212022 Compared to Three Months Ended September 30, 20202021
Royalties Royalty revenue was $99.6 million for the three months ended September 30, 2022 compared to $58.6 million for the three months ended September 30, 2021 compared to $23.9 million for the three months ended September 30, 2020.2021. The increase was mainly driven by continued sales uptake of DARZALEX FASPRO in the U.S and EU by Janssen due to the product launchand Phesgo by Roche in the second quarter of 2020,all geographies and contribution from Antares royalty revenue, partially offset by slightly lower sales of Herceptin SC and MabThera SC by Roche. In general, weWe expect royalty revenue to continue to grow as a result of our recent2020 ENHANZE partner product launches, offsetting the ongoing impact from biosimilars in Europe related to our mature ENHANZE partner products.
Product Sales, Net Product sales, net were as follows (in thousands):
Three Months EndedThree Months Ended
September 30,September 30,
20212020Change20222021Change
Sales of bulk rHuPH20Sales of bulk rHuPH20$18,862 $4,104 $14,758 Sales of bulk rHuPH20$19,259 $18,862 $397 
Sales of Hylenex6,185 4,944 1,241 
Sales of proprietary productsSales of proprietary products24,180 6,185 17,995 
Sales of device partnered productSales of device partnered product17,988 — 17,988 
Total product sales, netTotal product sales, net$25,047 $9,048 $15,999 Total product sales, net$61,427 $25,047 $36,380 
Product sales, net increased by $16.0$36.4 million in the three months ended September 30, 20212022 compared to the same period in 2020,2021, primarily due to highercontribution from our proprietary and device partnered products as the result of the Antares acquisition. We expect that sales of rHuPH20proprietary products will grow in future years as we work to our partners Janssen and Roche.expand market share in the TRT market. We expect that product sales of bulk rHuPH20 and device partnered products will fluctuate in future periods based on the needs of our collaborators. We expect future product sales of Hylenex to be relatively flat as we experience modest market growth offset by competition for market share.partners.
Revenues Under Collaborative Agreements – Revenues under collaborative agreements were as follows (in thousands):
Three Months EndedThree Months Ended
September 30,September 30,
20212020Change20222021Change
Upfront license fees, license fees for the election of additional targets,
license maintenance fees and other license fees and event-based
payments:
ENHANZE licensing and development revenue:ENHANZE licensing and development revenue:
JanssenJanssen$— $32,000 $(32,000)
BMSBMS25,000 — 25,000 
Janssen32,000 — 32,000 
RocheRoche— 17,000 (17,000)Roche19,000 — 19,000 
argenx— 15,000 (15,000)
Subtotal Subtotal32,000 32,000 —  Subtotal44,000 32,000 12,000 
Research and development services220 337 (117)
Device licensing and development revenueDevice licensing and development revenue3,998 220 3,778 
Total revenues under collaborative agreementsTotal revenues under collaborative agreements$32,220 $32,337 $(117)Total revenues under collaborative agreements$47,998 $32,220 $15,778 
Revenue from license fees increased $12.0 million for the three months ended September 30, 2021, were comparable2022, compared to the same period in 2020.2021, primarily due to milestones recognized related to development activities of BMS and Roche. Revenue from upfront licenses fees, license fees for the election of additional targets, license maintenance fees and other license fees and event-based payments vary from period to period based on our ENHANZE collaboration activity. We expect these revenues to continue to fluctuate in future periods based on our collaborators’partners’ ability to meet various clinical and regulatory milestones set forth in such agreements and our ability to obtain new collaborative agreements. To date, based on current partner communications, we have not identified any COVID-19 related delays that will materially impact our ENHANZE milestone revenue. We will continue
The acquisition of Antares is expected to monitor the ENHANZE development activitiesbe accretive to revenue in 2022, supported by Antares' proprietary product revenues and royalty revenues. The addition of our partnersAntares is also expected to accelerate top- and the impact of their plans on our milestone revenue, as there may be potential for COVID-19 related delays.bottom-line growth and enhance cash flow generation through 2027 and beyond.
Cost of Product Sales Cost of product 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 Hylenex recombinantour proprietary and device partnered products and bulk rHuPH20. Cost of product sales were $47.3 million for the three months ended September 30, 2022 compared to $18.6 million for the three months ended September 30, 2021 compared to $5.6 million for the three months ended September 30, 2020.2021. The increase of $13.0$28.7 million in cost of product sales was mainly due to an increase in sales in our proprietary, partnered products as a result of bulk rHuPH20 to JanssenAntares acquisition and Roche.amortization of inventory step-up associated with purchase accounting for the Antares acquisition.
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Amortization of intangiblesAmortization of intangibles expense was $27.2 million for the three months ended September 30, 2022. The amortization of intangibles expense is due to the acquisition of Antares in May 2022, in which we acquired intangible assets that are amortized over their useful lives.
Research and Development Research and development expenses consist of external costs, salaries and benefits and allocation of facilities and other overhead expenses related to research manufacturing, preclinical and regulatory activities related to our ENHANZE collaborations, and our rHuPH20 platform.development platforms. Research and development expenses were $16.7 million for the three months ended September 30, 2022 compared to $8.5 million for the three months ended September 30, 2021 compared to $7.7 million for the three months ended September 30, 2020.2021. The increase of $0.8$8.2 million is primarily due to planned investments in ENHANZE and the Antares Pharma acquisition and an increase in compensation expense including share-based compensation, for personnelrelated to support additional ENHANZE targets entering clinical development.

the ongoing combined larger workforce.
Selling, General and Administrative Selling, general and administrative (SG&A) expenses consist primarily of salaries and related costs for personnel in executive, selling and administrative functions as well as professional fees for legal and accounting, business development, commercial operations support for Hylenexproprietary products and alliance management and marketing support for ENHANZE.our collaborations. SG&A expenses were $34.5 million for the three months ended September 30, 2022 compared to $13.2 million for the three months ended September 30, 2021 compared to $11.7 million for the three months ended September 30, 2020.2021. The increase of $1.5$21.3 million, or 13%, was primarily due to the Antares Pharma acquisition and an increase in compensation expense including share-based compensation, for personnelrelated to support additional ENHANZE targets entering clinical development.the ongoing combined larger workforce.
Interest Expense Interest expense was $7.5 million for the three months ended September 30, 2022 compared to $1.8 million for the three months ended September 30, 2021 compared to $5.0 million for the three months ended September 30, 2020.2021. The decreaseincrease of $3.2$5.8 million was primarily due to a decreasean increase in interest expense related to the 2022 term loans, revolving credit facility and 2028 Convertible Notes as the non-cash interest expense associated with the amortization of the equity component of the Convertible Notes is eliminated upon adoption of ASU 2020-06.Notes.
Income Taxes Income tax expense was $12.1 million for the three months ended September 30, 2022, compared to income tax benefit wasof $142.5 million for the three months ended September 30, 2021, compared to income tax expense of $0.1 million for the three months ended September 30, 2020.2021. The increase in income tax expense is due to the recording of a full quarter income tax expense in the current year whereas in the prior year period there was an income tax benefit is due to the release of the valuation allowance during the current quarter.allowance.

3857



Nine Months Ended September 30, 20212022 Compared to Nine Months Ended September 30, 20202021
Royalties Royalty revenue was $254.5 million for the nine months ended September 30, 2022 compared to $141.3 million for the nine months ended September 30, 2021 compared to $56.6 million for the nine months ended September 30, 2020.2021. The increase was mainly driven by continued sales uptake of DARZALEX FASPRO in the U.S and EU by Janssen due to the product launchand Phesgo by Roche in the second quarter of 2020,all geographies and contribution from Antares royalty revenue, partially offset by slightly lower sales of Herceptin SC and MabThera SC by Roche. In general, we expect royalty revenue to grow as a result of our recent ENHANZE partner product launches, offsetting the ongoing impact from biosimilars in Europe related to our mature ENHANZE partner products.
Product Sales, Net Product sales, net were as follows (in thousands):
Nine Months EndedNine Months Ended
September 30,September 30,
20212020Change20222021Change
Sales of bulk rHuPH20Sales of bulk rHuPH20$59,719 $11,963 $47,756 Sales of bulk rHuPH20$60,764 $59,719 $1,045 
Sales of Hylenex17,454 11,569 5,885 
Sales of proprietary productsSales of proprietary products44,559 17,454 27,105 
Sales of device partnered productsSales of device partnered products24,544 — 24,544 
Total product sales, netTotal product sales, net$77,173 $23,532 $53,641 Total product sales, net$129,867 $77,173 $52,694 
Product sales, net increased by $53.6$52.7 million in the nine months ended September 30, 20212022 compared to the same period in 2020,2021, primarily due to higher salesa contribution from our proprietary and device partnered products driven by the acquisition of rHuPH20 to our partners Janssen, Roche and argenx. We expect that product sales of bulk rHuPH20 will fluctuate in future periods based on the needs of our collaborators. We expect that future product sales of Hylenex to be relatively flat as we experience modest market growth offset by competition for market share.Antares.
Revenues Under Collaborative Agreements – Revenues under collaborative agreements were as follows (in thousands):
Nine Months EndedNine Months Ended
September 30,September 30,
20212020Change20222021Change
Upfront license fees, license fees for the election of additional targets,
license maintenance fees and other license fees and event-based
payments:
ENHANZE licensing and development revenue:ENHANZE licensing and development revenue:
BMSBMS$30,000 $25,000 $5,000 
ChugaiChugai25,000 — 25,000 
RocheRoche19,000 — 19,000 
JanssenJanssen57,000 25,000 32,000 Janssen15,000 57,000 (42,000)
ViiVViiV$40,000 $— $40,000 ViiV— 40,000 (40,000)
BMS25,000 7,264 17,736 
Roche— 17,000 (17,000)
argenx— 15,000 (15,000)
Other— 500 (500)
SubtotalSubtotal122,000 64,764 57,236 Subtotal89,000 122,000 (33,000)
Reimbursements for research and development services870 996 (126)
Device licensing and development revenueDevice licensing and development revenue5,257 870 4,387 
Total revenues under collaborative agreementsTotal revenues under collaborative agreements$122,870 $65,760 $57,110 Total revenues under collaborative agreements$94,257 $122,870 $(28,613)
Revenue from license fees increased $57.2decreased $33.0 million in the nine months ended September 30, 2021,2022, compared to the same period in 2020 mainly2021 primarily due to the recognition of a total of $122.0 million related toupfront payment associated with entering into the ViiV BMS and Janssen collaborations in the current year. Revenue from upfront licenses fees, license fees forprior year period, as well as the electiontiming of additional targets, license maintenance fees and other license fees and event-based payments vary from period to period based on our ENHANZE collaboration activity. We expect these revenues to continue to fluctuate in future periods based on our collaborators’ ability to meet various clinical and regulatory milestones set forth in such agreements and our ability to obtain new collaborative agreements. To date, based on currentdriven by partner communications, we have not identified any COVID-19 related delays that will materially impact our ENHANZE milestone revenue. We will continue to monitor the ENHANZE development activities of our partners and the impact of their plans on our milestone revenue, as there may be potential for COVID-19 related delays.activities.
Cost of Product Sales Cost of product 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 Hylenex recombinant and bulk rHuPH20. Cost of product sales were $97.2 million for the nine months ended September 30, 2022 compared to $59.8 million for the nine months ended September 30, 2021 compared to $17.1 million for the nine months ended September 30, 2020.2021. The increase of $42.7$37.4 million in cost of product sales was mainly due to an increase in sales in our proprietary, partnered products as a result of bulk rHuPH20 to Janssen, Rochethe Antares acquisition and argenx.amortization of inventory step-up associated with purchase accounting for the Antares acquisition..
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Amortization of intangibles
Amortization of intangibles expense was $38.6 million for the nine months ended September 30, 2022. The amortization of intangibles expense is due to the acquisition of Antares in May 2022, in which we acquired intangible assets that are amortized over their useful lives.
Research and Development Research and development expenses consist of external costs, salaries and benefits and allocation of facilities and other overhead expenses relatedwere $44.0 million for the nine months ended September 30, 2022 compared to research manufacturing, preclinical and regulatory activities related to our ENHANZE collaborations and our rHuPH20 platform. Research and development expenses were $25.6 million for the nine months ended September 30, 2021 compared to $26.9 million for the nine months ended September 30, 2020.2021. The decreaseincrease of $1.3$18.4 million is primarily due to planned investments in ENHANZE and one-time compensation cost related to the discontinuation of our development activities for PEGPH20Antares acquisition and closure of our oncology operations, partially offset by an increase in costscompensation expense related to support additional ENHANZE targets entering clinical development.the ongoing combined larger workforce.
Selling, General and Administrative Selling, general and administrative (SG&A) expenses consist primarily of salaries and related costs for personnel in executive, selling and administrative functions as well as professional fees for legal and accounting, business development, commercial operations support for Hylenex and alliance management and marketing support for ENHANZE. SG&A expenses were $105.8 million for the nine months ended September 30, 2022 compared to $36.5 million for the nine months ended September 30, 2021 compared to $35.3 million for the nine months ended September 30, 2020.2021. The increase of $1.2$69.3 million or 4%, was primarily due to one-time transaction and compensation costs related to the Antares acquisition and an increase in compensation expense including share-based compensation, for personnel to support additional ENHANZE targets entering clinical development, partially offset by one time costs in the prior year related to the discontinuation of our development activities for PEGPH20 and closure of our oncology operations.ongoing combined larger workforce.
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Interest Expense Interest expense was $12.4 million for the nine months ended September 30, 2022 compared to $5.5 million for the nine months ended September 30, 2021 compared to $15.3 million for the nine months ended September 30, 2020.2021. The decreaseincrease of $9.8$6.9 million was primarily due to a decreasean increase in interest expense related to the 2022 term loans, revolving credit facility and 2028 Convertible Notes as the non-cash interest expense associated with the amortization of the equity component of the Convertible Notes is eliminated upon adoption of ASU 2020-06 and discontinuation in interest expense for the Royalty-backed Loan following the repayment of that obligations.Notes.
Income Taxes Income tax expense was $33.7 million for the nine months ended September 30, 2022, compared to income tax benefit wasof $142.2 million for the nine months ended September 30, 2021, compared to income tax expense of $0.1 million for the nine months ended September 30, 2020.2021. The increase in income tax expense is due to the recording of a full nine months of income tax expense in the current year whereas in the prior year period there was an income tax benefit is due to the release of the valuation allowance during the current quarter.allowance.








