Halozyme(HALO) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents Halozyme Therapeutics, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of income, comprehensive income, cash flows, and stockholders' equity, along with detailed notes explaining accounting policies, fair value measurements, revenue recognition, balance sheet items, goodwill, intangible assets, long-term debt, share-based compensation, earnings per share, and commitments Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets show a slight decrease in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, primarily due to a reduction in cash and cash equivalents and accumulated other comprehensive income (loss), while liabilities saw a modest increase Condensed Consolidated Balance Sheets (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total assets | $2,053,899 | $2,063,477 | | Total liabilities | $1,721,151 | $1,699,656 | | Total stockholders' equity | $332,748 | $363,821 | | Cash and cash equivalents | $61,861 | $115,850 | | Marketable securities, available-for-sale | $486,316 | $480,224 | | Accounts receivable, net and contract assets | $316,339 | $308,455 | | Inventories | $181,505 | $141,860 | | Long-term debt, net | $1,509,100 | $1,505,798 | - Cash and cash equivalents decreased by $53,989 thousand from December 31, 2024, to June 30, 2025[9] - Total stockholders' equity decreased by $31,073 thousand, primarily due to accumulated other comprehensive loss[9] Condensed Consolidated Statements of Income The Condensed Consolidated Statements of Income show significant revenue and net income growth for both the three and six months ended June 30, 2025, compared to the same periods in 2024, driven primarily by increased royalties and product sales Condensed Consolidated Statements of Income (In thousands, except per share amounts): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $325,719 | $231,353 | $590,580 | $427,232 | | Operating income | $202,441 | $117,235 | $343,976 | $212,777 | | Net income | $165,160 | $93,245 | $283,255 | $170,068 | | Basic EPS | $1.36 | $0.73 | $2.32 | $1.34 | | Diluted EPS | $1.33 | $0.72 | $2.26 | $1.32 | - Total revenues increased by 40.8% for the three months ended June 30, 2025, and by 38.2% for the six months ended June 30, 2025, compared to the respective prior year periods[11] - Net income increased by 77.1% for the three months ended June 30, 2025, and by 66.5% for the six months ended June 30, 2025, year-over-year[11] Condensed Consolidated Statements of Comprehensive Income The Condensed Consolidated Statements of Comprehensive Income show a significant increase in comprehensive income for both the three and six months ended June 30, 2025, compared to 2024, despite unrealized losses on derivative instruments in 2025 Condensed Consolidated Statements of Comprehensive Income (In thousands): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $165,160 | $93,245 | $283,255 | $170,068 | | Unrealized (loss) gain on derivative instruments, net | $(27,047) | $76 | $(34,270) | $8,691 | | Comprehensive income | $140,170 | $92,663 | $251,023 | $177,278 | - Comprehensive income increased by 51.3% for the three months ended June 30, 2025, and by 41.6% for the six months ended June 30, 2025, year-over-year[14] - Unrealized loss on derivative instruments significantly impacted comprehensive income in 2025, contrasting with a gain in 2024[14] Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows show a net decrease in cash and cash equivalents for the six months ended June 30, 2025, primarily due to significant share repurchases in financing activities, despite strong cash generation from operating activities Condensed Consolidated Statements of Cash Flows (In thousands): | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $253,932 | $185,221 | | Net cash used in investing activities | $(5,634) | $(124,720) | | Net cash (used in) provided by financing activities | $(302,287) | $8,993 | | Net (decrease) increase in cash and cash equivalents | $(53,989) | $69,494 | | Cash and cash equivalents at end of period | $61,861 | $187,864 | - Net cash provided by operating activities increased by $68,711 thousand (37.1%) for the six months ended June 30, 2025, compared to the same period in 2024[17][220] - Net cash used in financing activities significantly increased to $(302,287) thousand in 2025, primarily due to $303.5 million in common stock repurchases[17][222] Condensed Consolidated Statements of Stockholders' Equity The Condensed Consolidated Statements of Stockholders' Equity show a decrease