Halozyme(HALO) - 2024 Q4 - Annual Report

Revenue Growth - Royalties for the year ended December 31, 2024, increased to $570.99 million from$447.87 million in 2023, representing a 27% growth driven by sales of DARZALEX SC and Phesgo[238]. - The company expects further growth in royalty revenue due to anticipated increases in partner product sales, including recently launched products like VYVGART Hytrulo, TECENTRIQ SC, OCREVUS SC, and Opdivo Qvantig[238]. - Proprietary product sales increased by $35,786 thousand, or 27$166,620 thousand in 2024, while total product sales, net rose by $2,638 thousand, or 1$303,492 thousand[239]. - Revenues under collaborative agreements surged by $60,307 thousand, or 75$140,841 thousand, driven by a significant increase in upfront license fees, which rose by $25,000 thousand, or 1,250$12 million milestone payment[230]. - The company received $30 million in upfront payments from argenx for the nomination of four additional targets under an expanded collaboration agreement[230]. Financial Performance - Operating expenses decreased overall, with cost of sales down by$32,944 thousand, or 17%, to $159,417 thousand, while research and development expenses increased by$2,685 thousand, or 4%, to $79,048 thousand[241]. - Investment and other income, net increased by$7,435 thousand, or 46%, to $23,752 thousand, primarily due to a rise in the average invested balance[246]. - Income tax expense rose by$46,306 thousand, or 69%, to $113,041 thousand, attributed to higher income before tax and changes in tax benefits[247]. - Net cash provided by operating activities increased by$90,493 thousand, reaching $479,064 thousand, primarily due to higher revenue[257]. Debt and Financing - The company’s long-term debt, consisting of convertible notes, amounted to$1,525.0 million as of December 31, 2024, with future interest payments totaling $30.4 million[251]. - The company completed a share repurchase program of up to$750.0 million in June 2024 and authorized a new program for the same amount in February 2024[261]. - The 2027 Convertible Notes, totaling $805.0 million, have a maturity date of March 1, 2027, and pay interest at an annual rate of 0.25$460.0 million, were converted in full in March 2023, with approximately $13.5 million paid in cash and 288,886 shares issued[276]. Cash Management and Investments - As of December 31, 2024, the company had cash, cash equivalents, and marketable securities totaling$596.1 million, expected to fund operations for at least the next 12 months[249]. - Cash, cash equivalents, and marketable securities are deemed to have minimal risk of default or illiquidity, based on discussions with investment advisors[296]. - The primary objective of the company's investment activities is to preserve principal while maximizing income without significantly increasing risk[294]. - The cash management strategy is designed to minimize excessive risk while ensuring liquidity[296]. Risk Management - The company hedges a portion of foreign currency exchange risk related to forecasted royalties revenue in Swiss francs to mitigate earnings and cash flow volatility[295]. - The company does not believe that its results of operations would be materially impacted by an immediate change of 10% in interest rates based on its current investment portfolio[294]. - The company does not engage in speculative trading of derivatives or other financial instruments[295]. - The cash flow hedges are recorded at fair value with gains and losses reflected in AOCI and reclassified to royalty revenue[295].