Halozyme(HALO) - 2024 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents Halozyme Therapeutics, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2024 Item 1. Financial Statements This section presents Halozyme Therapeutics, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, cash flows, and stockholders' equity, with detailed notes on accounting policies and financial items Condensed Consolidated Balance Sheets (Unaudited) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Total Assets | $1,969,453 | $1,733,270 | | Total Liabilities | $1,680,029 | $1,649,462 | | Total Stockholders' Equity | $289,424 | $83,808 | Condensed Consolidated Statements of Income (Unaudited) This section presents the company's financial performance, including total revenues, operating income, net income, and earnings per share for the three and six months ended June 30, 2024 and 2023 Condensed Consolidated Statements of Income (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $231,353 | $221,038 | $427,232 | $383,181 | | Operating Income | $117,235 | $94,458 | $212,777 | $148,260 | | Net Income | $93,245 | $74,754 | $170,068 | $114,369 | | Basic EPS | $0.73 | $0.57 | $1.34 | $0.86 | | Diluted EPS | $0.72 | $0.56 | $1.32 | $0.84 | Condensed Consolidated Statements of Comprehensive Income (Unaudited) This section details the company's net income and other comprehensive income components for the three and six months ended June 30, 2024 and 2023 Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $93,245 | $74,754 | $170,068 | $114,369 | | Comprehensive Income | $92,663 | $73,115 | $177,278 | $113,676 | Condensed Consolidated Statements of Cash Flows (Unaudited) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $185,221 | $153,806 | | Net cash used in investing activities | $(124,720) | $(5,168) | | Net cash provided by (used in) financing activities | $8,993 | $(162,168) | | Cash, cash equivalents and restricted cash at end of period | $187,864 | $221,165 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) This section details changes in the company's stockholders' equity, including net income, share-based compensation, and share repurchases, for the six months ended June 30, 2024 - Total stockholders' equity increased significantly from $83,808 thousand as of December 31, 2023, to $289,424 thousand as of June 30, 2024, primarily driven by net income of $170,068 thousand and an increase in additional paid-in capital due to share-based compensation and stock issuance[16][17] - Share-based compensation expense for the six months ended June 30, 2024, was $19,345 thousand, contributing to the increase in additional paid-in capital[17] Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, fair value, revenue, and other financial items 1. Organization and Business This note describes Halozyme Therapeutics, Inc.'s biopharmaceutical business, its ENHANZE drug delivery technology, and proprietary product offerings - Halozyme Therapeutics, Inc. is a biopharmaceutical company focused on improving patient experiences and outcomes through disruptive solutions[18] - The company's core technology is ENHANZE drug delivery, utilizing the proprietary enzyme rHuPH20 to facilitate subcutaneous (SC) delivery of injected drugs, aiming for rapid delivery and reduced treatment burden[18] - Halozyme licenses ENHANZE to biopharmaceutical companies for co-development and earns royalties, milestone payments, and revenues from bulk rHuPH20 sales; key partners include Roche, Takeda, Pfizer, Janssen, AbbVie, Eli Lilly, BMS, argenx, ViiV, Chugai, and Acumen[18] - The company also develops, manufactures, and commercializes drug-device combination products using advanced auto-injector technologies, with proprietary products including Hylenex® and XYOSTED®[18] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the interim financial statements, including revenue recognition and cash equivalents - The interim unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for Form 10-Q, reflecting all necessary normal recurring adjustments[20] - Cash equivalents are highly liquid investments maturing within 90 days, while marketable securities are available-for-sale investments with maturities over 90 days, classified as current assets based on management's intent to fund operations[22] - Revenue is recognized when promised goods or services are transferred to customers, reflecting the expected consideration, including royalties, product sales, and collaborative agreement revenues, with specific criteria for each type[38] - The company operates in one operating segment, encompassing all activities related to research, development, and commercialization of proprietary enzymes and devices, as well as collaborative agreements and product sales[57] 3. Fair Value Measurement This