in total stockholders' equity from December 31, 2024, to June 30, 2025, primarily driven by significant share repurchases and other comprehensive loss, partially offset by net income and share-based compensation Condensed Consolidated Statements of Stockholders' Equity (In thousands): | Item | Balance as of Dec 31, 2024 | Balance as of Jun 30, 2025 | | :-------------------------------- | :------------------------- | :------------------------- | | Total Stockholders' Equity | $363,821 | $332,748 | | Net income | $283,255 | $283,255 | | Repurchase of common stock | $(306,132) | $(306,132) | | Other comprehensive income (loss) | $(32,232) | $(32,232) | | Share-based compensation expense | $22,834 | $22,834 | - Total stockholders' equity decreased by $31,073 thousand from December 31, 2024, to June 30, 2025[20] - Repurchase of common stock amounted to $306,132 thousand for the six months ended June 30, 2025, significantly impacting equity[20] Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies, financial instrument fair value measurements, revenue recognition methods, and specific balance sheet items, also covering goodwill and intangible assets, long-term debt, stockholders' equity activities including share-based compensation and repurchases, earnings per share calculations, and commitments and contingencies 1. Organization and Business Halozyme Therapeutics, Inc. is a biopharmaceutical company focused on improving patient experiences and outcomes through its ENHANZE drug delivery technology (rHuPH20) for subcutaneous drug delivery and advanced auto-injector technologies - Halozyme's core business involves the ENHANZE drug delivery technology (rHuPH20) for subcutaneous drug delivery, licensed to biopharmaceutical companies[23] - The company earns royalties, event and sales-based milestone payments, and revenues from bulk rHuPH20 sales from its ENHANZE collaborations[24] - Halozyme currently earns royalties from 10 commercial products, including five from Roche, two from Janssen, and one each from Takeda, argenx, and BMS collaborations[24] - Proprietary commercial products include Hylenex (rHuPH20) and XYOSTED (auto-injector technology)[25] 2. Summary of Significant Accounting Policies This section outlines Halozyme's key accounting policies, including the basis of presentation for interim unaudited condensed consolidated financial statements, use of estimates, classification and valuation of cash equivalents and marketable securities, fair value measurements, accounting for accounts receivable and contract assets, inventories, leases, property and equipment, comprehensive income, convertible notes, cash flow hedges for currency risks, business combinations, goodwill, intangible assets, and revenue recognition, detailing the company's single operating segment and recent accounting pronouncements - The company operates as a single operating segment, with the CEO reviewing results on an aggregate basis[94][95] - Halozyme uses cash flow hedging to mitigate foreign currency exchange risk for forecasted Swiss franc-denominated royalty revenue, with all hedges determined to be highly effective as of June 30, 2025[42][43] - Revenue is recognized when promised goods or services are transferred to customers, with specific five-step guidance applied to collaborative agreements and product sales[53] - New accounting standards, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation), are being evaluated for their impact on financial statements, with effective dates in 2025 and 2026/2027 respectively[96][98] 3. Fair Value Measurement This section details the fair value measurement of Halozyme's financial instruments, primarily available-for-sale marketable securities and cash equivalents, categorized using the three-tier fair value hierarchy, with $486.3 million in marketable securities as of June 30, 2025, and derivative liabilities for currency hedging contracts Available-for-sale marketable securities (In thousands): | Security Type | June 30, 2025 Estimated Fair Value | December 31, 2024 Estimated Fair Value | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Corporate debt securities | $130,893 | $102,575 | | U.S. treasury securities | $337,705 | $367,570 | | Agency bonds | $9,824 | $9,828 | | Commercial paper | $7,894 | $0 | | Total marketable securities | $486,316 | $480,224 | - As of June 30, 2025, 27 available-for-sale marketable securities with a fair market value of $280.8 million were in a gross unrealized loss position of $0.3 million, but no credit loss is expected[99] Fair Value Hierarchy