4059


Liquidity and Capital Resources
Overview
Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale marketable securities. As of September 30, 2021,2022, we had cash, cash equivalents and marketable securities of $815.9$265.6 million. We believe that our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months. We expect to fund our operations going forward with existing cash resources, anticipated revenues from our existing collaborations and cash that we may raise through future transactions. We may raise cash through any one of the following financing vehicles: (i) new collaborative agreements; (ii) expansions or revisions to existing collaborative relationships; (iii) private financings; (iv) other equity or debt financings; (v) monetizing assets; and/or (vi) the public offering of securities;
We may, in the future, draw on our existing line of credit, offer and sell additional equity, debt securities and warrants to purchase any of such securities, either individually or in units to raise capital to raise funds for additional working capital, capital expenditures, share repurchases, acquisitions or for other general corporate purposes.
Cash Flows
Operating Activities
Net cash provided by operations was $216.9$157.7 million for the nine months ended September 30, 20212022 compared to $4.5$216.9 million cash provided in the nine months ended September 30, 2020.2021. The $212.4$59.2 million increasedecrease in cash provided by operations was mainly due to an increase in collaboration partner license fees, royaltiestransaction expenses associated with Antares acquisition and product sales and a decreasean increase in working capital spend, partially offset by an increase in royalties revenue during the nine months ended September 30, 20212022 compared to the corresponding period in the prior year.
Investing Activities
Net cash used in investing activities was $106.8$485.3 million for the nine months ended September 30, 20212022 compared to $19.9$106.8 million cash provided byused in investing activities for the nine months ended September 30, 2020.2021. The increase in cash used in investing activities was primarily due to the acquisition of Antares, partially offset by an increase in purchasecash from the sale of marketable securities and the sale of assets for the nine months ended September 30, 2021.2022.
Financing Activities
Net cash provided by financing activities was $233.9$356.0 million for the nine months ended September 30, 2021,2022, compared to $78.9$233.9 million cash used inprovided by financing activities for the nine months ended September 30, 2020,2021, mainly due to $702.0 million cash received from the 2028 Convertible Notes during the current year and a $291.6 million decrease related to the 2022 Induced Conversion, partially offset by $10.3 million increase in repurchase of common stock, a $1.1 million decrease in net proceeds during the current year from the issuance of common stock under equity incentive plans, $784.9 million cash received from the 2027 Convertible Notes offering and $19.6 million cash payment for the Royalty-backed loan in the prior year partially offset by $369.1 million related to the Induced Conversion of the 2024 Convertible Notes, $79.8 million increase in repurchase of common stock and a $42.4$69.1 million decrease in net proceeds frompayment for the issuance of common stock under equity incentive plans.Capped Call Transactions.
Share Repurchases
In November 2019, theour Board of Directors approved a share repurchase program, pursuant to which we may repurchase our issued and outstanding shares of common stock from time to time. The CompanyWe completed the share repurchase program in October 2021 and retired the repurchased shares. In December 2021, we announced our second share repurchase program to repurchase up to $750.0 million of our outstanding common stock over a three-year period. See Note 8.10. Stockholders’ Equity, within the notes to the condensed consolidated financial statements for additional information regarding our share repurchases. In October 2021, we repurchased the remaining shares that had been authorized for repurchase under our November 2019 share repurchase program.
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Long-Term Debt
1.00% Convertible Notes due 2028
In August 2022, we completed the sale of $720.0 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “2028 Convertible Notes” and collectively with the 2024 and the 2027 Convertible Notes the “Convertible Notes”). 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 will be 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 5 consecutive business days immediately after any 5 consecutive trading day period (such 5 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 September 30, 2022, the 2027 Convertible Notes are not convertible.
Upon conversion, we will pay cash for the settlement of principal and for the premium, if applicable, we will pay cash, deliver shares of common stock or a combination of cash and shares of common stock, at our election. The initial conversion rate for the 2027 Convertible Notes will be 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.
0.25% Convertible Notes due 2027
In March 2021, we completed the sale of $805.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2027 (the “2027 Convertible Notes” and collectively with the 2024 Convertible Notes the “Convertible Notes”). The net proceeds in connection with the 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.
The 2027 Convertible Notes pay interest semi-annually in arrears on March 1st and September 1st of each year at an annual rate of 0.25%. The 2027 Convertible Notes are general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the 2027 Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all
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indebtedness and other liabilities (including trade payables) of our current or future subsidiaries. The 2027 Convertible Notes have a maturity date of March 1, 2027.
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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 5 consecutive trading day period (such 5 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. The Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, September 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date. As of September 30, 2021,2022, the 2027 Convertible Notes are 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.
1.25% Convertible Notes due 2024
In November 2019, we completed the sale of $460.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due 2024 (“2024 Convertible Notes”). The net proceeds in connection with the issuance of the 2024 Convertible Notes, after deducting the initial purchasers’ fee of $12.7 million, was approximately $447.3 million. We also incurred debt issuance cost totaling $0.3 million. Debt issuance costs and the initial purchasers’ fee are presented as a debt discount.
The 2024 Convertible Notes pay interest semi-annually in arrears on June 1st and December 1st of each year, beginning on June 1, 2020, at an annual rate of 1.25%. The 2024 Convertible Notes are general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right of payment to the 2024 Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of the our current or future subsidiaries. The 2024 Convertible Notes have a maturity date of December 1, 2024.
Holders may convert their 2024 Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020, if the last reported sale price per share of common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the ###five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on our common stock, as described in the offering memorandum for the 2024 Convertible Notes; (4) if we call such notes for redemption; and (5) at any time from, and including, June 1, 2024 until the close of business on the scheduled trading day immediately before the maturity date. As of September 30, 2021,2022, the 2024 Convertible Notes are convertible.
In January 2021 we notified the note holders our irrevocable election to settle the principal of the 2024 Convertible Notes in cash and for the premium, if applicable, deliver shares of common stock. The conversion rate for the 2024 Convertible Notes is 41.9208 shares of common stock per $1,000 in principal amount of 2024 Convertible Notes, equivalent to a conversion price of approximately $23.85 per share of our common stock. The conversion rate is subject to adjustment.
In March 2021, we completed a privately negotiated and induced conversion of $369.1 million principal amount of the 2024 Convertibles (“2021 Note Repurchases” or the “Induced“2021 Induced Conversion”). In connection with the 2021 Induced Conversion, we paid approximately $370.2 million in cash, which includes principal and accrued interest, and issued approximately 9.08 million shares of our common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion. As a result of the 2021 Induced Conversion, we recorded $21.0 million in induced conversion expense which is included in Other income (expense) of the Condensed Consolidated Statements of Operations for the three months
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ended September 30,Income in 2021. The induced conversion expense represents the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.
Royalty-backed Loan
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In January 2016, throughAugust 2022, we completed a privately negotiated induced conversion of $77.4 million principal amount of the 2024 Convertible Notes (“2022 Note Repurchases” or the “2022 Induced Conversion”). In connection with the 2022 Induced Conversion, we paid approximately $77.6 million in cash, which includes principal and accrued interest, and issued approximately 1.51 million shares of our wholly-owned subsidiary Halozyme Royalty LLC (Halozyme Royalty),common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion. As a result of the 2022 Induced Conversion, we received a $150recorded $2.7 million loan (the Royalty-backed Loan) pursuant toin induced conversion expense which is included in Other income (expense) of the Condensed Consolidated Statements of Income. The induced conversion expense represents the fair value of the common stock issued upon conversion in excess of the common stock issuable under the original terms of the 2024 Convertible Notes.
Revolving Credit and Term Loan Facilities (May 2022)
In May 2022, in connection with the closing of Antares acquisition, we entered into a credit agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders and L/C Issuers party thereto (the “2022 Credit Agreement), evidencing a credit facility (the “2022 Facility”) that provides for (i) a $350 million revolving credit facility (the “Revolving Credit Facility”) and (ii) a $250 million term loan facility (the “Term Facility”). The proceeds from a $120 million draw on the Revolving Credit Facility and the $250 million Term Facility were used to fund a portion of the Antares acquisition, refinance Antares’ existing debt and pay fees and expenses in connection with BioPharmathe acquisition. The 2022 Credit Investments IV Sub, LPAgreement contains an expansion feature, which allows us, subject to certain conditions, to increase the aggregate principal amount of the 2022 Facility, provided we remain in compliance with underlying financial covenants on a pro forma basis including the consolidated interest coverage ratio and Athyrium Opportunities II Acquisition LPthe consolidated net leverage ratio covenants set forth in 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.
In August 2022, we entered into Amendment No. 1 to the Credit Agreement (the Royalty-backed Lenders). Under“Amendment”) among the Company, the Guarantors (as defined in the Credit Agreement), each L/C Issuer from time to time party thereto, Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and swing line lender (in such capacity, the “Swing Line Lender”), and each lender party thereto, which amends the Credit Agreement dated as of May 24, 2022 (the “Credit Agreement”) among the Company, the Guarantors, the Administrative Agent, the Swing Line Lender, each Lender and the L/C Issuers. The Amendment, among other things, increases the size of the revolving credit facility from $350 million to $575 million. The terms of the Credit Agreement, Halozyme Therapeutics, Inc. transferred to Halozyme Royaltyrevolving credit facility are otherwise unchanged. Concurrently with the right to receive royalty payments fromentry into the commercial sales of ENHANZE products owedAmendment, the Company repaid the entire outstanding term loan facility and repaid all outstanding loans under the Roche Collaboration and Baxalta Collaboration (Collaboration Agreements). The royalty payments fromrevolving credit facility under the Collaboration Agreements were used to repay the principal and interest on the loan (the Royalty Payments). The Royalty-backed Loan bore interest at a per annum rate of 8.75% plus the three-month LIBOR rate. The three-month LIBOR rate was subject to a floor of 0.7% and a cap of 1.5%. In June 2020, we paid the full remaining balance and final payment of $2.93 million thereby satisfying and discharging all obligations under, and terminating, the Royalty-backed Loan.
Off-Balance Sheet ArrangementsCredit Agreement.
As of September 30, 2022, the revolving credit facility was undrawn.
Additional Capital Requirements.
Our expected working and other capital requirements are described in our 2021 we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referredAnnual Report on Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of September 30, 2022, other than the additional financing obtained to as structured finance or special purpose entities,complete the Antares acquisition, which wouldwas completed on May 24, 2022 and the changes disclosed in the “Notes to Condensed Consolidated Financial Statements” and “Liquidity and Capital Resources” in this Quarterly Report, there have been established for the purpose of facilitating off-balance sheet arrangements orno other contractually narrow or limited purposes. In addition, we did not engagematerial changes to our expected working and other capital requirements described in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.our 2021 Annual Report on Form 10-K.




