Halozyme Therapeutics
Annual Report 2015

Plain-text annual report

WE ARE HALOZYME. 2015 annual report KEY EVENTS MARCH Janssen announces the first product candidate with the ENHANZE™ collaboration will be daratumumab for multiple myeloma patients. MAY Ventana Collaboration Agreement for the PEGPH20 companion diagnostic announced. JUNE Global licensing and collaboration agreement with AbbVie announced. JULY Clinical collaboration formed with Eisai to study PEGPH20 with HALAVEN® (eribulin) in breast cancer patients. OCTOBER First patient dosed in the Phase 1 study with Pfizer’s rivipansel and ENHANZE™ technology for the treatment of vaso-occlusive crisis due to sickle cell disease. Dear Fellow Shareholders, Halozyme entered 2015 with a sharp focus on our two value-creating pillars and during the course of the year executed well against our plans. My conviction has never been stronger regarding the quality of our science and the potential to create long-term value for shareholders and employees as we invest behind this two-pillar strategy to develop world-class oncology therapies for patients. The first pillar is our oncology business, with our investigational drug, PEGPH20, at the core. PEGPH20 temporarily degrades or breaks down hyaluronan, or HA, a glycosaminoglycan or chain of natural sugars in the body that accumulate around certain tumors and can increase the pressure in and around the tumor, constrict the tumor vasculature and limit access of cancer therapies getting to the tumor to combat the disease. We are evaluating the ability of PEGPH20 to increase the effectiveness of co-administered cancer treatments in pancreatic, non-small cell lung and gastric cancer patients, but see broader potential applicability for its use in multiple tumor types in combination with immuno-oncology agents, monoclonal antibodies and chemotherapies. Our work in oncology is funded in part by the second pillar of our strategy, which is centered on our licensing agreements with marquee partners, including Roche, Baxalta, Pfizer, Janssen, AbbVie and Lilly. These partners co-formulate or co-administer their therapies with our ENHANZE™ technology platform, which temporarily degrades HA under the skin to enable larger fluid volumes or molecules to be delivered with a subcutaneous injection or on a less frequent dosing schedule. Both ENHANZE and PEGPH20 are based on our proprietary rHuPH20 enzyme. We believe in the potential of both pillars and have multiple 2015 highlights to celebrate, each of which drives our strong momentum as we enter 2016. • We reached target enrollment in our Phase 2 study of PEGPH20 in metastatic pancreatic cancer patients and advanced its study in other tumors and with other therapies. Advances included initiation of a second Phase 1b study in non-small cell lung and gastric cancer, and progress toward the 2016 initiation of a study in metastatic HER2-negative breast cancer patients in combination with eribulin. Our study in breast cancer is made possible by the signing of our first-ever clinical collaboration in 2015, with Eisai, a leading global pharmaceutical company; • We laid an important foundation for the future of PEGPH20 by establishing a partnership with Ventana to develop a companion diagnostic that will enable us to identify patients with high levels of HA, thereby targeting those that are most likely to respond to our therapy; • We finalized design elements and site selections for our pivotal Phase 3 trial, set to initiate at the end of March 2016. Strong execution of this trial at the approximately 200 planned global sites will be our top priority in 2016; • In the ENHANZE pillar, we signed major collaboration and licensing agreements during the year with AbbVie in June and Lilly in December that included a combined $48 million in upfront payments and the potential for additional payments of up to $130 million and $160 million per target, respectively, for the achievement of clinical, regulatory and commercial milestones. In the fourth quarter, Janssen initiated a clinical study with daratumumab and Pfizer with rivipansel, both promising new therapies co-formulated with the ENHANZE platform. That partner momentum carried into 2016 as AbbVie advanced into clinic with HUMIRA® and Pfizer with their PCSK9-inhibitor bococizumab, also co-formulated therapies on our ENHANZE platform; • We advanced our preclinical and early pipeline development programs in multiple areas, including the ongoing study of PEGPH20 in new tumor types, advancing our study of the tumor microenvironment and its immunology, and characterizing two potential novel cancer therapies; • Revenue for the year was $135.1 million, a 79 percent increase over 2014, and we exited the year with $108 million in cash. We began 2016 well financed through the strength of our unique business model, which continues to generate cash from royalty revenue, milestone payments and upfront payments associated with our ENHANZE platform business. Through this business model, we raised $150 million in non-dilutive debt financing that was secured by our growing royalty revenue stream. Of all our accomplishments during the year, I am most proud of the capabilities we built through the talented team we are assembling. We have added key personnel in areas that are critical to our long-term success and to achieve our goal of becoming a leading global oncology biotechnology company. In 2016, we have made a commitment to invest behind that strategy as we further build our capabilities, initiate our pivotal Phase 3 trial of PEGPH20 and continue to drive growth in our ENHANZE platform with new products moving into the clinic and with innovative new partnerships. We believe our business model is an important differentiator and driver of value for investors. I am very optimistic about the progress we are making in both pillars and the ability of our talented team to create even greater value for the future. We thank you, our shareholders, for supporting us on this important journey. NOVEMBER Janssen dosed first patient in a clinical trial evaluating daratumumab with our ENHANZE™ technology in multiple myeloma patients. First patient dosed with PEGPH20 in combination with Merck’s KEYTRUDA® (pembrolizumab) in a study for patients with advanced non-small cell lung and gastric cancers. DECEMBER Global licensing and collaboration agreement announced with Lilly. Halozyme opens San Francisco office. Achieved target enrollment in Stage 2 of Study 202 for PEGPH20 in metastatic pancreatic ductal adenocarcinoma patients. Sincerely, Helen Torley, M.B. Ch. B., M.R.C.P. President and Chief Executive Officer WE ARE HALOZYME. We’re a biopharmaceutical company on the forefront of cancer research. With our novel oncology and drug delivery therapies, we help break down tumor defenses and make existing treatments more effective. 8 clinical trials to study the pan-tumor potential of PEGPH20 229% increase in ENHANZE™ platform royalties in FY2015 4 new clinical trials to study therapies co-formulated with our ENHANZE™ platform I P R E C L N C A L I P H A S E 1 P H A S E 2 P H A S E 3 F I L E D A P P R O V E D Diversified Pipeline Broad Range of Partnered and Proprietary Products PRODUCT, COLLABORATION PRODUCTS AND PRODUCT CANDIDATES THERAPEUTIC AREA RESEARCH FOCUS ONCOLOGY PIPELINE AND PRODUCT CANDIDATES PEGPH20 with ABRAXANE® (nab-paclitaxel) and gemcitabine Oncology Pancreatic Cancer PEGPH20 with modified FOLFIRINOX Oncology PEGPH20 with docetaxel Oncology PEGPH20 with KEYTRUDA® (pembrolizumab) Oncology Pancreatic Cancer (Investigator Sponsored Trial with SWOG) Non-Small Cell Lung Cancer (PRIMAL) Gastric/Non-Small Cell Lung Cancer PEGPH20 with HALAVEN® (eribulin) Oncology Breast Cancer (Eisai) ENHANZE™ COLLABORATION PRODUCT CANDIDATES Pfizer (up to 6 potential targets) rivipansel PCSK-9 (bococizumab) Hematology Vaso-occlusive crisis in Sickle Cell Anemia Cardiovascular Cholesterol Lowering Janssen (up to 5 potential targets) Various daratumumab/CD38 Oncology Multiple Myeloma AbbVie (up to 9 potential targets) HUMIRA® (adalimumab) Various Lilly (up to 5 potential targets, 2 specified) Various PRODUCT, COLLABORATION PRODUCTS AND PRODUCT CANDIDATES THERAPEUTIC AREA APPROVED INDICATION PROPRIETARY APPROVED PRODUCT HYLENEX® recombinant (hyaluronidase human injection) Various Adjuvant for Sub-Q fluid delivery for dispersion and absorption of other injected drugs U.S. Approved ENHANZE™ COLLABORATION APPROVED PRODUCTS Roche (up to 8 potential targets) Herceptin® SC (trastuzumab) MabThera® SC (rituximab) Baxalta Oncology Oncology Breast Cancer Non-Hodgkin’s Lymphoma HYQVIA® [Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase] Immunology Primary Immunodeficiency OUS Approved* OUS Approved* U.S. & EU Approved *Approved in EU and other countries outside of U.S. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 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 (State or other jurisdiction of incorporation or organization) 11388 Sorrento Valley Road, San Diego, California (Address of principal executive offices) 88-0488686 (I.R.S. Employer Identification No.) 92121 (Zip Code) (858) 794-8889 (Registrant’s Telephone Number, Including Area Code) Securities registered under Section 12(b) of the Act: Title of Each Class Common Stock, $0.001 Par Value Name of Each Exchange on Which Registered The NASDAQ Stock Market, LLC Securities registered under Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No Indicate by check mark whether the 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 No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2015 was approximately $2.4 billion based on the closing price on the NASDAQ Global Select Market reported for such date. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 22, 2016, there were 129,061,401 shares of the registrant’s common stock issued, $0.001 par value per share, and outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement to be filed subsequent to the date hereof with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant’s 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report. Table of Contents PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 15. SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Page 1 12 25 25 25 25 26 28 29 37 37 37 37 40 40 41 41 41 42 42 43 This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the “safe harbor” provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. All statements, other than statements of historical fact, included herein, including without limitation those regarding our future product development and regulatory events and goals, product collaborations, our business intentions and financial estimates and anticipated results, are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,” “continue,” “potential,” “likely,” “opportunity” 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 Annual Report. Additionally, statements concerning future matters such as the development or regulatory approval of new products, enhancements of existing products or technologies, third party performance under key collaboration agreements, revenue and expense levels and other statements regarding matters that are not historical are forward-looking statements. Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” in Part I, Item 1A below, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual 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 Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. References to “Halozyme,” “the Company,” “we,” “us,” and “our” refer to Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd. and Halozyme Royalty LLC. References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (refer to Part II, Item 8). Item 1. Business Overview PART I Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that have the potential to improve cancer patient survival. Our research primarily focuses on human enzymes that alter the extracellular matrix and tumor microenvironment. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies. Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or can be used to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk and cost by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products that combine our technology with the collaborators’ proprietary compounds. The majority of our approved product 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 temporarily breaking down hyaluronan (or HA), a naturally occurring complex carbohydrate that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of 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™ Technology. 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. We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), and Eli Lilly and Company (Lilly). We receive royalties from two of these collaborations, including royalties from sales of one product 1 approved in both the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of our approved products, product candidates, and ENHANZE collaborations will depend on the ability of Halozyme and our collaborators to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates. Our proprietary development pipeline consists primarily of clinical stage product candidates in oncology. Our lead oncology program is PEGPH20 (PEGylated recombinant human hyaluronidase), a molecular entity we are developing for the systemic treatment of tumors that accumulate HA. When HA accumulates in a tumor, it can cause higher pressure in the tumor, reducing blood flow into the tumor and with that, reduced access of cancer therapies to the tumor. PEGPH20 works by temporarily degrading HA surrounding cancer cells resulting in reduced pressure and increased blood flow to the tumor thereby enabling increased amounts of anticancer treatments administered concomitantly gaining access to the tumor. We are currently in Phase 2 and Phase 3 clinical testing for PEGPH20 in stage IV pancreatic ductal adenocarcinoma (PDA) (Studies 109-202 and 109-301), in Phase 1b clinical testing in non-small cell lung cancer (Study 107-201) and in Phase 1b clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101). Our principal offices and research facilities are located at 11388 Sorrento Valley Road, San Diego, California 92121. Our telephone number is (858) 794-8889 and our e-mail address is info@halozyme.com. Our website address is www.halozyme.com. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. Our periodic and current reports that we filed with the SEC are available on our website at www.halozyme.com, free of charge, as soon as reasonably practicable after we have electronically filed such material with, or furnished them to, the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. Further copies of these reports are located at the SEC’s Public Reference Room at 100 F Street, N.W., Washington, D.C. 20549, and online at http://www.sec.gov. Technology rHuPH20 can be applied as a drug delivery platform to increase dispersion and absorption of other injected drugs and fluids that are injected under the skin or in the muscle thereby potentially enhancing efficacy or convenience. For example, rHuPH20 has been used to convert drugs that must be delivered intravenously into subcutaneous injections or to reduce the number of subcutaneous injections needed for effective therapy. When ENHANZE Technology is applied subcutaneously, the rHuPH20 acts locally and has a tissue half-life of less than 15 minutes. HA at the local site reconstitutes its normal density within a few days and, therefore, we anticipate that any effect of rHuPH20 on the architecture of the subcutaneous space is temporary. Additionally, we are expanding our scientific work to develop other enzymes and agents that target the extracellular matrix’s unique aspects, giving rise to potentially new molecular entities with a particular focus on oncology. We are developing a PEGylated version of the rHuPH20 enzyme (PEGPH20), that lasts for an extended period in the bloodstream (half-life of one to two days), and may therefore better target solid tumors that accumulate HA by degrading the surrounding HA and reducing the interstitial fluid pressure within malignant tumors to allow better penetration by co-administered agents. Strategy During 2015, we continued our strategy of focusing on developing our PEGPH20 product candidate for oncology as well as entering into new collaborations for ENHANZE Technology. This business model allows for growth in which revenue garnered from collaboration products helps fund our investment in PEGPH20 clinical development, with the goal of a future product approval that will support sustained growth. Key aspects of our corporate strategy include the following: • • Focus on developing PEGPH20, our investigational new drug candidate, in multiple different tumors that accumulate high levels of HA. PEGPH20 is in Phase 2 and Phase 3 development in stage IV PDA and in Phase 1b development in non-small cell lung cancer and gastric cancer. Over time, it is our goal to study additional types of cancer and to advance this program toward regulatory approval and commercial launch. Focus on ENHANZE collaborations. We currently have six collaborations with three current product approvals and additional product candidates in development. We intend to work with our existing collaborators to expand our collaborations to add new targets and product candidates under the terms of the operative agreements. In addition, we will continue our efforts to enter into new collaborations to further exploit and derive additional value from our proprietary technology. 2 Product and Product Candidates We have one marketed proprietary product and one proprietary product candidate targeting several indications in various stages of development. The following table summarizes our proprietary product and product candidate as well as products and product candidates under development with our collaborators: 3 Proprietary Pipeline Hylenex Recombinant (hyaluronidase human injection) Hylenex recombinant is a formulation of rHuPH20 that has received FDA approval to facilitate subcutaneous fluid administration for achieving hydration, to increase 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. PEGPH20 We are developing PEGPH20 as a candidate for the systemic treatment of tumors that accumulate HA in combination with currently approved cancer therapies. ‘PEG’ refers to the attachment of polyethylene glycol to rHuPH20, thereby creating PEGPH20. One of the novel properties of PEGPH20 is that it lasts for an extended duration in the bloodstream and, therefore, can be administered systemically to maintain its therapeutic effect to treat disease. Cancer malignancies, including pancreatic, lung, breast, gastric, colon and prostate cancers can accumulate high levels of HA and therefore we believe that PEGPH20 has the potential to help patients with these types of cancer when used with currently approved cancer therapies. Among solid tumors, PDA has been reported to be associated with the highest frequency of HA accumulation. Approximately 90,000 patients in the United States and the European Union will be diagnosed with PDA in 2016. The pathologic accumulation of HA, along with other matrix components, creates a unique microenvironment for the growth of tumor cells compared to normal cells. We believe that depleting the HA component of the tumor microenvironment with PEGPH20 remodels the tumor microenvironment, resulting in tumor growth inhibition in animal models. Removal of HA from the tumor microenvironment results in expansion of previously constricted blood vessels allowing increased blood flow, potentially increasing the access of activated immune cells and factors in the blood into the tumor microenvironment. If PEGPH20 is administered in conjunction with other anti-cancer therapies, the increase in blood flow may allow anti-cancer therapies to have greater access to the tumor, which may enhance the treatment effect of therapeutic modalities like chemotherapies, monoclonal antibodies and other agents. Study Halo 109-201: In January 2015, we presented the final results from Study 109-201, a multi-center, international open label dose escalation Phase 1b clinical study of PEGPH20 in combination with gemcitabine for the treatment of patients with stage IV PDA at the 2015 Gastrointestinal Cancers Symposium (also known as ASCO-GI meeting). This study enrolled 28 patients with previously untreated stage IV PDA. Patients were treated with one of three doses of PEGPH20 (1.0, 1.6 and 3.0 μg/kg twice weekly for four weeks, then weekly thereafter) in combination with gemcitabine 1000 mg/m2 administered intravenously. In this study, the confirmed overall response rate (complete response + partial response confirmed on a second scan as assessed by an independent radiology review) was 29 percent (7 of 24 patients) for those treated at therapeutic dose levels of PEGPH20 (1.6 and 3.0 μg/kg). Median progression-free survival (PFS) was 154 days (95% CI, 50-166) in the efficacy-evaluable population (n = 24). Among efficacy- evaluable patients with baseline tumor HA staining (n = 17), the median PFS in patients with high baseline tumor HA staining (6/17 patients) was substantially longer, 219 days, than in the patients with low baseline tumor HA staining (11/17 patients), 108 days. Median overall survival (OS) was 200 days (95% CI, 123-370) in the efficacy-evaluable population (n = 24). Among efficacy- evaluable patients with baseline tumor HA staining (n = 17), the median OS in patients with high baseline tumor HA staining (6/17 patients) was substantially longer, 395 days, than in the patients with low baseline tumor HA staining (11/17 patients), 174 days. The most common treatment-emergent adverse events (occurring in 15% of patients) were peripheral edema, muscle spasms, thrombocytopenia, fatigue, myalgia, anemia, and nausea. Thromboembolic (TE) events were reported in 8 patients (28.6%) and musculoskeletal events were reported in 21 patients (75%) which were generally grade 1/2 in severity. Study Halo 109-202: In the second quarter of 2013, we initiated Study 109-202, a Phase 2 multicenter randomized clinical trial evaluating PEGPH20 as a first-line therapy for patients with stage IV PDA. The study was designed to enroll patients who would receive gemcitabine and nab-paclitaxel (ABRAXANE®) either with or without PEGPH20. The primary endpoint is to measure the improvement in PFS in patients receiving PEGPH20 plus gemcitabine and nab-paclitaxel compared to those who are receiving gemcitabine and nab-paclitaxel alone. In April 2014, after 146 patients had been enrolled, the trial was put on clinical hold by Halozyme and the FDA to assess a question raised by the Data Monitoring Committee regarding a possible difference in the TE events rate between the group of patients treated with PEGPH20, nab-paclitaxel and gemcitabine (PAG arm) versus the group of patients treated with nab-paclitaxel and gemcitabine without PEGPH20 (AG arm). This portion of the study and patients in this portion are now referred to as Stage 1. It should be noted that at the time of the clinical hold all patients remaining in the study continued on gemcitabine and nab-paclitaxel. In July 2014, the Study 109-202 was reinitiated (Stage 2) under a revised protocol, which excludes patients that are expected to be at a greater risk for TE events. The revised protocol provides for thromboembolism prophylaxis of all patients in both arms of the study with low molecular weight heparin, and adds evaluation of the TE events rate in Stage 2 PEGPH20- 4 treated patients as a co-primary end point. Stage 2 of Study 109-202 enrolled an additional 133 patients, to add to the 146 patients already accrued in the clinical trial, with a 2:1 randomization for PAG compared to AG. We project to present mature PFS data and overall response rate in the fourth quarter of 2016. In May 2015, interim findings from the ongoing Phase 2 clinical study of PEGPH20 for the potential treatment of patients with stage IV PDA were presented at the American Society of Clinical Oncology annual meeting. The trial included 135 treated patients in Stage 1, of whom a total of 44 patients -- 23 receiving PEGPH20 in combination with ABRAXANE® and gemcitabine (PAG treatment arm) and 21 receiving ABRAXANE and gemcitabine alone (AG treatment arm) -- had available biopsies that were determined utilizing the Halozyme prototype HA assay in a retrospective analysis to have high levels of hyaluronan. PEGPH20 targets HA to help improve cancer therapy access to tumor cells. Results reported include: • A more than doubling of median PFS of 9.2 months versus 4.3 months in high-HA patients treated with PAG vs. AG (hazard ratio of 0.39; p-value of 0.05); • A more than doubling of overall response rate of 52 percent versus 24 percent (p-value of 0.038) and a duration of response of 8.1 months compared to 3.7 months in high-HA patients treated with PAG versus AG; • In the 30 high-HA patients (15 PAG treatment arm versus 15 AG treatment arm) who were evaluated for response prior to the April 2014 clinical hold and subsequent PEGPH20 treatment discontinuation, the overall response rate was 73 percent versus 27 percent (p-value of 0.01), respectively, consistent with findings presented in January; • A trend toward improvement in median overall survival of 12 months compared to 9 months in high-HA patients treated with PAG versus AG (hazard ratio of 0.62) despite discontinuation of PEGPH20 in more than half of the PAG-treated patients at the time of the clinical hold in April 2014. Data was also presented on the rate of TE events in 55 patients treated in Stage 2 of the trial, which is currently randomizing patients at a 2:1 ratio of PAG versus AG. As noted above, Stage 2 began after a protocol amendment in July 2014, excluding patients at high risk of TE events and adding prophylaxis with low molecular weight heparin (enoxaparin) to all patients in both treatment arms. Reported results included a TE event rate of 13% in 38 patients treated with PAG versus 18% in 17 patients receiving AG. We and the Data Monitoring Committee for Study 109-202 continue to closely monitor the occurrence of TE events in enrolled patients after the revision to the protocol. The revised protocol includes pre-specified analyses to evaluate the rate of TE events. While the pre-specified TE event rate analysis established in the protocol at the time of the clinical hold in 2014 have been passed, the continuation of Study 202 may be halted again if the FDA determines that imbalances in safety findings, including TE events, occur, or for any other emergent safety concerns. In March 2015, we met with the FDA to discuss both the interim efficacy and safety data from Study 109-202, which included the potential risk profile including TE event rate. Based on the feedback from that meeting, we proceeded with a Phase 3 clinical study (Study 109-301) of PEGPH20 in patients with stage IV PDA, using a design allowing for potential marketing application based on either PFS or overall survival. The study will enroll patients whose tumors accumulate high levels of HA using a companion diagnostic test. The FDA provided feedback on the current companion diagnostic approach and confirmed that an approved companion diagnostic strategy is required for Phase 3 related tumor biopsy. The use of PFS as the basis for marketing approval will be subject to the overall benefit and risk associated with PEGPH20 combined with nab-paclitaxel (ABRAXANE®) and gemcitabine therapy, including the: • Magnitude of the PFS treatment effect observed; • Toxicity profile; and • Interim overall survival data. In June 2015, we received scientific advice/protocol assistance from the European Medicines Agency (EMA) regarding our Phase 3 study. The EMA agreed to the patient population, and the use of both PFS and OS as co-primary endpoints stating that OS is the preferred endpoint and that ultimate approval would require an overall positive benefit:risk balance. In January 2016, an update on the Stage 1 PFS data utilizing the companion diagnostic that is currently in development with Ventana Medical Systems (Ventana) was presented. In a total of 43 high-HA patients, the data continued to show an improvement in median PFS when patients with high HA received PAG compared to AG (9.2 months compared to 6.3 months respectively); hazard ratio of 0.48 (95% CI: 0.16, 1.48). In addition, the overall response rate in the PAG treated patients was 55% (12 out of 22 patients) compared to 33% (7 out of 21 patients), which was not statistically significant. A modest improvement in median overall survival was seen in the PAG-treated high-HA patients. PEGPH20 was discontinued in over 40% of patients in the new companion diagnostic analysis due to the clinical hold in April 2014. We remain blinded to the efficacy results and project to present mature PFS and overall response rate from Stage 2 of Study 202 in the fourth quarter of 2016. For the secondary primary endpoint of the rate of TE events, we have passed the pre-specified analyses for TE events and are continuing with the Data Monitoring Committee 5 to monitor the rate of TE events since implementing low-molecular weight heparin (LMWH) prophylaxis. Additionally, an update on the rate of TE events in the PEGPH20 treatment arm in Stage 2 of Study 202 was provided. Reported results included a TE event rate with LMWH prophylaxis of 12% in 73 patients treated with PAG versus 9% in 34 patients receiving AG, and for those treated with 1mg/kg/day of LMWH, a TE event rate of 7% in 55 patients treated with PAG versus 4% in 27 patients receiving AG. We also reported an update on the development of the companion diagnostic. Halozyme has partnered with Ventana to develop the companion diagnostic and announced the methodology and scoring algorithm have been finalized. Based on the cutpoint for the Ventana diagnostic, we now expect approximately 35 to 40 percent of stage IV PDA patients to have high-HA tumors, similar to the previously reported interim results from Stage 1 of Study 202 using the Halozyme prototype assay. In February 2016, our partner Ventana submitted an investigational device exemption (IDE) application for our companion diagnostic test to enable patient selection in our Phase 3 Study 301 of PEGPH20 in high-HA patients. Study Halo 109-301: In the first quarter of 2016, we initiated Study 109-301, a Phase 3 multicenter randomized clinical trial evaluating PEGPH20 as a first-line therapy for patients with stage IV PDA. The study will explore PEGPH20 with gemcitabine and ABRAXANE in stage IV PDA patients at approximately 200 sites in 20 countries located in North America, Europe, South America and Asia Pacific. First dosing of a patient is expected to occur in March 2016. SWOG Study S1313: In October 2013, SWOG, a cancer research cooperative group of more than 4,000 researchers in over 500 institutions around the world, initiated a 144 patient Phase 1b/2 randomized clinical trial in some of their study centers, examining PEGPH20 in combination with modified FOLFIRINOX chemotherapy (mFOLFIRINOX) compared to mFOLFIRINOX treatment alone in patients with stage IV PDA (funded by the National Cancer Institute). This study was also placed on clinical hold temporarily at the time of the hold on Study 109-202. In September 2014, the FDA removed the clinical hold on patient enrollment and dosing of PEGPH20 in this SWOG cooperative study. The study has resumed under a revised protocol, and patient enrollment is continuing. The Phase 2 portion of the study, where up to 172 patients are planned to be enrolled, began in June 2015. As with Study 109-202, the occurrence of TE events will be closely monitored in enrolled patients, and the continuation of this study may be halted again in accordance with event rate rules established in the protocol, or for other safety reasons. Other indications outside of pancreatic cancer: Study HALO 107-201, PRIMAL Study: In December 2014, we initiated a Phase 1b/2 trial, to evaluate PEGPH20 in second line in combination with docetaxel (Taxotere®) in non-small cell lung cancer patients. In this study, we expect to evaluate and identify the maximum tolerated dose (MTD) and safety of PEGPH20 plus docetaxel in previously treated patients with non-small cell lung cancer. Upon identification of the MTD we plan to expand the trial into a dose expansion phase in patients prospectively tested for HA status, and then ultimately a Phase 2 portion of the study to evaluate the safety and efficacy of PEGPH20 in second line HA-high non-small cell lung cancer patients in combination with docetaxel. Study HALO 107-101, the immuno-oncology trial: We recently initiated a Phase 1b study exploring the combination of PEGPH20 and KEYTRUDA®, an immuno-oncology agent in relapsed non-small cell lung cancer and gastric cancer. We expect to evaluate and identify the dose and safety of PEGPH20 plus KEYTRUDA prior to embarking on dose expansion in high-HA patients in this study. Halozyme Eisai Clinical Collaboration: We expect a Phase 1b/2 study to be initiated in the second quarter of 2016, exploring the combination of PEGPH20 and eribulin in first line HER2-negative HA-high metastatic breast cancer. Halozyme and Eisai will jointly share the costs to conduct this global study. Regulatory: In September 2014, the FDA granted Fast Track designation for our program investigating PEGPH20 in combination with gemcitabine and nab-paclitaxel for the treatment of patients with stage IV PDA to demonstrate an improvement in overall survival. The Fast Track designation process was developed by the FDA to facilitate the development, and expedite the review of drugs to treat serious or life-threatening diseases and address unmet medical needs. In October 2014, the FDA granted Orphan Drug designation for PEGPH20 for the treatment of pancreatic cancer. The FDA Office of Orphan Products Development’s mission is to advance the evaluation and development of products (drugs, biologics, devices, or medical foods) that demonstrate promise for the diagnosis and/or treatment of rare diseases or conditions. In December 2014, the European Committee for Orphan Medicinal Products of the EMA designated PEGPH20 an orphan medicinal product for the treatment of pancreatic cancer. 6 In March 2015, we met with the FDA to discuss both the interim efficacy and safety data from Study 109-202 and to discuss the Phase 3 Study 109-301 as a potential registration study in stage IV PDA patients whose tumors are determined to have high levels of HA accumulation. In June 2015, we received scientific advice/protocol assistance from the EMA regarding our Phase 3 study. In addition, we continue our dialog with the FDA regarding the development of a companion diagnostic agent for detection and quantification of hyaluronan in the tumor tissue of cancer patients. In February 2016, our partner Ventana submitted an IDE application for our companion diagnostic test to enable patient selection in our Phase 3 Study 301 of PEGPH20 in high-HA patients. Collaborations Roche Collaboration In December 2006, we and Roche entered into a collaboration and license agreement under which Roche obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds (the Roche Collaboration). Roche initially had the exclusive right to apply rHuPH20 to only three pre-defined Roche biologic targets with the option to exclusively develop and commercialize rHuPH20 with ten additional targets. As of December 31, 2015, Roche has elected a total of five targets, two of which are exclusive, and retains the option to develop and commercialize rHuPH20 with three additional targets. 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. This formulation utilizes our patented ENHANZE Technology and is administered in two to five minutes, rather than 30 to 90 minutes with the standard intravenous form. Roche received European marketing approval for Herceptin SC in August 2013. The European Commission’s approval was based on data from Roche’s Phase 3 HannaH study which showed that the subcutaneous formulation of Herceptin was associated with comparable efficacy (pathological complete response, pCR) to Herceptin administered intravenously in women with HER2-positive early breast cancer and resulted in non-inferior trastuzumab plasma levels. Overall, the safety profile in both arms of the HannaH study was consistent with that expected from standard treatment with Herceptin and chemotherapy in this setting. No new safety signals were identified. Breast cancer is the most common cancer among women worldwide. Each year, about 1.7 million new cases of breast cancer are diagnosed worldwide, and over 500,000 women will die of the disease annually. In HER2-positive breast cancer, increased quantities of the human epidermal growth factor receptor 2 (HER2) are present on the surface of the tumor cells. This is known as “HER2 positivity” and affects approximately 15% to 20% of women with breast cancer. HER2-positive cancer is reported to be a particularly aggressive form of breast cancer. In June 2014, Roche launched MabThera SC in Europe for the treatment of patients with common forms of non-Hodgkin lymphoma (NHL). This formulation utilizes our patented ENHANZE Technology and is administered in approximately five minutes compared to the approximately 2.5 hour infusion time for intravenous MabThera. The European Commission approved MabThera SC in March 2014. The European Commission’s approval was based primarily on data from Roche’s Phase 3 pivotal clinical studies, which was published in The Lancet Oncology. NHL is a type of cancer that affects lymphocytes (white blood cells). NHL represents approximately 85% of all lymphomas diagnosed and was responsible for approximately 200,000 annual deaths worldwide in 2012. Lymphomas are a cancer of the lymphatic system (composed of lymph vessels, lymph nodes and organs) which helps to keep the bodily fluid levels balanced and to defend the body against invasion by disease. Lymphoma develops when white blood cells (usually B-lymphocytes) in the lymph fluid become cancerous and begin to multiply and collect in the lymph nodes or lymphatic tissues such as the spleen. Some of these cells are released into the bloodstream and spread around the body, interfering with the body’s production of healthy blood cells. Roche announced that it filed MabThera SC in Europe for previously untreated chronic lymphocytic leukemia in the fourth quarter of 2014. Additional information about the Phase 3 Herceptin SC and Phase 3 MabThera SC clinical trials can be found at www.clinicaltrials.gov and www.roche-trials.com. Information available on these websites is not incorporated into this report. Baxalta Collaboration In September 2007, we and Baxalta entered into a collaboration and license agreement under which Baxalta obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 with GAMMAGARD LIQUID (HYQVIA) (the Baxalta Collaboration). GAMMAGARD LIQUID is a current Baxalta product that is indicated for the treatment of primary immunodeficiency disorders associated with defects in the immune system. In October 2014, Baxalta announced the launch and first shipments of Baxalta’s HYQVIA product for treatment of adult patients with primary immunodeficiency in the U.S. HYQVIA was approved by the FDA in September 2014 and 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 majority of primary immunodeficiency patients today receive intravenous infusions in a doctor’s office or infusion center, and current subcutaneous IG treatments require weekly or bi-weekly treatment with multiple 7 infusion sites per treatment. The FDA’s approval of HYQVIA was a significant milestone for us as it represented the first U.S. approved Biologic License Application (BLA) which utilizes our rHuPH20 platform. In May 2013, the European Commission granted Baxalta 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. Baxalta launched HYQVIA in the first EU country in July 2013 and has continued to launch in additional countries. 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 directed to up to six targets in primary care and specialty care indications. Targets may be selected on an exclusive or non-exclusive basis. In September 2013, Pfizer elected the fourth therapeutic target on an exclusive basis. One of the targets is proprotein convertase subtilisin/kexin type 9 (PCSK9) which is the gene that provides instructions for making a protein that helps regulate the amount of cholesterol in the bloodstream. Pfizer initiated dosing of a subcutaneous formulation of rHuPH20 and bococizumab, an investigational PCSK9 inhibitor, in a Phase 1 trial in February 2016. Pfizer is also developing rivipansel directed to another target under the collaboration to treat vaso-occlusive crisis in individuals with sickle cell disease and initiated dosing of a subcutaneous formulation of rHuPH20 and rivipansel in a Phase 1 clinical trial in October 2015. 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. In November 2015, Janssen initiated dosing in a Phase 1b clinical trial evaluating subcutaneous delivery of daratumumab, using ENHANZE Technology, in multiple myeloma. 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 has elected TNF alpha as the first target on an exclusive basis. AbbVie is developing rHuPH20 with adalimumab (HUMIRA®) which may allow a reduced number of induction injections and deliver additional performance benefits. 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 one target on an exclusive basis and one target on a semi-exclusive basis. For a further discussion of the material terms of our collaboration agreements, refer to Note 4, Collaborative Agreements, to our consolidated financial statements. Customers The following table indicates the percentage of total revenues in excess of 10% with any single customer: Year Ended December 31, 2015 2014 2013 Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AbbVie. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Janssen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42% 19% 17% 1% 57% — — 20% 64% — — — For additional information regarding our revenues from external customers, refer to Note 2, Summary of Significant Accounting Policies — Concentrations of Credit Risk, Sources of Supply and Significant Customers, to our consolidated financial statements. 8 Patents and Proprietary Rights Patents and other proprietary rights are essential to our business. Our success will depend in part on our ability to obtain patent protection for our inventions, to preserve our trade secrets and to operate without infringing the proprietary rights of third parties. Our strategy is to actively pursue patent protection in the U.S. and certain foreign jurisdictions for technology that we believe to be proprietary to us and that offers us a potential competitive advantage. Our patent portfolio includes 21 issued patents in the U.S., more than 235 issued patents in Europe and other countries in the world and more than 260 pending patent applications. In general, patents have a term of 20 years from the application filing date or earlier claimed priority date. Our issued patents will expire between 2022 and 2032. 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, Hylenex recombinant, PEGPH20 and our endocrinology product candidates. In addition, we have, under prosecution throughout the world, multiple patent applications that relate specifically to individual product candidates under development, the expiration of which can only be definitely determined upon maturation into our issued patents. We believe our patent filings represent a barrier to entry for potential competitors looking to utilize these hyaluronidases. In addition to patents, we rely on unpatented trade secrets, proprietary know-how and continuing technological innovation. We seek protection of these trade secrets, proprietary know-how and innovation, in part, through confidentiality and proprietary information agreements. Our policy is to require our employees, directors, consultants, advisors, collaborators, outside scientific collaborators and sponsored researchers, other advisors and other individuals and entities to execute confidentiality agreements upon the start of employment, consulting or other contractual relationships with us. These agreements provide that all confidential information developed or made known to the individual or entity during the course of the relationship is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and some other parties, the agreements provide that all inventions conceived by the individual will be our exclusive property. Despite the use of these agreements and our efforts to protect our intellectual property, there will always be a risk of unauthorized use or disclosure of information. Furthermore, our trade secrets may otherwise become known to, or be independently developed by, our competitors. We also file trademark applications to protect the names of our products and product candidates. These applications may not mature to registration and may be challenged by third parties. We are pursuing trademark protection in a number of different countries around the world. There can be no assurances that our registered or unregistered trademarks or trade names will not infringe on rights of third parties or will be acceptable to regulatory agencies. Research and Development Activities Our research and development expenses consist primarily of costs associated with the development and manufacturing of our product candidates, compensation and other expenses for research and development personnel, supplies and materials, costs for consultants and related contract research, clinical trials, facility costs and amortization and depreciation. We charge all research and development expenses to operations as they are incurred. Our research and development activities are primarily focused on the development of our various product candidates. Due to the uncertainty in obtaining the FDA and other regulatory approvals, our reliance on third parties and competitive pressures, we are unable to estimate with any certainty the additional costs we will incur in the continued development of our proprietary product candidates for commercialization. However, we expect our research and development expenses for PEGPH20 to increase as our program advances into additional tumors and later stages of clinical development. Manufacturing We do not have our own manufacturing facility for our product and product candidates, or the capability to package our products. We have engaged third parties to manufacture bulk rHuPH20, PEGPH20 and Hylenex recombinant. We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and Cook Pharmica LLC (Cook) to produce supplies of bulk rHuPH20. These manufacturers each produce bulk rHuPH20 under current Good Manufacturing Practices (cGMP) for clinical and commercial uses. Cook currently produces bulk rHuPH20 for use in Hylenex recombinant, product candidates and collaboration product candidates. Avid currently produces bulk rHuPH20 for use in collaboration products. We rely on their ability to successfully manufacture these batches according to product specifications. In addition, we are working to scale-up, validate and qualify a new facility operated by Avid as a manufacturer of bulk rHuPH20 for use in the products and product candidates under the Roche collaboration. It is important for our business for Cook and Avid to (i) retain their status as cGMP-approved manufacturing facilities; (ii) to successfully scale up bulk rHuPH20 production; and/or (iii) manufacture the bulk rHuPH20 required by us and our collaborators for use in our proprietary and collaboration products and product candidates. In addition to supply obligations, Avid and Cook will also provide support for data and information used in the chemistry, manufacturing and controls sections for FDA and other regulatory filings. 9 We have a commercial manufacturing and supply agreement with Patheon Manufacturing Services, LLC (Patheon) under which Patheon will provide the final fill and finishing steps in the production process of Hylenex recombinant. Under our commercial services agreement with Patheon, Patheon has agreed to fill and finish Hylenex recombinant product for us until December 31, 2019, subject to further extensions in accordance with the terms of the agreement. In addition, we are in the early stages of scaling up our manufacturing of PEGPH20 with third party suppliers to support additional clinical trials, including a registration-enabling trial, and ultimately, if approved, potential commercial supply. Sales, Marketing and Distribution HYLENEX Recombinant Our commercial activities currently focus on Hylenex recombinant. We have a team of sales specialists that provide hospital and surgery center customers with the information about Hylenex recombinant and information needed to obtain formulary approval for, and support utilization of, Hylenex recombinant. Our commercial activities also include marketing and related services and commercial support services such as commercial operations, managed markets and commercial analytics. We also employ third- party vendors, such as advertising agencies, market research firms and suppliers of marketing and other sales support related services to assist with our commercial activities. We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. We have engaged Integrated Commercial Solutions (ICS), a division of AmerisourceBergen Specialty Group, a subsidiary of AmerisourceBergen, to act as our exclusive distributor for commercial shipment and distribution of Hylenex recombinant to our customers in the United States. In addition to distribution services, ICS provides us with other key services related to logistics, warehousing, returns and inventory management, contract administration and chargebacks processing and accounts receivable management. In addition, we utilize third parties to perform various other services for us relating to regulatory monitoring, including call center management, adverse event reporting, safety database management and other product maintenance services. Competition The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary therapeutics. We face competition from a number of sources, some of which may target the same indications as our product or product candidates, including large pharmaceutical companies, smaller pharmaceutical companies, biotechnology companies, academic institutions, government agencies and private and public research institutions, many of which have greater financial resources, drug development experience, sales and marketing capabilities, including larger, well established sales forces, manufacturing capabilities, experience in obtaining regulatory approvals for product candidates and other resources than us. We face competition not only in the commercialization of Hylenex recombinant, but also for the in-licensing or acquisition of additional product candidates, and the out-licensing of our ENHANZE Technology. In addition, our collaborators face competition in the commercialization of the product candidates for which the collaborators seek marketing approval from the FDA or other regulatory authorities. HYLENEX Recombinant Hylenex recombinant is currently the only FDA approved recombinant human hyaluronidase on the market. The competitors for Hylenex recombinant include, but are not limited to, Valeant Pharmaceuticals International, Inc.’s FDA approved product, Vitrase®, an ovine (ram) hyaluronidase, and Amphastar Pharmaceuticals, Inc.’s product, Amphadase®, a bovine (bull) hyaluronidase. In addition, some commercial pharmacies compound hyaluronidase preparations for institutions and physicians even though compounded preparations are not FDA approved products. Government Regulations The FDA and comparable regulatory agencies in foreign countries regulate the manufacture and sale of the pharmaceutical products that we have developed or currently are developing. The FDA has established guidelines and safety standards that are applicable to the laboratory and preclinical evaluation and clinical investigation of therapeutic products and stringent regulations that govern the manufacture and sale of these products. The process of obtaining regulatory approval for a new therapeutic product usually requires a significant amount of time and substantial resources. The steps typically required before a product can be introduced for human use include: • • animal pharmacology studies to obtain preliminary information on the safety and efficacy of a drug; or laboratory and preclinical evaluation in vitro and in vivo including extensive toxicology studies. 10 The results of these laboratory and preclinical studies may be submitted to the FDA as part of an IND (Investigational New Drug) application. The sponsor of an IND application may commence human testing of the compound 30 days after submission of the IND, unless notified to the contrary by the FDA. The clinical testing program for a new drug typically involves three phases: • • • Phase 1 investigations are generally conducted in healthy subjects (in certain instances, Phase 1 studies that determine the maximum tolerated dose and initial safety of the product candidate are performed in patients with the disease); Phase 2 studies are conducted in limited numbers of subjects with the disease or condition to be treated and are aimed at determining the most effective dose and schedule of administration, evaluating both safety and whether the product demonstrates therapeutic effectiveness against the disease; and Phase 3 studies involve large, well-controlled investigations in diseased subjects and are aimed at verifying the safety and effectiveness of the drug. Data from all clinical studies, as well as all laboratory and preclinical studies and evidence of product quality, are typically submitted to the FDA in a new drug application (NDA). The results of the preclinical and clinical testing of a biologic product candidate are submitted to the FDA in the form of a BLA, for evaluation to determine whether the product candidate may be approved for commercial sale. In responding to a BLA or NDA, the FDA may grant marketing approval, request additional information, or deny the application. Although the FDA’s requirements for clinical trials are well established and we believe that we have planned and conducted our clinical trials in accordance with the FDA’s applicable regulations and guidelines, these requirements, including requirements relating to testing the safety of drug candidates, may be subject to change as a result of recent announcements regarding safety problems with approved drugs. Additionally, we could be required to conduct additional trials beyond what we had planned due to the FDA’s safety and/or efficacy concerns or due to differing interpretations of the meaning of our clinical data. (See Part I, Item 1A, Risk Factors.) The FDA’s Center for Drug Evaluation and Research must approve an NDA and the FDA’s Center for Biologics Evaluation and Research must approve a BLA for a drug before it may be marketed in the United States. If we begin to market our proposed products for commercial sale in the U.S., any manufacturing operations that may be established in or outside the U.S. will also be subject to rigorous regulation, including compliance with cGMP. We also may be subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substance Control Act, the Export Control Act and other present and future laws of general application. In addition, the handling, care and use of laboratory animals are subject to the Guidelines for the Humane Use and Care of Laboratory Animals published by the National Institutes of Health. Regulatory obligations continue post-approval, and include the reporting of adverse events when a drug is utilized in the broader patient population. Promotion and marketing of drugs is also strictly regulated, with penalties imposed for violations of FDA regulations, the Lanham Act and other federal and state laws, including the federal anti-kickback statute. We currently intend to continue to seek, directly or through our collaborators, approval to market our products and product candidates in foreign countries, which may have regulatory processes that differ materially from those of the FDA. We anticipate that we will rely upon independent consultants to seek and gain approvals to market our proposed products in foreign countries or may rely on other pharmaceutical or biotechnology companies to license our proposed products. We cannot assure you that approvals to market any of our proposed products can be obtained in any country. Approval to market a product in any one foreign country does not necessarily indicate that approval can be obtained in other countries. From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of drug products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency or reviewing courts in ways that may significantly affect our business and development of our product candidates and any products that we may commercialize. It is impossible to predict whether additional legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, or what the impact of any such changes may be. Segment Information We operate our business as one segment, which includes all activities related to the research, development and commercialization of human enzymes. This segment also includes revenues and expenses related to (i) research and development activities conducted under our collaboration agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment. We had no foreign based operations and minimal long-lived assets located in foreign countries as of and for the years ended December 31, 2015, 2014 and 2013. Refer to the Notes for additional financial information regarding our operating segment. 11 Executive Officers of the Registrant Information concerning our executive officers, including their names, ages and certain biographical information can be found in Part III, Item 10, Directors, Executive Officers and Corporate Governance. This information is incorporated by reference into Part I of this report. Employees As of February 22, 2016, we had 216 full-time employees. None of our employees are unionized and we believe our employee relations to be good. Item 1A. Risk Factors Risks Related To Our Business We have generated only limited revenue from product sales to date; we have a history of net losses and negative cash flow, and we may never achieve or maintain profitability. Relative to expenses incurred in 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, and we may never generate sufficient revenues from future product sales, licensing fees and milestone payments to offset expenses. Even if we ultimately do achieve significant revenues from product sales, royalties, licensing fees, research reimbursements, bulk rHuPH20 supply payments and/or milestone payments, we expect to incur significant operating losses over the next few years. We have never been profitable, and we may never become profitable. Through December 31, 2015, we have incurred aggregate net losses of approximately $482.7 million. If our 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 manufacture and market pharmaceutical products 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 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 collaborators 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 collaborators expect, or at all. The FDA or other foreign regulatory agency may refuse or delay approval of our product candidates for failure to collect sufficient clinical or animal safety data and require us or our collaborators to conduct additional clinical or animal safety studies which may cause lengthy delays and increased costs to our programs. For example, the approval of Baxalta’s HYQVIA BLA was delayed until we and Baxalta 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 approved by the FDA in September 2014, we cannot assure you that they will not arise and have an adverse impact on future development of products which include rHuPH20, future sales of Hylenex recombinant, our ability to enter into collaborations, or be raised by the FDA or other health authorities in connection with testing or approval of products including rHuPH20. We and our collaborators 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 proprietary and collaboration product candidates or companion diagnostic assays 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 collaborators must maintain our regulatory approvals. If we or any of our collaborators are unsuccessful in maintaining our regulatory approvals, our ability to generate revenues would be adversely affected. We will likely need to raise additional capital in the future and there can be no assurance that we will be able to obtain such funds. We will likely need to raise additional capital in the future to continue the development of our product candidates or for other current corporate purposes. Our current cash reserves and expected revenues during the next few years will not be sufficient for us to continue the development of our proprietary product candidates, 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 12 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) the public offering of securities; (ii) new collaborative agreements; (iii) expansions or revisions to existing collaborative relationships; (iv) private financings; and/or (v) other equity or debt financings. In view of our stage of development, business prospects, the nature of our capital structure and general market conditions, if we are required to raise additional capital in the future, the additional financing may not be available on favorable terms, 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 one or more product development programs. If we raise additional capital, a substantial number of additional shares may be issued, and these shares will dilute the ownership interest of our current investors. Use of our product candidates or those of our collaborators could be associated with side effects or adverse events. As with most pharmaceutical products, use of our product candidates or those 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). Side effects or adverse events associated with the use of our product candidates or those 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’ ability to obtain or maintain regulatory approval or market our product candidates. Side effects such as toxicity or other safety issues associated with the use of our product candidates or those of our collaborators could require us or our collaborators to perform additional studies or halt development or commercialization of these product candidates or expose us to product liability lawsuits which will harm our business. We or our collaborators may be required by regulatory agencies to conduct additional animal or human studies regarding the safety and efficacy of our pharmaceutical product candidates which we have not planned or anticipated. Furthermore, there can be no assurance that we or our collaborators will resolve any issues related to any product related 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. For example, in April 2014, a clinical hold was placed on patient enrollment and dosing of PEGPH20 in Study 202 as a result of a possible difference in the TE event rate that had been observed at that time in the trial between the group of patients treated with PEGPH20 versus the group of patients treated without PEGPH20. The clinical hold was lifted by FDA in June 2014, and we have completed enrollment and resumed dosing of PEGPH20 in Study 202 under a revised clinical protocol. We and the data monitoring committee for Study 202 continue to closely monitor the occurrence of TE events in enrolled patients after the protocol amendments. While the pre-specified TE event rate analysis established in the protocol at the time of the clinical hold in 2014 have been passed, the continuation of Study 202 may be halted again if the FDA determines that imbalances in safety findings, including TE events, occur. If our contract manufacturers are unable to manufacture and supply to us bulk rHuPH20 or other raw materials in the quantity and quality required by us or our collaborators for use in our products and product candidates, our product development and commercialization efforts could be delayed or stopped and our collaborations could be damaged. We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and Cook Pharmica LLC (Cook) to produce bulk rHuPH20. These manufacturers each produce bulk rHuPH20 under current cGMP for clinical uses. Cook currently produces bulk rHuPH20 for use in Hylenex recombinant, product candidates and collaboration product candidates. Avid currently produces bulk rHuPH20 for use in collaboration products. In addition to supply obligations, Avid and Cook will also provide support for the chemistry, manufacturing and controls sections for FDA and other regulatory filings. We rely on their ability to successfully manufacture these batches according to product specifications. If either Avid or Cook: (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; or (iii) fails to manufacture and supply bulk rHuPH20 in the quantity and quality required by us or our collaborators for use in our proprietary and collaboration 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 party manufacturers’ business or financial condition could adversely affect their abilities 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 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 Avid and/or Cook. Any delays, interruptions or other problems regarding the ability of Avid and/or Cook to supply bulk rHuPH20 or the ability of other third party manufacturers, to supply other raw materials or ingredients necessary to produce our products on a timely basis could: (i) cause the delay of clinical trials or otherwise delay or prevent the regulatory approval of proprietary or collaboration product candidates; (ii) delay or prevent the effective commercialization of proprietary or collaboration products; and/or (iii) cause us to breach contractual obligations to deliver bulk rHuPH20 to our collaborators. Such delays would likely 13 damage our relationship with our collaborators, and they would have a material adverse effect on royalties and thus our business and financial condition. If we or any party to a key collaboration agreement fails 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 dependent on our collaborators to develop and commercialize product candidates subject to our collaborations in order for us to realize any financial benefits from these collaborations. Our collaborators may not devote the attention and resources to such efforts that we would ourselves, change their 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 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 delay or suspend our product development activities for some of our product candidates, as well as our commercialization efforts for some or all of our products. Specifically, the termination of a key collaboration agreement by one of our collaborators could materially impact our ability to enter into additional collaboration agreements with new collaborators 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. Most of our current proprietary and collaboration 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 collaborations, as well as proprietary programs. rHuPH20 is a key technological component of ENHANZE Technology and our most advanced proprietary and collaboration products and product candidates, including the current and future products and product candidates under our Roche, Pfizer, Janssen, Baxalta, AbbVie and Lilly collaborations, our PEGPH20 program, and Hylenex recombinant. 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’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’s program will have a significant impact on our other proprietary and other collaboration product candidates, there can be no assurance that there will not be other such occurrences in the foregoing programs or our other programs or that concerns regarding these antibodies will not also be raised by the FDA or other health authorities in the future, which could result in delays or discontinuations of our development or commercialization activities or deter entry into additional collaborations with third parties. We routinely evaluate, and may modify, our business strategy and our strategic focus to only a few fields or applications of our technology which may increase or decrease the risk for potential negative impact of adverse developments. 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 third quarter of 2014, we decided to focus our resources on advancing PEGPH20 and expanding utilization of our ENHANZE platform. While we believe these are applications with the greatest potential value, we have reduced the diversification of our programs and increased our dependence on the success of the areas we are pursuing. By focusing on one or a few areas, we increase the potential impact on us if one of those programs or product candidates does not successfully complete clinical trials, achieve commercial acceptance or meet expectations regarding sales and revenue. Our decision to focus on one or a few programs may also reduce the value of programs that are no longer within our principal strategic focus, which could impair our ability to pursue collaborations or other strategic alternatives for those programs we are not pursuing. Our proprietary and collaboration product candidates or companion diagnostic assays 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. 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 14 clinical trial results are promising, we or our collaborators may obtain different results in subsequent trials or studies that fail to show the desired levels of safety and efficacy, or we may not, or our collaborators may not, obtain applicable regulatory approval for a variety of other reasons. Preclinical, nonclinical, and clinical trials for any of our proprietary or collaboration product candidates or development of any collaboration companion diagnostic assays could be unsuccessful, which would delay or preclude regulatory approval and commercialization of the product candidates or companion diagnostic assays. In the U.S. and other jurisdictions, regulatory approval can be delayed, limited or not granted for many reasons, including, among others: • • clinical results may not meet prescribed endpoints for the studies or otherwise provide sufficient data to support the efficacy of our product candidates; clinical and nonclinical test results may reveal side effects, adverse events or unexpected safety issues associated with the use of our product candidates; for example, in April 2014, a clinical hold was placed on patient enrollment and dosing of PEGPH20 in Study 202 as a result of a possible difference in the TE event rate that had been observed at that time in the trial between the group of patients treated with PEGPH20 versus the group of patients treated without PEGPH20. The clinical hold was lifted by FDA in June 2014, and we have completed enrollment and resumed dosing of PEGPH20 in Study 202 under a revised clinical protocol; • Completion of clinical trials may be delayed for a variety of reasons including the amount of time it may take to • • • • • • • • • • identify and enroll patients with high levels of HA in our target population; regulatory review may not find a product candidate safe or effective enough to merit either continued testing or final approval; regulatory review may not find that the data from preclinical testing and clinical trials justifies approval; regulatory authorities may require that we change our studies or conduct additional studies which may significantly delay or make continued pursuit of approval commercially unattractive; a regulatory agency may reject our trial data or disagree with our interpretations of either clinical trial data or applicable regulations; a regulatory agency may approve only a narrow use of our product or may require additional safety monitoring and reporting through Risk Evaluation and Mitigation Strategies (REMS) or conditions to assure safe use program; the cost of clinical trials required for product approval may be greater than what we originally anticipate, and we 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, our contract manufacturers or our raw material suppliers; 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, 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 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 proprietary or collaboration product candidate or companion diagnostic assay is not approved in a timely fashion or obtained on commercially viable terms, or if development of any product candidate or a companion diagnostic assay is terminated due to difficulties or delays encountered in the regulatory approval process, it could have a material adverse impact on our business, and we would become more dependent on the development of other proprietary or collaboration product candidates and/or our ability to successfully acquire other products and technologies. There can be no assurances that any proprietary or collaboration product candidate or companion diagnostic assay will receive regulatory approval in a timely manner, or at all. There can be no assurance that we will be able to gain clarity as to the FDA’s requirements or that the requirements may be satisfied in a commercially feasible way, in which case our ability to enter into collaborations with third parties or explore other strategic alternatives to exploit this opportunity will be limited or may not be possible. We anticipate that certain proprietary and collaboration 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. 15 Our third party collaborators are responsible for providing certain proprietary materials that are essential components of our collaboration products and product candidates, and any failure to supply these materials could delay the development and commercialization efforts for these collaboration products and product candidates and/or damage our collaborations. Our development and commercialization collaborators are responsible for providing certain proprietary materials that are essential components of our collaboration products and product candidates. For example, Roche is responsible for producing the Herceptin and MabThera required for its subcutaneous products and Baxalta is responsible for producing the GAMMAGARD LIQUID for its product HYQVIA. If a collaborator, or any applicable third party service provider of a collaborator, encounters difficulties in the manufacture, storage, delivery, fill, finish or packaging of the collaboration 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 collaboration product candidates; and/or (ii) delay or prevent the effective commercialization of collaboration products. Such delays could have a material adverse effect on our business and financial condition. We rely on third parties to prepare, fill, finish and package our products and product candidates, and if such third parties should fail to perform, our commercialization and development efforts for our products and product candidates could be delayed or stopped. We rely on third parties to store and ship bulk rHuPH20 on our behalf and to also prepare, fill, finish and package our products and product candidates prior to their distribution. If we are unable to locate third parties to perform these functions on terms that are acceptable to us, or if the third parties we identify fail to perform their obligations, the progress of clinical trials could be delayed or even suspended and the commercialization of approved product candidates could be delayed or prevented. In addition, we are in the early stages of scaling up our manufacturing of PEGPH20 with third party suppliers to support additional clinical trials, including a Phase 3 trial, and ultimately, if approved, potential commercial supply. If our contract manufacturers are unable to successfully manufacture and supply PEGPH20, the progress of our clinical trials could be delayed or halted for a period of time. If we are unable to sufficiently develop our sales, marketing and distribution capabilities or enter into successful agreements with third parties to perform these functions, we will not be able to fully commercialize our products. We may not be successful in marketing and promoting our approved product, Hylenex recombinant, or any other products we develop or acquire in the future. Our sales, marketing and distribution capabilities are very limited. In order to commercialize any products successfully, we must internally develop substantial sales, marketing and distribution capabilities or establish collaborations or other arrangements with third parties to perform these services. We do not have extensive experience in these areas, and we may not be able to establish adequate in-house sales, marketing and distribution capabilities or engage and effectively manage relationships with third parties to perform any or all of such services. To the extent that we enter into co-promotion or other licensing arrangements, our product revenues are likely to be lower than if we directly marketed and sold our products, and any revenues we receive will depend upon the efforts of third parties, whose efforts may not meet our expectations or be successful. These third parties would be largely responsible for the speed and scope of sales and marketing efforts, and may not dedicate the resources necessary to maximize product opportunities. Our ability to cause these third parties to increase the speed and scope of their efforts may also be limited. In addition, sales and marketing efforts could be negatively impacted by the delay or failure to obtain additional supportive clinical trial data for our products. In some cases, third party collaborators are responsible for conducting these additional clinical trials, and our ability to increase the efforts and resources allocated to these trials may be limited. If we or our collaborators 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, 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 collaborators 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. Regulatory agencies may change existing requirements or adopt new requirements or policies. We, our collaborators 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, entirely 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 16 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 clinical trials or otherwise inhibit our ability to bring approved products to market, which would have a material adverse effect on our business and financial condition. Likewise, if we, our collaborators 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. Failure to comply with regulatory requirements may result in any of the following: restrictions on our products or manufacturing processes; • • warning letters; • withdrawal of the products from the market; • • • • • • • • • voluntary or mandatory recall; fines; suspension or withdrawal of regulatory approvals; suspension or termination of any of our ongoing clinical trials; refusal to permit the import or export of our products; refusal to approve pending applications or supplements to approved applications that we submit; product seizure; injunctions; or imposition of civil or criminal penalties. We currently have significant debt and failure by us to fulfill our obligations under the applicable loan agreements may cause the repayment obligations to accelerate. In December 2015, our subsidiaries, Halozyme, Inc. (Halozyme) and Halozyme Royalty LLC (Halozyme Royalty) entered into a credit agreement (the Credit Agreement) with BioPharma Credit Investments IV Sub, LP and Athyrium Opportunities II Acquisition LP (the Royalty-backed Lenders) pursuant to which we borrowed $150 million through Halozyme Royalty (the Royalty- backed Loan). The Royalty-backed Loan will be repaid primarily from a specified percentage of the royalty payments we receive under our collaboration agreements with Roche and Baxalta (the Royalty Payments). The obligations of Halozyme Royalty under the Credit Agreement to repay the Royalty-backed Loan may be accelerated upon the occurrence of certain events of default under the Credit Agreement, including but not limited to: • • • • • • if any payment of principal is not made within three days of when such payment is due and payable or otherwise made in accordance with the terms of the Credit Agreement; if any representations or warranties made in the Credit Agreement or any other transaction document proves to be incorrect or misleading in any material respect when made; if there occurs a default in the performance of affirmative and negative covenants set forth in the Credit Agreement or any other transaction document; the failure by either Baxalta or Roche to pay material amounts owed under our collaboration agreements because of an actual breach or default by us under the collaboration agreements; the voluntary or involuntary commencement of bankruptcy proceedings by either Halozyme or Halozyme Royalty and other insolvency related defaults; any materially adverse effect on the binding nature of any of the transaction documents or the collaboration agreements with Baxalta and Roche; or • Halozyme ceases to own, of record and beneficially, 100% of the equity interests in Halozyme Royalty. The Credit Agreement also contains covenants applicable to Halozyme and Halozyme Royalty, including certain visitation, information and audits rights granted to the collateral agent and the lenders and restrictions on the conduct of business, including continued compliance with the Baxalta and Roche collaboration agreements and specified affirmative actions regarding the escrow account established to facilitate payment of Royalty Payments to the Royalty-backed Lenders or other specified parties. The Credit Agreement also contains covenants solely applicable to Halozyme Royalty, including restrictions on incurring indebtedness, creating or granting liens, making acquisitions and making specified restricted payments. These covenants could make it more difficult for us to execute our business strategy. In connection with the Royalty-backed Loan, Halozyme Royalty granted a first priority lien and security interest (subject only to permitted liens) in all of its assets and all real, intangible and personal property, including all of its right, title and interest in and to the Royalty Payments. In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with Oxford Finance LLC (Oxford) and Silicon Valley Bank (SVB) (collectively, the Lenders), amending and restating in its entirety 17 our original loan agreement with the Lenders, dated December 2012. The Loan Agreement provided for an additional $20 million principal amount of new term loan, bringing the total term loan balance to $50 million. The proceeds are to be used for working capital and general business requirements. In January 2015, we entered into the Second Amendment to the Amended and Restated Loan and Security Agreement and First Amendment to Disbursement Letter (the Amendment) with the Lenders, amending and restating the loan payment schedules of the Amended and Restated Loan and Security Agreement. The amended and restated term loan repayment schedule provides for interest only payments through January 2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date of January 2018. The amended and restated term loan facility is secured by substantially all of the assets of the Company and its subsidiary, Halozyme, Inc., except that the collateral does not include any equity interests in Halozyme, Inc., any intellectual property (including all licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our domestic subsidiary. Complying with these covenants may make it more difficult for us to successfully execute our business strategy. The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. Our ability to make payments on our 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. We will need to use cash to pay principal and interest on our debt, thereby reducing the funds available to fund our research and development programs, strategic initiatives and working capital requirements. If we are unable to generate sufficient cash to service our debt obligation, an event of default may occur. In the event of default by us under the Credit Agreement or the Loan 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 Credit Agreement or the Loan Agreement which could harm our financial condition. If proprietary or collaboration product candidates are approved for marketing but do not gain market acceptance, our business may suffer and we may not be able to fund future operations. Assuming that our proprietary or collaboration product candidates obtain the necessary regulatory approvals for commercial sale, a number of factors may affect the market acceptance of these existing product candidates or any other products which are developed or acquired in the future, including, among others: • • • • • • • the price of products relative to other therapies for the same or similar treatments; 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; our ability to fund our sales and marketing efforts and the ability and willingness of our collaborators to fund sales and marketing efforts; the degree to which the use of these products is restricted by the approved product label; the effectiveness of our sales and marketing efforts and the effectiveness of the sales and marketing efforts of our collaborators; the introduction of generic competitors; and the extent to which reimbursement for our products and related treatments will be available from third party payors including government insurance programs (Medicare and Medicaid) and private insurers. If these products do not gain market acceptance, we may not be able to fund future operations, including the development or acquisition of new product candidates and/or our sales and marketing efforts for our approved products, which would cause our business to suffer. 