of Cash Equivalents and Marketable Securities (In thousands) as of June 30, 2025: | Asset Type | Level 1 | Level 2 | Total Estimated Fair Value | | :-------------------------------- | :------ | :------ | :------------------------- | | Money market funds | $4,977 | $0 | $4,977 | | Corporate debt securities | $0 | $130,893 | $130,893 | | U.S. treasury securities | $337,705 | $0 | $337,705 | | Agency bonds | $9,824 | $0 | $9,824 | | Commercial paper | $0 | $7,894 | $7,894 | | Currency hedging contracts (Liabilities) | $0 | $34,795 | $34,795 | 4. Revenue Halozyme's revenue streams include royalties, product sales (proprietary, bulk rHuPH20, and device partnered), and revenues under collaborative agreements (upfront license fees, milestones, and device licensing/development), with significant revenue recognized from licenses granted in prior periods, and accounts receivable and contract assets reflecting amounts due from partners Disaggregated Revenues (In thousands): | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Royalties | $205,639 | $124,918 | $373,831 | $245,511 | | Product sales, net | $81,510 | $78,886 | $159,551 | $137,469 | | Revenues under collaborative agreements | $38,570 | $27,549 | $57,198 | $44,252 | | Total revenues | $325,719 | $231,353 | $590,580 | $427,232 | - For the three months ended June 30, 2025, royalties increased by 64.6% and revenues under collaborative agreements increased by 40.0% year-over-year[103] - For the six months ended June 30, 2025, royalties increased by 52.3% and product sales, net increased by 16.1% year-over-year[103] Accounts Receivable, Net, Other Contract Assets and Deferred Revenues (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accounts receivable, net | $315,073 | $288,204 | | Other contract assets | $1,266 | $20,251 | | Deferred revenues | $8,373 | $10,343 | 5. Certain Balance Sheet Items This section provides a detailed breakdown of specific balance sheet items, including accounts receivable, inventories, prepaid expenses and other assets, property and equipment, and accrued expenses, highlighting changes between June 30, 2025, and December 31, 2024 Accounts Receivable, Net and Contract Assets (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Royalty payments | $203,070 | $164,348 | | Other product sales | $61,132 | $65,542 | | Contract assets | $1,266 | $20,251 | | Total accounts receivable, net and contract assets | $316,339 | $308,455 | Inventories (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Raw materials | $17,785 | $24,015 | | Work-in-process | $30,932 | $30,169 | | Finished goods | $164,871 | $142,944 | | Total inventories, current | $181,505 | $141,860 | Accrued Expenses (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accrued compensation and payroll taxes | $12,365 | $24,400 | | Taxes payable | $24,959 | $30,995 | | Product returns and sales allowance | $55,064 | $54,588 | | Other accrued expenses | $62,041 | $26,239 | | Lease liability | $28,970 | $30,705 | | Total accrued expenses, current | $115,591 | $128,851 | 6. Goodwill and Intangible Assets, net This section details the company's goodwill and intangible assets, with goodwill remaining stable at $416.8 million, and finite-lived intangible assets, primarily auto-injector technology and XYOSTED product rights, having a net carrying value of $317.6 million as of June 30, 2025, with an estimated future annual amortization schedule provided Goodwill and Intangible Assets, net (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Goodwill | $416,821 | $416,821 | | Total finite-lived intangibles, net | $317,606 | $317,606 (implied from total intangibles) | | ATRS-1902 (IPR&D) | $48,700 | $48,700 (implied from total intangibles) | | Total intangibles, net | $366,306 | $401,830 | Estimated Future Annual Amortization of Finite-Lived Intangible Assets (In thousands): | Year | Amortization Expense | | :-------------------------------- | :------------------- | | Remainder of 2025 | $35,525 | | 2026 | $71,049 | | 2027 | $71,049 | | 2028 | $71,049 | | 2029 | $36,313 | | Thereafter | $32,621 | | Total | $317,606 | 7. Long-Term Debt, Net This section details Halozyme's long-term debt, primarily consisting of 1.00% Convertible Senior Notes due 2028 ($720.0 million principal) and 0.25% Convertible Senior Notes due 2027 ($805.0 million principal), outlining their terms, conversion features, and associated capped call transactions, along with the company's revolving credit and term loan facilities, noting that neither series of Convertible Notes was convertible and the