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 Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021. The accounting policies and estimates that are most critical to a full understanding and evaluation of our reported financial results are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Except for the release during the three months ended September 30, 2021 of our valuation allowance related to federal and state deferred tax assets (which, as described more fully in Note 2 to our condensed consolidated financial statements, resulted in a benefit from income taxes of 142.5 million), there2021. There were no material changes to our critical accounting policies or estimates during the nine months ended September 30, 2021.2022.
Recent Accounting Pronouncements
Refer to Note 2, Summary of Significant Accounting Policies, of our condensed consolidated financial statements for a discussion of recent accounting pronouncements and their effect, if any.
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Risk Factors
Risks Related To Our Business
Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption of the development of our collaboration partners’and partnered product candidates and commercialization of our approved and our partnered products, impede our ability to supply bulk rHuPH20 to our ENHANZE partners or procure and sell Hylenexour proprietary products and otherwise adversely impact our business and results of operations.*
Public health crises such as pandemics or similar outbreaks could adversely impact our business and results of operations by, among other things, disrupting the development of our collaboration partners’and our partnered product candidates and commercialization of our partners’ approved partnered products, disrupting our ability to enter into new ENHANZE and other collaborations with potential partners in a timely manner, causing disruptions in the operations of our third partythird-party contract manufacturing organizations upon whom we rely for the production and supply of our commercial productproprietary products, including Hylenex and the bulk rHuPH20 we supply to our partners, and causing other disruptions to our operations. For example, the outbreak of a coronavirus, which causes COVID-19, has rapidly evolved into a global pandemic and has spread to most regions of the world including the city of San Diego, California where our main office is located.
The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. The extent to which COVID-19 and its variants impacts our operations and/or those of our collaboration partners will depend on future developments, which are highly uncertain and unpredictable, including the duration or recurrence of the outbreak, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions to contain COVID-19 or address its impact in the short and long term, among others.
We have respondedAs a result of COVID-19 restrictions and closures, our sales force has been subject to the COVID-19 pandemic by taking a number of actions including closing our offices in San Diego in March 2020, requesting that most of our personnel work remotelyvarying limitations on its ability to visit physicians and restrictingpatient’s access to physicians has been negatively impacted. As a result, we have experienced, and may continue to experience, a decrease in new prescriptions for our facilities mostly to personnel who perform critical activities that must be completed on-siteproprietary products. Our partners may also experience a decrease in accordance with California’s initial statewide shelter-in-place order and ongoing guidances. Increased reliance on personnel working from home may have a negative impact on productivity, or disrupt, delay or otherwise adversely impact business, by, among other things, increasing cyber security risk, impeding access to information that would be helpful to pursuedemand for our business objectives or disrupting our communications. We are continuing to monitor the situation to determine the timing for all employees to return to working from the office.partnered products.
The business disruptions associated with a global pandemic could impact the business, product development priorities and operations of our collaboration partners, including potential delays in manufacturing their product candidates or approved products. For example, some of our collaboration partners are conducting or are planning to conduct clinical trials in geographies affected by the COVID-19 pandemic. The progress or completion of these clinical trials could be adversely impacted by the pandemic. Additionally, interruption or delays in the operations of the FDA, the EMA and other similar foreign regulatory agencies, or changes in regulatory priorities to focus on the COVID-19 pandemic, may affect required regulatory review, inspection, clearance and approval timelines. Disruptions such as these could result in delays in the development programs of our collaborationpartnered products or impede the commercial efforts for approved products, resulting in potential reductions or delays in our revenues from collaboratorpartner royalty or milestone payments. We do not know the extent to which our collaboration partners’ development programs or product commercialization efforts will be impacted or delayed.
We rely on many third partyparties to source active pharmaceutical ingredient and drug products, manufacture and assemble our devices, distribute finished products and provide various logistics activities in order to manufacture and sell our partnered and proprietary products. For example, we rely on third-party manufacturers to manufacture the bulk rHuPH20 that we supply to our collaboration partners for their commercial products and product candidates, as well as our commercial product Hylenex. If any such third partythird-party manufacturer is adversely impacted by the COVID-19 pandemic and related consequences, including staffing shortages, production slowdowns and disruptions in delivery systems, availability of raw materials, reagents or components or if they divert resources or manufacturing capacity to accommodate the development of coronavirus treatments or vaccines, our supply chain may be disrupted, limiting our ability to sell Hylenex or supply bulk rHuPH20 to our collaboration partners. Any such disruptions to the operations of the third parties upon whom we rely to manufacture and sell our partnered and proprietary products could result in reductions or delays in our revenues.
The effects of COVID-19 could worsen in countries that are already afflicted with the coronavirus which could further adversely impact our ability to conduct our business and could have a material adverse impact on our operations, financial condition and results. We do not yet know the full extent of the impact that COVID-19 may or will have on our business.
In addition, the trading prices for our common shares and other biopharmaceutical companies have been highly volatile as a result of market and investor reactions to the COVID-19 pandemic and its potential consequences. As a result, access to sources of financing, should those be needed, may be more difficult and/or expensive. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common shares.
We have generated only limited revenues to date and we have a history of net losses and negative cash flows
.
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Relative to expenses incurred inIf our operations, we have generated only limited revenues from product sales, royalties, licensing fees, milestone payments, bulk rHuPH20 supply payments and research reimbursements to date. Through September 30, 2021, we have incurred aggregate net losses of $125.7 million. Although we expect to maintain sustainable profitability, unexpected declines in revenues and increases in expenses could inhibit our ability to sustain profitability.
If partners’partnered or proprietary product candidates do not receive and maintain regulatory approvals, or if approvals are not obtained in a timely manner, such failure or delay would substantially impair our ability to generate revenues.*
Approval from the FDA or equivalent health authorities is necessary to design, develop, test, manufacture and market pharmaceutical products and medical devices in the U.S. and the other countries in which we anticipate doing business have similar requirements. The process for obtaining FDA and other regulatory approvals is extensive, time-consuming, risky and costly, and there is no guarantee that the FDA or other regulatory bodies will approve any applications that may be filed with respect to any of our partners’partnered or proprietary product candidates, or that the timing of any such approval will be appropriate for the desired product launch schedule for a product candidate. We and our collaboratorspartners attempt to provide guidance as to the timing for the filing and acceptance of such regulatory approvals, but such filings and approvals may not occur when we or our collaboratorspartners expect, or at all. The FDA or other foreign regulatory agency may refuse or delay approval of our partners’partnered or proprietary product candidates for failure to collect sufficient clinical or animal safety data and require our collaborators to conduct additional clinical or animal safety studies which may cause lengthy delays and increased costs to ours or our partners’ development programs. Any such issues associated with rHuPH20 could have an adverse impact on future development of our partners’ products which include rHuPH20, future sales of Hylenex recombinant, or our ability to maintain our existing ENHANZE collaborations or enter into new ENHANZE collaborations.
We and our collaboratorspartners may not be successful in obtaining approvals for any additional potential products in a timely manner, or at all. Refer to the risk factor titled “Our collaborationpartnered or proprietary product candidates may not receive regulatory approvals or their development may be delayed for a variety of reasons, including delayed or unsuccessful clinical trials, regulatory requirements or safety concerns” for additional information relating to the approval of product candidates.
Additionally, even with respect to products which have been approved for commercialization, in order to continue to manufacture and market pharmaceutical products, we or our collaboratorspartners must maintain our regulatory approvals. If we or any of our collaboratorspartners are unsuccessful in maintaining ourthe required regulatory approvals, our ability to generate revenues would be adversely affected.
Use of Hylenex and theour partnered or proprietary products and product candidates of our partners’ could be associated with side effectsadverse events or adverse events.product recalls.*
As with most pharmaceutical products, use of Hylenex and theour partnered or proprietary products and product candidates of our collaborators could be associated with side effects or adverse events which can vary in severity (from minor reactions to death) and frequency (infrequent or prevalent). and product recalls. Side effects or adverse events associated with the use of Hylenex and theour partnered or proprietary products or product candidates of our collaborators may be observed at any time, including in clinical trials or when a product is commercialized, and any such side effects or adverse events may negatively affect our or our collaborators’partners’ ability to obtain or maintain regulatory approval or market such products and product candidates. Side effects such as toxicity or other safety issues associated with the use of Hylenex and theour partnered or proprietary products and product candidates of our collaborators could require us or our collaboratorspartners to perform additional studies or halt development or commercialization of these products and product candidates or expose us to product liability lawsuits which will harm our business. For example, we experienced a clinical hold on patient enrollment and dosing in our phase 2 study of PEGPH20 in patients with PDA (a discontinued program), which was not resolved until we implemented steps to address an observed possible difference in TE event rates between the arms of the study. We or our collaboratorspartners may be required by regulatory agencies to conduct additional animal or human studies regarding the safety and efficacy of our pharmaceutical products or product candidates which we have not planned or anticipated. Furthermore, thereThere can be no assurance that we or our collaboratorspartners will resolve any issues related to any product or product candidate side effects or adverse events to the satisfaction of the FDA or any regulatory agency in a timely manner or ever, which could harm our business, prospects and financial condition.
To the extent that a product fails to conform to its specifications or comply with the applicable laws or regulations, we or our partners may be required to or may decide to voluntarily recall the product or regulatory authorities may request or require that we recall a product even if there is no immediate potential harm to a patient. Any recall of our products or their components that we supply to our partners could materially adversely affect our business by rendering us unable to sell those products or components for some time and by adversely affecting our reputation. Recalls are costly and take time and effort to administer. Even if a recall only initially relates to a single product, product batch, or a portion of a batch, recalls may later be expanded to additional products or batches or we or our partners may incur additional costs and need to dedicate additional efforts to investigate and rule out the potential for additional impacted products or batches. Moreover, if any of our partners recall a product due to an issue with a product or component that we supplied, they may claim that we are responsible for such issue and may seek to recover the costs related to such recall or be entitled to certain contractual remedies from us. Recalls may further result in decreased demand for our partnered or proprietary products, could cause our partners or distributors to return products to us for which we may be required to provide refunds or replacement products, or could result in product shortages. Recalls may also require regulatory reporting and prompt regulators to conduct additional inspections of our or our partners’ or contractors’ facilities, which could result in findings of noncompliance and regulatory enforcement actions. A recall could also result in product liability claims by individuals and third-party payers. In addition, product liability claims or other safety issues
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could result in an investigation of the safety or efficacy of our products, our manufacturing processes and facilities, or our marketing programs conducted by the FDA or the authorities of the EU member states and other jurisdictions. Such investigations could also potentially lead to a recall of our products or more serious enforcement actions, limitations on the indications for which they may be used, or suspension, variation, or withdrawal of approval. Any such regulatory action by the FDA, the EMA or the competent authorities of the EU member states could lead to product liability lawsuits as well.
If our contract manufacturers or vendors are unable or elect not to manufacture and supply to us bulk rHuPH20 or other raw materials, reagents, components or componentsdevices in the quantity and quality required by us or our collaboratorspartners for use in the production of Hylenex or our partners’other proprietary or partnered products and product candidates, our Hylenex commercialization efforts orand our partners’ product development andor commercialization efforts could be delayed or stopped and our business results of operations and our collaborations could be harmed.*
We rely on a number of third parties in our supply chain for the supply and manufacture of our partnered and proprietary products and the availability of such products depends upon our ability to procure the raw materials, components, packaging materials and finished products from these third parties, many of which are currently our single source for the materials necessary for certain of our products. We have entered into supply agreements with numerous third-party suppliers. For example, we have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and Catalent Indiana LLC (Catalent) to produce bulk rHuPH20. These manufacturers each produce bulk rHuPH20 under cGMP for use in Hylenex recombinant, and for use in collaborationpartnered products and product candidates. We rely on their ability to successfully manufacture bulk rHuPH20 according to product specifications. In addition to supply obligations, our contract manufacturers will also provide support for the chemistry, manufacturing and controls sections for FDA and other regulatory
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filings. We also rely on vendors to supply us with raw materials to produce reagents and other materials for bioanalytical assays used to support our partners’ clinical trials. We also have a commercial manufacturing and supply agreement with Patheon under which Patheon provides the final fill and finishing steps in the production process of Hylenex recombinant. If any of our contract manufacturers or vendors: (i) is unable to retain its status as an FDA approved manufacturing facility; (ii) is unable to otherwise successfully scale up bulk rHuPH20 production to meet corporate or regulatory authority quality standards; (iii) is unable to procure the labor, raw materials, reagents or components necessary to produce our proprietary products, including bulk rHuPH20 and Hylenex recombinant, or our bioanalytical assays or our partnered products or (iv) fails to manufacture and supply our partnered and proprietary products, including bulk rHuPH20 in the quantity and quality required by us or our collaboratorspartners for use in Hylenex and collaborationpartnered products and product candidates for any other reason, our business will be adversely affected. In addition, a significant change in such parties’ or other third partythird-party manufacturers’ business or financial condition could adversely affect their abilities or willingness to fulfill their contractual obligations to us. We have not established, and may not be able to establish, favorable arrangements with additional bulk rHuPH20 manufacturers and suppliers of the ingredients necessary to manufacture bulk rHuPH20 should the existing manufacturers and suppliers become unavailable or in the event that our existing manufacturers and suppliers are unable or unwilling to adequately perform their responsibilities. We have attempted to mitigate the impact of a potential supply interruption through the establishment of excess bulk rHuPH20 inventory where possible, but there can be no assurances that this safety stock will be maintained or that it will be sufficient to address any delays, interruptions or other problems experienced by any of our contract manufacturers. Any delays, interruptions or other problems regarding the ability or willingness of our contract manufacturers to supply bulk rHuPH20 or the ability or willingness of other third partythird-party manufacturers, to supply other raw materials or ingredients necessary to produce our other proprietary or partnered products on a timely basis could: (i) cause the delay of our partners’ clinical trials or otherwise delay or prevent the regulatory approval of our partners’ product candidates; (ii) delay or prevent the effective commercialization of Hylenexour proprietary or collaborationpartnered products and product candidates; and/or (iii) cause us to breach contractual obligations to deliver bulk rHuPH20 to our collaborators.partners. Such delays would likelycould damage our relationship with our collaborators,partners, and they wouldcould have a material adverse effect on royalties and thus our business and financial condition. Additionally, we rely on third parties to manufacture, prepare, fill, finish, package, store and ship our productproprietary and partners’partnered products and product candidates on our behalf. If the third parties we identify fail to perform their obligations, the progress of partners’ clinical trials could be delayed or even suspended and the commercialization of our product and partnerpartnered or proprietary products could be delayed or prevented.
In addition, our Minnetonka, Minnesota facility supports our administrative functions, product development and quality operations and is intended to eventually provide additional manufacturing and warehousing capabilities in the future. If we begin manufacturing and producing commercial products in the future, we will be subject to relevant risks comparable to those of our third-party manufacturers. For example, we may not be able to begin product manufacturing and production due to a number of different reasons including, but not limited to, an ability to obtain necessary supplies and materials, labor and expertise. To the extent we rely on our ability to manufacture any of our proprietary and partnered products, our inability to do so could have a material adverse impact on our business, financial condition and results of operations.