18 In addition, our proprietary and collaboration 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 products may be negatively affected. Developing and marketing pharmaceutical products for human use involves significant product liability risks for which we currently have limited insurance coverage. The testing, marketing and sale of pharmaceutical products involves the risk of product liability claims by consumers and other third parties. Although we maintain product liability insurance coverage, product liability claims can be high in the 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 lack or insufficiency of insurance coverage 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 collaboration product candidates include the pharmaceutical products of a third party, we run the risk that problems with the third party pharmaceutical product will give rise to liability claims against us. Our inability to attract, hire and retain key management and scientific personnel could negatively affect our business. Our success depends on the performance of key management and scientific employees with relevant experience. For example, in order to pursue our current business strategy, we will need to recruit and retain personnel experienced in oncology drug development which is a highly competitive market for talent. We depend substantially on our ability to hire, train, motivate and retain high quality personnel, especially our scientists and management team. Particularly in view of the small number of employees on our staff to cover our numerous programs and key functions, if we are unable to retain existing personnel or identify or hire additional personnel, we may not be able to research, develop, commercialize or market our products and product candidates as expected or on a timely basis and we may not be able to adequately support current and future alliances with strategic collaborators. Furthermore, if we were to lose key management personnel, we would likely lose some portion of our institutional knowledge and technical know-how, potentially causing a substantial delay in one or more of our development programs until adequate replacement personnel could be hired and trained. We currently have a severance policy applicable to all employees and a change in control policy applicable to senior executives. We do not have key man life insurance policies on the lives of any of our 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 four buildings in San Diego, California. In addition, we have a satellite office in South San Francisco, California. We depend on our facilities and on our collaborators, contractors and vendors for the continued operation of our business. Natural disasters or other catastrophic events, interruptions in the supply of natural resources, political and governmental changes, wildfires and other fires, floods, explosions, actions of animal rights activists, earthquakes and civil unrest could disrupt our operations or those of our collaborators, 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 research and development programs. If we or our collaborators do not achieve projected development, clinical, regulatory or sales goals in the timeframes we publicly announce or otherwise expect, the commercialization of our products and the development of our product candidates 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, we or our collaborators may publicly articulate 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 control. If scientific, regulatory, strategic or other factors cause us to not meet a goal, regardless of whether that goal has been publicly articulated or not, our stock price may decline rapidly. For example, the announcement in April 2014 of the temporary halting of our Phase 2 clinical trial for PEGPH20 caused a rapid decline in our stock price. 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 19 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 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 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 collaborators 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 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. Security breaches may disrupt our operations and harm our operating results. The wrongful use, theft, deliberate sabotage or any other type of security breach with respect to any of our information technology storage and access systems could result in the disruption of our ability to use such systems or disclosure or dissemination of our proprietary and confidential information that is electronically stored, including research or clinical data, resulting in a material adverse impact on our business, operating results and financial condition. Our security and data recovery measures may not be adequate to protect against computer viruses, break-ins, and similar disruptions from unauthorized tampering with our electronic storage systems. 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 and financial condition. 20 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. As a result, the high and low sales prices of our common stock during the twelve months ended December 31, 2015 were $25.25 and $9.47, respectively. We expect our stock price to continue to be subject to significant volatility and, in addition to the other risks and uncertainties described elsewhere in this Annual Report on Form 10-K 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 us; failure (actual or perceived) of our collaborators to devote attention or resources to the development or commercialization of product candidates licensed to such collaborator; a dispute regarding our failure, or the failure of one of our third party collaborators, 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; general negative conditions in the financial markets; the cost associated with obtaining regulatory approval for any of our proprietary or collaboration product candidates; the failure, for any reason, to secure or defend our intellectual property position; for those products that are not yet approved for commercial sale, the failure or delay of applicable regulatory bodies to approve such products; identification of safety or tolerability issues; failure of clinical trials to meet efficacy endpoints; suspensions or delays in the conduct of clinical trials or securing of regulatory approvals; adverse regulatory action with respect to our and our collaborators’ products and product candidates such as clinical holds, imposition of onerous requirements for approval or product recalls; our failure, or the failure of our third party collaborators, to successfully commercialize products approved by applicable regulatory bodies such as the FDA; our failure, or the failure of our third party collaborators, 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 candidate; the sale of additional debt and/or equity securities by us; our failure to obtain financing on acceptable terms or at all; or a restructuring of our operations. 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 our 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. In the future, we may issue additional options, warrants or other derivative securities convertible into our common stock. Our rights agreement and anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. We are party to a Rights Agreement designed to deter abusive takeover tactics and to encourage prospective acquirers to negotiate with our board of directors rather than attempt to acquire us in a manner or on terms that our board deems unacceptable, which could delay or discourage takeover attempts that stockholders may consider favorable. In addition, anti-takeover provisions in our charter documents 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, as amended, does not include a provision for cumulative voting for directors. Under cumulative voting, a minority stockholder holding a sufficient percentage of a class of 21 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 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 board of directors. 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 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 product sales, introductions or modifications. Extensive industry regulation has had, and will continue to have, a significant impact on our business. All pharmaceutical 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 products. 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 products or may impose onerous, costly and time-consuming requirements such as additional clinical or animal testing. Regulatory authorities may require that we change our studies or conduct additional studies, which may significantly delay or make continued pursuit of approval commercially unattractive. For example, the approval of Baxalta’s HYQVIA BLA was delayed by the FDA until we and Baxalta 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 approved by the FDA in September 2014, the FDA or other foreign regulatory agency may, at any time, halt our and our collaborators’ development and commercialization activities due to safety concerns. In addition, even if our products are approved, regulatory agencies may also take post-approval action limiting or revoking our ability to sell our products. Any of these regulatory actions may adversely affect the economic benefit we may derive from our products and therefore harm our financial condition. Under certain of these regulations, 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 we, or our contract supplier, fail these inspections, we may not be able to commercialize our product 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. 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, false claims laws, civil monetary penalty laws, data privacy and security laws, tracing and tracking laws, as well as transparency 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 22 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 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. • • 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 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. 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’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 23 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. 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. If third party reimbursement and customer contracts are not available, our products may not be accepted in the market. Our ability to earn sufficient returns on our products will depend in part on the extent to which reimbursement for our products and related treatments will be available from government health administration authorities, private health insurers, managed care organizations and other healthcare providers. Third-party payors 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 payors may not establish adequate levels of reimbursement for the products that we 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 our products are 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 that could cause us to sell our products at lower prices, resulting in less revenue to us. Any of the proprietary or collaboration 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 payors 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, 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 products. In March 2010, the U.S. adopted the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the Healthcare Reform Act). This law substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The Healthcare Reform Act contains a number of provisions that are expected to impact our business and operations, in some cases in ways we cannot currently predict. Changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, fraud 24 and abuse and enforcement. These changes will impact existing government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. Additional provisions of the Healthcare Reform Act may negatively affect our revenues in the future. For example, the Healthcare Reform Act imposes a non-deductible excise tax on pharmaceutical manufacturers or importers that sell branded prescription drugs to U.S. government programs that we believe will impact our revenues from our products. In addition, as part of the Healthcare Reform Act’s provisions closing a funding gap that currently exists in the Medicare Part D prescription drug program, we will also be required to provide a 50% discount on branded prescription drugs dispensed to beneficiaries under this prescription drug program. We expect that the Healthcare Reform Act and other healthcare reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our ability to maintain or increase our product sales or successfully commercialize our product candidates or could limit or eliminate our future spending on development projects. Furthermore, individual states 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 payors 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. We face intense competition and rapid technological change that could result in the development of products by others that are superior to our proprietary and collaboration products under development. Our proprietary and collaboration 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. The competitors for Hylenex recombinant include, but are not limited to, Valeant Pharmaceuticals International, Inc.’s FDA-approved product, Vitrase®, an ovine (ram) hyaluronidase, and Amphastar Pharmaceuticals, Inc.’s product, Amphadase®, a bovine (bull) hyaluronidase. For our PEGPH20 product candidate, 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 collaboration product candidates or that could render our technologies and product candidates obsolete or noncompetitive. Many of these competitors have substantially more resources and product development, manufacturing and marketing experience and capabilities than we do. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of pharmaceutical product candidates and obtaining FDA and other regulatory approvals of products and therapies for use in healthcare. Item 1B. Unresolved Staff Comments None. Item 2. Properties Our administrative offices and research facilities are currently located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research space for a monthly rent expense of approximately $145,000, net of costs and property taxes associated with the operation and maintenance of the subleased facilities. In addition, we have a satellite office in South San Francisco, California, where we lease approximately 10,000 square feet of office space for a monthly rent expense of approximately $26,000. We believe the current space is adequate for our immediate needs. Item 3. 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 4. Mine Safety Disclosures Not applicable. 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NASDAQ Global Select Market under the symbol “HALO.” The following table sets forth the high and low sales prices per share of our common stock during each quarter of the two most recent fiscal years: 2015 2014 High Low High Low First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16.55 $22.85 $25.25 $18.65 $9.47 $13.91 $12.80 $12.80 $18.18 $12.97 $10.70 $10.00 $11.28 $6.88 $8.58 $7.51 On February 22, 2016, the closing sales price of our common stock on the NASDAQ Global Select Market was $8.19 per share. As of February 22, 2016, we had approximately 21,000 stockholders of record and beneficial owners of our common stock. Dividends We have never declared or paid any dividends on our common stock. We currently intend to retain available cash for funding operations; therefore, we do not expect to pay any dividends on our common stock in the foreseeable future. In addition, the provisions of our Loan Agreement limit, among other things, our ability to pay dividends and make certain other payments. Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contract restrictions, business prospects and other factors our board of directors may deem relevant. 26 Stock Performance Graph and Cumulative Total Return Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed to be “filed” with the SEC or to be “soliciting material” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and it shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. The graph below compares Halozyme Therapeutics, Inc.’s cumulative five-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite Index and the NASDAQ Biotechnology Index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from December 31, 2010 to December 31, 2015. The historical stock price performance included in this graph is not necessarily indicative of future stock price performance. Halozyme Therapeutics, Inc. . . . . . . . . . . . . . . NASDAQ Composite . . . . . . . . . . . . . . . . . . . NASDAQ Biotechnology . . . . . . . . . . . . . . . . 12/31/2010 $100 $100 $100 12/31/2011 $120 $99 $112 12/31/2012 $85 $116 $148 12/31/2013 $189 $163 $246 12/31/2014 $122 $187 $331 12/31/2015 $219 $200 $370 27 Item 6. Selected Financial Data The selected consolidated financial data set forth below as of December 31, 2015 and 2014, and for the fiscal years ended December 31, 2015, 2014 and 2013, are derived from our audited consolidated financial statements included elsewhere in this report. This information should be read in conjunction with those consolidated financial statements, the notes thereto, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The selected consolidated financial data set forth below as of December 31, 2013, 2012 and 2011, and for the fiscal years ended December 31, 2012 and 2011, are derived from our audited consolidated financial statements that are contained in reports previously filed with the SEC, not included herein. Summary Financial Information Statement of Operations Data: Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss per share, basic and diluted . . . . . . . . . . . . . . Shares used in computing net loss per share, basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015(1) 2014(2) Year Ended December 31, 2013(3) (in thousands, except for per share amounts) $ 56,086 $ 42,325 $ 54,799 $ 75,334 $ 135,057 $ (32,231) $ (68,375) $ (83,479) $ (53,552) $ (19,770) (0.19) $ (0.56) $ (0.48) $ (0.74) $ (0.25) $ 2012(4) 2011(5) 126,704 122,690 112,805 111,077 102,566 Balance Sheet Data: 2015 2014 2013 2012 2011 As of December 31, (in thousands) Cash and cash equivalents and available-for-sale marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity (deficit). . . . . . . . . . . . . . . . . . . . ______________ $ 108,339 $ 109,315 $ 181,789 $ 53,223 $ 27,971 $ 138,790 $ 42,999 $ 135,623 $ 136,990 $ 165,977 $ 54,634 $ 49,860 $ 124,625 $ 41,352 $ 99,501 $ 71,503 $ 111,682 $ 70,293 $ 134,728 $ 101,793 $ 43,846 $ 53,143 $ 29,662 $ 49,772 $ 85,875 $ 121,783 $ (19,991) $ 48,854 $ 52,376 $ 46,236 $ 65,759 $ 40,884 $ — $ 54,858 $ 10,900 (1) Revenues in 2015 included $23.0 million and $25.0 million in license fees from collaboration agreements with AbbVie and Lilly, respectively. (2) Revenues in 2014 included a $15.0 million license fee from the Janssen Collaboration. (3) Revenues in 2013 reflected increases in supply of bulk rHuPH20 to Roche and product sales of Hylenex recombinant, which was relaunched in December 2011. (4) Revenues in 2012 included $9.5 million in license fees from the Pfizer Collaboration. (5) Revenues in 2011 included $18.0 million in license fees from collaboration agreements with ViroPharma Incorporated and Intrexon Corporation and $18.1 million related to recognition of unamortized deferred prepaid product-based payments and unamortized deferred upfront payment in connection with the termination of the collaboration with Baxalta for the marketing rights of Hylenex recombinant in July 2011. 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the Part I, Item 1A, Risks Factors, and elsewhere in this Annual Report. References to “Notes” are Notes included in our Notes to Consolidated Financial Statements. Overview Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that can improve cancer survival. Our research primarily focuses on human enzymes that alter the extracellular matrix and tumor microenvironment. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies. Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk and cost by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products that combine our technology with the collaborators’ proprietary compounds. The majority of our approved product 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 temporarily breaking down hyaluronan (or HA), a naturally occurring substance that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of 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™ Technology. 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. We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), and Eli Lilly and Company (Lilly). We receive royalties from two of these collaborations, including royalties from sales of one product approved in the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of our approved products, product candidates, and ENHANZE collaborations will depend on the ability of Halozyme and our collaborators to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates. Our proprietary development pipeline consists of a clinical stage product candidate in oncology and research-stage oncology projects. Our lead oncology program is PEGPH20 (PEGylated recombinant human hyaluronidase), a molecular entity we are developing for the systemic treatment of tumors that accumulate HA. When HA accumulates in a tumor, it can cause higher pressure in the tumor, reducing blood flow into the tumor and with that, reduced access of cancer therapies to the tumor. PEGPH20 works by temporarily degrading HA surrounding cancer cells resulting in reduced pressure and increased blood flow to the tumor thereby enabling increased amounts of anticancer treatments administered concomitantly gaining access to the tumor. We are currently in Phase 2 and Phase 3 clinical testing for PEGPH20 in stage IV PDA (Studies 109-202 and 109-301), in Phase 1b clinical testing in non-small cell lung cancer (Study 107-201) and in Phase 1b clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101). Our 2015 and recent key accomplishments and events are as follows: • • • In the first quarter of 2016, we initiated the Phase 3 study of PEGPH20 (Halozyme Study 301) in previously untreated stage IV PDA patients. Dosing of the first patient is planned to occur by the end of March 2016. In February 2016, we completed enrollment of 133 patients in Halozyme Study 202 and project to present mature PFS results of Stage 2 of the study in the fourth quarter of 2016. In February 2016, our partner Ventana filed an IDE with the FDA for the companion diagnostic test we co-developed to prospectively identify patients with high levels of HA. 29 • • • • • • • • • • • • In February 2016, Pfizer dosed the first patient in the Phase 1 clinical trial evaluating subcutaneous delivery of bococizumab, an investigational PCSK9 inhibitor developed by Pfizer, with ENHANZE Technology. In January 2016, through our subsidiary, Halozyme Royalty LLC (Halozyme Royalty), we received a $150.0 million loan secured by future royalties received from our collaborations with Roche and Baxalta. In January 2016, AbbVie dosed the first patient in the Phase 1 clinical trial evaluating subcutaneous delivery of adalimumab (HUMIRA®) with ENHANZE Technology. In December 2015, we entered into a collaboration and license agreement with Lilly, under which Lilly has the worldwide license to develop and commercialize products combining our ENHANZE Technology with Lilly proprietary biologics directed to up to five targets. Targets may be selected on an exclusive basis. We received $25.0 million for the license with two specified targets. In November 2015, we finalized our assay methodology and pathology-based scoring algorithm with Ventana for our affinity-histochemistry companion diagnostic. In November 2015, we announced the dosing of the first patient in a Phase 1b clinical trial of PEGPH20 in combination with Merck’s immuno-oncology drug KEYTRUDA (pembrolizumab) for patients with advanced non-small cell lung and gastric cancers. In November 2015, Janssen dosed the first patient in a Phase 1b clinical trial evaluating subcutaneous delivery of daratumumab (DARZALEX®) with ENHANZE Technology in multiple myeloma. In October 2015, Pfizer dosed the first patient in the Phase 1 clinical trial evaluating subcutaneous delivery of rivipansel with our ENHANZE Technology for the treatment of individuals with vaso-occlusive crisis of sickle cell disease. In July 2015, we entered into a clinical collaboration agreement with Eisai Co. Ltd. (Eisai) to evaluate Eisai's agent eribulin mesylate Halaven® (eribulin) in combination with PEGPH20 in first line HER2-negative HA-high metastatic breast cancer patients. In June 2015, we entered into a collaboration and license agreement with AbbVie, under which AbbVie has the worldwide license to develop and commercialize products combining our ENHANZE Technology with AbbVie proprietary biologics directed to up to nine targets. Targets may be selected on an exclusive basis. We received $23.0 million for the license with one specified target, HUMIRA. In May 2015, we entered into a global collaboration agreement with Ventana, a member of the Roche Group, to collaborate on the development of, and for Ventana to ultimately commercialize, a companion diagnostic assay for use with PEGPH20. The Ventana assay will be used to identify high levels of HA. Under the agreement, Ventana will develop an in vitro diagnostic (IVD), under design control, using our proprietary HA binding protein, with the intent of submitting it for regulatory approval in the United States, Europe and other countries. In January 2015, we disclosed initial efficacy and safety data from an interim assessment of Stage 1 of Study 109-202, a Phase 2 multicenter, randomized clinical trial evaluating PEGPH20 as a first-line therapy for patients with stage IV PDA. We also presented the final results from Study 109-201, a multi-center, international open label dose escalation Phase 1b clinical study of PEGPH20 in combination with gemcitabine for the treatment of patients with stage IV PDA at the 2015 Gastrointestinal Cancers Symposium (also known as ASCO-GI meeting). Results of Operations Comparison of Years Ended December 31, 2015, 2014 and 2013 Product Sales, Net — Product sales increased in 2015 compared to 2014 by $8.3 million, or 22%, primarily due to the sale of bulk rHuPH20 to Baxalta of $6.4 million in 2015, compared to no sales in 2014, and a $2.9 million increase in product sales of Hylenex recombinant, which increased to $16.1 million in 2015 from $13.2 million in 2014. Product sales increased in 2014 compared to 2013 by $13.4 million, or 55%, primarily due to a $9.8 million increase in product sales of bulk rHuPH20 to Roche and a $4.1 million increase in product sales of Hylenex recombinant. Prior to the receipt of the European marketing approval of Roche’s Herceptin SC product in August 2013 and MabThera SC product in March 2014, and Baxalta’s HYQVIA product in May 2013, revenue from bulk rHuPH20 supply for these collaboration products was recorded as revenues under collaborative agreements instead of product sales revenue. 30 Revenues Under Collaborative Agreements — Revenues under collaborative agreements for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands): 2015 Change 2014 Change 2013 Upfront payments, license maintenance fees and amortization of deferred upfront, license fees and product-based payments: Lilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AbbVie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pfizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Baxalta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Janssen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reimbursements for research and development services: Roche(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Janssen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Baxalta(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues under collaborative agreements . . . . . . . . . . . . _______________ n/a n/a $ — $ 25,000 — 23,000 3,028 8% 3,269 1,000 100% 2,000 765 765 0% — (100)% 15,000 — 54,034 n/a 173% 19,793 n/a n/a 31% (33%) 27% n/a $ — — 2,308 1,500 604 — 2,000 6,412 — (100%) 209% 2,556 834 292 284 3,966 $ 58,000 6,923 (63%) — n/a 1,209 (76%) 161 76% (52%) 8,293 107% $ 28,086 (64%) n/a (70%) (79%) (65%) 19,086 — 4,059 770 23,915 (7%) $ 30,327 (1) Subsequent to the European approvals of Roche’s Herceptin SC product in August 2013 and MabThera SC product in March 2014 and Baxalta’s HYQVIA product in May 2013, revenue from supply of bulk rHuPH20 for those products to the collaborators was recorded as product sales. In 2015, we recognized $25.0 million in license fee revenue in connection with the Lilly Collaboration and $23.0 million in license fee revenue in connection with the AbbVie Collaboration. In 2014, we recognized $15.0 million in license fee revenue in connection with the Janssen Collaboration. Revenue from reimbursements for research and development services and bulk rHuPh20 supply decreased in 2015 compared to 2014 mainly due to a reduction in services provided to Roche compared to the same period in 2014. Revenue from reimbursements for research and development services and bulk rHuPh20 supply decreased in 2014 compared to 2013 mainly due to revenue from supply of bulk rHuPH20 for Roche collaboration products being recognized as product sales revenue in 2014, as opposed to revenue from reimbursements for research and development services in the same period in 2013. The decrease was also due to a decrease in reimbursements for manufacturing services to support the launches by Roche and Baxalta. Research and development services rendered by us on behalf of our collaborators are at the request of the collaborators; therefore, the amount of future revenues related to reimbursable research and development services is uncertain. We expect the non-reimbursement revenues under our collaborative agreements to continue to fluctuate in future periods based on our collaborators’ abilities to meet various clinical and regulatory milestones set forth in such agreements and our abilities to obtain new collaborative agreements. Royalties – Royalty revenue was $31.0 million in 2015 compared to $9.4 million in 2014 and $33,000 in 2013. The increase relates primarily to increased sales of Herceptin SC by Roche since the launch of Herceptin SC in September 2013. We recognize royalties on sales of the collaboration products by the collaborators in the quarter following the quarter in which the corresponding sales occurred. In general, we expect royalty revenue to increase in future periods reflecting expected increases in sales of collaboration products, although there may be periods with flat or declining royalty revenue as sales of products under collaborations vary. Cost of Product Sales — Cost of product sales increased in 2015 compared to 2014 by $6.5 million, or 29%, primarily due to the increased product sales of bulk rHuPH20 for HYQVIA. Cost of product sales increased in 2014 compared to 2013 by $16.5 million, or 264%, primarily due to the increased product sales of bulk rHuPH20 for Herceptin SC. Prior to European marketing approvals of Roche’s collaboration products, Herceptin SC in August 2013 and MabThera SC in March 2014, and Baxalta’s collaboration HYQVIA product in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development expenses in the periods such costs were incurred. Therefore, cost of product sales of bulk rHuPH20 for these collaboration products in 2013 was materially reduced due to the exclusion of those manufacturing costs that were charged to research and development expenses in the periods prior to receiving marketing approvals. 31 Cost of product sales of bulk rHuPH20 for collaboration products in 2014 excluded $1.0 million in manufacturing costs, of which $0.9 million and $0.1 million were charged to research and development expenses for 2013 and 2012, respectively. Cost of product sales of bulk rHuPH20 for collaboration products in 2013 excluded $10.0 million in manufacturing costs, of which $9.0 million and $1.0 million were charged to research and development expenses in 2013 and 2012, respectively. The estimated selling price of the zero-cost inventory of bulk rHuPH20 for Herceptin SC on hand as of December 31, 2013, was approximately $1.3 million. We sold all of this inventory in 2014. In 2015, the cost of product sales of bulk rHuPH20 was approximately 81% of bulk rHuPH20 product sales revenue. 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, clinical trials, preclinical and regulatory activities. Research and development expenses incurred for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands): 2015 Change 2014 Change 2013 Programs Product Candidates: PEGPH20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ultrafast insulin program. . . . . . . . . . . . . . . . . . . . . . . . . . . . Hylenex recombinant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENHANZE collaborations(1) . . . . . . . . . . . . . . . . . . . . . . . . . . rHuPH20 platform(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HTI-501 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total research and development expenses. . . . . . . . . . . . . . . $ 75,616 1,634 1,468 3,181 7,333 5 3,999 $ 93,236 117 % $ 34,857 22,424 (93)% 5,318 (72)% 6,799 (53)% 5,807 26 % 1,447 (100)% 3,044 31 % 17 % $ 79,696 86 % $ 18,742 24,723 (9)% 10,734 (50)% 31,104 (78)% 5,895 (1)% 2,712 (47)% 2,730 12 % (18)% $ 96,640 _______________ (1) Subsequent to the European approvals of Roche’s Herceptin SC product in August 2013 and MabThera SC product in March 2014 and Baxalta’s HYQVIA product in May 2013, the manufacturing costs of bulk rHuPH20 for these collaboration products were capitalized as inventory. (2) Includes research, development and manufacturing expenses related to our proprietary rHuPH20 enzyme. These expenses were not designated to a specific program at the time the expenses were incurred. Research and development expenses relating to our PEGPH20 program in 2015 increased by 117%, compared to 2014 primarily due to increased clinical trial activities. Research and development expenses relating to our ultrafast insulin program in 2015 decreased by 93% compared to 2014 primarily due to decreased clinical trial and manufacturing activities. Research and development expenses relating to Hylenex recombinant program decreased in 2015 by 72% compared to 2014 mainly due to the completion of the technology transfer and validation campaign with a second manufacturer for Hylenex recombinant in 2014. Research and development expenses relating to our ENHANZE collaborations in 2015 decreased by 53%, primarily due to a decrease in manufacturing expenses related to our collaboration with Roche. We expect total research and development expenses to increase in future periods reflecting expected increases in our PEGPH20 development activities. Research and development expenses relating to our PEGPH20 program in 2014 increased by 86%, compared to 2013 primarily due to the increased clinical trial activities mostly relating to Study 109-202. Research and development expenses relating to Hylenex recombinant program decreased in 2014 by 50% compared to 2013 mainly due to the completion of the technology transfer and validation campaign with a second manufacturer for Hylenex recombinant in 2014. Research and development expenses relating to our ENHANZE collaborations in 2014 decreased by 78%, primarily due to a $12.0 million decrease resulting from capitalizing manufacturing costs for approved collaboration products in the current period, an $8.1 million decrease in other outsourced regulatory and manufacturing activities to support our collaboration with Roche and a $2.5 million decrease in preclinical activities to support Baxalta. Subsequent to the European approvals of Roche's Herceptin SC product in August 2013 and MabThera SC product in March 2014 and Baxalta's HYQVIA product in May 2013, the manufacturing costs of bulk rHuPH20 for these collaboration products were capitalized as inventory. Selling, General and Administrative — Selling, general and administrative (SG&A) expenses increased in 2015 compared to 2014 by $4.1 million, or 11%, primarily due to the increase in compensation costs, including a $3.7 million increase in stock- based compensation. SG&A expenses increased in 2014 compared to 2013 by $3.6 million, or 11%, primarily due to the increase in compensation costs, including a $2.3 million increase in stock-based compensation. 32 Interest Expense — Interest expense included interest expense and amortization of the debt discount related to the long- term debt. Interest expense decreased by $0.4 million in 2015 as compared to 2014. Interest expense increased by $2.3 million in 2014 as compared to 2013 due to the $20.0 million increase in the principal balance of the long-term debt in December 2013. Liquidity and Capital Resources Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale marketable securities. As of December 31, 2015, we had cash, cash equivalents and marketable securities of approximately $108.3 million. We will continue to have significant cash requirements to support product development activities. The amount and timing of cash requirements will depend on the progress and success of our clinical development programs, regulatory and market acceptance, and the resources we devote to research and other commercialization activities. 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 currently anticipate an increase of cash and cash equivalents of approximately $35 million to $55 million for the year ending December 31, 2016, which includes cash received in January 2016 of $25 million paid by Lilly and $150 million from the royalty-backed debt agreement, and will depend on the progress of various preclinical and clinical programs, the timing of our manufacturing scale up and the achievement of various milestones and royalties under our existing collaborative agreements. 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, such as the $150 million royalty-backed loan we received in January 2016. Refer to Note 15, Subsequent Event, for further information on our royalty-backed debt agreement. We may finance future cash needs through any one of the following financing vehicles: (i) the public offering of securities; (ii) new collaborative agreements; (iii) expansions or revisions to existing collaborative relationships; (iv) private financings; and/or (v) other equity or debt financings. We are a “well known seasoned issuer”, which allows us to file an automatically effective shelf registration statement on Form S-3 which would allow us, from time to time, to offer and sell equity, debt securities and warrants to purchase any of such securities, either individually or in units. We may, in the future, offer and sell equity, debt securities and warrants to purchase any of such securities, either individually or in units to raise capital to fund the continued development of our product candidates, the commercialization of our products or for other general corporate purposes. Our existing cash, cash equivalents and marketable securities may not be adequate to fund our operations until we become profitable, if ever. We cannot be certain that additional financing will be available when needed or, if available, financing will be obtained on favorable terms. If we are unable to raise sufficient funds, we may need to delay, scale back or eliminate some or all of our research and development programs, delay the launch of our product candidates, if approved, and/or restructure our operations. If we raise additional funds by issuing equity securities, substantial dilution to existing stockholders could result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations, the issuance of warrants that may ultimately dilute existing stockholders when exercised and covenants that may restrict our ability to operate our business. Cash Flows Operating Activities Net cash used in operations was $37.1 million in 2015 compared to $47.5 million in 2014. The $10.4 million decrease in utilization of cash in operations was mainly due to an increase of license fees and royalties from our collaborators; offset in part by increased spending on our R&D programs. Net cash used in operations was $47.5 million in 2014 compared to $49.3 million in 2013. The $1.8 million decrease in utilization of cash in operations was mainly due to the receipt of a $15.0 million license fee payment from the Janssen Collaboration; offset in part by the timing of the collection of accounts receivable and the payment of accounts payable. Investing Activities Net cash provided by investing activities was $5.9 million in 2015 compared to net cash used of $33.0 million in 2014 and $47.9 million in 2013. The change in 2015 compared to 2014 was primarily due to the $17.4 million decrease in purchases of marketable securities and $22.4 million increase in proceeds from the maturities of marketable securities. The decrease in 2014 compared to 2013 was primarily due to a $53.9 million increase in proceeds from maturities of marketable securities; offset in part by a $39.9 million increase in purchases of marketable securities in 2014. 33 Financing Activities Net cash provided by financing activities was $13.1 million in 2015 compared to $114.5 million in 2014 and $25.1 million in 2013. Net cash provided by financing activities in 2015 consisted of $13.1 million in net proceeds from issuance of common stock under equity incentive plans. Net cash provided by financing activities in 2014 consisted of $107.7 million in net proceeds from the sale of our common stock in February 2014 and $6.8 million in net proceeds from option exercises. Net cash provided by financing activities in 2013 consisted of net proceeds of $20.0 million from the amended long-term debt and $5.1 million in net proceeds from option exercises. Long-Term Debt In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with Oxford Finance LLC (Oxford) and Silicon Valley Bank (SVB) (collectively, the Lenders), amending and restating in its entirety our original loan agreement with the Lenders, dated December 2012. The Loan Agreement provided for an additional $20 million principal amount of new term loan, bringing the total term loan balance to $50 million. The proceeds are to be used for working capital and general business requirements. The amended term loan facility matures on January 1, 2018. The outstanding term loan was $49.8 million as of December 31, 2015, net of unamortized debt discount of $0.2 million. In January 2015, we and the Lenders entered into a second amendment to the Loan Agreement (the Amendment) amending and restating the loan repayment schedule of the Loan Agreement. The amended and restated loan repayment schedule provides for interest only payments in arrears through January 2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date. Consistent with the original loan, the Loan Agreement provides for a 7.55% interest rate on the term loan and a final interest payment equal to 8.5% of the original principal amount, or $4.25 million, which is due when the term loan becomes due or upon the prepayment of the facility. We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1% to 3% depending upon when the prepayment occurs. In December 2015, we entered into a consent, release and third amendment to the Loan Agreement with the Lenders, in which the Lenders consented to (i) the formation of Halozyme Royalty as a wholly-owned subsidiary of Halozyme, (ii) the release of liens and the sale of certain rights to receive royalty payments to Halozyme Royalty, and (iii) entering into a Credit Agreement with BioPharma Credit Investments IV Sub, LP., (BioPharma), as collateral agent and lender, and the other lenders party, whereby Halozyme Royalty will incur indebtedness from and grant liens on the royalty payments to BioPharma. This amendment allowed us to enter into a royalty-backed debt agreement. Refer to Note 15, Subsequent Event, for further information on our royalty- backed debt agreement. The amended and restated term loan facility is secured by substantially all of the assets of the Company and its subsidiary, Halozyme, Inc., except that the collateral does not include any equity interests in Halozyme, Inc. and any intellectual property (including all licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our domestic subsidiary. The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. In the event of default by us under the Loan 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 Loan Agreement, which could harm our financial condition. Off-Balance Sheet Arrangements As of December 31, 2015, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we did not engage 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 relationship. 34 Contractual Obligations As of December 31, 2015, future minimum payments due under our contractual obligations are as follows (in thousands): Payments Due by Period Contractual Obligations(1,5) Long-term debt, including interest(2) . . . . . . . . . . . . . . . . . . . Operating leases(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third-party manufacturing obligations(4) . . . . . . . . . . . . . . . . Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total $ 58,592 6,527 39,897 960 $105,976 Less than 1 Year $ 25,077 2,539 37,466 344 $ 65,426 1-3 Years $ 33,515 3,526 2,431 616 $ 40,088 _______________ More than 5 Years 4-5 Years $ — $ 462 — — 462 $ $ — — — — — (1) Does not include milestone or contractual payment obligations contingent upon the achievement of certain milestones or events if the amount and timing of such obligations are unknown or uncertain. Our in-license agreement is cancelable with written notice within 90 days. We may be required to pay up to approximately $9.3 million in milestone payments, plus sales royalties, in the event that all scientific research under these agreements is successful. One of the milestone payments of $1.3 million is due upon the first dosing of a patient in our Phase 3 study of PEGPH20, which is expected to occur at the end of the first quarter of 2016. (2) Long-term debt obligations include future monthly interest payments based on a fixed rate of 7.55% and a final payment of $4.25 million for our long-term debt due in January 2018. (3) Includes minimum lease payments related to leases of our office and research facilities and certain autos under non- cancelable operating leases. (4) We have contracted with third-party manufacturers for the supply of bulk rHuPH20 and fill/finish of Hylenex recombinant. Under these agreements, we are required to purchase certain quantities each year during the terms of the agreements. The amounts presented represent our estimates of the minimum required payments under these agreements. (5) Excludes contractual obligations already recorded on our consolidated balance sheet as current liabilities. Contractual obligations for purchases of goods or services include agreements that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. For obligations with cancellation provisions, the amounts included in the preceding table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee. For the restricted stock units and performance stock units granted, the number of shares issued on the date the restricted stock units vest is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. The obligation to pay the relevant taxing authority is not included in the preceding table, as the amount is contingent upon continued employment. In addition, the amount of the obligation is unknown, as it is based in part on the market price of our common stock when the awards vest. The expected timing of payments of the obligations above is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations. Our future capital uses and requirements depend on numerous forward-looking factors. These factors may include, but are not limited to, the following: • • • • • • • • the rate of progress and cost of research and development activities; the number and scope of our research activities; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; our ability to establish and maintain product discovery and development collaborations, including scale-up manufacturing costs for our collaborators’ product candidates; the amount of royalties from our collaborators; the amount of product sales for Hylenex recombinant; the costs of obtaining and validating additional manufacturers of Hylenex recombinant; the effect of competing technological and market developments; 35 • • the terms and timing of any collaborative, licensing and other arrangements that we may establish; and the extent to which we acquire or in-license new products, technologies or businesses. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our 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. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition We generate revenues from product sales and collaborative agreements. Payments received under collaborative agreements may include nonrefundable fees at the inception of the agreements, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20 and/or royalties on sales of products resulting from collaborative arrangements. We recognize revenue in accordance with the authoritative guidance on revenue recognition. Revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured. Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements, of our consolidated financial statements for further discussion of our revenue recognition policies for product sales and revenues under our collaborative agreements and Note 4, Collaborative Agreements, of our consolidated financial statements for a further discussion of our collaborative agreements. Share-Based Payments We use the fair value method to account for share-based payments in accordance with the authoritative guidance for share- based compensation. The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option pricing model (Black-Scholes model) that uses assumptions regarding a number of complex and subjective variables. Changes in these assumptions may lead to variability with respect to the amount of expense we recognize in connection with share-based payments. Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements, of our consolidated financial statements for a further discussion of share-based payments. Research and Development Expenses Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases or manufacturing of bulk rHuPH20 for such product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, which were incurred after the receipt of marketing approvals are capitalized as inventory. Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements, of our consolidated financial statements for a further discussion of research and development expenses. Due to the uncertainty in obtaining the FDA and other regulatory approvals, our reliance on third parties and competitive pressures, we are unable to estimate with any certainty the additional costs we will incur in the continued development of our proprietary product candidates for commercialization. However, we expect our research and development expenses to increase this year as we continue with our clinical trial programs and continue to develop and manufacture our product candidates. Clinical development timelines, likelihood of success and total costs vary widely. We anticipate that we will make ongoing determinations as to which research and development projects to pursue and how much funding to direct to each project on an ongoing basis in response to existing resource levels, the scientific and clinical progress of each product candidate, and other market and regulatory developments. We plan on focusing our resources on those proprietary and collaboration product candidates that represent the most valuable economic and strategic opportunities. 36 Product candidate completion dates and costs vary significantly for each product candidate and are difficult to estimate. The lengthy process of seeking regulatory approvals and the subsequent compliance with applicable regulations require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could cause our research and development expenditures to increase and, in turn, have a material adverse effect on our results of operations. We cannot be certain when, or if, our product candidates will receive regulatory approval or whether any net cash inflow from our other product candidates, or development projects, will commence. Recent Accounting Pronouncements Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements, of our consolidated financial statements for a discussion of recent accounting pronouncements and their effect, if any, on us. Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2015, our cash equivalents and marketable securities consisted of investments in money market funds and corporate debt obligations. 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. As of December 31, 2015 based on our current investment portfolio, 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 8. Financial Statements and Supplementary Data Our financial statements are annexed to this report beginning on page F-1. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Control and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15 (e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K. 37 Changes in Internal Control Over Financial Reporting There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • • • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework) (the COSO criteria). Based on our assessment, management concluded that, as of December 31, 2015, our internal control over financial reporting is effective based on the COSO criteria. 38 The independent registered public accounting firm that audited the consolidated financial statements that are included in this Annual Report on Form 10-K has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2015. The report appears below. Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Halozyme Therapeutics, Inc. We have audited Halozyme Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Halozyme Therapeutics, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Halozyme Therapeutics, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Halozyme Therapeutics, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity (deficit) for each of the three years in the period ended December 31, 2015 of Halozyme Therapeutics, Inc. and our report dated February 29, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP San Diego, California February 29, 2016 39 Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item regarding directors is incorporated by reference to our definitive Proxy Statement (the Proxy Statement) to be filed with the Securities and Exchange Commission in connection with our 2016 Annual Meeting of Stockholders under the heading “Election of Directors.” The information required by this item regarding compliance with Section 16 (a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference to the information under the caption “Compliance with Section 16(a) of the Exchange Act” to be contained in the Proxy Statement. The information required by this item regarding our code of ethics is incorporated by reference to the information under the caption “Code of Conduct and Ethics” to be contained in the Proxy Statement. The information required by this item regarding our audit committee is incorporated by reference to the information under the caption “Board Meetings and Committees—Audit Committee” to be contained in the Proxy Statement. The information required by this item regarding material changes, if any, to the process by which stockholders may recommend nominees to our board of directors is incorporated by reference to the information under the caption “Board Meetings and Committees—Nominating and Governance Committee” to be contained in the Proxy Statement. Executive Officers Helen I. Torley, M.B. Ch. B., M.R.C.P. (53), President, Chief Executive Officer and Director. Dr. Torley joined Halozyme in January 2014 as President and Chief Executive Officer and as a member of Halozyme’s Board of Directors. Throughout her career, Dr. Torley has led several successful product launches, including Kyprolis®, Prolia®, Sensipar®, and Miacalcin®. Prior to joining Halozyme, Dr. Torley served as Executive Vice President and Chief Commercial Officer for Onyx Pharmaceuticals (Onyx) from August 2011 to December 2013 overseeing the collaboration with Bayer on Nexavar® and Stivarga® and the U.S. launch of Kyprolis. She was responsible for the development of Onyx's commercial capabilities in ex-US markets and in particular, in Europe. Prior to Onyx, Dr. Torley spent 10 years in management positions at Amgen Inc., most recently serving as Vice President and General Manager of the US Nephrology Business Unit from 2003 to 2009 and the U.S. Bone Health Business Unit from 2009 to 2011. From 1997 to 2002, she held various senior management positions at Bristol-Myers Squibb, including Regional Vice President of Cardiovascular and Metabolic Sales and Head of Cardiovascular Global Marketing. She began her career at Sandoz/ Novartis, where she ultimately served as Vice President of Medical Affairs, developing and conducting post-marketing clinical studies across all therapeutic areas, including oncology. Dr. Torley serves on the board of directors of Relypsa, Inc., a biopharmaceutical company. Before joining the industry, Dr. Torley was in medical practice as a senior registrar in rheumatology at the Royal Infirmary in Glasgow, Scotland. Dr. Torley received her Bachelor of Medicine and Bachelor of Surgery degrees (M.B. Ch.B.) from the University of Glasgow and is a Member of the Royal College of Physicians (M.R.C.P). Laurie D. Stelzer (48), Senior Vice President, Chief Financial Officer. Ms. Stelzer joined Halozyme in 2015 as Senior Vice President, Chief Financial Officer. Prior to joining Halozyme, Ms. Stelzer served from April 2014 to January 2015 as the Senior Vice President of Finance supporting R&D, Technical Operations and M&A at Shire, Inc. Prior to that she was the Division CFO for the Regenerative Medicine Division and the Head of Investor Relations at Shire from March 2012 to April 2014. Prior to Shire, Ms. Stelzer held positions of increasing responsibility for 15 years at Amgen, Inc. including Interim Treasurer, Head of Emerging Markets Expansion, Executive Director of Global Commercial Finance and Head of Global Accounting. Early in her career, she held various finance and accounting positions in the real estate and banking industries. Ms. Stelzer received her MBA from the Anderson School at the University of California, Los Angeles, and a Bachelor of Science in Accounting from Arizona State University. Athena Countouriotis, M.D. (44), Senior Vice President, Chief Medical Officer. Dr. Countouriotis joined Halozyme in January 2015 as Senior Vice President, Chief Medical Officer. From February 2012 to January 2015, Dr. Countouriotis served as chief medical officer at Ambit Biosciences Corporation, a pharmaceutical company, which was acquired by Daiichi Sankyo in November 2014. From August 2007 to February 2012, Dr. Countouriotis was a clinical leader within the Pfizer Inc., a pharmaceutical company, Oncology Business Unit. From October 2005 to August 2007, she was director of oncology global clinical research at Bristol- Myers Squibb Company, a pharmaceutical company, with responsibility for leading clinical development of Sprycel® in acute lymphoblastic leukemia and chronic myeloid leukemia. Earlier in her career, she held the position as Associate Medical Director at Cell Therapeutics, Inc., a biopharmaceutical company. Dr. Countouriotis received a B.S. from the University of California, Los Angeles, and an M.D. at Tufts University School of Medicine. She received her initial training in pediatrics at the University of California, Los Angeles, and additional training at the Fred Hutchinson Cancer Research Center in the Pediatric Hematology/ Oncology Program. 40 Harry J. Leonhardt, Esq. (59), Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. Mr. Leonhardt joined Halozyme in April 2015 as Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. Mr. Leonhardt brings more than 30 years of executive management, corporate legal, intellectual property, compliance, business development and mergers and acquisitions experience to Halozyme, with an extensive background in the biotechnology industry. Prior to joining Halozyme, Mr. Leonhardt was an arbitrator before the International Centre for Dispute Resolution and a consultant in the biotechnology industry from January 2013 to April 2015. He served as Senior Vice President, Legal and Compliance, and Corporate Secretary at Amylin Pharmaceuticals, Inc., a biotechnology company, from September 2011 to January 2013 and previously served in other senior management legal positions at Amylin since September 2007. Prior to Amylin, he served as Senior Vice President, General Counsel and Corporate Secretary at Senomyx, Inc., a company focused on taste receptor technology and the development of novel flavor ingredients for the food and beverage industry, from September 2003 to September 2007. From February 2001 to September 2003, Mr. Leonhardt was Executive Vice President, General Counsel and Corporate Secretary at Genoptix, Inc. and from July 1996 to November 2000, he served as Vice President and then Senior Vice President, General Counsel and Corporate Secretary at Nanogen, Inc. Prior to Nanogen, Mr. Leonhardt held positions of increasing responsibility at Allergan, Inc. including Chief Litigation Counsel and General Counsel for European Operations. Early in his career, he was an attorney at Lyon & Lyon LLP where he represented a number of prominent clients in the biotech, pharmaceutical and consumer products industries. Mr. Leonhardt received a B.S. in Pharmacy from the University of the Sciences and a Juris Doctorate from the University of Southern California School of Law. Item 11. Executive Compensation The information required by this item is incorporated by reference to the information under the caption “Executive Compensation” to be contained in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Other than as set forth below, the information required by this item is incorporated by reference to the information under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” to be contained in the Proxy Statement. Equity Compensation Plan Information The following table summarizes our compensation plans under which our equity securities are authorized for issuance as of December 31, 2015: Plan Category Equity compensation plans approved by stockholders (1) . . . . . . . . . Equity compensation plans not approved by stockholders. . . . . . . . Number of Shares to Be Issued upon Exercise of Outstanding Options and Restricted Stock Units (a) 8,969,113 — 8,969,113 Weighted Average Exercise Price of Outstanding Options and Restricted Stock Units (b) $13.03 (2) — $13.03 Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) (c) 7,440,487 — 7,440,487 _____________________ (1) Represents stock options, restricted stock units, and performance restricted stock units under the Amended and Restated 2011 Stock Plan, 2008 Stock Plan, 2006 Stock Plan, 2005 Outside Directors’ Stock Plan, and 2004 Stock Plan. (2) This amount does not include restricted stock units and performance restricted stock units as there is no exercise price for such units. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the information under the caption “Certain Relationships and Related Transactions” to be contained in the Proxy Statement. 41 Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to the information under the caption “Principal Accounting Fees and Services” to be contained in the Proxy Statement. PART IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of this report. 1. Financial Statements Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets at December 31, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations for Each of the Years Ended December 31, 2015, 2014 and 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Loss for Each of the Years Ended December 31, 2015, 2014 and 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows for Each of the Years Ended December 31, 2015, 2014 and 2013 . . . . Consolidated Statements of Stockholders’ Equity (Deficit) for Each of the Years Ended December 31, 2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page F-1 F-2 F-3 F-4 F-5 F-6 F-7 2. List of all Financial Statement schedules. The following financial statement schedule of Halozyme Therapeutics, Inc. is filed as part of this Annual Report on Form 10-K on page F-32 and should be read in conjunction with the consolidated financial statements of Halozyme Therapeutics, Inc. Schedule II: Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto. 3. List of Exhibits required by Item 601 of Regulation S-K. See part (b) below. (b) Exhibits. The exhibits listed in the accompanying “Exhibit Index” are incorporated herein by reference. (c) Financial Statement Schedules. See Item 15(a) 2 above. 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 29, 2016 Halozyme Therapeutics, Inc., a Delaware corporation By: /s/ Helen I. Torley, M.B. Ch.B., M.R.C.P. Helen I. Torley, M.B. Ch.B., M.R.C.P. President and Chief Executive Officer POWER OF ATTORNEY Know all persons by these presents, that each person whose signature appears below constitutes and appoints Helen I. Torley and Laurie D. Stelzer, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substituted, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Helen I. Torley, M.B. Ch.B., M.R.C.P. Helen I. Torley, M.B. Ch.B., M.R.C.P. President and Chief Executive Officer (Principal Executive Officer), Director February 29, 2016 /s/ Laurie D. Stelzer Laurie D. Stelzer /s/ Kathryn E. Falberg Kathryn E. Falberg /s/ Jean-Pierre Bizzari Jean-Pierre Bizzari /s/ Jeffrey W. Henderson Jeffrey W. Henderson /s/ Kenneth J. Kelley Kenneth J. Kelley /s/ Randal J. Kirk Randal J. Kirk /s/ Connie L. Matsui Connie L. Matsui /s/ Matthew L. Posard Matthew L. Posard Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) February 29, 2016 Chair of the Board of Directors February 29, 2016 Director Director Director Director Director Director February 29, 2016 February 29, 2016 February 29, 2016 February 29, 2016 February 29, 2016 February 29, 2016 43 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Halozyme Therapeutics, Inc. We have audited the accompanying consolidated balance sheets of Halozyme Therapeutics, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity (deficit) for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Halozyme Therapeutics, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.? We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Halozyme Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2016 expressed an unqualified opinion thereon. San Diego, California February 29, 2016 /s/ Ernst & Young LLP F-1 HALOZYME THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketable securities, available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue, current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies (Note 9) Stockholders’ equity: Preferred stock — $0.001 par value; 20,000 shares authorized; no shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock — $0.001 par value; 200,000 shares authorized; 128,152 and 125,721 shares issued and outstanding at December 31, 2015 and 2014, respectively . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ December 31, 2015 December 31, 2014 $ $ $ 43,292 65,047 32,410 9,489 21,534 171,772 3,943 5,574 500 181,789 4,499 26,792 9,304 21,862 62,457 43,919 27,971 4,443 61,389 74,234 9,149 6,406 10,143 161,321 2,951 1,205 500 165,977 3,003 13,961 7,367 — 24,331 47,267 49,860 3,167 — — 128 525,628 (99) (482,658) 42,999 181,789 $ 126 491,694 (41) (450,427) 41,352 165,977 See accompanying notes to consolidated financial statements. F-2 HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Revenues: Product sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenues under collaborative agreements. . . . . . . . . . . . . . . . . . . . . . . . Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Operating expenses: Cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income (expense): Investment and other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic and diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ Year Ended December 31, 2015 2014 2013 46,082 58,000 30,975 135,057 29,245 93,236 40,028 162,509 (27,452) $ $ 37,823 28,086 9,425 75,334 22,732 79,696 35,942 138,370 (63,036) 422 (5,201) (32,231) $ 242 (5,581) (68,375) $ 24,439 30,327 33 54,799 6,246 96,640 32,347 135,233 (80,434) 229 (3,274) (83,479) (0.25) $ (0.56) $ (0.74) Shares used in computing basic and diluted net loss per share . . . . . . . . . . 126,704 122,690 112,805 See accompanying notes to consolidated financial statements. F-3 HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income: Unrealized (loss) gain on marketable securities . . . . . . . . . . . . . . . . . . . . Total comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ Year Ended December 31, 2015 2014 2013 (32,231) $ (68,375) $ (83,479) (58) (32,289) $ (58) (68,433) $ 17 (83,462) See accompanying notes to consolidated financial statements. F-4  HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Operating activities: Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of premiums on marketable securities, net . . . . . . . . . . . . . . Loss on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in operating assets and liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing activities: Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from maturities of marketable securities . . . . . . . . . . . . . . . . . . . Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . Financing activities: Proceeds from issuance of common stock under equity incentive plans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of common stock, net Proceeds from issuance of long-term debt, net . . . . . . . . . . . . . . . . . . . . . . Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . Supplemental disclosure of cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplemental disclosure of non-cash investing and financing activities: Amounts accrued for purchases of property and equipment . . . . . . . . . . . . Capitalized property and liability associated with a build-to-suit lease arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2014 2013 2015 $ (32,231) $ (68,375) $ (83,479) 20,838 1,677 1,243 879 8 (23,261) (3,083) (15,774) — 13,866 (1,411) 166 (37,083) (71,482) 79,730 (2,360) 5,888 13,098 — — 13,098 (18,097) 61,389 43,292 3,775 473 $ $ $ 15,274 1,762 2,025 1,457 233 (52) (236) (265) — (816) 1,490 (15) (47,518) (88,884) 57,301 (1,368) (32,951) 6,788 107,713 — 114,501 34,032 27,357 61,389 3,460 156 $ $ $ 9,538 1,227 156 1,116 — 6,606 (3,499) 1,959 (100) 7,888 9,297 (48) (49,339) (48,947) 3,375 (2,297) (47,869) 5,079 — 19,985 25,064 (72,144) 99,501 27,357 3,099 100 — $ — $ (1,450) $ $ $ $ See accompanying notes to consolidated financial statements. F-5 HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands) Common Stock Shares Amount Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit) BALANCE AT JANUARY 1, 2013. . . . 112,709 $ 113 $ 347,315 $ — $ (298,573) $ Share-based compensation expense . . . . — Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net . . . . . . . . . . . . Issuance of restricted stock awards . . . . Other comprehensive income. . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363 462 — — BALANCE AT DECEMBER 31, 2013 . 114,534 Share-based compensation expense . . . . Issuance of common stock for cash, net. Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net . . . . . . . . . . . . Issuance of restricted stock awards . . . . Other comprehensive loss . . . . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . — 8,846 1,552 789 — — BALANCE AT DECEMBER 31, 2014 . 125,721 Share-based compensation expense . . . . Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units and performance restricted stock units, net . . . . . . . . . . . . Issuance of restricted stock awards . . . . Other comprehensive loss . . . . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,056 375 — — — 1 1 — — 115 — 9 1 1 — — 126 — 2 — — — 9,538 5,078 (1) — — 361,930 15,274 107,704 6,787 (1) — — 491,694 20,838 13,096 — — — — — — 17 — 17 — — — — (58) — (41) — — — (58) — — — — — (83,479) (382,052) — — — — — (68,375) (450,427) — — — — 48,855 9,538 5,079 — 17 (83,479) (19,990) 15,274 107,713 6,788 — (58) (68,375) 41,352 20,838 13,098 — (58) (32,231) (32,231) BALANCE AT DECEMBER 31, 2015 . 128,152 $ 128 $ 525,628 $ (99) $ (482,658) $ 42,999 See accompanying notes to consolidated financial statements. F-6 Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements 1. Organization and Business Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that have the potential to improve cancer patient survival. Our research primarily focuses on human enzymes that alter the extracellular matrix and tumor microenvironment. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies. Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or can be used to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk and cost by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products that combine our technology with the collaborators’ proprietary compounds. The majority of our approved product 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 temporarily breaking down hyaluronan (or HA), a naturally occurring complex carbohydrate that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of 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™ Technology. We license the Enhance Technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or benefiting from injection via the subcutaneous route of administration. We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), and Eli Lilly and Company (Lilly). We receive royalties from two of these collaborations, including royalties from sales of one product approved in both the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of our approved products, product candidates, and ENHANZE collaborations will depend on the ability of Halozyme and our collaborators to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates. Our proprietary development pipeline consists primarily of clinical stage product candidates in oncology. Our lead oncology program is PEGPH20 (PEGylated recombinant human hyaluronidase), a molecular entity we are developing for the systemic treatment of tumors that accumulate HA. When HA accumulates in a tumor, it can cause higher pressure in the tumor, reducing blood flow into the tumor and with that, reduced access of cancer therapies to the tumor. PEGPH20 works by temporarily degrading HA surrounding cancer cells resulting in reduced pressure and increased blood flow to the tumor thereby enabling increased amounts of anticancer treatments administered concomitantly gaining access to the tumor. We are currently in Phase 2 and Phase 3 clinical testing for PEGPH20 in stage IV PDA (Studies 109-202 and 109-301), in Phase 1b clinical testing in non-small cell lung cancer (Study 107-201) and in Phase 1b clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101). Except where specifically noted or the context otherwise requires, references to “Halozyme,” “the Company,” “we,” “our,” and “us” in these notes to consolidated financial statements refer to Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd. and Halozyme Royalty LLC. F-7 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd. and Halozyme Royalty LLC. All intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that 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 ninety days or less from date of purchase. Our cash equivalents consist of money market funds. Marketable securities are investments with original maturities of more than ninety 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 gain (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 consolidated statements of operations. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations. Restricted Cash Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2015 and 2014, 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. Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value. Available-for-sale marketable securities consist of corporate debt securities, commercial paper and certificates of deposit and were measured at fair value using 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 service. We validate the fair values of Level 2 financial instruments provided by our investment manager by comparing these fair values to a third-party pricing source. F-8 The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): December 31, 2015 December 31, 2014 Level 1 Level 2 Total estimated fair value Level 1 Level 2 Total estimated fair value Cash equivalents: Money market funds . . . . . . . . . . $ 38,595 $ — $ 38,595 $ 42,685 $ — $ 42,685 Available-for-sale marketable securities: Corporate debt securities . . . . . . . — 65,047 65,047 — 74,234 74,234 $ 38,595 $ 65,047 $ 103,642 $ 42,685 $ 74,234 $ 116,919 There were no transfers between Level 1 and Level 2 of the fair value hierarchy for the years ended December 31, 2015 and 2014. We have no instruments that are classified within Level 3 as of December 31, 2015 and 2014. Concentrations of Credit Risk, Sources of Supply and Significant Customers We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent balances with one major commercial bank and marketable securities with another financial institution. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet. We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have license and collaborative agreements with pharmaceutical companies under which we receive payments for license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically evaluating the collectibility of the accounts receivable based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2015 and 2014. Approximately 89% of the accounts receivable balance at December 31, 2015 represents amounts due from Roche and Lilly. Approximately 76% of the accounts receivable balance at December 31, 2014 represents amounts due from Roche and Pfizer. The following table indicates the percentage of total revenues in excess of 10% with any single customer: Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AbbVie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Janssen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2015 42% 19% 17% 1% 2014 57% — — 20% 2013 64% — — — F-9 We attribute revenues under collaborative agreements to the individual countries where the collaborator is headquartered. We attribute revenues from product sales to the individual countries to which the product is shipped. Worldwide revenues from external customers are summarized by geographic location in the following table (in thousands): Year Ended December 31, 2015 2014 2013 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 77,149 57,136 772 135,057 $ $ 31,397 42,791 1,146 75,334 $ $ 19,019 35,157 623 54,799 For the years ended December 31, 2015, 2014 and 2013, we had no foreign based operations. As of December 31, 2015 and 2014, we had $0.3 million and $0.4 million, respectively, of research equipment in Germany. We rely on two third-party manufacturers for the supply of bulk rHuPH20 for use in the manufacture of Hylenex recombinant and our other collaboration products and product candidates. Payments due to these suppliers represented 20% and 0% of the accounts payable balance at December 31, 2015 and 2014, respectively. We also rely on a third-party manufacturer for the fill and finish of Hylenex recombinant product under a contract. Payments due to this supplier represented 4% and 6% of the accounts payable balance at December 31, 2015 and 2014, respectively. Accounts Receivable, Net Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks. We recorded no allowance for doubtful accounts at December 31, 2015 and 2014 as the collectibility of accounts receivable was reasonably assured. Inventories Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. Management evaluates 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. Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials. As of December 31, 2015 and 2014, inventories consisted of $1.4 million and $3.0 million of Hylenex recombinant inventory, respectively, and $8.1 million and $3.4 million of bulk rHuPH20, respectively, for use in the manufacture of Balxalta’s and Roche’s collaboration products. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Leased buildings under build- to-suit lease arrangements are capitalized and included in property and equipment when we are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases. F-10 Impairment of Long-Lived Assets We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the year ended December 31, 2015, there was no impairment of the value of long-lived assets. For the year ended December 31, 2014, we recorded an impairment of $0.2 million relating to manufacturing equipment. Deferred Rent Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent in the accompanying consolidated balance sheets. Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources. Revenue Recognition We generate revenues from product sales and payments received under collaborative agreements. Collaborative agreement payments may include nonrefundable fees at the inception of the agreements, license fees, milestone and event-based payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements. We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured. Product Sales, Net 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 provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations (“GPOs”), hospitals and government programs. The wholesalers take title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales. We have developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, we recognize Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers. Upon recognition of revenue from product sales of Hylenex recombinant, we record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include: Product Returns. We allow the wholesalers to return product that is damaged or received in error. In addition, we accept unused product to be returned beginning six months prior to and ending twelve months following product expiration. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of historical return patterns. • Distribution Fees. The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers. • Prompt Payment Discounts. We offer cash discounts to certain wholesalers as an incentive to meet certain payment terms. We estimate prompt payment discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates. • Other Discounts and Fees. We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase products from the wholesalers at a contracted discounted price, and the wholesalers then charge back to us the difference between the current retail price and the price the end-users paid for the product. We also incur GPO administrative service fees for these transactions. In addition, we provide predetermined discounts under certain government programs. Our estimate for these chargebacks and fees takes into consideration contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates. F-11 Allowances for product returns and chargebacks are based on amounts owed or to be claimed on the related sales. We believe that our estimated product returns for Hylenex recombinant requires a high degree of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyzed many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities of the wholesalers as well as their customers and (3) levels of inventory in the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We consider the dating of product at the time of shipment into the distribution channel and changes in the estimated levels of inventory within the distribution channel to estimate our exposure to returned product. We also consider historical chargebacks activity and current contract prices to estimate our exposure to returned product. Based on such data, we believe we have the information needed to reasonably estimate product returns and chargebacks. We recognize product sales allowances as a reduction of product sales in the same period the related revenue is recognized. 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. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments. Bulk rHuPH20 Subsequent to receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries, sales of bulk rHuPH20 for use in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer’s acceptance and title and risk of loss have transferred to the customer. Following the receipt of European marketing approvals of Roche’s Herceptin SC product in August 2013 and MabThera® SC product in March 2014 and Baxalta’s HYQVIA product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products has been recognized as product sales. For the years ended December 31, 2015 and 2014, we recognized $22.8 million and $23.5 million in product sales of bulk rHuPH20 for Roche’s collaboration products, respectively. For the years ended December 31, 2015 and 2014, we recognized $6.4 million and zero in product sales of bulk rHuPH20 for Baxalta’s collaboration product, respectively. Revenues under Collaborative Agreements We have license and collaboration agreements under which the collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of the collaborators’ biologic compounds identified as targets. The collaborative agreements may also contain other elements. Pursuant to the terms of these agreements, collaborators could be required to make various payments to us for each target, including nonrefundable upfront license fees, exclusivity fees, payments based on achievement of specified milestones designated in the collaborative agreements, annual maintenance fees, reimbursements of research and development services, payments for supply of bulk rHuPH20 for the collaborator and/or royalties on sales of products resulting from collaborative agreements. In order to account for the multiple-element arrangements, we identify the deliverables included within the agreement and evaluate which deliverables represent units of accounting. We then determine the appropriate method of revenue recognition for each unit based on the nature and timing of the delivery process. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. We base this determination on the collaborators’ ability to use the delivered items on their own without us supplying undelivered items, which we determine taking into consideration factors such as the research capabilities of the collaborator, the availability of research expertise in this field in the general marketplace, and the ability to procure the supply of bulk rHuPH20 from the market place. Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are not contingent upon the delivery of additional items or meeting other specified performance conditions. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement. F-12 Nonrefundable upfront license fees are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, our price to the collaborator is fixed or determinable and collectibility is reasonably assured. Upfront license fees are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period. When collaborators have rights to elect additional targets, the rights are assessed as to whether they represent deliverables at the inception of the arrangement. In assessing these contingent deliverables, we consider whether the right is a substantive option. We consider a right to be a substantive option if the election of the additional targets is not essential to the functionality of the other elements in the arrangement and if we are truly at risk of the right being exercised. If the right is determined to be a substantive option, we further consider whether the right is priced at a significant and incremental discount that should be accounted for as an element of the arrangement. If a right is determined to be a substantive option and is not priced at a significant and incremental discount, it is not treated as a deliverable in the arrangement and receives no allocation at the inception of the arrangement of the original arrangement consideration. The right is then accounted for when and if it is exercised. Certain of our collaborative agreements provide for milestone payments upon achievement of development and regulatory events and/or specified sales volumes of commercialized products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method (“Milestone Method of Accounting”). We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria: 1. The consideration is commensurate with either the entity’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone; 2. The consideration relates solely to past performance; and 3. The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the vendor. Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Revenue from the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator’s acceptance and title and risk of loss have transferred to the collaborator. We do not directly control when any collaborator will request research and development services or supply of bulk rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20. Since we receive royalty reports 60 days after quarter end, royalty revenue from sales of collaboration products by our collaborators will be recognized in the quarter following the quarter in which the corresponding sales occurred. The collaborative agreements typically provide the collaborators the right to terminate such agreement in whole or on a product-by-product or target-by-target basis at any time upon 30 to 90 days prior written notice to us. There are no performance, cancellation, termination or refund provisions in any of our collaborative agreements that contain material financial consequences to us. Refer to Note 4, “Collaborative Agreements,” for further discussion on our collaborative arrangements. 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 for use in approved collaboration products. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of any inventories that do not meet certain product specifications, if any. Prior to European marketing approvals of Roche’s collaboration products Herceptin SC in August 2013 and MabThera SC in March 2014 and Baxalta’s collaboration product HYQVIA in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development expenses in the periods such costs were incurred. F-13 Therefore, cost of product sales of these bulk rHuPH20 for the year ended December 31, 2013 was materially reduced due to the exclusion of the manufacturing costs that were charged to research and development expenses in the periods prior to receiving marketing approvals. For the year ended December 31, 2014, cost of product sales of bulk rHuPH20 excluded $1.0 million in manufacturing costs, of which $0.9 million and $0.1 million were charged to research and development expenses in the years ended December 31, 2013 and 2012, respectively. There was no bulk rHuPH20 excluded from cost of product sales for the year ended December 31, 2015. Research and Development Expenses Research and development expenses include salaries and benefits, facilities and other overhead expenses, external clinical trial expenses, research related manufacturing services, contract services and other outside expenses. Research and development expenses are charged to operations as incurred when these expenditures relate to our research and development efforts and have no alternative future uses. After receiving approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases and manufacturing of bulk rHuPH20 for such product are capitalized as inventory. The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, incurred after the receipt of marketing approvals are capitalized as inventory. 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. Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic value are expensed as research and development costs at the time the costs are incurred. We have no in-licensed technologies that have alternative future uses in research and development projects or otherwise. Clinical Trial Expenses Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. Payments under these contracts depend on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones. Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we modify our accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, we have had no changes in clinical trial expense accruals that had a material impact on our consolidated results of operations or financial position. Share-Based Compensation We record compensation expense associated with stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and RSUs with performance conditions (“PRSUs”) 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, net of estimated forfeitures, over the requisite service period of the award. Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. 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. Share-based compensation expense recognition is based on awards ultimately expected to vest and is reduced for estimated forfeitures. The authoritative guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 10% for employees for the years ended December 31, 2015, 2014 and 2013 based on our historical experience for the years then ended. F-14 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 and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. Valuation allowances have been established to reduce our net deferred tax assets to zero, as we believe that it is more likely than not that such assets will not be realized. Net Loss Per Share Basic net loss per common share is computed by dividing net loss 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 and unvested PRSUs 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. Because of our net loss, outstanding stock options, unvested RSAs, unvested RSUs and unvested PRSUs totaling approximately 9,780,593, 8,405,903 and 8,070,141 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2015, 2014 and 2013, respectively, because their effect was anti-dilutive. PRSUs for which the performance conditions were satisfied or probable of being satisfied were included in potentially dilutive securities at December 31, 2015 and 2014. Segment Information We operate our business in one segment, which includes all activities related to the research, development and commercialization of our proprietary enzymes. 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. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment. Adoption and Pending Adoption of Recent Accounting Pronouncements In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 supersedes the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. An entity’s equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of ASU 2016-01. ASU 2016-01 requires public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with Topic 820, Fair Value Measurement. ASU 2016-01 is effective for our interim and annual reporting beginning on January 1, 2018. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of ASU 2016-01. We currently do not hold equity securities and we are evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. In November 2015, the FASB issued Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 requires companies to classify all deferred tax assets and liabilities as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts. For public business entities, the guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all companies in any interim or annual period. The guidance may be adopted on either a prospective or retrospective basis. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that for entities that measure inventory using the first-in, first- out method, inventory should be measured at the lower of cost and net realizable value. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 is not expected to have a material impact on our consolidated financial position or results of operations. F-15 In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The adoption of ASU 2015-03 is not expected to have a material impact on our consolidated financial position or results of operations. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements — Going Concern (“ASU 2014-15”). The provisions of ASU 2014-15 provide that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our consolidated financial position or results of operations. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 will eliminate transaction-specific and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. ASU 2014-09 also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for our interim and annual reporting beginning on January 1, 2018. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. 3. Marketable Securities Available-for-sale marketable securities consisted of the following (in thousands): Description December 31, 2015 Gross Unrealized Gains Gross Unrealized Losses Amortized Cost Estimated Fair Value Corporate debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,146 $ — $ (99) $ 65,047 Description Corporate debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2014 Gross Unrealized Gains Gross Unrealized Losses Amortized Cost Estimated Fair Value $ 74,275 $ 2 $ (43) $ 74,234 As of December 31, 2015, $59.0 million of our available-for-sale marketable securities were scheduled to mature within the next twelve months. There were $79.7 million of available-for-sale securities that matured during the year ended December 31, 2015. There were no realized gains or losses for the years ended December 31, 2015, 2014 and 2013. As of December 31, 2015, all available-for-sale marketable securities were in a gross unrealized loss position, all of which had been in such position for less than twelve months. Based on our review of these marketable securities, we believe we had no other-than-temporary impairments on these securities as of December 31, 2015 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. F-16 4. Collaborative Agreements Roche Collaboration In December 2006, we and Roche entered into a collaboration and license agreement, under which Roche obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds (the “Roche Collaboration”). As of December 31, 2015, Roche has elected a total of five targets, two of which are exclusive, and retains the option to develop and commercialize rHuPH20 with three additional targets. In August 2013, Roche received European marketing approval for its collaboration product, Herceptin SC, for the treatment of patients with HER2-positive breast cancer and launched Herceptin SC in the European Union (“EU”) in September 2013. In March 2014, Roche received European marketing approval for its collaboration product, MabThera SC, for the treatment of patients with common forms of non-Hodgkin lymphoma (“NHL”). In June 2014, Roche launched MabThera SC in the EU which triggered a $5.0 million sales-based payment to us for the achievement of the first commercial sale pursuant to the terms of the Roche Collaboration. Roche assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Roche Collaboration, while we are responsible for the supply of bulk rHuPH20. We are entitled to receive reimbursements for providing research and development services and supplying bulk rHuPH20 to Roche at its request. Under the terms of the Roche Collaboration, Roche pays us a royalty on each product commercialized under the agreement consisting of a mid-single digit percent of the net sales of such product. Unless terminated earlier in accordance with its terms, the Roche Collaboration continues in effect until the expiration of Roche’s obligation to pay royalties. Roche has the obligation to pay royalties to us with respect to each product commercialized in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the Roche Collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. As of December 31, 2015, we have received $79.0 million from Roche, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20. The amounts received consisted of a $20.0 million upfront license fee payment for the application of rHuPH20 to the initial three Roche exclusive targets, $23.0 million in connection with Roche’s election of two additional exclusive targets and annual license maintenance fees for the right to designate the remaining targets as exclusive targets, $13.0 million in clinical development milestone payments, $8.0 million in regulatory milestone payments and $15.0 million in sales-based payments. Due to our continuing involvement obligations (for example, support activities associated with rHuPH20), revenues from the upfront payment, exclusive designation fees, annual license maintenance fees and sales-based payments were deferred and are being amortized over the remaining term of the Roche Collaboration. For the years ended December 31, 2015, 2014 and 2013, we recognized approximately $4.5 million, $8.1 million, and $4.6 million, respectively, of Roche deferred revenues as revenues under collaborative agreements. In addition, for the years ended December 31, 2015, 2014 and 2013, we recognized approximately zero, $2.0 million and $1.3 million, respectively, of deferred bulk rHuPH20 sales revenue as product sales revenue. Total Roche deferred revenues was approximately $43.5 million and $42.7 million as of December 31, 2015 and 2014, respectively. There were no revenues recognized related to milestone payments under this collaboration for the years ended December 31, 2015, 2014 and 2013. Baxalta Collaboration In September 2007, we and Baxalta entered into a collaboration and license agreement, under which Baxalta obtained a worldwide, exclusive license to develop and commercialize HYQVIA, a combination of Baxalta’s current product GAMMAGARD LIQUID™ and our patented rHuPH20 enzyme (the “Baxalta Collaboration”). In May 2013, the European Commission granted Baxalta marketing authorization in all EU Member States for the use of HYQVIA (solution for subcutaneous use), a combination of GAMMAGARD LIQUID and rHuPH20 in dual vial units, as replacement therapy for adult patients with primary and secondary immunodeficiencies. Baxalta launched HYQVIA in the EU in July 2013. In September 2014, the FDA approved HYQVIA for treatment of adult patients with primary immunodeficiency. In October 2014, Baxalta announced the launch and first shipments of HYQVIA in the U.S. The Baxalta Collaboration is applicable to both kit and formulation combinations. Baxalta assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Baxalta Collaboration, while we are responsible for the supply of bulk rHuPH20. We perform research and development activities and supply bulk rHuPH20 at the request of Baxalta, and are reimbursed by Baxalta under the terms of the Baxalta Collaboration. In addition, Baxalta has certain product development and commercialization obligations in major markets identified in the Baxalta Collaboration. F-17 Unless terminated earlier in accordance with its terms, the Baxalta Collaboration continues in effect until the expiration of Baxalta’s obligation to pay royalties to us. Baxalta has the obligation to pay royalties, with respect to each product commercialized in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the Baxalta Collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. As of December 31, 2015, we have received $17.0 million under the Baxalta Collaboration, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20. The amounts received consisted of a $10.0 million upfront license fee payment, a $3.0 million regulatory milestone payment and a $4.0 million sales-based payment. Baxalta pays us a royalty on HYQVIA consisting of a mid-single digit percent of the net sales of such product. Due to our continuing involvement obligations (for example, support activities associated with rHuPH20 enzyme), the upfront license fee and sales- based payments were deferred and are being recognized over the term of the Baxalta Collaboration. For the years ended December 31, 2015, 2014 and 2013, we recognized approximately $0.8 million, $0.8 million, and $0.6 million, respectively, of Baxalta deferred revenues as revenues under collaborative agreements. In addition, for the year ended December 31, 2015, we recognized approximately $1.7 million of deferred bulk rHuPH20 sales revenue as product sales revenue, with no such revenues recognized in the years ended December 31, 2014 and 2013. Total Baxalta deferred revenues was approximately $9.0 million and $10.9 million as of December 31, 2015 and 2014, respectively. There were no revenues recognized related to milestone payments under this collaboration for the years ended December 31, 2015, 2014 and 2013. Other Collaborations In December 2015, we and Eli Lilly and Company (“Lilly”) entered into a collaboration and license agreement, under which Lilly has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with Lilly proprietary biologics directed at up to five targets (the “Lilly Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2015, we have recognized $25.0 million as revenue for the license fee of one specified exclusive target and one specified semi-exclusive target. Lilly has the right to elect up to three additional targets for additional fees. The upfront license payment may be followed by event-based payments subject to Lilly’s achievement of specified development, regulatory and sales-based milestones. In addition, Lilly will pay tiered royalties if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the Lilly Collaboration continues in effect until the later of: (i) 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, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Lilly Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Lilly may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 90 days prior written notice to us. Upon any such termination, the license granted to Lilly (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non- exclusive and fully paid. In June 2015, we and AbbVie, Inc. (“AbbVie”) entered into a collaboration and license agreement, under which AbbVie has the worldwide license to develop and commercialize products combining our patented rHuPH20 enzyme with AbbVie proprietary biologics directed at up to nine targets (the “AbbVie Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2015, we have received a $23.0 million payment for the license fee of one specified exclusive target, TNF alpha. AbbVie has announced plans to develop rHuPH20 with adalimumab (HUMIRA®) which may allow reduced number of induction injections and deliver additional performance benefits. AbbVie has the right to elect up to eight additional targets for additional fees. The upfront license payment may be followed by event-based payments subject to AbbVie’s achievement of specified development, regulatory and sales-based milestones. In addition, AbbVie will pay tiered royalties if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the AbbVie Collaboration continues in effect until the later of: (i) 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, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the AbbVie Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. AbbVie may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 90 days prior written notice to us. Upon any such termination, the license granted to AbbVie (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid. F-18 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 patented rHuPH20 enzyme with Janssen proprietary biologics directed at up to five targets (the “Janssen Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2015, we have received a $15.0 million payment for the license fee of one specified exclusive target, CD38. Janssen has the right to elect four additional targets in the future upon payment of additional fees. Unless terminated earlier in accordance with its terms, the Janssen Collaboration continues in effect until the later of (i) 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, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Janssen Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Janssen may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 90 days prior written notice to us. Upon any such termination, the license granted to Janssen (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid. 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 patented rHuPH20 enzyme with Pfizer proprietary biologics directed at up to six targets (the “Pfizer Collaboration”). Targets may be selected on an exclusive or non-exclusive basis. As of December 31, 2015, we have received $11.0 million in upfront and license fee payments for the licenses to four specified exclusive targets. One of the targets is proprotein convertase subtilisin/kexin type 9, also known as PCSK9. Pfizer is also developing rivipansel directed to another target under the collaboration to treat vaso-occlusive crisis in individuals with sickle cell disease. Pfizer has the right to elect two additional targets in the future upon payment of additional fees. Unless terminated earlier in accordance with its terms, the Pfizer Collaboration continues in effect until the later of (i) 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, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Pfizer Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Pfizer may terminate the agreement prior to expiration for any reason in its entirety or on a target- by-target basis upon 30 days prior written notice to us. Upon any such termination, the license granted to Pfizer (in total or with respect to the terminated target, as applicable) will terminate, provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid. At the inception of the Pfizer, Janssen, AbbVie and Lilly arrangements, we identified the deliverables in each arrangement to include the license, research and development services and supply of bulk rHuPH20. We have determined that the license, research and development services and supply of bulk rHuPH20 individually represent separate units of accounting, because each deliverable has standalone value. We determined that the rights to elect additional targets in the future upon the payment of additional license fees are substantive options that are not priced at a significant and incremental discount. Therefore, we determined for each collaboration that the rights to elect additional targets are not deliverables at the inception of the arrangement. The estimated selling prices for the units of accounting we identified were determined based on market conditions, the terms of comparable collaborative arrangements for similar technology in the pharmaceutical and biotech industry and entity-specific factors such as the terms of our previous collaborative agreements, our pricing practices and pricing objectives. The arrangement consideration was allocated to the deliverables based on the relative selling price method and the nature of the research and development services to be performed for the collaborator. The amount allocable to the delivered unit or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (non-contingent amount). As such, we excluded from the allocable arrangement consideration the event-based payments, milestone payments, annual exclusivity fees and royalties regardless of the probability of receipt. Based on the results of our analysis, we allocated the $11.0 million license fees from Pfizer, the $15.0 million upfront license fee from Janssen, the $23.0 million upfront license fee from AbbVie and the $25.0 million upfront license fee from Lilly to the license fee deliverable under each of the arrangements. We determined that the upfront payments were earned upon the granting of the worldwide, exclusive right to our technology to the collaborators in these arrangements. As a result, we recognized the $11.0 million license fees under the Pfizer Collaboration, the $15.0 million upfront license fee under the Janssen Collaboration, the $23.0 million upfront license fee under the AbbVie Collaboration and the $25.0 million upfront license fee under the Lilly Collaboration as revenues under collaborative agreements in the period when such license fees were earned. Revenues recognized related to event-based payments or milestone payments under these collaborations were $1.0 million, $0 and $0 for the years ended December 31, 2015, 2014 and 2013. F-19 The collaborators are each solely responsible for the development, manufacturing and marketing of any products resulting from their respective collaborations. We are entitled to receive payments for research and development services and supply of bulk rHuPH20 to these collaborators if requested by such collaborator. We recognize amounts allocated to research and development services as revenues under collaborative agreements as the related services are performed. We recognize amounts allocated to the sales of bulk rHuPH20 as revenues under collaborative agreements when such bulk rHuPH20 has met all required specifications by the collaborators and the related title and risk of loss and damages have passed to the collaborators. We cannot predict the timing of delivery of research and development services and bulk rHuPH20 as they are at the collaborators’ requests. In May 2011 and June 2011, we entered into collaboration and license agreements with ViroPharma Incorporated and Intrexon Corporation, respectively. These collaboration agreements were terminated effective May 2014. Pursuant to the terms of our collaboration agreements with Roche and Pfizer, certain future payments meet the definition of a milestone in accordance with the Milestone Method of Accounting. We are entitled to receive additional milestone payments for the successful development of the elected targets in the aggregate of up to approximately $54.0 million upon achievement of specified clinical development milestone events and up to approximately $12.0 million upon achievement of specified regulatory milestone events in connection with specified regulatory filings and receipt of marketing approvals. 5. Certain Balance Sheet Items Accounts receivable, net consisted of the following (in thousands): December 31, 2015 December 31, 2014 Accounts receivable from revenues under collaborative agreements . . . . . . . . . . . . . . . . . Accounts receivable from product sales to collaborators . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable from other product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for distribution fees and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Inventories consisted of the following (in thousands): $ 25,939 $ 4,996 2,442 33,377 (967) 32,410 $ 1,266 6,361 2,133 9,760 (611) 9,149 Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work-in-process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 677 $ 8,481 331 9,489 $ 553 5,207 646 6,406 December 31, 2015 December 31, 2014 Prepaid expenses and other assets consisted of the following (in thousands): December 31, 2015 December 31, 2014 Prepaid manufacturing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less long-term portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total prepaid expenses and other assets, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 16,155 9,225 1,198 530 27,108 5,574 21,534 $ $ 6,339 2,380 1,094 1,535 11,348 1,205 10,143 F-20 Property and equipment, net consisted of the following (in thousands): December 31, 2015 December 31, 2014 Research equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer and office equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 9,666 2,570 2,025 14,261 (10,318) 3,943 $ $ 8,474 2,178 1,518 12,170 (9,219) 2,951 Depreciation and amortization expense was approximately $1.7 million, $1.8 million and $1.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. Accrued expenses consisted of the following (in thousands): December 31, 2015 December 31, 2014 Accrued outsourced research and development expenses. . . . . . . . . . . . . . . . . . . . . . . . . . Accrued compensation and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued outsourced manufacturing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less long-term accrued outsourced research and development expenses. . . . . . . . . . . . . . $ $ 8,617 8,636 6,205 4,118 27,576 784 Total accrued expenses, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,792 $ 4,383 5,923 2,112 2,023 14,441 480 13,961 Long-term accrued outsourced research and development is included in other long-term liabilities in the consolidated balance sheets. Deferred revenue consisted of the following (in thousands): Collaborative agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 53,223 — 53,223 9,304 $ 43,919 $ 53,479 1,155 54,634 7,367 47,267 December 31, 2015 December 31, 2014 6. Long-Term Debt, Net In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”), amending and restating in its entirety our original loan agreement with the Lenders, dated December 2012. The Loan Agreement provided for an additional $20 million principal amount of new term loan, bringing the total term loan balance to $50 million. The proceeds are to be used for working capital and general business requirements. The amended term loan facility matures on January 1, 2018. In January 2015, we entered into the second amendment to the Loan Agreement with the Lenders, amending and restating the loan repayment schedules of the Loan Agreement. The amended and restated term loan repayment schedule provides for interest only payments through January 2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date of January 2018. Consistent with the original loan, the Loan Agreement provides for a 7.55% interest rate on the term loan and a final interest payment equal to 8.5% of the original principal amount, or $4.25 million, which is due when the term loan becomes due or upon the prepayment of the facility. We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1%. In December 2015, we entered into a consent, release and third amendment to the Loan Agreement with the Lenders, in which the Lenders consent to (i) the formation of Halozyme Royalty LLC (“Halozyme Royalty”) as a wholly-owned Subsidiary F-21 of Halozyme, (ii) the release of liens and the sale of certain rights to receive royalty payments to Halozyme Royalty, and (iii) enter into a Credit Agreement with BioPharma Credit Investments IV Sub, LP., (“BioPharma”), as collateral agent and lender, and the other lenders party, whereby Halozyme Royalty will incur indebtedness from and grant liens on the royalty payments to BioPharma. This amendment allowed us to enter into a royalty-backed debt agreement. Refer to Note 15, “Subsequent Event”, for further information on our royalty-backed debt agreement. In connection with the term loan, the debt offering costs have been recorded as a debt discount in our condensed consolidated balance sheets which, together with the final payment and fixed interest rate payments, are being amortized and recorded as interest expense throughout the life of the term loan using the effective interest rate method. The amended term loan is secured by substantially all of the assets of the Company and our subsidiary, Halozyme, Inc., except that the collateral does not include any equity interests in Halozyme, Inc., any of our intellectual property (including all licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our subsidiary, Halozyme, Inc. The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. In the event of default by us under the Loan 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 Loan Agreement, which could harm our financial condition. As of December 31, 2015, we were in compliance with all material covenants under the Loan Agreement and there was no material adverse change in our business, operations or financial condition. Future maturities and interest payments under the term loan as of December 31, 2015, are as follows (in thousands): 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total minimum payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross balance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less unamortized debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, less current portion and unamortized debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 25,077 27,013 6,501 — — 58,591 (8,591) 50,000 (167) 49,833 (21,862) 27,971 Interest expense, including amortization of debt discount, related to the long-term debt for the years ended December 31, 2015, 2014 and 2013 was approximately $5.2 million, $5.6 million and $3.3 million, respectively. Accrued interest, which is included in accrued expenses and other long-term liabilities, was $3.2 million and $2.0 million as of December 31, 2015 and December 31, 2014, respectively. F-22 7. Stockholders’ Equity During 2015, we issued an aggregate of 1,926,368 shares of common stock, in connection with the exercises of stock options for cash in the aggregate amount of approximately $14.4 million. In addition, we issued 375,019 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs. We issued 82,069 shares of common stock upon vesting of RSUs. The RSU holders surrendered 52,019 RSUs to pay for minimum withholding taxes totaling approximately $0.7 million. We issued 47,454 shares of common stock upon vesting of PRSUs. The PRSU holders surrendered 35,926 PRSUs to pay for minimum withholding taxes totaling approximately $0.6 million. During 2014, we issued an aggregate of 1,432,206 shares of common stock in connection with the exercises of stock options for cash in the aggregate amount of approximately $7.8 million. In addition, we issued 789,345 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 120,043 shares of common stock upon vesting of certain RSUs. The RSU holders surrendered 74,325 RSUs to pay for minimum withholding taxes totaling approximately $1.0 million. In February 2014, we completed an underwritten public offering and issued 8,846,153 shares of common stock, including 1,153,846 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter. All of the shares were offered at a public offering price of $13.00 per share, generating approximately $107.7 million in net proceeds. 8. Equity Incentive Plans We currently grant stock options, restricted stock awards and restricted stock units under the Amended and Restated 2011 Stock Plan (“2011 Stock Plan”), which provides for the grant of up to 19.5 million shares of common stock (subject to certain limitations as described in the Amended and Restated 2011 Stock Plan) to selected employees, consultants and non-employee members of our Board of Directors (“Outside Directors”) as stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards. The 2011 Stock Plan was approved by the stockholders. Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors. During the year ended December 31, 2015, we granted share-based awards under the 2011 Stock Plan. At December 31, 2015, 8,969,113 shares were subject to outstanding awards and 7,440,487 shares were available for future grants of share-based awards. At the present time, management intends to issue new common shares upon the exercise of stock options, issuance of restricted stock awards and settlement of restricted stock unit awards and performance awards. Total share-based compensation expense related to share-based awards was comprised of the following (in thousands): Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2015 2014 2013 $ $ 9,795 11,043 20,838 $ $ 7,939 7,335 15,274 $ $ 4,476 5,062 9,538 Share-based compensation expense by type of share-based award (in thousands): Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RSAs, RSUs and PRSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2015 11,145 9,693 20,838 $ $ 2014 2013 $ $ 7,884 7,390 15,274 $ $ 5,499 4,039 9,538 F-23 Total unrecognized estimated compensation expense by type of award and the weighted average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted): Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RSAs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RSUs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PRSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ 31,058 5,531 4,795 79 Unrecognized Expense Remaining Weighted Average Recognition Period (years) 3.0 2.3 2.5 1.1 December 31, 2015 Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for options exercised (excess tax benefits) are classified as cash inflows provided by financing activities and cash outflows used in operating activities. Due to our net loss position, no tax benefits have been recognized in the consolidated statements of cash flows. Stock Options. Options granted under the Plans must have an exercise price equal to at least 100% of the fair market value of our common stock on the date of grant. The options will generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans). A summary of our stock option award activity as of and for the years ended December 31, 2015, 2014 and 2013 is as follows: Shares Underlying Stock Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at January 1, 2013 . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . Vested and expected to vest at December 31, 2015 . . . . . Exercisable at December 31, 2015 . . . . . . . . . . . . . . . . . . 6,379,867 1,806,392 (1,270,362) (214,982) 6,700,915 2,271,143 (1,432,206) (1,185,960) 6,353,892 3,973,604 (1,926,368) (407,936) 7,993,192 7,313,178 2,839,265 $6.59 $7.14 $4.34 $8.18 $7.11 $13.02 $5.43 $9.39 $9.18 $16.26 $7.49 $10.64 $13.03 $12.77 $9.15 7.8 7.7 5.9 $38.9 million $37.1 million $23.2 million The weighted average grant date fair values of options granted during the years ended December 31, 2015, 2014 and 2013 were $9.60 per share, $8.13 per share and $4.40 per share, respectively. The fair value of options vested during the years ended December 31, 2015, 2014 and 2013 was approximately $6.2 million, $4.8 million and $3.9 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was approximately $16.2 million, $8.1 million and $8.3 million, respectively. Cash received from stock option exercises for the years ended December 31, 2015, 2014 and 2013 was approximately $14.4 million, $7.8 million and $5.5 million, respectively. F-24 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”) that uses the assumptions noted in the following table. 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 by us. Assumptions used in the Black-Scholes model were as follows: Year Ended December 31, 2015 2014 2013 Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66.2-67.4% 66.6-71.8% 70.1-72.5% 5.6 1.34-1.92% 5.7 1.73-2.04% 5.7 0.86-2.00% 0% 0% 0% Restricted Stock Awards. RSAs are grants that entitle the holder to acquire shares of our common stock at zero or a fixed price, which is typically nominal. The shares covered by a RSA cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by us for the original purchase price following the awardee’s termination of service. The RSAs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. Annual grants of RSAs to Outside Directors typically vest in full the first day the awardee may trade our stock in compliance with our insider trading policy following the date immediately preceding the first annual meeting of stockholders following the grant date. The following table summarizes our RSA activity during the years ended December 31, 2015, 2014 and 2013: Unvested at January 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unvested at December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unvested at December 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unvested at December 31, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of Shares 382,320 476,096 (211,178) (14,367) 632,871 1,055,122 (263,765) (265,777) 1,158,451 515,695 (721,990) (140,676) 811,480 Weighted Average Grant Date Fair Value $10.21 $6.88 $8.78 $8.17 $8.23 $11.15 $8.33 $10.86 $10.26 $15.00 $10.11 $11.84 $13.13 The estimated fair value of the RSAs was based on the market value of our common stock on the date of grant. The total grant date fair value of RSAs vested during the years ended December 31, 2015, 2014 and 2013 was approximately $7.3 million, $2.2 million and $1.9 million, respectively. The total intrinsic value of RSAs vested during the years ended December 31. 2015, 2014, 2013, was approximately $13.9 million, $3.0 million and $1.5 million, respectively. F-25 Restricted Stock Units. A RSU is a promise by us to issue a share of our common stock upon vesting of the unit. The RSUs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. The following table summarizes our RSU activity during the years ended December 31, 2015, 2014 and 2013: Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (yrs) Aggregate Intrinsic Value Number of Shares Unvested at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . . 682,146 323,700 (154,124) (115,367) 736,355 305,535 (194,368) (385,200) 462,322 422,492 (134,088) (84,512) 666,214 $10.61 $6.69 $10.41 $9.76 $9.06 $13.71 $9.12 $8.84 $11.12 $14.75 $10.93 $10.86 $13.49 2.5 $11.5 million The estimated fair value of the RSUs was based on the market value of our common stock on the date of grant. The total grant date fair value of RSUs vested during the years ended December 31, 2015, 2014 and 2013 was approximately $1.5 million, $1.8 million and $1.6 million, respectively. The total intrinsic value of RSUs vested during the years ended December 31, 2015, 2014 and 2013 was approximately $1.8 million, $2.6 million and $1.1 million, respectively. Performance Restricted Stock Units. A PRSU is a promise by us to issue a share of our common stock upon achievement of a specific performance condition. The following table summarizes our PRSU activity during the years ended December 31, 2015 and 2014: Outstanding at January 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . . Number of Shares Weighted Average Grant Date Fair Value — — $ Weighted Average Remaining Contractual Term (yrs) Aggregate Intrinsic Value 540,742 $ — (109,504) $ $ 431,238 $ 118,209 (83,380) $ (156,360) $ $ 309,707 8.91 — 8.91 8.91 11.19 9.48 9.21 9.48 1.1 $ 5.4 million The estimated fair value of the PRSUs was based on the market value of our common stock on the date of grant. The total grant date fair value and intrinsic value of PRSUs vested during the year ended December 31, 2015 was approximately $0.8 million and $1.4 million, respectively. F-26 9. Commitments and Contingencies Operating Leases Our administrative offices and research facilities are located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research space in four buildings. The leases commenced in June 2011 and November 2013 and continue through January 2018. The leases are subject to approximately 2.5% to 3.0% annual increases throughout the terms of the leases. We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes. We received incentives under the leases, including tenant improvement allowances and reduced or free rent, for which the unamortized deferred rent balances associated with these incentives was $0.8 million and $1.0 million as of December 31, 2015 and 2014, respectively. In November 2015, we opened a satellite office in South San Francisco, California. We lease approximately 10,000 square feet of office space. The lease commenced in November 2015 and continues through January 2021. The lease is subject to approximately 3.0% annual increases throughout the term of the lease. We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes. We received incentives under the lease, including tenant improvement allowances and reduced or free rent, for which the unamortized deferred rent balances associated with these incentives was $0.4 million as of December 31, 2015. Additionally, we lease certain office equipment under operating leases. Total rent expense was approximately $1.9 million, $1.9 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. Approximate annual future minimum operating lease payments as of December 31, 2015 are as follows (in thousands): Year: 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Operating Leases 2,539 2,606 507 413 426 36 Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,527 Other Commitments In order to scale up the production of bulk rHuPH20 and to identify another manufacturer that would help meet anticipated production obligations arising from our proprietary programs and our collaborations, we entered into a Technology Transfer Agreement and a Clinical Supply Agreement with Cook Pharmica LLC (“Cook”). The technology transfer was completed in 2008. In 2009, multiple batches of bulk rHuPH20 were produced to support planned future clinical studies. In March 2010, we entered into a Commercial Supply Agreement with Cook (the “Cook Commercial Supply Agreement”). Under the terms of the Cook Commercial Supply Agreement, Cook will manufacture certain batches of bulk rHuPH20 that will be used for commercial supply of certain products and product candidates. Under the terms of the Cook Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to four quarters of forecasted supply. At December 31, 2015, we had a $5.7 million minimum purchase obligation in connection with the Cook Commercial Supply Agreement. In March 2010, we entered into a second Commercial Supply Agreement with Avid (the “Avid Commercial Supply Agreement”). Under the terms of the Avid Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in the collaboration products. At December 31, 2015, we had a $30.2 million minimum purchase obligation in connection with this agreement. In June 2011, we entered into a services agreement with another third party manufacturer for the technology transfer and manufacture of Hylenex recombinant. At December 31, 2015, we had a $0.9 million minimum purchase obligation in connection with this agreement. Contingencies We have entered into an in-licensing agreement with a research organization, which is cancelable at our option with 90 days written notice. Under the terms of this agreement, we have received license to know-how and technology claimed, in certain patents or patent applications. We are required to pay fees, milestones and/or royalties on future sales of products employing the technology or falling under claims of a patent, and some of the agreements require minimum royalty payments. We continually reassess the F-27 value of the license agreement. If the in-licensed and research candidate is successfully developed, we may be required to pay milestone payments of approximately $9.3 million over the life of this agreement in addition to royalties on sales of the affected products. One of the milestone payments of $1.3 million is due upon the first dosing of a patient in our Phase 3 study of PEGPH20, which is expected to occur at the end of the first quarter of 2016. Due to the uncertainties of the development process, the timing and probability of the remaining milestone and royalty payments cannot be accurately estimated. Legal Contingencies From time to time, we may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of our business. Any of these claims could subject us to costly legal expenses and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations or financial position. 10. Income Taxes Significant components of our net deferred tax assets at December 31, 2015 and 2014 are shown below (in thousands). A valuation allowance of $182.5 million and $179.0 million has been established to offset the net deferred tax assets as of December 31, 2015 and 2014, respectively, as realization of such assets is uncertain. Deferred tax assets: Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research and development credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance for deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets, net of valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2015 2014 $ 104,505 $ 120,707 16,344 54,846 6,286 906 182,887 (182,507) 380 (380) (380) 18,034 34,146 5,381 891 179,159 (178,965) 194 (194) (194) — Net deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (in thousands): December 31, 2015 2014 2013 Federal income tax at 34% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State income tax, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . Increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign income subject to tax at other than federal statutory rate . . . . . Tax effect on non-deductible expenses and other. . . . . . . . . . . . . . . . . . Research and development credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (10,804) $ 5,526 3,897 14,945 6,042 (19,606) (23,247) $ (1,761) 16,998 12,747 540 (5,277) $ — $ — $ (28,383) (1,745) 33,525 — 5,219 (8,616) — At December 31, 2015, we had federal and California tax net operating loss carryforwards of approximately $320.0 million and $329.0 million, respectively. Included in these amounts are federal and California net operating losses of approximately $49.1 million and $34.2 million, respectively, attributable to stock option, RSA, RSU, and PRSU deductions for which the tax benefit F-28 will be credited to equity when realized. The federal tax net operating loss carryforwards will begin to expire in 2018, unless previously utilized. The California tax net operating loss carryforwards will expire in 2016, 2017 and 2028 and beyond in the amounts of $13.1 million, $10.4 million and $302.0 million, respectively. At December 31, 2015, we also had federal and California research and development tax credit carryforwards of approximately $28.0 million and $15.1 million, respectively. The federal research and development tax credits will begin to expire in 2024 unless previously utilized. The California research and development tax credits will carryforward indefinitely until utilized. Additionally, we had Orphan Drug Credit carryforwards of $16.9 million which will begin to expire in 2024. Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of June 30, 2014. Based upon the analysis, we determined that ownership changes occurred in prior years. However, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards. At December 31, 2015, our unrecognized income tax benefits and uncertain tax positions were $4.9 million and would not, if recognized, affect the effective tax rate. We had no such unrecognized income tax benefits or uncertain tax positions at December 31, 2014. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2015, 2014 and 2013, we recognized no interest or penalties. We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. At December 31, 2015 and 2014, there were no undistributed earnings in the foreign subsidiary. We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 1998 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits. 11. Employee Savings Plan We have an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to participate, provided they meet the requirements of the plan. We are not required to make matching contributions under the plan. However, we voluntarily contributed to the plan approximately $0.7 million, $0.7 million and $0.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. 12. Related Party Transactions In June 2011, we and Intrexon entered into the Intrexon Collaboration, under which Intrexon obtained a worldwide exclusive license for the use of rHuPH20 enzyme in the development of a subcutaneous injectable formulation of Intrexon’s recombinant human alpha 1-antitrypsin (rHuA1AT). The Intrexon Collaboration was terminated in May 2014. Intrexon’s chief executive officer and chairman of its board of directors, Randal J. Kirk, is also a member of our Board of Directors. The collaborative arrangement with Intrexon was reviewed and approved by our Board of Directors in accordance with our related party transaction policy. For the years ended December 31, 2015 and 2014, we recognized zero in revenue under collaborative agreements pursuant to the terms of the Intrexon Collaboration. In December 2013, we recognized $1.0 million in revenue under collaborative agreements pursuant to the terms of the Intrexon Collaboration. 13. Restructuring Expense In November 2014, we completed a corporate reorganization to focus our resources on advancing our PEGPH20 oncology proprietary program and ENHANZE collaborations. This reorganization resulted in a reduction in the workforce of approximately 13%, primarily in research and development. We recorded approximately $1.2 million of severance pay and benefits expense in connection with the reorganization, of which $1.1 million and $0.1 million was included in research and development expense and selling, general and administrative expense, respectively, in the consolidated statement of operations for the year ended December 31, 2014. No other restructuring charges were incurred. We made cash payments of $0.7 million related to the restructuring expense for the year ended December 31, 2014. As of December 31, 2014, the restructuring liability was approximately $0.5 million and was included in current accrued expenses. The restructuring liability was paid in full during the three months ended March 31, 2015. F-29 14. Summary of Unaudited Quarterly Financial Information The following is a summary of our unaudited quarterly results for the years ended December 31, 2015 and 2014 (in thousands): 2015 (Unaudited): March 31, June 30, September 30, December 31, Quarter Ended Total revenues(1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit on product sales . . . . . . . . . . . . . . . . . . . . . Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares used in computing net income (loss) per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 (Unaudited): Total revenues(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit on product sales . . . . . . . . . . . . . . . . . . . . . Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss per share, basic and diluted . . . . . . . . . . . . . . . Shares used in computing basic and diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______________ $ $ $ $ $ $ $ $ $ $ $ 18,666 $ $ 3,366 32,577 $ (15,108) $ 43,384 4,198 39,153 3,019 (0.12) $ (0.12) $ 0.02 0.02 $ $ $ $ $ $ 20,780 $ $ 4,121 44,017 $ (24,460) $ 52,227 5,152 46,762 4,318 (0.19) $ (0.19) $ 0.03 0.03 125,299 125,299 126,144 134,507 126,921 126,921 127,197 129,248 March 31, June 30, September 30, December 31, Quarter Ended 11,966 3,048 $ $ 37,185 $ (26,548) $ (0.22) $ 18,385 3,570 $ $ 33,325 $ (16,273) $ (0.13) $ 14,606 4,476 $ $ 33,632 $ (20,280) $ (0.16) $ 30,377 3,997 34,228 (5,274) (0.04) 118,943 123,710 124,041 124,272 (1) Revenues for the quarter ended June 30, 2015 included $23.0 million in revenue under collaborative agreements from the AbbVie Collaboration. (2) Revenues for the quarter ended December 31, 2015 included $25.0 million in revenue under collaborative agreements from the Lilly Collaboration. (3) Revenues for the quarter ended December 31, 2014 included $15.0 million in revenue under collaborative agreements from the Janssen Collaboration. F-30 15. Subsequent Event In January 2016, through our subsidiary Halozyme Royalty, we received a $150 million loan (the “Royalty-backed Loan”) pursuant to a credit agreement (the “Credit Agreement”) with BioPharma Credit Investments IV Sub, LP and Athyrium Opportunities II Acquisition LP (the “Royalty-backed Lenders”). Under the terms of the Credit Agreement, Halozyme Therapeutics, Inc. transfered to Halozyme Royalty the right to receive certain royalty payments from the commercial sales of Herceptin SC, MabThera SC and HYQVIA. The royalty payments from the collaboration agreements will be used to repay the principal and interest on the loan (the “Royalty Payments”). The loan bears interest at a per annum rate of 8.75% plus the three-month LIBOR rate. The three-month LIBOR rate is subject to a floor of 0.7% and a cap of 1.5%. Quarterly Royalty Payments from Baxalta and Roche will first be applied to pay (i) escrow fees payable by Halozyme, (ii) certain expenses incurred by the Royalty-backed Lenders in connection with the Credit Agreement and related transaction documents, including enforcement of their rights under the Credit Agreement and (iii) expenses incurred by Halozyme enforcing the right to indemnification under the collaboration and license agreements with Roche and Baxalta (“License Agreements”). The Credit Agreement provides that none of the remaining Royalty Payments are required to be applied to the Royalty-backed Loan prior to January 1, 2017, 50% of the remaining Royalty Payments are required to be applied to the Royalty-backed Loan between January 1, 2017 and January 1, 2018 and thereafter all remaining Royalty Payments must be applied to the Royalty-backed Loan. Additionally, the amounts available to repay the Royalty-backed Loan are subject to caps of $13.75 million per quarter in 2017, $18.75 million per quarter in 2018, $21.25 million per quarter in 2019 and $22.5 million per quarter in 2020 and thereafter. Amounts available to repay the Royalty-backed Loan will be applied first, to pay interest and second, to repay principal on the Royalty-backed Loan. Any accrued interest that is not paid on any applicable quarterly payment date will be capitalized and added to the principal balance of the Royalty-backed Loan. Halozyme Royalty will be entitled to receive and distribute to Halozyme any Royalty Payments that are not required to be applied to the Royalty-backed Loan or which are in excess of the foregoing caps. The final maturity date of the Royalty-backed Loan will be the earlier of (i) the date when principal and interest is paid in full, (ii) the termination of Halozyme Royalty’s right to receive royalties under the License Agreements, and (iii) December 31, 2050. Under the terms of the Credit Agreement, at any time after January 1, 2019, Halozyme Royalty may, subject to certain limitations, prepay the outstanding principal of the Royalty-backed Loan in whole or in part, at a price equal to 105% of the outstanding principal on the Royalty-backed Loan, plus accrued but unpaid interest. The Royalty-backed Loan constitutes an obligation of Halozyme Royalty, and is non-recourse to Halozyme. F-31 Halozyme Therapeutics, Inc. Schedule II Valuation and Qualifying Accounts (in thousands) Balance at Beginning of Period Additions Deductions Balance at End of Period For the year ended December 31, 2015 Accounts receivable allowances (1) . . . . . . . . . . . . . . . . . . For the year ended December 31, 2014 Accounts receivable allowances (1) . . . . . . . . . . . . . . . . . . For the year ended December 31, 2013 Accounts receivable allowances (1) . . . . . . . . . . . . . . . . . . $ $ $ _______________ 611 610 178 $ $ $ 4,150 4,520 2,979 $ $ $ (3,794) $ (4,519) $ (2,547) $ 967 611 610 (1) Allowances are for chargebacks, prompt payment discounts and distribution fees related to Hylenex recombinant product sales. F-32 Exhibit Index Exhibit Title Herewith Form File No. Date Filed Incorporated by Reference Filed Composite Certification of Incorporation Certificate of Designation, Preferences and Rights of the terms of the Series A Preferred Stock Bylaws, as amended Amended Rights Agreement between Corporate Stock Transfer, as rights agent, and Registrant, dated November 12, 2007 License Agreement between University of Connecticut and Registrant, dated November 15, 2002 10-Q 001-32335 8/7/2013 8-K 001-32335 11/20/2007 8-K 001-32335 12/12/2011 10-K 001-32335 3/14/2008 SB-2 333-114776 4/23/2004 First Amendment to the License Agreement between University of Connecticut and Registrant, dated January 9, 2006 8-K 001-32335 1/12/2006 Halozyme Therapeutics, Inc. 2005 Outside Directors’ Stock Plan 8-K 001-32335 7/6/2005 Form of Stock Option Agreement (2005 Outside Directors’ Stock Plan) Form of Restricted Stock Agreement (2005 Outside Directors’ Stock Plan) 10-Q 001-32335 8/8/2006 10-Q 001-32335 8/8/2006 Halozyme Therapeutics, Inc. 2006 Stock Plan 8-K 001-32335 3/24/2006 Form of Stock Option Agreement (2006 Stock Plan) 10-Q 001-32335 8/8/2006 Form of Restricted Stock Agreement (2006 Stock Plan) 10-Q 001-32335 8/8/2006 Halozyme Therapeutics, Inc. 2008 Stock Plan 8-K 001-32335 3/19/2008 Exhibit Number 3.1 3.2 3.3 4.1 10.1 10.2 10.3# 10.4# 10.5# 10.6# 10.7# 10.8# 10.9# 10.10# Form of Stock Option Agreement (2008 Stock Plan) 10-Q 001-32335 8/7/2009 10.11# Form of Restricted Stock Agreement (2008 Stock Plan) 10-Q 001-32335 8/7/2009 10.12# Halozyme Therapeutics, Inc. 2008 Outside Directors’ Stock Plan 8-K 001-32335 3/19/2008 10.13# Form of Restricted Stock Agreement (2008 Outside Directors’ Stock Plan) 10-Q 001-32335 8/7/2009 Exhibit Number 10.14# Exhibit Title Herewith Form File No. Date Filed Halozyme Therapeutics, Inc. 2011 Stock Plan (as amended through May 6, 2015) 10-Q 001-32335 8/10/2015 Incorporated by Reference Filed 10.15# Form of Stock Option Agreement (2011 Stock Plan) 10.16# 10.17# 10.18# Form of Stock Option Agreement for Executive Officers (2011 Stock Plan) Form of Restricted Stock Units Agreement for Officers (2011 Stock Plan) Form of Restricted Stock Award Agreement for Officers (2011 Stock Plan) 10.19# Form of Restricted Stock Units Agreement (2011 Stock Plan) 10.20# Form of Restricted Stock Award Agreement (2011 Stock Plan) 10.21# 10.22# 10.23# Form of Stock Option Agreement (2011 Stock Plan -grants made on or after 11/4/2015) Form of Restricted Stock Units Agreement (2011 Stock Plan - grants made on or after 11/4/2015) Form of Restricted Stock Award Agreement (2011 Stock Plan - grants made on or after 11/4/2015) 8-K 8-K 001-32335 5/6/2011 001-32335 5/6/2011 10-Q 001-32335 8/10/2015 10-Q 001-32335 8/10/2015 8-K 8-K 001-32335 5/6/2011 001-32335 5/6/2011 10-Q 001-32335 11/9/2015 10-Q 001-32335 11/9/2015 10-Q 001-32335 11/9/2015 10.24# Form of Indemnity Agreement for Directors and Executive Officers 8-K 001-32335 12/20/2007 10.25# Severance Policy 10.26# Form of Amended and Restated Change In Control Agreement with Officer 10-Q 001-32335 5/9/2008 10-K 001-32335 11/9/2015 10.27 Lease (11404 and 11408 Sorrento Valley Road) 8-K 001-32335 6/16/2011 10.28 10.29 10.30 10.31 10.32 10.33 Amended and Restated Lease (11388 Sorrento Valley Road), effective as of June 10, 2011 8-K 001-32335 6/16/2011 Lease (11436 Sorrento Valley Road), effective as of April 2013 10-K 001-32335 2/28/2013 First modification to Lease (11436 Sorrento Valley Road) 10-Q 001-32335 5/8/2013 Amended and Restated Loan and Security Agreement, dated December 27, 2013 Consent and First Amendment to Amended and Restated Loan and Security Agreement, dated June 10, 2014 Second Amendment to Amended and Restated Loan and Security Agreement, dated January 23, 2015 10-K 001-32335 2/28/2014 10-Q 001-32335 8/11/2014 10-K 001-32335 3/2/2015 Exhibit Title Herewith Form File No. Date Filed Incorporated by Reference Filed Exhibit Number 10.34 10.35* 21.1 23.1 31.1 31.2 32 Consent, Release and Third Amendment to Amended and Restated Loan and Security Agreement, dated December 28, 2015 Credit Agreement, dated December 30, 2015 Subsidiaries of Registrant Consent of Independent Registered Public Accounting Firm Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Presentation Linkbase _______________ X X X X X X X X X X X X X * # Confidential treatment has been granted (or requested) for certain portions of this exhibit. These portions have been omitted from this agreement and have been filed separately with the Securities and Exchange Commission. Indicates management contract or compensatory plan or arrangement. This page intentionally left blank This page intentionally left blank This page intentionally left blank CORPORATE INFORMATION BOARD OF DIRECTORS EXECUTIVE TEAM GENERAL INFORMATION Jean-Pierre Bizzari, M.D. Former Executive Vice President Clinical Development Celgene Corporation James M. Daly Former Executive Vice President and Chief Commercial Officer, Incyte Corporation Kathryn E. Falberg Chairman of the Board, Halozyme Therapeutics Jeffrey W. Henderson Former Chief Financial Officer of Cardinal Health Director, FibroGen, Inc. and Qualcomm Inc. Kenneth J. Kelley Advanced Leadership Fellow, Harvard University Randal J. Kirk Chairman and Chief Executive Officer, Intrexon Senior Managing Director and Chief Executive Officer, Third Security, LLC. Connie L. Matsui Former Executive Vice President, Knowledge and Innovation Networks, Biogen Idec Matthew L. Posard Executive Vice President and Chief Commercial Officer, Trovagene, Inc. Helen Torley, M.B. Ch.B., M.R.C.P President and Chief Executive Officer, Halozyme Therapeutics Helen Torley, M.B. Ch.B., M.R.C.P President and Chief Executive Officer, Corporate Headquarters 11388 Sorrento Valley Road San Diego, CA 92121 858-794-8889 Outside Counsel DLA Piper LLP (U.S.) San Diego, California Independent Auditors Ernst & Young LLP San Diego, California Transfer Agent Corporate Stock Transfer, Inc. 3200 Cherry Creek Drive South, Suite 430 Denver, Colorado 80209 303-282-4800 Form 10-K Annual Report Each Stockholder may receive without charge a copy of the Annual Report on form 10-K filed with the Securities and Exchange Commission by written request addressed to Investor Relations at the address provided. Stock Listing Halozyme Therapeutics, Inc. common stock trades on the Nasdaq Stock Market under the symbol HALO. Halozyme Therapeutics Athena M. Countouriotis, M.D. Senior Vice President & Chief Medical Officer William J. Fallon Vice President, CMC Operations Sunil Joshi Vice President & Global Product Team Lead, Oncology Michael J. LaBarre, Ph.D. Vice President and Chief Scientific Officer Harry J. Leonhardt, Esq. Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary Jim S. Mazzola Vice President, Corporate Communication and Investor Relations Michael E. Paolucci Vice President, Alliances and Human Capital Kenneth A. Schultz, M.D. Vice President of Innovation, Strategy & Business Development Laurie D. Stelzer Senior Vice President and Chief Financial Officer Kristina Vlaovic Vice President of Regulatory & Safety SAFE HARBOR STATEMENT This Annual Report contains forward-looking statements regarding our products in development, anticipated clinical, regulatory and commercial milestones, business intentions, financial conditions and results of operations and prospects and other statements concerning future matters. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” 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 the Annual Report. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, unexpected adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company’s reports on Forms 10-K, 10-Q, and other filings with the Securities and Exchange Commission. Halozyme Therapeutics, Inc. 11388 Sorrento Valley Road San Diego, California 92121 Main 858.794.8889 Fax 858.704.8311 www.halozyme.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 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 (State or other jurisdiction of incorporation or organization) 11388 Sorrento Valley Road, San Diego, California (Address of principal executive offices) 88-0488686 (I.R.S. Employer Identification No.) 92121 (Zip Code) (858) 794-8889 (Registrant’s Telephone Number, Including Area Code) Securities registered under Section 12(b) of the Act: Title of Each Class Common Stock, $0.001 Par Value Name of Each Exchange on Which Registered The NASDAQ Stock Market, LLC Securities registered under Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     x   Yes         ¨   No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     ¨   Yes         x   No Indicate by check mark whether the 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.     x   Yes         ¨   No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     x   Yes         ¨   No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K.   o                      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company ” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ¨   Yes         x     No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2015 was approximately $2.4 billion based on the closing price on the NASDAQ Global Select Market reported for such date. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 22, 2016 , there were 129,061,401 shares of the registrant’s common stock issued, $0.001 par value per share, and outstanding. Portions of the registrant’s definitive Proxy Statement to be filed subsequent to the date hereof with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant’s 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report. DOCUMENTS INCORPORATED BY REFERENCE               Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Table of Contents PART I PART II Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Item 9. Item 9A. Item 9B. Item 10. Item 11. Item 12. Item 13. Item 14. Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation PART III Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Item 15. Exhibits, Financial Statement Schedules SIGNATURES PART IV Page 1 14 29 29 30 30 31 33 34 44 44 44 44 47 47 48 48 49 49 50 51                   This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the “safe harbor” provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. All statements, other than statements of historical fact, included herein, including without limitation those regarding our future product development and regulatory events and goals, product collaborations, our business intentions and financial estimates and anticipated results, are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,” “continue,” “potential,” “likely,” “opportunity” 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 Annual Report. Additionally, statements concerning future matters such as the development or regulatory approval of new products, enhancements of existing products or technologies, third party performance under key collaboration agreements, revenue and expense levels and other statements regarding matters that are not historical are forward-looking statements. Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” in Part I, Item 1A below, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual 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 Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. References to “Halozyme,” “the Company,” “we,” “us,” and “our” refer to Halozyme Therapeutics, Inc. and its wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd. and Halozyme Royalty LLC. References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (refer to Part II, Item 8). Item 1. Business Overview PART I Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that have the potential to improve cancer patient survival. Our research primarily focuses on human enzymes  that  alter  the extracellular  matrix  and tumor  microenvironment.  The extracellular  matrix  is a complex  matrix  of proteins  and carbohydrates surrounding  the  cell  that  provides  structural  support  in  tissues  and  orchestrates  many  important  biological  activities,  including  cell  migration,  signaling  and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies. Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or can be used to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk and cost by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products that combine our technology with the collaborators’ proprietary compounds. 1 The majority of our approved product 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  temporarily  breaking  down  hyaluronan  (or  HA),  a naturally  occurring  complex  carbohydrate  that  is  a  major  component  of  the  extracellular  matrix  in  tissues  throughout  the  body  such  as  skin  and  cartilage.  We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of 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 ™ Technology. 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. We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), and Eli Lilly and Company (Lilly). We receive royalties from two of these collaborations, including royalties from sales of one product approved in both the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of  our  approved  products,  product  candidates,  and  ENHANZE  collaborations  will  depend  on  the  ability  of  Halozyme  and  our  collaborators  to  develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates. Our  proprietary  development  pipeline  consists  primarily  of  clinical  stage  product  candidates  in  oncology.  Our  lead  oncology  program  is  PEGPH20 (PEGylated  recombinant  human  hyaluronidase),  a  molecular  entity  we  are  developing  for  the  systemic  treatment  of  tumors  that  accumulate  HA.  When  HA accumulates  in  a  tumor,  it  can  cause  higher  pressure  in  the  tumor,  reducing  blood  flow  into  the  tumor  and  with  that,  reduced  access  of  cancer  therapies  to  the tumor.  PEGPH20  works  by  temporarily  degrading  HA  surrounding  cancer  cells  resulting  in  reduced  pressure  and  increased  blood  flow  to  the  tumor  thereby enabling  increased  amounts  of  anticancer  treatments  administered  concomitantly  gaining  access  to  the  tumor.  We  are  currently  in  Phase  2 and  Phase  3 clinical testing  for  PEGPH20  in  stage  IV  pancreatic  ductal  adenocarcinoma  (PDA)  (Studies  109-202  and  109-301),  in  Phase  1b  clinical  testing  in  non-small  cell  lung cancer (Study 107-201) and in Phase 1b clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101). Our principal offices and research facilities are located at 11388 Sorrento Valley Road, San Diego, California 92121. Our telephone number is (858) 794- 8889 and our e-mail address is info@halozyme.com . Our website address is www.halozyme.com . Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. Our periodic and current reports that we filed with the SEC are available on our website at www.halozyme.com ,  free  of  charge,  as  soon  as  reasonably  practicable  after  we  have  electronically  filed  such  material  with,  or  furnished  them  to,  the  SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. Further copies of these reports are located at the SEC’s Public Reference Room at 100 F Street, N.W., Washington, D.C. 20549, and online at http://www.sec.gov . Technology rHuPH20 can be applied as a drug delivery platform to increase dispersion and absorption of other injected drugs and fluids that are injected under the skin or in the muscle thereby potentially enhancing efficacy or convenience. For example, rHuPH20 has been used to convert drugs that must be delivered intravenously into  subcutaneous  injections  or  to  reduce  the  number  of  subcutaneous  injections  needed  for  effective  therapy.  When  ENHANZE  Technology  is  applied subcutaneously, the rHuPH20 acts locally and has a tissue half-life of less than 15 minutes. HA at the local site reconstitutes its normal density within a few days and, therefore, we anticipate that any effect of rHuPH20 on the architecture of the subcutaneous space is temporary. Additionally, we are expanding our scientific work to develop other enzymes and agents that target the extracellular matrix’s unique aspects, giving rise to potentially new molecular entities with a particular focus on oncology. We are developing a PEGylated version of the rHuPH20 enzyme (PEGPH20), that lasts for an extended period in the bloodstream (half-life of one to two days), and may therefore better target solid tumors that accumulate HA by degrading the surrounding HA and reducing the interstitial fluid pressure within malignant tumors to allow better penetration by co-administered agents. 2 Strategy During 2015, we continued our strategy of focusing on developing our PEGPH20 product candidate for oncology as well as entering into new collaborations for ENHANZE Technology. This business model allows for growth in which revenue garnered from collaboration products helps fund our investment in PEGPH20 clinical development, with the goal of a future product approval that will support sustained growth. Key aspects of our corporate strategy include the following: • • Focus  on  developing  PEGPH20,  our  investigational  new  drug  candidate,  in  multiple  different  tumors  that  accumulate  high  levels  of  HA. PEGPH20  is  in  Phase  2  and  Phase  3  development  in  stage  IV  PDA  and  in  Phase  1b  development  in  non-small  cell  lung  cancer  and  gastric cancer.  Over time,  it is our goal to study additional  types of cancer  and to advance  this program  toward regulatory  approval  and commercial launch. Focus  on  ENHANZE  collaborations.  We  currently  have  six  collaborations  with  three  current  product  approvals  and  additional  product candidates  in  development.  We  intend  to  work  with  our  existing  collaborators  to  expand  our  collaborations  to  add  new  targets  and  product candidates  under  the  terms  of  the  operative  agreements.  In  addition,  we  will  continue  our  efforts  to  enter  into  new  collaborations  to  further exploit and derive additional value from our proprietary technology. 