note details the fair value measurements of financial instruments, including marketable securities and derivative instruments, using a three-level hierarchy Available-for-sale marketable securities (in thousands) | Asset Type | June 30, 2024 Estimated Fair Value | December 31, 2023 Estimated Fair Value | | :-------------------------- | :--------------------------------- | :----------------------------------- | | Asset-backed securities | $926 | $3,504 | | Corporate debt securities | $52,453 | $6,013 | | U.S. treasury securities | $282,600 | $176,184 | | Agency bonds | $5,187 | $16,103 | | Commercial paper | — | $15,826 | | Total marketable securities | $341,166 | $217,630 | - As of June 30, 2024, 41 available-for-sale marketable securities with a fair market value of $315.5 million were in a gross unrealized loss position of $0.3 million, but no credit loss is expected[60] Fair Value Hierarchy of Financial Instruments (in thousands) as of June 30, 2024 | Asset Type | Level 1 | Level 2 | Total Fair Value | | :------------------------- | :--------- | :--------- | :--------------- | | Cash equivalents | $76,965 | $— | $76,965 | | Marketable securities | $287,787 | $53,379 | $341,166 | | Derivative instruments | $— | $1,389 | $1,389 | | Total Assets | $364,752 | $54,768 | $419,520 | | Derivative liabilities | $— | $688 | $688 | 4. Revenue This note disaggregates the company's total revenues by type, including royalties, product sales, and milestone payments, for the reported periods Disaggregated Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Royalties | $124,918 | $111,740 | $245,511 | $211,380 | | Proprietary product sales | $44,139 | $32,293 | $79,394 | $60,254 | | Bulk rHuPH20 sales | $24,634 | $27,133 | $35,144 | $49,202 | | Device partnered product sales | $10,113 | $14,463 | $22,931 | $25,227 | | Event-based milestones & other fees | $25,500 | $33,000 | $39,500 | $33,000 | | Device licensing & development | $2,049 | $2,409 | $4,752 | $4,118 | | Total Revenues | $231,353 | $221,038 | $427,232 | $383,181 | - For the three months ended June 30, 2024, the company recognized $150.4 million in revenue related to licenses granted in prior periods, including current period royalties and $25.5 million from resolved variable consideration for development milestones[65] - For the six months ended June 30, 2024, $285.0 million in revenue was recognized from prior period licenses, including current period royalties and $39.5 million from resolved variable consideration for development milestones[65] 5. Certain Balance Sheet Items This note provides detailed breakdowns of specific balance sheet accounts, including accounts receivable, inventories, property and equipment, and accrued expenses Accounts Receivable, Net and Contract Assets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------------------------------------- | :------------ | :---------------- | | Accounts receivable from product sales to partners | $29,307 | $58,588 | | Accounts receivable from revenues under collaborative agreements | $9,803 | $16,183 | | Accounts receivable from royalty payments | $128,015 | $118,170 | | Accounts receivable from other product sales | $49,909 | $47,060 | | Contract assets | $4,108 | $956 | | Total accounts receivable, net and contract assets | $214,524 | $234,210 | Inventories, Net (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Raw materials | $27,223 | $23,646 | | Work-in-process | $36,690 | $34,025 | | Finished goods | $126,643 | $69,930 | | Total inventories, net | $190,556 | $127,601 | | Less long-term portion | $31,244 | — | | Total inventories, net current | $159,312 | $127,601 | Property and Equipment, Net (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------------------- | :------------ | :---------------- | | Research equipment | $8,796 | $8,588 | | Manufacturing equipment | $37,427 | $32,472 | | Computer and office equipment | $9,183 | $9,722 | | Leasehold improvements | $7,042 | $6,987 | | Subtotal (Gross) | $62,448 | $57,769 | | Accumulated depreciation and amortization | $(22,239) | $(19,661) | | Subtotal (Net of Depreciation) | $40,209 | $38,108 | | Right of use of assets | $34,791 | $36,836 | | Total property and equipment, net | $75,000 | $74,944 | Accrued Expenses (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :---------------- | | Accrued compensation and payroll taxes | $12,561 | $17,361 | | Accrued outsourced manufacturing expenses | $13,523 | $12,361 | | Income taxes payable | $29,265 | $963 | | Product returns and sales allowance | $42,653 | $41,932 | | Other accrued expenses | $19,771 | $33,584 | | Lease liability | $30,664 | $32,197 | | Total accrued expenses | $148,437 | $138,398 | | Less long-term portion | $(30,507) | $(37,720) | | Total accrued expenses, current | $117,930 | $100,678 | 