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We rely on third parties to perform many necessary services for our products including services related to the distribution, invoicing, rebates and contract administration, co-pay program administration, sample distribution and administration, storage and transportation of our products. If anything should impede their ability to meet their commitments this could impact our business performance.*
Depending on the product, we have retained third-party service providers to perform a variety of functions related to the distribution, invoicing, rebates and contract administration, co-pay program administration, sample distribution and administration, storage and transportation of our products, key aspects of which are out of our direct control. We place substantial reliance on these providers as well as other third-party providers that perform services for us, including, depending on the product, entrusting our inventories of products to their care and handling. We also may rely on third parties to administer our drug price reporting and rebate payments and contracting obligations under federal programs. Despite our reliance on third parties, we are responsible for compliance with the applicable legal and program requirements. By example, in certain states, we are required to hold licenses to distribute our products in these states and must comply with the associated state laws. Moreover, if these third-party service providers fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us or encounter physical damage or a natural disaster at their facilities, our ability to deliver products to meet commercial demand would be significantly impaired. In addition, we may use third parties to perform various other services for us relating to regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If our employees or any third-party service providers fail to comply with applicable laws and regulations, we and/or they may face regulatory or False Claims Act enforcement actions. Moreover, if the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market our products could be jeopardized or we and/or they could be subject to regulatory sanctions. We do not currently have the internal capacity to perform these important commercial functions, and we may not be able to maintain commercial arrangements for these services on reasonable terms.

If we or any party to a key collaboration agreement fail to perform material obligations under such agreement, or if a key collaboration agreement, is terminated for any reason, our business could significantly suffer.
We have entered into multiple collaboration agreements under which we may receive significant future payments in the form of milestone payments, target designation fees, maintenance fees and royalties. We are heavily dependent on our collaboratorspartners to develop and commercialize product candidates subject to our collaborations in order for us to realize any financial benefits, including revenues from milestones, royalties and product sales from these collaborations. Our collaboratorspartners may not devote the attention and resources to such efforts that we would ourselves, change their clinical development plans, promotional efforts or simultaneously develop and commercialize products in competition to those products we have licensed to them. Any of these actions could not be visible to us immediately and could negatively impact our ability to forecast and our ability to achieve the benefits and revenue we receive from such collaboration. In addition, in the event that a party fails to perform under a key collaboration agreement, or if a key collaboration agreement is terminated, the reduction in anticipated revenues could negatively impact our operations. In addition, the termination of a key collaboration agreement by one or more of our collaboratorspartners could have a material adverse impact on our ability to enter into additional collaboration agreements with new collaboratorspartners on favorable terms, if at all. In certain circumstances, the termination of a key collaboration agreement would require us to revise our corporate strategy going forward and reevaluate the applications and value of our technology.
Hylenex and our partners’ ENHANZE products and product candidates rely on the rHuPH20 enzyme, and any adverse development regarding rHuPH20 could substantially impact multiple areas of our business, including current and potential ENHANZE collaborations, as well as any proprietary programs.*
rHuPH20 is a key technological component of Hylenex and our ENHANZE technology and most of our collaborationENHANZE partnered products and product candidates, including the current and future products and product candidates under our ENHANZE collaborations. IfWe derive a substantial portion of our revenues from our ENHANZE collaborations. Therefore, if there is an adverse development for rHuPH20 (e.g., an adverse regulatory determination relating to rHuPH20, if we are unable to obtain sufficient quantities of rHuPH20, if we are unable to obtain or maintain material proprietary rights to rHuPH20 or if we discover negative characteristics of rHuPH20), multiple areas of our business, including current and potential collaborations, as well as proprietary programs would be substantially impacted. For example, elevated anti-rHuPH20 antibody titers were detected in the registration trial for Baxalta’s HYQVIA product as well as in a former collaborator’spartner’s product in a Phase 2 clinical trial with rHuPH20, but have not been associated, in either case, with any adverse events. We monitor for antibodies to rHuPH20 in our collaboration and proprietary programs, and although we do not believe at this time that the incidence of non-neutralizing anti-rHuPH20 antibodies in either the HYQVIA program or the former collaborator’spartner’s program will have a significant impact on our proprietary product and our partners’ product and product candidates, there can be no assurance that there will not be other such occurrences in the foregoing programs or that concerns regarding these antibodies
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will not also be raised by the FDA or other health authorities in the future, which could result in delays or discontinuations of our Hylenex commercialization activities, the development or commercialization activities of our ENHANZE partners, or deter our entry into additional ENHANZE collaborations with third parties.
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Our business strategy and our strategic focus is currently limited to only a few fields or applicationsfocused on growth of our ENHANZE technology, which may increaseour autoinjector technology, our commercial products and potential growth through acquisition. Currently, ENHANZE is the largest revenue driver and as a result there is a risk for potential negative impact from adverse developments. Future expansion of our strategic focus to additional applications of our ENHANZE technology or by acquiring new technologies may require the use of additional resources, result in increased expense and ultimately may not be successful.*
We routinely evaluate our business strategy, and may modify this strategy in the future in light of our assessment of unmet medical needs, growth potential, resource requirements, regulatory issues, competition, risks and other factors. As a result of these strategic evaluations, we may focus our resources and efforts on one or a few programs or fields and may suspend or reduce our efforts on other programs and fields. For example, in the fourth quarter of 2019, we decided to focus our resources on our ENHANZE technology and our commercial product, Hylenex. By focusing primarily on these areas, we increase the potential impact on us if one of those partner programs does not successfully complete clinical trials, achieve commercial acceptance or meet expectations regarding sales and revenue. We may also expand our strategic focus by seeking new therapeutics applications of our ENHANZE technology or by acquiring new technologies which may require the use of additional resources, increased expense and would require the attention of senior management. For example, in May 2022, we acquired Antares as a means to expand our strategic focus into new therapeutic applications with a goal of diversifying the sources of our revenues. There can be no assurance that our investment in Antares or any such future investment of resources wouldin new technologies will ultimately result in additional approved collaborationproprietary or partnered products or commercial success of new therapeutic applications of our technology.
Our collaborationpartnered or proprietary product candidates may not receive regulatory approvals or their development may be delayed for a variety of reasons, including delayed or unsuccessful clinical trials, regulatory requirements or safety concerns. If we or our partners fail to obtain, or have delays in obtaining, regulatory approvals for any product candidates, our business, financial condition and results of operations may be materially adversely affected.*
Clinical testing of pharmaceutical products is a long, expensive and uncertain process, and the failure or delay of a clinical trial can occur at any stage, including the patient enrollment stage. Even if initial results of preclinical and nonclinical studies or clinical trial results are promising, our collaboratorspartners may obtain different results in subsequent trials or studies that fail to show the desired levels of dose safety and efficacy, we or our collaboratorspartners may not obtain applicable regulatory approval for our products for a variety of other reasons. Preclinical, nonclinical, and clinical trials for collaborationproprietary and partnered product candidates could be unsuccessful, which would delay or preclude regulatory approval and commercialization of the product candidates. In the U.S. and other jurisdictions, regulatory approval can be delayed, limited or not granted for many reasons, including, among others:
during the course of clinical studies, the final data may differ from initial reported data, and clinical results may not meet prescribed endpoints for the studies or otherwise provide sufficient data to support the efficacy of our collaborators’partners’ product candidates;
clinical and nonclinical test results may reveal inferior pharmacokinetics, side effects, adverse events or unexpected safety issues associated with the use of our collaborators’partners’ product candidates;
regulatory review may not find that the data from preclinical testing and clinical trials justifies approval;
regulatory authorities may require that we or our partners change their studies or conduct additional studies which may significantly delay or make continued pursuit of approval commercially unattractive;
a regulatory agency may reject partnerour and our partners’ trial data or disagree with their interpretations of either clinical trial data or applicable regulations;
a regulatory agency may require additional safety monitoring and reporting through Risk Evaluation and Mitigation Strategies orincluding conditions to assure safe use programs;
programs and we or a partner may decide to not pursue regulatory approval for such a product;
a regulatory agency may not approve our manufacturing processes or facilities, or the processes or facilities of our collaborators,partners, our contract manufacturers or our raw material suppliers;
failure of our or our partners’ contract research organization, or CRO, to properly perform the clinical trial in accordance with the written protocol, our contractual obligations with them or applicable regulatory requirements;
a regulatory agency may identify problems or other deficiencies in our existing manufacturing processes or facilities, or the existing processes or facilities of our collaborators,partners, our contract manufacturers or our raw material suppliers;
a regulatory agency may change its formal or informal approval requirements and policies, act contrary to previous guidance, adopt new regulations or raise new issues or concerns late in the approval process; or
a partnerproprietary or partnered product candidate may be approved only for indications that are narrow or under conditions that place the product at a competitive disadvantage, which may limit the sales and marketing activities for such product candidate or otherwise adversely impact the commercial potential of a product.
If a collaborationproprietary or partnered product candidate is not approved in a timely fashion or obtained on commercially viable terms, or if development of any product candidate is terminated due to difficulties or delays encountered in the regulatory
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approval process, it could have a material adverse impact on our business, financial condition and results of operation and we would become more dependent on the development of other collaborationproprietary or partnered product candidates and/or our ability to successfully acquire other technologies. There can be no assurances that we or our any collaborationpartnered product candidate will receive regulatory approval in a timely manner, or at all. There can be no assurance that partners will be able to gain clarity as to the FDA’s requirements or that the requirements may be satisfied in a
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commercially feasible way, in which case our ability to enter into collaborations with third parties or explore other strategic alternatives to exploit an opportunity will be limited or may not be possible.
We anticipate that certain collaborationproprietary or partnered products will be marketed, and perhaps manufactured, in foreign countries. The process of obtaining regulatory approvals in foreign countries is subject to delay and failure for the reasons set forth above, as well as for reasons that vary from jurisdiction to jurisdiction. The approval process varies among countries and jurisdictions and can involve additional testing. The time required to obtain approval may differ from that required to obtain FDA approval. Foreign regulatory agencies may not provide approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA.
Our third party collaboratorsthird-party partners are responsible for providing certain proprietary materials that are essential components of our collaborationpartnered products and product candidates, and any failure to supply these materials could delay the development and commercialization efforts for these collaborationpartnered products and product candidates and/or damage our collaborations. Our partners are also responsible for distributing and commercializing their products, and any failure to successfully commercialize their products could materially adversely affect our revenues.*
Our development and commercialization collaboratorspartners are responsible for providing certain proprietary materials that are essential components of our collaborationpartnered products and product candidates. For example, Roche is responsible for producing the Herceptin and MabThera required for its subcutaneous products and BaxaltaTakeda is responsible for producing the GAMMAGARD LIQUID for its product HYQVIA. If a collaborator,partner, or any applicable third party service provider of a collaborator,partner, encounters difficulties in the manufacture, storage, delivery, fill, finish or packaging of the collaborationpartnered product or product candidate or component of such product or product candidate, such difficulties could (i) cause the delay of clinical trials or otherwise delay or prevent the regulatory approval of collaborationpartnered product candidates; and/or (ii) delay or prevent the effective commercialization of collaborationpartnered products. Such delays could have a material adverse effect on our business and financial condition. We also rely on our partners to commercialize and distribute their products and if they are unsuccessful in commercializing their products, the resulting royalty revenue we would receive may be lower than expected.
If we or our collaboratorspartners fail to comply with regulatory requirements applicable to promotion, sale and manufacturing of approved products, regulatory agencies may take action against us or them, which could significantly harm our business.*
Any approved products, along with the manufacturing processes, post-approval clinical data requirements, labeling, advertising and promotional activities for these products, are subject to continual requirements and review by the FDA, state and foreign regulatory bodies. Regulatory authorities subject a marketed product, its manufacturer and the manufacturing facilities to continual review and periodic inspections. We, our collaboratorspartners and our respective contractors, suppliers and vendors, will be subject to ongoing regulatory requirements, including complying with regulations and laws regarding advertising, promotion and sales of drug products, required submissions of safety and other post-market information and reports, registration requirements, cGMP regulations (including requirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation), and the requirements regarding the distribution of samples to physicians and recordkeeping requirements. Further, because some of our proprietary and partnered products and product candidates are drug/device combination products, we and our partners will have to comply with extensive regulatory requirements than would otherwise be required for products that are not combination products. Regulatory agencies may change existing requirements or adopt new requirements or policies. We, our collaboratorspartners and our respective contractors, suppliers and vendors, may be slow to adapt or may not be able to adapt to these changes or new requirements.
In particular, regulatory requirements applicable to pharmaceutical products make the substitution of suppliers and manufacturers costly and time consuming. We have minimal internal manufacturing capabilities and are, and expect to be in the future, entirelysubstantially dependent on contract manufacturers and suppliers for the manufacture of our products and for their active and other ingredients. The disqualification of these manufacturers and suppliers through their failure to comply with regulatory requirements could negatively impact our business because the delays and costs in obtaining and qualifying alternate suppliers (if such alternative suppliers are available, which we cannot assure) could delay our or our partners’ clinical trials or otherwise inhibit our or partners’ ability to bring approved products to market, which would have a material adverse effect on our business and financial condition. Likewise, if we, our collaboratorspartners and our respective contractors, suppliers and vendors involved in sales and promotion of our products do not comply with applicable laws and regulations, for example off-label or false or misleading promotion, this could materially harm our business and financial condition.
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Failure to comply with regulatory requirements may result in adverse regulatory actions including but not limited to, any of the following:
restrictions on our or our partners’ products or manufacturing processes;
warning letters;
withdrawal of our or our partners’ products from the market;
voluntary or mandatory recall;
fines;
suspension or withdrawal of regulatory approvals;
suspension or termination of any of our partners’ ongoing clinical trials;
refusal to permit the import or export of our or our partners’ products;
refusal to approve pending applications or supplements to approved applications that we submit;
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product seizure;
injunctions; or
imposition of civil or criminal penalties.
Failure to successfully integrate the Antares business, or failure of the Antares business to perform could adversely impact our stock price and future business and operations.*
In May 2022, we completed the acquisition of Antares. Our integration of the Antares business into our operations will be a complex and time-consuming process that may not be successful. The primary areas of focus for successfully combining the business of Antares with our operations may include, among others: retaining and integrating management and other key employees; aligning and prioritizing product development initiatives, integrating information, communications and other systems; and managing the growth of the combined company.
Even if we successfully integrate the business of Antares into our operations, we may not realize the anticipated benefits. We acquired Antares with the expectation that the acquisition will result in various benefits for the combined company, including providing an opportunity for increased revenues, expansion into additional market segments and the ability to leverage existing U.S. commercial infrastructure to promote the companies' proprietary products. Increased competition and/or deterioration in business conditions may limit our ability to expand this business. As such, we may not be able to realize the benefits anticipated in connection with the acquisition.
We may need to raise additional capital in the future and there can be no assurance that we will be able to obtain such funds.*
We may need to raise additional capital in the future to fund our operations and for general corporate purposes if revenueswe do not occur asachieve the level of revenues we expected. Our current cash reserves and expected revenues may not be sufficient for us to fund general operations and conduct our business at the level desired. In addition, if we engage in acquisitions of companies, products or technologies in order to execute our business strategy, we may need to raise additional capital. We may raise additional capital in the future through one or more financing vehicles that may be available to us including (i) new collaborative agreements; (ii) expansions or revisions to existing collaborative relationships; (iii) private financings; (iv) other equity or debt financings; (v) monetizing assets; and/or (vi) the public offering of securities.
If we are required to raise additional capital in the future, it may not be available on favorable financing terms within the time required, or at all. If additional capital is not available on favorable terms when needed, we will be required to raise capital on adverse terms or significantly reduce operating expenses through the restructuring of our operations or deferral of strategic business initiatives. If we raise additional capital through a public offering of securities or equity, a substantial number of additional shares may be issued, which may negatively affect our stock price and these additional shares will dilute the ownership interest of our current investors.investors and may negatively affect our stock price.
We currently have significant debt and mayexpect to incur additional debt. Failure by us to fulfill our obligations under the applicable debt agreements may cause the repayment obligations to accelerate.*
The aggregate amount of our consolidated indebtedness, net of debt discount, as of September 30, 20212022 was $875.7$1,504.5 million, which includes $90.9$13.5 million in aggregate principal amount of the 2024 Convertible Notes, and $805.0 million in aggregate principal amount of the 2027 Convertible Notes and $720.0 million in aggregate principal of the 2028 Convertible Notes, net of unamortized debt discount of $1.7$0.2 million, $15.2 million and of $18.5$18.6 million for 2024 Convertible Notes, 2027 Convertible Notes and 2028 Convertible Notes, respectively. We also may incur additional indebtedness in the future.