3 Product and Product Candidates We  have  one  marketed  proprietary  product  and  one  proprietary  product  candidate  targeting  several  indications  in  various  stages  of  development.  The following table summarizes our proprietary product and product candidate as well as products and product candidates under development with our collaborators: 4 Proprietary Pipeline Hylenex Recombinant (hyaluronidase human injection) Hylenex recombinant is a formulation of rHuPH20 that has received FDA approval to facilitate subcutaneous fluid administration for achieving hydration, to increase 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. PEGPH20 We  are  developing  PEGPH20  as  a  candidate  for  the  systemic  treatment  of  tumors  that  accumulate  HA  in  combination  with  currently  approved  cancer therapies. ‘PEG’ refers to the attachment of polyethylene glycol to rHuPH20, thereby creating PEGPH20. One of the novel properties of PEGPH20 is that it lasts for an extended duration in the bloodstream and, therefore, can be administered systemically to maintain its therapeutic effect to treat disease. Cancer malignancies, including pancreatic, lung, breast, gastric, colon and prostate cancers can accumulate high levels of HA and therefore we believe that PEGPH20 has the potential to help patients with these types of cancer when used with currently approved cancer therapies. Among solid tumors, PDA has been reported  to  be  associated  with  the  highest  frequency  of  HA  accumulation.  Approximately  90,000  patients  in  the  United  States  and  the  European  Union  will  be diagnosed with PDA in 2016. The  pathologic  accumulation  of  HA,  along  with  other  matrix  components,  creates  a  unique  microenvironment  for  the  growth  of  tumor  cells  compared  to normal  cells.  We  believe  that  depleting  the  HA  component  of  the  tumor  microenvironment  with  PEGPH20 remodels  the  tumor  microenvironment,  resulting  in tumor growth inhibition in animal models. Removal of HA from the tumor microenvironment results in expansion of previously constricted blood vessels allowing increased  blood  flow,  potentially  increasing  the  access  of  activated  immune  cells  and  factors  in  the  blood  into  the  tumor  microenvironment.  If  PEGPH20  is administered in conjunction with other anti-cancer therapies, the increase in blood flow may allow anti-cancer therapies to have greater access to the tumor, which may enhance the treatment effect of therapeutic modalities like chemotherapies, monoclonal antibodies and other agents. Study Halo 109-201 : In  January  2015,  we  presented  the  final  results  from  Study  109-201,  a  multi-center,  international  open  label  dose  escalation  Phase  1b  clinical  study  of PEGPH20  in  combination  with  gemcitabine  for  the  treatment  of  patients  with  stage  IV  PDA  at  the  2015  Gastrointestinal  Cancers  Symposium  (also  known  as ASCO-GI meeting). This study enrolled 28 patients with previously untreated stage IV PDA. Patients were treated with one of three doses of PEGPH20 (1.0, 1.6 and 3.0 µg/kg twice weekly for four weeks, then weekly thereafter) in combination with gemcitabine 1000 mg/m2 administered intravenously. In this study, the confirmed overall response rate (complete response + partial response confirmed on a second scan as assessed by an independent radiology review) was 29 percent (7 of 24 patients) for those treated at therapeutic dose levels of PEGPH20 (1.6 and 3.0 µg/kg). Median progression-free survival (PFS) was 154 days (95% CI, 50- 166) in the efficacy-evaluable population (n = 24). Among efficacy-evaluable patients with baseline tumor HA staining (n = 17), the median PFS in patients with high baseline tumor HA staining (6/17 patients) was substantially longer, 219 days, than in the patients with low baseline tumor HA staining (11/17 patients), 108 days.  Median  overall  survival  (OS)  was  200  days  (95%  CI,  123-370)  in  the  efficacy-evaluable  population  (n  =  24).  Among  efficacy-evaluable  patients  with baseline tumor HA staining (n = 17), the median OS in patients with high baseline tumor HA staining (6/17 patients) was substantially longer, 395 days, than in the patients with low baseline tumor HA staining (11/17 patients), 174 days. The most common treatment-emergent adverse events (occurring in ≥ 15% of patients) were peripheral edema, muscle spasms, thrombocytopenia, fatigue, myalgia, anemia, and nausea. Thromboembolic (TE) events were reported in 8 patients (28.6%) and musculoskeletal events were reported in 21 patients (75%) which were generally grade 1/2 in severity. Study Halo 109-202 : In the second quarter of 2013, we initiated Study 109-202, a Phase 2 multicenter  randomized clinical  trial evaluating PEGPH20 as a first-line  therapy for patients with stage IV PDA. The study was designed to enroll patients who would receive gemcitabine and nab-paclitaxel (ABRAXANE ® ) either with or without PEGPH20. The primary endpoint is to measure the improvement in PFS in patients receiving PEGPH20 plus gemcitabine and nab-paclitaxel compared to those who are receiving gemcitabine and nab-paclitaxel alone. In April 2014, after 146 patients had been enrolled, the trial was put on clinical hold by Halozyme and the 5 FDA to assess a question raised by the Data Monitoring Committee regarding a possible difference in the TE events rate between the group of patients treated with PEGPH20, nab-paclitaxel and gemcitabine (PAG arm) versus the group of patients treated with nab-paclitaxel and gemcitabine without PEGPH20 (AG arm). This portion of the study and patients in this portion are now referred to as Stage 1. It should be noted that at the time of the clinical hold all patients remaining in the study continued on gemcitabine and nab-paclitaxel. In July 2014, the Study 109-202 was reinitiated (Stage 2) under a revised protocol, which excludes patients that are expected to be at a greater risk for TE events. The revised protocol provides for thromboembolism prophylaxis of all patients in both arms of the study with low molecular weight heparin, and adds evaluation of the TE events rate in Stage 2 PEGPH20-treated patients as a co-primary end point. Stage 2 of Study 109-202 enrolled an additional 133 patients, to add to the 146 patients already accrued in the clinical trial, with a 2:1 randomization for PAG compared to AG. We project to present mature PFS data and overall response rate in the fourth quarter of 2016. In May 2015, interim findings from the ongoing Phase 2 clinical study of PEGPH20 for the potential treatment of patients with stage IV PDA were presented at the American Society of Clinical Oncology annual meeting. The trial included 135 treated patients in Stage 1, of whom a total of 44 patients -- 23 receiving PEGPH20 in combination with ABRAXANE ® and gemcitabine (PAG treatment arm) and 21 receiving ABRAXANE and gemcitabine alone (AG treatment arm) -- had available biopsies that were determined utilizing the Halozyme prototype HA assay in a retrospective analysis to have high levels of hyaluronan. PEGPH20 targets HA to help improve cancer therapy access to tumor cells. Results reported include: • • • • A more than doubling of median PFS of 9.2 months versus 4.3 months in high-HA patients treated with PAG vs. AG (hazard ratio of 0.39; p-value of 0.05); A more than doubling of overall response rate of 52 percent versus 24 percent (p-value of 0.038) and a duration of response of 8.1 months compared to 3.7 months in high-HA patients treated with PAG versus AG; In the 30 high-HA patients (15 PAG treatment arm versus 15 AG treatment arm) who were evaluated for response prior to the April 2014 clinical hold and subsequent PEGPH20 treatment discontinuation, the overall response rate was 73 percent versus 27 percent (p-value of 0.01), respectively, consistent with findings presented in January; A trend toward improvement in median overall survival of 12 months compared to 9 months in high-HA patients treated with PAG versus AG (hazard ratio of 0.62) despite discontinuation of PEGPH20 in more than half of the PAG-treated patients at the time of the clinical hold in April 2014. Data was also presented on the rate of TE events in 55 patients treated in Stage 2 of the trial, which is currently randomizing patients at a 2:1 ratio of PAG versus AG. As noted above, Stage 2 began after a protocol amendment in July 2014, excluding patients at high risk of TE events and adding prophylaxis with low molecular weight heparin (enoxaparin) to all patients in both treatment arms. Reported results included a TE event rate of 13% in 38 patients treated with PAG versus 18% in 17 patients receiving AG. We and the Data Monitoring Committee for Study 109-202 continue to closely monitor the occurrence of TE events in enrolled patients after the revision to the protocol. The revised protocol includes pre-specified analyses to evaluate the rate of TE events. While the pre-specified TE event rate analysis established in the protocol at the time of the clinical hold in 2014 have been passed, the continuation of Study 202 may be halted again if the FDA determines that imbalances in safety findings, including TE events, occur, or for any other emergent safety concerns. In  March  2015,  we  met  with  the  FDA  to  discuss  both  the  interim  efficacy  and  safety  data  from  Study  109-202,  which  included  the  potential  risk  profile including TE event rate. Based on the feedback from that meeting, we proceeded with a Phase 3 clinical study (Study 109-301) of PEGPH20 in patients with stage IV  PDA,  using  a  design  allowing  for  potential  marketing  application  based  on  either  PFS  or  overall  survival.  The  study  will  enroll  patients  whose  tumors accumulate high levels of HA using a companion diagnostic test. The FDA provided feedback on the current companion diagnostic approach and confirmed that an approved companion diagnostic strategy is required for Phase 3 related tumor biopsy. 6 The use of PFS as the basis for marketing  approval will be subject to the overall  benefit  and risk associated  with PEGPH20 combined with nab-paclitaxel (ABRAXANE ® ) and gemcitabine therapy, including the: • Magnitude of the PFS treatment effect observed; • • Toxicity profile; and Interim overall survival data. In June 2015, we received scientific advice/protocol assistance from the European Medicines Agency (EMA) regarding our Phase 3 study. The EMA agreed to  the  patient  population,  and  the  use  of  both  PFS  and  OS  as  co-primary  endpoints  stating  that  OS  is  the  preferred  endpoint  and  that  ultimate  approval  would require an overall positive benefit:risk balance. In  January  2016,  an  update  on  the  Stage  1  PFS  data  utilizing  the  companion  diagnostic  that  is  currently  in  development  with  Ventana  Medical  Systems (Ventana) was presented. In a total of 43 high-HA patients, the data continued to show an improvement in median PFS when patients with high HA received PAG compared to AG (9.2 months compared to 6.3 months respectively); hazard ratio of 0.48 (95% CI: 0.16, 1.48). In addition, the overall response rate in the PAG treated patients was 55% (12 out of 22 patients) compared to 33% (7 out of 21 patients), which was not statistically significant. A modest improvement in median overall survival was seen in the PAG-treated high-HA patients. PEGPH20 was discontinued in over 40% of patients in the new companion diagnostic analysis due to the clinical hold in April 2014. We remain blinded to the efficacy results and project to present mature PFS and overall response rate from Stage 2 of Study 202 in  the  fourth  quarter  of  2016.  For  the  secondary  primary  endpoint  of  the  rate  of  TE  events,  we  have  passed  the  pre-specified  analyses  for  TE  events  and  are continuing with the Data Monitoring Committee to monitor the rate of TE events since implementing low-molecular weight heparin (LMWH) prophylaxis. Additionally, an update on the rate of TE events in the PEGPH20 treatment arm in Stage 2 of Study 202 was provided. Reported results included a TE event rate with LMWH prophylaxis of 12% in 73 patients treated with PAG versus 9% in 34 patients receiving AG, and for those treated with 1mg/kg/day of LMWH, a TE event rate of 7% in 55 patients treated with PAG versus 4% in 27 patients receiving AG. We also reported an update on the development of the companion diagnostic. Halozyme has partnered with Ventana to develop the companion diagnostic and announced the methodology and scoring algorithm have been finalized. Based on the cutpoint for the Ventana diagnostic, we now expect approximately 35 to 40 percent  of  stage  IV  PDA  patients  to  have  high-HA  tumors,  similar  to  the  previously  reported  interim  results  from  Stage  1  of  Study  202  using  the  Halozyme prototype assay. In February 2016, our partner Ventana submitted an investigational device exemption (IDE) application for our companion diagnostic test to enable patient selection in our Phase 3 Study 301 of PEGPH20 in high-HA patients. Study Halo 109-301 : In the first quarter of 2016, we initiated Study 109-301, a Phase 3 multicenter randomized clinical trial evaluating PEGPH20 as a first-line therapy for patients with stage IV PDA. The study will explore PEGPH20 with gemcitabine and ABRAXANE in stage IV PDA patients at approximately 200 sites in 20 countries located in North America, Europe, South America and Asia Pacific. First dosing of a patient is expected to occur in March 2016. SWOG Study S1313 : In October 2013, SWOG, a cancer research cooperative group of more than 4,000 researchers in over 500 institutions around the world, initiated a 144 patient Phase  1b/2  randomized  clinical  trial  in  some  of  their  study  centers,  examining  PEGPH20  in  combination  with  modified  FOLFIRINOX  chemotherapy (mFOLFIRINOX)  compared  to  mFOLFIRINOX  treatment  alone  in  patients  with  stage  IV  PDA  (funded  by  the  National  Cancer  Institute).  This  study  was  also placed on clinical hold temporarily at the time of the hold on Study 109-202. In September 2014, the FDA removed the clinical hold on patient enrollment and dosing of PEGPH20 in this SWOG cooperative study. The study has resumed under a revised protocol, and patient enrollment is continuing. The Phase 2 portion of the study, where up to 172 patients are planned to be enrolled, began in June 2015. As with Study 109-202, the occurrence of TE events will be closely monitored in  enrolled  patients,  and  the  continuation  of  this  study  may  be  halted  again  in  accordance  with  event  rate  rules  established  in  the  protocol,  or  for  other  safety reasons. 7 Other indications outside of pancreatic cancer : Study HALO 107-201, PRIMAL Study : In December 2014, we initiated a Phase 1b/2 trial, to evaluate PEGPH20 in second line in combination with docetaxel (Taxotere ® ) in non-small cell lung cancer patients. In this study, we expect to evaluate and identify the maximum tolerated dose (MTD) and safety of PEGPH20 plus docetaxel in previously treated patients with non-small cell lung cancer. Upon identification of the MTD we plan to expand the trial into a dose expansion phase in patients prospectively tested for HA status, and then ultimately a Phase 2 portion of the study to evaluate the safety and efficacy of PEGPH20 in second line HA-high non-small cell lung cancer patients in combination with docetaxel. Study HALO 107-101, the immuno-oncology trial: We recently initiated a Phase 1b study exploring the combination of PEGPH20 and KEYTRUDA ® , an immuno-oncology  agent  in  relapsed  non-small  cell  lung  cancer  and  gastric  cancer.  We  expect  to  evaluate  and  identify  the  dose  and  safety  of  PEGPH20  plus KEYTRUDA prior to embarking on dose expansion in high-HA patients in this study. Halozyme Eisai Clinical Collaboration: We expect a Phase 1b/2 study to be initiated in the second quarter of 2016, exploring the combination of PEGPH20 and eribulin in first line HER2-negative HA-high metastatic breast cancer. Halozyme and Eisai will jointly share the costs to conduct this global study. Regulatory : In September 2014, the FDA granted Fast Track designation for our program investigating PEGPH20 in combination with gemcitabine and nab-paclitaxel for the treatment of patients with stage IV PDA to demonstrate an improvement in overall survival. The Fast Track designation process was developed by the FDA to facilitate the development, and expedite the review of drugs to treat serious or life-threatening diseases and address unmet medical needs. In  October  2014,  the  FDA  granted  Orphan  Drug  designation  for  PEGPH20  for  the  treatment  of  pancreatic  cancer.  The  FDA  Office  of  Orphan  Products Development’s mission is to advance the evaluation and development of products (drugs, biologics, devices, or medical foods) that demonstrate promise for the diagnosis  and/or  treatment  of  rare  diseases  or  conditions.  In  December  2014,  the  European  Committee  for  Orphan  Medicinal  Products  of  the  EMA  designated PEGPH20 an orphan medicinal product for the treatment of pancreatic cancer. In March 2015, we met with the FDA to discuss both the interim efficacy and safety data from Study 109-202 and to discuss the Phase 3 Study 109-301 as a potential registration study in stage IV PDA patients whose tumors are determined to have high levels of HA accumulation. In June 2015, we received scientific advice/protocol  assistance  from  the  EMA  regarding  our  Phase  3  study.  In  addition,  we  continue  our  dialog  with  the  FDA  regarding  the  development  of  a companion diagnostic agent for detection and quantification of hyaluronan in the tumor tissue of cancer patients. In February 2016, our partner Ventana submitted an IDE application for our companion diagnostic test to enable patient selection in our Phase 3 Study 301 of PEGPH20 in high-HA patients. Collaborations Roche Collaboration In December 2006, we and Roche entered into a collaboration and license agreement under which Roche obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds (the Roche Collaboration). Roche initially had the exclusive right to apply rHuPH20 to only three pre-defined Roche biologic targets with the option to exclusively develop and commercialize rHuPH20 with ten additional targets. As of December 31, 2015 , Roche has elected a total of five targets, two of which are exclusive, and retains the option to develop and commercialize rHuPH20 with three additional targets. 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.  This  formulation  utilizes  our  patented  ENHANZE  Technology  and  is  administered  in  two  to  five  minutes,  rather  than  30  to  90 minutes  with  the  standard  intravenous  form.  Roche  received  European  marketing  approval  for  Herceptin  SC  in  August  2013.  The  European  Commission’s approval was based on data from Roche’s Phase 3 HannaH study which showed that the subcutaneous formulation of Herceptin was associated with comparable efficacy 8 (pathological  complete  response,  pCR)  to  Herceptin  administered  intravenously  in  women  with  HER2-positive  early  breast  cancer  and  resulted  in  non-inferior trastuzumab plasma levels. Overall, the safety profile in both arms of the HannaH study was consistent with that expected from standard treatment with Herceptin and chemotherapy in this setting. No new safety signals were identified. Breast cancer is the most common cancer among women worldwide. Each year, about 1.7  million  new  cases  of  breast  cancer  are  diagnosed  worldwide,  and  over  500,000  women  will  die  of  the  disease  annually.  In  HER2-positive  breast  cancer, increased quantities of the human epidermal growth factor receptor 2 (HER2) are present on the surface of the tumor cells. This is known as “HER2 positivity” and affects approximately 15% to 20% of women with breast cancer. HER2-positive cancer is reported to be a particularly aggressive form of breast cancer. In June 2014, Roche launched MabThera SC in Europe for the treatment of patients with common forms of non-Hodgkin lymphoma (NHL). This formulation utilizes  our  patented  ENHANZE  Technology  and  is  administered  in  approximately  five  minutes  compared  to  the  approximately  2.5  hour  infusion  time  for intravenous MabThera. The European Commission approved MabThera SC in March 2014. The European Commission’s approval was based primarily on data from Roche’s Phase 3 pivotal clinical studies, which was published in The Lancet Oncology. NHL is a type of cancer that affects lymphocytes (white blood cells). NHL represents approximately 85% of all lymphomas diagnosed and was responsible for approximately 200,000 annual deaths worldwide in 2012. Lymphomas are a cancer of the lymphatic system (composed of lymph vessels, lymph nodes and organs) which helps to keep the bodily fluid levels balanced and to defend the body against invasion by disease. Lymphoma develops when white blood cells (usually B-lymphocytes) in the lymph fluid become cancerous and begin to multiply and  collect  in  the  lymph  nodes  or  lymphatic  tissues  such  as  the  spleen.  Some  of  these  cells  are  released  into  the  bloodstream  and  spread  around  the  body, interfering with the body’s production of healthy blood cells. Roche announced that it filed MabThera SC in Europe for previously untreated chronic lymphocytic leukemia in the fourth quarter of 2014. Additional  information  about  the  Phase  3  Herceptin  SC  and  Phase  3  MabThera  SC  clinical  trials  can  be  found  at  www.clinicaltrials.gov and www.roche- trials.com . Information available on these websites is not incorporated into this report. Baxalta Collaboration In  September  2007,  we  and  Baxalta  entered  into  a  collaboration  and  license  agreement  under  which  Baxalta  obtained  a  worldwide,  exclusive  license  to develop and commercialize product combinations of rHuPH20 with GAMMAGARD LIQUID (HYQVIA) (the Baxalta Collaboration). GAMMAGARD LIQUID is a current Baxalta product that is indicated for the treatment of primary immunodeficiency disorders associated with defects in the immune system. In  October  2014,  Baxalta  announced  the  launch  and  first  shipments  of  Baxalta’s  HYQVIA  product  for  treatment  of  adult  patients  with  primary immunodeficiency in the U.S. HYQVIA was approved by the FDA in September 2014 and 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 majority of primary immunodeficiency patients today receive intravenous infusions in a doctor’s office or infusion center, and current subcutaneous IG treatments require weekly or bi-weekly treatment with multiple infusion sites per treatment. The FDA’s approval of HYQVIA was a significant milestone for us as it represented the first U.S. approved Biologic License Application (BLA) which utilizes our rHuPH20 platform. In  May  2013,  the  European  Commission  granted  Baxalta  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. Baxalta launched HYQVIA in the first EU country in July 2013 and has continued to launch in additional countries. 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  directed  to  up  to  six  targets  in  primary  care  and  specialty  care indications. Targets may be selected on an exclusive or non-exclusive basis. In September 2013, Pfizer elected the fourth therapeutic target on an exclusive basis. One of the targets is proprotein convertase subtilisin/kexin type 9 (PCSK9) which is the gene that provides instructions for making a protein that helps regulate the amount of cholesterol in the bloodstream. Pfizer initiated dosing of a subcutaneous formulation of rHuPH20 and bococizumab, an investigational PCSK9 inhibitor, in a Phase 1 trial in February 2016. Pfizer is also developing rivipansel directed to another target 9 under the collaboration  to treat  vaso-occlusive  crisis  in individuals  with sickle  cell  disease and initiated  dosing of a subcutaneous  formulation  of rHuPH20 and rivipansel in a Phase 1 clinical trial in October 2015. 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.  In  November  2015,  Janssen  initiated  dosing  in  a  Phase  1b  clinical  trial  evaluating subcutaneous delivery of daratumumab, using ENHANZE Technology, in multiple myeloma. 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 has elected TNF alpha as the first target on an exclusive basis. AbbVie is developing rHuPH20 with adalimumab (HUMIRA ® ) which may allow a reduced number of induction injections and deliver additional performance benefits. 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 one target on an exclusive basis and one target on a semi-exclusive basis. For a further discussion of the material terms of our collaboration agreements, refer to Note 4, Collaborative Agreements , to our consolidated financial statements. Customers The following table indicates the percentage of total revenues in excess of 10% with any single customer: Roche Lilly AbbVie Janssen Year Ended December 31, 2015 2014 2013 42%   19%   17%   1%   57%   —   —   20%   64% — — — For additional information regarding our revenues from external customers, refer to Note 2, Summary of Significant Accounting Policies — Concentrations of Credit Risk, Sources of Supply and Significant Customer s, to our consolidated financial statements. Patents and Proprietary Rights Patents and other proprietary rights are essential to our business. Our success will depend in part on our ability to obtain patent protection for our inventions, to preserve our trade secrets and to operate without infringing the proprietary rights of third parties. Our strategy is to actively pursue patent protection in the U.S. and certain foreign jurisdictions for technology that we believe to be proprietary to us and that offers us a potential competitive advantage. Our patent portfolio includes 21 issued patents in the U.S., more than 235 issued patents in Europe and other countries in the world and more than 260 pending patent applications. In general, patents have a term of 20 years from the application filing date or earlier claimed priority date. Our issued patents will expire between 2022 and 2032. 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 10         collaborations, Hylenex recombinant, PEGPH20 and our endocrinology product candidates. In addition, we have, under prosecution throughout the world, multiple patent  applications  that  relate  specifically  to  individual  product  candidates  under  development,  the  expiration  of  which  can  only  be  definitely  determined  upon maturation into our issued patents. We believe our patent filings represent a barrier to entry for potential competitors looking to utilize these hyaluronidases. In addition to patents, we rely on unpatented trade secrets, proprietary know-how and continuing technological innovation. We seek protection of these trade secrets,  proprietary  know-how  and  innovation,  in  part,  through  confidentiality  and  proprietary  information  agreements.  Our  policy  is  to  require  our  employees, directors, consultants, advisors, collaborators, outside scientific collaborators and sponsored researchers, other advisors and other individuals and entities to execute confidentiality  agreements  upon  the  start  of  employment,  consulting  or  other  contractual  relationships  with  us.  These  agreements  provide  that  all  confidential information developed or made known to the individual or entity during the course of the relationship is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and some other parties, the agreements provide that all inventions conceived by the individual will be our exclusive property. Despite the use of these agreements and our efforts to protect our intellectual property, there will always be a risk of unauthorized use or disclosure of information. Furthermore, our trade secrets may otherwise become known to, or be independently developed by, our competitors. We also file trademark applications to protect the names of our products and product candidates. These applications may not mature to registration and may be challenged  by third  parties.  We are  pursuing trademark  protection  in a number of different  countries  around the world. There  can be no assurances  that  our registered or unregistered trademarks or trade names will not infringe on rights of third parties or will be acceptable to regulatory agencies. Research and Development Activities Our  research  and  development  expenses  consist  primarily  of  costs  associated  with  the  development  and  manufacturing  of  our  product  candidates, compensation and other expenses for research and development personnel, supplies and materials, costs for consultants and related contract research, clinical trials, facility  costs  and  amortization  and  depreciation.  We  charge  all  research  and  development  expenses  to  operations  as  they  are  incurred.  Our  research  and development activities are primarily focused on the development of our various product candidates. Due to the uncertainty in obtaining the FDA and other regulatory approvals, our reliance on third parties and competitive pressures, we are unable to estimate with  any  certainty  the  additional  costs  we  will  incur  in  the  continued  development  of  our  proprietary  product  candidates  for  commercialization.  However,  we expect our research and development expenses for PEGPH20 to increase as our program advances into additional tumors and later stages of clinical development. Manufacturing We do not have our own manufacturing facility for our product and product candidates, or the capability to package our products. We have engaged third parties to manufacture bulk rHuPH20, PEGPH20 and Hylenex recombinant. We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and Cook Pharmica LLC (Cook) to produce supplies of bulk rHuPH20. These manufacturers each produce bulk rHuPH20 under current Good Manufacturing Practices (cGMP) for clinical and commercial uses. Cook currently produces bulk rHuPH20 for use in Hylenex recombinant, product candidates and collaboration product candidates. Avid currently produces bulk rHuPH20 for use in collaboration products. We rely on their ability to successfully manufacture these batches according to product specifications. In addition, we are working to scale-up, validate and qualify a new facility operated by Avid as a manufacturer of bulk rHuPH20 for use in the products and product candidates under  the  Roche  collaboration.  It  is  important  for  our  business  for  Cook  and  Avid  to  (i)  retain  their  status  as  cGMP-approved  manufacturing  facilities;  (ii)  to successfully scale up bulk rHuPH20 production; and/or (iii) manufacture  the bulk rHuPH20 required by us and our collaborators  for use in our proprietary and collaboration  products  and product candidates.  In addition  to supply obligations,  Avid and Cook will also provide  support for data  and information  used in the chemistry, manufacturing and controls sections for FDA and other regulatory filings. We have a commercial  manufacturing  and supply agreement  with Patheon Manufacturing  Services, LLC (Patheon)  under which Patheon will provide the final fill and finishing steps in the production process of Hylenex recombinant. Under our commercial services agreement with Patheon, Patheon has agreed to fill and finish Hylenex recombinant product for us until December 31, 2019, subject to further extensions in accordance with the terms of the agreement. In addition, we are in the early stages of scaling 11 up our manufacturing of PEGPH20 with third party suppliers to support additional clinical trials, including a registration-enabling trial, and ultimately, if approved, potential commercial supply. Sales, Marketing and Distribution HYLENEX Recombinant Our commercial activities currently focus on Hylenex recombinant. We have a team of sales specialists that provide hospital and surgery center customers with the information about Hylenex recombinant and information needed to obtain formulary approval for, and support utilization of, Hylenex recombinant. Our commercial  activities  also  include  marketing  and  related  services  and  commercial  support  services  such  as  commercial  operations,  managed  markets  and commercial analytics. We also employ third-party vendors, such as advertising agencies, market research firms and suppliers of marketing and other sales support related services to assist with our commercial activities. We sell Hylenex recombinant in the U.S. to wholesale pharmaceutical distributors, who sell the product to hospitals and other end-user customers. We have engaged Integrated Commercial Solutions (ICS), a division of AmerisourceBergen Specialty Group, a subsidiary of AmerisourceBergen, to act as our exclusive distributor  for  commercial  shipment  and  distribution  of  Hylenex recombinant  to  our  customers  in  the  United  States.  In  addition  to  distribution  services,  ICS provides us with other key services related to logistics, warehousing, returns and inventory management, contract administration and chargebacks processing and accounts  receivable  management.  In  addition,  we  utilize  third  parties  to  perform  various  other  services  for  us  relating  to  regulatory  monitoring,  including  call center management, adverse event reporting, safety database management and other product maintenance services. Competition The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary therapeutics. We face competition from a number of sources, some of which may target the same indications as our product or product candidates, including large pharmaceutical companies, smaller pharmaceutical companies, biotechnology companies, academic institutions, government agencies and private and public research institutions, many  of  which  have  greater  financial  resources,  drug  development  experience,  sales  and  marketing  capabilities,  including  larger,  well  established  sales  forces, manufacturing capabilities, experience in obtaining regulatory approvals for product candidates and other resources than us. We face competition not only in the commercialization of Hylenex recombinant, but also for the in-licensing or acquisition of additional product candidates, and the out-licensing of our ENHANZE Technology. In addition, our collaborators face competition in the commercialization of the product candidates for which the collaborators seek marketing approval from the FDA or other regulatory authorities. HYLENEX Recombinant Hylenex recombinant  is  currently  the  only  FDA  approved  recombinant  human  hyaluronidase  on  the  market.  The  competitors  for  Hylenex  recombinant include,  but  are  not  limited  to,  Valeant  Pharmaceuticals  International,  Inc.’s  FDA  approved  product,  Vitrase  ® ,  an  ovine  (ram)  hyaluronidase,  and  Amphastar Pharmaceuticals, Inc.’s product, Amphadase ® , a bovine (bull) hyaluronidase. In addition, some commercial pharmacies compound hyaluronidase preparations for institutions and physicians even though compounded preparations are not FDA approved products. Government Regulations The FDA and comparable regulatory agencies in foreign countries regulate the manufacture and sale of the pharmaceutical products that we have developed or currently are developing. The FDA has established guidelines and safety standards that are applicable to the laboratory and preclinical evaluation and clinical investigation of therapeutic products and stringent regulations that govern the manufacture and sale of these products. The process of obtaining regulatory approval for  a  new  therapeutic  product  usually  requires  a  significant  amount  of  time  and  substantial  resources.  The  steps  typically  required  before  a  product  can  be introduced for human use include: • • animal pharmacology studies to obtain preliminary information on the safety and efficacy of a drug; or laboratory and preclinical evaluation in vitro and in vivo including extensive toxicology studies. 12 The results of these laboratory and preclinical studies may be submitted to the FDA as part of an IND (Investigational New Drug) application. The sponsor of an IND application may commence human testing of the compound 30 days after submission of the IND, unless notified to the contrary by the FDA. The clinical testing program for a new drug typically involves three phases: • • • Phase 1 investigations  are generally  conducted in healthy subjects (in certain  instances, Phase 1 studies that determine  the maximum  tolerated dose and initial safety of the product candidate are performed in patients with the disease); Phase 2 studies are conducted in limited numbers of subjects with the disease or condition to be treated and are aimed at determining the most effective dose and schedule of administration, evaluating both safety and whether the product demonstrates therapeutic effectiveness against the disease; and Phase 3 studies involve large, well-controlled investigations in diseased subjects and are aimed at verifying the safety and effectiveness of the drug. Data from all clinical studies, as well as all laboratory and preclinical studies and evidence of product quality, are typically submitted to the FDA in a new drug  application  (NDA).  The  results  of  the  preclinical  and  clinical  testing  of  a  biologic  product  candidate  are  submitted  to  the  FDA in  the  form  of  a  BLA,  for evaluation  to  determine  whether  the  product  candidate  may  be  approved  for  commercial  sale.  In  responding  to  a  BLA  or  NDA, the  FDA may  grant  marketing approval, request additional information, or deny the application. Although the FDA’s requirements for clinical trials are well established and we believe that we have  planned  and  conducted  our  clinical  trials  in  accordance  with  the  FDA’s  applicable  regulations  and  guidelines,  these  requirements,  including  requirements relating  to testing the safety of drug candidates,  may be subject to change as a result of recent  announcements  regarding  safety problems  with approved drugs. Additionally, we could be required to conduct additional trials beyond what we had planned due to the FDA’s safety and/or efficacy concerns or due to differing interpretations of the meaning of our clinical data. (See Part I, Item 1A, Risk Factors. ) The FDA’s Center for Drug Evaluation and Research must approve an NDA and the FDA’s Center for Biologics Evaluation and Research must approve a BLA for a drug before it may be marketed in the United States. If we begin to market our proposed products for commercial sale in the U.S., any manufacturing operations that may be established in or outside the U.S. will also be subject to rigorous regulation, including compliance with cGMP. We also may be subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substance Control Act, the Export Control Act and other present and future laws of general application. In addition, the handling, care and use of laboratory animals are subject to the Guidelines for the Humane Use and Care of Laboratory Animals published by the National Institutes of Health. Regulatory  obligations  continue  post-approval,  and  include  the  reporting  of  adverse  events  when  a  drug  is  utilized  in  the  broader  patient  population. Promotion and marketing of drugs is also strictly regulated, with penalties imposed for violations of FDA regulations, the Lanham Act and other federal and state laws, including the federal anti-kickback statute. We currently intend to continue to seek, directly or through our collaborators, approval to market our products and product candidates in foreign countries, which may have regulatory processes that differ materially from those of the FDA. We anticipate that we will rely upon independent consultants to seek and gain approvals to market our proposed products in foreign countries or may rely on other pharmaceutical or biotechnology companies to license our proposed products. We cannot assure you that approvals to market any of our proposed products can be obtained in any country. Approval to market a product in any one foreign country does not necessarily indicate that approval can be obtained in other countries. From  time  to  time,  legislation  is  drafted  and  introduced  in  Congress  that  could  significantly  change  the  statutory  provisions  governing  the  approval, manufacturing and marketing of drug products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency or reviewing courts in ways that may significantly affect our business and development of our product candidates and any products that we may commercialize. It is impossible to predict whether additional legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, or what the impact of any such changes may be. 13 Segment Information We operate our business as one segment, which includes all activities related to the research, development and commercialization of human enzymes. This segment also includes revenues and expenses related to (i) research and development activities conducted under our collaboration agreements with third parties and (ii) product sales of Hylenex recombinant. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single  operating  segment.  We  had  no  foreign  based  operations  and  minimal  long-lived  assets  located  in  foreign  countries  as  of  and  for  the  years  ended December 31, 2015, 2014 and 2013 . Refer to the Notes for additional financial information regarding our operating segment. Executive Officers of the Registrant Information concerning our executive officers, including their names, ages and certain biographical information can be found in Part III, Item 10, Directors, Executive Officers and Corporate Governance . This information is incorporated by reference into Part I of this report. Employees As of February 22, 2016 , we had 216 full-time employees. None of our employees are unionized and we believe our employee relations to be good. Item 1A. Risk Factors Risks Related To Our Business We have generated only limited revenue from product sales to date; we have a history of net losses and negative cash flow, and we may never achieve or maintain profitability. Relative to expenses incurred in 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, and we may never generate sufficient revenues from future product sales, licensing fees and milestone  payments  to  offset  expenses.  Even  if  we  ultimately  do  achieve  significant  revenues  from  product  sales,  royalties,  licensing  fees,  research reimbursements,  bulk  rHuPH20  supply  payments  and/or  milestone  payments,  we  expect  to  incur  significant  operating  losses  over  the  next  few  years.  We  have never been profitable, and we may never become profitable. Through December 31, 2015 , we have incurred aggregate net losses of approximately $482.7 million . If our 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 manufacture and market pharmaceutical products 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 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 collaborators 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 collaborators expect, or at all. The FDA or other foreign regulatory agency may refuse or delay approval of our product candidates for failure to collect sufficient clinical or animal safety data and require us or our collaborators to conduct additional clinical or animal safety studies which may cause lengthy delays  and  increased  costs  to  our  programs.  For  example,  the  approval  of  Baxalta’s  HYQVIA  BLA  was  delayed  until  we  and  Baxalta  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 approved by the FDA in September 2014, we cannot assure you that they will not arise and have an adverse impact on future development of products which include rHuPH20, future sales of Hylenex recombinant, our ability to enter into collaborations, or be raised by the FDA or other health authorities in connection with testing or approval of products including rHuPH20. 14 We and our collaborators 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 proprietary and collaboration product candidates or companion diagnostic assays 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  collaborators  must  maintain  our  regulatory  approvals.  If  we  or  any  of  our  collaborators  are  unsuccessful  in  maintaining  our  regulatory approvals, our ability to generate revenues would be adversely affected. We will likely need to raise additional capital in the future and there can be no assurance that we will be able to obtain such funds. We will likely need to raise additional capital in the future to continue the development of our product candidates or for other current corporate purposes. Our current  cash  reserves  and  expected  revenues  during  the  next  few  years  will  not  be  sufficient  for  us  to  continue  the  development  of  our  proprietary  product candidates,  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)  the  public  offering  of  securities;  (ii)  new  collaborative  agreements;  (iii)  expansions  or  revisions  to existing collaborative relationships; (iv) private financings; and/or (v) other equity or debt financings. In  view  of  our  stage  of  development,  business  prospects,  the  nature  of  our  capital  structure  and  general  market  conditions,  if  we  are  required  to  raise additional capital in the future, the additional financing may not be available on favorable terms, 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 one or more product development programs. If we raise additional capital, a substantial number of additional shares may be issued, and these shares will dilute the ownership interest of our current investors. Use of our product candidates or those of our collaborators could be associated with side effects or adverse events. As with most pharmaceutical products, use of our product candidates or those 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). Side effects or adverse events associated with the use of our product candidates or those 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’ ability to obtain or maintain regulatory approval or market our product candidates. Side effects such as toxicity or other safety issues associated with the use of our product candidates or those of our collaborators could require us or our collaborators to perform additional studies or halt development or commercialization of these product candidates or expose us to product liability lawsuits which will harm our business. We or our collaborators may be required by regulatory agencies to conduct additional animal or human studies regarding the safety and efficacy of our pharmaceutical product candidates which we have not planned or anticipated. Furthermore, there can be no assurance that we or our collaborators will resolve any issues related  to any  product  related  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. For example, in April 2014, a clinical hold was placed on patient enrollment and dosing of PEGPH20 in Study 202 as a result of a possible difference in the TE event rate that had been observed at that time in the trial between the group of patients treated with PEGPH20 versus the group  of  patients  treated  without  PEGPH20.  The  clinical  hold  was  lifted  by  FDA  in  June  2014,  and  we  have  completed  enrollment  and  resumed  dosing  of PEGPH20 in Study 202 under a revised clinical protocol. We and the data monitoring committee for Study 202 continue to closely monitor the occurrence of TE events in enrolled patients after the protocol amendments. While the pre-specified TE event rate analysis established in the protocol at the time of the clinical hold in 2014 have been passed, the continuation of Study 202 may be halted again if the FDA determines that imbalances in safety findings, including TE events, occur. 15 If our contract manufacturers are unable to manufacture and supply to us bulk rHuPH20 or other raw materials in the quantity and quality required by us or our collaborators for use in our products and product candidates, our product development and commercialization efforts could be delayed or stopped and our collaborations could be damaged. We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and Cook Pharmica LLC (Cook) to produce bulk  rHuPH20.  These  manufacturers  each  produce  bulk  rHuPH20  under  current  cGMP  for  clinical  uses.  Cook  currently  produces  bulk  rHuPH20  for  use  in Hylenex recombinant,  product  candidates  and  collaboration  product  candidates.  Avid  currently  produces  bulk  rHuPH20  for  use  in  collaboration  products.  In addition to supply obligations, Avid and Cook will also provide support for the chemistry, manufacturing and controls sections for FDA and other regulatory filings. We rely on their ability to successfully manufacture these batches according to product specifications. If either Avid or Cook: (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; or (iii) fails to manufacture and supply bulk rHuPH20 in the quantity and quality required by us or our collaborators for use in our proprietary and collaboration 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 party manufacturers’ business or financial condition could adversely affect their abilities 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  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 Avid and/or Cook. Any delays, interruptions or other problems regarding the ability of Avid and/or Cook to supply bulk rHuPH20 or the ability of other third party manufacturers, to supply other raw materials or ingredients necessary to produce  our  products  on  a  timely  basis  could:  (i)  cause  the  delay  of  clinical  trials  or  otherwise  delay  or  prevent  the  regulatory  approval  of  proprietary  or collaboration product candidates; (ii) delay or prevent the effective commercialization of proprietary or collaboration products; and/or (iii) cause us to breach contractual obligations to deliver bulk rHuPH20 to our collaborators. Such delays would likely damage our relationship with our collaborators, and they would have a material adverse effect on royalties and thus our business and financial condition. If we or any party to a key collaboration agreement fails 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  dependent  on  our  collaborators  to  develop  and  commercialize  product  candidates  subject  to  our collaborations  in  order  for  us  to  realize  any  financial  benefits  from  these  collaborations.  Our  collaborators  may  not  devote  the  attention  and  resources  to  such efforts that we would ourselves, change their 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  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 delay or suspend our product development activities for some of our product candidates, as well as our commercialization efforts for some or all of our products. Specifically, the termination of a key collaboration agreement by one of our collaborators could materially impact our ability to  enter  into  additional  collaboration  agreements  with  new  collaborators  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. Most of our current proprietary and collaboration 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 collaborations, as well as proprietary programs. rHuPH20 is a key technological component of ENHANZE Technology and our most advanced proprietary and collaboration products and product candidates, including  the  current  and  future  products  and  product  candidates  under  our  Roche,  Pfizer,  Janssen,  Baxalta,  AbbVie  and  Lilly  collaborations,  our  PEGPH20 program, and Hylenex recombinant. If there is an adverse development 16 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’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’s program will have a significant impact on our other proprietary and other collaboration product candidates, there can be no assurance that there will not be other such occurrences in the foregoing programs or our other programs or that concerns regarding these antibodies will not also be raised by the FDA or other health authorities in the future, which could result in delays or discontinuations of our development or commercialization activities or deter entry into additional collaborations with third parties. We routinely evaluate, and may modify, our business strategy and our strategic focus to only a few fields or applications of our technology which may increase or decrease the risk for potential negative impact of adverse developments. 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 third quarter of 2014, we decided to focus our resources on advancing PEGPH20 and expanding utilization of our ENHANZE platform. While we believe these are applications with the greatest potential value, we have reduced the diversification of our programs and increased our dependence on the success of the areas we are pursuing. By focusing on one or a few areas, we increase  the potential  impact  on us if one of those programs  or product candidates  does not successfully  complete  clinical  trials,  achieve  commercial acceptance or meet expectations regarding sales and revenue. Our decision to focus on one or a few programs may also reduce the value of programs that are no longer within our principal strategic focus, which could impair our ability to pursue collaborations  or other strategic alternatives  for those programs we are not pursuing. Our proprietary and collaboration product candidates or companion diagnostic assays 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. 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, we or our collaborators may obtain different results in subsequent trials or studies that fail to show the desired levels of safety and efficacy, or we may not, or our collaborators may not, obtain applicable  regulatory  approval  for  a  variety  of  other  reasons.  Preclinical,  nonclinical,  and  clinical  trials  for  any  of  our  proprietary  or  collaboration  product candidates  or  development  of  any  collaboration  companion  diagnostic  assays  could  be  unsuccessful,  which  would  delay  or  preclude  regulatory  approval  and commercialization of the product candidates or companion diagnostic assays. In the U.S. and other jurisdictions, regulatory approval can be delayed, limited or not granted for many reasons, including, among others: • • • • clinical  results  may  not  meet  prescribed  endpoints  for  the  studies  or  otherwise  provide  sufficient  data  to  support  the  efficacy  of  our  product candidates; clinical  and  nonclinical  test  results  may  reveal  side  effects,  adverse  events  or  unexpected  safety  issues  associated  with  the  use  of  our  product candidates; for example, in April 2014, a clinical hold was placed on patient enrollment and dosing of PEGPH20 in Study 202 as a result of a possible difference in the TE event rate that had been observed at that time in the trial between the group of patients treated with PEGPH20 versus the group of patients treated without PEGPH20. The clinical hold was lifted by FDA in June 2014, and we have completed enrollment and resumed dosing of PEGPH20 in Study 202 under a revised clinical protocol; Completion of clinical trials may be delayed for a variety of reasons including the amount of time it may take to identify and enroll patients with high levels of HA in our target population; regulatory review may not find a product candidate safe or effective enough to merit either continued testing or final approval; 17 • • • • • • • • • regulatory review may not find that the data from preclinical testing and clinical trials justifies approval; regulatory authorities may require that we change our studies or conduct additional studies which may significantly delay or make continued pursuit of approval commercially unattractive; a regulatory agency may reject our trial data or disagree with our interpretations of either clinical trial data or applicable regulations; a regulatory agency may approve only a narrow use of our product or may require additional safety monitoring and reporting through Risk Evaluation and Mitigation Strategies (REMS) or conditions to assure safe use program; the cost of clinical trials required for product approval may be greater than what we originally anticipate, and we 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,  our  contract manufacturers or our raw material suppliers; 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, 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 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 proprietary  or collaboration  product candidate  or companion  diagnostic  assay is not approved  in a timely  fashion  or obtained  on commercially  viable terms,  or  if  development  of  any  product  candidate  or  a  companion  diagnostic  assay  is  terminated  due  to  difficulties  or  delays  encountered  in  the  regulatory approval  process,  it  could  have  a  material  adverse  impact  on  our  business,  and  we  would  become  more  dependent  on  the  development  of  other  proprietary  or collaboration  product  candidates  and/or  our  ability  to  successfully  acquire  other  products  and  technologies.  There  can  be  no  assurances  that  any  proprietary  or collaboration product candidate or companion diagnostic assay will receive regulatory approval in a timely manner, or at all. There can be no assurance that we will be able to gain clarity as to the FDA’s requirements or that the requirements may be satisfied in a commercially feasible way, in which case our ability to enter into collaborations with third parties or explore other strategic alternatives to exploit this opportunity will be limited or may not be possible. We anticipate that certain proprietary and collaboration 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 collaborators are responsible for providing certain proprietary materials that are essential components of our collaboration products and product candidates, and any failure to supply these materials could delay the development and commercialization efforts for these collaboration products and product candidates and/or damage our collaborations. Our  development  and  commercialization  collaborators  are  responsible  for  providing  certain  proprietary  materials  that  are  essential  components  of  our collaboration  products  and  product  candidates.  For  example,  Roche  is  responsible  for  producing  the  Herceptin  and  MabThera  required  for  its  subcutaneous products and Baxalta is responsible for producing the GAMMAGARD LIQUID for its product HYQVIA. If a collaborator, or any applicable third party service provider of a collaborator, encounters difficulties in the manufacture, storage, delivery, fill, finish or packaging of the collaboration 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 collaboration product candidates; and/or (ii) delay or prevent the effective commercialization of collaboration products. Such delays could have a material adverse effect on our business and financial condition. 18 We rely on third parties to prepare, fill, finish and package our products and product candidates, and if such third parties should fail to perform, our commercialization and development efforts for our products and product candidates could be delayed or stopped. We rely on third parties to store and ship bulk rHuPH20 on our behalf and to also prepare, fill, finish and package our products and product candidates prior to their distribution. If we are unable to locate third parties to perform these functions on terms that are acceptable to us, or if the third parties we identify fail to perform their obligations, the progress of clinical trials could be delayed or even suspended and the commercialization of approved product candidates could be delayed or prevented. In addition, we are in the early stages of scaling up our manufacturing of PEGPH20 with third party suppliers to support additional clinical trials, including a Phase 3 trial, and ultimately, if approved, potential commercial supply. If our contract manufacturers are unable to successfully manufacture and supply PEGPH20, the progress of our clinical trials could be delayed or halted for a period of time. If we are unable to sufficiently develop our sales, marketing and distribution capabilities or enter into successful agreements with third parties to perform these functions, we will not be able to fully commercialize our products. We may not be successful in marketing and promoting our approved product, Hylenex recombinant, or any other products we develop or acquire in the future. Our  sales,  marketing  and  distribution  capabilities  are  very  limited.  In  order  to  commercialize  any  products  successfully,  we  must  internally  develop  substantial sales,  marketing  and  distribution  capabilities  or  establish  collaborations  or  other  arrangements  with  third  parties  to  perform  these  services.  We  do  not  have extensive experience in these areas, and we may not be able to establish adequate in-house sales, marketing and distribution capabilities or engage and effectively manage relationships with third parties to perform any or all of such services. To the extent that we enter into co-promotion or other licensing arrangements, our product  revenues  are  likely  to  be  lower  than  if  we  directly  marketed  and  sold  our  products,  and  any  revenues  we  receive  will  depend  upon  the  efforts  of  third parties,  whose  efforts  may  not  meet  our  expectations  or  be  successful.  These  third  parties  would  be  largely  responsible  for  the  speed  and  scope  of  sales  and marketing efforts, and may not dedicate the resources necessary to maximize product opportunities. Our ability to cause these third parties to increase the speed and scope  of  their  efforts  may  also  be  limited.  In  addition,  sales  and  marketing  efforts  could  be  negatively  impacted  by  the  delay  or  failure  to  obtain  additional supportive clinical trial data for our products. In some cases, third party collaborators are responsible for conducting these additional clinical trials, and our ability to increase the efforts and resources allocated to these trials may be limited. If we or our collaborators 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,  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  collaborators  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.  Regulatory  agencies  may  change  existing  requirements  or  adopt  new  requirements  or policies. We, our collaborators 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, entirely 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 clinical trials or otherwise inhibit our ability to bring approved products to market, which would have a material adverse effect on our business and financial condition. Likewise, if we, our collaborators and our respective contractors, suppliers and vendors involved in sales and promotion of our products do 19 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. Failure to comply with regulatory requirements may result in any of the following: • • • • • • • • • • • • restrictions on our products or manufacturing processes; warning letters; withdrawal of the products from the market; voluntary or mandatory recall; fines; suspension or withdrawal of regulatory approvals; suspension or termination of any of our ongoing clinical trials; refusal to permit the import or export of our products; refusal to approve pending applications or supplements to approved applications that we submit; product seizure; injunctions; or imposition of civil or criminal penalties. We currently have significant debt and failure by us to fulfill our obligations under the applicable loan agreements may cause the repayment obligations to accelerate. In December 2015, our subsidiaries, Halozyme, Inc. (Halozyme) and Halozyme Royalty LLC (Halozyme Royalty) entered into a credit agreement (the Credit Agreement) with BioPharma Credit Investments IV Sub, LP and Athyrium Opportunities II Acquisition LP (the Royalty-backed Lenders) pursuant to which we borrowed $150 million through Halozyme Royalty (the Royalty-backed Loan). The Royalty-backed Loan will be repaid primarily from a specified percentage of the royalty payments we receive under our collaboration agreements with Roche and Baxalta (the Royalty Payments). The  obligations  of  Halozyme  Royalty  under  the  Credit  Agreement  to  repay  the  Royalty-backed  Loan  may  be  accelerated  upon  the  occurrence  of  certain events of default under the Credit Agreement, including but not limited to: • • • • • • • if any payment of principal is not made within three days of when such payment is due and payable or otherwise made in accordance with the terms of the Credit Agreement; if any representations or warranties made in the Credit Agreement or any other transaction document proves to be incorrect or misleading in any material respect when made; if there occurs a default in the performance of affirmative and negative covenants set forth in the Credit Agreement or any other transaction document; the failure by either Baxalta or Roche to pay material amounts owed under our collaboration agreements because of an actual breach or default by us under the collaboration agreements; the voluntary or involuntary commencement of bankruptcy proceedings by either Halozyme or Halozyme Royalty and other insolvency related defaults; any materially adverse effect on the binding nature of any of the transaction documents or the collaboration agreements with Baxalta and Roche; or Halozyme ceases to own, of record and beneficially, 100% of the equity interests in Halozyme Royalty. The  Credit  Agreement  also  contains  covenants  applicable  to  Halozyme  and  Halozyme  Royalty,  including  certain  visitation,  information  and  audits  rights granted to the collateral agent and the lenders and restrictions on the conduct of business, including continued compliance with the Baxalta and Roche collaboration agreements and specified affirmative actions regarding the escrow account established to facilitate payment of Royalty Payments to the Royalty-backed Lenders or other  specified  parties.  The  Credit  Agreement  also  contains  covenants  solely  applicable  to  Halozyme  Royalty,  including  restrictions  on  incurring  indebtedness, creating  or  granting  liens,  making  acquisitions  and  making  specified  restricted  payments.  These  covenants  could  make  it  more  difficult  for  us  to  execute  our business strategy. 20 In connection with the Royalty-backed Loan, Halozyme Royalty granted a first priority lien and security interest (subject only to permitted liens) in all of its assets and all real, intangible and personal property, including all of its right, title and interest in and to the Royalty Payments. In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with Oxford Finance LLC (Oxford) and Silicon Valley Bank (SVB) (collectively, the Lenders), amending and restating in its entirety our original loan agreement with the Lenders, dated December 2012. The Loan Agreement provided for an additional $20 million principal amount of new term loan, bringing the total term loan balance to $50 million. The proceeds are to be used for working capital and general business requirements. In January 2015, we entered into the Second Amendment to the Amended and Restated Loan and Security Agreement and First Amendment to Disbursement Letter (the Amendment) with the Lenders, amending and restating the loan payment schedules of the Amended and Restated Loan and Security Agreement. The amended and restated term loan repayment schedule provides for interest only payments through January 2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established  maturity  date  of  January  2018.  The  amended  and  restated  term  loan  facility  is  secured  by  substantially  all  of  the  assets  of  the  Company  and  its subsidiary,  Halozyme,  Inc.,  except  that  the  collateral  does  not  include  any  equity  interests  in  Halozyme,  Inc.,  any  intellectual  property  (including  all  licensing, collaboration and similar agreements relating thereto), and certain other excluded assets. The Loan Agreement contains customary representations, warranties and covenants by us, which covenants limit our ability to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts  and  commodities,  and  to  do  the  same  for  our  domestic  subsidiary.  Complying  with  these  covenants  may  make  it  more  difficult  for  us to  successfully execute our business strategy. The  Loan  Agreement  also  contains  customary  indemnification  obligations  and  customary  events  of  default,  including,  among  other  things,  our  failure  to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. Our ability to make payments on our 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. We will need to use cash to pay principal and interest on our debt, thereby reducing the funds available to fund our research  and  development  programs,  strategic  initiatives  and  working  capital  requirements.  If  we  are  unable  to  generate  sufficient  cash  to  service  our  debt obligation,  an  event  of  default  may  occur.  In  the  event  of  default  by  us  under  the  Credit  Agreement  or  the  Loan  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 Credit Agreement or the Loan Agreement which could harm our financial condition. If proprietary or collaboration product candidates are approved for marketing but do not gain market acceptance, our business may suffer and we may not be able to fund future operations. Assuming that our proprietary or collaboration product candidates obtain the necessary regulatory approvals for commercial sale, a number of factors may affect the market acceptance of these existing product candidates or any other products which are developed or acquired in the future, including, among others: • • • • the price of products relative to other therapies for the same or similar treatments; 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; our ability to fund our sales and marketing efforts and the ability and willingness of our collaborators to fund sales and marketing efforts; the degree to which the use of these products is restricted by the approved product label; 21 • • • the effectiveness of our sales and marketing efforts and the effectiveness of the sales and marketing efforts of our collaborators; the introduction of generic competitors; and the extent to which reimbursement for our products and related treatments will be available from third party payors including government insurance programs (Medicare and Medicaid) and private insurers. If  these  products  do  not  gain  market  acceptance,  we  may  not  be  able  to  fund  future  operations,  including  the  development  or  acquisition  of  new  product candidates and/or our sales and marketing efforts for our approved products, which would cause our business to suffer. In addition, our proprietary and collaboration 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 products may be negatively affected. Developing and marketing pharmaceutical products for human use involves significant product liability risks for which we currently have limited insurance coverage. The testing, marketing and sale of pharmaceutical products involves the risk of product liability claims by consumers and other third parties. Although we maintain product liability insurance coverage, product liability claims can be high in the 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  lack  or  insufficiency  of  insurance coverage 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 collaboration product candidates include the pharmaceutical products of a third party, we run the risk that problems with the third party pharmaceutical product will give rise to liability claims against us. Our inability to attract, hire and retain key management and scientific personnel could negatively affect our business. Our success depends on the performance of key management and scientific employees with relevant experience. For example, in order to pursue our current business  strategy,  we  will  need  to  recruit  and  retain  personnel  experienced  in  oncology  drug  development  which  is  a  highly  competitive  market  for  talent.  We depend substantially on our ability to hire, train, motivate and retain high quality personnel, especially our scientists and management team. Particularly in view of the small number of employees on our staff to cover our numerous programs and key functions, if we are unable to retain existing personnel or identify or hire additional personnel, we may not be able to research, develop, commercialize or market our products and product candidates as expected or on a timely basis and we may not be able to adequately support current and future alliances with strategic collaborators. Furthermore,  if  we  were  to  lose  key  management  personnel,  we  would  likely  lose  some  portion  of  our  institutional  knowledge  and  technical  know-how, potentially causing a substantial delay in one or more of our development programs until adequate replacement personnel could be hired and trained. We currently have a severance policy applicable to all employees and a change in control policy applicable to senior executives. We do not have key man life insurance policies on the lives of any of our employees. 22 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  four  buildings  in  San  Diego,  California.  In  addition,  we  have  a satellite office in South San Francisco, California. We depend on our facilities and on our collaborators, contractors and vendors for the continued operation of our business. Natural disasters or other catastrophic events, interruptions in the supply of natural resources, political and governmental changes, wildfires and other fires, floods, explosions, actions of animal rights activists, earthquakes and civil unrest could disrupt our operations or those of our collaborators, 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 research and development programs. If we or our collaborators do not achieve projected development, clinical, regulatory or sales goals in the timeframes we publicly announce or otherwise expect, the commercialization of our products and the development of our product candidates 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, we or our collaborators may publicly articulate 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 control. If scientific, regulatory, strategic or other factors cause us to not meet a goal, regardless of  whether  that  goal  has  been  publicly  articulated  or  not,  our  stock  price  may  decline  rapidly.  For  example,  the  announcement  in  April  2014  of  the  temporary halting of our Phase 2 clinical trial for PEGPH20 caused a rapid decline in our stock price. 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 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 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 collaborators 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; 23 • • • • 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 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. Security breaches may disrupt our operations and harm our operating results. The wrongful use, theft, deliberate sabotage or any other type of security breach with respect to any of our information technology storage and access systems could result in the disruption of our ability to use such systems or disclosure or dissemination of our proprietary and confidential information that is electronically stored, including research or clinical data, resulting in a material adverse impact on our business, operating results and financial condition. Our security and data recovery measures may not be adequate to protect against computer viruses, break-ins, and similar disruptions from unauthorized tampering with our electronic storage systems. 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 and financial condition. 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.  As  a  result,  the  high  and  low  sales  prices  of  our  common  stock  during  the  twelve  months  ended  December  31,  2015  were $25.25 and $9.47 , respectively. We expect our stock price to continue to be subject to significant volatility and, in addition to the other risks and uncertainties described elsewhere in this Annual Report on Form 10-K 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 us; failure  (actual  or  perceived)  of  our  collaborators  to  devote  attention  or  resources  to  the  development  or  commercialization  of  product  candidates licensed to such collaborator; a dispute regarding our failure, or the failure of one of our third party collaborators, 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; general negative conditions in the financial markets; the cost associated with obtaining regulatory approval for any of our proprietary or collaboration product candidates; the failure, for any reason, to secure or defend our intellectual property position; for those products that are not yet approved for commercial sale, the failure or delay of applicable regulatory bodies to approve such products; identification of safety or tolerability issues; 24 • • • • • • • • • failure of clinical trials to meet efficacy endpoints; suspensions or delays in the conduct of clinical trials or securing of regulatory approvals; adverse regulatory  action with respect  to our and our collaborators’  products and product candidates  such as clinical  holds, imposition  of onerous requirements for approval or product recalls; our failure, or the failure of our third party collaborators, to successfully commercialize products approved by applicable regulatory bodies such as the FDA; our failure, or the failure of our third party collaborators, 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 candidate; the sale of additional debt and/or equity securities by us; our failure to obtain financing on acceptable terms or at all; or a restructuring of our operations. 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 our 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. In the future, we may issue additional options, warrants or other derivative securities convertible into our common stock. Our rights agreement and anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. We are party to a Rights Agreement designed to deter abusive takeover tactics and to encourage prospective acquirers to negotiate with our board of directors rather than attempt to acquire us in a manner or on terms that our board deems unacceptable, which could delay or discourage takeover attempts that stockholders may consider favorable. In addition, anti-takeover provisions in our charter documents 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,  as  amended,  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 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 board of directors. 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 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 product sales, introductions or modifications. Extensive  industry  regulation  has  had,  and  will  continue  to  have,  a  significant  impact  on  our  business.  All  pharmaceutical  companies,  including  ours,  are subject to extensive, complex, costly and evolving regulation by the health regulatory agencies 25 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 products. 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  products  or  may  impose  onerous,  costly  and  time-consuming  requirements  such  as additional clinical or animal testing. Regulatory authorities may require that we change our studies or conduct additional studies, which may significantly delay or make  continued  pursuit  of  approval  commercially  unattractive.  For  example,  the  approval  of  Baxalta’s  HYQVIA  BLA  was  delayed  by  the  FDA  until  we  and Baxalta 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 approved by the FDA in September 2014, the FDA or other foreign regulatory agency may, at any time, halt our and our collaborators’ development and commercialization activities due to safety concerns.  In  addition,  even  if  our  products  are  approved,  regulatory  agencies  may  also  take  post-approval  action  limiting  or  revoking  our  ability  to  sell  our products. Any of these regulatory actions may adversely affect the economic benefit we may derive from our products and therefore harm our financial condition. Under  certain  of  these  regulations,  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 we, or our contract supplier, fail these inspections, we may not be able to commercialize our product 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. 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, false claims laws, civil monetary penalty laws, data privacy and security laws, tracing and tracking laws, as well as transparency 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 26 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  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. 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 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. 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’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. 27 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. If third party reimbursement and customer contracts are not available, our products may not be accepted in the market. Our ability to earn sufficient returns on our products will depend in part on the extent to which reimbursement for our products and related treatments will be available from government health administration authorities, private health insurers, managed care organizations and other healthcare providers. Third-party payors 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  payors  may  not  establish  adequate  levels  of reimbursement  for  the  products  that  we  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 our products are 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 that could cause us to sell our products at lower prices, resulting in less revenue to us. Any of  the  proprietary  or  collaboration  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 payors 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, 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 products. 28 In  March  2010,  the  U.S.  adopted  the  Patient  Protection  and  Affordable  Care  Act,  as  amended  by  the  Health  Care  and  Education  Reconciliation  Act  (the Healthcare Reform Act). This law substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The Healthcare Reform Act contains a number of provisions that are expected to impact our business and operations, in some cases in ways  we  cannot  currently  predict.  Changes  that  may  affect  our  business  include  those  governing  enrollment  in  federal  healthcare  programs,  reimbursement changes,  fraud  and  abuse  and  enforcement.  