6. Goodwill and Intangible Assets This note details the company's goodwill and intangible assets, including their carrying values, accumulated amortization, and estimated future amortization schedules Goodwill (in thousands) | Metric | Amount | | :---------------------- | :---------- | | Balance as of Dec 31, 2023 | $416,821 | | Adjustment | — | | Balance as of Jun 30, 2024 | $416,821 | Intangible Assets, Net (in thousands) as of June 30, 2024 | Asset Type | Useful Life (years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | | :------------------------------ | :------------------ | :------------------- | :----------------------- | :----------------- | | Auto Injector technology platform | 7 | $402,000 | $120,878 | $281,122 | | XYOSTED proprietary product | 10 | $136,200 | $28,668 | $107,532 | | Total finite-lived intangibles | | $538,200 | $149,546 | $388,654 | | ATRS-1902 (IPR&D) | Indefinite | | | $48,700 | | Total intangibles, net | | | | $437,354 | Estimated Future Annual Amortization of Finite-Lived Intangible Assets (in thousands) | Year | Amortization Expense | | :--------------- | :------------------- | | Remainder of 2024 | $35,524 | | 2025 | $71,049 | | 2026 | $71,049 | | 2027 | $71,049 | | 2028 | $71,049 | | Thereafter | $68,934 | | Total | $388,654 | 7. Long-Term Debt, Net This note describes the company's long-term debt, including convertible notes and credit facilities, and their carrying and fair values Net Carrying Amounts and Fair Value of Convertible Notes (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :---------------- | | 2027 Convertible Notes Principal | $805,000 | $805,000 | | 2028 Convertible Notes Principal | $720,000 | $720,000 | | Total Principal Amount | $1,525,000 | $1,525,000 | | 2027 Convertible Notes Carrying Amount | $795,763 | $794,050 | | 2028 Convertible Notes Carrying Amount | $706,752 | $705,198 | | Total Carrying Amount | $1,502,515 | $1,499,248 | | 2027 Convertible Notes Fair Value | $768,920 | $695,826 | | 2028 Convertible Notes Fair Value | $801,115 | $670,522 | | Total Fair Value of Outstanding Notes | $1,570,035 | $1,366,348 | - The 2028 Convertible Notes (1.00% due 2028) and 2027 Convertible Notes (0.25% due 2027) were not convertible as of June 30, 2024, based on their respective conversion conditions[80][84] - The 2024 Convertible Notes were fully converted in March 2023, with $13.5 million cash paid and 288,886 shares issued[85] - The company has a $575 million revolving credit facility and a $250 million term loan facility (2022 Facility), maturing on November 30, 2026; the Revolving Credit Facility was undrawn as of June 30, 2024[91][93] 8. Share-based Compensation This note details the company's share-based compensation expense by type of award and function, along with unrecognized compensation costs Total Share-based Compensation Expense (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $2,568 | $3,670 | $5,913 | $6,771 | | Selling, general and administrative | $6,903 | $5,952 | $13,432 | $10,817 | | Total share-based compensation expense | $9,471 | $9,622 | $19,345 | $17,588 | Share-based Compensation Expense by Type of Award (in thousands) | Award Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | $3,894 | $4,190 | $8,193 | $7,645 | | RSUs, PSUs and ESPP | $5,577 | $5,432 | $11,152 | $9,943 | | Total share-based compensation expense | $9,471 | $9,622 | $19,345 | $17,588 | Unrecognized Estimated Compensation Cost (in thousands) | Award Type | Unrecognized Expense | Remaining Weighted-Average Recognition Period (in years) | | :------------ | :------------------- | :------------------------------------------------------- | | Stock options | $35,381 | 2.56 | | RSUs | $50,035 | 2.92 | | PSUs | $9,577 | 2.05 | | ESPP | $253 | 0.40 | 9. Stockholders' Equity This note outlines changes in stockholders' equity, including share issuances, repurchases, and the completion of a share repurchase program - During the six months ended June 30, 2024, the company issued 475,828 shares of common stock from stock option exercises for $11.4 million and 331,693 shares upon vesting of RSUs and PSUs[101] - The December 2021 share repurchase program, authorizing up to $750.0 million, was completed in June 2024, with a total of 19.1 million shares repurchased at an average price of $39.31 per share[102] - In February 2024, the Board of Directors authorized a new capital return program to repurchase up to $750.0 million of outstanding common stock[102] 10. Earnings per share This note presents the calculation of basic and diluted earnings per share, including the impact of dilutive securities Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $93,245 | $74,754 | $170,068 | $114,369 | | Weighted average common shares outstanding for basic EPS | 127,116 | 131,730 | 127,029 | 133,369 | | Dilutive potential common stock outstanding | | | | | | Stock options | 1,762 | 1,656 | 1,669 | 1,910 | | RSUs, PSUs and ESPP | 344 | 157 | 399 | 363 | | Convertible Notes | — | — | — | 116 | | Weighted average common shares outstanding for diluted EPS | 129,222 | 133,543 | 129,097 | 135,758 | | Basic EPS | $0.73 | $0.57 | $1.34 | $0.86 | | Diluted EPS | $0.72 | $0.56 | $1.32 | $0.84 | - Anti-dilutive securities, including stock options, unvested RSUs, PSUs, ESPP shares, and Convertible Notes, totaling 26.7 million shares for the three months ended June 30, 2024, were excluded from diluted EPS calculation[106] 11. Commitments and Contingencies This note addresses the company's legal proceedings and other commitments, confirming no material adverse effects are currently anticipated - The company is not currently a party to any legal proceedings that, in its opinion, would individually or in aggregate have a material adverse effect on its condensed consolidated statements of income or balance sheets[108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Halozyme's financial performance, liquidity, and capital resources for the three and six months ended June 30, 2024 Overview This section provides a high-level description of Halozyme's biopharmaceutical business, its ENHANZE technology, and proprietary product portfolio - Halozyme Therapeutics, Inc. is a biopharmaceutical company focused on improving patient experiences and outcomes through its ENHANZE drug delivery technology and advanced auto-injector products[111] - ENHANZE technology, utilizing rHuPH20, facilitates subcutaneous delivery of high-dose, high-volume injectable biologics, reducing treatment burden and potentially enabling fixed-dose and home administration[113] - The company has ENHANZE collaborations with major biopharmaceutical companies (e.g., Roche, Takeda, Janssen, BMS, argenx) and earns royalties from eight commercial products[113] - Proprietary products include Hylenex® (rHuPH20) and XYOSTED® (auto-injector technology)[113] Second Quarter of 2024 and Recent Key Events This section highlights significant corporate and product development milestones achieved during and after the second quarter of 2024 - Janssen received FDA approval for DARZALEX FASPRO for an additional indication in newly diagnosed multiple myeloma patients in July 2024[115] - argenx received NMPA approval for efgartigimod SC for generalized myasthenia gravis (gMG) in China in July 2024 and FDA approval for VYVGART Hytrulo for chronic inflammatory demyelinating polyneuropathy (CIDP) in June 2024[115] - BMS's BLA for subcutaneous Opdivo (nivolumab) co-formulated with ENHANZE was accepted by the FDA with an updated PDUFA goal date of December 29, 2024, and EMA validated its Extension Application[115] - Roche received EC marketing authorization for Ocrevus (ocrelizumab) SC in the EU and MHRA approval in Great Britain for multiple sclerosis in June/July 2024[115] - Halozyme completed its $250 million Accelerated Share Repurchase (ASR) program in June 2024, repurchasing 6.5 million shares, concluding the December 2021 share repurchase program[116] Product and Product Candidates This section details Halozyme's proprietary products and product candidates, along with its partnered products utilizing ENHANZE technology Proprietary Products and Product Candidates This section describes Halozyme's owned products, Hylenex® and XYOSTED®, and the adrenal crisis rescue product candidate ATRS-1902 - Hylenex® recombinant (hyaluronidase human injection) is marketed for facilitating SC administration, increasing dispersion and absorption of other injected drugs, and improving resorption in SC urography[121] - XYOSTED® (testosterone enanthate) Injection is the only FDA-approved SC testosterone enanthate product for once-weekly, at-home self-administration for testosterone replacement therapy[122] - ATRS-1902 is a proprietary drug-device combination product in development for the endocrinology market, specifically for adrenal crisis rescue, with positive Phase 1 clinical study results and FDA Fast Track designation[123][124] Partnered Products This section lists key ENHANZE collaborations and device partnerships, highlighting recent regulatory approvals and milestones - ENHANZE collaborations include Roche (Herceptin® SC, Phesgo®, MabThera® SC, Tecentriq® SC, Ocrelizumab SC), Takeda (HYQVIA®), Janssen (DARZALEX FASPRO®, RYBREVANT® SC), BMS (Opdivo® SC), argenx (VYVGART Hytrulo®), ViiV Healthcare, Chugai, and Acumen[125][126][127][129][131][135][136][138][139][140] - Device and other drug product collaborations include Teva (epinephrine auto-injector, teriparatide injection pen), Pfizer (QuickShot auto-injector), Idorsia (selatogrel drug-device product), and Otter (OTREXUP® auto-injection system)[141][142][144][145] - Recent