Our indebtedness may:
make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our indebtedness;
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general corporate purposes;
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limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions, share repurchases or other general business purposes;
require us to use a portion of our cash flow from operations to make debt service payments;
limit our flexibility to plan for, or react to, changes in our business and industry;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
In addition, our 2022 Credit Agreement includes certain affirmative and negative covenants, that, among other things, may restrict our ability to: create liens on assets; incur additional indebtedness; make investments; make acquisitions and other fundamental changes; and sell and dispose of property or assets. The 2022 Credit Agreement also includes financial covenants requiring us to maintain, measured as of the end of each fiscal quarter, a maximum consolidated net leverage ratio of 4.75 to 1.00 initially, which declines to 4.00 to 1.00 over the term of the loan facility, and a minimum consolidated interest coverage ratio of 3.00 to 1.00. The 2022 Credit Agreement also contains customary representations and warranties and events of default. Complying with the covenants contained in the 2022 Credit Agreement could make it more difficult for us to execute our business strategy. Further, in the event of default by us under the 2022 Credit Agreement, the lenders would be entitled to exercise their remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the 2022 Credit Agreement which would harm our financial condition.
Our ability to make payments on our existing or any future debt will depend on our future operating performance and ability to generate cash and may also depend on our ability to obtain additional debt or equity financing. It will also depend on financial, business or other factors affecting our operations, many of which are beyond our control. We will need to use cash to pay principal and interest on our debt, thereby reducing the funds available to fund operations, strategic initiatives and working capital requirements. If we are unable to generate sufficient cash to service our debt obligations, an event of default may occur under any of our debt instruments which could result in an acceleration of such debt upon which we may be required to repay all the amounts outstanding under some or all of our debt instruments. Such an acceleration of our debt obligations could harm our financial condition. From time to time, we may seek to retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Any such repurchases or exchanges would be on such terms and at such prices as we determine, and will depend on current market conditions, our liquidity needs, any restrictions in our contracts and other factors. The amounts involved in such transactions could be material.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their notes, we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. Even if holders of the Convertible Notes do not elect to convert their notes, we are required under applicable
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accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability when the conditional conversion feature is triggered, which results in a material reduction of our net working capital. For example, as of September 30, 2021,2022, the conditional conversion feature was triggered and our 2024 Convertible Notes are classified as a current liability.
Conversion of our Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
The conversion of some or all of our Convertible Notes, to the extent we deliver shares upon conversion, will dilute the ownership interests of existing stockholders. Any sales in the public market of the Convertible Notes or our common stock issuable upon conversion of the Convertible Notes could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.