These  changes  will  impact  existing  government  healthcare  programs  and  will  result  in  the  development  of  new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. Additional provisions of the Healthcare Reform Act may negatively affect  our revenues in the future. For example,  the Healthcare  Reform Act imposes a non-deductible  excise  tax  on  pharmaceutical  manufacturers  or  importers  that  sell  branded  prescription  drugs  to  U.S.  government  programs  that  we  believe  will impact our revenues from our products. In addition, as part of the Healthcare Reform Act’s provisions closing a funding gap that currently exists in the Medicare Part  D  prescription  drug  program,  we  will  also  be  required  to  provide  a  50%  discount  on  branded  prescription  drugs  dispensed  to  beneficiaries  under  this prescription  drug  program.  We  expect  that  the  Healthcare  Reform  Act  and  other  healthcare  reform  measures  that  may  be  adopted  in  the  future  could  have  a material adverse effect on our industry generally and on our ability to maintain or increase our product sales or successfully commercialize our product candidates or could limit or eliminate our future spending on development projects. Furthermore, individual states 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 payors 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. We face intense competition and rapid technological change that could result in the development of products by others that are superior to our proprietary and collaboration products under development. Our proprietary and collaboration 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. The competitors for Hylenex recombinant include, but are not  limited  to,  Valeant  Pharmaceuticals  International,  Inc.’s  FDA-approved  product,  Vitrase  ® , an ovine (ram)  hyaluronidase,  and Amphastar  Pharmaceuticals, Inc.’s  product,  Amphadase  ®  ,  a  bovine  (bull)  hyaluronidase.  For  our  PEGPH20  product  candidate,  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  collaboration  product  candidates  or  that  could  render  our  technologies  and  product  candidates  obsolete  or  noncompetitive.  Many  of  these competitors have substantially more resources and product development, manufacturing and marketing experience and capabilities than we do. In addition, many of our  competitors  have  significantly  greater  experience  than  we  do  in  undertaking  preclinical  testing  and  clinical  trials  of  pharmaceutical  product  candidates  and obtaining FDA and other regulatory approvals of products and therapies for use in healthcare. Item 1B. Unresolved Staff Comments None. Item 2. Properties Our administrative offices and research facilities are currently located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research space for a monthly rent expense of approximately $145,000 , net of costs and property taxes associated with the operation and maintenance of the subleased facilities. In addition, we have a satellite office in South San Francisco, California, where we lease approximately 10,000 square feet of office space for a monthly rent expense of approximately $26,000. We believe the current space is adequate for our immediate needs. 29 Item 3. 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 4. Mine Safety Disclosures Not applicable. 30 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NASDAQ Global Select Market under the symbol “HALO.” The following table sets forth the high and low sales prices per share of our common stock during each quarter of the two most recent fiscal years: PART II First Quarter Second Quarter Third Quarter Fourth Quarter 2015 2014 High $16.55   $22.85   $25.25   $18.65   Low $9.47   $13.91   $12.80   $12.80   High $18.18   $12.97   $10.70   $10.00   Low $11.28 $6.88 $8.58 $7.51 On February 22, 2016 , the closing sales price of our common stock on the NASDAQ Global Select Market was $8.19 per share. As of February 22, 2016 , we had approximately 21,000 stockholders of record and beneficial owners of our common stock. Dividends We have never declared or paid any dividends on our common stock. We currently intend to retain available cash for funding operations; therefore, we do not expect to pay any dividends on our common stock in the foreseeable future. In addition, the provisions of our Loan Agreement limit, among other things, our ability to pay dividends and make certain other payments. Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contract restrictions, business prospects and other factors our board of directors may deem relevant. 31                         Stock Performance Graph and Cumulative Total Return Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed to be “filed” with the SEC or to be “soliciting material” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and it shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. The graph below compares Halozyme Therapeutics, Inc.’s cumulative five-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite Index and the NASDAQ Biotechnology Index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from December 31, 2010 to December 31, 2015. The historical stock price performance included in this graph is not necessarily indicative of future stock price performance. Halozyme Therapeutics, Inc. NASDAQ Composite NASDAQ Biotechnology 12/31/2010 $100 12/31/2011 $120 12/31/2012 $85 12/31/2013 $189 12/31/2014 $122 12/31/2015 $219 $100 $100 $99 $112 $116 $148 $163 $246 $187 $331 $200 $370 32   Item 6. Selected Financial Data The selected consolidated financial data set forth below as of December 31, 2015 and 2014 , and for the fiscal years ended December 31, 2015, 2014 and 2013 , are derived from our audited consolidated financial statements included elsewhere in this report. This information should be read in conjunction with those consolidated financial statements, the notes thereto, and with “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .” The selected consolidated  financial  data set forth below as of December  31, 2013, 2012 and 2011, and for the fiscal years ended December 31, 2012 and 2011, are derived from our audited consolidated financial statements that are contained in reports previously filed with the SEC, not included herein. Summary Financial Information Year Ended December 31, Statement of Operations Data: 2015 (1) 2014 (2) 2013 (3) 2012 (4) 2011 (5) Total revenues Net loss Net loss per share, basic and diluted (in thousands, except for per share amounts)   $   $   $ 135,057   $ 75,334   $ 54,799   $ 42,325   $ 56,086 (32,231)   $ (68,375)   $ (83,479)   $ (53,552)   $ (19,770) (0.25)   $ (0.56)   $ (0.74)   $ (0.48)   $ (0.19) Shares used in computing net loss per share, basic and diluted 126,704   122,690   112,805   111,077   102,566 Balance Sheet Data: 2015 2014 2013 2012 2011 As of December 31, Cash and cash equivalents and available-for-sale marketable securities Working capital Total assets Deferred revenue Long-term debt, net Total liabilities Stockholders’ equity (deficit) ______________  (in thousands)   $   $   $   $   $   $   $ 108,339   $ 135,623   $ 71,503   $ 99,501   $ 109,315   $ 136,990   $ 70,293   $ 111,682   $ 181,789   $ 165,977   $ 101,793   $ 134,728   $ 53,223   $ 54,634   $ 53,143   $ 43,846   $ 27,971   $ 49,860   $ 49,772   $ 29,662   $ 138,790   $ 124,625   $ 121,783   $ 85,875   $ 42,999   $ 41,352   $ (19,991)   $ 48,854   $ 52,376 46,236 65,759 40,884 — 54,858 10,900 (1) Revenues in 2015 included $23.0 million and $25.0 million in license fees from collaboration agreements with AbbVie and Lilly, respectively. (2) Revenues in 2014 included a $15.0 million license fee from the Janssen Collaboration. (3) Revenues  in  2013  reflected  increases  in  supply  of  bulk  rHuPH20  to  Roche  and  product  sales  of  Hylenex recombinant,  which  was  relaunched  in December 2011. (4) Revenues in 2012 included $9.5 million in license fees from the Pfizer Collaboration. (5) Revenues in 2011 included $18.0 million in license fees from collaboration agreements with ViroPharma Incorporated and Intrexon Corporation and $18.1 million related to recognition of unamortized deferred prepaid product-based payments and unamortized deferred upfront payment in connection with the termination of the collaboration with Baxalta for the marketing rights of Hylenex recombinant in July 2011. 33                                           Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the Part I, Item 1A, Risks Factors, and elsewhere in this Annual Report. References to “Notes” are Notes included in our Notes to Consolidated Financial Statements. Overview Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that can improve cancer survival. Our research primarily focuses on human enzymes that alter the extracellular matrix and tumor microenvironment. The extracellular matrix is a complex matrix of proteins and carbohydrates surrounding the cell that provides structural support in tissues and orchestrates many important biological activities, including cell migration, signaling and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies. Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk  and  cost  by:  (1)  developing  our  own  proprietary  products  in  therapeutic  areas  with  significant  unmet  medical  needs,  with  a  focus  on  oncology,  and  (2) licensing  our  technology  to  biopharmaceutical  companies  to  collaboratively  develop  products  that  combine  our  technology  with  the  collaborators’  proprietary compounds. The majority of our approved product 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  temporarily  breaking  down  hyaluronan  (or  HA),  a naturally  occurring  substance  that  is  a  major  component  of  the  extracellular  matrix  in  tissues  throughout  the  body  such  as  skin  and  cartilage.  We  believe  this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of 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  ™  Technology.  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. We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), and Eli Lilly and Company (Lilly). We receive royalties from two of these collaborations, including royalties from sales of one product approved in the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of our approved products, product candidates, and ENHANZE collaborations will depend on the ability of Halozyme and our collaborators to develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates. Our  proprietary  development  pipeline  consists  of  a  clinical  stage  product  candidate  in  oncology  and  research-stage  oncology  projects.  Our  lead  oncology program is PEGPH20 (PEGylated recombinant human hyaluronidase), a molecular entity we are developing for the systemic treatment of tumors that accumulate HA.  When  HA  accumulates  in  a  tumor,  it  can  cause  higher  pressure  in  the  tumor,  reducing  blood  flow  into  the  tumor  and  with  that,  reduced  access  of  cancer therapies to the tumor. PEGPH20 works by temporarily degrading HA surrounding cancer cells resulting in reduced pressure and increased blood flow to the tumor thereby  enabling increased  amounts  of anticancer  treatments  administered  concomitantly  gaining access  to the tumor.  We are  currently  in Phase 2 and Phase 3 clinical testing for PEGPH20 in stage IV PDA (Studies 109-202 and 109-301), in Phase 1b clinical testing in non-small cell lung cancer (Study 107-201) and in Phase 1b clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101). 34 Our 2015 and recent key accomplishments and events are as follows: • • • • • • • • • • • • • • • In the first quarter of 2016, we initiated the Phase 3 study of PEGPH20 (Halozyme Study 301) in previously untreated stage IV PDA patients. Dosing of the first patient is planned to occur by the end of March 2016. In February 2016, we completed enrollment of 133 patients in Halozyme Study 202 and project to present mature PFS results of Stage 2 of the study in the fourth quarter of 2016. In February 2016, our partner Ventana filed an IDE with the FDA for the companion diagnostic test we co-developed to prospectively identify patients with high levels of HA. In February 2016, Pfizer dosed the first patient in the Phase 1 clinical trial evaluating subcutaneous delivery of bococizumab, an investigational PCSK9 inhibitor developed by Pfizer, with ENHANZE Technology. In  January  2016,  through  our  subsidiary,  Halozyme  Royalty  LLC  (Halozyme  Royalty),  we  received  a  $150.0  million  loan  secured  by  future  royalties received from our collaborations with Roche and Baxalta. In  January  2016,  AbbVie  dosed  the  first  patient  in  the  Phase  1  clinical  trial  evaluating  subcutaneous  delivery  of  adalimumab  (HUMIRA  ®  )  with ENHANZE Technology. In  December  2015,  we  entered  into  a  collaboration  and  license  agreement  with  Lilly,  under  which  Lilly  has  the  worldwide  license  to  develop  and commercialize products combining our ENHANZE Technology with Lilly proprietary biologics directed to up to five targets. Targets may be selected on an exclusive basis. We received $25.0 million for the license with two specified targets. In November 2015, we finalized our assay methodology and pathology-based scoring algorithm with Ventana for our affinity-histochemistry companion diagnostic. In November 2015, we announced the dosing of the first patient in a Phase 1b clinical trial of PEGPH20 in combination with Merck’s immuno-oncology drug KEYTRUDA (pembrolizumab) for patients with advanced non-small cell lung and gastric cancers. In November 2015, Janssen dosed the first patient in a Phase 1b clinical trial evaluating subcutaneous delivery of daratumumab (DARZALEX ® ) with ENHANZE Technology in multiple myeloma. In October 2015, Pfizer dosed the first patient in the Phase 1 clinical trial evaluating subcutaneous delivery of rivipansel with our ENHANZE Technology for the treatment of individuals with vaso-occlusive crisis of sickle cell disease. In July 2015, we entered into a clinical collaboration agreement with Eisai Co. Ltd. (Eisai) to evaluate Eisai's agent eribulin mesylate Halaven ® (eribulin) in combination with PEGPH20 in first line HER2-negative HA-high metastatic breast cancer patients. In  June  2015,  we  entered  into  a  collaboration  and  license  agreement  with  AbbVie,  under  which  AbbVie  has  the  worldwide  license  to  develop  and commercialize products combining our ENHANZE Technology with AbbVie proprietary biologics directed to up to nine targets. Targets may be selected on an exclusive basis. We received $23.0 million for the license with one specified target, HUMIRA. In May 2015, we entered into a global collaboration agreement with Ventana, a member of the Roche Group, to collaborate on the development of, and for Ventana to ultimately commercialize, a companion diagnostic assay for use with PEGPH20. The Ventana assay will be used to identify high levels of HA. Under the agreement, Ventana will develop an in vitro diagnostic (IVD), under design control, using our proprietary HA binding protein, with the intent of submitting it for regulatory approval in the United States, Europe and other countries. In January 2015, we disclosed initial efficacy and safety data from an interim assessment of Stage 1 of Study 109-202, a Phase 2 multicenter, randomized clinical trial evaluating PEGPH20 as a first-line therapy for patients with stage IV PDA. We also presented the final results from Study 109-201, a multi- center, international open label dose escalation Phase 1b clinical study of PEGPH20 in combination with gemcitabine for the treatment of patients with stage IV PDA at the 2015 Gastrointestinal Cancers Symposium (also known as ASCO-GI meeting). 35 Results of Operations Comparison of Years Ended December 31, 2015, 2014 and 2013 Product Sales, Net — Product sales increased in 2015 compared to 2014 by $8.3 million, or 22%, primarily due to the sale of bulk rHuPH20 to Baxalta of $6.4 million in 2015, compared to no sales in 2014, and a $2.9 million increase in product sales of Hylenex recombinant, which increased to $16.1 million in 2015 from $13.2 million in 2014. Product sales increased in 2014 compared to 2013 by $13.4 million, or 55%, primarily due to a $9.8 million increase in product sales of bulk rHuPH20 to Roche and a $4.1 million increase in product sales of Hylenex recombinant. Prior to the receipt of the European marketing approval of Roche’s Herceptin  SC  product  in  August  2013  and  MabThera  SC  product  in  March  2014,  and  Baxalta’s  HYQVIA  product  in  May  2013,  revenue  from  bulk  rHuPH20 supply for these collaboration products was recorded as revenues under collaborative agreements instead of product sales revenue. Revenues Under Collaborative Agreements — Revenues under collaborative agreements for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands): Upfront payments, license maintenance fees and amortization of deferred upfront, license fees and product-based payments: 2015 Change 2014 Change 2013 Lilly AbbVie Roche Pfizer Baxalta Janssen Other   $ 25,000   23,000   3,269   2,000   765   —   —     $ n/a n/a 8%   100%   0%   —   —   3,028   1,000   765     $ n/a n/a 31%   (33%)   27%   (100)%   15,000   n/a n/a —   (100%)   209%   Reimbursements for research and development services: 54,034   173%   19,793   Roche (1) Janssen Baxalta (1) Other 2,556   (63%)   6,923   (64%)   19,086 834   292   284   3,966   n/a —   n/a (76%)   76%   (52%)   1,209   161   8,293   (70%)   (79%)   (65%)   23,915 — — 2,308 1,500 604 — 2,000 6,412 — 4,059 770 Total revenues under collaborative agreements   $ 58,000   107%   $ 28,086   (7%)   $ 30,327 _______________ (1) Subsequent  to  the  European  approvals  of  Roche’s  Herceptin  SC  product  in  August  2013  and  MabThera  SC  product  in  March  2014  and  Baxalta’s HYQVIA product in May 2013, revenue from supply of bulk rHuPH20 for those products to the collaborators was recorded as product sales. In 2015, we recognized $25.0 million in license fee revenue in connection with the Lilly Collaboration and $23.0 million in license fee revenue in connection with  the  AbbVie  Collaboration.  In  2014,  we  recognized  $15.0  million  in  license  fee  revenue  in  connection  with  the  Janssen  Collaboration.  Revenue  from reimbursements  for  research  and  development  services  and  bulk  rHuPh20  supply  decreased  in  2015  compared  to  2014  mainly  due  to  a  reduction  in  services provided to Roche compared to the same period in 2014. Revenue from reimbursements for research and development services and bulk rHuPh20 supply decreased in 2014 compared to 2013 mainly due to revenue from supply of bulk rHuPH20 for Roche collaboration products being recognized as product sales revenue in 2014, as opposed to revenue from reimbursements for research and development services in the same period in 2013. The decrease was also due to a decrease in reimbursements  for manufacturing  services  to support the  launches  by Roche and Baxalta.  Research and development  services  rendered  by us on behalf of our collaborators  are  at  the  request  of  the  collaborators;  therefore,  the  amount  of  future  revenues  related  to  reimbursable  research  and  development  services  is uncertain. 36                                                                                             We expect the non-reimbursement revenues under our collaborative agreements to continue to fluctuate in future periods based on our collaborators’ abilities to meet various clinical and regulatory milestones set forth in such agreements and our abilities to obtain new collaborative agreements. Royalties – Royalty revenue was $31.0 million in 2015 compared to $9.4 million in 2014 and $33,000 in 2013. The increase relates primarily to increased sales  of  Herceptin  SC  by  Roche  since  the  launch  of  Herceptin  SC  in  September  2013.  We  recognize  royalties  on  sales  of  the  collaboration  products  by  the collaborators in the quarter following the quarter in which the corresponding sales occurred. In general, we expect royalty revenue to increase in future periods reflecting  expected increases in sales of collaboration  products, although there may be periods with flat or declining royalty revenue as sales of products under collaborations vary. Cost of Product Sales — Cost of product sales increased in 2015 compared to 2014 by $6.5 million, or 29%, primarily due to the increased product sales of bulk rHuPH20 for HYQVIA. Cost of product sales increased in 2014 compared to 2013 by $16.5 million, or 264%, primarily due to the increased product sales of bulk rHuPH20 for Herceptin SC. Prior to European marketing approvals of Roche’s collaboration products, Herceptin SC in August 2013 and MabThera SC in March 2014, and Baxalta’s collaboration HYQVIA product in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development  expenses  in  the  periods  such  costs  were  incurred.  Therefore,  cost  of  product  sales  of  bulk  rHuPH20  for  these  collaboration  products  in  2013  was materially  reduced  due to the exclusion of those manufacturing  costs that  were charged  to research  and development  expenses in the periods prior  to receiving marketing approvals. Cost  of  product  sales  of  bulk  rHuPH20  for  collaboration  products  in  2014  excluded  $1.0  million  in  manufacturing  costs,  of  which  $0.9  million  and  $0.1 million were charged to research and development expenses for 2013 and 2012, respectively. Cost of product sales of bulk rHuPH20 for collaboration products in 2013 excluded $10.0 million in manufacturing costs, of which $9.0 million and $1.0 million were charged to research and development expenses in 2013 and 2012, respectively. The estimated selling price of the zero-cost inventory of bulk rHuPH20 for Herceptin SC on hand as of December 31, 2013, was approximately $1.3 million. We sold all of this inventory in 2014. In 2015, the cost of product sales of bulk rHuPH20 was approximately 81% of bulk rHuPH20 product sales revenue. 37 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, clinical trials, preclinical and regulatory activities. Research and development expenses incurred for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands): Programs Product Candidates: PEGPH20 Ultrafast insulin program Hylenex  recombinant ENHANZE collaborations (1) rHuPH20 platform (2) HTI-501 Other 2015 Change 2014 Change 2013   $ 75,616   117 %   $ 34,857   86 %   $ 1,634   1,468   3,181   7,333   5   3,999   (93)%   (72)%   (53)%   26 %   (100)%   31 %   22,424   5,318   6,799   5,807   1,447   3,044   (9)%   (50)%   (78)%   (1)%   (47)%   12 %   18,742 24,723 10,734 31,104 5,895 2,712 2,730 Total research and development expenses   $ 93,236   17 %   $ 79,696   (18)%   $ 96,640 _______________ (1) (2) Subsequent  to  the  European  approvals  of  Roche’s  Herceptin  SC  product  in  August  2013  and  MabThera  SC  product  in  March  2014  and  Baxalta’s HYQVIA product in May 2013, the manufacturing costs of bulk rHuPH20 for these collaboration products were capitalized as inventory. Includes  research,  development  and  manufacturing  expenses  related  to  our  proprietary  rHuPH20  enzyme.  These  expenses  were  not  designated  to  a specific program at the time the expenses were incurred. Research and development expenses relating to our PEGPH20 program in 2015 increased by 117%, compared to 2014 primarily due to increased clinical trial  activities.  Research  and  development  expenses  relating  to  our  ultrafast  insulin  program  in  2015  decreased  by  93%  compared  to  2014  primarily  due  to decreased  clinical  trial  and  manufacturing  activities.  Research  and  development  expenses  relating  to  Hylenex recombinant  program  decreased  in  2015  by  72% compared to 2014 mainly due to the completion of the technology transfer and validation campaign with a second manufacturer for Hylenex recombinant in 2014. Research and development expenses relating to our ENHANZE collaborations in 2015 decreased by 53%, primarily due to a decrease in manufacturing expenses related  to  our  collaboration  with  Roche.  We  expect  total  research  and  development  expenses  to  increase  in  future  periods  reflecting  expected  increases  in  our PEGPH20 development activities. Research and development expenses relating to our PEGPH20 program in 2014 increased by 86%, compared to 2013 primarily due to the increased clinical trial  activities  mostly  relating  to  Study  109-202.  Research  and  development  expenses  relating  to  Hylenex recombinant  program  decreased  in  2014  by  50% compared to 2013 mainly due to the completion of the technology transfer and validation campaign with a second manufacturer for Hylenex recombinant in 2014. Research and development expenses relating to our ENHANZE collaborations in 2014 decreased by 78%, primarily due to a $12.0 million decrease resulting from capitalizing  manufacturing  costs  for  approved  collaboration  products  in  the  current  period,  an  $8.1  million  decrease  in  other  outsourced  regulatory  and manufacturing  activities  to  support  our  collaboration  with  Roche  and  a  $2.5  million  decrease  in  preclinical  activities  to  support  Baxalta.  Subsequent  to  the European approvals of Roche's Herceptin SC product in August 2013 and MabThera SC product in March 2014 and Baxalta's HYQVIA product in May 2013, the manufacturing costs of bulk rHuPH20 for these collaboration products were capitalized as inventory. Selling, General and Administrative — Selling, general and administrative (SG&A) expenses increased in 2015 compared to 2014 by $4.1 million, or 11%, primarily due to the increase in compensation costs, including a $3.7 million increase in stock-based compensation. SG&A expenses increased in 2014 compared to 2013 by $3.6 million, or 11%, primarily due to the increase in compensation costs, including a $2.3 million increase in stock-based compensation. 38                                                                 Interest Expense — Interest  expense  included  interest  expense  and  amortization  of  the  debt  discount  related  to  the  long-term  debt.  Interest  expense decreased by $0.4 million in 2015 as compared to 2014 . Interest expense increased by $2.3 million in 2014 as compared to 2013 due to the $20.0 million increase in the principal balance of the long-term debt in December 2013. Liquidity and Capital Resources Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale marketable securities. As of December 31, 2015 , we had cash,  cash  equivalents  and  marketable  securities  of  approximately  $108.3  million.  We  will  continue  to  have  significant  cash  requirements  to  support  product development activities. The amount and timing of cash requirements will depend on the progress and success of our clinical development programs, regulatory and market acceptance, and the resources we devote to research and other commercialization activities. 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 currently anticipate an increase of cash and cash equivalents of approximately $35 million to $55 million for the year ending December 31, 2016, which includes cash received in January 2016 of $25 million paid by Lilly and $150 million from the royalty-backed debt agreement, and will depend on the progress of various preclinical  and  clinical  programs,  the  timing  of  our  manufacturing  scale  up  and  the  achievement  of  various  milestones  and  royalties  under  our  existing collaborative agreements. 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, such as the $150 million royalty-backed loan we received in January 2016. Refer to Note 15, Subsequent Event , for further information on our royalty-backed debt agreement. We may finance future cash needs through any one of the following financing vehicles: (i) the public offering of securities; (ii) new collaborative agreements; (iii) expansions or revisions to existing collaborative relationships; (iv) private financings; and/or (v) other equity or debt financings. We are a “well known seasoned issuer”, which allows us to file an automatically effective shelf registration statement on Form S-3 which would allow us, from time to time, to offer and sell equity, debt securities and warrants to purchase any of such securities, either individually or in units. We may, in the future, offer  and  sell  equity,  debt  securities  and  warrants  to  purchase  any  of  such  securities,  either  individually  or  in  units  to  raise  capital  to  fund  the  continued development of our product candidates, the commercialization of our products or for other general corporate purposes. Our existing cash, cash equivalents and marketable securities may not be adequate to fund our operations until we become profitable, if ever. We cannot be certain that additional financing will be available when needed or, if available, financing will be obtained on favorable terms. If we are unable to raise sufficient funds,  we  may  need  to  delay,  scale  back  or  eliminate  some  or  all  of  our  research  and  development  programs,  delay  the  launch  of  our  product  candidates,  if approved, and/or restructure our operations. If we raise additional funds by issuing equity securities, substantial dilution to existing stockholders could result. If we raise  additional  funds  by  incurring  debt  financing,  the  terms  of  the  debt  may  involve  significant  cash  payment  obligations,  the  issuance  of  warrants  that  may ultimately dilute existing stockholders when exercised and covenants that may restrict our ability to operate our business. Cash Flows Operating Activities Net cash used in operations was $37.1 million in 2015 compared to $47.5 million in 2014. The $10.4 million decrease in utilization of cash in operations was mainly due to an increase of license fees and royalties from our collaborators; offset in part by increased spending on our R&D programs. Net cash used in operations was $47.5 million in 2014 compared to $49.3 million in 2013. The $1.8 million decrease in utilization of cash in operations was mainly due to the receipt of a $15.0 million license fee payment from the Janssen Collaboration; offset in part by the timing of the collection of accounts receivable and the payment of accounts payable. Investing Activities Net cash provided by investing activities was $5.9 million in 2015 compared to net cash used of $33.0 million in 2014 and $47.9 million in 2013. The change in 2015 compared to 2014 was primarily due to the $17.4 million decrease in purchases of 39 marketable securities and $22.4 million increase in proceeds from the maturities of marketable securities. The decrease in 2014 compared to 2013 was primarily due to a $53.9 million increase in proceeds from maturities of marketable securities; offset in part by a $39.9 million increase in purchases of marketable securities in 2014. Financing Activities Net cash provided by financing activities was $13.1 million in 2015 compared to $114.5 million in 2014 and $25.1 million in 2013. Net cash provided by financing activities in 2015 consisted of $13.1 million in net proceeds from issuance of common stock under equity incentive plans. Net cash provided by financing activities in 2014 consisted of $107.7 million in net proceeds from the sale of our common stock in February 2014 and $6.8 million in net proceeds from option exercises. Net cash provided by financing activities in 2013 consisted of net proceeds of $20.0 million from the amended long-term debt and $5.1 million in net proceeds from option exercises. Long-Term Debt In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with Oxford Finance LLC (Oxford) and Silicon Valley Bank (SVB) (collectively, the Lenders), amending and restating in its entirety our original loan agreement with the Lenders, dated December 2012. The Loan Agreement provided for an additional $20 million principal amount of new term loan, bringing the total term loan balance to $50 million. The proceeds are to be used for working capital and general business requirements. The amended term loan facility matures on January 1, 2018. The outstanding term loan was $49.8 million as of December 31, 2015, net of unamortized debt discount of $0.2 million. In January 2015, we and the Lenders entered into a second amendment to the Loan Agreement (the Amendment) amending and restating the loan repayment schedule  of  the  Loan  Agreement.  The  amended  and  restated  loan  repayment  schedule  provides  for  interest  only  payments  in  arrears  through  January  2016, followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date. Consistent with the original loan, the Loan Agreement provides for a 7.55% interest rate on the term loan and a final interest payment equal to 8.5% of the original principal amount, or $4.25 million, which is due when the term loan becomes due or upon the prepayment of the facility. We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1% to 3% depending upon when the prepayment occurs. In December 2015, we entered into a consent, release and third amendment to the Loan Agreement with the Lenders, in which the Lenders consented to (i) the formation of Halozyme Royalty as a wholly-owned subsidiary of Halozyme, (ii) the release of liens and the sale of certain rights to receive royalty payments to Halozyme Royalty, and (iii) entering into a Credit Agreement with BioPharma Credit Investments IV Sub, LP., (BioPharma), as collateral agent and lender, and the other lenders party, whereby Halozyme Royalty will incur indebtedness from and grant liens on the royalty payments to BioPharma. This amendment allowed us to enter into a royalty-backed debt agreement. Refer to Note 15, Subsequent Event , for further information on our royalty-backed debt agreement. The amended and restated term loan facility is secured by substantially all of the assets of the Company and its subsidiary, Halozyme, Inc., except that the collateral  does  not  include  any  equity  interests  in  Halozyme,  Inc.  and  any  intellectual  property  (including  all  licensing,  collaboration  and  similar  agreements relating  thereto),  and  certain  other  excluded  assets.  The  Loan  Agreement  contains  customary  representations,  warranties  and  covenants  by  us,  which  covenants limit  our  ability  to  convey,  sell,  lease,  transfer,  assign  or  otherwise  dispose  of  certain  of  our  assets;  engage  in  any  business  other  than  the  businesses  currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our domestic subsidiary. The  Loan  Agreement  also  contains  customary  indemnification  obligations  and  customary  events  of  default,  including,  among  other  things,  our  failure  to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations or condition (financial or otherwise), a material 40 impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. In the event of default by us under the Loan 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 Loan Agreement, which could harm our financial condition. Off-Balance Sheet Arrangements As  of  December  31, 2015  ,  we  did  not  have  any  relationships  with  unconsolidated  entities  or  financial  partnerships,  such  as  entities  often  referred  to  as structured  finance  or  special  purpose  entities,  which  would  have  been  established  for  the  purpose  of  facilitating  off-balance  sheet  arrangements  or  other contractually  narrow  or  limited  purposes.  In  addition,  we  did  not  engage  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 relationship. Contractual Obligations As of December 31, 2015 , future minimum payments due under our contractual obligations are as follows (in thousands): Contractual Obligations (1,5) Long-term debt, including interest (2) Operating leases (3) Third-party manufacturing obligations (4) Purchase obligations Total _______________ Total 58,592   $   $ Payments Due by Period Less than 1 Year 1-3 Years 4-5 Years More than 5 Years 25,077   $ 33,515   $ —   $ 6,527   39,897   960   2,539   37,466   344   3,526   2,431   616   462   —   —     $ 105,976   $ 65,426   $ 40,088   $ 462   $ — — — — — (1) Does  not  include  milestone  or  contractual  payment  obligations  contingent  upon  the  achievement  of  certain  milestones  or  events  if  the  amount  and timing of such obligations are unknown or uncertain. Our in-license agreement is cancelable with written notice within 90 days. We may be required to pay  up  to  approximately  $9.3  million  in  milestone  payments,  plus  sales  royalties,  in  the  event  that  all  scientific  research  under  these  agreements  is successful. One of the milestone payments of $1.3 million is due upon the first dosing of a patient in our Phase 3 study of PEGPH20, which is expected to occur at the end of the first quarter of 2016. (2) Long-term debt obligations include future monthly interest payments based on a fixed rate of 7.55% and a final payment of $4.25 million for our long- term debt due in January 2018. (3) Includes minimum lease payments related to leases of our office and research facilities and certain autos under non-cancelable operating leases. (4) We have contracted with third-party manufacturers for the supply of bulk rHuPH20 and fill/finish of Hylenex recombinant. Under these agreements, we are required to purchase certain quantities each year during the terms of the agreements. The amounts presented represent our estimates of the minimum required payments under these agreements. (5) Excludes contractual obligations already recorded on our consolidated balance sheet as current liabilities. Contractual obligations for purchases of goods or services include agreements that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities  to be purchased; fixed, minimum or variable  price provisions; and the approximate timing of the transaction.  For obligations  with  cancellation  provisions,  the  amounts  included  in  the  preceding  table  were  limited  to  the  non-cancelable  portion  of  the  agreement  terms  or  the minimum cancellation fee. For  the  restricted  stock  units  and  performance  stock  units  granted,  the  number  of  shares  issued  on  the  date  the  restricted  stock  units  vest  is  net  of  the minimum  statutory  withholding  requirements  that  we  pay  in  cash  to  the  appropriate  taxing  authorities  on  behalf  of  our  employees.  The  obligation  to  pay  the relevant taxing authority is not included in the preceding table, as the amount is contingent upon continued employment. In addition, the amount of the obligation is unknown, as it is based in part on the market price of our common stock when the awards vest. 41                     The expected timing of payments of the obligations above is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations. Our future capital uses and requirements depend on numerous forward-looking factors. These factors may include, but are not limited to, the following: • • • • • • • • • • the rate of progress and cost of research and development activities; the number and scope of our research activities; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; our ability to establish and maintain product discovery and development collaborations, including scale-up manufacturing costs for our collaborators’ product candidates; the amount of royalties from our collaborators; the amount of product sales for Hylenex recombinant; the costs of obtaining and validating additional manufacturers of Hylenex recombinant; the effect of competing technological and market developments; the terms and timing of any collaborative, licensing and other arrangements that we may establish; and the extent to which we acquire or in-license new products, technologies or businesses. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally  accepted  accounting principles,  or U.S. GAAP. The preparation  of our 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. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates  under  different  assumptions  or  conditions.  We  believe  the  following  accounting  policies  to  be  critical  to  the  judgments  and  estimates  used  in  the preparation of our consolidated financial statements. Revenue Recognition We generate revenues from product sales and collaborative agreements. Payments received under collaborative agreements may include nonrefundable fees at the inception of the agreements, license fees, milestone payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20 and/or royalties on sales of products resulting from collaborative arrangements. We recognize revenue in accordance with the authoritative guidance on revenue recognition. Revenue is recognized when all of the following criteria are met: (1)  persuasive  evidence  of  an  arrangement  exists;  (2)  delivery  has  occurred  or  services  have  been  rendered;  (3)  the  seller’s  price  to  the  buyer  is  fixed  or determinable; and (4) collectibility is reasonably assured. Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements , of our consolidated financial  statements  for  further  discussion  of  our  revenue  recognition  policies  for  product  sales  and  revenues  under  our  collaborative  agreements  and  Note  4, Collaborative Agreements, of our consolidated financial statements for a further discussion of our collaborative agreements. 42 Share-Based Payments We  use  the  fair  value  method  to  account  for  share-based  payments  in  accordance  with  the  authoritative  guidance  for  share-based  compensation.  The  fair value  of  each  option  award  is  estimated  on  the  date  of  grant  using  a  Black-Scholes-Merton  option  pricing  model  (Black-Scholes  model)  that  uses  assumptions regarding a number of complex and subjective variables. Changes in these assumptions may lead to variability with respect to the amount of expense we recognize in connection with share-based payments. Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements , of our consolidated financial statements for a further discussion of share-based payments. Research and Development Expenses Research  and  development  expenses  include  salaries  and  benefits,  facilities  and  other  overhead  expenses,  external  clinical  trial  expenses,  research  related manufacturing  services,  contract  services  and  other  outside  expenses.  Research  and  development  expenses  are  charged  to  operations  as  incurred  when  these expenditures relate to our research and development efforts and have no alternative future uses.   After receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries for a product, costs related to purchases or manufacturing of bulk rHuPH20 for such product are capitalized as inventory. The manufacturing  costs of bulk rHuPH20 for the collaboration  products, Herceptin  SC, MabThera SC and HYQVIA, which were incurred  after  the receipt  of marketing  approvals  are  capitalized  as  inventory.  Refer  to  Note  2,  Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements , of our consolidated financial statements for a further discussion of research and development expenses. Due to the uncertainty in obtaining the FDA and other regulatory approvals, our reliance on third parties and competitive pressures, we are unable to estimate with  any  certainty  the  additional  costs  we  will  incur  in  the  continued  development  of  our  proprietary  product  candidates  for  commercialization.  However,  we expect our research and development expenses to increase this year as we continue with our clinical trial programs and continue to develop and manufacture our product candidates. Clinical  development  timelines,  likelihood  of  success  and  total  costs  vary  widely.  We  anticipate  that  we  will  make  ongoing  determinations  as  to  which research  and  development  projects  to  pursue  and  how  much  funding  to  direct  to  each  project  on  an  ongoing  basis  in  response  to  existing  resource  levels,  the scientific and clinical progress of each product candidate, and other market and regulatory developments. We plan on focusing our resources on those proprietary and collaboration product candidates that represent the most valuable economic and strategic opportunities. Product  candidate  completion  dates  and  costs  vary  significantly  for  each  product  candidate  and  are  difficult  to  estimate.  The  lengthy  process  of  seeking regulatory approvals and the subsequent compliance with applicable regulations require the expenditure of substantial resources. Any failure by us to obtain, or any delay  in  obtaining,  regulatory  approvals  could  cause  our  research  and  development  expenditures  to  increase  and,  in  turn,  have  a  material  adverse  effect  on  our results  of  operations.  We  cannot  be  certain  when,  or  if,  our  product  candidates  will  receive  regulatory  approval  or  whether  any  net  cash  inflow  from  our  other product candidates, or development projects, will commence. Recent Accounting Pronouncements Refer to Note 2, Summary of Significant Accounting Policies - Adoption and Pending Adoption of Recent Accounting Pronouncements , of our consolidated financial statements for a discussion of recent accounting pronouncements and their effect, if any, on us. 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2015 , our cash equivalents and marketable securities consisted of investments in money market funds and corporate debt obligations. 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. As of December 31, 2015 based on our current investment portfolio, 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 8. Financial Statements and Supplementary Data Our financial statements are annexed to this report beginning on page F-1. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Control and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed,  summarized  and  reported  within  the  timelines  specified  in  the  Securities  and  Exchange  Commission’s  rules  and  forms,  and  that  such  information  is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 44 Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal  executive  and  principal  financial  officers  and  effected  by  our  board  of  directors,  management  and  other  personnel,  to  provide  reasonable  assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • • • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and Provide  reasonable  assurance  regarding  prevention  or  timely  detection  of  unauthorized  acquisition,  use  or  disposition  of  our  assets  that  could  have  a material effect on our financial statements. Because  of  its  inherent  limitations,  internal  control  over  financial  reporting  may  not  prevent  or  detect  misstatements.  Projections  of  any  evaluation  of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our  management  assessed  the  effectiveness  of  our  internal  control  over  financial  reporting  as  of  December  31,  2015  .  In  making  this  assessment,  our management  used  the  criteria  set  forth  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (COSO)  in  Internal  Control-Integrated Framework (2013 framework) (the COSO criteria). Based on our assessment, management concluded that, as of December 31, 2015 , our internal  control over financial reporting is effective based on the COSO criteria. 45 The independent registered public accounting firm that audited the consolidated financial statements that are included in this Annual Report on Form 10-K has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2015 . The report appears below. Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Halozyme Therapeutics, Inc. We have audited Halozyme Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control  -  Integrated  Framework  issued  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (2013  framework)  (the  COSO  criteria). Halozyme  Therapeutics,  Inc.’s  management  is  responsible  for  maintaining  effective  internal  control  over  financial  reporting,  and  for  its  assessment  of  the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  effective  internal  control  over  financial  reporting  was  maintained  in  all  material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial  statements  in  accordance  with  generally  accepted  accounting  principles,  and  that  receipts  and  expenditures  of  the  company  are  being  made  only  in accordance  with authorizations  of management  and directors  of the company; and (3) provide reasonable  assurance  regarding  prevention  or timely  detection  of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Halozyme Therapeutics, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on the COSO criteria . We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Halozyme Therapeutics, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity (deficit) for each of the three years in the period ended December 31, 2015 of Halozyme Therapeutics, Inc. and our report dated February 29, 2016 expressed an unqualified opinion thereon.                                                                                                    /s/    Ernst & Young LLP San Diego, California February 29, 2016 46   Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item regarding directors is incorporated by reference to our definitive Proxy Statement (the Proxy Statement) to be filed with  the  Securities  and  Exchange  Commission  in  connection  with  our  2016 Annual  Meeting  of  Stockholders  under  the  heading  “Election  of  Directors.”  The information required by this item regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is incorporated by reference to the information under the caption “Compliance with Section 16(a) of the Exchange Act” to be contained in the Proxy Statement. The information required by this item regarding  our  code  of  ethics  is  incorporated  by  reference  to  the  information  under  the  caption  “Code  of  Conduct  and  Ethics”  to  be  contained  in  the  Proxy Statement. The information required by this item regarding our audit committee is incorporated by reference to the information under the caption “Board Meetings and  Committees—Audit  Committee”  to  be  contained  in  the  Proxy  Statement.  The  information  required  by  this  item  regarding  material  changes,  if  any,  to  the process  by  which  stockholders  may  recommend  nominees  to  our  board  of  directors  is  incorporated  by  reference  to  the  information  under  the  caption  “Board Meetings and Committees—Nominating and Governance Committee” to be contained in the Proxy Statement. Executive Officers Helen I. Torley, M.B. Ch. B., M.R.C.P. (53), President, Chief Executive Officer and Director. Dr. Torley joined Halozyme in January 2014 as President and Chief  Executive  Officer  and  as  a  member  of  Halozyme’s  Board  of  Directors.  Throughout  her  career,  Dr.  Torley  has  led  several  successful  product  launches, including  Kyprolis®,  Prolia®,  Sensipar®,  and  Miacalcin®.  Prior  to  joining  Halozyme,  Dr.  Torley  served  as  Executive  Vice  President  and  Chief  Commercial Officer for Onyx Pharmaceuticals (Onyx) from August 2011 to December 2013 overseeing the collaboration with Bayer on Nexavar® and Stivarga® and the U.S. launch of Kyprolis. She was responsible for the development of Onyx's commercial capabilities in ex-US markets and in particular, in Europe. Prior to Onyx, Dr. Torley spent 10 years in management positions at Amgen Inc., most recently serving as Vice President and General Manager of the US Nephrology Business Unit from 2003 to 2009 and the U.S. Bone Health Business Unit from 2009 to 2011. From 1997 to 2002, she held various senior management positions at Bristol-Myers Squibb,  including  Regional  Vice  President  of  Cardiovascular  and  Metabolic  Sales  and  Head  of  Cardiovascular  Global  Marketing.  She  began  her  career  at Sandoz/Novartis,  where  she  ultimately  served  as  Vice  President  of  Medical  Affairs,  developing  and  conducting  post-marketing  clinical  studies  across  all therapeutic areas, including oncology. Dr. Torley serves on the board of directors of Relypsa, Inc., a biopharmaceutical company. Before joining the industry, Dr. Torley was in medical practice as a senior registrar in rheumatology at the Royal Infirmary in Glasgow, Scotland. Dr. Torley received her Bachelor of Medicine and Bachelor of Surgery degrees (M.B. Ch.B.) from the University of Glasgow and is a Member of the Royal College of Physicians (M.R.C.P). Laurie D. Stelzer (48),  Senior  Vice  President,  Chief  Financial  Officer.  Ms.  Stelzer  joined  Halozyme  in  2015  as  Senior  Vice  President,  Chief  Financial Officer.  Prior  to  joining  Halozyme,  Ms.  Stelzer  served  from  April  2014  to  January  2015  as  the  Senior  Vice  President  of  Finance  supporting  R&D,  Technical Operations and M&A at Shire, Inc. Prior to that she was the Division CFO for the Regenerative Medicine Division and the Head of Investor Relations at Shire from March 2012 to April 2014. Prior to Shire, Ms. Stelzer held positions of increasing responsibility for 15 years at Amgen, Inc. including Interim Treasurer, Head of Emerging Markets Expansion, Executive Director of Global Commercial Finance and Head of Global Accounting. Early in her career, she held various finance and accounting positions in the real estate and banking industries. Ms. Stelzer received her MBA from the Anderson School at the University of California, Los Angeles, and a Bachelor of Science in Accounting from Arizona State University. 47 Athena Countouriotis, M.D. (44),  Senior  Vice  President,  Chief  Medical  Officer.  Dr.  Countouriotis  joined  Halozyme  in  January  2015  as  Senior  Vice President,  Chief  Medical  Officer.  From  February  2012  to  January  2015,  Dr. Countouriotis  served  as  chief  medical  officer  at  Ambit  Biosciences  Corporation,  a pharmaceutical company, which was acquired by Daiichi Sankyo in November 2014. From August 2007 to February 2012, Dr. Countouriotis was a clinical leader within  the  Pfizer  Inc.,  a  pharmaceutical  company,  Oncology  Business  Unit.  From  October  2005  to  August  2007,  she  was  director  of  oncology  global  clinical research at Bristol-Myers Squibb Company, a pharmaceutical company, with responsibility for leading clinical development of Sprycel ® in acute lymphoblastic leukemia and chronic myeloid leukemia. Earlier in her career, she held the position as Associate Medical Director at Cell Therapeutics, Inc., a biopharmaceutical company. Dr. Countouriotis received a B.S. from the University of California, Los Angeles, and an M.D. at Tufts University School of Medicine. She received her initial training in pediatrics at the University of California, Los Angeles, and additional training at the Fred Hutchinson Cancer Research Center in the Pediatric Hematology/Oncology Program. Harry J. Leonhardt, Esq. (59), Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. Mr. Leonhardt joined Halozyme in  April  2015  as  Senior  Vice  President,  General  Counsel,  Chief  Compliance  Officer  and  Corporate  Secretary.  Mr.  Leonhardt  brings  more  than  30  years  of executive  management, corporate  legal, intellectual  property, compliance,  business development  and mergers  and acquisitions  experience  to Halozyme, with an extensive  background  in  the  biotechnology  industry.  Prior  to  joining  Halozyme,  Mr.  Leonhardt  was  an  arbitrator  before  the  International  Centre  for  Dispute Resolution  and  a  consultant  in  the  biotechnology  industry  from  January  2013  to  April  2015.  He  served  as  Senior  Vice  President,  Legal  and  Compliance,  and Corporate  Secretary  at  Amylin  Pharmaceuticals,  Inc.,  a  biotechnology  company,  from  September  2011  to  January  2013  and  previously  served  in  other  senior management legal positions at Amylin since September 2007. Prior to Amylin, he served as Senior Vice President, General Counsel and Corporate Secretary at Senomyx,  Inc.,  a  company  focused  on  taste  receptor  technology  and  the  development  of  novel  flavor  ingredients  for  the  food  and  beverage  industry,  from September  2003  to  September  2007.  From  February  2001  to  September  2003,  Mr.  Leonhardt  was  Executive  Vice  President,  General  Counsel  and  Corporate Secretary at Genoptix, Inc. and from July 1996 to November 2000, he served as Vice President and then Senior Vice President, General Counsel and Corporate Secretary at Nanogen, Inc. Prior to Nanogen, Mr. Leonhardt held positions of increasing responsibility at Allergan, Inc. including Chief Litigation Counsel and General Counsel for European Operations. Early in his career, he was an attorney at Lyon & Lyon LLP where he represented a number of prominent clients in the biotech, pharmaceutical and consumer products industries. Mr. Leonhardt received a B.S. in Pharmacy from the University of the Sciences and a Juris Doctorate from the University of Southern California School of Law. Item 11. Executive Compensation The information required by this item is incorporated by reference to the information under the caption “ Executive Compensation ” to be contained in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Other than as set forth below, the information required by this item is incorporated by reference to the information under the caption “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” to be contained in the Proxy Statement. 48 Equity Compensation Plan Information The following table summarizes our compensation plans under which our equity securities are authorized for issuance as of December 31, 2015 : Plan Category Equity compensation plans approved by stockholders  (1) Equity compensation plans not approved by stockholders _____________________ Number of Shares to Be Issued upon Exercise of Outstanding Options and Restricted Stock Units (a) 8,969,113   Weighted Average Exercise Price of Outstanding Options and Restricted Stock Units (2) (b) $13.03 —   8,969,113   — $13.03 Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) (c) 7,440,487 — 7,440,487 (1) Represents stock options, restricted stock units, and performance restricted stock units under the Amended and Restated 2011 Stock Plan, 2008 Stock Plan, 2006 Stock Plan, 2005 Outside Directors’ Stock Plan, and 2004 Stock Plan. (2) This amount does not include restricted stock units and performance restricted stock units as there is no exercise price for such units. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the information under the caption “ Certain Relationships and Related Transactions ” to be contained in the Proxy Statement. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to the information under the caption “ Principal Accounting Fees and Services ” to be contained in the Proxy Statement. 49                     Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of this report. 1.   Financial Statements   PART IV Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2015 and 2014 Consolidated Statements of Operations for Each of the Years Ended December 31, 2015, 2014      and 2013 Consolidated Statements of Comprehensive Loss for Each of the Years Ended December 31, 2015, 2014  and 2013 Consolidated Statements of Cash Flows for Each of the Years Ended December 31, 2015, 2014 and 2013 Consolidated Statements of Stockholders’ Equity (Deficit) for Each of the Years Ended December  31,      2015, 2014 and 2013 Notes to the Consolidated Financial Statements 2.   List of all Financial Statement schedules. Page F-1 F-2 F-3 F-4 F-5 F-6 F-7 The following financial statement schedule of Halozyme Therapeutics, Inc. is filed as part of this Annual Report on Form 10-K on page F-37 and should be read in conjunction with the consolidated financial statements of Halozyme Therapeutics, Inc. Schedule II: Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto. 3.   List of Exhibits required by Item 601 of Regulation S-K. See part (b) below. (b) Exhibits. The exhibits listed in the accompanying “Exhibit Index” are incorporated herein by reference. (c) Financial Statement Schedules. See Item 15(a) 2 above. 50                            SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date:   February 29, 2016 Halozyme Therapeutics, Inc., a Delaware corporation By:   /s/    Helen I. Torley, M.B. Ch.B., M.R.C.P. Helen I. Torley, M.B. Ch.B., M.R.C.P. President and Chief Executive Officer 51                                                         POWER OF ATTORNEY Know all persons by these presents, that each person whose signature appears below constitutes and appoints Helen I. Torley and Laurie D. Stelzer, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substituted, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/    Helen I. Torley, M.B. Ch.B., M.R.C.P. President and Chief Executive Officer February 29, 2016        Helen I. Torley, M.B. Ch.B., M.R.C.P.  (Principal Executive Officer), Director /s/   Laurie D. Stelzer        Laurie D. Stelzer /s/    Kathryn E. Falberg        Kathryn E. Falberg /s/ Jean-Pierre Bizzari      Jean-Pierre Bizzari /s/    Jeffrey W. Henderson        Jeffrey W. Henderson /s/    Kenneth J. Kelley        Kenneth J. Kelley /s/    Randal J. Kirk        Randal J. Kirk /s/    Connie L. Matsui        Connie L. Matsui /s/    Matthew L. Posard        Matthew L. Posard Senior Vice President and Chief Financial Officer February 29, 2016 (Principal Financial and Accounting Officer) Chair of the Board of Directors February 29, 2016 Director Director Director Director Director Director 52 February 29, 2016 February 29, 2016 February 29, 2016 February 29, 2016 February 29, 2016 February 29, 2016                                                                                                                                                                                               The Board of Directors and Stockholders Halozyme Therapeutics, Inc. Report of Independent Registered Public Accounting Firm We  have  audited  the  accompanying  consolidated  balance  sheets  of  Halozyme  Therapeutics,  Inc.  as  of  December  31,  2015  and  2014,  and  the  related consolidated  statements  of  operations,  comprehensive  loss,  cash  flows,  and  stockholders’  equity  (deficit)  for  each  of  the  three  years  in  the  period  ended December 31, 2015.  Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  financial  statements  are  free  of  material  misstatement.  An  audit  includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used  and  significant  estimates  made  by  management,  as  well  as  evaluating  the  overall  financial  statement  presentation.  We  believe  that  our  audits  provide  a reasonable basis for our opinion. In  our  opinion,  the  financial  statements  referred  to  above  present  fairly,  in  all  material  respects,  the  consolidated  financial  position  of  Halozyme Therapeutics, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December  31,  2015,  in  conformity  with  U.S.  generally  accepted  accounting  principles.  Also,  in  our  opinion,  the  related  financial  statement  schedule,  when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Halozyme Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2016 expressed an unqualified opinion thereon. San Diego, California February 29, 2016 /s/    Ernst & Young LLP F-1 Current assets: Cash and cash equivalents Marketable securities, available-for-sale Accounts receivable, net Inventories Prepaid expenses and other assets Total current assets Property and equipment, net Prepaid expenses and other assets Restricted cash       Total assets Current liabilities: Accounts payable Accrued expenses Deferred revenue, current portion Current portion of long-term debt, net Total current liabilities Deferred revenue, net of current portion Long-term debt, net Other long-term liabilities Commitments and contingencies (Note 9) Stockholders’ equity: HALOZYME THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) ASSETS December 31, 2015 December 31, 2014   $ 43,292   $ 65,047   32,410   9,489   21,534   171,772   3,943   5,574   500   61,389 74,234 9,149 6,406 10,143 161,321 2,951 1,205 500   $ 181,789   $ 165,977 LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 4,499   $ 26,792   9,304   21,862   62,457   43,919   27,971   4,443   —   128   525,628   (99)   (482,658)   42,999     $ 181,789   $ 3,003 13,961 7,367 — 24,331 47,267 49,860 3,167 — 126 491,694 (41) (450,427) 41,352 165,977 Preferred stock — $0.001 par value; 20,000 shares authorized; no shares issued and outstanding Common stock — $0.001 par value; 200,000 shares authorized; 128,152 and 125,721 shares issued and outstanding at December 31, 2015 and 2014, respectively Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders’ equity       Total liabilities and stockholders’ equity See accompanying notes to consolidated financial statements. F-2                                                                                         HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2015 2014 2013   $ 46,082   $ 37,823   $ 58,000   30,975   135,057   29,245   93,236   40,028   162,509   (27,452)   422   (5,201)   28,086   9,425   75,334   22,732   79,696   35,942   138,370   (63,036)   242   (5,581)   (32,231)   $ (68,375)   $ 24,439 30,327 33 54,799 6,246 96,640 32,347 135,233 (80,434) 229 (3,274) (83,479)   $   $ (0.25)   $ (0.56)   $ (0.74) Revenues: Product sales, net Revenues under collaborative agreements Royalties Total revenues Operating expenses: Cost of product sales Research and development Selling, general and administrative Total operating expenses Operating loss Other income (expense): Investment and other income, net Interest expense Net loss Basic and diluted net loss per share Shares used in computing basic and diluted net loss per share 126,704   122,690   112,805 See accompanying notes to consolidated financial statements. F-3                                                                                                   HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) Net loss Other comprehensive (loss) income: Unrealized (loss) gain on marketable securities Total comprehensive loss Year Ended December 31, 2015 2014 2013   $ (32,231)   $ (68,375)   $ (83,479) (58)   (58)     $ (32,289)   $ (68,433)   $ 17 (83,462) See accompanying notes to consolidated financial statements. F-4                           HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation Depreciation and amortization Non-cash interest expense Amortization of premiums on marketable securities, net Loss on disposal of equipment Changes in operating assets and liabilities: Accounts receivable, net Inventories Prepaid expenses and other assets Restricted cash Accounts payable and accrued expenses Deferred revenue Other liabilities Net cash used in operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Purchases of property and equipment Net cash provided by (used in) investing activities Financing activities: Proceeds from issuance of common stock under equity incentive  plans, net Proceeds from issuance of common stock, net Proceeds from issuance of long-term debt, net Net cash provided by financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosure of cash flow information: Interest paid Supplemental disclosure of non-cash investing and financing activities: Amounts accrued for purchases of property and equipment Capitalized property and liability associated with a build-to-suit lease       arrangement Year Ended December 31, 2015 2014 2013   $ (32,231)   $ (68,375)   $ (83,479) 20,838   1,677   1,243   879   8   (23,261)   (3,083)   (15,774)   —   13,866   (1,411)   166   (37,083)   (71,482)   79,730   (2,360)   5,888   13,098   —   —   13,098   (18,097)   61,389   15,274   1,762   2,025   1,457   233   (52)   (236)   (265)   —   (816)   1,490   (15)   9,538 1,227 156 1,116 — 6,606 (3,499) 1,959 (100) 7,888 9,297 (48) (47,518)   (49,339) (88,884)   57,301   (1,368)   (32,951)   6,788   107,713   —   114,501   34,032   27,357   (48,947) 3,375 (2,297) (47,869) 5,079 — 19,985 25,064 (72,144) 99,501 27,357   $   $   $   $ 43,292   $ 61,389   $ 3,775   $ 3,460   $ 3,099 473   $ 156   $ 100 —   $ —   $ (1,450) See accompanying notes to consolidated financial statements. F-5                                                                                                                                                             HALOZYME THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands) Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit) 113   $ 347,315   $ —   $ (298,573)   $ BALANCE AT JANUARY 1, 2013 Share-based compensation expense Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net   Issuance of restricted stock awards Other comprehensive income Net loss Shares 112,709   $ —   1,363   462   —   —   —   1   1   —   —   9,538   5,078   (1)   —   —   BALANCE AT DECEMBER 31, 2013 114,534   115   361,930   Share-based compensation expense Issuance of common stock for cash, net Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units, net   Issuance of restricted stock awards Other comprehensive loss Net loss BALANCE AT DECEMBER 31, 2014 Share-based compensation expense Issuance of common stock pursuant to exercise of stock options and vesting of restricted stock units and performance restricted stock units, net Issuance of restricted stock awards Other comprehensive loss Net loss —   8,846   1,552   789   —   —   125,721   —   2,056   375   —   —   —   9   1   1   —   —   126   —   2   —   —   —   15,274   107,704   6,787   (1)   —   —   491,694   20,838   13,096   —   —   —   —   —   —   17 —   17 —   —   —   —   (58) —   (41) —   —   —   (58) —   —   —   —   —   (83,479)   (382,052)   —   —   —   —   —   (68,375)   (450,427)   —   —   —   —   (32,231)   48,855 9,538 5,079 — 17 (83,479) (19,990) 15,274 107,713 6,788 — (58) (68,375) 41,352 20,838 13,098 — (58) (32,231) 42,999 BALANCE AT DECEMBER 31, 2015 128,152   $ 128   $ 525,628   $ (99)   $ (482,658)   $ See accompanying notes to consolidated financial statements. F-6                                                                   Halozyme Therapeutics, Inc. Notes to Consolidated Financial Statements 1. Organization and Business Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing novel oncology therapies. We are seeking to translate our unique knowledge of the tumor microenvironment to create therapies that have the potential to improve cancer patient survival. Our research primarily focuses on human enzymes  that  alter  the extracellular  matrix  and tumor  microenvironment.  The extracellular  matrix  is a complex  matrix  of proteins  and carbohydrates surrounding  the  cell  that  provides  structural  support  in  tissues  and  orchestrates  many  important  biological  activities,  including  cell  migration,  signaling  and survival. Over many years, we have developed unique technology and scientific expertise enabling us to pursue this target-rich environment for the development of therapies. Our proprietary enzymes are used to facilitate the delivery of injected drugs and fluids, potentially enhancing the efficacy and the convenience of other drugs or can be used to alter tissue structures for potential clinical benefit. We exploit our technology and expertise using a two pillar strategy that we believe enables us to manage risk and cost by: (1) developing our own proprietary products in therapeutic areas with significant unmet medical needs, with a focus on oncology, and (2) licensing our technology to biopharmaceutical companies to collaboratively develop products that combine our technology with the collaborators’ proprietary compounds. The majority of our approved product 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  temporarily  breaking  down  hyaluronan  (or  HA),  a naturally  occurring  complex  carbohydrate  that  is  a  major  component  of  the  extracellular  matrix  in  tissues  throughout  the  body  such  as  skin  and  cartilage.  We believe this temporary degradation creates an opportunistic window for the improved subcutaneous delivery of 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  ™ Technology.  We  license  the  Enhance  Technology  to  form  collaborations  with  biopharmaceutical  companies  that  develop  or  market drugs requiring or benefiting from injection via the subcutaneous route of administration. We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen), AbbVie, Inc. (AbbVie), and Eli Lilly and Company (Lilly). We receive royalties from two of these collaborations, including royalties from sales of one product approved in both the United States and outside the United States from the Baxalta collaboration and from sales of two products approved for marketing outside the United States from the Roche collaboration. Future potential revenues from the sales and/or royalties of  our  approved  products,  product  candidates,  and  ENHANZE  collaborations  will  depend  on  the  ability  of  Halozyme  and  our  collaborators  to  develop, manufacture, secure and maintain regulatory approvals for approved products and product candidates and commercialize product candidates. Our  proprietary  development  pipeline  consists  primarily  of  clinical  stage  product  candidates  in  oncology.  Our  lead  oncology  program  is  PEGPH20 (PEGylated  recombinant  human  hyaluronidase),  a  molecular  entity  we  are  developing  for  the  systemic  treatment  of  tumors  that  accumulate  HA.  When  HA accumulates  in  a  tumor,  it  can  cause  higher  pressure  in  the  tumor,  reducing  blood  flow  into  the  tumor  and  with  that,  reduced  access  of  cancer  therapies  to  the tumor.  PEGPH20  works  by  temporarily  degrading  HA  surrounding  cancer  cells  resulting  in  reduced  pressure  and  increased  blood  flow  to  the  tumor  thereby enabling  increased  amounts  of  anticancer  treatments  administered  concomitantly  gaining  access  to  the  tumor.  We  are  currently  in  Phase  2 and  Phase  3 clinical testing for PEGPH20 in stage IV PDA (Studies 109-202 and 109-301), in Phase 1b clinical testing in non-small cell lung cancer (Study 107-201) and in Phase 1b clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101). Except  where  specifically  noted  or  the  context  otherwise  requires,  references  to  “Halozyme,”  “the  Company,”  “we,”  “our,”  and  “us”  in  these  notes  to consolidated  financial  statements  refer  to  Halozyme  Therapeutics,  Inc.  and  its  wholly  owned  subsidiary,  Halozyme,  Inc.,  and  Halozyme,  Inc.’s  wholly  owned subsidiaries, Halozyme Holdings Ltd. and Halozyme Royalty LLC. F-7 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Halozyme Therapeutics, Inc. and our wholly owned subsidiary, Halozyme, Inc., and Halozyme, Inc.’s wholly owned subsidiaries, Halozyme Holdings Ltd. and Halozyme Royalty LLC. All intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that 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 ninety  days  or  less from  date  of  purchase.  Our cash equivalents consist of money market funds. Marketable  securities  are  investments  with  original  maturities  of  more  than  ninety  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 gain (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 consolidated statements of operations. We use the specific identification method for calculating realized gains and losses on marketable securities sold. Realized gains and losses and declines in value judged to be other-than-temporary on marketable securities, if any, are included in investment and other income, net in the consolidated statements of operations. Restricted Cash Under the terms of the leases on our facilities, we are required to maintain letters of credit as security deposits during the terms of such leases. At December 31, 2015 and 2014 , 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. Our financial instruments include cash equivalents, available-for-sale marketable securities, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and long-term debt. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value. F-8 Available-for-sale  marketable  securities  consist  of  corporate  debt  securities,  commercial  paper  and  certificates  of  deposit  and  were  measured  at  fair  value using 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 service. 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. The following table summarizes, by major security type, our cash equivalents and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): Cash equivalents: Money market funds Available-for-sale marketable    securities: Corporate debt securities December 31, 2015 December 31, 2014 Level 1 Level 2 Total estimated fair value Level 1 Level 2 Total estimated fair value   $ 38,595   $ —   $ 38,595   $ 42,685   $ —   $ 42,685 —   65,047   65,047   —   74,234     $ 38,595   $ 65,047   $ 103,642   $ 42,685   $ 74,234   $ 74,234 116,919 There were no transfers between Level 1 and Level 2 of the fair value hierarchy for the years ended December 31, 2015 and 2014 . We have no instruments that are classified within Level 3 as of December 31, 2015 and 2014 . Concentrations of Credit Risk, Sources of Supply and Significant Customers We  are  subject  to  credit  risk  from  our  portfolio  of  cash  equivalents  and  marketable  securities.  These  investments  were  made  in  accordance  with  our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalent  balances  with  one  major  commercial  bank  and  marketable  securities  with  another  financial  institution.  Deposits  held  with  the  financial  institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet. We are also subject to credit risk from our accounts receivable related to our product sales and revenues under our license and collaborative agreements. We have  license  and  collaborative  agreements  with  pharmaceutical  companies  under  which  we  receive  payments  for  license  fees,  milestone  payments  for  specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk formulation of rHuPH20. In addition, we sell Hylenex ® recombinant in the United States to a limited number of established wholesale distributors in the pharmaceutical  industry. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is not required. Management monitors our exposure to accounts receivable by periodically  evaluating  the  collectibility  of  the  accounts  receivable  based  on  a  variety  of  factors  including  the  length  of  time  the  receivables  are  past  due,  the financial health of the customer and historical experience. Based upon the review of these factors, we recorded no allowance for doubtful accounts at December 31, 2015 and 2014 . Approximately 89% of the accounts receivable balance at December 31, 2015 represents amounts due from Roche and Lilly. Approximately 76% of the accounts receivable balance at December 31, 2014 represents amounts due from Roche and Pfizer. F-9                                                                                                   The following table indicates the percentage of total revenues in excess of 10% with any single customer: Roche Lilly AbbVie Janssen 2015 42% 19% 17% 1% Year Ended December 31, 2014 57% — — 20% 2013 64% — — — We attribute revenues under collaborative agreements to the individual countries where the collaborator is headquartered. We attribute revenues from product sales  to  the  individual  countries  to  which  the  product  is  shipped.  Worldwide  revenues  from  external  customers  are  summarized  by  geographic  location  in  the following table (in thousands): United States Switzerland All other foreign Total revenues Year Ended December 31, 2015 2014 2013   $ 77,149   $ 31,397   $ 57,136   772   42,791   1,146     $ 135,057   $ 75,334   $ 19,019 35,157 623 54,799 For the years ended December 31, 2015, 2014 and 2013 , we had no foreign based operations. As of December 31, 2015 and 2014 , we had $0.3 million and $0.4 million , respectively, of research equipment in Germany. We rely on two third-party manufacturers for the supply of bulk rHuPH20 for use in the manufacture of Hylenex recombinant and our other collaboration products  and  product  candidates.  Payments  due  to  these  suppliers  represented  20% and 0% of  the  accounts  payable  balance  at  December  31,  2015  and  2014  , respectively.  We  also  rely  on  a  third-party  manufacturer  for  the  fill  and  finish  of  Hylenex recombinant  product  under  a  contract.  Payments  due  to  this  supplier represented 4% and 6% of the accounts payable balance at December 31, 2015 and 2014 , respectively. Accounts Receivable, Net Accounts receivable is recorded at the invoiced amount and is non-interest bearing. Accounts receivable is recorded net of allowances for doubtful accounts, cash discounts for prompt payment, distribution fees and chargebacks. We recorded no allowance for doubtful accounts at December 31, 2015 and 2014 as the collectibility of accounts receivable was reasonably assured. Inventories Inventories are stated at lower of cost or market. Cost is determined on a first-in, first-out basis. Inventories are reviewed periodically for potential excess, dated or obsolete status. Management evaluates 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. Prior to receiving marketing approval from the U.S. Food and Drug Administration (“FDA”) or comparable regulatory agencies in foreign countries, costs related to purchases of bulk rHuPH20 and raw materials and the manufacturing of the product candidates are recorded as research and development expense. All direct manufacturing costs incurred after receiving marketing approval are capitalized as inventory. Inventories used in clinical trials are expensed at the time the inventories are packaged for the clinical trials. As of December 31, 2015 and 2014 , inventories consisted of $1.4 million and $3.0 million of Hylenex recombinant inventory, respectively, and $8.1 million and $3.4 million of bulk rHuPH20, respectively, for use in the manufacture of Balxalta’s and Roche’s collaboration products. F-10                                                     Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease  term,  whichever  is  shorter.  Leased  buildings  under  build-to-suit  lease  arrangements  are  capitalized  and  included  in  property  and  equipment  when  we  are involved in the construction of the structural improvements or take construction risk prior to the commencement of the lease. Upon completion of the construction under the build-to-suit leases, we assess whether those arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities would be accounted for as financing leases. Impairment of Long-Lived Assets We account for long-lived assets in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. For the year ended December 31, 2015 , there was no impairment  of  the  value  of  long-lived  assets.  For  the  year  ended  December  31,  2014  ,  we  recorded  an  impairment  of  $0.2  million  relating  to  manufacturing equipment. Deferred Rent Rent expense is recorded on a straight-line basis over the initial term of the lease. The difference between rent expense accrued and amounts paid under lease agreements is recorded as deferred rent in the accompanying consolidated balance sheets. Comprehensive Income (Loss) Comprehensive  income  (loss)  is  defined  as the change  in equity  during  the period  from  transactions  and other  events  and circumstances  from  non-owner sources. Revenue Recognition We  generate  revenues  from  product  sales  and  payments  received  under  collaborative  agreements.  