Revolving Credit Facility was undrawn as of June 30, 2025 Net Carrying Amounts and Fair Value of Convertible Notes (In thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | 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 | | Total carrying amount | $1,509,100 | $1,505,798 | | Total fair value of outstanding notes | $1,627,750 | $1,549,100 | Interest Expense and Effective Interest Rates (In thousands): | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Total coupon interest | $2,303 | $4,606 | | Total amortization of debt discount | $1,653 | $3,301 | | Total interest expense | $3,956 | $7,907 | | 2027 Convertible Notes Effective Rate | 0.7% | 0.7% | | 2028 Convertible Notes Effective Rate | 1.5% | 1.5% | - The 2028 Convertible Notes have an initial conversion price of approximately $56.02 per share, and the 2027 Convertible Notes have an initial conversion price of approximately $77.17 per share[120][127] - The company has a $575 million revolving credit facility and a $250 million term loan facility, with the revolving credit facility undrawn as of June 30, 2025[134][137] 8. Stockholders' Equity This section details changes in stockholders' equity, including share-based compensation expenses for stock options, RSUs, PSUs, and ESPP, and significant share repurchase activities, with the company completing a $750.0 million repurchase program in June 2024 and initiating a new $750.0 million program in February 2024, with substantial repurchases made in Q1 and Q2 2025 Total Share-Based Compensation Expense (In thousands): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $3,545 | $2,568 | $6,774 | $5,913 | | Selling, general and administrative | $8,616 | $6,903 | $16,060 | $13,432 | | Total share-based compensation expense | $12,161 | $9,471 | $22,834 | $19,345 | - Total share-based compensation expense increased by 28.4% for the three months ended June 30, 2025, and by 18.0% for the six months ended June 30, 2025, year-over-year[138] Share Repurchase Activity (In thousands, except share and per share amounts): | Period | Total Number of Shares Purchased | Weighted-Average Price Paid Per Share | Total Cost | | :-------------------------------- | :------------------------------- | :------------------------------------ | :--------- | | First quarter 2025 | 452,453 | $53.95 | $24,410 | | Second quarter 2025 | 5,818,338 | $52.16 | $303,490 | | Total (Six Months Ended June 30, 2025) | 6,270,791 | $52.29 | $327,900 | - The company initiated a third $250.0 million share repurchase tranche in June 2025 under the $750.0 million program approved in February 2024[143] 9. Earnings per share This section details the calculation of basic and diluted earnings per share (EPS), showing a significant increase in both basic and diluted EPS for the three and six months ended June 30, 2025, compared to the prior year, with the reconciliation including the impact of dilutive potential common shares from stock options, RSUs, PSUs, ESPP, and Convertible Notes Earnings Per Share (In thousands, except per share amounts): | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $165,160 | $93,245 | $283,255 | $170,068 | | Basic EPS | $1.36 | $0.73 | $2.32 | $1.34 | | Diluted EPS | $1.33 | $0.72 | $2.26 | $1.32 | | Weighted average common shares outstanding for basic EPS | 121,343 | 127,116 | 122,274 | 127,029 | | Weighted average common shares outstanding for diluted EPS | 124,158 | 129,222 | 125,452 | 129,097 | - Basic EPS increased by 86.3% and diluted EPS increased by 84.7% for the three months ended June 30, 2025, year-over-year[146] - Basic EPS increased by 73.1% and diluted EPS increased by 71.2% for the six months ended June 30, 2025, year-over-year[146] - Anti-dilutive securities, including stock options, RSUs, PSUs, ESPP, and Convertible Notes, totaled 24.4 million shares for the three months ended June 30, 2025[146] 10. Commitments and Contingencies Halozyme may be involved in disputes and litigation in the normal course of business, and while the company believes it has adequate insurance, adverse outcomes could materially affect its financial statements and reputation, though currently no legal proceedings are expected to have a material adverse effect - The company is not currently a party to any legal proceedings that, in its opinion, would have a material adverse effect on its condensed consolidated statements of income or balance sheets[147] - Potential legal claims could lead to costly legal expenses, and insurance coverage may be inadequate, potentially damaging reputation and