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If collaborationproprietary or partnered product candidates are approved for marketingcommercialization but do not gain market acceptance resulting in commercial performance below that which was expected or projected, our business may suffer and we may not be able to fund future operations.suffer.*
Assuming that existing or future collaborationproprietary or partnered product candidates obtain the necessary regulatory approvals for commercial sale, a number of factors may affect the market acceptance of these newly-approved products, including, among others:
the degree to which the use of these products is restricted by the approved product label;
the price of these products relative to other therapies for the same or similar treatments;
the extent to which reimbursement for these products and related treatments will be available from third party payorsthird-party payers including government insurance programs and private insurers;
the introduction of generic or biosimilar competitors to these products;
the perception by patients, physicians and other members of the health care community of the effectiveness and safety of these products for their prescribed treatments relative to other therapies for the same or similar treatments;
the ability and willingness of our collaboratorspartners to fund sales and marketing efforts; and
the effectiveness of the sales and marketing efforts of our collaborators.partners.
If these collaborationproprietary or partnered products do not gain or maintain market acceptance or experience reduced sales resulting in commercial performance below that which was expected or projected, the royaltiesrevenues we expect to receive from these products will be diminished which could harm our ability to fund future operations, including conduct acquisitions, execute our planned share repurchases, or affect our ability to use funds for other general corporate purposes and cause our business to suffer.
In addition, our partners’proprietary or partnered product candidates will be restricted to the labels approved by FDA and applicable regulatory bodies, and these restrictions may limit the marketing and promotion of the ultimate products. If the approved labels are restrictive, the sales and marketing efforts for these collaboration products may be negatively affected.
Our ability to license our ENHANZE technologyand device technologies to our collaboration partners depends on the validity of our patents and other proprietary rights.*  
Patents and other proprietary rights are essential to our business. Our success will depend in part on our ability to obtain and maintain patent protection for our inventions, to preserve our trade secrets and to operate without infringing the proprietary rights of third parties. We have multiple patents and patent applications throughout the world pertaining to our recombinant human hyaluronidase and methods of use and manufacture, including an issued U.S. patent which expires in 2027 and an issued European patent which expires in 2024, which we believe cover the products and product candidates under our existing collaborations, and Hylenex. Although we believe our patent filings represent a barrier to entry for potential competitors looking to utilize these hyaluronidases, upon expiration of our patents other pharmaceutical companies may (if they do not infringe our other patents) seek to compete with us by developing, manufacturing and selling biosimilars to the active drug ingredient in our ENHANZE technology used by our collaboration partners in combination with their products. Any such loss of patent protection or proprietary rights could lead to a reduction or loss of revenues, incentivize one or more of our key ENHANZE collaboration partners to terminate their relationship with us and impact our ability to enter into new collaboration and license agreements.
Developing, manufacturing and marketing pharmaceutical products for human use involves significant product liability risks for which we currentlymay have limitedinsufficient insurance coverage.*
The development, manufacture, testing, marketing and sale of pharmaceutical products and medical devices involves the risk of product liability claims by consumers and other third parties. Product liability claims may be brought by individuals seeking relief for themselves, or by groups seeking to represent a class of injured patients. Further, third-party payers, either individually or as a putative class, may bring actions seeking to recover monies spent on one of our products. Although we maintain product liability insurance coverage, product liability claims can be high in the
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pharmaceutical industry, and our insurance may not sufficiently cover our actual liabilities. If product liability claims were to be made against us, it is possible that the liabilities may exceed the limits of our insurance policy, or our insurance carriers may deny, or attempt to deny, coverage in certain instances. If a lawsuit against us is successful, then the insurance coverage may not be sufficient and could materially and adversely affect our business and financial condition. Furthermore, various distributors of pharmaceutical products require minimum product liability insurance coverage before purchase or acceptance of products for distribution. Failure to satisfy these insurance requirements could impede our ability to achieve broad distribution of our proposed products, and higher insurance requirements could impose additional costs on us. In addition, since many of our collaborationpartnered product candidates include the pharmaceutical products of a third party,third-party, we run the risk that problems with the third partythird-party pharmaceutical product will give rise to liability claims against us. Product liability claims can also result in additional regulatory consequences including, but not limited to, investigations and regulatory enforcement actions, as well as recalls, revocation or approvals, or labeling, marketing or promotional restrictions or changes. Product liability claims could also harm our reputation and the reputation of our products, adversely affecting our ability to market our products successfully. In
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addition, defending a product liability lawsuit is expensive and can divert the attention of our key employees from operating our business. Such claims can also impact our ability to initiate or complete clinical trials.
If our collaboratorspartners do not achieve projected development, clinical, or regulatory goals in the timeframes publicly announced or otherwise expected, the commercialization of our collaborationpartnered products may be delayed and, as a result, our stock price may decline, and we may face lawsuits relating to such declines.
From time to time, our collaboratorspartners may publicly articulateannounce the estimated timing for the accomplishment of certain scientific, clinical, regulatory and other product development goals. The accomplishment of any goal is typically based on numerous assumptions, and the achievement of a particular goal may be delayed for any number of reasons both within and outside of our and our collaborators’partners’ control. If scientific, regulatory, strategic or other factors cause a collaboration partner to not meet a goal, regardless of whether that goal has been publicly articulatedannounced or not, our stock price may decline rapidly. Stock price declines may also trigger direct or derivative shareholder lawsuits. As with any litigation proceeding, the eventual outcome of any legal action is difficult to predict. If any such lawsuits occur, we will incur expenses in connection with the defense of these lawsuits, and we may have to pay substantial damages or settlement costs in connection with any resolution thereof. Although we have insurance coverage against which we may claim recovery against some of these expenses and costs, the amount of coverage may not be adequate to cover the full amount or certain expenses and costs may be outside the scope of the policies we maintain. In the event of an adverse outcome or outcomes, our business could be materially harmed from depletion of cash resources, negative impact on our reputation, or restrictions or changes to our governance or other processes that may result from any final disposition of the lawsuit. Moreover, responding to and defending pending litigation significantly diverts management’s attention from our operations.
In addition, the consistent failure to meet publicly announced milestones may erode the credibility of our management team with respect to future milestone estimates.
Future acquisitions could disrupt our business and harm our financial condition.
In order to augment our product pipeline or otherwise strengthen our business, we acquired Antares in May 2022 and we may decide to acquire additional businesses, products and technologies. As we have limited experience in evaluating and completing acquisitions, our ability as an organization to make such acquisitions is unproven. Acquisitions could require significant capital infusions and could involve many risks, including, but not limited to, the following:
we may have to issue additional convertible debt or equity securities to complete an acquisition, which would dilute our stockholders and could adversely affect the market price of our common stock;
an acquisition may negatively impact our results of operations because it may require us to amortize or write down amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or it may cause adverse tax consequences, substantial depreciation or deferred compensation charges;
we may encounter difficulties in assimilating and integrating the business, products, technologies, personnel or operations of companies that we acquire;
certain acquisitions may impact our relationship with existing or potential collaboratorspartners who are competitive with the acquired business, products or technologies;
acquisitions may require significant capital infusions and the acquired businesses, products or technologies may not generate sufficient value to justify acquisition costs;
we may take on liabilities from the acquired company such as debt, legal liabilities or business risk which could be significant;
an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience; and
key personnel of an acquired company may decide not to work for us.
If any of these risks occurred, it could adversely affect our business, financial condition and operating results. There is no assurance that we will be able to identify or consummate any future acquisitions on acceptable terms, or at all. If we do pursue any future acquisitions, it is possible that we may not realize the anticipated benefits from such acquisitions or that the market will not view such acquisitions positively.
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Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.
Our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including changes in the mix of our profitability between different tax jurisdictions, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in
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tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.
In addition, on September 30, 2021, we determined, based on our facts and circumstances, that it was more likely than not that a substantial portion of our deferred tax assets would be realized and, as a result, substantially all of our valuation allowance against our deferred tax assets was released. This resulted in substantially and disproportionately increasing our reported net income and our earnings per share compared to our operating results for the third quarter of 2021. Historical and future comparisons to these amounts are not, and will not be, indicative of actual profitability trends for our business. Beginning in 2022, we expect to commence recording income tax expense at an estimated tax rate that will likely approximate statutory tax rates, which would result in a significant reduction in our net income and net income per share.
Risks Related To Ownership of Our Common Stock
Our stock price is subject to significant volatility.
We participate in a highly dynamic industry which often results in significant volatility in the market price of common stock irrespective of company performance. The high and low sales prices of our common stock during the twelve months ended September 30, 20212022 were $56.40$52.98 and $25.70,$31.36, respectively. We expect our stock price to continue to be subject to significant volatility and, inIn addition to the other risks and uncertainties described elsewhere in this Quarterly Report on Form 10-Q and all other risks and uncertainties that are either not known to us at this time or which we deem to be immaterial, any of the following factors may lead to a significant drop in our stock price:
the presence of competitive products to those being developed by our partners;
failure (actual or perceived) of our collaboratorspartners to devote attention or resources to the development or commercialization of partnered products or product candidates licensed to such collaborator;partner;
a dispute regarding our failure, or the failure of one of our third party collaborators,partners, to comply with the terms of a collaboration agreement;
the termination, for any reason, of any of our collaboration agreements;
the sale of common stock by any significant stockholder, including, but not limited to, direct or indirect sales by members of management or our Board of Directors;
the resignation, or other departure, of members of management or our Board of Directors;
general negative conditions in the healthcare industry;
pandemics or other global crises;
general negative conditions in the financial markets;
the cost associated with obtaining regulatory approval for any of our collaborationproprietary or partnered product candidates;
the failure, for any reason, to secure or defend our intellectual property position;
the failure or delay of applicable regulatory bodies to approve our partners’proprietary or partnered product candidates;
identification of safety or tolerability issues;issues associated with our proprietary or partnered products or product candidates;
failure of our or our partners’ clinical trials to meet efficacy endpoints;
suspensions or delays in the conduct of our or our partners’ clinical trials or securing of regulatory approvals;
adverse regulatory action with respect to our and our collaborators’proprietary or partnered products and product candidates such as loss of regulatory approval to commercialize such products, clinical holds, imposition of onerous requirements for approval or product recalls;
our failure, or the failure of our third party collaborators,partners, to successfully commercialize products approved by applicable regulatory bodies such as the FDA;
our failure, or the failure of our third party collaborators,partners, to generate product revenues anticipated by investors;
disruptions in our clinical or commercial supply chains, including disruptions caused by problems with a bulk rHuPH20 contract manufacturer or a fill and finish manufacturer for any product or product collaboration candidate;
the sale of additional debt and/or equity securities by us;
our failure to obtain financing on acceptable terms or at all;
a restructuring of our operations;
an inability to execute our share repurchase program in the time and manner we expect due to market, business, legal or other considerations; or
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a conversion of the Convertible Notes into shares of our common stock.
Future transactions where we raise capital may negatively affect our stock price.
We are currently a “Well-Known Seasoned Issuer” and may file automatic shelf registration statements at any time with the SEC. Sales of substantial amounts of shares of our common stock or other securities under any future shelf registration statements could lower the market price of our common stock and impair our ability to raise capital through the sale of equity securities.
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Anti-takeover provisions in our charter documents, the Indentures and Delaware law may make an acquisition of us more difficult.*
Anti-takeover provisions in our charter documents, the Indentures and Delaware law may make an acquisition of us more difficult. First, our Board of Directors is classified into three classes of directors. Under Delaware law, directors of a corporation with a classified board may be removed only for cause unless the corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation as amended, does not provide otherwise. In addition, our bylaws limit who may call special meetings of stockholders, permitting only stockholders holding at least 50% of our outstanding shares to call a special meeting of stockholders. Our amended and restated certificate of incorporation does not include a provision for cumulative voting for directors. Under cumulative voting, a minority stockholder holding a sufficient percentage of a class of shares may be able to ensure the election of one or more directors. Finally, our bylaws establish procedures, including advance notice procedures, with regard to the nomination of candidates for election as directors and stockholder proposals.
These provisions in our charter documents may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by our boardBoard of directors.Directors.
Further, in connection with our Convertible Notes issuances, we have entered into an indentureindentures dated as of November 18, 2019, and an indenture dated as of March 1, 2021 and August 18, 2022 (the “Indentures”), with The Bank of New York Mellon Trust Company, N.A., as trustee. Certain provisions in the Indentures could make it more difficult or more expensive for a third partythird-party to acquire us. For example, if a takeover would constitute a fundamental change, holders of the Convertible Notes will have the right to require us to repurchase their Convertible Notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their Convertible Notes in connection with such takeover. In addition, a change of control constitutes an event of default under our 2022 Credit Agreement. Such event of default could result in the administrative agent or the lender parties thereto declaring the unpaid principal, all accrued and unpaid interest, and all other amounts owing or payable under the 2022 Credit Agreement to be immediately due and payable. In either case, and in other cases, our obligations under the Convertible Notes, the Indentures and the Indentures2022 Credit Agreement could increase the cost of acquiring us or otherwise discourage a third partythird-party from acquiring us or removing incumbent management.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit large stockholders from consummating a merger with, or acquisition of, us.
These provisions may deter an acquisition of us that might otherwise be attractive to stockholders.
Risks Related to Our Industry
Our partners’or our partnered products must receive regulatory approval before they can be sold, and compliance with the extensive government regulations is expensive and time consuming and may result in the delay or cancellation of collaborationour or our partnered product sales, introductions or modifications.*
Extensive industry regulation has had, and will continue to have, a significant impact on our business. All pharmaceutical and medical device companies, including ours, are subject to extensive, complex, costly and evolving regulation by the health regulatory agencies including the FDA (and with respect to controlled drug substances, the U.S. Drug Enforcement Administration (DEA)) and equivalent foreign regulatory agencies and state and local/regional government agencies. The Federal Food, Drug and Cosmetic Act, the Controlled Substances Act and other domestic and foreign statutes and regulations govern or influence the testing, manufacturing, packaging, labeling, storing, recordkeeping, safety, approval, advertising, promotion, sale and distribution of our productproducts and our partners’ products and product candidates. We are dependent on receiving FDA and other governmental approvals, including regulatory approvals in jurisdictions outside the United States, prior to manufacturing, marketing and shipping our products. Consequently, there is always a risk that the FDA or other applicable governmental authorities, including those outside the United States, will not approve our or our partners’ products or may impose onerous, costly and time-consuming requirements such as additional clinical or animal testing. Regulatory authorities may require that our partners’ change our studies or conduct additional studies, which may significantly delay or make continued pursuit of approval commercially unattractive to our partners. For example, the approval of Baxalta’sthe HYQVIA BLA was delayed by the FDA until we and Baxaltaour partner provided additional preclinical data sufficient to address concerns regarding non-neutralizing antibodies to rHuPH20 that were detected in the registration trial. Although these antibodies have not been associated with any known adverse clinical effects, and the HYQVIA BLA was ultimately approved by the FDA, the FDA or other foreign regulatory agency may, at any
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time, halt our and our collaborators’partners’ development and commercialization activities due to safety concerns. In addition, even if our productproprietary or partners’or partnered products are approved, regulatory agencies may also take post-approval action limiting or revoking our or our partners’ ability to sell these products. Any of these regulatory actions may adversely affect the economic benefit we may derive from our productproprietary or our partners’partnered products and therefore harm our financial condition.
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Under certain of these regulations, in addition to our partners, we and our contract suppliers and manufacturers are subject to periodic inspection of our or their respective facilities, procedures and operations and/or the testing of products by the FDA, the DEA and other authorities, which conduct periodic inspections to confirm that we and our contract suppliers and manufacturers are in compliance with all applicable regulations. The FDA also conducts pre-approval and post-approval reviews and plant inspections to determine whether our systems, or our contract suppliers’ and manufacturers’ processes, are in compliance with cGMP and other FDA regulations. If our partners, we, or our contract suppliers and manufacturers, fail these inspections, our partners may not be able to commercialize their products in a timely manner without incurring significant additional costs, or at all.
In addition, the FDA imposes a number of complex regulatory requirements on entities that advertise and promote pharmaceuticals including, but not limited to, standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities involving the Internet.
Because some of our and our partners’ products and product candidates are considered to be drug/device combination products, the approval and post-approval requirements that we and they are required to comply with can be more complex.*
Many of our and our partners’ products and product candidates are considered to be drug/device combination products by the FDA, consisting of a drug product and a drug delivery device. If marketed individually, each component would be subject to different regulatory pathways and reviewed by different centers within the FDA. A combination product, however, is assigned to a center that will have primary jurisdiction over its pre-market review and regulation based on a determination of the product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of our and our partners’ products and product candidates, the primary mode of action is typically attributable to the drug component of the products, which means that the Center of Drug Evaluation and Research has primary jurisdiction over the products’ premarket development and review. These products and product candidates will be and have been subject to the FDA drug approval process and will not require a separate FDA clearance or approval for the device component. Even though these products and product candidates will not require a separate FDA clearance or approval, both the drug and device centers within the FDA will review the marketing application for safety, the efficacy of both the drug and device component, including the design and reliability of the injector, and a number of other different areas, such as to ensure that the drug labeling adequately discloses all relevant information and risks, and to confirm that the instructions for use are accurate and easy to use. These reviews could increase the time needed for review completion of a successful application and may require additional studies, such as usage studies, to establish the validity of the instructions for use. Such reviews and requirements may extend the time necessary for the approval of drug-device combinations. In the case of combination product candidates for which we or our partners are seeking approval via the ANDA pathway, it is also possible that the agency may decide that the unique nature of combination products leads it to question the claims of bioequivalence and/or same labeling, resulting in the need to refile the application under Section 505(b)(2). This may result in delays in product approval and may cause us or our partners to incur additional costs associated with testing, including clinical trials. Approval via the 505(b)(2) pathway may also result in additional selling expenses and a decrease in market acceptance due to the lack of substitutability by pharmacies or formularies. In addition, approval under the 505(b)(2) or ANDA regulatory pathway is not a guarantee of an exclusive position for the approved product in the marketplace.
Further, although precedent and guidance exist for the approval of such combination products, FDA could change what it requires or how it reviews submissions. Changes in review processes or the requirement for the study of combination products could delay anticipated launch dates or be cost prohibitive. Such delay or failure to launch these products or devices could adversely affect our revenues and future profitability. If our or our partners’ combination product candidates are approved, we, our partners, and any of our respective contractors will be required to comply with FDA regulatory requirements related to both drugs and devices. For instance, drug/device combination products must comply with both the drug cGMPs and device QSRs. Depending on whether the drug and device components are at the same facility, however, the FDA regulations provide a streamlined method to comply with both sets of requirements. The FDA has specifically promulgated guidance on injectors, which discuss FDA’s requirements with respect to marketing application and post-market injector design controls and reliability analyses. Additionally, drug/device combination products will be subject to additional FDA and constituent part reporting requirements. Compliance with these requirements will require additional effort and monetary expenditure.