Collaborative  agreement  payments  may  include nonrefundable fees at the inception of the agreements, license fees, milestone and event-based payments for specific achievements designated in the collaborative agreements, reimbursements of research and development services and supply of bulk rHuPH20, and/or royalties on sales of products resulting from collaborative arrangements. We recognize revenues in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met:  (1)  persuasive  evidence  of  an  arrangement  exists;  (2)  delivery  has  occurred  or  services  have  been  rendered;  (3)  the  seller’s  price  to  the  buyer  is  fixed  or determinable; and (4) collectibility is reasonably assured. Product Sales, Net 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 provide for selling prices that are fixed on the date of sale, although we offer discounts to certain group purchasing organizations (“GPOs”), hospitals and government programs. The wholesalers take title to the product, bear the risk of loss of ownership and have economic substance to the inventory. Further, we have no significant obligations for future performance to generate pull-through sales. We have developed sufficient historical experience and data to reasonably estimate future returns and chargebacks of Hylenex recombinant. As a result, we recognize Hylenex recombinant product sales and related cost of product sales at the time title transfers to the wholesalers. Upon recognition of revenue from product sales of Hylenex recombinant, we record certain sales reserves and allowances as a reduction to gross revenue. These reserves and allowances include: Product Returns .  We  allow  the  wholesalers  to  return  product  that  is  damaged  or  received  in  error.  In  addition,  we  accept  unused  product  to  be returned beginning six months prior to and ending twelve months following product F-11 expiration. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of historical return patterns. • • • Distribution Fees . The distribution fees, based on contractually determined rates, arise from contractual agreements we have with certain wholesalers for distribution services they provide with respect to Hylenex recombinant. These fees are generally a fixed percentage of the price of the product purchased by the wholesalers. Prompt Payment Discounts .  We  offer  cash  discounts  to  certain  wholesalers  as  an  incentive  to  meet  certain  payment  terms.  We  estimate  prompt payment discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates.     Other Discounts and Fees . We provide discounts to end-user members of certain GPOs under collective purchasing contracts between us and the GPOs. We also provide discounts to certain hospitals, who are members of the GPOs, with which we do not have contracts. The end-user members purchase  products  from  the  wholesalers  at  a  contracted  discounted  price,  and  the  wholesalers  then  charge  back  to  us  the  difference  between  the current retail price and the price the end-users paid for the product. We also incur GPO administrative service fees for these transactions. In addition, we  provide  predetermined  discounts  under  certain  government  programs.  Our  estimate  for  these  chargebacks  and  fees  takes  into  consideration contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates. Allowances for product returns and chargebacks  are based on amounts owed or to be claimed  on the related  sales. We believe  that our estimated  product returns  for  Hylenex recombinant  requires  a  high  degree  of  judgment  and  is  subject  to  change  based  on  our  experience  and  certain  quantitative  and  qualitative factors. In order to develop a methodology to reliably estimate future returns and provide a basis for recognizing revenue on sales to wholesale distributors, we analyzed many factors, including, without limitation: (1) actual Hylenex recombinant product return history, taking into account product expiration dating at the time of shipment, (2) re-order activities  of the wholesalers  as well as their customers  and (3) levels of inventory in the wholesale channel. We have monitored actual return history on an individual product lot basis since product launch. We consider the dating of product at the time of shipment into the distribution channel and  changes  in  the  estimated  levels  of  inventory  within  the  distribution  channel  to  estimate  our  exposure  to  returned  product.  We  also  consider  historical chargebacks activity and current contract prices to estimate our exposure to returned product. Based on such data, we believe we have the information needed to reasonably estimate product returns and chargebacks. We  recognize  product  sales  allowances  as  a  reduction  of  product  sales  in  the  same  period  the  related  revenue  is  recognized.  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. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on product sales revenue and earnings in the period of adjustments. Bulk rHuPH20 Subsequent  to  receiving  marketing  approval  from  the  FDA  or  comparable  regulatory  agencies  in  foreign  countries,  sales  of  bulk  rHuPH20  for  use  in collaboration commercial products are recognized as product sales when the materials have met all the specifications required for the customer’s acceptance and title and risk of loss have transferred to the customer. Following the receipt of European marketing approvals of Roche’s Herceptin SC product in August 2013 and MabThera ® SC product in March 2014 and Baxalta’s HYQVIA product in May 2013, revenue from the sales of bulk rHuPH20 for these collaboration products has been  recognized  as  product  sales.  For  the  years  ended  December  31,  2015  and  2014  ,  we recognized  $22.8 million and $23.5 million in product sales of bulk rHuPH20 for Roche’s collaboration products, respectively. For the years ended December 31, 2015 and 2014 , we recognized $6.4 million and zero in product sales of bulk rHuPH20 for Baxalta’s collaboration product, respectively. Revenues under Collaborative Agreements We have license and collaboration agreements under which the collaborators obtained worldwide rights for the use of our proprietary rHuPH20 enzyme in the development and commercialization of the collaborators’ biologic compounds identified as targets. The collaborative agreements may also contain other elements. Pursuant to the terms of these agreements, collaborators could be required to make various payments to us for each target, including nonrefundable upfront license fees, exclusivity fees, F-12 payments  based  on  achievement  of  specified  milestones  designated  in  the  collaborative  agreements,  annual  maintenance  fees,  reimbursements  of  research  and development services, payments for supply of bulk rHuPH20 for the collaborator and/or royalties on sales of products resulting from collaborative agreements. In  order  to  account  for  the  multiple-element  arrangements,  we  identify  the  deliverables  included  within  the  agreement  and  evaluate  which  deliverables represent  units  of  accounting.  We  then  determine  the  appropriate  method  of  revenue  recognition  for  each  unit  based  on  the  nature  and  timing  of  the  delivery process. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The deliverables under our collaborative agreements include (i) the license to our rHuPH20 technology, (ii) at the collaborator’s request, research and development services which are reimbursed at contractually determined rates, and (iii) at the collaborator’s request, supply of bulk rHuPH20 which is reimbursed at our cost plus a margin. A delivered item is considered a separate unit of accounting when the delivered item has value to the collaborator on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. We base this determination on the collaborators’ ability to use the delivered items on their own without us supplying undelivered items, which we determine taking into consideration factors such  as  the  research  capabilities  of  the  collaborator,  the  availability  of  research  expertise  in  this  field  in  the  general  marketplace,  and  the  ability  to  procure  the supply of bulk rHuPH20 from the market place. Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable  arrangement  consideration  is  limited  to  amounts  that  are  not  contingent  upon  the  delivery  of  additional  items  or  meeting  other  specified  performance conditions. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement. Nonrefundable upfront license fees are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of bulk rHuPH20, the relative selling price allocation of the license  is  equal  to  or  exceeds  the  upfront  license  fee,  persuasive  evidence  of  an  arrangement  exists,  our  price  to  the  collaborator  is  fixed  or  determinable  and collectibility  is  reasonably  assured.  Upfront  license  fees  are  deferred  if  facts  and  circumstances  dictate  that  the  license  does  not  have  standalone  value.  The determination  of the length of the period over which to defer  revenue  is subject to judgment  and estimation  and can have an impact  on the amount  of revenue recognized in a given period. When collaborators have rights to elect additional targets, the rights are assessed as to whether they represent deliverables at the inception of the arrangement. In assessing these contingent deliverables, we consider whether the right is a substantive option. We consider a right to be a substantive option if the election of the additional targets is not essential to the functionality of the other elements in the arrangement and if we are truly at risk of the right being exercised. If the right is determined to be a substantive option, we further consider whether the right is priced at a significant and incremental discount that should be accounted for as an element  of  the  arrangement.  If  a  right  is determined  to  be  a  substantive  option  and  is  not  priced  at  a  significant  and incremental  discount,  it  is  not  treated  as  a deliverable in the arrangement and receives no allocation at the inception of the arrangement of the original arrangement consideration. The right is then accounted for when and if it is exercised. F-13 Certain  of  our  collaborative  agreements  provide  for  milestone  payments  upon  achievement  of  development  and  regulatory  events  and/or  specified  sales volumes of commercialized  products by the collaborator. We account for milestone payments in accordance with the provisions of ASU No. 2010-17, Revenue Recognition - Milestone Method (“Milestone Method of Accounting”). We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria: 1. The  consideration  is  commensurate  with  either  the  entity’s  performance  to  achieve  the  milestone  or  the  enhancement  of  the  value  of  the  delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone; 2. The consideration relates solely to past performance; and 3. The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity’s performance or on the occurrence of a specific outcome resulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the vendor. Reimbursements of research and development services are recognized as revenue during the period in which the services are performed as long as there is persuasive  evidence  of  an  arrangement,  the  fee  is  fixed  or  determinable  and  collection  of  the  related  receivable  is  reasonably  assured.  Revenue  from  the manufacture of bulk rHuPH20 is recognized when the materials have met all specifications required for the collaborator’s acceptance and title and risk of loss have transferred  to  the  collaborator.  We  do  not  directly  control  when  any  collaborator  will  request  research  and  development  services  or  supply  of  bulk  rHuPH20; therefore, we cannot predict when we will recognize revenues in connection with research and development services and supply of bulk rHuPH20. Since we receive royalty reports 60 days after quarter end, royalty revenue from sales of collaboration products by our collaborators will be recognized in the quarter following the quarter in which the corresponding sales occurred. The  collaborative  agreements  typically  provide  the  collaborators  the  right  to  terminate  such  agreement  in  whole  or  on  a  product-by-product  or  target-by- target  basis  at  any  time  upon  30 to 90 days  prior  written  notice  to  us.  There  are  no  performance,  cancellation,  termination  or  refund  provisions  in  any  of  our collaborative agreements that contain material financial consequences to us. Refer to Note 4, “Collaborative Agreements, ” for further discussion on our collaborative arrangements. 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 for use in approved collaboration products. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories and the write-off of any inventories that do not meet certain product specifications, if any. Prior  to  European  marketing  approvals  of  Roche’s  collaboration  products  Herceptin  SC  in  August  2013  and  MabThera  SC  in  March  2014  and  Baxalta’s collaboration product HYQVIA in May 2013, all costs related to the manufacturing of bulk rHuPH20 for these collaboration products were charged to research and development expenses in the periods such costs were incurred. Therefore, cost of product sales of these bulk rHuPH20 for the year ended December 31, 2013 was materially  reduced  due  to  the  exclusion  of  the  manufacturing  costs  that  were  charged  to  research  and  development  expenses  in  the  periods  prior  to  receiving marketing approvals. For the year ended December 31, 2014, cost of product sales of bulk rHuPH20 excluded $1.0 million in manufacturing costs, of which $0.9 million and $0.1 million were charged to research and development expenses in the years ended December 31, 2013 and 2012, respectively. There was no bulk rHuPH20 excluded from cost of product sales for the year ended December 31, 2015. F-14 Research and Development Expenses Research  and development  expenses  include salaries  and benefits,  facilities  and other  overhead  expenses,  external  clinical  trial  expenses,  research  related manufacturing  services,  contract  services  and  other  outside  expenses.  Research  and  development  expenses  are  charged  to  operations  as  incurred  when  these expenditures relate to our research and development efforts and have no alternative future uses.   After receiving approval from the FDA or comparable regulatory agencies  in  foreign  countries  for  a  product,  costs  related  to  purchases  and  manufacturing  of  bulk  rHuPH20  for  such  product  are  capitalized  as  inventory.  The manufacturing costs of bulk rHuPH20 for the collaboration products, Herceptin SC, MabThera SC and HYQVIA, incurred after the receipt of marketing approvals are capitalized as inventory. 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. Milestone payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic value are expensed as research and development costs at the time the costs are incurred. We have no in-licensed technologies that have alternative future uses in research and development projects or otherwise. Clinical Trial Expenses Payments in connection with our clinical trials are often made under contracts with multiple contract research organizations that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. Payments under these contracts depend on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones. Expenses  related  to  clinical  trials  are  accrued  based  on  our  estimates  and/or  representations  from  service  providers  regarding  work  performed,  including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we modify our accruals accordingly on a prospective basis. Revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain. Historically, we have had no changes in clinical trial expense accruals that had a material impact on our consolidated results of operations or financial position. Share-Based Compensation We  record  compensation  expense  associated  with  stock  options,  restricted  stock  awards  (“RSAs”),  restricted  stock  units  (“RSUs”),  and  RSUs  with performance  conditions  (“PRSUs”)  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, net of estimated forfeitures, over the requisite service period of the award. Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. 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.  Share-based  compensation  expense  recognition  is  based  on  awards  ultimately  expected  to  vest  and  is  reduced  for  estimated  forfeitures.  The authoritative guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be approximately 10% for employees for the years ended December 31, 2015, 2014 and 2013 based on our historical experience for the years then ended. F-15 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 and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets and other tax benefits are recorded when it is more likely  than  not  that  the  position  will  be  sustained  upon  audit.  Valuation  allowances  have  been  established  to  reduce  our  net  deferred  tax  assets  to  zero , as we believe that it is more likely than not that such assets will not be realized. Net Loss Per Share Basic net loss per common share is computed by dividing net loss 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  and  unvested  PRSUs  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. Because  of  our  net  loss,  outstanding  stock  options,  unvested  RSAs,  unvested  RSUs  and  unvested  PRSUs  totaling  approximately  9,780,593  ,  8,405,903  and 8,070,141 were excluded from the calculation of diluted net loss per common share for the years ended December 31, 2015, 2014 and 2013 , respectively, because their  effect  was  anti-dilutive.  PRSUs  for  which  the  performance  conditions  were  satisfied  or  probable  of  being  satisfied  were  included  in  potentially  dilutive securities at December 31, 2015 and 2014. Segment Information We  operate  our  business  in  one  segment,  which  includes  all  activities  related  to  the  research,  development  and  commercialization  of  our  proprietary enzymes. 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. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment. Adoption and Pending Adoption of Recent Accounting Pronouncements In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 supersedes the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized  through  net  income.  An  entity’s  equity  investments  that  are  accounted  for  under  the  equity  method  of  accounting  or  result  in  consolidation  of  an investee  are  not  included  within  the  scope  of  ASU  2016-01.  ASU  2016-01  requires  public  business  entities  that  are  required  to  disclose  fair  value  of  financial instruments  measured  at  amortized  cost  on  the  balance  sheet  to  measure  that  fair  value  using  the  exit  price  notion  consistent  with  Topic  820,  Fair  Value Measurement. ASU 2016-01 is effective for our interim and annual reporting beginning on January 1, 2018. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable  fair values (including disclosure requirements)  should be applied prospectively  to equity investments  that exist as of the date of adoption of ASU 2016-01. We currently do not hold equity securities and we are evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. In November 2015, the FASB issued Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015- 17 requires companies to classify all deferred tax assets and liabilities as non-current on the balance sheet instead of separating deferred taxes into current and non- current amounts. For public business entities, the guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all companies in any interim or annual period. The guidance may be adopted on either a prospective or retrospective basis. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. F-16 In July 2015, the FASB issued Accounting Standards Update No. 2015-11,  Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015- 11”). ASU 2015-11 requires that for entities that measure inventory using the first-in, first-out method, inventory should be measured at the lower of cost and net realizable  value.  Topic  330,  Inventory,  currently  requires  an  entity  to  measure  inventory  at  the  lower  of  cost  or  market.  Market  could  be  replacement  cost,  net realizable value, or net realizable value less an approximately normal profit margin. Net realizable value is the estimated selling prices in the ordinary course of business,  less  reasonably  predictable  costs  of  completion,  disposal,  and  transportation.  ASU  2015-11  is  effective  for  fiscal  years  beginning  after  December  15, 2016, and interim periods within those fiscal years. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 is not expected to have a material  impact on our consolidated financial position or results of operations. In April 2015, the FASB issued Accounting Standards Update No. 2015-03,  Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The adoption of ASU 2015-03 is not expected to have a material impact on our consolidated financial position or results of operations. In  August  2014,  the  FASB  issued  Accounting  Standards  Update  No.  2014-15,    Presentation of Financial Statements — Going Concern (“ASU  2014- 15”).  The  provisions  of  ASU  2014-15  provide  that  in  connection  with  preparing  financial  statements  for  each  annual  and  interim  reporting  period,  an  entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be  issued  when  applicable).  ASU  2014-15  is  effective  for  the  annual  reporting  period  ending  after  December  15,  2016,  and  for  annual  and  interim  periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our consolidated financial position or results of operations. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 will eliminate  transaction-specific  and  industry-specific  revenue  recognition  guidance  under  current  U.S.  GAAP  and  replace  it  with  a  principle-based  approach  for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. ASU 2014-09 also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts,  including  significant  judgments  and  changes  in  judgments  and  assets  recognized  from  costs  incurred  to  obtain  or  fulfill  a  contract.  ASU  2014-09  is effective for our interim and annual reporting beginning on January 1, 2018. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. F-17 3. Marketable Securities Available-for-sale marketable securities consisted of the following (in thousands): Corporate debt securities Corporate debt securities Description Description December 31, 2015   Amortized Cost   $ 65,146   $ Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value —   $ (99)   $ 65,047 December 31, 2014   Amortized Cost   $ 74,275   $ Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value 2   $ (43)   $ 74,234 As of December 31, 2015 , $59.0 million of our available-for-sale marketable securities were scheduled to mature within the next twelve months. There were $79.7 million of available-for-sale securities that matured during the year ended December 31, 2015 . There were no realized gains or losses for the years ended December 31, 2015, 2014 and 2013 . As of December 31, 2015 , all available-for-sale marketable securities were in a gross unrealized loss position, all of which had been in such position for less than twelve months. Based on our review of these marketable securities, we believe we had no other-than-temporary impairments on these securities as of December 31, 2015 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. 4. Collaborative Agreements Roche Collaboration In December 2006, we and Roche entered into a collaboration and license agreement, under which Roche obtained a worldwide, exclusive license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds (the “Roche Collaboration”). As of December 31, 2015 , Roche has elected a total of five targets, two of which are exclusive, and retains the option to develop and commercialize rHuPH20 with three additional targets. In August 2013, Roche received European marketing approval for its collaboration product, Herceptin SC, for the treatment of patients with HER2-positive breast cancer and launched Herceptin SC in the European Union (“EU”) in September 2013. In March 2014, Roche received European marketing approval for its collaboration product, MabThera SC, for the treatment of patients with common forms of non-Hodgkin lymphoma (“NHL”). In June 2014, Roche launched MabThera SC in the EU which triggered a $5.0 million sales-based payment to us for the achievement of the first commercial sale pursuant to the terms of the Roche Collaboration. Roche assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Roche Collaboration, while we are responsible for the supply of bulk rHuPH20. We are entitled to receive reimbursements for providing research and development services and supplying bulk rHuPH20 to Roche at its request. Under the terms of the Roche Collaboration, Roche pays us a royalty on each product commercialized under the agreement consisting of a mid-single digit percent of the net sales of such product. Unless terminated earlier in accordance with its terms, the Roche Collaboration continues in effect until the expiration of Roche’s obligation to pay royalties. Roche has the obligation to pay royalties to us with respect to each product commercialized in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the Roche Collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. F-18                     As of December 31, 2015 , we have received $79.0 million from Roche, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20. The amounts received consisted of a $20.0 million upfront license fee payment for the application of rHuPH20 to the initial three Roche exclusive targets, $23.0 million in connection with Roche’s election of two additional exclusive targets and annual license maintenance fees for the right  to  designate  the  remaining  targets  as  exclusive  targets,  $13.0  million  in  clinical  development  milestone  payments,  $8.0  million  in  regulatory  milestone payments and $15.0 million in sales-based payments. Due to our continuing involvement obligations (for example, support activities associated with rHuPH20), revenues from the upfront payment, exclusive designation fees, annual license maintenance fees and sales-based payments were deferred and are being amortized over the remaining term of the Roche Collaboration. For the years ended December 31, 2015, 2014 and 2013 , we recognized approximately $4.5 million , $8.1 million , and $4.6 million , respectively, of Roche deferred revenues as revenues under collaborative agreements. In addition, for the years ended December 31, 2015, 2014 and 2013 , we recognized approximately zero  ,  $2.0  million  and  $1.3  million  ,  respectively,  of  deferred  bulk  rHuPH20  sales  revenue  as  product  sales  revenue.  Total  Roche  deferred  revenues  was approximately $43.5 million and $42.7 million as of December 31, 2015 and 2014, respectively. There were no revenues recognized related to milestone payments under this collaboration for the years ended December 31, 2015, 2014 and 2013 . Baxalta Collaboration In  September  2007,  we  and  Baxalta  entered  into  a  collaboration  and  license  agreement,  under  which  Baxalta  obtained  a  worldwide,  exclusive  license  to develop and commercialize HYQVIA, a combination of Baxalta’s current product GAMMAGARD LIQUID ™ and our patented rHuPH20 enzyme (the “Baxalta Collaboration”). In May 2013, the European Commission granted Baxalta marketing authorization in all EU Member States for the use of HYQVIA (solution for subcutaneous  use),  a  combination  of  GAMMAGARD  LIQUID  and  rHuPH20  in  dual  vial  units,  as  replacement  therapy  for  adult  patients  with  primary  and secondary  immunodeficiencies.  Baxalta  launched  HYQVIA  in  the  EU  in  July  2013.  In  September  2014,  the  FDA  approved  HYQVIA  for  treatment  of  adult patients with primary immunodeficiency. In October 2014, Baxalta announced the launch and first shipments of HYQVIA in the U.S. The Baxalta Collaboration is applicable to both kit and formulation combinations. Baxalta assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the Baxalta Collaboration, while we are responsible for the supply of bulk rHuPH20. We perform research and development activities and supply bulk rHuPH20 at the request of Baxalta, and are reimbursed by Baxalta under the terms of the Baxalta Collaboration. In addition, Baxalta has certain product development and commercialization obligations in major markets identified in the Baxalta Collaboration. Unless  terminated  earlier  in  accordance  with  its  terms,  the  Baxalta  Collaboration  continues  in  effect  until  the  expiration  of  Baxalta’s  obligation  to  pay royalties to us. Baxalta has the obligation to pay royalties, with respect to each product commercialized in each country, during the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the Baxalta Collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. As of December 31, 2015 , we have received $17.0 million under the Baxalta Collaboration, excluding royalties and reimbursements for providing research and development services and supplying bulk rHuPH20. The amounts received consisted of a $10.0 million upfront license fee payment, a $3.0 million regulatory milestone payment and a $4.0 million sales-based payment. Baxalta pays us a royalty on HYQVIA consisting of a mid-single digit percent of the net sales of such product. Due to our continuing involvement obligations (for example, support activities associated with rHuPH20 enzyme), the upfront license fee and sales-based payments were deferred and are being recognized over the term of the Baxalta Collaboration. For the years ended December 31, 2015, 2014 and 2013, we recognized approximately $0.8 million , $0.8 million , and $0.6 million , respectively, of Baxalta deferred revenues as revenues under collaborative agreements. In addition, for the year ended December 31, 2015, we recognized approximately $1.7 million of deferred bulk rHuPH20 sales revenue as product sales revenue, with no such revenues recognized in the years ended December 31, 2014 and 2013. Total Baxalta deferred revenues was approximately $9.0 million and $10.9 million as of December 31, 2015 and 2014, respectively. There were no revenues recognized related to milestone payments under this collaboration for the years ended December 31, 2015, 2014 and 2013. F-19 Other Collaborations In December 2015, we and Eli Lilly and Company (“Lilly”) entered into a collaboration and license agreement, under which Lilly has the worldwide license to  develop  and  commercialize  products  combining  our  patented  rHuPH20  enzyme  with  Lilly  proprietary  biologics  directed  at  up  to  five  targets  (the  “Lilly Collaboration”).  Targets,  once  selected,  will  be  on  an  exclusive,  global  basis.  As  of  December  31,  2015,  we  have  recognized  $25.0 million as  revenue  for  the license fee of one specified exclusive target and one specified semi-exclusive target. Lilly has the right to elect up to three additional targets for additional fees. The upfront license payment may be followed by event-based payments subject to Lilly’s achievement of specified development, regulatory and sales-based milestones. In addition, Lilly will pay tiered royalties if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the Lilly Collaboration continues in effect until the later of: (i) 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, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the Lilly Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. Lilly may terminate  the  agreement  prior  to  expiration  for  any  reason  in  its  entirety  or  on  a  target-by-target  basis  upon  90 days prior  written  notice  to  us.  Upon  any  such termination,  the  license  granted  to  Lilly  (in  total  or  with  respect  to  the  terminated  target,  as  applicable)  will  terminate  provided,  however,  that  in  the  event  of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid. In June 2015, we and AbbVie, Inc. (“AbbVie”) entered into a collaboration and license agreement, under which AbbVie has the worldwide license to develop and  commercialize  products  combining  our  patented  rHuPH20  enzyme  with  AbbVie  proprietary  biologics  directed  at  up  to  nine  targets  (the  “AbbVie Collaboration”). Targets, once selected, will be on an exclusive, global basis. As of December 31, 2015 , we have received a $23.0 million payment for the license fee of one specified exclusive target, TNF alpha. AbbVie has announced plans to develop rHuPH20 with adalimumab (HUMIRA  ® ) which may allow reduced number  of  induction  injections  and deliver  additional  performance  benefits.  AbbVie has  the right  to  elect  up to  eight additional targets for additional fees. The upfront  license  payment  may  be  followed  by  event-based  payments  subject  to  AbbVie’s  achievement  of  specified  development,  regulatory  and  sales-based milestones. In addition, AbbVie will pay tiered royalties if products under the collaboration are commercialized. Unless terminated earlier in accordance with its terms, the AbbVie Collaboration continues in effect until the later of: (i) 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, and (ii) expiration of the last to expire royalty term for a product developed under the collaboration. The royalty term of a product developed under the AbbVie Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in such country or (b) ten years following the date of the first commercial sale of such product in such country. AbbVie may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis upon 90 days prior written notice to us. Upon any such termination, the license granted to AbbVie (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid. F-20 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 patented rHuPH20 enzyme with Janssen proprietary biologics directed at up to five targets (the “Janssen Collaboration”). Targets,  once  selected,  will  be  on  an  exclusive,  global  basis.  As  of  December  31, 2015  ,  we  have  received  a  $15.0 million payment  for  the  license  fee  of  one specified exclusive target, CD38. Janssen has the right to elect four additional targets in the future upon payment of additional fees. Unless terminated earlier in accordance  with  its  terms,  the  Janssen  Collaboration  continues  in  effect  until  the  later  of  (i)  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,  and  (ii) expiration  of  the  last  to  expire  royalty  term  for  a  product  developed  under  the  collaboration.  The  royalty  term  of  a  product  developed  under  the  Janssen Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other  specified  patents  developed  under  the  collaboration  which  valid  claim  covers  the  product  in  such  country  or  (b)  ten years  following  the  date  of  the  first commercial sale of such product in such country. Janssen may terminate the agreement prior to expiration for any reason in its entirety or on a target-by-target basis  upon  90  days  prior  written  notice  to  us.  Upon  any  such  termination,  the  license  granted  to  Janssen  (in  total  or  with  respect  to  the  terminated  target,  as applicable) will terminate provided, however, that in the event of expiration of the agreement, the licenses granted will become perpetual, non-exclusive and fully paid. 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  patented  rHuPH20  enzyme  with  Pfizer  proprietary  biologics  directed  at  up  to  six targets  (the  “Pfizer  Collaboration”). Targets may be selected on an exclusive or non-exclusive basis. As of December 31, 2015 , we have received $11.0 million in upfront and license fee payments for the licenses to four specified exclusive targets. One of the targets is proprotein convertase subtilisin/kexin type 9, also known as PCSK9. Pfizer is also developing rivipansel directed to another target under the collaboration to treat vaso-occlusive crisis in individuals with sickle cell disease. Pfizer has the right to elect two additional targets in the future upon payment of additional fees. Unless terminated earlier in accordance with its terms, the Pfizer Collaboration continues in effect until the later of (i) 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,  and  (ii)  expiration  of  the  last  to  expire  royalty  term  for  a  product  developed  under  the collaboration. The royalty term of a product developed under the Pfizer Collaboration, with respect to each country, consists of the period equal to the longer of: (a) the duration of any valid claim of our patents covering rHuPH20 or other specified patents developed under the collaboration which valid claim covers the product in  such  country  or  (b)  ten years  following  the  date  of  the  first  commercial  sale  of  such  product  in  such  country.  Pfizer  may  terminate  the  agreement  prior  to expiration for any reason in its entirety or on a target-by-target basis upon 30 days prior written notice to us. Upon any such termination, the license granted to Pfizer  (in  total  or  with  respect  to  the  terminated  target,  as  applicable)  will  terminate,  provided,  however,  that  in  the  event  of  expiration  of  the  agreement,  the licenses granted will become perpetual, non-exclusive and fully paid. At the inception of the Pfizer, Janssen, AbbVie and Lilly arrangements, we identified the deliverables in each arrangement to include the license, research and development  services  and  supply  of  bulk  rHuPH20.  We  have  determined  that  the  license,  research  and  development  services  and  supply  of  bulk  rHuPH20 individually represent separate units of accounting, because each deliverable has standalone value. We determined that the rights to elect additional targets in the future upon the payment of additional license fees are substantive options that are not priced at a significant and incremental discount. Therefore, we determined for each collaboration that the rights to elect additional targets are not deliverables at the inception of the arrangement. The estimated selling prices for the units of accounting  we  identified  were  determined  based  on  market  conditions,  the  terms  of  comparable  collaborative  arrangements  for  similar  technology  in  the pharmaceutical  and  biotech  industry  and  entity-specific  factors  such  as  the  terms  of  our  previous  collaborative  agreements,  our  pricing  practices  and  pricing objectives.  The  arrangement  consideration  was  allocated  to  the  deliverables  based  on  the  relative  selling  price  method  and  the  nature  of  the  research  and development services to be performed for the collaborator. The  amount  allocable  to  the  delivered  unit  or  units  of  accounting  is  limited  to  the  amount  that  is  not  contingent  upon  the  delivery  of  additional  items  or meeting  other  specified  performance  conditions  (non-contingent  amount).  As  such,  we  excluded  from  the  allocable  arrangement  consideration  the  event-based payments, milestone payments, annual exclusivity fees and royalties regardless of the probability of receipt. Based on the results of our analysis, we allocated the $11.0 million license fees from Pfizer, the $15.0 million upfront license fee from Janssen, the $23.0 million upfront license fee from AbbVie and the $25.0 million upfront license fee from Lilly to the license fee deliverable under each of the arrangements. We determined that the upfront payments were F-21 earned  upon  the  granting  of  the  worldwide,  exclusive  right  to  our  technology  to  the  collaborators  in  these  arrangements.  As  a  result,  we  recognized  the  $11.0 million license  fees  under the  Pfizer  Collaboration,  the  $15.0 million upfront license  fee under the Janssen Collaboration,  the $23.0 million upfront license fee under the AbbVie Collaboration and the $25.0 million upfront license fee under the Lilly Collaboration as revenues under collaborative agreements in the period when such license fees were earned. Revenues recognized related to event-based payments or milestone payments under these collaborations were $1.0 million , $0 and $0 for the years ended December 31, 2015, 2014 and 2013 . The  collaborators  are  each  solely  responsible  for  the  development,  manufacturing  and  marketing  of  any  products  resulting  from  their  respective collaborations. We are entitled to receive payments for research and development services and supply of bulk rHuPH20 to these collaborators if requested by such collaborator.  We  recognize  amounts  allocated  to  research  and  development  services  as  revenues  under  collaborative  agreements  as  the  related  services  are performed.  We  recognize  amounts  allocated  to  the  sales  of  bulk  rHuPH20  as  revenues  under  collaborative  agreements  when  such  bulk  rHuPH20  has  met  all required specifications  by the collaborators and the related title and risk of loss and damages have passed to the collaborators. We cannot predict the timing of delivery of research and development services and bulk rHuPH20 as they are at the collaborators’ requests. In May 2011 and June 2011, we entered  into collaboration  and license  agreements  with ViroPharma Incorporated  and Intrexon  Corporation, respectively. These collaboration agreements were terminated effective May 2014 . Pursuant to the terms of our collaboration agreements with Roche and Pfizer, certain future payments meet the definition of a milestone in accordance with the  Milestone  Method  of  Accounting.  We  are  entitled  to  receive  additional  milestone  payments  for  the  successful  development  of  the  elected  targets  in  the aggregate of up to approximately $54.0 million upon achievement of specified clinical development milestone events and up to approximately $12.0 million upon achievement of specified regulatory milestone events in connection with specified regulatory filings and receipt of marketing approvals. 5. Certain Balance Sheet Items Accounts receivable, net consisted of the following (in thousands): December 31, 2015 December 31, 2014 Accounts receivable from revenues under collaborative agreements   $ 25,939   $ Accounts receivable from product sales to collaborators Accounts receivable from other product sales Total accounts receivable Allowance for distribution fees and discounts Total accounts receivable, net Inventories consisted of the following (in thousands): Raw materials Work-in-process Finished goods Total inventories 4,996   2,442   33,377   (967)     $ 32,410   $ 1,266 6,361 2,133 9,760 (611) 9,149 December 31, 2015 December 31, 2014   $   $ 677   $ 8,481   331   9,489   $ 553 5,207 646 6,406 F-22                         Prepaid expenses and other assets consisted of the following (in thousands): Prepaid manufacturing expenses Prepaid research and development expenses Other prepaid expenses Other assets Total prepaid expenses and other assets Less long-term portion Total prepaid expenses and other assets, current Property and equipment, net consisted of the following (in thousands): Research equipment Computer and office equipment Leasehold improvements Subtotal Accumulated depreciation and amortization Property and equipment, net December 31, 2015 December 31, 2014   $ 16,155   $ 9,225   1,198   530   27,108   5,574     $ 21,534   $ 6,339 2,380 1,094 1,535 11,348 1,205 10,143 December 31, 2015 December 31, 2014   $ 9,666   $ 2,570   2,025   14,261   (10,318)     $ 3,943   $ 8,474 2,178 1,518 12,170 (9,219) 2,951 Depreciation and amortization expense was approximately $1.7 million , $1.8 million and $1.2 million for the years ended December 31, 2015, 2014 and 2013 , respectively. Accrued expenses consisted of the following (in thousands): Accrued outsourced research and development expenses   $ 8,617   $ Accrued compensation and payroll taxes Accrued outsourced manufacturing expenses Other accrued expenses Total accrued expenses Less long-term accrued outsourced research and development expenses      Total accrued expenses, current 8,636   6,205   4,118   27,576   784     $ 26,792   $ 4,383 5,923 2,112 2,023 14,441 480 13,961 December 31, 2015 December 31, 2014 F-23                                               Long-term accrued outsourced research and development is included in other long-term liabilities in the consolidated balance sheets. Deferred revenue consisted of the following (in thousands): Collaborative agreements Product sales Total deferred revenue Less current portion Deferred revenue, net of current portion 6. Long-Term Debt, Net December 31, 2015 December 31, 2014   $ 53,223   $ —   53,223   9,304     $ 43,919   $ 53,479 1,155 54,634 7,367 47,267 In December 2013, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and  Silicon  Valley  Bank  (“SVB”)  (collectively,  the  “Lenders”),  amending  and  restating  in  its  entirety  our  original  loan  agreement  with  the  Lenders,  dated December  2012.  The  Loan  Agreement  provided  for  an  additional  $20  million  principal  amount  of  new  term  loan,  bringing  the  total  term  loan  balance  to  $50 million . The proceeds are to be used for working capital and general business requirements. The amended term loan facility matures on January 1, 2018 . In January 2015, we entered into the second amendment to the Loan Agreement with the Lenders, amending and restating the loan repayment schedules of the Loan Agreement. The amended and restated term loan repayment schedule provides for interest only payments through January 2016 , followed by consecutive equal monthly payments of principal and interest in arrears starting in February 2016 and continuing through the previously established maturity date of January 2018. Consistent with the original loan, the Loan Agreement provides for a 7.55% interest rate on the term loan and a final interest payment equal to 8.5% of the original principal amount, or $4.25 million , which is due when the term loan becomes due or upon the prepayment of the facility. We have the option to prepay the outstanding balance of the term loan in full, subject to a prepayment fee of 1% . In December 2015, we entered into a consent, release and third amendment to the Loan Agreement with the Lenders, in which the Lenders consent to (i) the formation of Halozyme Royalty LLC (“Halozyme Royalty”) as a wholly-owned Subsidiary of Halozyme, (ii) the release of liens and the sale of certain rights to receive  royalty  payments  to  Halozyme  Royalty,  and  (iii)  enter  into  a  Credit  Agreement  with  BioPharma  Credit  Investments  IV  Sub,  LP.,  (“BioPharma”),  as collateral  agent  and  lender,  and  the  other  lenders  party,  whereby  Halozyme  Royalty  will  incur  indebtedness  from  and  grant  liens  on  the  royalty  payments  to BioPharma.  This  amendment  allowed  us to  enter  into  a  royalty-backed  debt  agreement.  Refer  to  Note  15,  “Subsequent Event” , for further information on our royalty-backed debt agreement. In connection with the term loan, the debt offering costs have been recorded as a debt discount in our condensed consolidated balance sheets which, together with  the  final  payment  and  fixed  interest  rate  payments,  are  being  amortized  and  recorded  as  interest  expense  throughout  the  life  of  the  term  loan  using  the effective interest rate method. F-24             The amended term loan is secured by substantially all of the assets of the Company and our subsidiary, Halozyme, Inc., except that the collateral does not include any equity interests in Halozyme, Inc., any of our intellectual property (including all licensing, collaboration and similar agreements relating thereto), and certain  other  excluded  assets.  The  Loan  Agreement  contains  customary  representations,  warranties  and  covenants  by  us,  which  covenants  limit  our  ability  to convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets; engage in any business other than the businesses currently engaged in by us or reasonably related thereto; liquidate or dissolve; make certain management changes; undergo certain change of control events; create, incur, assume, or be liable with respect to certain indebtedness; grant certain liens; pay dividends and make certain other restricted payments; make certain investments; make payments on any subordinated debt; and enter into transactions with any of our affiliates outside of the ordinary course of business or permit our subsidiaries to do the same. In addition, subject to certain exceptions, we are required to maintain with SVB our primary deposit accounts, securities accounts and commodities, and to do the same for our subsidiary, Halozyme, Inc. The  Loan  Agreement  also  contains  customary  indemnification  obligations  and  customary  events  of  default,  including,  among  other  things,  our  failure  to fulfill certain of our obligations under the Loan Agreement and the occurrence of a material adverse change which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral. In the event of default by us under the Loan 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 Loan Agreement, which could harm our financial condition.  As of December 31, 2015 , we were in compliance with all material covenants under the Loan Agreement and there was no material adverse change in our business, operations or financial condition. Future maturities and interest payments under the term loan as of December 31, 2015 , are as follows (in thousands): 2016 2017 2018 2019 2020 Total minimum payments Less amount representing interest Gross balance of long-term debt Less unamortized debt discount Present value of long-term debt Less current portion of long-term debt Long-term debt, less current portion and unamortized debt discount   $   $ 25,077 27,013 6,501 — — 58,591 (8,591) 50,000 (167) 49,833 (21,862) 27,971 Interest expense, including amortization of debt discount, related to the long-term debt for the years ended December 31, 2015, 2014 and 2013 was approximately $5.2 million , $5.6 million and $3.3 million , respectively. Accrued interest, which is included in accrued expenses and other long-term liabilities, was $3.2 million and $2.0 million as of December 31, 2015 and December 31, 2014 , respectively. F-25                     7. Stockholders’ Equity During 2015 ,  we  issued  an  aggregate  of  1,926,368 shares  of  common  stock,  in  connection  with  the  exercises  of  stock  options  for  cash  in  the  aggregate amount of approximately $14.4 million . In addition, we issued 375,019 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs. We issued  82,069  shares  of  common  stock  upon  vesting  of  RSUs.  The  RSU  holders  surrendered  52,019  RSUs  to  pay  for  minimum  withholding  taxes  totaling approximately  $0.7  million  .  We  issued  47,454  shares  of  common  stock  upon  vesting  of  PRSUs.  The  PRSU  holders  surrendered  35,926  PRSUs  to  pay  for minimum withholding taxes totaling approximately $0.6 million . During 2014 ,  we  issued  an  aggregate  of  1,432,206 shares  of  common  stock  in  connection  with  the  exercises  of  stock  options  for  cash  in  the  aggregate amount of approximately $7.8 million . In addition, we issued 789,345 shares of common stock, net of RSAs canceled, in connection with the grants of RSAs and 120,043  shares  of  common  stock  upon  vesting  of  certain  RSUs.  The  RSU  holders  surrendered  74,325  RSUs  to  pay  for  minimum  withholding  taxes  totaling approximately $1.0 million . In February 2014, we completed an underwritten public offering and issued 8,846,153 shares of common stock, including 1,153,846 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriter. All of the shares were offered at a public offering price of $13.00 per share, generating approximately $107.7 million in net proceeds. 8. Equity Incentive Plans We currently grant stock options, restricted stock awards and restricted stock units under the Amended and Restated 2011 Stock Plan (“2011 Stock Plan”), which provides for the grant of up to 19.5 million shares of common stock (subject to certain limitations as described in the Amended and Restated 2011 Stock Plan) to selected employees, consultants and non-employee members of our Board of Directors (“Outside Directors”) as stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards. The 2011 Stock Plan was approved by the stockholders. Awards are subject to terms and conditions established by the Compensation Committee of our Board of Directors. During the year ended December 31, 2015 , we granted share-based awards under the 2011 Stock Plan. At December 31, 2015 , 8,969,113 shares were subject to outstanding awards and 7,440,487 shares were available for future grants of share-based awards. At the present time, management intends to issue new common shares upon the exercise of stock options, issuance of restricted stock awards and settlement of restricted stock unit awards and performance awards. Total share-based compensation expense related to share-based awards was comprised of the following (in thousands): Research and development Selling, general and administrative Share-based compensation expense Share-based compensation expense by type of share-based award (in thousands): Stock options RSAs, RSUs and PRSUs F-26 Year Ended December 31, 2015 2014 2013 9,795   $ 11,043   7,939   $ 7,335   20,838   $ 15,274   $ 4,476 5,062 9,538 Year Ended December 31, 2015 2014 2013 11,145   $ 9,693   7,884   $ 7,390   20,838   $ 15,274   $ 5,499 4,039 9,538   $   $   $   $                               Total unrecognized estimated compensation expense by type of award and the weighted average remaining requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted): Stock options RSAs RSUs PRSUs December 31, 2015 Unrecognized Expense 31,058   5,531   4,795   79     $   $   $   $ Remaining Weighted Average Recognition Period (years) 3.0 2.3 2.5 1.1 Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for options exercised (excess tax benefits) are classified as cash inflows provided by financing activities and cash outflows used in operating activities. Due to our net loss position, no tax benefits have been recognized in the consolidated statements of cash flows. Stock Options.  Options granted under the Plans must have an exercise price equal to at least 100% of the fair market value of our common stock on the date of grant. The options will generally have a maximum contractual term of ten years and vest at the rate of one-fourth of the shares on the first anniversary of the date of grant and 1/48 of the shares monthly thereafter. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans). A summary of our stock option award activity as of and for the years ended December 31, 2015, 2014 and 2013 is as follows:   Outstanding at January 1, 2013 Granted Exercised Canceled/forfeited Outstanding at December 31, 2013 Granted Exercised Canceled/forfeited Outstanding at December 31, 2014 Granted Exercised Canceled/forfeited Outstanding at December 31, 2015 Vested and expected to vest at December 31, 2015 Exercisable at December 31, 2015 Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Weighted Average Exercise Price per Share $6.59 $7.14 $4.34 $8.18 $7.11 $13.02 $5.43 $9.39 $9.18 $16.26 $7.49 $10.64 $13.03 $12.77 $9.15 7.8 7.7 5.9 $38.9 million $37.1 million $23.2 million Shares Underlying Stock Options 6,379,867   1,806,392   (1,270,362)   (214,982)   6,700,915   2,271,143   (1,432,206)   (1,185,960)   6,353,892   3,973,604   (1,926,368)   (407,936)   7,993,192   7,313,178   2,839,265   F-27                                                                                                                                                         The weighted average grant date fair values of options granted during the years ended December 31, 2015, 2014 and 2013 were $9.60 per share, $8.13 per share and $4.40 per share, respectively. The fair value of options vested during the years ended December 31, 2015, 2014 and 2013 was approximately $6.2 million , $4.8  million  and $3.9  million  ,  respectively.  The  total  intrinsic  value  of  options  exercised  during  the  years  ended  December  31,  2015,  2014  and  2013  was approximately $16.2 million , $8.1 million and $8.3 million , respectively. Cash received from stock option exercises for the years ended December 31, 2015, 2014 and 2013 was approximately $14.4 million , $7.8 million and $5.5 million , respectively. 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”) that uses the assumptions noted in the following table. 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 by us. Assumptions used in the Black-Scholes model were as follows: Expected volatility Average expected term (in years) Risk-free interest rate Expected dividend yield Year Ended December 31, 2015 2014 2013 66.2-67.4% 66.6-71.8% 70.1-72.5% 5.6 5.7 5.7 1.34-1.92% 1.73-2.04% 0.86-2.00% 0% 0% 0% Restricted Stock Awards . RSAs are grants that entitle the holder to acquire shares of our common stock at zero or a fixed price, which is typically nominal. The shares covered by a RSA cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by us for the original purchase price following the awardee’s termination of service. The RSAs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. Annual grants of RSAs to Outside Directors typically vest in full the first day the awardee may trade our stock in compliance with our insider trading policy following the date immediately preceding the first annual meeting of stockholders following the grant date. The following table summarizes our RSA activity during the years ended December 31, 2015, 2014 and 2013 : Unvested at January 1, 2013 Granted Vested Forfeited Unvested at December 31, 2013 Granted Vested Forfeited Unvested at December 31, 2014 Granted Vested Forfeited Unvested at December 31, 2015 F-28 Number of Shares 382,320   476,096   (211,178)   (14,367)   632,871   Weighted Average Grant Date Fair Value $10.21 $6.88 $8.78 $8.17 $8.23 1,055,122   $11.15 (263,765)   (265,777)   1,158,451   515,695   (721,990)   (140,676)   811,480   $8.33 $10.86 $10.26 $15.00 $10.11 $11.84 $13.13                                             The estimated fair value of the RSAs was based on the market value of our common stock on the date of grant. The total grant date fair value of RSAs vested during the years ended December 31, 2015, 2014 and 2013 was approximately $7.3 million , $2.2 million and $1.9 million , respectively. The total intrinsic value of RSAs vested during the years ended December 31. 2015, 2014, 2013, was approximately $13.9 million , $3.0 million and $1.5 million , respectively. Restricted Stock Units .  A RSU is a promise by us to issue a share of our common stock upon vesting of the unit. The RSUs will generally vest at the rate of one-fourth of the shares on each anniversary of the date of grant. The following table summarizes our RSU activity during the years ended December 31, 2015, 2014 and 2013 : Unvested at January 1, 2013 Granted Vested Forfeited Outstanding at December 31, 2013 Granted Vested Forfeited Outstanding at December 31, 2014 Granted Vested Forfeited Outstanding at December 31, 2015 Number of Shares 682,146   Weighted Average Grant Date Fair Value $10.61 323,700   $6.69 (154,124)   $10.41 (115,367)   736,355   $9.76 $9.06 305,535   $13.71 (194,368)   (385,200)   462,322   422,492   (134,088)   (84,512)   666,214   $9.12 $8.84 $11.12 $14.75 $10.93 $10.86 $13.49 Weighted Average Remaining Contractual Term (yrs) Aggregate Intrinsic Value 2.5 $11.5 million The estimated fair value of the RSUs was based on the market value of our common stock on the date of grant. The total grant date fair value of RSUs vested during the years ended December 31, 2015, 2014 and 2013 was approximately $1.5 million , $1.8 million and $1.6 million , respectively. The total intrinsic value of RSUs vested during the years ended December 31, 2015, 2014 and 2013 was approximately $1.8 million , $2.6 million and $1.1 million , respectively. F-29                                                                                                                                   Performance Restricted Stock Units .  A  PRSU  is  a  promise  by  us  to  issue  a  share  of  our  common  stock  upon  achievement  of  a  specific  performance condition. The following table summarizes our PRSU activity during the years ended December 31, 2015 and 2014 : Outstanding at January 1, 2014 Granted Vested Forfeited Outstanding at December 31, 2014 Granted Vested Forfeited Outstanding at December 31, 2015 Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (yrs) Aggregate Intrinsic Value —     8.91     —     8.91     8.91     Number of Shares —   $ 540,742   $ —   (109,504)   $ 431,238   $ 118,209   $ 11.19     (83,380)   $ (156,360)   $ 309,707   $ 9.48     9.21     9.48   1.1   $ 5.4 million The estimated fair value of the PRSUs was based on the market value of our common stock on the date of grant. The total grant date fair value and intrinsic value of PRSUs vested during the year ended December 31, 2015 was approximately $0.8 million and $1.4 million , respectively. 9. Commitments and Contingencies Operating Leases Our administrative offices and research facilities are located in San Diego, California. We lease an aggregate of approximately 76,000 square feet of office and research  space in four buildings.  The  leases  commenced  in  June  2011  and  November  2013  and  continue  through  January 2018 .  The  leases  are  subject  to approximately 2.5% to 3.0% annual increases throughout the terms of the leases. We also pay a pro rata share of operating costs, insurance costs, utilities and real property taxes. We received incentives under the leases, including tenant improvement allowances and reduced or free rent, for which the unamortized deferred rent balances associated with these incentives was $0.8 million and $1.0 million as of December 31, 2015 and 2014, respectively. In November 2015, we opened a satellite office in South San Francisco, California. We lease approximately 10,000 square feet of office space. The lease commenced in November 2015 and continues through January 2021 . The lease is subject to approximately 3.0% annual increases throughout the term of the lease. We  also  pay  a  pro  rata  share  of  operating  costs,  insurance  costs,  utilities  and  real  property  taxes.  We  received  incentives  under  the  lease,  including  tenant improvement  allowances  and  reduced  or  free  rent,  for  which  the  unamortized  deferred  rent  balances  associated  with  these  incentives  was  $0.4  million  as  of December 31, 2015. Additionally, we lease certain office equipment under operating leases. Total rent expense was approximately $1.9 million , $1.9 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013 , respectively. F-30                                                             Approximate annual future minimum operating lease payments as of December 31, 2015 are as follows (in thousands):   Year: 2016 2017 2018 2019 2020 Thereafter Total minimum lease payments Other Commitments   $ Operating Leases 2,539 2,606 507 413 426 36   $ 6,527 In order to scale up the production of bulk rHuPH20 and to identify another manufacturer that would help meet anticipated production obligations arising from our proprietary programs and our collaborations, we entered into a Technology Transfer Agreement and a Clinical Supply Agreement with Cook Pharmica LLC  (“Cook”).  The  technology  transfer  was  completed  in  2008.  In  2009,  multiple  batches  of  bulk  rHuPH20  were  produced  to  support  planned  future  clinical studies. In March 2010, we entered into a Commercial Supply Agreement  with Cook (the “Cook Commercial  Supply Agreement”).  Under the terms of the Cook Commercial Supply Agreement, Cook will manufacture certain batches of bulk rHuPH20 that will be used for commercial supply of certain products and product candidates. Under the terms of the Cook Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to four quarters  of  forecasted  supply.  At  December  31,  2015  ,  we  had  a  $5.7  million  minimum  purchase  obligation  in  connection  with  the  Cook  Commercial  Supply Agreement. In March 2010, we entered into a second Commercial Supply Agreement with Avid (the “Avid Commercial Supply Agreement”). Under the terms of the Avid Commercial Supply Agreement, we are committed to certain minimum annual purchases of bulk rHuPH20 equal to three quarters of forecasted supply. In addition, Avid has the right to manufacture and supply a certain percentage of bulk rHuPH20 that will be used in the collaboration products. At December 31, 2015 , we had a $30.2 million minimum purchase obligation in connection with this agreement. In  June  2011,  we  entered  into  a  services  agreement  with  another  third  party  manufacturer  for  the  technology  transfer  and  manufacture  of  Hylenex recombinant. At December 31, 2015 , we had a $0.9 million minimum purchase obligation in connection with this agreement. Contingencies We have entered into an in-licensing agreement with a research organization, which is cancelable at our option with 90 days written notice. Under the terms of this agreement, we have received license to know-how and technology claimed, in certain patents or patent applications. We are required to pay fees, milestones and/or royalties on future sales of products employing the technology or falling under claims of a patent, and some of the agreements require minimum royalty payments. We continually reassess the value of the license agreement. If the in-licensed and research candidate is successfully developed, we may be required to pay milestone payments of approximately $9.3 million over the life of this agreement in addition to royalties on sales of the affected products. One of the milestone payments of $1.3 million is due upon the first dosing of a patient in our Phase 3 study of PEGPH20, which is expected to occur at the end of the first quarter of 2016.  Due  to  the  uncertainties  of  the  development  process,  the  timing  and  probability  of  the  remaining  milestone  and  royalty  payments  cannot  be  accurately estimated. F-31             Legal Contingencies From time to time, we may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of our business. Any of  these  claims  could  subject  us  to  costly  legal  expenses  and,  while  we  generally  believe  that  we  have  adequate  insurance  to  cover  many  different  types  of liabilities,  our  insurance  carriers  may  deny  coverage  or  our  policy  limits  may  be  inadequate  to  fully  satisfy  any  damage  awards  or  settlements.  If  this  were  to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We currently are not a party to any legal proceedings, the adverse outcome of which,  in  management’s  opinion,  individually  or  in  the  aggregate,  would  have  a  material  adverse  effect  on  our  consolidated  results  of  operations  or  financial position. 10. Income Taxes Significant  components  of  our  net  deferred  tax  assets  at  December 31, 2015 and 2014 are  shown below  (in  thousands).  A  valuation  allowance  of  $182.5 million and $179.0 million has been established to offset the net deferred tax assets as of December 31, 2015 and 2014 , respectively, as realization of such assets is uncertain. Deferred tax assets: Net operating loss carryforwards Deferred revenue Research and development credits Share-based compensation Other, net Valuation allowance for deferred tax assets Deferred tax assets, net of valuation Deferred tax liabilities: Depreciation Net deferred tax liabilities Net deferred tax assets December 31, 2015 2014   $ 104,505   $ 120,707 16,344   54,846   6,286   906   182,887   (182,507)   380   (380)   (380)   —   $   $ 18,034 34,146 5,381 891 179,159 (178,965) 194 (194) (194) — The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (in thousands): Federal income tax at 34% State income tax, net of federal benefit Increase in valuation allowance Foreign income subject to tax at other than federal statutory rate Tax effect on non-deductible expenses and other Research and development credits F-32 December 31, 2015 2014 2013   $ (10,804)   $ (23,247)   $ 5,526   3,897   14,945   6,042   (19,606)   (1,761)   16,998   12,747   540   (5,277)     $ —   $ —   $ (28,383) (1,745) 33,525 — 5,219 (8,616) —                                                   At  December  31,  2015  ,  we  had  federal  and  California  tax  net  operating  loss  carryforwards  of  approximately  $320.0  million  and  $329.0  million  , respectively. Included in these amounts are federal and California net operating losses of approximately $49.1 million and $34.2 million , respectively, attributable to  stock  option,  RSA,  RSU,  and  PRSU  deductions  for  which  the  tax  benefit  will  be  credited  to  equity  when  realized.  The  federal  tax  net  operating  loss carryforwards will begin to expire in 2018 , unless previously utilized. The California tax net operating loss carryforwards will expire in 2016 , 2017 and 2028 and beyond in the amounts of $13.1 million , $10.4 million and $302.0 million , respectively. At December 31, 2015 , we also had federal and California research and development tax credit carryforwards of approximately  $28.0 million and $15.1 million  ,  respectively.  The  federal  research  and  development  tax  credits  will  begin  to  expire  in  2024  unless  previously  utilized.  The  California  research  and development tax credits will carryforward indefinitely until utilized. Additionally, we had Orphan Drug Credit carryforwards of $16.9 million which will begin to expire in 2024 . Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three year testing period. As a result of any such ownership change, portions of our net operating loss  carryforwards  and  research  and  development  tax  credits  are  subject  to  annual  limitations.  We  completed  an  updated  Section  382  analysis  regarding  the limitation of the net operating losses and research and development credits as of June 30, 2014. Based upon the analysis, we determined that ownership changes occurred  in  prior  years.  However,  the  annual  limitations  on  net  operating  loss  and  research  and  development  tax  credit  carryforwards  will  not  have  a  material impact on the future utilization of such carryforwards. At December 31, 2015 , our unrecognized income tax benefits and uncertain tax positions were $4.9 million and would not, if recognized, affect the effective tax rate. We had no such unrecognized income tax benefits or uncertain tax positions at December 31, 2014. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2015, 2014 and 2013 , we recognized no interest or penalties. We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. At December 31, 2015 and 2014 , there were no undistributed earnings in the foreign subsidiary. We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 1998 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits. 11. Employee Savings Plan We have an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees are eligible to participate, provided they meet the requirements of the plan. We are not required to make matching contributions under the plan. However, we voluntarily contributed to the plan approximately $0.7 million , $0.7 million and $0.6 million for the years ended December 31, 2015, 2014 and 2013 , respectively. 12. Related Party Transactions In June 2011, we and Intrexon entered into the Intrexon Collaboration, under which Intrexon obtained a worldwide exclusive license for the use of rHuPH20 enzyme in the development of a subcutaneous injectable formulation of Intrexon’s recombinant human alpha 1-antitrypsin (rHuA1AT). The Intrexon Collaboration was terminated in May 2014 . Intrexon’s chief executive officer and chairman of its board of directors, Randal J. Kirk, is also a member of our Board of Directors. The collaborative arrangement with Intrexon was reviewed and approved by our Board of Directors in accordance with our related party transaction policy. For the years ended December 31, 2015 and 2014 , we recognized zero in revenue under collaborative agreements pursuant to the terms of the Intrexon Collaboration. In December 2013, we recognized $1.0 million in revenue under collaborative agreements pursuant to the terms of the Intrexon Collaboration. F-33 13. Restructuring Expense In  November  2014,  we  completed  a  corporate  reorganization  to  focus  our  resources  on  advancing  our  PEGPH20  oncology  proprietary  program  and ENHANZE collaborations. This reorganization resulted in a reduction in the workforce of approximately 13% , primarily in research and development. We recorded approximately $1.2 million of severance pay and benefits expense in connection with the reorganization, of which $1.1 million and $0.1 million was included in research and development expense and selling, general and administrative expense, respectively, in the consolidated statement of operations for the year ended December 31, 2014. No other restructuring charges were incurred. We made cash payments of $0.7 million related to the restructuring expense for the year ended December 31, 2014. As of December 31, 2014, the restructuring liability was approximately $0.5 million and was included in current accrued expenses. The restructuring liability was paid in full during the three months ended March 31, 2015 . F-34 14. Summary of Unaudited Quarterly Financial Information The following is a summary of our unaudited quarterly results for the years ended December 31, 2015 and 2014 (in thousands): 2015 (Unaudited): Total revenues (1) (2) Gross profit on product sales Total operating expenses Net income (loss) Net income (loss) per share: Basic Diluted Shares used in computing net income (loss) per share: Basic Diluted 2014 (Unaudited): Total revenues (3) Gross profit on product sales Total operating expenses Net loss Net loss per share, basic and diluted Shares used in computing basic and diluted net loss  per share _______________   $   $   $   $   $   $   $   $   $   $   $ March 31, June 30, September 30, December 31, Quarter Ended 18,666   $ 3,366   $ 32,577   $ (15,108)   $ 43,384   $ 4,198   $ 39,153   $ 3,019   $ 20,780   $ 4,121   $ 44,017   $ (24,460)   $ (0.12)   $ (0.12)   $ 0.02   $ 0.02   $ (0.19)   $ (0.19)   $ 52,227 5,152 46,762 4,318 0.03 0.03 125,299   125,299   126,144   134,507   126,921   126,921   127,197 129,248 Quarter Ended March 31, June 30, September 30, December 31, 11,966   $ 3,048   $ 37,185   $ 18,385   $ 3,570   $ 33,325   $ 14,606   $ 4,476   $ 33,632   $ (26,548)   $ (16,273)   $ (20,280)   $ (0.22)   $ (0.13)   $ (0.16)   $ 30,377 3,997 34,228 (5,274) (0.04) 118,943   123,710   124,041   124,272 (1) Revenues for the quarter ended June 30, 2015 included $23.0 million in revenue under collaborative agreements from the AbbVie Collaboration. (2) Revenues for the quarter ended December 31, 2015 included $25.0 million in revenue under collaborative agreements from the Lilly Collaboration. (3) Revenues for the quarter ended December 31, 2014 included $15.0 million in revenue under collaborative agreements from the Janssen Collaboration. F-35                                                                                 15. Subsequent Event In January 2016, through our subsidiary Halozyme Royalty, we received a $150 million loan (the “Royalty-backed Loan”) pursuant to a credit agreement (the “Credit Agreement”) with BioPharma Credit Investments IV Sub, LP and Athyrium Opportunities II Acquisition LP (the “Royalty-backed Lenders”). Under the terms of the Credit Agreement, Halozyme Therapeutics, Inc. transfered to Halozyme Royalty the right to receive certain royalty payments from the commercial sales of Herceptin SC, MabThera SC and HYQVIA. The royalty payments from the collaboration agreements will be used to repay the principal and interest on the loan (the “Royalty Payments”).  The loan bears interest at a per annum rate of 8.75% plus the three-month LIBOR rate . The three-month LIBOR rate is subject to a floor of 0.7% and a cap of 1.5% .  Quarterly Royalty Payments from Baxalta and Roche will first be applied to pay (i) escrow fees payable by Halozyme, (ii) certain expenses incurred by the Royalty-backed  Lenders  in  connection  with  the  Credit  Agreement  and  related  transaction  documents,  including  enforcement  of  their  rights  under  the  Credit Agreement and (iii) expenses incurred by Halozyme enforcing the right to indemnification under the collaboration and license agreements with Roche and Baxalta (“License Agreements”). The Credit Agreement provides that none of the remaining Royalty Payments are required to be applied to the Royalty-backed Loan prior to January 1, 2017, 50% of the remaining Royalty Payments are required to be applied to the Royalty-backed Loan between January 1, 2017 and January 1, 2018 and thereafter all remaining Royalty Payments must be applied to the Royalty-backed Loan. Additionally, the amounts available to repay the Royalty-backed Loan are subject to caps of $13.75 million per quarter in 2017, $18.75 million per quarter in 2018, $21.25 million per quarter in 2019 and $22.5 million per quarter in 2020 and thereafter. Amounts available to repay the Royalty-backed Loan will be applied first, to pay interest and second, to repay principal on the Royalty-backed Loan. Any accrued interest that is not paid on any applicable quarterly payment date will be capitalized and added to the principal balance of the Royalty-backed Loan. Halozyme Royalty will be entitled to receive and distribute to Halozyme any Royalty Payments that are not required to be applied to the Royalty-backed Loan or which are in excess of the foregoing caps. The  final  maturity  date  of  the  Royalty-backed  Loan  will  be  the  earlier  of  (i)  the  date  when  principal  and  interest  is  paid  in  full,  (ii)  the  termination  of Halozyme Royalty’s right to receive royalties under the License Agreements, and (iii) December 31, 2050 .  Under the terms of the Credit Agreement, at any time after January 1, 2019, Halozyme Royalty may, subject to certain limitations, prepay the outstanding principal of the Royalty-backed Loan in whole or in part, at a price equal to 105% of the outstanding principal on the Royalty-backed Loan, plus accrued but unpaid interest. The Royalty-backed Loan constitutes an obligation of Halozyme Royalty, and is non-recourse to Halozyme. F-36 Halozyme Therapeutics, Inc. Schedule II Valuation and Qualifying Accounts (in thousands) Balance at Beginning of Period   Additions Deductions Balance at End of Period   $   $   $ 611   $ 4,150   $ (3,794)   $ 610   $ 4,520   $ (4,519)   $ 178   $ 2,979   $ (2,547)   $ 967 611 610 For the year ended December 31, 2015 Accounts receivable allowances (1) For the year ended December 31, 2014 Accounts receivable allowances (1) For the year ended December 31, 2013 Accounts receivable allowances (1) _______________ (1) Allowances are for chargebacks, prompt payment discounts and distribution fees related to Hylenex recombinant product sales. F-37                                                         Exhibit Number 3.1 3.2 3.3 4.1 10.1 10.2 10.3# 10.4# 10.5# 10.6# 10.7# 10.8# 10.9# Exhibit Index Composite Certification of Incorporation Exhibit Title Certificate of Designation, Preferences and Rights of the terms of the Series A Preferred Stock Bylaws, as amended Amended Rights Agreement between Corporate Stock Transfer, as rights agent, and Registrant, dated November 12, 2007 License Agreement between University of Connecticut and Registrant, dated November 15, 2002 Incorporated by Reference Filed Herewith Form File No. Date Filed 10-Q 001-32335 8/7/2013 8-K 001-32335 11/20/2007 8-K 001-32335 12/12/2011 10-K 001-32335 3/14/2008 SB-2 333-114776 4/23/2004 First Amendment to the License Agreement between University of Connecticut and Registrant, dated January 9, 2006 8-K 001-32335 1/12/2006 Halozyme Therapeutics, Inc. 2005 Outside Directors’ Stock Plan Form of Stock Option Agreement (2005 Outside Directors’ Stock Plan) Form of Restricted Stock Agreement (2005 Outside Directors’ Stock Plan) Halozyme Therapeutics, Inc. 2006 Stock Plan Form of Stock Option Agreement (2006 Stock Plan) Form of Restricted Stock Agreement (2006 Stock Plan) Halozyme Therapeutics, Inc. 2008 Stock Plan 10.10# Form of Stock Option Agreement (2008 Stock Plan) 10.11# Form of Restricted Stock Agreement (2008 Stock Plan) 10.12# Halozyme Therapeutics, Inc. 2008 Outside Directors’ Stock Plan 8-K 10-Q 10-Q 8-K 10-Q 10-Q 8-K 10-Q 10-Q 8-K 001-32335 7/6/2005 001-32335 8/8/2006 001-32335 8/8/2006 001-32335 3/24/2006 001-32335 8/8/2006 001-32335 8/8/2006 001-32335 3/19/2008 001-32335 8/7/2009 001-32335 8/7/2009 001-32335 3/19/2008 10.13# Form of Restricted Stock Agreement (2008 Outside Directors’ Stock Plan) 10-Q 001-32335 8/7/2009                                                                                                                                                                                                                                                             Exhibit Number Exhibit Title Filed Herewith 10.14# Halozyme Therapeutics, Inc. 2011 Stock Plan (as amended through May 6, 2015) 10.15# Form of Stock Option Agreement (2011 Stock Plan) 10.16# Form of Stock Option Agreement for Executive Officers (2011 Stock Plan) 10.17# Form of Restricted Stock Units Agreement for Officers (2011 Stock Plan) 10.18# Form of Restricted Stock Award Agreement for Officers (2011 Stock Plan) 10.19# Form of Restricted Stock Units Agreement (2011 Stock Plan) 10.20# Form of Restricted Stock Award Agreement (2011 Stock Plan) Incorporated by Reference Form 10-Q 8-K 8-K 10-Q 10-Q 8-K 8-K File No. Date Filed 001-32335 8/10/2015 001-32335 5/6/2011 001-32335 5/6/2011 001-32335 8/10/2015 001-32335 8/10/2015 001-32335 5/6/2011 001-32335 5/6/2011 10.21# 10.22# 10.23# Form of Stock Option Agreement (2011 Stock Plan -grants made on or after 11/4/2015) 10-Q 001-32335 11/9/2015 Form of Restricted Stock Units Agreement (2011 Stock Plan - grants made on or after 11/4/2015) 10-Q 001-32335 11/9/2015 Form of Restricted Stock Award Agreement (2011 Stock Plan - grants made on or after 11/4/2015) 10-Q 001-32335 11/9/2015 10.24# Form of Indemnity Agreement for Directors and Executive Officers 10.25# Severance Policy 10.26# Form of Amended and Restated Change In Control Agreement with Officer 10.27 10.28 10.29 10.30 10.31 10.32 10.33 Lease (11404 and 11408 Sorrento Valley Road) Amended and Restated Lease (11388 Sorrento Valley Road), effective as of June 10, 2011 Lease (11436 Sorrento Valley Road), effective as of April 2013 First modification to Lease (11436 Sorrento Valley Road) Amended and Restated Loan and Security Agreement, dated December 27, 2013 Consent and First Amendment to Amended and Restated Loan and Security Agreement, dated June 10, 2014 Second Amendment to Amended and Restated Loan and Security Agreement, dated January 23, 2015 8-K 10-Q 10-K 8-K 8-K 10-K 10-Q 10-K 10-Q 10-K 001-32335 12/20/2007 001-32335 5/9/2008 001-32335 11/9/2015 001-32335 6/16/2011 001-32335 6/16/2011 001-32335 2/28/2013 001-32335 5/8/2013 001-32335 2/28/2014 001-32335 8/11/2014 001-32335 3/2/2015                                                                                                                                                                                                                                                                                                       Exhibit Number 10.34 Exhibit Title Consent, Release and Third Amendment to Amended and Restated Loan and Security Agreement, dated December 28, 2015 10.35* Credit Agreement, dated December 30, 2015 21.1 23.1 31.1 31.2 32 Subsidiaries of Registrant Consent of Independent Registered Public Accounting Firm Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE _______________ XBRL Taxonomy Presentation Linkbase Incorporated by Reference Filed Herewith Form File No. Date Filed X X X X X X X X X X X X X * # Confidential treatment has been granted (or requested) for certain portions of this exhibit. These portions have been omitted from this agreement and have been filed separately with the Securities and Exchange Commission. Indicates management contract or compensatory plan or arrangement.                                                                                                                                                                                                                                                         