business[147] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Halozyme's financial condition and results of operations, highlighting the company's business overview, recent key events, product pipeline, and a detailed comparison of financial performance for the three and six months ended June 30, 2025, versus 2024, also discussing liquidity, capital resources, and critical accounting policies Overview Halozyme Therapeutics, Inc. is a biopharmaceutical company focused on improving patient experiences through its ENHANZE drug delivery technology and auto-injector products, licensing ENHANZE to partners for royalties and milestone payments, and commercializing proprietary products, with recent key events including multiple regulatory approvals for partner products utilizing ENHANZE and new share repurchase tranches - Halozyme's ENHANZE technology facilitates subcutaneous delivery of injected drugs, aiming to reduce treatment burden and enable flexible administration options[153][154] - Key recent partner approvals include Janssen's DARZALEX SC for smoldering multiple myeloma (EU), Takeda's HYQVIA SC for chronic inflammatory demyelinating polyneuropathy (Japan), argenx's VYVGART SC for chronic inflammatory demyelinating polyneuropathy (EU), and BMS's Opdivo SC for multiple adult solid tumors (EU)[157] - The company initiated the third $250 million share repurchase tranche in June 2025, part of a $750 million program approved in February 2024[159] - Halozyme filed a patent infringement lawsuit against Merck Sharp & Dohme Corp. in April 2025, alleging infringement of its MDASE™ SC delivery technology by Merck's SC Keytruda[159] Product and Product Candidates This section provides a comprehensive overview of Halozyme's proprietary and partnered product portfolio, including marketed products and candidates in various stages of development, highlighting the broad application of ENHANZE technology across multiple therapeutic areas and the company's device collaboration products Proprietary Products and Product Candidates Halozyme's proprietary portfolio includes Hylenex recombinant, a hyaluronidase product for subcutaneous fluid delivery, and XYOSTED, an FDA-approved subcutaneous testosterone enanthate for testosterone replacement therapy, with the company also developing ATRS-1902, a proprietary drug-device combination for adrenal crisis rescue, which has shown positive Phase 1 results and received Fast Track designation from the FDA - Hylenex recombinant is the number one prescribed branded hyaluronidase, facilitating SC administration of fluids and other injected drugs[162] - XYOSTED is the only FDA-approved once-weekly, at-home self-administered SC testosterone enanthate product[163] - ATRS-1902, a proprietary hydrocortisone auto-injector for adrenal crisis rescue, received positive Phase 1 results and FDA Fast Track designation, advancing to a pivotal study[164][166] Partnered Products (ENHANZE Collaborations) Halozyme has extensive ENHANZE collaborations with major biopharmaceutical companies like Roche, Takeda, Janssen, AbbVie, Lilly, BMS, argenx, ViiV Healthcare, Chugai, and Acumen, resulting in multiple approved products across various therapeutic areas, with ongoing development for new indications and product candidates, and recent approvals expanding market reach and patient convenience - Roche collaboration includes approved ENHANZE products like Herceptin SC, Phesgo, MabThera SC, TECENTRIQ SC, and OCREVUS SC, with recent EU label updates for Phesgo and OCREVUS SC[168][170][171] - Takeda's HYQVIA, an ENHANZE product, received FDA and European Commission approval for chronic inflammatory demyelinating polyneuropathy and Japan approval for multifocal motor neuropathy[177] - Janssen's DARZALEX FASPRO/SC (ENHANZE) received multiple approvals for various multiple myeloma indications, including a new EU approval for smoldering multiple myeloma, and RYBREVANT SC (ENHANZE) was approved in the EU for non-small cell lung cancer[179][180] - argenx's VYVGART Hytrulo/SC (ENHANZE) received FDA approval for self-injection in generalized myasthenia gravis and EU approval for chronic inflammatory demyelinating polyneuropathy[185][186] - BMS's Opdivo Qvantig/SC (ENHANZE) was approved by the FDA for SC use in most previously approved adult, solid IV Opdivo indications and received EU approval for multiple solid tumors[183] - ViiV Healthcare, Chugai, and Acumen collaborations are advancing new ENHANZE-enabled product candidates, including N6LS for HIV treatment and ACU193 for Alzheimer's disease, with positive Phase 1 results for