partner milestones include FDA approval for Janssen's DARZALEX FASPRO for NDMM, NMPA approval for argenx's efgartigimod SC in China, FDA acceptance of BMS's BLA for Opdivo SC, and EC/MHRA approval for Roche's Ocrevus SC[115] Results of Operations This section analyzes the company's financial performance, comparing revenues and operating expenses for the three and six months ended June 30, 2024 and 2023 Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023 This section provides a detailed comparison of revenues and operating expenses for the three months ended June 30, 2024, versus the same period in 2023 Revenue Comparison (Three Months Ended June 30, in thousands) | Revenue Type | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------------- | :-------- | :-------- | :--------- | :--------- | | Royalties | $124,918 | $111,740 | $13,178 | 12% | | Proprietary product sales | $44,139 | $32,293 | $11,846 | 37% | | Bulk rHuPH20 sales | $24,634 | $27,133 | $(2,499) | (9)% | | Device partnered product sales | $10,113 | $14,463 | $(4,350) | (30)% | | Event-based milestones & other fees | $25,500 | $33,000 | $(7,500) | (23)% | | Device licensing & development | $2,049 | $2,409 | $(360) | (15)% | | Total Revenues | $231,353 | $221,038 | $10,315 | 5% | Operating Expenses Comparison (Three Months Ended June 30, in thousands) | Expense Type | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Cost of sales | $39,607 | $50,070 | $(10,463) | (21)% | | Amortization of intangibles | $17,762 | $17,835 | $(73) | —% | | Research and development | $21,038 | $19,727 | $1,311 | 7% | | Selling, general and administrative | $35,711 | $38,948 | $(3,237) | (8)% | - Investment and other income, net increased by 58% to $5,032 thousand, primarily due to higher market interest rates and an increased average invested balance[151] - Income tax expense increased by 33% to $24,498 thousand, driven by higher income before taxes[152] Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023 This section provides a detailed comparison of revenues and operating expenses for the six months ended June 30, 2024, versus the same period in 2023 Revenue Comparison (Six Months Ended June 30, in thousands) | Revenue Type | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------------- | :-------- | :-------- | :--------- | :--------- | | Royalties | $245,511 | $211,380 | $34,131 | 16% | | Proprietary product sales | $79,394 | $60,254 | $19,140 | 32% | | Bulk rHuPH20 sales | $35,144 | $49,202 | $(14,058) | (29)% | | Device partnered product sales | $22,931 | $25,227 | $(2,296) | (9)% | | Event-based milestones & other fees | $39,500 | $33,000 | $6,500 | 20% | | Device licensing & development | $4,752 | $4,118 | $634 | 15% | | Total Revenues | $427,232 | $383,181 | $44,051 | 11% | Operating Expenses Comparison (Six Months Ended June 30, in thousands) | Expense Type | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Cost of sales | $67,936 | $85,240 | $(17,304) | (20)% | | Amortization of intangibles | $35,525 | $35,670 | $(145) | —% | | Research and development | $40,149 | $37,706 | $2,443 | 6% | | Selling, general and administrative | $70,845 | $76,305 | $(5,460) | (7)% | - Investment and other income, net increased by 62% to $10,025 thousand, primarily due to higher market interest rates and an increased average invested balance[158] - Income tax expense increased by 41% to $43,703 thousand, primarily due to higher income before taxes[159] Liquidity and Capital Resources This section discusses the company's cash position, cash flow activities, and its ability to fund operations for the foreseeable future - As of June 30, 2024, Halozyme had $529.0 million in cash, cash equivalents, and available-for-sale marketable securities, which are believed to be sufficient to fund operations for at least the next twelve months[162] Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2024 | 2023 | Change ($) | | :-------------------------------------------------------- | :---------- | :----------- | :----------- | | Net cash provided by operating activities | $185,221 | $153,806 | $31,415 | | Net cash used in investing activities | $(124,720) | $(5,168) | $(119,552) | | Net cash provided by (used in) financing activities | $8,993 | $(162,168) | $171,161 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $69,494 | $(13,530) | $83,024 | - The increase in net cash provided by operations was primarily due to increased revenue, partially offset by higher working capital spend[163] - The increase in net cash used in investing activities was mainly due to increased net purchases of marketable securities[163] - The decrease in net cash used in financing activities was primarily due to the absence of significant common stock repurchases and 2024 Convertible Notes