CONSENT, RELEASE AND THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT EXHIBIT 10.34 THIS CONSENT, RELEASE AND THIRD AMENDMENT to Amended and Restated Loan and Security Agreement (this “ Amendment ”) is entered into as of December 28, 2015, by and among OXFORD FINANCE LLC (“ Oxford ”) as collateral agent (in such capacity, the “ Collateral Agent ”) and a lender (in such capacity, a “ Lender ”) and SILICON VALLEY BANK as lender (in such capacity, a “ Lender ” and collectively with Oxford, the “ Lenders ”), and HALOZYME THERAPEUTICS, INC. , a Delaware corporation (“ Parent ”), and HALOZYME, INC. , a California corporation (“ Halozyme ” and together with Parent, individually and collectively, jointly and severally, “ Borrower ”). RECITALS A. Collateral  Agent,  Lenders  and  Borrower  have  entered  into  that  certain  Amended  and  Restated  Loan  and  Security  Agreement  dated  as  of December 27, 2013 (as the same has been and may from time to time further be amended, modified, supplemented or restated, collectively, the “ Loan Agreement ”). Lenders have extended credit to Borrower for the purposes permitted in the Loan Agreement. B.     (i) Halozyme desires to form Halozyme Royalty LLC (“ LLC ”), as a wholly-owned Subsidiary of Halozyme, (ii) Halozyme intends to sell to LLC certain  rights  to  receive  royalty  payments  (the  “  Applicable Assets ”)  pursuant  to  that  certain  Purchase  and  Sale  Agreement  in  substantially  the  form  attached hereto as Schedule 1 (the “ Purchase Agreement ”), and (iii) Halozyme and LLC intend to enter into that certain Credit Agreement (the “ BCI Credit Agreement ”) with BioPharma Credit Investments IV Sub, LP as collateral agent and lender (“ BCI ”), and the other lenders party thereto from time to time, whereby LLC will incur Indebtedness from and grant liens on the Applicable Assets to BCI. C.     Borrower has requested that Collateral Agent and Lenders (i) consent to the formation of LLC, the Investment in LLC consisting solely of the initial capitalization  of  LLC  and  Halozyme’s  ownership  of  the  equity  securities  of  LLC,  the  sale  of  the  Applicable  Assets  by  Halozyme  to  LLC,  and  the  transactions contemplated by the Purchase Agreement, (ii) release Collateral Agent’s Lien on the Applicable Assets, (iii) amend the Loan Agreement to permit the Indebtedness and  Liens  under  the  BCI  Credit  Agreement  and  permit  Halozyme  and  LLC  to  enter  into  the  BCI  Credit  Agreement,  the  Purchase  Agreement,  the  Escrow Agreement  and  the  other  agreements  contemplated  thereby  (the  actions  described  in  clauses  (i),  (ii)  and  (iii)  being  referred  to  herein  as  the  “  Permitted Transactions ”), and (iv) make certain other revisions to the Loan Agreement as more fully set forth herein. D.     Collateral Agent and Lenders have agreed to so consent to the transactions set forth above and to amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement. 2.      Consent. Subject to the terms of Section 10 below, Collateral Agent and Lenders hereby consent to the Permitted Transactions, waive any non- compliance with the terms of the Loan Agreement as a result of the consummation of the Permitted Transactions and agree that the same shall not constitute an “Event of Default” under the Loan Agreement. 3.      Release . Subject to the terms of Section 9 below and effective only upon the consummation of the sale of the Applicable Assets in accordance with the Purchase Agreement, Collateral Agent hereby releases any security interest it has in the Applicable Assets without delivery of any instrument or any further action by any party; provided, however, that nothing in this Amendment shall constitute a release of any security interest Collateral Agent has in any consideration or other proceeds of the Applicable Assets which are payable to or received by Borrower in connection with the sale of the Applicable Assets, whether now owned or hereafter acquired. At the request and sole expense of Borrower at any time after the effectiveness of the foregoing release, Collateral Agent shall execute and deliver  to  Borrower  such  documents  as  Borrower  may  reasonably  request  to  evidence  the  release  of  the  Applicable  Assets.  At  the  request  and  sole  expense  of Borrower at any time after the effectiveness of the foregoing release, Collateral Agent shall file, or cause to be filed, a UCC amendment to exclude the Applicable Assets to evidence the release of Collateral Agent’s Lien thereon. 4.           Reaffirmation .  Except  to  the  extent  the  Applicable  Assets  are  released  pursuant  to  Section  3  above,  Borrower  hereby  reaffirms  its  grant  to Collateral Agent of a security interest in the Collateral. 5.      Amendments to Loan Agreement . 5.1      Section 6.2 ( Financial Statements, Reports, Certificates ). The following new clause (ix) is hereby added to Section 6.2(a): (ix)    notice of any default or breach under the BCI Credit Agreement or of any claim or enforcement action against Halozyme thereunder, in each case, within one (1) Business Day of the occurrence thereof. 5.2      Section 6.6 ( Operating Accounts ). The following new clause (d) is hereby added to Section 6.6: (d)    Notwithstanding the foregoing, LLC shall not be required to comply with this Section 6.6. 5.3      Section 6.12 (Creation/Acquisition of Subsidiaries) . The following is hereby added at the end of Section 6.12: Notwithstanding  the  foregoing,  LLC  shall  not  become  a  co-Borrower  hereunder  or  guarantee  the  Obligations  of  Borrower  under  the  Loan Documents and shall not grant any Liens on any of its assets in favor of Collateral Agent or Lenders. Agreement: 5.4           Section 6.14 (  Distributions by LLC to Halozyme ).  The  following  new  Section  6.14  is  hereby  added  to  Section  6  of  the  Loan 6.14 Distributions by LLC to Halozyme .  Subject  to  the  terms  and  conditions  set  forth  in  the  BCI  Credit  Agreement  (as  delivered  to Collateral  Agent  on  or  about  the  Third  Amendment  Date)  and  the  Escrow  Agreement  (as  defined  in  the  BCI  Credit  Agreement  and  as  delivered  to Collateral Agent on or about the Third Amendment Date), Borrower shall cause LLC to distribute to Halozyme all assets of LLC except (a) any assets required to be held by LLC in accordance with the BCI Credit Agreement (as delivered to Collateral Agent on or about the Third Amendment Date) and (b)  any  assets  in  an  aggregate  amount  not  to  exceed  Five  Hundred  Thousand  Dollars  ($500,000)  which  are  required  to  be  held  by  LLC  to  maintain adequate capital in light of its contemplated business purpose, transactions and liabilities, and Borrower shall take such actions as may be permitted under the  BCI  Credit  Agreement  (as  delivered  to  Collateral  Agent  on  or  about  the  Third  Amendment  Date)  and  the  Escrow  Agreement  (as  delivered  to Collateral Agent on or about the Third Amendment Date) to cause such distributions to be made promptly as such assets become available for distribution. 2 5.5      Section 7.7 ( Distributions; Investments ). The following is hereby added to the end of Section 7.7(a): , provided that LLC may pay dividends and make distributions to Halozyme 5.6      Section 7.8 ( Transactions with Affiliates ). Section 7.8 is hereby amended by deleting clause (b) in its entirety and replacing it with the (b) Investments permitted pursuant to clauses (d), (h) and (n) of the definition of Permitted Investments, 5.7      Section 7.13 ( Voluntary Prepayments of BCI Indebtedness ). The following new Section 7.13 is hereby added to Section 7 of the Loan following: Agreement: 7.13 Voluntary Prepayments of BCI Indebtedness; Amendments to BCI Credit Agreement . (a) Make or allow any Subsidiary to make any voluntary prepayment of the BCI Indebtedness; or (b) execute any amendment, agreement or other document which has the effect of (i) increasing the rate of interest with respect to the BCI Indebtedness, (ii) accelerating the payment of the principal, interest or any other portion of the BCI Indebtedness, (iii)  increasing  the  aggregate  principal  amount  of  the  BCI  Indebtedness,  (iv)  imposing  additional  obligations  upon  Halozyme  under  the  BCI  Credit Agreement or otherwise in connection with the BCI Indebtedness, and (v) modifying or otherwise altering the distributions by LLC to Halozyme required under Section 6.14. 5.8      Section 7.14 ( LLC Assets ). The following new Section 7.14 is hereby added to Section 7 of the Loan Agreement: 7.14 LLC Assets .  Permit  LLC  to  hold  any  assets  except  (a)  any  assets  required  to  be  held  by  LLC  under  the  BCI  Credit  Agreement  (as delivered to Collateral Agent on or about the Third Amendment Date) and (b) any assets in an aggregate amount not to exceed Five Hundred Thousand Dollars  ($500,000)  which  are  required  to  be  held  by  LLC  to  maintain  adequate  capital  in  light  of  its  contemplated  business  purpose,  transactions  and liabilities. immediately after the reference to “6.13 (Further Assurances)” therein. 5.9           Section 8.2 (  Covenant Default ).  Section  8.2(a)  is  hereby  amended  by  adding  “or  6.14  (Distributions  by  LLC  to  Halozyme)” 5.10      Section 8.13 ( BCI Credit Agreement ). The following new Section 8.13 is hereby added to Section 8 of the Loan Agreement: 8.13 BCI Credit Agreement .  (a)  A  default  or  breach  occurs  under  the  BCI  Credit  Agreement  resulting  in  a  right  by  any  third  party thereunder,  whether  or  not  exercised,  to  accelerate  the  maturity  of  the  BCI  Indebtedness;  or  (b)  any  claim  or  enforcement  action  is  brought  against Halozyme under the BCI Credit Agreement; alphabetical order: 5.11      Section 13.1 (Definitions) . The following terms and their respective definitions hereby are added to Section 13.1 in their appropriate “ BCI Credit Agreement ” means that certain Credit Agreement dated on or about the Third Amendment Date by and among LLC, Halozyme, BioPharma Credit Investments IV Sub, LP. and Athyrium Opportunities II Acquisition LP, as amended, restated or otherwise modified from time to time in accordance with the terms of this Agreement. “ BCI Indebtedness ” means Indebtedness incurred by LLC pursuant to the BCI Credit Agreement. 3 “ LLC ” means Halozyme Royalty LLC, a Delaware limited liability company and wholly-owned Subsidiary of Halozyme. “ Third Amendment Date ” is December 28, 2015. 5.12      Section 13.1 (Definitions) . The following new clause (p) is hereby added to the definition of “Permitted Indebtedness”: (p)        (i)  the  BCI  Indebtedness  in  an  aggregate  principal  amount  not  to  exceed  One  Hundred  Fifty  Million  Dollars  ($150,000,000),  plus  any interest  that  shall  be  “paid-in-kind”  by  being  capitalized  and  added  to  such  outstanding  principal  amount  pursuant  to  the  BCI  Credit  Agreement  (as delivered to Collateral Agent on or about the Third Amendment Date); and (ii) Contingent Obligations consisting of inchoate indemnity obligations owed by Halozyme under the BCI Credit Agreement (as delivered to Collateral Agent on or about the Third Amendment Date). 5.13      Section 13.1 (Definitions) . The following new clause (n) is hereby added to the definition of “Permitted Investments”: (n)    Investments of Halozyme in LLC consisting solely of the intial capitalization of LLC and Halozyme’s ownership of the equity securities of LLC. 5.14      Section 13.1 (Definitions) . The following new clause (m) is hereby added to the definition of “Permitted Liens”: (m)    Liens granted by LLC securing the BCI Indebtedness. 5.15      Exhibit A . The following new sentence is hereby added to the Description of Collateral in Exhibit A: Notwithstanding the foregoing, the Collateral shall not include any assets transferred by Halozyme, Inc. to Halozyme Royalty LLC pursuant to that certain Purchase and Sale Agreement dated on or about January 15, 2016, provided, however, that the Collateral shall include any consideration or other proceeds of such assets which are payable to or received by Borrower in connection with such transfer, whether now owned or hereafter acquired. 6.      Limitation of Amendments. 6.1     The consent, release and amendments set forth in Sections 2, 3 and 5, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Collateral Agent or any Lender may now have or may have in the future under or in connection with any Loan Document. 6.2        This  Amendment  shall  be  construed  in  connection  with  and  as  part  of  the  Loan  Documents  and  all  terms,  conditions,  representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 7.      Representations and Warranties. To induce Collateral Agent and Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and Lenders as follows: 7.1     Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents (as such may be modified by the updated Perfection Certificate delivered to Collateral Agent to reflect the Permitted Transactions, which updated Perfection Certificate shall be delivered to Collateral Agent within ten (10) Business Days of the date of this Amendment) are true, accurate and complete in all material respects 4 as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct in all material respects as of such date), and (b), no Event of Default has occurred and is continuing; amended by this Amendment; 7.2     Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as have not been amended, supplemented or restated and are and continue to be in full force and effect; 7.3     The organizational documents of Borrower most recently delivered to Collateral Agent and Lenders are true, accurate and complete and Agreement, as amended by this Amendment, have been duly authorized; 7.4        The  execution  and  delivery  by  Borrower  of  this  Amendment  and  the  performance  by  Borrower  of  its  obligations  under  the  Loan 7.5        The  execution  and  delivery  by  Borrower  of  this  Amendment  and  the  performance  by  Borrower  of  its  obligations  under  the  Loan Agreement,  as  amended  by  this  Amendment,  do  not  and  will  not  contravene  (a)  any  material  Requirement  of  Law  binding  on  or  affecting  Borrower,  (b)  any material agreement by which Borrower is bound in a manner that constitutes an event of default thereunder, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 7.6        The  execution  and  delivery  by  Borrower  of  this  Amendment  and  the  performance  by  Borrower  of  its  obligations  under  the  Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made or is being obtained pursuant to Section 6.1(b) of the Loan Agreement; and 7.7        This  Amendment  has  been  duly  executed  and  delivered  by  Borrower  and  is  the  binding  obligation  of  Borrower,  enforceable  against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights. 8.      Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile  or electronic  mail shall be equally as effective  as delivery of an original executed counterpart of this Amendment. 9.      Covenants. Borrower shall, (a) within three (3) Business Days of the formation of LLC, deliver to Collateral Agent (i) all Operating Documents of LLC  and  a  good  standing  certificate  of  LLC  certified  by  the  Secretary  of  State  (or  equivalent  agency)  of  LLC’s  jurisdiction  of  organization  or  formation,  (ii) certified copies, dated as of date no earlier than thirty (30) days prior to the date hereof, of financing statement searches for LLC, as Collateral Agent may request, and (iii)  any original  certificates  representing  the Shares  of LLC issued to Halozyme together  with appropriate  instruments  of transfer  as Collateral  Agent may request, (b) within three (3) Business Days of the consummation of the sale of the Applicable Assets, deliver to Collateral Agent (i) fully executed copies of the Purchase  Agreement,  the  BCI  Credit  Agreement,  the  Escrow  Agreement,  and  all  documents  related  thereto,  and  (ii)  evidence  satisfactory  to  Bank  in  its  sole discretion that Halozyme has received the proceeds from the sale of the Applicable Assets in the form and amounts set forth in the Purchase Agreement, and (c) within three (3) Business Days of the consummation of the Permitted Transactions pay all of Lenders’ Expenses through such date. 10.           Effectiveness. This  Amendment  shall  be  deemed  effective  upon  the  due  execution  and  delivery  to  Collateral  Agent  and  Lenders  of  this Amendment. [ Balance of Page Intentionally Left Blank ] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above. COLLATERAL AGENT: OXFORD FINANCE LLC By:     /s/ Timothy A. Lex     Name:     Timothy A. Lex        BORROWER: HALOZYME THERAPEUTICS, INC. By:     /s/ Laurie Stelzer        Name:     Laurie Stelzer        Title:     Chief Operating Officer and Executive Vice President           Title:     Chief Financial Officer     LENDERS: OXFORD FINANCE LLC By:     /s/ Timothy A. Lex     Name:     Timothy A. Lex        Title:     Chief Operating Officer and Executive Vice President            HALOZYME, INC. By:     /s/ Laurie Stelzer        Name:     Laurie Stelzer        Title:     Chief Financial Officer     SILICON VALLEY BANK By:     /s/ Anthony Flores     Name:     Anthony Flores        Title:     Vice President        [SIGNATURE PAGE TO CONSENT, RELEASE AND THIRD AMENDMENT TO  AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]     SCHEDULE 1 PURCHASE AGREEMENT [See attached.] EXHIBIT 10.35 among CREDIT AGREEMENT Dated as of December , 2015 HALOZYME ROYALTY LLC, as Borrower, HALOZYME, INC., BIOPHARMA CREDIT INVESTMENTS IV SUB, LP, as Collateral Agent and a Lender, and ATHYRIUM OPPORTUNITIES II ACQUISITION LP, as a Lender Page TABLE OF CONTENTS Article I INTERPRETATION    1 Section 1.01    Defined Terms    1 Section 1.02    Other Interpretative Provisions    16 Article II CREDIT FACILITY    16 Section 2.01    Loan    16 Section 2.02    Manner of Borrowing    16 Section 2.03    Interest    16 Section 2.04    Repayment    17 Section 2.05    Voluntary Prepayments    18 Section 2.06    Mandatory Prepayment for Change in Control    18 Section 2.07    Register    19 Section 2.08    Evidence of Indebtedness    19 Section 2.09    Payments by the Borrower    19 Section 2.10    Changes In Law    22 Section 2.11    Additional Consideration    23 Section 2.12    Pro Rata Treatment    23 Section 2.13    AHYDO    23 Article III CONDITIONS TO LOAN    24 Section 3.01    Conditions to Loan    24 Article IV CERTAIN REPRESENTATIONS AND WARRANTIES    26 Section 4.01    Organization; Power; Qualification    26 Section 4.02    Authorization; Enforceability; Required Consents; Absence of Conflicts    27 Section 4.03    Litigation    27    Section 4.04    Information    27 Section 4.05    No Adverse Change or Event    28 Section 4.06    No Default    28 Section 4.07    Investment Company Act    28 Section 4.08    License Agreements    28 Section 4.09    UCC Representations and Warranties    30 Section 4.10    Intellectual Property    30 Section 4.11    Royalty Rights    32 Section 4.12    Manufacturing and Supply    32 Section 4.13    Regulatory Communications    32 Section 4.14    Certain Information    32 Section 4.15    OFAC; Anti-Terrorism Laws    33 Article V CERTAIN COVENANTS    33 Section 5.01 Preservation of Existence and Properties; Compliance with Law; Payment of Taxes and Claims; Preservation of Enforceability; Separateness    33 Section 5.02    Use of Proceeds    34 Section 5.03    Visits, Inspections and Discussions    34 Section 5.04    Information to Be Furnished    34 Section 5.05    Modification of Certain Documents    35 Section 5.06    Conduct of Business    36 Section 5.07    Purchase Agreement    36 Section 5.08    Indebtedness    36 Section 5.09    Liens    36 Section 5.10    Restricted Payments    36 Section 5.11    Mergers    37 Section 5.12    No Subsidiaries    37 Section 5.13    No Modifications    37 Section 5.14    Enforcement of Rights    37 Section 5.15    Audit Rights of Halozyme    37 Section 5.16    Defense of Intellectual Property    38 Section 5.17    Manufacturing and Supply    38 Section 5.18    Affiliates    38 Article VI COVENANTS RELATING TO THE ESCROW    39 Section 6.01    Remittances to Escrow Account    39 Section 6.02    Information to Be Furnished    39 Section 6.03    Disbursement Instructions    40 Section 6.04    Disbursements upon Event of Default    41 Article VII DEFAULT    42 Section 7.01    Events of Default    42 Section 7.02    Remedies upon Event of Default    45 Article VIII COLLATERAL    46 Section 8.01    Pledge and Grant of Security Interest and Lien    46 Section 8.02    Representations and Warranties regarding the Collateral    47 Section 8.03    Covenants with respect to the Collateral    48 Section 8.04    Remedies with respect to Collateral    49 Section 8.05    Security Interest Absolute; Rights Cumulative; the Borrower Remains Liable; Further Assurances    50 Article IX THE COLLATERAL AGENT.    52 Section 9.01    Appointment and Authority    52 Section 9.02    Rights as a Lender    52 Section 9.03    Exculpatory Provisions    52 Section 9.04    Reliance by Collateral Agent    53 Section 9.05    Delegation of Duties    53 Section 9.06    Resignation of Collateral Agent    54 Section 9.07    Non-Reliance on Collateral Agent and Other Lenders    54 Section 9.08    Collateral Matters    54 Section 9.09    Reimbursement by Lenders    55 Article X MISCELLANEOUS    55 Section 10.01    Notices and Deliveries    55 Section 10.02    Amounts Payable Due upon Request for Payment    57 Section 10.03    Rights Cumulative    57 Section 10.04    Amendments; Waivers    57 Section 10.05    Set-Off    58 Section 10.06    Assignment and Sale    59 Section 10.07    Governing Law    59 Section 10.08    Judicial Proceedings; Waiver of Jury Trial    59 Section 10.09    Severability of Provisions    60 Section 10.10    Confidentiality    60 Section 10.11    Counterparts    60 Section 10.12    Entire Agreement    60 Section 10.13    Successors and Assigns    60 Section 10.14    Expenses; Indemnification    60 Section 10.15    Tax Legending of Notes CREDIT AGREEMENT Dated as of December 30, 2015 Halozyme Royalty LLC, a Delaware limited liability company, as Borrower, BioPharma Credit Investments IV Sub, LP, a Cayman Islands exempted limited partnership, as Collateral Agent, Halozyme, Inc., a California corporation and the lenders party hereto from time to time, agree as follows (with certain terms used herein being defined in Article I ): ARTICLE I INTERPRETATION Section 1.01     Defined Terms . For the purposes of this Agreement: “ Account” means an “account” as defined in Article 9 of the Code. “ Additiona l Consideration ” has the meaning set forth in Section 2.11 . “ Adjusted Post-Closing Royalty A mounts” means, with respect to any Interest Period, the Post-Closing Royalty Amounts paid by Licensees during such Interest Period, minus the sum of: (i)  the amount of any Escrow Agent Fees paid by Halozyme prior to or during such Interest Period in accordance with the terms of the Escrow Agreement and not previously reimbursed; (ii) the amount of any Borrower Expenses then due and payable by the Borrower and not previously paid or reimbursed; and (iii) the amount of any Indemnity Collection Costs actually incurred by Halozyme prior to or during such Interest Period and not previously reimbursed. “ Af fi liate” means, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person; unless otherwise specified, “Affiliate” means an Affiliate of the Borrower and shall include Halozyme. “Control” shall be presumed where, directly or indirectly, such first Person owns more than 10% of the common stock or voting ownership interest of any other Person. “ Af filiate Agreeme nt” has the meaning set forth in Section 5.1 8. “ Agreem e nt” means this Agreement, including all schedules, annexes and exhibits hereto. “ Agreem ent D ate” means the date as of which this Agreement is dated. “ Applicable L aw” means, anything in Section 10.07 to the contrary notwithstanding, (a) all applicable common law and principles of equity and (b) all applicable  provisions  of  all  (i)  constitutions,  statutes,  rules,  regulations  and  orders  of  governmental  bodies,  (ii)  Governmental  Approvals  and  Governmental Registrations and (iii) orders, decisions, judgments and decrees. “ Applicab le P ercentage” means fifty percent (50%). “ A vailable Amo unt” has the meaning set forth in Section 2 .04. “ A vid B ioServices” means Avid BioServices, Inc., a Delaware corporation. 1 “ Baxalta” means Baxalta US Inc. and Baxalta GmbH. “ Baxalta Consent and D irection” means the Consent and Acknowledgement of Payment Direction, to be dated on or prior to the Closing Date, in form and substance satisfactory to the Lenders. “ Baxalta License Agreeme nt” means the Enhanze™ Technology License and Collaboration Agreement (Biologic), dated as of September 7, 2007, by Halozyme and Baxalta (as successor-in-interest to Baxter Healthcare Corporation and Baxter Healthcare S.A.) and any amendments, restatements, supplements or other modifications thereto. “ Baxalta License  Termination  Date  ”  means  the  date  on  which  the  Borrower’s  right  to  receive  royalties  under  Section  4.3  of  the  Baxalta  License Agreement and other Post-Closing Royalty Amounts under Section 4.6.1 or 9.1 of the Baxalta License Agreement has terminated in its entirety. “ Baxalta P roduct” means each “Kit Product” and “Co-formulation Product”, as such terms are defined in the Baxalta License Agreement. “ Baxalta Side L etters”  means  (a)  that  certain  letter  agreement,  dated  March  3,  2015,  between  Baxter  International  Inc.  (on  behalf  of  its  direct  and indirect subsidiaries) and Halozyme and (b) that certain letter agreement dated November 30, 2015 between Baxalta and Halozyme. “ Bill of Sale ” means that certain Bill of Sale, to be dated as of the Closing Date (or such earlier date that the parties to the Purchase Agreement shall agree), executed by Halozyme and delivered to Borrower pursuant to the Purchase Agreement. “ Borrower” means Halozyme Royalty LLC, a Delaware limited liability company. “ Borrower E xpenses” has the meaning set forth in Section 1 0.14(a). “ Business D ay” means any day other than a Saturday, Sunday or other day on which banks in New York, New York or London, England are authorized to close. “ Calculations” has the meaning set forth in Section 6 .03(a). “ Change in  C  ontrol”  means  a  transaction  in  which  any  “person”  or  “group”  (within  the  meaning  of  Section  13(d)  and  14(d)(2)  of  the  Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient  number  of  shares/equity  interests  of  all  classes  of  stock/equity  then  outstanding  of  Borrower  or  Halozyme  or  the  Parent,  as  applicable,  ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the board of directors of Borrower, Halozyme or Parent, as  applicable,  who  did  not  have  such  power  before  such  transaction.  A  direct  or  indirect  sale  of  all  or  substantially  all  of  the  assets  of  Parent,  Halozyme  or Borrower, as applicable, that relates to the Collateral shall be deemed a Change in Control. “ Chattel P aper” means “chattel paper” as defined in Article 9 of the Code, including “electronic chattel paper” or “tangible chattel paper”, as each such term is defined in Article 9 of the Code. “ Closing Dat e” ” means the date on which the Loan is advanced by the Lenders, which date shall be fifteen (15) Business Days after the later of (a) the Agreement Date and (b) the date on which each of the conditions set forth in Article III have been satisfied in full. 2 “ Code” means the Uniform Commercial Code from time to time in effect in the State of New York; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted hereunder in any item or portion of the Collateral is governed  by  the  Uniform  Commercial  Code  of  a  jurisdiction  other  than  New  York,  “Code”  means  the  Uniform  Commercial  Code  as  in  effect  in  such  other jurisdiction for purposes of provisions hereof relating to such perfection or effect of perfection or non-perfection. “ Collaboration Supported Biologic Patent R ights” has the meaning ascribed to such term in the Baxalta License Agreement. “ Collaboration Supported PH20 Patent R ights” has the meaning ascribed to such term in the Baxalta License Agreement. “ Collateral” has the meaning set forth in Section 8 .01. “ Collateral A gent” means BioPharma Credit Investments IV Sub, LP, in its capacity as Collateral Agent, as appointed under Section 9.01 hereof, and its successors and permitted assigns in such capacity. “ Comm encement N otice” has the meaning set forth in Section 6 .01(a). “ Comm ercial Tort Claims ” means all “commercial tort claims” as defined in Article 9 of the Code. “ Comm itment Amo unt” means $150,000,000. “ Com p etitor” means any Person which, to the knowledge of a Lender based on representations from the applicable pledgee and assignee in accordance with Section 1 0.06, (a) conducts scientific research or engages in development activities with respect to diagnostic or therapeutic products in the biotechnology or pharmaceutical industries, (b) manufactures, promotes, markets, distributes or sells any diagnostic or therapeutic products in the biotechnology or pharmaceutical industries, or (c) controls, is controlled by or is under common control with any Person that conducts any of the activities in the foregoing clauses (a) or (b). “ Contract” means any (a) agreement and (b) certificate of incorporation, charter, limited liability company agreement, limited partnership agreement or by-law. “ Def a ult” means any condition or event that constitutes an Event of Default or that with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. “ Deposit A ccounts” means all “deposit accounts” as defined in Article 9 of the Code. “ Docum e nts” means all “documents” as defined in Article 9 of the Code. “ Dollars” and the sign “ $” means the lawful currency of the United States of America. “ EMA” means the European Medicines Agency, and any successor agency(ies) or authority having substantially the same function. “ Enacted”, as applied to a Regulatory Change, means the date such Regulatory Change first becomes effective or is implemented or first required or expected to be complied with, whether the same is the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority, a request or directive of a regulatory authority, or otherwise. 3 “ Equipm e nt” means all “equipment” as such term is defined in Article 9 of the Code. “ Equity I nterests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, whether preferred or common and whether voting or nonvoting, and equity securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or other such interests), and other  ownership  or  profit  interests  in  such  Person  (including,  without  limitation,  partnership,  member  or  trust  units  or  interests  therein),  whether  voting  or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination. “ Escrow A ccount” has the meaning ascribed to such term in the Escrow Agreement. “ Escrow A gent” means The Bank of New York Mellon (or such other bank approved by the Lenders), in its capacity as the escrow agent under the Escrow Agreement, and any successor in such capacity. “ Escrow Agent F ees” has the meaning ascribed to such term in the Escrow Agreement. “ Escrow Agreeme nt” means that certain Escrow Agreement, to be dated as of the Closing Date (or such earlier date that the parties thereto shall agree), by and among the Borrower, Halozyme, the Collateral Agent and the Escrow Agent. “ Event of D efault” means any of the events specified in Section 7 .01. “ Event of Default N otice” has the meaning set forth in Section 6 .04. “ Excluded Tax ” means any of the following Taxes imposed on or with respect to a Lender or required to be withheld or deducted from a payment to or for the benefit of a Lender, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Lender being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Taxes imposed as a result of a present or former connection between such Lender and the jurisdiction imposing such Tax (other than connections arising from such Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in the Loan or any Loan Document), (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of a Lender with respect to an applicable interest in the Loan pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2 .09(c), amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Lender’s failure to comply with Section 2.09(d) and (d) any U.S. federal withholding Tax imposed under FATCA. “ F ATC A”  means  Sections  1471  through  1474  of  the  IRS  Code,  as  of  the  date  of  this  Agreement  (or  any  amended  or  successor  version  that  is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the IRS Code or intergovernmental agreement (or legislation, regulations or administrative guidance thereunder) for the implementation of the same. 4 “ FDA” means the United States Food and Drug Administration, and any successor agency(ies) or authority having substantially the same function. “ Fixtur es ” means all “fixtures” as defined in Article 9 of the Code. “ General I ntangibles” means all “general intangibles” as such term is defined in Article 9 of the Code. “ Generally Accepted Accounting Pri nciples” means United States generally accepted accounting principles as in effect from time to time. “ Goods” (a) means all “goods” as defined in Article 9 of the Code and (b) includes all Inventory and Equipment (in each case, regardless of whether characterized as goods under the Code). “ Governm ental A pproval” means any authority, consent, approval, license (or the like) or exemption (or the like) of any Governmental Authority. “ Governm ental A uthority” means any government, court, regulatory or administrative agency or commission or other governmental authority, agency or instrumentality, whether foreign, federal, state or local (domestic or foreign). “ Governm ental R egistration” means any registration or filing (or the like) with, or report or notice (or the like) to, any Governmental Authority. “ Guaranty”  of  or  by  any  Person  shall  mean  any  obligation,  contingent  or  otherwise,  of  such  Person  guaranteeing  or  having  the  economic  effect  of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation  of  such  Person,  direct  or  indirect,  (a)  to  purchase  or  pay  (or  advance  or  supply  funds  for  the  purchase  or  payment  of)  such  Indebtedness  or  other obligation  or  to  purchase  (or  to  advance  or  supply  funds  for  the  purchase  of)  any  security  for  the  payment  of  such  Indebtedness  or  other  obligation,  (b)  to purchase  or  lease  property,  securities  or  services  for  the  purpose  of  assuring  the  owner  of  such  Indebtedness  or  other  obligation  of  the  payment  of  such Indebtedness or other obligation or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The word “Guarantee” when used as a verb has the correlative meaning. “ Halozym e ” means Halozyme, Inc., a California corporation. “ Halozym e Te chnology” means the “Licensed IP Rights”, as such term is defined in the License Agreements. “ Indebtedness”  of  any  Person  means  without  duplication  (a)  any  obligation  of  such  Person  for  borrowed  money,  (b)  any  obligation  of  such  Person evidenced by a bond, debenture, note or other similar instrument, (c) any obligation of such Person to pay the deferred purchase price of property or services, except a trade account payable that arises in the ordinary course of business, (d) any obligation of such Person as lessee under a capital lease, (e) any Mandatorily Redeemable Stock of such Person, (f) any obligation of such Person to purchase securities or other property that arises out of or in connection with the sale of the same or substantially similar securities or property, (g) any non-contingent obligation of such Person to reimburse any other Person in respect of amounts paid under a letter of credit or other Guaranty issued by such other Person, (h) any Indebtedness of others secured by a Lien on any asset of such Person and (i) any Indebtedness of others Guaranteed by such Person. 5 “ Indem nified Tax ” means any Tax, other than an Excluded Tax, imposed on or with respect to any payments made by or on account of any obligation of any Loan Party under any Loan Document. “ Indem ni tee” has the meaning set forth in Section 1 0.14(b). “ Indem nity Collection C osts” has the meaning set forth in Section 6 .02(c). “ Independen t D irector” has the meaning ascribed to such term in the LLC Agreement. “ Inform at ion”    means    data,    certificates,    reports,    statements    (including    financial statements), documents and other information. “ Instrum e nts” means all “instruments” as defined in Article 9 of the Code. “ Intellectual P roperty” means (a) trademarks; (b) patents; (c) trade secrets; (d) copyrights; (e) domain names; and (f) any equivalent rights to any of the foregoing anywhere in the world. “ Intellectual Property L icenses” means any copyright licenses, patent licenses, trademark licenses and trade secret licenses. “ Inte rest Per iod” means, with respect to the Loan, the period: (a) commencing on (and including) the Closing Date (in the case of the initial Interest Period applicable to the Loan) or the last day of the prior Interest Period (in the case of each subsequent Interest Period applicable to the Loan) and (b) ending on each Quarterly Payment Date. “ Interest R ate” means, as of any Interest Rate Determination Date, the per annum interest rate equal to the LIBOR Rate as of such date plus 8.75%. “ Interes t Rate Determination D ate” means the commencement date of each Interest Period as set forth in clause (a) of the definition thereof. “ Inventory” means all “inventory” as defined in Article 9 of the Code. “ Investm ent  P  roperty”  means  (a)  all  “investment  property”  as  such  term  is  defined  in  Article  9  of  the  Code  and  (b)  whether  or  not  constituting “investment property” as so defined, all Equity Interests and other Securities. “ IRS C ode” means the U.S. Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, or any corresponding provision of a successor law thereto. “ Joint Disbursement I nstruction” has the meaning set forth in Section 6 .03(b). “ Lender” means each Person signatory hereto as a “Lender” and its registered successors and assigns. “ Letter of C redit” means “letter of credit” as defined in Article 9 of the Code. “ Letter of Credit R ight” means “letter-of-credit right” as defined in Article 9 of the Code. “ Liability”  of  any  Person  means  (in  each  case,  whether  with  full  or  limited  recourse)  any  indebtedness,  liability,  obligation,  covenant  or  duty  of  or binding upon, or any term or condition to be observed by or binding upon, such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, whether arising under contract, Applicable Law, or otherwise, 6 whether now existing or hereafter arising, and whether for the payment of money or the performance or non-performance of any act. “ LIBOR R ate” means, as of any Interest Rate Determination  Date, the rate per annum equal to (a) the rate of interest appearing on Reuters Screen LIBOR01 Page (or any successor page) for three-month Dollar deposits or (b) if no such rate is available, the rate of interest determined by the Collateral Agent to  be  the  rate  or  the  arithmetic  mean  of  rates  at  which  Dollar  deposits  in  immediately  available  funds  are  offered  to  first-tier  banks  in  the  London  interbank Eurodollar market, in each case under clause (a) or (b) above at approximately 11:00 a.m., London time, on such Interest Rate Determination Date for a period of three months; p rovided, h owever, that, for purposes of calculating the Interest Rate, the LIBOR Rate shall at all times have a floor of 0.70% and a cap of 1.50%. “ License Agreeme nts” means, collectively, the Baxalta License Agreement and the Roche License Agreement. “ Licensed Patent Rights ” has the meaning ascribed to such term in the Baxalta License Agreements or the Roche License Agreement, as the context dictates. “ Licensee” means each of Baxalta and Roche. “ Licensee Payment D ate” means, with respect to any calendar quarter, the date that is the sixtieth (60th) day after the end of such calendar quarter. “ License Termination D ate” means the date on which both the Baxalta License Termination Date and the Roche License Termination Date shall have occurred. “ Lien” means, with respect to any property or asset (or any income or profits therefrom) of any Person (in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise) (a) any mortgage, lien, pledge, attachment, levy or other security interest of any kind thereupon or in respect thereof or (b) any other arrangement, express or implied, under which the same is transferred, sequestered or otherwise identified so as  to  subject  the  same  to,  or  make  the  same  available  for,  the  payment  or  performance  of  any  Liability  in  priority  to  the  payment  of  the  ordinary,  unsecured Liabilities of such Person. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. “ LLC Agreeme nt”  means  the  Limited  Liability  Company  Agreement  of  the  Borrower  effective  as  of  December  30,  2015,  in  form  and  substance satisfactory to the Lenders, and any duly authorized amendments or restatements thereto. “ Loan” means the term loans advanced by the Lenders pursuant to Section 2.01 in an original aggregate principal amount of $150,000,000.00. “ Loan Document Related Claim ” means any claim or dispute (whether arising under Applicable Law, under contract or otherwise) in any way arising out of, related to, or connected with, the Loan Documents, the relationships established thereunder or any actions or conduct thereunder or with respect thereto, whether such claim or dispute arises or is asserted before or after the Agreement Date or before or after the Repayment Date. “  Loan  Document  Representation  and  War  ranty”  means  any  “Representation  and  Warranty”  as  defined  in  any  Loan  Document  and  any  other representation or warranty made or deemed made under any Loan Document. 7 “ Loan Documen ts” means (a) this Agreement, the Notes and the Escrow Agreement and (b) any other agreement, document or instrument, now or in the future, between the Borrower or any other Loan Party and the Collateral Agent or the Lenders in connection with this Agreement, including without limitation, the Roche Consent and Direction and the Baxalta Consent and Direction. “ Loan Party ” means each of the Borrower and Halozyme. “ Mandatorily Redeemable Sto ck” means, with respect to any Person, any share of such Person’s capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into any Indebtedness or other Liability of such Person, (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as a redemption required to be made out of future earnings or (b) convertible into any share(s) of such Person’s capital stock described in clause (a) above. “ Material Adverse  Eff  ect”  means  any:  (a)  materially  adverse  effect  on  the  binding  nature,  validity  or  enforceability  of  any  Loan  Document  as  an obligation  of  any  Loan  Party  that  is  a  party  thereto;  (b)  materially  adverse  effect  on  the  binding  nature,  validity  or  enforceability  of  the  Baxalta  License Agreement  as  an  obligation  of  Baxalta  or  Halozyme;  (c)  materially  adverse  effect  on  the  binding  nature,  validity  or  enforceability  of  the  Roche  License Agreement as an obligation of Roche or Halozyme; (d) materially adverse effect on any of the Collateral (except to the extent such effect results directly from net sales or the prospects for future net sales of Product); (e) materially adverse effect on the binding nature, validity or enforceability of the Escrow Agreement as an obligation  of  the  Escrow  Agent;  (f)  materially  adverse  effect  on  the  binding  nature,  validity  or  enforceability  of  the  Purchase  Agreement  as  an  obligation  of Halozyme; (g) material adverse change in any of the rights or remedies of the Collateral Agent or the Lenders under any Loan Document, or the ability of the Borrower to perform the Secured Obligations; (h) material adverse change in any of the rights or remedies of Borrower under the Purchase Agreement; (i) failure to  pay  when  due  any  material  amount  or  other  material  default  by  either  Baxalta  or  Halozyme  under  the  Baxalta  License  Agreement,  or  any  material  delay, elimination or material diminution of the amounts paid or payable by Baxalta under Sections 4 .3, 4.6.1 or 9.1 of the Baxalta License Agreement with respect to any Post-Closing Royalty Amounts, but only to the extent caused by or resulting from any actual breach or default by Halozyme of any of its obligations under the  Baxalta  License  Agreement;  or  (j)  failure  to  pay  when  due  any  material  amount  or  other  material  default  by  either  Roche  or  Halozyme  under  the  Roche License Agreement, or any material delay, elimination or material diminution of the amounts paid or payable by Roche under Sections 4 .3, 4.6.6 or 9.1 of the Roche License Agreement with respect to any Post-Closing Royalty Amounts, but only to the extent caused by or resulting from any actual breach or default by Halozyme of any of its obligations under the Roche License Agreement. “ Maturity Dat e” means the earliest of: (a) the date on which payments made pursuant to Section 2.04 hereof have resulted in payment in full of all outstanding principal (including principal consisting of capitalized interest on the Loan) of and interest accrued on the Loan; (b) the License Termination Date; and (c) December 31, 2050. “ Maxim um Permissible R ate” means, with respect  to interest  payable on any amount, the rate of interest  on such amount that, if exceeded,  could, under Applicable Law, result in (a) civil or criminal penalties being imposed on the payee or (b) the payee’s being unable to enforce payment of (or, if collected, to retain) all or any part of such amount or the interest payable thereon. “ Money” means “money” as defined in the Code. “ Note” means the Borrower’s secured promissory notes, each substantially in the form of Exhibit B hereto. 8 “ Non-U.S. L ender” means a Lender that is not a U.S. Lender. “ OF AC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control and any successor thereto. “ Parent” means Halozyme Therapeutics, Inc., a Delaware corporation. “ Parent Disbursement I nstruction” has the meaning set forth in Section 6 .03(c). “ PATRIOT A ct” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act of 2001) and any successor statute. “ Paym ent R eport” has the meaning set forth in Section 5 .04(a). “ Perm itted L iens” means (i) the Liens and rights of Set-off in favor of the Escrow Agent under the Escrow Agreement, (ii) the rights of Set-off of the Escrow Agent, as depositary, with respect to the Escrow Account and the Residual Account, and (iii) the Liens in favor of the Collateral Agent or the Lenders created hereby or otherwise existing under or in connection with the Loan Documents. “ Person” means any individual, sole proprietorship, corporation, partnership, trust, unincorporated organization, mutual company, joint stock company, estate, union, employee organization, government or any agency or political subdivision thereof. “ PIK Payme nt” has the meaning set forth in Section 2 .03(b). “ Pledged Royalty R ights” means (a) all of the Borrower’s right, title and interest in and to the Post-Closing Royalty Amounts, including all amounts credited  or transferred  to the Escrow Account pursuant to the Escrow Agreement,  (b) all of the Borrower’s rights under the Escrow Agreement,  (c) all of the Borrower’s right, title and interest in, to and under the Purchase Agreement and (d) all Proceeds in respect of any of the foregoing . “ Post-Closing Royalty Amo unts” means: (a) any and all royalty payments specified in Section 4.3 of the Baxalta License Agreement paid or payable pursuant thereto after the effective date of the Purchase Agreement (including late payments thereof, if any); (b) any and all royalty payments specified in Section 4.3 of the Roche License Agreement paid or payable pursuant thereto after the effective date of the Purchase Agreement (including late payments thereof, if any); (c)  any  and  all  amounts  paid  or  payable  pursuant  to  Section 4.6.1 of  the  Baxalta  License  Agreement  after  the  effective  date  of  the  Purchase  Agreement  with respect to the underpayment of any royalties payable under Section 4.3 of the Baxalta License Agreement (excluding the out- of-pocket costs of the auditing party in connection with any such audit that are payable by Baxalta, if any); (d) any and all amounts paid or payable pursuant to Section 4.6.6 of the Roche License Agreement after the effective date of the Purchase Agreement with respect to the underpayment of any royalties payable under Section 4.3 of the Roche License Agreement (excluding the out-of-pocket costs of the auditing party in connection with any such audit that are payable by Roche, if any); (e) any and all indemnity payments paid or payable pursuant to Section 9.1 of the Baxalta License Agreement with respect to Liabilities (as defined in the Baxalta License Agreement) suffered by Borrower after the effective date of the Purchase Agreement with respect to any amounts payable under Sections 4.3 or 4.6.1 of the Baxalta License Agreement;  and  (f)  any  and  all  indemnity  payments  paid  or  payable  pursuant  to  Section  9.1  of  the  Roche  License  Agreement  with  respect  to  Liabilities  (as defined in the Roche License Agreement) suffered by Borrower after the effective date of the Purchase Agreement with respect to any amounts payable under Sections 4.3 or 4.6.6 of the Roche License Agreement. 9 “ Prepaym ent Premium ”  means,  with  respect  to  any  prepayment  of  the  Loan  by  the  Borrower  pursuant  to  this  Agreement,  an  amount  equal  to  the product  of  the  amount  of  such  prepayment  (including  all  principal  and  any  interest  that  has  been  capitalized  and  added  thereto  in  accordance  with  Section 2 .03(b)), multiplied by 0.05. “ Proceeds” means all “proceeds” (as such term is defined in Article 9 of the Code) of Collateral. “ Product” means, collectively, Baxalta Product and Roche Product. “ Purchase Agreeme nt” means that certain Asset Purchase Agreement, to be dated as of the Closing Date (or such earlier date that the parties thereto shall  agree),  by  and  between  Halozyme  and  the  Borrower,  and  the  related  Bill  of  Sale,  each  in  form  and  substance  satisfactory  to  the  Lenders,  and  any amendments or restatements thereto. “ Quarterly C ap” means: (a) with respect to the amount of any Adjusted Post-Closing Royalty Amounts paid under the License Agreements during any calendar quarter occurring in the calendar year ending December 31, 2017 (regardless of when earned or accrued) attributable to any royalty payments described in  clauses  (a)  and  (b)  of  the  term  “Post-Closing  Royalty  Amounts”,  $13,750,000.00;  (b)  with  respect  to  the  amount  of  any  Adjusted  Post-Closing  Royalty Amounts paid under the License Agreements during any calendar quarter occurring in the calendar year ending December 31, 2018 (regardless of when earned or accrued) attributable to any royalty payments described in clauses (a) and (b) of the term “Post-Closing Royalty Amounts”, $18,750,000.00; (c) with respect to the amount of any Adjusted Post-Closing Royalty Amounts paid under the License Agreements during any calendar quarter occurring in the calendar year ending December 31, 2019 (regardless of when earned or accrued) attributable to any royalty payments described in clauses (a) and (b) of the term “Post-Closing Royalty Amounts”, $21,250,000.00, and (d) with respect to the amount of any Adjusted Post-Closing Royalty Amounts paid under the License Agreements during any calendar quarter occurring on or after January 1, 2020 (regardless of when earned or accrued) attributable to any royalty payments described in clauses (a) and (b) of the term “Post-Closing Royalty Amounts”, $22,500,000.00. “ Quarterly Payment D ate” means, with respect to each calendar quarter, the date that is fifteen (15) days after the Licensee Payment Date with respect to such calendar quarter. “ Recipient” means any Lender and any other recipient (including on a pass-through basis for U.S. federal income tax purposes) of any payment to be made by or on account of any obligation of any Loan Party under any Loan Document. “ Register” has the meaning set forth in Section 2 .07(a). “ Regulatory C hange” means any Applicable Law, interpretation, directive, determination, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that is Enacted after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement. “  Related  P  arties”  means,  with  respect  to  any  Person,  such  Person’s  Affiliates  and  the  partners,  directors,  officers,  employees,  agents,  trustees, administrators, managers, advisors, sub- advisors and representatives of such Person and of such Person’s Affiliates. “ Required Len ders” means Lenders representing greater than the Applicable Percentage of the outstanding principal amount of the Loan evidenced by the Notes. 10 “ Repaym ent D ate” means the later of (a) the termination of this Agreement and (b) the payment in full of the Secured Obligations. “ Representation and War ranty” means any representation or warranty made pursuant to or under (a) Article IV or any other provision of this Agreement or (b) any amendment to, or waiver of rights under, this Agreement. “ Residual Ac count” has the meaning ascribed to such term in the Escrow Agreement. “ Residual Amo unt” means, with respect to any Interest Period, an amount, if greater than zero, equal to the Adjusted Post-Closing Royalty Amounts paid  during  such  Interest  Period  into  the  Escrow  Account  pursuant  to  the  Escrow  Agreement  less the  Quarterly  Cap,  if  any,  applicable  to  the  Adjusted  Post- Closing Royalty Amounts earned or accrued during the calendar quarter to which such Quarterly Cap, if any, applies and paid during such Interest Period. “ Responsible Officer of the B orrower” means the manager, or any senior or other responsible officer, of the Borrower. “ Restr icted Payme nt” means any payment with respect to or on account of any of the Borrower’s Equity Interests, including any dividend or other distribution  on,  any  payment  of  interest  on  or  principal  of,  and  any  payment  on  account  of  any  purchase,  redemption,  retirement,  exchange,  defeasance  or conversion of, or on account of any claim relating to or arising out of the offer, sale or purchase of, any such Equity Interests. For the purposes of this definition, a “payment” shall include the transfer of any asset or the incurrence of any Indebtedness or other Liability (the amount of any such payment to be the fair market value of such asset or the amount of such obligation, respectively) but shall not include the issuance of any capital stock of the Borrower other than Mandatorily Redeemable Stock. “ Roche” means F. Hoffmann-La Roche Ltd., a Swiss corporation, and Hoffmann-La Roche Inc., a New Jersey corporation, individually or collectively as the context dictates. “ Roche Consent and D irection” means the Consent and Acknowledgement of Payment Direction, to be dated on or prior to the Closing Date, in form and substance satisfactory to the Lenders. “  Roche  License  A  greement”  means  the  License  and  Collaboration  Agreement,  dated  as  of  December  5,  2006,  by  Halozyme  and  Roche  and  any amendments, restatements, supplements or other modifications thereto. “  Roche  License  Termination  D  ate”  means  the  date  on  which  the  Borrower’s  right  to  receive  royalties  under  Section  4.3  of  the  Roche  License Agreement and other Post-Closing Royalty Amounts under Section 4 .6.6 or 9.1 of the Roche License Agreement has terminated in its entirety. “ Roche P roduct” means each “Kit Product” and “Coformulation Product”, as such terms are defined in the Roche License Agreement. “ Roche Side L etters”  means  (a)  that  certain  letter  agreement,  dated  June  14,  2010,  between  Halozyme  and  Roche  and  (b)  that  certain  letter,  dated September 3, 2015, from Halozyme to Roche. “ Royalty R ights” has the meaning set forth in Section 4.11 . “  Sanctioned  C  ountry”  means  a  country  subject  to  a  sanctions  program  identified  on  the  list  maintained  by  OFAC  and  available  at http://www.treas.gov/offices/enforcement/ofac/programs/ , or as otherwise published from time to time. 11 “ Sanction ed P erson” means (i) a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.shtml  ,  or  as  otherwise  published  from  time  to  time,  or  (ii)(A)  an  agency  of  the  government  of  a Sanctioned Country, (B) an organization controlled by a Sanctioned Country or (C) a Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC. “  Sanction  (s  )”  means  any  sanction  administered  or  enforced  by  the  United  States  Government  (including,  without  limitation,  OFAC),  the  United Nations Security Council, the European Union, Her Majesty’s Treasury (“HMT”) or other relevant sanctions authority. “ Secured O bligations”  means  all  obligations  of  the  Borrower  under  this  Agreement,  the  Notes  and  any  of  the  other  Loan  Documents,  in  each  case whether direct or indirect (including those acquired by assignment), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired, including, subject to Sections 2.03 and 2.04 hereof, the obligation to pay the principal (including principal consisting of capitalized interest on the Loan) of and all interest (including to the extent permitted by law, all post-petition interest), charges, expenses, fees, attorneys’ fees and any other sums payable (including Additional Consideration and any applicable Prepayment Premium) by the Borrower to the Collateral Agent or the Lenders under this Agreement, the Notes or any of the other Loan Documents. “ Secured Par ties” means, collectively, the Lenders and the Collateral Agent. “ Securities A ccount” means all “securities accounts” as defined in Article 8 of the Code. “ Security” means “security” as defined in Article 8 of the Code. “ Set-of f ” means any set-off, offset, rescission, claim, counterclaim, defense, reduction or deduction of any kind. Without limiting the generality of the foregoing,  the  term  “Set-off”  shall  include  the  right  of  Baxalta  (or  its  Affiliates),  Roche  (or  its  Affiliates)  or  other  applicable  licensee  to  pay  less  than  the otherwise  required  amount  of  the  Post-Closing  Royalty  Amount  for  any  reason,  including  in  connection  with  (a)  a  breach  by  Halozyme  of  either  License Agreement, (b) any rights to reimbursement of any costs or expenses of Baxalta (or its Affiliates), Roche (or its Affiliates) or such other licensee under either License Agreement or (c) any amounts paid or payable pursuant to any indemnification rights or other obligations of Halozyme under either License Agreement. “ Single Purpose E ntity” means, as such term applies to the Borrower, a Person that (i) does not engage at any time in any business or business activity other than any business or business activity consisting of (or reasonably incidental to) the performance of its obligations or the exercise of its rights under or in connection with the Transaction Documents and the Loan Documents, (ii) owns no assets other than those required for or reasonably related to the conduct of any such business or business activity, including its books and records, deposit accounts maintained pursuant to the Escrow Agreement, cash and the Collateral, (iii) maintains its own separate books and records and its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person; provided, that the Borrower’s financial statements may be included in the consolidated financial statements of Halozyme and/or its parent company, (iv) holds itself out as being a Person, separate and apart from any other Person, except that the Borrower is a disregarded entity for U.S. federal tax purposes, (v) does not commingle its assets or properties with those of any other Person, (vi) conducts its own business in its own name, (vii) prepares and maintains separate financial statements, (viii) pays its own liabilities out of its own funds except as permitted under the Loan Documents, (ix) observes all limited liability company formalities, (x) maintains an arm’s-length relationship with Halozyme and its other Affiliates, (xi) pays the salaries of its own employees, if any, and does so with its own funds, (xii) does not 12 Guarantee or otherwise obligate itself with respect to the Indebtedness or other Liabilities of any other Person or hold out its credit as being available to satisfy the Indebtedness or other Liabilities of any other Person, (xiii) does not acquire Indebtedness, Equity Interests or other securities of its member, (xiv) allocates fairly and reasonably any overhead for any shared office space, (xv) uses separate stationery, invoices, and checks, if any, (xvi) does not pledge its assets or properties for the benefit of any other Person or make any loans or advances to any other Person, (xvii) does and will correct any known misunderstanding regarding its separate identity, and (xviii) maintains adequate capital in light of its contemplated business operations (to the extent there exists sufficient cash flow from the Collateral available to Borrower to do so after the payment of its obligations under this Agreement and this clause shall not require Halozyme to make additional capital contributions to Borrower). “ Subsidia ry ” means with respect to any Person (i) any corporation of which the outstanding capital stock having at least a majority of votes entitled to be  cast  in  the  election  of  directors  (or,  if  there  are  no  such  voting  interests,  50%  or  more  of  the  equity  interests)  under  ordinary  circumstances  is  at  the  time owned, directly or indirectly, by such Person or by another Subsidiary of such Person or (ii) any other Person of which at least a majority voting interest (or, if there are no such voting interests, 50% or more of the Equity Interests) under ordinary circumstances is at the time owned, directly or indirectly, by such Person or by another Subsidiary of such Person. “ T a x” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. “ T rading with the Enemy A ct” means the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto. “ T ransaction Documen ts” means the Baxalta License Agreement, the Roche License Agreement, the Baxalta Side Letters, the Roche Side Letters, the Purchase Agreement, the Baxalta Consent and Direction and the Roche Consent and Direction. “ United Sta tes” and “U.S.” mean the United States of America. “ U.S. L ender” means a Lender that is a United States person, as such term is defined under Section 7701(a)(30) of the IRS Code. Section 1.02 Other Interpretative P rovisions. For the purposes hereof and as used herein, except as otherwise specified, (a) references to any Person include its successors and assigns and, in the case of any governmental authority, any Person succeeding to its functions and capacities;  (b) references to any Applicable Law include amendments, supplements and successors thereto; (c) references to any Loan Document or Contract include amendments, supplements and waivers thereto (and, in the case of instruments, instruments issued in substitution therefor); (d) references to specific sections, articles, annexes, schedules and exhibits are to this Agreement; (e) words importing gender include the other gender; (f) the singular includes the plural and the plural includes the singular; (g) the words “including”, “include” and “includes” shall be deemed followed by the words “without limitation”; (h) each authorization herein shall be deemed irrevocable and coupled with an interest; (i) all accounting terms shall be interpreted, and all determinations relating thereto shall be made, in accordance with Generally Accepted Accounting Principles; (j) captions and headings are for ease of reference only and shall not affect the construction hereof; (k) references to any time of day shall be to New York time; (l) the words “knowledge of the Borrower,” “of which the 13 Borrower is aware”, “knowledge of Halozyme”, “of which Halozyme is aware” and similar phrases shall be deemed to constitute references to the knowledge of the Borrower and Halozyme; and (m) the word “or” is not exclusive. ARTICLE II CREDIT FACILITY Section 2.01     L oan. Subject to the terms and conditions hereof (including Section 3 .01(a)), the Lenders, severally and not jointly, agree to make, on the Closing Date, the Loan to the Borrower in an aggregate original principal amount of $150,000,000.00, which such original principal amount shall be allocated among the Lenders in accordance with Exhibit A hereto. Section 2.02     Manner of B orrowing. The Lenders shall disburse the Loan on the Closing Date no later than 12:00 PM on such date in Dollars in funds immediately available to the Borrower (in accordance with the allocations set forth in Exhibit A hereto) by wire transfer to an account of the Borrower in the United States as shall have been specified in a prior written notice to the Lenders. Section 2.03     I nterest. (a)  I nterest.  The Loan shall bear interest  on the outstanding principal  amount thereof  (including  principal  consisting of capitalized interest on the Loan) during each Interest Period at a rate per annum equal to the Interest Rate as determined on the Interest Rate Determination Date falling on the commencement of the applicable Interest Period. The Collateral Agent shall give notice to the Borrower and the Lenders of the Interest Rate on each Interest Rate Determination Date. (b)  Payme nt. Interest in respect of the Loan shall be payable in cash in Dollars quarterly in arrears on each Quarterly Payment Date and  on  (i)  the  Maturity  Date  and  (ii)  any  other  date  on  which  the  Loan  or  any  portion  thereof  shall  be  due  (whether  by  reason  of  notice  of  prepayment  or acceleration  or  otherwise),  but  only  to  the  extent  then  accrued  on  the  amount  then  so  due;  p rovided, h owever,  that  if  on  any  Quarterly  Payment  Date  the Available Amount available for the payment of accrued and unpaid interest in respect of the Loan as determined pursuant to Section 2.04 is insufficient to make such interest payment in full in cash on any such Quarterly Payment Date, the amount of any such shortfall shall instead be “paid-in- kind” by being capitalized and added to the outstanding principal balance of the Loan on such Quarterly Payment Date (such that the same shortfall amount will no longer constitute accrued and unpaid interest but instead will be part of the principal of the Loan for all purposes), (each, a “ PIK P ayment”). Unless the context otherwise requires, for all purposes hereof, references to “principal amount” of the Loan shall refer to the face amount of the Loan and shall include any increase in the principal amount of the outstanding Loan as a result of a PIK Payment. Interest for any period, including any Interest Period, shall be calculated from and including the first day thereof to but excluding the last day thereof. (c)  Computation of I nterest.  Interest  shall be computed  on the basis of a year of 360 days and the actual  number of days elapsed. 14 (d)  Maximum Interest R ate. Nothing contained in the Loan Documents shall require the Borrower at any time to pay interest at a rate exceeding  the  Maximum  Permissible  Rate.  If  interest  payable  by  the  Borrower  on  any  date  would  exceed  the  maximum  amount  permitted  by  the  Maximum Permissible Rate, such interest payment shall automatically be reduced to such maximum permitted amount, and interest for any subsequent period, to the extent less than the maximum amount permitted for such period by the Maximum Permissible Rate, shall be increased by the unpaid amount of such reduction. Any interest actually received for any period in excess of such maximum amount permitted for such period shall be deemed to have been applied as a prepayment of the Loan (but without any prepayment penalty). Section 2.04 Repayme nt. The Loan shall be due and payable in quarterly installments on each Quarterly Payment Date, in an amount equal to (such amount being referred to as the “ A vailable Amo unt”): (a) for each Interest Period occurring prior to January 1, 2017, $0, (b) for each Interest Period occurring on or after January 1, 2017 and ending prior to January 1, 2018, the lesser of (i) fifty percent (50%) of the Adjusted Post-Closing Royalty Amounts paid under the License  Agreements  during  such  Interest  Period  and  (ii)  the  Quarterly  Cap  applicable  to  the  Adjusted  Post-Closing  Royalty  Amounts  paid  under  the  License Agreements during the calendar quarter to which such Quarterly Cap applies (regardless of when earned or accrued) and received during such Interest Period; and (c) for each Interest Period ending on or after January 1, 2018, the lesser of (i) one hundred percent (100%) of the Adjusted Post-Closing Royalty Amounts paid under the License Agreements during such calendar quarter and (ii) the Quarterly Cap applicable to the Adjusted Post-Closing Royalty Amounts paid under the License Agreements during the calendar quarter to which such Quarterly Cap applies (regardless of when earned or accrued) and received during such Interest Period; l ess, in each case, the portion of the Available Amount applied to interest as hereinafter provided in this Section 2 .04. The Available Amount shall be applied on each such Quarterly Payment Date as follows: (i) first, to the payment of any unpaid and uncapitalized interest accrued during prior Interest Periods, if any, (ii) second, to the payment of interest accrued during the current Interest Period, and (iii) third, to the payment of the outstanding principal amount of Loan. The outstanding principal amount of the Loan (including principal consisting of capitalized interest on the Loan) shall mature and shall be due and payable on the Maturity Date (together with all accrued and unpaid interest thereon), p rovided, h owever, in the event any such principal or interest remains outstanding on the Maturity Date following the occurrence of the License Termination Date, the Borrower’s obligation to repay such principal and interest shall be limited to the Available Amount. For the avoidance of doubt, the Lenders and the Borrower confirm that the failure of the Borrower to repay the Loan on the Maturity Date, or any other date, resulting from the failure of Baxalta to make payments under the Baxalta License Agreement or from the failure of Roche to make payments under the Roche License  Agreement,  for  any  reason  other  than  a  breach  or  default  by  Halozyme  of  any  of  its  obligations  under  the  Baxalta  License  Agreement  or  the  Roche License Agreement, respectively, shall not constitute a breach of Section 2.03(b) or this Section 2.4 or constitute an Event of Default under Section 7 .01(a). Section 2.05 Voluntary Prepaymen ts.  At  any  time  after  January  1,  2019,  the  Borrower  may  prepay  the  outstanding  principal  amount  of  the  Loan  in whole or in part in increments of no less than $25,000,000 upon at least three (3) Business Days’ prior written notice to the Lenders (which notice may be by telephone, if confirmed in writing immediately thereafter, facsimile, e- mail or other written communication). All prepayments by the Borrower pursuant to this Section 2.05 shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to the date of payment in full, which unpaid interest, for the avoidance of doubt, shall not include any such interest that has already been capitalized and added to the then-outstanding principal amount of the Loan in accordance with Section 15 2  .03(b).  Any  prepayments  of  the  Loan  by  the  Borrower  pursuant  to  this  Section  2.05  shall,  in  each  case,  be  accompanied  by  payment  of  the  applicable Prepayment Premium. Section 2.06 Mandatory Prepayment for Change in C ontrol. Upon a Change in Control, Borrower shall prepay the outstanding amounts of the Loan in full, without any notice from or other action by Lenders, no later than ten (10) Business Days after the consummation of such Change in Control. Prepayment by the Borrower pursuant to this Section 2.06 shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to the date of payment in full,  which  unpaid  interest,  for  the  avoidance  of  doubt,  shall  not  include  any  such  interest  that  has  already  been  capitalized  and  added  to  the  then-outstanding principal  amount  of  the  Loan  in  accordance  with  Section  2  .03(b).  The  prepayment  of  the  Loan  by  the  Borrower  pursuant  to  this  Section  2.06  shall  be accompanied by payment of the applicable Prepayment Premium. From and after the Closing Date, Borrower shall promptly, and in any event no later than two (2) Business Days prior to the consummation thereof, notify the Collateral Agent and the Lenders in writing in accordance with Section 10.01 of the occurrence of a Change in Control, which notice shall include reasonable detail as to the nature and other circumstances of such Change in Control. Section 2.07     R egister. (a)     The Collateral Agent shall establish and maintain at its address referred to in Section 10.01 (i) a record of ownership (the “Register”) in which the Collateral Agent shall register by book entry the interests (including any rights to receive payment of principal and interest hereunder) of each Lender in each Note, and any assignment of any such interest and (ii) accounts in the Register in accordance with its usual practice in which it shall record (A) the names, addresses and bank account details of the Lenders (and any change thereto pursuant to this Agreement), (B) the principal amounts (and stated interest) owing to each Lender and (C) any other payment received by the Lenders pursuant to the Loan Documents. (b)     Notwithstanding anything to the contrary  contained  in this Agreement,  (i) each Note is a registered  obligation,  (ii) the right, title  and interest of the Lenders and their assignees in and to the Notes or any portion thereof shall be transferable only upon notation of such transfer in the Register and (iii) no assignment thereof therein shall be effective until recorded therein. This Section 2.07 and Sections 10.06 and 10.13 shall be construed so that each Note is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the IRS Code and Section 5f.103-1(c) of the United States Treasury Regulations. (c)     The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Collateral Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender (and as the owner of the amounts owing to it under the Notes as reflected in the Register) for all purposes of this Agreement. Information contained in the Register with respect to any Lender shall be available for access by such Lender at any reasonable time and from time to time upon reasonable prior notice. Section 2.08 Evidence of Indebtednes s. The Loan and the Borrower’s obligation to repay the Loan with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the Register, and one or more Notes. The terms of this Agreement shall be incorporated by reference into the Notes as if set forth therein and, in the event of any conflict between the terms of this Agreement and the Notes, the terms of this Agreement shall control. Section 2.09     Payments by the Borrow er. 16 (a)  Time, Place and M anner. Any and all payments and other amounts due under the Loan Documents shall be made to the applicable Lender’s bank account as designated by such Lender in writing by notice from time to time to the Borrower. A payment to be made in cash hereunder shall not be deemed to have been made on any day unless such payment has been received by the applicable Lender, at the required place of payment, in Dollars in funds immediately available to such Lender at such place, no later than 12:00 p.m. (noon) on such day. (b)  No R eductions. All payments due to Lenders under the Loan Documents shall be made by Borrower without any reduction or deduction for any Set-off, recoupment, counterclaim or similar amount, except as required by Applicable Law. (c)  Withholding  Taxes;  Indemni  fication.  Borrower  and  each  Lender  intend  that  under  current  Applicable  Law,  no  deduction  or withholding for any Tax is required with respect to any payments due to a Recipient under the Loan Documents, provided that such Recipient has complied with the applicable requirements of Section 2 .09(d). All payments due to each Lender under the Loan Documents shall be made by Borrower without any deduction or withholding for any Tax. If any Applicable Law (as determined in the good faith discretion of the Borrower) requires the deduction or withholding of any Tax from any such payment, then the Borrower shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower to each applicable  Lender  shall  be  increased  as  necessary  so  that  after  such  deduction  or  withholding  has  been  made  (including  such  deductions  and  withholdings applicable to additional sums payable under this Section 2 .09(c)) the recipient Lender receives an amount equal to the sum that it would have received had no such deduction or withholding been made. The Borrower shall indemnify each Recipient, within five (5) days after request therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2 .09(c)) payable or paid by such Recipient  or  required  to  be  withheld  or  deducted  from  a  payment  to  such  Recipient  and  any  reasonable  expenses  arising  therefrom  or  with  respect  thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Recipient shall be conclusive absent manifest error. (d) Status of L enders. (i)  Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower, at the time or times reasonably requested by the Borrower, such properly completed and executed documentation reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably  requested  by the Borrower, shall deliver  such other documentation  prescribed  by applicable  law or reasonably requested  by  the  Borrower  as  will  enable  the  Borrower  to  determine  whether  or  not  such  Lender  is  subject  to  backup  withholding  or  information reporting requirements. (ii) Without limiting the generality of the foregoing, (A)  a U.S. Lender shall deliver to the Borrower on or prior to the Closing Date or later date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax; 17 (B)  a  Non-U.S.  Lender  shall,  to  the  extent  legally  entitled  to  do  so,  deliver  to  the  Borrower  (in  such  number  of copies as shall be requested by the Borrower) on or prior to the Closing Date or later date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), whichever of the following is applicable: (1)  in the case of a Non-U.S. Lender claiming the benefits of an income Tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN-E establishing an exemption from U.S. federal withholding Tax pursuant to the “interest” article of such Tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E establishing an exemption from U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such Tax treaty, and establishing compliance with FATCA; (2) executed originals of IRS Form W-8ECI; (3)  in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the IRS Code, (x) a certificate to the effect that such Non-U.S. Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the IRS Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the IRS Code, or a “controlled foreign corporation” described  in  Section  881(c)(3)(C)  of  the  IRS  Code  and  (y)  executed  originals  of  IRS  Form  W-8BEN-E,  and  establishing  compliance  with FATCA; or (4)  to the extent a Non-U.S. Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by any  certifications  or  documents  required  by  Section 2.09(d)(i) or (ii) with  respect  to  the  beneficial  owner,  and  establishing  compliance  with FATCA. (iii)  any Non-U.S. Lender shall deliver, to the extent legally entitled to do so, to the Borrower (in such number of copies as shall be requested by the Borrower) on or prior to the Closing Date or later date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from U.S. federal withholding Tax, duly completed; and (iv)  each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower in writing of its legal inability to do so. (e)  Treatment of Certain Refunds.    