sabirnetug (ACU193) SC administration[190][191][192][193] Device and Other Drug Product Collaborations Halozyme collaborates with Teva, Pfizer, Viatris, and Otter on device and other drug product development, including supplying auto-injectors for Teva's generic epinephrine and teriparatide products, developing a rescue pen with Pfizer, and supplying the VIBEX auto-injection system for Otter's OTREXUP, with Viatris also developing selatogrel with Halozyme's QuickShot auto-injector for acute myocardial infarction, currently in Phase 3 - Halozyme is the exclusive supplier of auto-injector devices for Teva's generic Epinephrine Injection USP and Teriparatide Injection products[194] - The company supplies the VIBEX auto-injection system for Otter's OTREXUP (methotrexate) injection, used for rheumatoid arthritis, pJIA, and psoriasis[198] - A global development agreement with Viatris (formerly Idorsia) is progressing selatogrel, a novel drug-device product for acute myocardial infarction, which is currently in a Phase 3 study[196][197] Results of Operations This section analyzes Halozyme's financial performance for the three and six months ended June 30, 2025, compared to the same periods in 2024, detailing changes in revenues (royalties, product sales, collaborative agreements) and operating expenses (cost of sales, R&D, SG&A), as well as investment income and income tax expense Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 For the three months ended June 30, 2025, total revenues increased by 40.8% year-over-year, driven by a 65% increase in royalties and a 40% increase in revenues under collaborative agreements, while operating expenses increased by 8.0%, primarily due to higher cost of sales and SG&A, with R&D decreasing, and net income seeing a substantial 77.1% increase Revenues (In thousands): | Revenue Type | 2025 | 2024 | Change (Dollar) | Change (%) | | :-------------------------------- | :----- | :----- | :-------------- | :--------- | | Royalties | $205,639 | $124,918 | $80,721 | 65% | | Product sales, net | $81,510 | $78,886 | $2,624 | 3% | | Revenues under collaborative agreements | $38,570 | $27,549 | $11,021 | 40% | | Total revenues | $325,719 | $231,353 | $94,366 | 41% | - Royalty increase was primarily due to continued sales uptake of DARZALEX SC, VYVGART Hytrulo, and Phesgo[199] - Product sales, net increased due to XYOSTED market penetration and device partnered products, partially offset by bulk rHuPH20 timing[200] Operating Expenses (In thousands): | Expense Type | 2025 | 2024 | Change (Dollar) | Change (%) | | :-------------------------------- | :----- | :----- | :-------------- | :--------- | | Cost of sales | $46,359 | $39,607 | $6,752 | 17% | | Research and development | $17,543 | $21,038 | $(3,495) | (17)% | | Selling, general and administrative | $41,614 | $35,711 | $5,903 | 17% | - R&D expense decreased due to lower compensation and timing of ENHANZE manufacturing process investments[205] - SG&A expense increased due to higher consulting fees, including $2.6 million in patent infringement litigation costs, and increased compensation[206] - Income tax expense increased by 62% due to higher income before tax, partially offset by tax benefits from share-based compensation and Foreign Derived Intangible Income deduction[209] Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 For the six months ended June 30, 2025, total revenues increased by 38.2% year-over-year, driven by a 52% increase in royalties and a 16% increase in product sales, while operating expenses increased by 15.0%, with higher cost of sales and SG&A, R&D decreasing, and net income increasing by 66.5% Revenues (In thousands): | Revenue Type | 2025 | 2024 | Change (Dollar) | Change (%) | | :-------------------------------- | :----- | :----- | :-------------- | :--------- | | Royalties | $373,831 | $245,511 | $128,320 | 52% | | Product sales, net | $159,551 | $137,469 | $22,082 | 16% | | Revenues under collaborative agreements | $57,198 | $44,252 | $12,946 | 29% | | Total revenues | $590,580 | $427,232 | $163,348 | 38% | - Royalty increase was primarily due to continued sales uptake of DARZALEX SC, VYVGART Hytrulo, and Phesgo[210] - Product sales, net increased due to higher bulk rHuPH20 and device partnered product sales, and XYOSTED market penetration[211] Operating Expenses (In thousands): | Expense Type | 2025 | 2024 | Change (Dollar) | Change (%) | | :-------------------------------- | :----- | :----- | :-------------- | :--------- | | Cost of sales | $94,762 | $67,936 | $26,826 | 39% | | Research and