repayments seen in the prior year[164] Long-Term Debt This section details the company's outstanding convertible notes and credit facilities, including their principal amounts and conversion status - The company has $720.0 million in 1.00% Convertible Senior Notes due 2028 and $805.0 million in 0.25% Convertible Senior Notes due 2027, neither of which were convertible as of June 30, 2024[168][170][171] - The 2024 Convertible Notes were fully converted in March 2023, involving a cash payment of $13.5 million and the issuance of 288,886 common shares[172] - A $575 million revolving credit facility and a $250 million term loan facility (2022 Facility) mature on November 30, 2026; the revolving credit facility was undrawn as of June 30, 2024[173][175] Additional Capital Requirements This section confirms no material changes to the company's expected working capital and capital requirements since the last annual report - There have been no material changes to the company's expected working capital and other capital requirements as described in its Annual Report on Form 10-K for the year ended December 31, 2023[176] Critical Accounting Policies and Estimates This section states that there were no material changes to the company's critical accounting policies or estimates during the reporting period - There were no material changes to the company's critical accounting policies or estimates during the six months ended June 30, 2024[177] Recent Accounting Pronouncements This section refers to Note 2 for a discussion of recent accounting pronouncements and their impact on the financial statements - Refer to Note 2, Summary of Significant Accounting Policies, for a discussion of recent accounting pronouncements and their effect[178] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risks, including interest rate and foreign currency exchange risks, and its hedging strategies - No material changes in market risks occurred during the quarter ended June 30, 2024[180] - The investment portfolio includes money market funds, asset-backed securities, U.S. Treasury securities, corporate debt securities, agency bonds, and commercial paper, managed to preserve principal and maximize income[181] - The company hedges a portion of foreign currency exchange risk for forecasted Swiss franc-denominated royalty revenue using cash flow hedges to mitigate adverse effects from exchange rate fluctuations[181] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no significant changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2024[182] - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2024[183] PART II — OTHER INFORMATION This section provides additional information not included in the financial statements, covering legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings This section confirms that the company is not involved in any legal proceedings that would materially adversely affect its financial statements - The company is not a party to any legal proceedings that, in its opinion, would individually or in the aggregate, have a material adverse effect on its condensed consolidated statements of income or balance sheets[185] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's latest annual report - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2023[186] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the completion of a share repurchase program and the authorization of a new program for outstanding common stock - The December 2021 share repurchase program, totaling $750.0 million, was completed in June 2024, including an Accelerated Share Repurchase (ASR) of $250.0 million that resulted in the delivery of 6.5 million shares[187] - A new capital return program to repurchase up to $750.0 million of outstanding common stock was authorized by the Board of Directors in February 2024[187] Item 3. Defaults Upon Senior Securities This section indicates that there are no defaults upon senior securities to report - Not applicable[188] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures to report - Not applicable[188] Item 5. Other Information This section confirms no directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[189] Item 6. Exhibits This section lists all documents filed as exhibits to the Form 10-Q, including organizational documents and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Indentures and Forms of Note for 2021 and 2022 convertible notes, Form of Restricted Unit Agreement, and Certifications of CEO and CFO (Rule 13a-14(a) and 18 U.S.C. 1350)[191] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers for the Form 10-Q filing - The report is signed by Helen I. Torley, President and Chief Executive Officer, and Nicole LaBrosse, Senior Vice President and Chief Financial Officer, on August 6, 2024[192]