We may be subject, directly or indirectly, to various broad federal and state healthcare laws. If we are unable to comply, or have not fully complied, with such laws, we could face civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.
Our business operations and activities may be directly, or indirectly, subject to various broad federal and state healthcare laws, including without limitation, anti-kickback laws, the Foreign Corrupt Practices Act (FCPA), false claims laws, civil
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monetary penalty laws, data privacy and security laws, tracing and tracking laws, as well as transparency (or “sunshine”) laws regarding payments or other items of value provided to healthcare providers. These laws may restrict or prohibit a wide range of business activities, including, but not limited to, research, manufacturing, distribution, pricing, discounting, marketing and promotion and other business arrangements. These laws may impact, among other things, our current activities with principal investigators and research subjects, as well as sales, marketing and education programs. Many states have similar healthcare fraud and abuse laws, some of which may be broader in scope and may not be limited to items or services for which payment is made by a government health care program.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. While we have adopted a healthcare corporate compliance program, it is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws. If our operations or activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to, without limitation, civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.
In addition, any sales of products outside the U.S. will also likely subject us to the FCPA and foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
We may be required to initiate or defend against legal proceedings related to intellectual property rights, which may result in substantial expense, delay and/or cessation of the development and commercialization of our products.
We primarily rely on patents to protect our intellectual property rights. The strength of this protection, however, is uncertain. For example, it is not certain that:
we will be able to obtain patent protection for our products and technologies;
the scope of any of our issued patents will be sufficient to provide commercially significant exclusivity for our products and technologies;
others will not independently develop similar or alternative technologies or duplicate our technologies and obtain patent protection before we do; and
any of our issued patents, or patent pending applications that result in issued patents, will be held valid, enforceable and infringed in the event the patents are asserted against others.
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We currently own or license several patents and also have pending patent applications applicable to rHuPH20 and other proprietary materials. There can be no assurance that our existing patents, or any patents issued to us as a result of our pending patent applications, will provide a basis for commercially viable products, will provide us with any competitive advantages, or will not face third partythird-party challenges or be the subject of further proceedings limiting their scope or enforceability. Any weaknesses or limitations in our patent portfolio could have a material adverse effect on our business and financial condition. In addition, if any of our pending patent applications do not result in issued patents, or result in issued patents with narrow or limited claims, this could result in us having no or limited protection against generic or biosimilar competition against our product candidates which would have a material adverse effect on our business and financial condition.
We may become involved in interference proceedings in the U.S. Patent and Trademark Office, or other proceedings in other jurisdictions, to determine the priority, validity or enforceability of our patents. In addition, costly litigation could be necessary to protect our patent position.
We also rely on trademarks to protect the names of our products (e.g. Hylenex recombinant). We may not be able to obtain trademark protection for any proposed product names we select. In addition, product names for pharmaceutical products must be approved by health regulatory authorities such as the FDA in addition to meeting the legal standards required for trademark protection and product names we propose may not be timely approved by regulatory agencies which may delay product launch. In addition, our trademarks may be challenged by others. If we enforce our trademarks against third parties, such enforcement proceedings may be expensive.
We also rely on trade secrets, unpatented proprietary know-how and continuing technological innovation that we seek to protect with confidentiality agreements with employees, consultants and others with whom we discuss our business. Disputes may arise concerning the ownership of intellectual property or the applicability or enforceability of these agreements, and we might not be able to resolve these disputes in our favor.
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In addition to protecting our own intellectual property rights, third parties may assert patent, trademark or copyright infringement or other intellectual property claims against us. If we become involved in any intellectual property litigation, we may be required to pay substantial damages, including but not limited to treble damages, attorneys’ fees and costs, for past infringement if it is ultimately determined that our products infringe a third party’sthird-party’s intellectual property rights. Even if infringement claims against us are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from other business concerns. Further, we may be stopped from developing, manufacturing or selling our products until we obtain a license from the owner of the relevant technology or other intellectual property rights. If such a license is available at all, it may require us to pay substantial royalties or other fees.
We may incur significant liability if it is determined that we are promoting or have in the past promoted the “off-label” use of drugs or medical devices, or otherwise promoted or marketed approved products in a manner inconsistent with the FDA’s requirements.*
In the U.S. and certain other jurisdictions, companies may not promote drugs or medical devices for “off-label” uses, that is, uses that are not described in the product’s labeling and that differ from those that were approved or cleared by the FDA or other foreign regulatory agencies. However, physicians and other healthcare practitioners may prescribe drug products and use medical devices for off-label or unapproved uses, and such uses are common across some medical specialties. Although the FDA does not regulate a physician’s choice of medications, treatments or product uses, the Federal Food, Drug and Cosmetic Act and FDA regulations significantly restrict permissible communications on the subject of off-label uses of drug products and medical devices by pharmaceutical and medical device companies. As the sponsors of FDA approved products, we and our partners will not only be responsible for the actions of the companies but also can be held liable for the actions of employees and contractors, requiring that all employees and contractors engaging in regulated functions, such as product promotion, be adequately trained and monitored, which requires time and monetary expenditures.
If the FDA determines that a company has improperly promoted a product “off label” or otherwise not in accordance with the agency’s promotional requirements, the FDA may issue a warning letter or seek other enforcement action to limit or restrict certain promotional activities or materials or seek to have product withdrawn from the market or seize product, among other enforcement requirements. In addition, a company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil fines, criminal fines and penalties, civil damages and exclusion from federal funded healthcare programs such as Medicare and Medicaid and/or government contracting, consent decrees and corporate integrity agreements, as well as potential liability under the federal FCA and applicable state false claims acts. Conduct giving rise to such liability could also form the basis for private civil litigation by third-party payers or other persons allegedly harmed by such conduct.
Moreover, in addition to the regulatory restrictions on off-label promotion, there are other FDA restrictions on and requirements concerning product promotion and advertising, such as requirements that such communications be truthful and non-misleading and adequately supported. The FDA also has requirements concerning the distribution of drug samples. The FDA and other authorities may take the position that we are not in compliance with promotional, advertising, and marketing requirements, and, if such non-compliance is proven, we may be subject to significant liability, including but not limited to administrative, civil and criminal penalties and fines, in addition to regulatory enforcement actions.
For certain of our products, we and our independent contractors, distributors, prescribers, and dispensers are required to comply with regulatory requirements related to controlled substances, which will require the expenditure of additional time and will incur additional expenses to maintain compliance and may subject us to additional penalties for noncompliance, which could inhibit successful commercialization.*
Certain of our products are controlled substances and accordingly, we, and our contractors, distributors, prescribers, and dispensers must comply with Federal controlled substances laws and regulations, enforced by the U.S. Drug Enforcement Administration (“DEA”), as well as state-controlled substances laws and regulations enforced by state authorities. These requirements include, but are not limited to, registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, and other requirements. These requirements are enforced by the DEA through periodic inspections. Not only must continuous controlled substance registration be maintained, but compliance with the applicable controlled substance requirements will require significant efforts and expenditures, which could also inhibit successful commercialization. If we and our contractors, distributors, prescribers, and dispensers do not comply with the applicable controlled substance requirements, we or they may be subject to administrative, civil or criminal enforcement, including civil penalties, refusals to renew necessary registrations, revocation of registrations, criminal proceedings, or consent decrees.
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Patent protection for protein-based therapeutic products and other biotechnology inventions is subject to a great deal of uncertainty, and if patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize products based on our discoveries.
Patent protection for protein-based therapeutic products is highly uncertain and involves complex legal and factual questions. In recent years, there have been significant changes in patent law, including the legal standards that govern the scope of protein and biotechnology patents. Standards for patentability of full-length and partial genes, and their corresponding proteins, are changing. Recent court decisions have made it more difficult to obtain patents, by making it more difficult to satisfy the patentable subject matter requirement and the requirement of non-obviousness, have decreased the availability of injunctions against infringers, and have increased the likelihood of challenging the validity of a patent through a declaratory judgment action. Taken together, these decisions could make it more difficult and costly for us to obtain, license and enforce our patents. In addition, the Leahy-Smith America Invents Act (HR 1249) was signed into law in September 2011, which among other changes to the U.S. patent laws, changes patent priority from “first to invent” to “first to file,” implements a post-grant opposition system for patents and provides for a prior user defense to infringement. These judicial and legislative changes have introduced significant uncertainty in the patent law landscape and may potentially negatively impact our ability to procure, maintain and enforce patents to provide exclusivity for our products.
There also have been, and continue to be, policy discussions concerning the scope of patent protection awarded to biotechnology inventions. Social and political opposition to biotechnology patents may lead to narrower patent protection within the biotechnology industry. Social and political opposition to patents on genes and proteins and recent court decisions concerning patentability of isolated genes may lead to narrower patent protection, or narrower claim interpretation, for isolated genes, their corresponding proteins and inventions related to their use, formulation and manufacture. Patent protection relating to biotechnology products is also subject to a great deal of uncertainty outside the U.S., and patent laws are evolving and undergoing revision in many countries. Changes in, or different interpretations of, patent laws worldwide may result in our inability to obtain or enforce patents, and may allow others to use our discoveries to develop and commercialize competitive products, which would impair our business.
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If third partythird-party reimbursement and customer contracts are not available, Hylenexour proprietary and our partners’partnered products may not be accepted in the market resulting in commercial performance below that which was expected or projected.
Our ability to earn sufficient returns on Hylenex and our partners’ ability to earn sufficient returns on theirproprietary and partnered products will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, managed care organizations and other healthcare providers.
Third-party payorspayers are increasingly attempting to limit both the coverage and the level of reimbursement of new drug products to contain costs. Consequently, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Third party payorsThird-party payers may not establish adequate levels of reimbursement for the products that we and our partners commercialize, which could limit their market acceptance and result in a material adverse effect on our revenues and financial condition.
Customer contracts, such as with group purchasing organizations and hospital formularies, will often not offer contract or formulary status without either the lowest price or substantial proven clinical differentiation. If, for example, Hylenex is compared to animal-derived hyaluronidases by these entities, it is possible that neither of these conditions will be met, which could limit market acceptance and result in a material adverse effect on our revenues and financial condition.
The rising cost of healthcare and related pharmaceutical product pricing has led to cost containment pressures from third-party payers as well as changes in federal coverage and reimbursement policies and practices that could cause us and our partners to sell our products at lower prices, and impact access to our and our partners’ products, resulting in less revenue to us.*
Any of our proprietary or collaborationpartnered products that have been, or in the future are, approved by the FDA may be purchased or reimbursed by state and federal government authorities, private health insurers and other organizations, such as health maintenance organizations and managed care organizations. Such third party payorsthird-party payers increasingly challenge pharmaceutical product pricing. The trend toward managed healthcare in the U.S., the growth of such organizations, and various legislative proposals and enactments to reform healthcare and government insurance programs, including the Medicare Prescription Drug Modernization Act of 2003 and the Affordable Care Act of 2010 (ACA), could significantly influence the manner in which pharmaceutical products are prescribed and purchased, resulting in lower prices and/or a reduction in demand. Such cost containment measures and healthcare reforms could adversely affect our ability to sell our product and our partners’ ability to sell their products.
In the U.S., our business may be impacted by changes in federal reimbursement policy resulting from executive actions, federal regulations, or federal demonstration projects.
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The federal administration and/or agencies, such as the Centers for Medicare & Medicaid Services, or CMS, have announced a number of demonstration projects, recommendations and proposals to implement various elements described in the drug pricing blueprint. CMS, the federal agency responsible for administering Medicare and overseeing state Medicaid programs and Health Insurance Marketplaces, has substantial power to implement policy changes or demonstration projects that can quickly and significantly affect how drugs, including our products, are covered and reimbursed. For example, in November 2020, former President Trump announced the interim final rule to implement the Most Favored Nations drug pricing model seeking to tie Medicare payment rates to an international index price. This final rule is currently subject to a preliminary injunction.was subsequently rescinded by CMS. Additionally, a number of Congressional committees have also held hearings and evaluated proposed legislation on drug pricing and payment policy which may affect our business. For example, in July 2019, the Senate Finance Committee advanced a bill that in part would penalize pharmaceutical manufacturers for increasing drug list prices covered by Medicare Part B and Part D, faster than the rate of inflation, and cap out-of-pocket expenses for Medicare Part D beneficiaries. Several other proposals have been introduced that, if enacted and implemented, could affect access to and sales of our and our partners’ products, allow the federal government to engage in price negotiations on certain drugs, and allow importation of prescription medication from Canada or other countries. For example, in August 2022, “The Inflation Reduction Act of 2022” was enacted which will, among other things, require the federal government to negotiate prices for some drugs covered under Medicare Part B and Part D, require drug companies to pay rebates to Medicare if prices rise faster than inflation for drugs used by Medicare beneficiaries and cap out-of-pocket spending for individuals enrolled in Medicare Part D.
In this dynamic environment, we are unable to predict which or how many federal policy, legislative or regulatory changes may ultimately be enacted. To the extent federal government initiatives decrease or modify the coverage or reimbursement available for our or our partners’ products, limit or impact our decisions regarding the pricing of biopharmaceutical products or otherwise reduce the use of our or our partners’ U.S. products, such actions could have a material adverse effect on our business and results of operations.
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Furthermore, individual states are considering proposed legislation and have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third party payorsthird-party payers or other restrictions could negatively and materially impact our revenues and financial condition. We anticipate that we will encounter similar regulatory and legislative issues in most other countries outside the U.S.
In addition, private payers in the US, including insurers, pharmacy benefit managers (PBMs), integrated healthcare delivery systems, and group purchasing organizations, are continuously seeking ways to reduce drug costs. Many payers have developed and continue to develop ways to shift a greater portion of drug costs to patients through, for example, limited benefit plan designs, high deductible plans and higher co-pay or coinsurance obligations. Consolidation in the payer space has also resulted in a few large PBMs and insurers which place greater pressure on pricing and utilization negotiations for our and our partners’ products in the U.S., increasing the need for higher discounts and rebates and limiting patient access and utilization. Ultimately, additional discounts, rebates and other price reductions, fees, coverage and plan changes, or exclusions imposed by these private payers on our and our partners’ products could have an adverse event on product sales, our business and results of operations.
To help patients afford certain of our products, we offer discount, rebate, and co-pay coupon programs. Co-pay coupon programs have received some negative publicity related to their use to promote branded pharmaceutical products over other less costly alternatives. CMS recently has issued a regulation imposing additional obligations on manufacturers in order to continue excluding such programs from government pricing calculations to avoid payment of increased Medicaid rebates. In recent years, other pharmaceutical manufacturers have been named in class action lawsuits challenging the legality of their co-pay programs under a variety of federal and state laws. Our co-pay coupon programs could become the target of similar lawsuits or insurer actions. It is possible that the outcome of litigation against other manufacturers, changes in insurer policies regarding co-pay coupons, and/or the introduction and enactment of new legislation or regulatory action could restrict or otherwise negatively affect these programs.
We also face risks relating to the reporting of pricing data that affects the reimbursement of and discounts provided for our products. Government price reporting regulations are complex and may require a manufacturer to update certain previously submitted data. If our submitted pricing data are incorrect, we may become subject to substantial fines and penalties or other government enforcement actions, which could have a material adverse effect on our business and results of operations. In addition, as a result of restating previously reported price data, we also may be required to pay additional rebates and provide additional discounts.
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We face intense competition and rapid technological change that could result in the development of products by others that are competitive with or superior to our proprietary and collaborationpartnered products, including those under development.
Our proprietary and collaborationpartnered products have numerous competitors in the U.S. and abroad including, among others, major pharmaceutical and specialized biotechnology firms, universities and other research institutions that have developed competing products. Many of these competitors have substantially more resources and product development, manufacturing and marketing experience and capabilities than we do. The competitors for Hylenex recombinant include, but are not limited to, Valeant Pharmaceuticals International,Bausch Health Companies, Inc.’s FDA-approved product, Vitrase®, an ovine (ram) hyaluronidase, and Amphastar Pharmaceuticals, Inc.’s product, Amphadase®, a bovine (bull) hyaluronidase. For our ENHANZE technology, such competitors may include major pharmaceutical and specialized biotechnology firms. These competitors may develop technologies and products that are more effective, safer, or less costly than our current or future proprietary and collaborationpartnered products and product candidates or that could render our and our partners’ products, technologies and product candidates obsolete or noncompetitive.
General Risks
Our inabilityIf we are unable to attract, hire and retain key management and scientific personnel our business could be negatively affect our business.affected.
Our success depends on the performance of key management and scientific employees with relevant experience. We depend substantially on our ability to hire, train, motivate and retain high quality personnel, especially our scientists and management team. If we are unable to identify, hire and retain qualified personnel, our ability to support current and future alliances with strategic collaboratorspartners could be adversely impacted. Our use of domestic and international third-party contractors, consultants and staffing agencies also subjects us to potential co-employment liability claims.
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Furthermore, if we were to lose key management personnel, we may lose some portion of our institutional knowledge and technical know-how, potentially causing a disruption or delay in one or more of our partnered development programs until adequate replacement personnel could be hired and trained. In addition, we do not have key person life insurance policies on the lives of any of our employees which would help cover the cost of associated with the loss of key employees.
Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic event.
Our operations, including laboratories, offices and other research facilities, are located in multiple buildingsheadquartered in San Diego, California. We have additional facilities in Ewing, New Jersey and Minnetonka, Minnesota. We depend on our facilities and on our collaborators,partners, contractors and vendors for the continued operation of our business. Natural disasters or other catastrophic events, pandemics, interruptions in the supply of natural resources, political and governmental changes, wildfires and other fires, tornadoes, floods, explosions, actions of animal rights activists, earthquakes and civil unrest could disrupt our operations or those of our collaborators,partners, contractors and vendors. Even though we believe we carry commercially reasonable business interruption and liability insurance, and our contractors may carry liability insurance that protect us in certain events, we may suffer losses as a result of business interruptions that exceed the coverage available under our and our contractors’ insurance policies or for which we or our contractors do not have coverage. Any natural disaster or catastrophic event could have a significant negative impact on our operations and financial results. Moreover, any such event could delay our partners’ research and development programs.
Cyberattacks, security breaches or system breakdowns may disrupt our operations and harm our operating results and reputation.
We and our partners are subject to increasingly sophisticated attempts to gain unauthorized access to our information technology storage and access systems and are devoting resources to protect against such intrusion. Cyberattacks could render us or our partners unable to utilize key systems or access important data needed to operate our business. The wrongful use, theft, deliberate sabotage or any other type of security breach with respect to any of our or any of our vendors and partners’ information technology storage and access systems could result in the breakdown or other service interruption, or the disruption of our ability to use such systems or disclosure or dissemination of proprietary and confidential information that is electronically stored, including intellectual property, trade secrets, financial information, regulatory information, strategic plans, sales trends and forecasts, litigation materials or personal information belonging to us, our staff, our patients, customers and/or other business partners which could result in a material adverse impact on our business, operating results and financial condition. We continue to invest in monitoring, and other security and data recovery measures to protect our critical and sensitive data and systems. However, these may not be adequate to prevent or fully recover systems or data from all breakdowns, service interruptions, attacks or breaches of our systems. In addition, our cybersecurity insurance may not be sufficient to cover us against liability related to any such breaches. Furthermore, any physical break-in or trespass of our facilities could result in the misappropriation, theft, sabotage or any other type of security breach with respect to our proprietary and confidential information, including research or clinical data or damage to our research and development equipment and assets. Such adverse effects could be material and irrevocable to our business, operating results, financial condition and reputation.