development | $32,342 | $40,149 | $(7,807) | (19)% | | Selling, general and administrative | $83,976 | $70,845 | $13,131 | 19% | - R&D expense decreased due to lower compensation, resource optimization, and timing of ENHANZE manufacturing process investments[214] - SG&A expense increased due to higher consulting and professional service fees, including litigation costs, and increased compensation[215] - Income tax expense increased by 50% due to higher income before tax, partially offset by tax benefits from share-based compensation, Foreign Derived Intangible Income deduction, and uncertain tax benefit adjustments[216] Liquidity and Capital Resources Halozyme's primary liquidity sources are cash, cash equivalents, and marketable securities, totaling $548.2 million as of June 30, 2025, with the company expecting these resources, along with anticipated revenues, to fund operations for at least the next 12 months, and cash flows for the six months ended June 30, 2025, showing increased cash from operations, decreased cash used in investing, and a significant increase in cash used in financing due to share repurchases, also detailing its convertible notes and undrawn revolving credit facility - As of June 30, 2025, Halozyme had $548.2 million in cash, cash equivalents, and marketable securities[217] - The company expects existing cash resources and anticipated revenues to fund operations for at least the next 12 months[217] Cash Flows (Six Months Ended June 30, In thousands): | Activity | 2025 | 2024 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $253,932 | $185,221 | $68,711 | | Net cash used in investing activities | $(5,634) | $(124,720) | $119,086 | | Net cash (used in) provided by financing activities | $(302,287) | $8,993 | $(311,280) | | Net (decrease) increase in cash and cash equivalents | $(53,989) | $69,494 | $(123,483) | - The increase in net cash used in financing activities was primarily due to a $303.5 million increase in common stock repurchases[222] - The Revolving Credit Facility of $575 million was undrawn as of June 30, 2025[237] Critical Accounting Policies and Estimates This section states that there were no material changes to Halozyme's critical accounting policies or estimates during the six months ended June 30, 2025, as compared to those described in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes occurred in critical accounting policies or estimates during the six months ended June 30, 2025[240] Recent Accounting Pronouncements This section refers to Note 2, Summary of Significant Accounting Policies, for a discussion of recently issued accounting standards and their potential effects on the financial statements - Refer to Note 2 for details on recent accounting pronouncements and their potential impact[241] Item 3. Quantitative and Qualitative Disclosures About Market Risk Halozyme's market risks, primarily related to interest rate fluctuations on investments and foreign currency exchange risk on royalty revenue, remained unchanged during the quarter ended June 30, 2025, with the company using cash flow hedges to mitigate foreign currency risk and believing its investment portfolio does not have significant default or illiquidity risk - No material changes in market risks occurred during the quarter ended June 30, 2025[242] - The company hedges foreign currency exchange risk associated with forecasted Swiss franc-denominated royalty revenue using cash flow hedges[244] - The investment portfolio, consisting of money market funds, U.S. Treasury securities, corporate debt, commercial paper, and agency bonds, is managed to preserve principal and maximize income without significantly increasing risk[243] Item 4. Controls and Procedures Halozyme's management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no significant changes in internal control over financial reporting during the quarter that materially affected or are reasonably likely to materially affect these controls - Disclosure controls and procedures were effective as of June 30, 2025[247] - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[248] PART II — OTHER INFORMATION Item 1. Legal Proceedings Halozyme may face disputes and litigation in the normal course of business, which could lead to substantial expenses and reputational damage, and while the company believes it has adequate insurance, there is no assurance that coverage will be sufficient, though currently no legal proceedings are expected to have a material adverse effect on the company's financial condition - The company is not currently a party to any legal proceedings that, in its opinion, would have a material adverse effect on its condensed consolidated statements of income or balance sheets[250] - Potential legal claims could lead to costly legal expenses, and insurance coverage may be inadequate, potentially damaging reputation and business[250] Item 1A. Risk Factors This section updates the risk factors, noting no material changes other than those discussed, with key risks including potential legal proceedings related to intellectual property rights, such as the patent infringement lawsuit against Merck, and the impact of rising healthcare costs, government policies (like the IRA and MFN pricing proposals), and workforce reductions at federal agencies on product pricing, reimbursement, and regulatory approvals - No material changes to risk factors were identified, other than those specifically discussed in this section[251] - The company filed a patent infringement lawsuit against Merck Sharp & Dohme Corp. in April 2025, alleging infringement of its MDASE™ SC delivery technology[253] - Challenges to intellectual property, including patent validity (e.g., European Patent Office revoking Janssen's DARZALEX co-formulation patents), could materially adversely affect the business[254] - The Inflation Reduction Act of 2022 (IRA) and potential Most Favored Nations (MFN) pricing policies could negatively impact product pricing, reimbursement, and revenue[261][262] - Workforce reductions at federal health agencies and changes in U.S. trade policy (e.g., tariffs) could delay regulatory approvals and increase costs[269] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities under the $750.0 million capital return program authorized in February 2024, with Halozyme repurchasing 5.8 million shares at an average price of $52.16 per share, totaling $303.5 million, for the three months ended June 30, 2025 - A new capital return program to repurchase up to $750.0 million of outstanding common stock was authorized in February 2024[270] Share Repurchase Activity (Three Months Ended June 30, 2025, in thousands, except share and per share amounts): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Cost | | :-------------------------------- | :------------------------------- | :--------------------------- | :--------- | | April 1, 2025 through April 30, 2025 | — | $— | $0 | | May 1, 2025 through May 31, 2025 | 2,966,648 | $51.23 | $151,900 | | June 1, 2025 through June 30, 2025 | 2,851,690 | $53.13 | $151,590 | | Total | 5,818,338 | $52.16 | $303,490 | - As of June 30, 2025, approximately $196.5 million remained available for repurchase under the program[270] Item 3. Defaults Upon Senior Securities This item is not applicable to Halozyme for the reporting period Item 4. Mine Safety Disclosures This item is not applicable to Halozyme for the reporting period Item 5. Other Information This section discloses Rule 10b5-1 trading arrangements adopted by two officers, Bernadette Connaughton (Director) and Nicole LaBrosse (SVP and CFO), during the three months ended June 30, 2025, for the sale of common stock Rule 10b5-1 Trading Arrangements Adopted (Three Months Ended June 30, 2025): | Name and Title | Action Date | Rule 10b5-1* | Total Shares To Be Sold | Expiration Date | | :-------------------------------- | :---------- | :----------- | :---------------------- | :-------------- | | Bernadette Connaughton, Director | 5/29/2025 | X | 17,330 | 8/31/2026 | | Nicole LaBrosse, SVP and CFO | 6/11/2025 | X | 39,337 | 4/22/2026 | - Nicole LaBrosse's plan includes 22,227 shares plus an undetermined number from vesting restricted stock units, less shares withheld for tax obligations[275] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, indenture agreements for convertible notes, certifications from the CEO and CFO, and various Inline XBRL documents - Exhibits include Amended and Restated Certificate of Incorporation, Company Bylaws, Indentures for 2021 and 2022 Convertible Notes, CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. 1350), and Inline XBRL documents[276][278] SIGNATURES SIGNATURES This section contains the required signatures for the Form 10-Q, certifying its submission by Halozyme Therapeutics, Inc. on August 5, 2025, by the President and Chief Executive Officer, Helen I. Torley, and the Senior Vice President and Chief Financial Officer, Nicole LaBrosse - The report was signed by Helen I. Torley, President and Chief Executive Officer, and Nicole LaBrosse, Senior Vice President and Chief Financial Officer, on August 5, 2025[280]