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Item 3.Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our market risks during the quarter ended September 30, 2021.2022.
As of September 30, 2021,2022, our cash equivalents and marketable securities consisted of investments in money market funds, U.S.non-U.S. Treasury securities, asset-backed securities, corporate debt obligations and commercial paper.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. Some of the financial instruments that we invest in could be subject to market risk. This means that a change in prevailing interest rates may cause the value of the instruments to fluctuate. For example, if we purchase a security that was issued with a fixed interest rate and the prevailing interest rate later rises, the value of that security will probably decline. Based on our current investment portfolio as of September 30, 2021,2022, we do not believe that our results of operations would be materially impacted by an immediate change of 10% in interest rates.
We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. Further, we do not believe our cash, cash equivalents and marketable securities have significant risk of default or illiquidity. We made this determination based on discussions with our investment advisors and a review of our holdings. While we believe our cash, cash equivalents and marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. All of our cash equivalents and marketable securities are recorded at fair market value.
Item 4.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 Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
ThereOn May 24, 2022, we completed the acquisition of Antares. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. In conducting our evaluation of the effectiveness of our internal control over financial reporting, we excluded Antares from our evaluation for the period ended September 30, 2022. We are in the process of integrating Antares into our system of internal control over financial reporting.
Except as noted above. there have been no significant changes in our internal control over financial reporting that occurred during the quarter ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1.Legal Proceedings
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 management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position.
Item 1A.Risk Factors
WeReflecting our recent acquisition of Antares in May 2022 and our convertible note financing in August 2022, we have provided new and updated Risk Factors in the section labeled “Risk Factors” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Except for the additionOperations.” We believe these new and updated Risk Factors provide important disclosures regarding additional risks we face. The heading of theeach new and significantly updated Risk Factor entitled “Our effective tax rate may fluctuate,is marked with an “*”. Other than the additions reflecting the acquisition of Antares in May 2022 and we may incur obligationsour convertible note financing in tax jurisdictions in excess of accrued amounts”, we do not believe theAugust 2022, there have been no updates that have materially changed the type or magnitude of risks we face in comparison to the disclosure providedRisk Factors in our most recent Annual Report on Form 10-K.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
The table below sets forth information regarding repurchases of our common stock during the three months ended September 30, 2021:2022:
PeriodTotal Number of Shares PurchasedWeighted-Average Price paid per shareTotal Number of Shares Purchased as Part of Publicly Announced ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased under the Programs (thousands)
July 1, 2021 through July 31, 2021— $— — $74,864 
August 1, 2021 through August 31, 2021504,092 $41.07 504,092 $54,149 
September 1, 2021 through September 30, 20211,058,521 $41.55 1,058,521 $10,147 
Total1,562,613 1,562,613 
PeriodTotal Number of Shares PurchasedWeighted-Average Price paid per shareTotal Number of Shares Purchased as Part of Publicly Announced ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased under the Programs (thousands)
July 1, 2022 through July 31, 2022— $— — $600,000 
August 1, 2022 through August 31, 20222,093,584 $43.09 2,093,584 $400,000 
September 1, 2022 through September 30, 2022— $— — $400,000 
Total2,093,584 2,093,584 
Accelerated Share Repurchase2,025,000 2,025,000 $400,000 

In November, 2019, we announced that ourDecember 2021, the Board of Directors authorized a second capital return program to repurchase up to $550.0$750.0 million of outstanding common stock duringover a three-year period. The above repurchases wereIn August 2022, we entered into an ASR agreement to repurchase $109.8 million of common stock. At inception pursuant to that program. the agreement, we paid $109.8 million to Bank of America and took initial delivery of 2.0 million shares.
In October 2021,connection with the sale of the 2028 Convertible Notes, on August 18, 202, we repurchased 0.3 millionexchanged a combination of cash and shares of our common stock for $10.3a portion of our outstanding 2024 Convertible Notes through privately negotiated and induced conversion transactions with certain holders of the 2024 Convertible Notes (“2022 Note Repurchases” or the “2022 Induced Conversion”). In connection with the 2022 Induced Conversion, we paid approximately $77.6 million excluding commissions, completingin cash, which included accrued interest, and issued 1,512,120 shares of our November 2019 share repurchase program.common stock representing the intrinsic value based on the contractual conversion rate and incremental shares as an inducement for conversion. These shares were issued in a transaction with our existing security holders not involving a public offering pursuant to the exemptions from registration set forth in Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act.
Item 3.Defaults Upon Senior Securities
Not applicable.
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Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
None.
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Item 6.Exhibits
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3#
10.4#
31.1
31.2
32
101.INS  Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline Taxonomy Extension Schema Document.
101.CALInline Taxonomy Extension Calculation Linkbase Document.
101.DEFInline Taxonomy Extension Definition Linkbase Document.
101.LABInline Taxonomy Extension Label Linkbase Document.
101.PREInline Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
# Indicates management contract or compensatory plan or arrangement
(1)Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed May 3, 2019.
(2)Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed December 19, 2016.10, 2021.
(3)Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed November 18, 2019.
(4)Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed March 1, 2021.
(5)Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed August 18, 2022.
(6)Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed August 19, 2022.



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SIGNATURES
Pursuant to the requirements 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.,
a Delaware corporation
 
Dated:November 2, 20218, 2022/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)
 
 
Dated:November 2, 20218, 2022/s/ Elaine SunNicole LaBrosse
 Elaine SunNicole LaBrosse
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 

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