If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.09 (including by the payment of additional amounts pursuant to this Section 2 .09), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified  party  the  amount  paid  over  pursuant  to  this  paragraph  (h)  (plus  any  penalties,  interest  or  other  charges  imposed  by  the  relevant  Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (e), in no event 18 will  the  indemnified  party  be  required  to  pay  any  amount  to  an  indemnifying  party  pursuant  to  this  paragraph  (e)  the  payment  of  which  would  place  the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person. (f)  Extension of Payment D ates. Whenever any payment to the Lenders under the Loan Documents would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day. If the date any payment under the Loan Documents is due is extended (whether by operation of any Loan Document, Applicable Law or otherwise), such payment shall bear interest for such extended time at the Interest Rate applicable hereunder. (g)  Prepayment Premium . Any prepayments of the Loan by the Borrower (i) after January 1, 2019 pursuant to Section 2 .05, (ii) as a result of a Change in Control pursuant to Section 2.06 , (iii) as a result of the acceleration of the Maturity Date pursuant to Section 7.02(a) or (iv) as a result of any other circumstance where the Borrower violates its obligations under this Agreement to avoid payment of such Prepayment Premium, shall, in any such case, be accompanied by payment of the applicable Prepayment Premium. Section 2.10 Changes In L aw. If at any time any Lender determines that any Regulatory Change Enacted after the Agreement Date makes it unlawful or impossible for such Lender to maintain the Loan, such Lender shall promptly notify the Borrower of any circumstance that would make the provisions of this Section 2.10 applicable and each of such Lender, Borrower and Halozyme agree, if legally possible and commercially practicable under the circumstances, to promptly negotiate in good faith such amendments or other modifications to the Loan, this Agreement or any of the other Loan Documents to which it is a party, as the case may be, so that it is no longer unlawful or impossible for such Lender to maintain the Loan. Each Lender agrees to pay (within five (5) days after the receipt  of  written  notice  from  Borrower  and  Halozyme)  all  out-of-pocket  costs  and  expenses  of  Borrower  and  Halozyme  (including,  without  limitation,  the reasonable and documented fees and expenses of Borrower’s and Halozyme’s legal counsel) reasonably incurred by Borrower and Halozyme in connection with any such negotiations, amendments or modifications involving such Lender. Section 2.11 Additional C onsideration. As additional consideration for the making of the Loan, Borrower shall pay to each Lender on the Closing Date an  amount  equal  to  one  percent  (1.00%)  of  the  original  principal  amount  of  the  Loan  allocated  to  such  Lender  in  accordance  with  Exhibit A hereto (the “ A dditional Consideration ”). Section 2.12     Pro Rata Treatme nt. (a)  All payments on account of principal of or interest of the Loan, fees or any other Secured Obligations owing to or for the account of  any  one  or  more  Lenders  shall  be  apportioned  ratably  among  such  Lenders  in  proportion  to  the  amounts  of  such  principal,  interest,  fees  or  other  Secured Obligations owed to them respectively. (b)  If any Lender shall, by exercising any right of Set-off (including in accordance with Section 7 .02(c)) or counterclaim or otherwise, obtain payment in respect of any principal of or interest on the Loan or other Secured Obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of the Loan and accrued interest thereon or other such Secured Obligations greater than its pro rata share thereof as 19 provided  herein,  then  the  Lender  receiving  such  greater  proportion  shall  (i)  notify  the  other  Lenders  of  such  fact  and  (ii)  purchase  (for  cash  at  face  value) participations in the Loan and such other Secured Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on the Loan and other amounts owing  them;  provided  that  (A)  if  any  such  participations  are  purchased  and  all  or  any  portion  of  the  payment  giving  rise  thereto  is  recovered,  then  such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (B) the provisions of this Section 2.12(b) shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration  for the assignment of or sale of a participation  in any of its portion of the Loan evidenced  by its Note to any assignee or participant, other than to the Borrower or its Affiliates (as to which the provisions of this Section 2.12(b) shall apply). The Borrower consents to the foregoing  and  agrees,  to  the  extent  it  may  effectively  do  so  under  Applicable  Law,  that  any  Lender  acquiring  a  participation  pursuant  to  the  foregoing arrangements  may  exercise  against  the  Borrower rights  of  Set-off  and counterclaim  with respect  to  such participation  as  fully  as if  such Lender  were  a direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or similar law, any Lender receives a secured claim in lieu of a Set-off to which this Section 2.12(b) applies, then such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.12(b) to share in the benefits of any recovery on such secured claim. Section  2.13  A HYDO.  Notwithstanding  anything  in  this  Agreement  to  the  contrary,  commencing  with  the  first  “accrual  period”  (as  defined  under Treasury Regulation Section 1.1272-1(b)(1)(ii)) ending after the fifth anniversary of the Agreement Date, and each accrual period thereafter, the Borrower shall, in respect  of the Loan, pay in cash, on or before the end of such accrual  period, both the stated interest  due and payable as set forth in Section 2.03 and any accrued and unpaid “original issue discount” (determined in accordance with Treasury Regulation Sections 1.1273-1 and 1.1272-1 and taking into account, for the avoidance of doubt, the Additional Consideration) with respect to the Loan if, but only to the extent that, the aggregate amount of such original issue discount that has accrued and has not been paid in cash from the Agreement Date through the end of such accrual period (treating any payments made pursuant to this Article II as  a  payment  of  interest  and  original  issue  discount  to  the  full  extent  required  under  Treasury  Regulation  Sections  1.446-2(e)(l)  and  1.1275-2(a))  exceeds  the product of the “issue price” (as defined in Treasury Regulation Section 1.1273-2(a)(1)) of the Loan and the “yield to maturity” (determined in accordance with Treasury Regulation Section 1.1272-1(b) and taking into account, for the avoidance of doubt, the Additional Consideration) on the Loan. 20 Section 3.01     Conditions to L oan. ARTICLE III CONDITIONS TO LOAN that each of the following conditions has been fulfilled prior to the making of the Loan: (a)  The obligation of the Lenders to make the Loan is subject to the determination by the Lenders, in their sole and absolute discretion, the Lenders shall have received duly executed copies of this Agreement and each of the other Loan Documents and such other certificates, documents, instruments and agreements as the Lenders shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents; (i)  (ii)  the Lenders shall have received from each Loan Party each of the items referred to in clauses (x) and (y) below: (x)  a copy of the certificate of formation, limited liability company agreement, certificate of incorporation, by-laws or  other  constituent  or  governing  documents,  including  all  amendments  thereto,  of  such  Loan  Party,  (A)  if  applicable  in  such  jurisdiction, certified as of a recent date by the Secretary of State (or other similar official) of the jurisdiction of its organization, and a certificate as to the good standing (to the extent such concept or a similar concept exists under the laws of such jurisdiction) of such Loan Party as of a recent date from such Secretary of State (or other similar official), and (B) otherwise, (1) certified by the Secretary or Assistant Secretary of such Loan Party or other Person duly authorized by the constituent documents of such Loan Party or (2) in form and substance reasonably satisfactory to the Lender; and authorized by the constituent documents of such Loan Party dated as of the Closing Date and certifying: (y)  a certificate  of the Secretary or Assistant Secretary or similar officer of such Loan Party or other Person duly (A)  that attached thereto is a true and complete copy of the limited liability company agreement, certificate of incorporation, by-laws or other equivalent constituent and governing documents of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below; (B)  that attached thereto is a true and complete copy of the resolutions (or equivalent authorizing actions) duly adopted by such Loan Party’s managing member or non-member manager or board of directors, as applicable, authorizing the execution, delivery and performance of the Loan Documents to which it is a party, the Purchase Agreement and the Consent and Direction and, in the case of such resolutions of the Borrower, the borrowings pursuant to the Loan, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the Closing Date; (C)  that the certificate of formation, limited liability company agreement, certificate of incorporation, by-laws or other equivalent constituent and governing documents 21 of such Loan Party have not been amended since the date of the last amendment thereto disclosed pursuant to clause (ii)(x) above; (D)  that  attached  thereto  are  true and complete  copies  of each  of the Transaction  Documents to which it  is a party; and as to the incumbency and specimen signature of each officer or other duly authorized Person executing any Loan  Document  or  any  other  document  delivered  in  connection  herewith  on  behalf  of  each  of  the  Loan  Parties  (including,  without limitation, the Purchase Agreement, the Baxalta Consent and Direction and the Roche Consent and Direction); (E)  (iii)  the Lenders shall have received (A) UCC-1 financing statements in appropriate form for filing and necessary and sufficient to perfect the security interests created pursuant to this Agreement, (B) evidence satisfactory to it that an appropriate UCC-1 financing statement has been filed in the correct filing office with respect to the sale and back-up security interest provided for in the Purchase Agreement and (C) the results of a recent lien search in each of the jurisdictions where the Borrower, Halozyme and their respective assets, including the Collateral, are located or deemed located, and such search shall reveal no Liens on any of the Borrower’s assets (including those acquired from Halozyme pursuant to the Purchase Agreement), including the Collateral; (iv)  the  Lenders  shall  have  received  an  opinion  or  opinions  of  counsel  to  the  Loan  Parties,  satisfactory  in  scope,  form  and substance to the Lenders, in respect of (A) certain corporate and Code matters, and (B) true sale and consolidation; (v)  the Lenders shall have received (A) the Baxalta Consent and Direction, fully executed by the parties thereto, and a copy of the Commencement Notice delivered by Halozyme to Baxalta, and (B) the Roche Consent and Direction, fully executed by the parties thereto, and a copy of the Commencement Notice delivered by Halozyme to Roche; (vi)  (vii)  each Loan Document Representation and Warranty shall be true and correct at and as of the time the Loan is to be made; no Default shall have occurred and be continuing at the time the Loan is to be made or would result from the making of the Loan or from the application of the proceeds thereof; (viii)  no Regulatory Change Enacted after the Agreement Date makes it unlawful or impossible for any Lender to make the Loan; (ix)  the Lenders shall have received a certificate, signed by a financial officer of the Borrower, on the date of the Loan, (x) stating  that no Default has occurred  and is continuing  and (y) stating that each Loan Document Representation  and Warranty  of the Borrower is true and correct as of such date; Loan Document Representation and Warranty of Halozyme is true and correct as of such date; and (x)  the Lenders shall have received a certificate, signed by an officer of Halozyme, on the date of the Loan, stating that each (xi)  the Lenders shall have received evidence of the Consent, Release and Third Amendment to Amended and Restated Loan and Security Agreement, dated as of December 28, 2015, 22 by and among, Oxford Finance LLC, Silicon Valley Bank, Halozyme and Parent, which remains in full force and effect as of the Closing, and, for the avoidance of doubt, the release described in Section 3 therein shall be effective and each of the covenants in Section 9 therein shall be fully satisfied. ARTICLE IV CERTAIN REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Agreement and to make the Loan, each of the Borrower and Halozyme, severally and not jointly with the other,  represents  and  warrants  to  the  Collateral  Agent  and  the  Lenders  as  follows,  which  representations  and  warranties  shall  be  deemed  to  be  made  on  the Agreement Date and the Closing Date (both with and without giving effect to the Loan): Section  4.01  Organization;  Power;  Qualificat  ion.  Such  Loan  Party  is  a  corporation  or  limited  liability  company,  as  applicable,  duly  formed,  validly existing and in good standing under the laws of the State of Delaware (in the case of the Borrower) or the State of California (in the case of Halozyme), has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and in good standing as a foreign company, and is authorized to do business, in all jurisdictions in which the character of its properties or the nature of its business requires such  qualification  or  authorization,  except  for  qualifications  and  authorizations  the  lack  of  which,  singly  or  in  the  aggregate,  has  not  had  and  will  not  have  a Material Adverse Effect. Section  4.02  Authorization;  Enforceability;  Required  Consents;  Absence  of  Confl  icts.  Such  Loan  Party  has  the  power,  and  has  taken  all  necessary action to authorize it, to execute, deliver and perform in accordance with their respective terms the Loan Documents and Transaction Documents to which it is party and to exercise its rights under the License Agreement and the other Transaction Documents to which it is a party. This Agreement has been, and each of the other Loan Documents to which it is a party when delivered to the Lenders will have been, duly executed and delivered by such Loan Party and is, or when so delivered will be, a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance in accordance with their respective terms by such Loan Party of the Loan Documents and the Transaction Documents to which it is party, and, in the case of the Borrower, the borrowing hereunder, do not and (absent any change in any Applicable Law or any applicable Contract) will not (a) require any Governmental Approval or any other consent or approval to have been obtained or any Governmental Registration to have been made, other than (i) Governmental Approvals and other consents and approvals and Governmental Registrations that have been obtained or made, as the case may be, are final and not subject to review on appeal or to collateral attack, are in full force and effect and copies of which have been delivered to the Lenders and (ii) the filing of financing  statements  under the  Code necessary  and sufficient  to perfect  the security  interests  created  pursuant  to this Agreement,  or (b) violate,  conflict  with, result  in  a  breach  of,  constitute  a  default  under,  require  the  consent  or  approval  of  any  Person  (other  than  the  Baxalta  Consent  and  Direction  and  the  Roche Consent and Direction), or, except as expressly contemplated in the Loan Documents, result in or require the creation of any Lien upon any assets of such Loan Party under, (i) any Contract to which such Loan Party is a party or by which such Loan Party or any of its properties may be bound or (ii) any Applicable Law. Each of the Transaction Documents to which such Loan Party is a party is in full force and effect, and has not been amended, modified or supplemented. 23 Section 4.03 L itigation. There are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits or proceedings pending or, to the knowledge of such Loan Party, threatened against or in any other way relating to or affecting (a) such Loan Party or any of its business or properties, (b) Product or (c) any Loan Document or Transaction Document to which it is a party, except (in the case of (a) and (b) above)  those  actions,  suits  or  proceedings  that,  if  adversely  determined,  could  not  reasonably  be  expected  to  have,  either  individually  or  in  the  aggregate,  a Material Adverse Effect (without giving effect the parenthetical in clause (d) of the definition of “Material Adverse Effect”). Section 4.04 Informa tion.  The  Information  furnished  to  the  Collateral  Agent  and  the  Lenders  by  or  on  behalf  of  such  Loan  Party  on  or  prior  to  the Agreement Date does not, and the Information furnished to the Collateral Agent and the Lenders by or on behalf of such Loan Party after the Agreement Date will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in the light of the circumstances under which they were made; p rovided, h owever, that in no event does a Loan Party make any representation as to the truth or accuracy of Information generated or disclosed by third parties, including Baxalta and Roche. Section 4.05 No Adverse Change or E vent. No change, effect, event, occurrence, state of facts, development or condition has occurred relating to or affecting the business, assets, Liabilities, financial condition, results of operations or business prospects of the Borrower, and no change, effect, event, occurrence, state of facts, development or condition relating to or affecting either License Agreement, the other Transaction Documents, any other Loan Party (or any of its Subsidiaries  or  Affiliates  other  than  Borrower),  or,  to  such  Loan  Party’s  knowledge,  Baxalta  (or  any  of  its  Subsidiaries  or  Affiliates)  or  Roche  (or  any  of  its Subsidiaries or Affiliates) has occurred or failed to occur, that has had or could reasonably be expected to have, either alone or in conjunction with all other such changes, effects, events, occurrences, facts, developments, conditions and failures, a Material Adverse Effect (without giving effect the parenthetical in clause (d) of the definition of “Material Adverse Effect”). Section 4.06 No Defau lt. No Default exists hereunder or would result from the making of the Loan or from the application of the proceeds thereof. Section 4.07 Investment Company A ct. Such Loan Party is not an “investment company” or a Person “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940. Section 4.08     License Agreeme nts. (a)  Other than the Transaction  Documents  and the Loan Documents  to which  it  is a party,  there  is no contract,  agreement  or other arrangement (whether written or oral) to which such Loan Party or any of its Subsidiaries or Affiliates is a party or by which any of its or their assets or properties is bound or committed (i) that creates a Lien on the Collateral (or any portion thereof) or (ii) the breach, nonperformance, cancellation or termination of which could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. between Halozyme and Baxalta (and its Affiliates) relating to the Collateral (including, without limitation, the Post-Closing Royalty Amounts). (b)  The Baxalta License Agreement, the Baxalta Side Letters and the Baxalta Consent and Direction constitute the entire agreement between Halozyme (and its Affiliates) and Roche (and its Affiliates) relating to the Collateral (including without limitation the Post-Closing Royalty Amounts). (c)  The  Roche  License  Agreement,  the  Roche  Side  Letters  and  the  Roche  Consent  and  Direction  constitute  the  entire  agreement 24 (d)  The Baxalta License Agreement is the legal, valid and binding obligation of Halozyme and, to the knowledge of such Loan Party, Baxalta, enforceable against Halozyme and, to the knowledge of such Loan Party, Baxalta, in accordance with its terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general equitable principles. There is no breach or default, and no event has occurred or circumstance exists (other than as expressly provided for in the Baxalta License Agreement) that (with or without notice or lapse  of  time,  or  both)  would  constitute  or  give  rise  to  a  breach  or  default,  in  the  performance  of  the  Baxalta  License  Agreement  by  Halozyme  or,  to  the knowledge of such Loan Party, Baxalta. To the knowledge of such Loan Party, no event has occurred or circumstance exists that (with or without notice or lapse of time, or both) would give either Halozyme or Baxalta the right to terminate the Baxalta License Agreement for breach or give Baxalta or any of its Affiliates a right of Set-off against any amounts payable thereunder, including any Post-Closing Royalty Amounts. (e)  The Roche License Agreement is the legal, valid and binding obligation of Halozyme and, to the knowledge of such Loan Party, Roche, enforceable against Halozyme and, to the knowledge of such Loan Party, Roche, in accordance with its terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general equitable principles. There is no breach or default, and no event has occurred or circumstance exists (other than as expressly provided for in the Roche License Agreement) that (with or without notice or lapse of time, or both) would constitute or give rise to a breach or default, in the performance of the Roche License Agreement by Halozyme or, to the knowledge of such Loan Party, Roche. To the knowledge of such Loan Party, no event has occurred or circumstance exists that (with or without notice or lapse of time, or both) would give either Halozyme or Roche the right to terminate the Roche License Agreement for breach or give Roche or any of its Affiliates a right of Set-off against any amounts payable thereunder, including any Post-Closing Royalty Amounts. Halozyme has not waived any rights or defaults under either License Agreement or taken any action or omitted to take any action under either License Agreement that adversely affects the Collateral Agent’s or the Lenders’ rights under any of the Loan Documents, including its or their rights in respect of the Collateral (including the Post-Closing Royalty Amounts), or that could otherwise have a Material Adverse Effect. (f)  (g)  Halozyme has not received any notice, and has no knowledge, of (i) Baxalta’s intention to terminate, amend or restate the Baxalta License Agreement in whole or in part, (ii) Roche’s intention to terminate, amend or restate the Roche License Agreement in whole or in part, (iii) Baxalta’s or any other Person’s or Governmental Authority’s (where applicable) intention to challenge the validity or enforceability of the Baxalta License Agreement or the obligation  of  Baxalta  to  pay  the  Post-Closing  Royalty  Amounts  or  other  monetary  payment  under  the  Baxalta  License  Agreement,  (iv)  Roche’s  or  any  other Person’s or Governmental Authority’s (where applicable) intention to challenge the validity or enforceability of the Roche License Agreement or the obligation of Roche to pay the Post-Closing Royalty Amounts or other monetary payment under the Roche License Agreement, (v) Halozyme or Baxalta being in breach or default of any of its obligations under the Baxalta License Agreement, or (vi) Halozyme or Roche being in breach or default of any of its obligations under the Roche License Agreement. (h)  Neither  the  granting  of  a  Lien  on  the  Collateral  to  the  Collateral  Agent  or  the  Lenders  pursuant  to  Section  8.01  nor  the consummation  of  the  other  transactions  contemplated  by  the  Purchase  Agreement,  the  other  Transaction  Documents  or  the  Loan  Documents  will  require  the approval, consent, ratification, waiver, or other authorization of Baxalta (other than as expressly provided in the Baxalta Consent and Direction), Roche (other than  as  expressly  provided  in  the  Roche  Consent  and  Direction)  or  any  other  Person  or  Governmental  Authority  under  either  License  Agreement,  the  other Transaction Documents or otherwise and will not constitute a breach of or default 25 or event of default under either License Agreement, the other Transaction Documents or any other agreement to which such Loan Party or any of its Subsidiaries or Affiliates is a party. (i)  All of the representations or warranties made by Halozyme in Sections 2 and 6.6 of the Baxalta License Agreement were accurate and complete in all material respects as of the effective date of the Baxalta License Agreement and continue to be accurate and complete in all material respects as of the Agreement Date and as of the Closing Date (it being understood and agreed that any representations and warranties stated to relate to a specific earlier date shall have been true and correct in all material respects solely as of such earlier date). (j)  All  of  the  representations  or  warranties  made  by  Halozyme  in  Sections 2 , 6.6 and 11.9 of  the  Roche  License  Agreement  were accurate and complete in all material respects as of the effective date of the Roche License Agreement and continue to be accurate and complete in all material respects as of the Agreement Date and as of the Closing Date (it being understood and agreed that any representations and warranties stated to relate to a specific earlier date shall have been true and correct in all material respects solely as of such earlier date). (k)  To the knowledge of such Loan Party, (i) Baxalta has not indicated (whether in writing or orally) that the royalties paid pursuant to Section  4.3  of  the  Baxalta  License  Agreement  would,  in  the  reasonable  determination  of  such  Loan  Party,  be  insufficient  to  enable  the  Borrower  to  make payments of principal of and interest on the Loan or the Notes when and as due and payable in accordance with the terms of this Agreement and the Notes, and (ii)  Roche  has  not  indicated  (whether  in  writing  or  orally)  that  the  royalties  paid  pursuant  to  Section  4.3  of  the  Baxalta  License  Agreement  would,  in  the reasonable determination of such Loan Party, be insufficient to enable the Borrower to make payments of principal of and interest on the Loan or the Notes when and as due and payable in accordance with the terms of this Agreement and the Notes. Section 4.09 UCC Representations and War ranties. The Borrower’s exact legal name is, and has always been, “Halozyme Royalty LLC”. Halozyme’s exact legal name is, and, since September 1, 2007 has been, “Halozyme, Inc.” The principal place of business and chief executive office of the Borrower has always been, and the office where it keeps its books and records relating to the License Agreement are located at, the address of the Borrower set forth in Section 10.01  hereof.  The  Borrower’s  Delaware  organizational  identification  number  and  Federal  Employer  Identification  Number  are  5920833  and  81-0926319, respectively. Section 4.10     Intellectual P roperty. (a)  any of its Affiliates). Halozyme is the sole owner or exclusive licensee of the Halozyme Technology, free and clear of all Liens created by Halozyme (or (b)  Halozyme is a co-owner with Baxalta or Roche, as applicable, or licensee of any Collaboration Supported Biologic Patent Rights (that are not also Collaboration Supported PH20 Patent Rights) to the extent that there exist any such Collaboration Supported Biologic Patent Rights and to the knowledge of such Loan Party of the existence of any such Collaboration Supported Biologic Patent Rights, free and clear of all Liens created by Halozyme (or any of its Affiliates). Halozyme  is  the  sole  owner  or  nonexclusive  licensee  of  the  Collaboration  Supported  PH20  Patent  Rights,  free  and  clear  of  all Liens, and in the case of Collaboration  Supported PH20 Patent Rights in respect  of which Halozyme is the nonexclusive  licensee,  free and clear  of all Liens, created by Halozyme (or any of its Affiliates). (c)  26 (d)  To the knowledge of such Loan Party, no third party owns any Intellectual Property rights that could be validly asserted against the development, manufacture, use, sale or importation of any Product. (e)  No claims have been made or, to the knowledge of such Loan Party, threatened, against Halozyme (or any of its Affiliates) or, to the  knowledge  of  such  Loan  Party,  any  Licensee  (or  any  of  its  Affiliates),  since  the  effective  date  of  the  Baxalta  License  Agreement  and  the  Roche  License Agreement,  respectively,  that  the  development,  manufacture,  use,  sale  or  importation  of  any  Product  (including  the  development,  manufacture,  use,  sale  or importation of any Product under the License Agreements), infringes, misappropriates, or otherwise violates any Intellectual Property right of any third party. (f)  To the knowledge of such Loan Party, no Licensee has given Halozyme (or any of its Affiliates) any written notice of any claims that have been made or threatened against such Licensee that any Product, any licensed process or licensed technology or any use or practice thereof by such Licensee (or any of its Affiliates), in each case with respect to any Product, infringes, misappropriates, or otherwise violates any Intellectual Property right of any third party. any Licensed Patent Rights, Collaboration Supported Biologic Patent Rights or Collaboration Supported PH20 Patent Rights. (g)  To the knowledge of such Loan Party, no third party is currently infringing, misappropriating, or otherwise violating in any respect (h)  To the knowledge of such Loan Party, each of the Licensed Patent Rights, Collaboration Supported Biologic Patent Rights and Collaboration Supported PH20 Patent Rights are valid and enforceable, and no third party is currently challenging, has challenged, or has a reasonable basis to challenge,  the  validity,  the  scope,  a  priority  claim,  term,  inventorship,  ownership  or  enforceability  of  any  Licensed  Patent  Right,  Collaboration  Supported Biologic Patent Right or Collaboration Supported PH20 Patent Right in any respect. To the knowledge of such Loan Party, no third party has provided notice or other information to a Licensee with respect  to the submission or the acceptance for review of an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) for a product that references the Baxalta Product or the Roche Product. (i)  27 (j)  To the knowledge of such Loan Party, no third party has provided notice to such Loan Party under section 505(b)(3) or 505(j)(2) (B) of the Federal Food, Drug and Cosmetic Act relating to a patent certification under section 505(b)(2)(A)(iv) or 505(j)(2)(A)(vii)(IV) of such Act, commonly referred to as a Paragraph IV certification, to U.S. Patent No. 7,767,429 or to any other Collaboration Supported PH20 Patent Rights. Section 4.11 Royalty R ights. Pursuant to the Purchase Agreement, the Borrower has purchased, acquired and accepted from Halozyme, and Halozyme has sold, assigned and transferred to the Borrower, all of Halozyme’s right, title and interest in and to the Post-Closing Royalty Amounts (the “ Royalty Rig hts”), free and clear of any and all Liens of any kind whatsoever. Prior to such purchase, such Royalty Rights were owned exclusively and at all times by Halozyme, free and clear of any and all Liens of any kind whatsoever. Section 4.12     Manufacturing and S upply. (a)  During each of the 2014 and 2015 calendar years, Halozyme supplied, indirectly through Avid BioServices, sufficient rHuPH20 to satisfy  100%  of  rHuPH20  ordered  by  each  of  Roche  and  Baxalta  during  each  such  calendar  year  and,  to  the  knowledge  of  Halozyme,  Avid  BioServices  had sufficient capacity to manufacture up to 100% of rHuPH20 ordered by each of Roche and Baxalta during each such calendar year. for Roche to manufacture *** of Herceptin SC and *** of MabThera SC and for Baxalta to manufacture *** of HyQvia. (b)  To the knowledge of Halozyme, Avid BioSciences has manufacturing capacity to supply sufficient rHuPH20 during 2016 in order Section 4.13 Regulatory Communications . To the knowledge of Halozyme, neither Baxter nor Roche has filed or has expressed an intention to file a Biological Product Deviation Report with the FDA or EMA relating to MabThera SC, Herceptin SC or HYQVIA. Section 4.14     Certain Informa tion. (a)  To the knowledge of Halozyme, there are no adverse events or other safety issues associated with HYQVIA observed or reported since the approval of the biologics license application for HYQVIA by the FDA on September 12, 2014 that are likely to (A) give rise to any material limitation or modification of the US regulatory approval or labeling for HYQVIA or (B) materially adversely affect the current level of use of HYQVIA in patients. (b)  To the knowledge of Halozyme, there are no adverse events or other safety issues associated with Herceptin SC or MabThera SC observed or reported since the date of announcement of the recommendation for marketing authorization by the European Commission on September 2, 2013 (for Herceptin  SC)  and  January  24,  2014  (for  MabThera  SC)  that  are  likely  to  (A)  give  rise  to  any  material  limitation  or  modification  of  the  European  marketing authorization  or  labeling  for  Herceptin  SC  or  MabThera  SC,  or  (B)  materially  adversely  affect  the  current  level  of  use  of  Herceptin  SC  or  MabThera  SC  in patients. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 28 (c)  To  the  knowledge  of  Halozyme,  Halozyme  has  received  no  data,  information  or  reports  from  the  long-term  safety  study  of HYQVIA as described in the September 12, 2014, FDA approval letter for HYQVIA that are likely to (A) give rise to a material limitation or modification of the US regulatory approval or labeling for HYQVIA or (B) materially adversely affect the current level of use of HYQVIA in patients. Section 4.15     OFAC; Anti-Terrorism L aws. Countries or (iii) derives more than 10% of its operating income from investments in, or transactions with, Sanctioned Persons or Sanctioned Countries. (a)  No Loan Party or any of their respective Affiliates (i) is a Sanctioned Person, (ii) has more than 10% of its assets in Sanctioned (b)  Each Loan Party is in compliance in all material respects with (i) the PATRIOT Act and (ii) the Trading with the Enemy Act. ARTICLE V CERTAIN COVENANTS From the Agreement Date and until the Repayment Date, the Borrower or Halozyme, as applicable, shall, or shall cause their Affiliates to: Section 5.01     Preservation of Existence and Properties; Compliance with Law; Payment of Taxes and Claims; Preservation of Enforceability; S eparateness. (a)  (i) Preserve and maintain (A) in the case of the Borrower, the Borrower’s limited liability company existence, (B) in the case of Halozyme, Halozyme’s corporate existence, and (C) as to both Halozyme and the Borrower, all of their respective other franchises, rights and privileges material to the conduct of its business, (ii) comply with Applicable Law, (iii) pay or discharge when due all Taxes and all Liabilities of the Borrower that are or might become Liens on any of its properties and (iv) take all action and obtain all consents and Governmental Approvals and make all Governmental Registrations the Borrower is required to take or obtain so that its obligations under the Loan Documents will at all times be legal, valid and binding and enforceable against the Borrower and Halozyme and each of their respective rights and obligations under the Transaction Documents to which it is a party will at all times be legal, valid and binding and enforceable by the Borrower or Halozyme, as applicable, against the relevant counterparty in accordance with their respective terms, except that this Section 5.01(a) (other than clauses (i), insofar as it requires the Borrower to preserve its limited liability company existence and Halozyme to preserve its corporate existence, and (iv)) shall not apply in any circumstance where noncompliance, together with all other noncompliances with this Section 5 .01(a), will not have a Material Adverse Effect. (b)  Take all actions necessary for the Borrower to remain a Single Purpose Entity. Section 5.02 Use of P roceeds. (a) Use the proceeds of the Loan solely to fund the purchase price payable pursuant to the Purchase Agreement, to fund the Additional Consideration and to pay for other closing costs related to the transactions contemplated by this Agreement and (b) not use the proceeds of the Loan to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock, in each case in violation of said Regulations. If requested by a 29 Lender, the Borrower shall complete and sign Part I of a copy of Federal Reserve Form G-3 referred to in Regulation U and deliver such copy to such Lender. Section 5.03 Visits, Inspections and D iscussions. Permit representatives (whether or not officers or employees) of the Lenders, from time to time but no more than one (1) time per year (except that during the occurrence and continuation of an Event of Default, no such limit on frequency shall apply) upon not less than  five  (5)  Business  Days  prior  written  notice,  to  (a)  visit  any  of  the  Borrower’s  premises  or  property,  (b)  inspect,  and  verify  the  amount,  character  and condition  of, any of the Borrower’s  property,  (c)  review  and make  extracts  from the Borrower’s  books and records  and from  the books and records  of others relating  to  the  Borrower,  including  management  letters  prepared  by  its  independent  certified  public  accountants  and  books  and  records  relating  to  the  Post- Closing Royalty Amounts, and (d) discuss with the Borrower’s manager and other principal officers its business, assets, Liabilities, financial condition, results of operation and business prospects. Section 5.04     Information to Be F urnished. Furnish to the Lenders: (a)  Royalty and Audit R eports. Promptly upon, but in no event later than five (5) Business Days following, any Loan Party’s receipt thereof, each report required or contemplated by, or otherwise delivered pursuant to, (i) Section 4.5 of the Baxalta License Agreement, (ii) Section 4.5 of the Roche License Agreement, and (iii) to the extent relating to any Post-Closing Royalty Amount, any other reports, accountings or similar materials delivered pursuant to the Baxalta License Agreement, including Section 4.6.1 thereof, or delivered pursuant to the Roche License Agreement, including Section 4.6.6 thereof (any such report, accounting or materials, a “ Paym ent R eport”). (b)  Requested  Informa  tion.  From  time  to  time  and  promptly  upon  request  of  any  Lender,  such  Information  regarding  the  Loan Documents, the Loan, the Transaction Documents, Product, the Post-Closing Royalty Amounts and the business, assets, Liabilities, financial condition, results of operations  or  business  prospects  of  the  Borrower  as  such  Lender  may  reasonably  request  (including  any  notices,  reports  or  correspondence  required  or contemplated by, or otherwise delivered pursuant to, Section 5.1(a)(iii) of the Purchase Agreement), in each case in form and substance and certified in a manner reasonably satisfactory to such Lender, and any other Information such Loan Party (or its Affiliates) receives from Baxalta or Roche and is permitted to share with the Lenders pursuant to and in accordance with the confidentiality obligations and disclosure provisions set forth in, with respect to Baxalta, the Baxalta License  Agreement  and  the  Baxalta  Consent  and  Direction,  and  with  respect  to  Roche,  the  Roche  License  Agreement  and  the  Roche  Consent  and  Direction, which the Lenders shall receive subject to the confidentiality obligations in Section 10 .10. (c)  Notice of Defaults and Material Adverse E ffect. Prompt notice, after a Responsible Officer of the applicable Loan Party shall have obtained knowledge thereof, of (i) the occurrence of any Default, or (ii) any event or circumstance that would render any of the representations or warranties in Section 4.05 or 4.08(f) hereof untrue if made at such time. (d)  Notice  of  Amendments,  Modifications  and  Terminations  of  Transaction  Documen  ts.  Without  limiting  Section  5  .13,  prompt notice  of  any  amendment,  restatement,  modification  or  termination  of  any  of  the  Transaction  Documents,  together  with  a  true  and  correct  copy  of  such amendment, restatement or modification or any writing evidencing such termination, as applicable. delivered pursuant to, Section 5.1(a)(ii) of the Purchase Agreement. (e)  Notice  of  Litiga  tion.  Promptly  following  Borrower’s  receipt  thereof,  all  notices  required  or  contemplated  by,  or  otherwise 30 (f)  Notice of Paragraph IV Patent Cert ification. Promptly following any Loan Party’s receipt thereof, all notices or other information relating to a Paragraph IV patent certification under section 505(b) or section 505(j) of the Food, Drug and Cosmetic Act to U.S. Patent No. 7,767,429 or to any other Collaboration Supported PH20 Patent Rights. Section 5.05 Modification of Certain Documen ts. Maintain the Borrower’s organizational documents in conformity with this Agreement, such that it does  not  amend,  restate,  supplement  or  otherwise  modify  its  Certificate  of  Formation  or  the  LLC  Agreement  in  any  respect  except  for  such  amendments, restatements, supplements or modifications that: (a) do not materially and adversely affect the rights and privileges of any Loan Party or that would impair the ability of any Loan Party to comply with the terms or provisions of any of the Loan Documents to which it is a party, including, without limitation, this Section 5 .05, (b) do not affect the interests of the Lenders or the Collateral Agent under the Loan Documents or in the Collateral, and (c) could not reasonably be expected to have a Material Adverse Effect. Without limiting the foregoing, the Borrower shall not amend or modify or permit the amendment or modification of Sections 9(j) and 10 of the LLC Agreement and, at all times on and after the Agreement Date, the LLC Agreement shall (i) provide for not less than ten (10) days’ prior written notice to the Lenders of (A) the removal of the Independent Director and (B) the proposed appointment of any Person that is to serve as an Independent Director or a successor Independent Director, as applicable, and (ii) require as a condition precedent to giving effect to the appointment or replacement of a new Independent  Director  that  (A)  the  Borrower  certify  that  the  designated  Person  has  satisfied  the  criteria  set  forth  in  the  definition  in  the  LLC  Agreement  of “Independent Director” and (B) the Lenders acknowledge in writing that in their reasonable judgment such designated Person satisfies the criteria set forth in the definition in the LLC Agreement of “Independent Director” (which acknowledgement shall not be unreasonably withheld or delayed). Section 5.06 Conduct of B usiness. (a) Comply, in the case of Halozyme, in all material respects with its obligations under each License Agreement, (b) comply in all material respects with all Applicable Law, (c) in the case of Halozyme, not terminate either License Agreement, (d) not take any action that may cause either License Agreement to be terminated and (e) not engage in any action with the intent to, directly or indirectly, adversely impact or materially delay, or which  would  reasonably  be  expected  to  have  the  effect  of  adversely  impacting  or  materially  delaying,  the  payment  of  any  Post-Closing  Royalty  Amounts  as contemplated by either License Agreement, this Agreement and the Escrow Agreement. Section 5.07 Purchase Agreeme nt. Maintain the effectiveness of, and continue to perform under, the Purchase Agreement, such that it does not amend, restate, supplement, cancel, terminate or otherwise modify the Purchase Agreement, or give any consent, waiver, directive or approval thereunder or waive any default, action, omission or breach under the Purchase Agreement or otherwise grant any indulgence thereunder, without (in each case) the prior written consent of the Required Lenders in their sole discretion. Section 5.08 I ndebtedness.  The  Borrower  shall  not  create,  incur,  Guarantee,  assume  or  suffer  to  exist  any  Indebtedness,  other  than  (a)  Indebtedness under this Agreement and the other Loan Documents and (b) with the prior written consent of the Required Lenders (not to be unreasonably withheld or delayed), secured  or  unsecured  Indebtedness  of  the  Borrower  to  any  Person;  provided that  (i)  the  incurrence  of  such  secured  or  unsecured  Indebtedness  does  not  (A) adversely affect any of the rights of the Lenders (or their respective successors or permitted assigns) hereunder or under any of the other Loan Documents, or (B) cause any adverse tax consequence to any Lender (or its successors or permitted assigns) or any its Affiliates, (ii) in the case of any such secured Indebtedness, such Indebtedness may be secured solely by the Residual Amount and the funds credited to the Residual Account in respect of any Residual 31 Amount (and, for the avoidance of doubt, shall not be secured by, and the holders of such Indebtedness (or the agent or other representative acting on behalf of, and  for  the  benefit  of,  such  holders)  shall  have  no  recourse  to,  any  other  assets  or  properties  of  the  Borrower),  (iii)  the  Borrower  and  the  holders  of  such Indebtedness (or the agent or other representative acting on behalf of, and for the benefit of, such holders) shall have entered into a subordination and intercreditor agreement with the Lenders in form and substance satisfactory to the Lenders in their sole discretion, and (iv) no Default or Event of Default exists immediately prior to, or would result from, the incurrence of such Indebtedness. Section 5.09 L iens. The Borrower shall not create, grant or permit to exist any Lien on any of its assets or property, including the Collateral, other than (i) Permitted Liens and (ii) solely with respect to the Residual Amount and the funds credited to the Residual Account in respect of any Residual Amount, the Liens securing Indebtedness permitted by Section 5 .08(b). For the avoidance of doubt, the parties hereto acknowledge and agree that this Section 5.09 shall not apply to any Residual Amount if and to the extent such Residual Amount has been distributed from the Residual Account to Halozyme by the Escrow Agent. Section 5.10     Restricted Payme nts. (a)  The  Borrower  shall  not  declare,  order,  pay,  make  or  set  apart  any  sum  for  any  Restricted  Payment  except  that,  so  long  as  no Default or Event of Default shall have occurred and be continuing at such time, the Borrower may make dividends or other distributions to Halozyme, free and clear  of all Liens and claims  of the Lenders, in an aggregate  amount  in respect  of any Interest  Period not greater  than the sum of (i)  the Residual  Amount in respect of such Interest Period and (ii) any Residual Amount in respect of any prior Interest Period if and only to the extent such amount has been disbursed to the Residual Account and has not been previously distributed to Halozyme. (b)  Notwithstanding  anything  herein  to  the  contrary,  the  Borrower  and  Lenders  agree  that,  notwithstanding  the  occurrence  and continuance of any Default or Event of Default, the Escrow Agent, acting at the direction of Halozyme pursuant to Section 6.04 and the Escrow Agreement, may make distributions to Halozyme, free and clear of all Liens and claims of Lenders, but only to the extent such distributions constitute amounts allocated for the reimbursement to Halozyme of any Escrow Agent Fees not previously reimbursed in an aggregate amount in respect of any Interest Period not greater than the amounts paid by Halozyme under the Escrow Agreement in respect of such Interest Period. Section 5.11 M ergers.  The  Borrower  shall  not  merge  or  consolidate  with  or  into,  or  convey,  transfer,  lease  or  otherwise  dispose  of  (whether  in  one transaction  or  in  a  series  of  transactions,  and  except  as  otherwise  contemplated  herein)  all  or  substantially  all  of  its  assets  (whether  now  owned  or  hereafter acquired) to, or acquire all or substantially all of the assets of, any Person. Section 5.12 No Subsidiar ies. The Borrower shall not create, have, acquire, maintain or hold any interest in any Subsidiary. Section 5.13 No M odifications. Not waive any of its rights under, amend or otherwise modify any of the Transaction Documents in a manner which could reasonably be expected to directly or indirectly affect any Post-Closing Royalty Amount, the Collateral (or any portion thereof), or any of the rights of any Lender or Collateral Agent related thereto or under any Loan Document, or permit any of its Affiliates party thereto to do any of the foregoing, without the prior written consent of the Lenders. 32 Section  5.14  Enforcement  of  R  ights.  Not  fail  to  diligently  monitor  (a)  the  performance  of  Baxalta  under  the  Baxalta  License  Agreement,  (b)  the performance of Roche under the Roche License Agreement and (c) the Escrow Agent under the Escrow Agreement, and enforce all rights under such agreements. Section 5.15 Audit Rights of Halozyme . Halozyme agrees that it shall not initiate an audit under the Baxalta License Agreement or the Roche License Agreement without first providing the Lenders with (i) prior written notice of such audit, and (ii) an opportunity to consult in good faith with Halozyme with respect  to  the  particulars  of  such  audit.  To  the  extent  that  the  Lenders  believe  in  good  faith  that  Baxalta  or  Roche  has  underpaid  any  Post-Closing  Royalty Amounts resulting in a reduction to any Adjusted Post-Closing Royalty Amounts payable to Lenders under Section 2.0 4, the Required Lenders shall, in writing, notify Halozyme of such belief, including the calendar quarter in question, and shall request that Halozyme initiate an audit for the fiscal year that includes such calendar  quarter  pursuant to Section 4.6.1 of  the  Baxalta  License  Agreement  or  Section 4.6.6 of  the  Roche  License  Agreement,  as  applicable,  to  confirm  the accuracy of such Post-Closing Royalty Amounts, and Halozyme shall initiate such audit pursuant to Section 4.6.1 of the Baxalta License Agreement or Section 4.6.6 of the Roche License Agreement, as applicable; provided that, in such case, (a) the Lenders shall reimburse Halozyme for all expenses of such audit actually incurred by Halozyme pursuant to Section 4.6.1 of the Baxalta License Agreement (to the extent such expenses are not paid by Baxalta) or Section 4.6.6 of the Roche License Agreement (to the extent such expenses are not paid by Roche) and (b) Halozyme shall direct Baxalta or Roche, as applicable, to remit into the Escrow Account the amount of any underpayments revealed by such audit or, if received by Halozyme, Halozyme shall promptly remit such amount into the Escrow Account. Section 5.16 Defense of Intellectual P roperty. Notwithstanding Halozyme’s retention of the right to pursue infringement claims and other enforcement actions  with  respect  to  all  Licensed  Patents  Rights  under  the  Baxalta  License  Agreement  and  with  respect  to  all  Licensed  Patent  Rights  and  Collaboration Supported PH20 Patent Rights under the Roche License Agreement, if Halozyme becomes aware of alleged or threatened infringement of any such patent rights, including the submission or the acceptance for review of an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) for a product that references a Baxalta Product or a Roche Product, Halozyme will give prompt written notice of such alleged or threatened infringement to the Lenders and will,  where  reasonable,  take  steps  to  enforce  its  patent  rights  subject  to  and  consistent  with  the  terms  of  the  Baxalta  License  Agreement  or  Roche  License Agreement, as applicable. Section  5.17  Manufacturing  and  S  upply.  Halozyme  will  use  its  best  efforts  to  ensure  that  Avid  BioSciences  or  another  manufacturer  maintains manufacturing capacity to supply and directly, or indirectly through Halozyme, supplies Baxalta with sufficient rHuPH20 during the 2016 calendar year so that Roche can manufacture no less than *** of Herceptin SC and *** of MabThera SC and Baxalta can manufacture no less than *** of HyQvia. Section  5.18  Affi  liates.  Other  than  those  expressly  contemplated  by  the  Loan  Documents,  not  enter  into,  amend,  extend,  renew  or  terminate  any agreement between Borrower and any of its Affiliates (the “ Af filiate A greements”), or waive or fail to enforce any term or provision of any Affiliate Agreement (other than a de minimis term or provision) in a manner which could reasonably be expected to directly or indirectly affect any Post-Closing Royalty Amount, the Collateral (or any portion thereof), or any of the rights of any Lender or Collateral Agent related thereto or under any Loan Document without the prior written consent of the Lenders. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 33 Section 5.19 S anctions. Directly or indirectly, use a portion of the Loan or any portion of the proceeds of the Loan, or lend, contribute or otherwise make available such a portion of the Loan or any portion of the proceeds of the Loan to any Sanctioned Person, to fund any activities of or business with any Sanctioned  Person,  or  in  any  Sanctioned  Country,  that,  at  the  time  of  such  funding,  is  the  subject  of  Sanctions,  or  in  any  other  manner  that  will  result  in  a violation by any Person (including any Person participating in the transaction, whether as a Lender, Collateral Agent, or otherwise) of Sanctions. Section 5.20 Anti-Corruption Laws . Directly or indirectly, use any portion of the Loan or any portion of the proceeds of the Loan for any purpose which would  breach  the  United  States  Foreign  Corrupt  Practices  Act  of  1977,  the  UK  Bribery  Act  2010  and  other  similar  anti-  corruption  legislation  in  other jurisdictions. ARTICLE VI COVENANTS RELATING TO THE ESCROW Section 6.01     Remittances to Escrow A ccount. (a)  On or before the Closing Date, (i) Borrower and Halozyme shall direct Baxalta to promptly remit to the Escrow Account any and all  Post-Closing  Royalty  Amounts,  pursuant  to  the  Baxalta  Consent  and  Direction,  (ii)  Borrower  and  Halozyme  shall  direct  Roche  to  promptly  remit  to  the Escrow Account any and all Post-Closing Royalty Amounts, pursuant to the Roche Consent and Direction, and (iii) Halozyme shall notify each of Baxalta and Roche, in writing, that the transactions contemplated herein and in the Purchase Agreement have been consummated, and shall provide to each of Baxalta and Roche in such notice the identity of the Escrow Agent and the details of the Escrow Account (each such notice, a “ Comm encement N otice”). (b)  If and to the extent any Post-Closing Royalty Amounts are received by Borrower or Halozyme (despite and in contradiction to the Baxalta  Consent  and  Direction,  the  Roche  Consent  and  Direction  and  the  Commencement  Notices),  (i)  such  amounts  shall  be  held  in  trust  for  the  benefit  of Lenders, and (ii) Borrower or Halozyme, as applicable, shall promptly remit any and all such amounts directly to the Escrow Agent by deposit to the Escrow Account. Section 6.02     Information to Be F urnished. On each Licensee Payment Date: (a)  Halozyme  shall  deliver  a  written  notice  to  Borrower,  the  Collateral  Agent  and  Lenders  setting  forth  any  Escrow  Agent  Fees previously paid by Halozyme under the Escrow Agreement prior to or during the portion of the Interest Period occurring prior to such Licensee Payment Date and not previously reimbursed, and to be reimbursed on the next Quarterly Payment Date and all supporting documentation therefor. Borrower shall deliver a written notice to the Collateral Agent and Lenders setting forth any Borrower Expenses due and payable by Borrower on the next Quarterly Payment Date and not previously paid or reimbursed, and to be paid or reimbursed on the next Quarterly Payment Date and all supporting documentation therefor. (b)  (c)  Halozyme  shall  deliver  a  written  notice  to  Borrower,  the  Collateral  Agent  and  Lenders  setting  forth  any  out-of-pocket  costs (including reasonable attorney’s fees) actually incurred by Halozyme prior to or during the portion of the Interest Period occurring prior to such Licensee Payment Date in connection with the collection 34 of any indemnity payments paid or payable pursuant to Section 9.1 of the Baxalta License Agreement with respect to Liabilities (as defined in the Baxalta License Agreement)  suffered  by  Borrower  after  the  effective  date  of  the  Purchase  Agreement  with  respect  to  any  amounts  payable  under  Sections  4.3  or 4.6.1 of the Baxalta License Agreement or pursuant to Section 9.1 of the Roche License Agreement with respect to Liabilities (as defined in the Roche License Agreement) suffered by Borrower after the effective date of the Purchase Agreement with respect to any amounts payable under Sections 4.3     or 4.6.6 of the Roche License Agreement (any and all such out-of-pocket costs, “ Indem nity Collection C osts”) and not previously reimbursed, and to be reimbursed on the next Quarterly Payment Date and all supporting documentation therefor. Section 6.03     Disbursement I nstructions. (a)     Promptly  upon its  receipt  of  each  Payment  Report and the  notices  described  in  Section 6 .02, the Collateral Agent and Lenders shall determine, in consultation with Borrower and Halozyme, the calculations of the amounts described in clause (b)(i) through (v) below relating to the next Quarterly Payment Date (the “ Calculations”), which Calculations shall be binding on all parties hereto absent manifest error. (b)     Promptly upon such determination, in consultation with Borrower and Halozyme, of the Calculations, but in no event later than two (2) Business  Days  prior  to  the  next  Quarterly  Payment  Date,  Lenders  and  Borrower  shall  jointly  deliver  to  Halozyme  and  Escrow  Agent  a  duly  executed  written notice  setting  forth  the  following  transfers  to  be  made  by Escrow  Agent  from  the  Escrow  Account  on such  Quarterly  Payment  Date  in  the  following  order  of priority (a “ Joint Disbursement I nstruction”): (i)     The amount of Escrow Agent Fees described in  Section 6.02(a) not previously reimbursed, if any, to be transferred by Escrow Agent to Halozyme on such Quarterly Payment Date, together with the account of Halozyme to which such funds are to be transferred under the Escrow Agreement; (ii)     The amount of Borrower Expenses described in Section 6.02(b) not previously paid or reimbursed, if any, to be transferred by Escrow Agent to Borrower on such Quarterly Payment Date, together with the account of Borrower to which such funds are to be transferred under the Escrow Agreement; (iii)     The amount of Indemnity Collection Costs described in Section 6.02(c) not previously reimbursed, if any, to be transferred by Escrow Agent to Halozyme on such Quarterly Payment Date, together with the account of Halozyme to which such funds are to be transferred under the Escrow Agreement; (iv) To the extent the Available Amount is sufficient therefor, (A)        the  amount  of  unpaid  and  uncapitalized  interest  accrued  during  prior  Interest  Periods,  if  any,  to  be  transferred  by Escrow Agent to Lenders on such Quarterly Payment Date, (B)     the amount of interest accrued during the current Interest Period to be transferred by Escrow Agent to Lenders on such Quarterly Payment Date, and (C)     the amount of outstanding principal under the Loan to be transferred by Escrow Agent to Lenders on such Quarterly Payment Date, together with the account of Lenders to which such funds are to be transferred under the Escrow Agreement; and 35 (v)     The Residual Amount, if any, to be transferred by Escrow Agent to the Residual Account on such Quarterly Payment Date. For the avoidance of doubt, such Disbursement Instruction shall specify the Quarterly Payment Date on which such transfers are to be made by Escrow Agent pursuant to the Escrow Agreement and instruct Escrow Agent to make such transfers on such date. (c)     In the event Lenders and Borrower fail to jointly deliver to Escrow Agent the Disbursement Instruction at least two (2) Business Days prior to any Quarterly Payment Date, the parties hereto agree that so long as Halozyme has timely delivered to Borrower, the Collateral Agent and Lenders the notices described in Section 6 .02(a), Halozyme shall have the right to deliver to Escrow Agent a duly executed written notice of the occurrence of such failure, setting forth: (i) the amount of Escrow Agent Fees described in Section 6.02(a) not previously reimbursed, if any, to be transferred by Escrow Agent to Halozyme on such Quarterly Payment Date (which amount shall be equal to the amount stated in such applicable notice); (ii) the account of Halozyme to which such funds are to be transferred under the Escrow Agreement; and (iii) the Quarterly Payment Date on which such transfers are to be made by Escrow Agent pursuant to the Escrow Agreement (a “ Parent Disbursement I nstruction”). In the event any Lender has delivered an Event of Default Notice to Escrow Agent, the parties hereto further agree that so long as Halozyme has timely delivered to Borrower, the Collateral Agent and Lenders the notices described in Section 6 .02(a), Halozyme shall have the right to deliver a Parent Disbursement Instruction to Escrow Agent. Section 6.04     Disbursements upon Event of D efault. (a)  During the continuance of any Event of Default, any Lender, upon written notice to the Borrower, may notify Escrow Agent in writing that an Event of Default hereunder has occurred and is continuing (an “ Event of Default N otice”); p rovided, h owever, that upon the occurrence of an Event of Default specified in Section 7.01(i) with respect to Borrower, any Lender may deliver an Event of Default Notice to Escrow Agent without any notice to the Borrower. (b)  The parties hereto acknowledge and agree that in the event Escrow Agent receives an Event of Default Notice, Escrow Agent shall not make any disbursements from the Escrow Account in accordance with any pending or future Joint Disbursement Instruction, until such time as Escrow Agent receives written notice from Lenders that such Event of Default no longer exists; p rovided, h owever, that, notwithstanding the foregoing, Escrow Agent shall continue to make disbursements from the Escrow Account only to the extent in accordance with any pending or future Parent Disbursement Instruction. (c)  At such time as an Event of Default is no longer continuing, if any Lender has delivered an Event of Default Notice to Escrow Agent in respect of such Event of Default, Borrower shall promptly notify Escrow Agent in writing that such Event of Default no longer exists. 36 ARTICLE VII DEFAULT Section 7.01     Events of D efault.    The occurrence and continuance of any of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of the Borrower, or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or nongovernmental body: (a)  Any payment of principal of the Loan or the Notes, including any payment of Prepayment Premium applicable thereto, shall not be made within three (3) Business Days of when such payment is due and payable hereunder; (b)  Any Loan Document Representation and Warranty shall at any time prove to have been incorrect or misleading in any material respect when made; (c)  Any Loan Party shall fail to perform or observe its respective obligations under: (A)  any  term,  covenant,  condition  or  agreement  contained  in  Section  5.01(a)(i)  (insofar  as  such  Section  requires  the preservation of the limited liability company existence of Borrower), 5.01(a)( iv), 5 .02, 5 .04(a), 5.04(c) , and Sections 5.05 through 5 .15; or (B)  any  term,  covenant,  condition  or  agreement  contained  in  this  Agreement  (other  than  a  term,  covenant,  condition  or agreement a failure in the performance or observance of which is elsewhere in this Section 7.01 specifically addressed) or any other Loan Document and, if capable of being remedied, such failure shall continue unremedied for a period of thirty (30) days after such Loan Party obtains knowledge of any such default; (d)  Halozyme shall fail to perform or observe Section 10.14(c) hereof, which failure is not cured within thirty (30) days after written demand thereof by the Collateral Agent or the Required Lenders; (e)  The occurrence of any failure by Baxalta to pay any material amount, or other material breach or default by Baxalta, under the Baxalta License Agreement, or any material delay, elimination or material diminution of the amounts paid or payable by Baxalta under Sections 4 .3, 4.6.1 or 9.1 of the Baxalta License Agreement with respect to Post-Closing Royalty Amounts, in each case, only if and to the extent caused by or resulting from an actual breach or default by Halozyme of any of its obligations under the Baxalta License Agreement; (f)  The occurrence of any failure by Roche to pay any material amount, or other material breach or default by Roche, under the Roche License Agreement, or any material delay, elimination or material diminution of the amounts paid or payable by Roche under Sections 4 .3, 4.6.6 or 9.1 of the Roche License Agreement with respect to Post-Closing Royalty Amounts, in each case, only if and to the extent caused by or resulting from a breach or default by Halozyme of any of its obligations under the Roche License Agreement; This Agreement shall for any reason fail to be in full force and effect or fail to be effective to give the Collateral Agent a valid and perfected first priority security interest in and Lien upon any and all of the Collateral (subject only to Permitted Liens), or any Loan Party (or any of its Affiliates) asserts, or institutes any proceedings seeking to establish, that any provision of the Loan Documents, or all or any portion of the Lien on the (g)  37 Collateral granted pursuant to this Agreement, is invalid, not binding or unenforceable, in each case unless any such failure is due to any act or omission on the part of the Collateral Agent or the Lenders; (h)  (i) The occurrence of a material breach or default by Borrower under the Escrow Agreement, or (ii) the occurrence of a material breach or default by Halozyme under the Purchase Agreement, in each case, which breach or default is not cured within thirty (30) days after written demand thereof by the Collateral Agent or the Required Lenders; (i)  (i) Any Loan Party shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a  petition  seeking  to  take  advantage  of  any  other  laws,  domestic  or  foreign,  relating  to  bankruptcy,  insolvency,  reorganization,  winding  up  or  composition  or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws  or  other  laws,  (D)  apply  for,  or  consent  to,  or  fail  to  contest  in  a  timely  and  appropriate  manner,  the  appointment  of,  or  the  taking  of  possession  by,  a receiver, custodian, trustee, liquidator or the like of itself or of a substantial part of its assets, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts (other than those that are the subject of bona fide disputes) as they become due, (F) make a general assignment for the benefit of creditors, or (G) take any corporate or limited liability company action, as applicable, for the purpose of effecting any of the foregoing; (ii)     (A) A case or other proceeding shall be commenced against any Loan Party seeking (1) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (2) the appointment of a trustee, receiver, custodian, liquidator or the like of such Loan Party, or of all or any substantial part of its assets, domestic or foreign, and such case or proceeding shall continue undismissed and unstayed for a period of sixty (60) days, or (B) an order granting the relief requested in such case or proceeding against any Loan Party (including an order for relief under such Federal bankruptcy laws) shall be entered; (j)  The occurrence of (A) any materially adverse effect on the binding nature, validity or enforceability of any Loan Document as an obligation of any Loan Party that is a party thereto, (B) any materially adverse effect on the binding nature, validity or enforceability of either License Agreement as an obligation of Halozyme or Baxalta or Roche, as applicable, (C) any materially adverse effect on the binding nature, validity or enforceability of the Escrow Agreement as an obligation of the Escrow Agent, (D) any materially adverse effect on the binding nature, validity or enforceability of the Purchase Agreement as an obligation of Halozyme, or (E) any material adverse change in any of the rights or remedies of Borrower against Halozyme under the Purchase Agreement; (k)  Any Person shall be appointed as an Independent Director of the Borrower (other than the Independent Director as of the Closing Date) without (i) at least ten (10) days’ prior written notice to the Collateral Agent and the Lenders of (x) in the case of removal of the Independent Director, the removal of such Independent Director and (y) the proposed appointment of the Independent Director or a successor Independent Director, as applicable, which shall include a certification by the Borrower that such Person has satisfied the criteria set forth in the definition of “Independent Director” in the LLC Agreement, in  accordance  with  Section  5  .05,  and  (ii)  the  written  acknowledgement  by  the  Collateral  Agent  or  the  Lenders  that  such  Person  satisfies,  in  the  reasonable judgment of the Collateral Agent or the Lenders (as applicable), the criteria set forth in the definition of “Independent Director” in the LLC Agreement (which acknowledgement shall not be unreasonably withheld); 38 (l)  (m)  Halozyme shall at any time cease to own, of record and beneficially, 100% of the Equity Interests in the Borrower; or The payment of the Additional Consideration shall not be made when such payment is due and payable hereunder. For the avoidance of doubt, the Lenders and Borrower confirm that neither (x) the failure to pay or other default by Baxalta under the Baxalta License Agreement, or any delay, elimination or diminution of the amounts paid or payable by Baxalta under Sections 4.3, 4.6.1 or 9.1 of the Baxalta License Agreement for any reason other than a breach or default by Halozyme of any of its obligations under the Baxalta License Agreement, nor (y) the failure to pay or other default by Roche under the Roche License Agreement, or any delay, elimination or diminution of the amounts paid or payable by Roche under Sections 4 .3, 4.6.6 or 9.1 of the Roche License Agreement for any reason other than a breach or default by Halozyme of any of its obligations under the Roche License Agreement, and, in either case, any consequent delay, elimination and reduction of the amounts paid or payable by the Borrower hereunder with respect to the Loan, shall constitute an Event of Default under Section 7 .01(a). Section 7.02     Remedies upon Event of D efault. Upon the occurrence and during the continuance of any Event of Default: (a)  Acceleration  of  I  ndebtedness.  The  Required  Lenders  may  declare  all  or  any  part  of  the  Loan  (including,  for  the  avoidance  of doubt, the applicable Prepayment Premium) immediately due and payable, whereupon the Loan (including, for the avoidance of doubt, the applicable Prepayment Premium) shall become immediately due and payable without presentment, demand, protest, notice or legal process of any kind, all of which are hereby expressly waived  by  the  Borrower  (provided,  however,  that  all  Loan  (including,  for  the  avoidance  of  doubt,  the  applicable  Prepayment  Premium)  shall  automatically become due and payable upon the occurrence of an Event of Default under Section 7.01(i) with respect to the Borrower); Lenders pursue all other remedies available to it by contract, at law or in equity, including its rights under the Loan Documents. (b)  Other Remed ies. The Collateral Agent may with the approval of the Required Lenders and shall at the direction of the Required (c)  Right of Set -off. Each Lender may, and is hereby authorized by the Borrower to, at any time and from time to time, to the fullest extent permitted by Applicable Law, without advance notice to the Borrower (any such notice being expressly waived by the Borrower), Set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time owing by such Lender or any of its  Affiliates  to  or  for  the  credit  or  the  account  of  the  Borrower  against  any  or  all  of  the  Secured  Obligations  now  or  hereafter  existing,  whether  or  not  such obligations have matured. Each Lender agrees promptly to notify the Borrower, each other Lender and the Collateral Agent after any such Set-off or application; p rovided, h owever, that the failure to give such notice shall not affect the validity of such Set-off and application. (d)  Rights  and  Remedies  Cumulative;  Non-Waiver;  e  tc.  The  enumeration  of  the  Collateral  Agent’s  and  the  Lenders’  rights  and remedies set forth in this Agreement is not intended to be exhaustive and the exercise by the Collateral Agent or the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, under the other Loan Documents or under any other agreement between the Borrower and the Collateral Agent or the Lenders or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Collateral Agent or the Lenders in exercising any right, power or privilege shall operate as a waiver 39 thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Loan Parties and the Collateral Agent or the Lenders  or  their  respective  agents  or  employees  shall  be  effective  to  change,  modify  or  discharge  any  provision  of  this  Agreement  or  any  of  the  other  Loan Documents or to constitute a waiver of any Event of Default. (e)  Notices to Len ders. The Collateral Agent shall deliver to the Lenders any notice of acceleration received by it pursuant to Section 7.02(a) and written approval or written direction received by it pursuant to Section 7 .02(b); p rovided, that any delivery of or failure to deliver any such notice, approval or direction shall not otherwise alter or effect the rights of the Lenders or the Collateral Agent under this Section 7.02 or Section 8 .04. In addition, to the extent the Collateral Agent or the Required Lenders deliver any notices to the Borrower with regards to the failure by any Loan Party to perform any covenant, restriction or agreement contained in any Loan Document, the Collateral Agent or the Required Lenders, as applicable, will also deliver such notice to the other Lenders on or about the same time such notice is provided to the Borrower; p rovided, that the delivery of or failure to deliver such notice to the other Lenders shall not in any way effect the obligations of the Borrower, or the rights of the Collateral Agent or the Required Lenders, in respect of such notice. (f)  Prepayment  Premium  .  The  Borrower  acknowledges  and  agrees  that  if  all  or  any  part  of  the  Loan  shall  be  repaid  prior  to  the repayment schedule required by Section 2.04 or prior to maturity (including without limitation by acceleration pursuant to Sections 2 .05, 2.06 and 7 .02(a)), the Prepayment Premium shall become due and payable by the Borrower upon such repayment or acceleration, whether such acceleration is automatic or is effected by the Collateral Agent’s or the Lenders’ declaration thereof. ARTICLE VIII COLLATERAL Section 8.01     Pledge and Grant of Security Interest and L ien. (a) The Borrower hereby pledges and collaterally assigns to the Collateral Agent, for the ratable benefit of the Lenders, and hereby grants to the Collateral Agent, for the ratable benefit of the Lenders, a first priority Lien upon and security interest in all of  the  assets  and  all  real,  intangible  and  personal  property  of  the  Borrower  (subject  only  to  Permitted  Liens),  including  all  of  the  Borrower’s  right,  title  and interest in and to the Pledged Royalty Rights and the following other property, in each case, wherever located and whether now owned or at any time hereafter acquired by the Borrower or in which the Borrower now has or at any time in the future may acquire any right, title or interest (such assets and property referred to herein as the “ Collateral”), as security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) and observance of all Secured Obligations: (i)  (ii) all Accounts; all Chattel Paper; (iii) all Commercial Tort Claims described in Section 8 .03(b); (iv) (v) all Deposit Accounts; all Documents; 40 (vi) all Equipment; (vii) all Fixtures; (viii) all General Intangibles; (ix) (x) (xi) all Goods; all Instruments; all Intellectual Property and Intellectual Property Licenses; (xii) all Inventory (xiii) all Investment Property, including all Equity Interests and Securities; (xiv) all Letters of Credit and Letter of Credit Rights; (xv) all Money; (xvi) all Securities Accounts; (xvii)  all  books,  records,  ledger  cards,  files,  correspondence,  customer  lists,  blueprints,  technical  specifications,  manuals, computer software, computer printouts, tapes, disks and other electronic storage media and related data processing software and similar items that at any time  pertain  to  or  evidence  or  contain  information  relating  to  any  of  the  Collateral  or  are  otherwise  necessary  or  helpful  in  the  collection  thereof  or realization thereupon; (xviii)  all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing; and to the extent not otherwise included, all other personal property, whether tangible or intangible, of the Borrower and all Proceeds, products, accessions, rents, issues and profits of any and all of the foregoing and all collateral security, supporting obligations and guarantees given by any Person with respect to any of the foregoing. (xix)  Section 8.02 Representations and Warranties regarding the C ollateral. Without limitation of any of the representations or warranties in Article I V, the Borrower represents and warrants to the Collateral Agent and the Lenders as of the date hereof and the date of the Loan that: (a)  The Borrower is the record and beneficial owner of, and has good and marketable title to, the Collateral; (b)  No security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any government or public office, and the Borrower has not filed or consented to the filing of any such statement or notice, except (i) Code financing statements naming the Collateral Agent as secured party, (ii) filings with respect to which termination statements and other necessary releases have been delivered to the Collateral Agent for filing or will be filed promptly on or after the Agreement Date, and (iii) as may be otherwise permitted by this Agreement or any other Loan Document; 41 (c)  This Agreement, together with the filing, with respect to the Borrower, of duly completed Code financing statements naming the Borrower as debtor, the Collateral Agent as secured party, and describing the Collateral, in the office of the Secretary of State of the State of Delaware creates, and  at  all  times  shall  constitute,  a  valid  and  perfected  security  interest  in  and  Lien  upon  the  Collateral  in  favor  of  the  Collateral  Agent,  for  the  benefit  of  the Secured Parties, to the extent a security interest therein can be perfected by such filings or possession, as applicable, superior and prior to the rights of all other Persons therein (except for Permitted Liens), enforceable as such against all creditors of the Borrower and any Persons purporting to purchase any Collateral from the Borrower, and no other or additional filings, registrations, recordings or actions are or shall be necessary or appropriate in order to maintain the perfection and priority of such Lien and security interest, other than continuation statements required under the Code. (d)  (i) the Borrower holds the Collateral free and clear of all Liens of every kind and nature, except for the security interest granted to the Collateral Agent hereunder and the other Permitted Liens, (ii) the Collateral is subject to no options to purchase or any similar rights of any Person, (iii) the Borrower will neither make nor permit to be made any assignment, pledge, hypothecation or loan, transfer of, or create any security interest in, the Collateral, except for the security interest granted to the Collateral Agent hereunder and the Permitted Liens, and the Borrower agrees to deliver promptly or cause to be delivered to the Collateral Agent any and all certificates or instruments at any time representing any of the Collateral, together with any necessary endorsement or instruments of transfer satisfactory to the Collateral Agent, and such other instruments and documents as the Collateral Agent may request that are necessary to perfect its security interest. No  authorization,  consent  or  approval  of,  or  declaration  or  filing  with,  any  Governmental  Authority  is  required  for  the  valid execution, delivery and performance by the Borrower of this Agreement, the grant by it of the Lien and security interest in favor of the Collateral Agent provided for herein, or the exercise by the Collateral Agent of its rights and remedies hereunder, except for the filings described in clause (c) above. (e)  (f)  There  are  no  statutory  or  regulatory  restrictions,  prohibitions  or  limitations  on  the  Borrower’s  ability  to  grant  to  the  Collateral Agent  a  Lien  upon  and  security  interest  in  the  Collateral  pursuant  to  this  Agreement  or  on  the  exercise  by  the  Collateral  Agent  of  its  rights  and  remedies hereunder (including any foreclosure upon or collection of the Collateral), and there are no contractual restrictions on the Borrower’s ability to grant such Lien and security interest. Section 8.03 Covenants with respect to the Collate ral. Borrower covenants and agrees with the Lenders that, from the Agreement Date and until the Repayment Date, the Borrower will: (a)  not, directly or indirectly, sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, or amend or modify, any Collateral; provided that the foregoing shall not prohibit the Borrower from (i) making payments to the Lenders pursuant to this Agreement and the other Loan Documents, (ii) making Restricted Payments expressly permitted under Section 5.10 hereof, (iii) paying the Purchase Price under, and as defined in, the Purchase Agreement, or (iv) any other assignment, transfer or disposal required or expressly permitted by this Agreement. Borrower shall defend the right, title and interest of the Lenders in and to the Collateral against the claims and demands of all Persons whomsoever; and if Borrower shall acquire any interest in any commercial tort claim having a value predicted of $5,000,000 or more (as reasonably determined  by  a  Responsible  Officer  of  Borrower  in  good  faith  and  based  upon  reasonable  assumptions),  whether  from  another  Person  or  because  such commercial tort claim shall have come into (b)  42 existence,  (i)  promptly  (and  in  any  event,  within  five  (5)  Business  Days)  upon  such  acquisition,  deliver  to  the  Collateral  Agent,  in  each  case,  in  form  and substance reasonably satisfactory to the Collateral Agent, a notice of the existence and nature of such commercial tort claim containing a specific description of such commercial tort claim, (ii) Section 8.01 shall apply to such commercial tort claim and (iii) Borrower shall execute and deliver to the Collateral Agent, in each case,  in  form  and  substance  reasonably  satisfactory  to  the  Collateral  Agent,  any  document,  and  take  all  other  action,  deemed  by  the  Collateral  Agent  to  be reasonably necessary or appropriate for the Collateral Agent to obtain a perfected security interest having at least the priority set forth in Section 8.01 in all such commercial tort claims. Section 8.04     Remedies with respect to C ollateral. Without limiting the generality of Section 7 .02: (a)  If an Event of Default shall occur and be continuing, the Collateral Agent may exercise, in addition to all other rights and remedies granted in this Agreement, at law or in equity, and in any other instrument or agreement securing, evidencing or relating to the Loan, all rights and remedies of a secured creditor under the Code, and, subject to any restrictions set forth below, may foreclose or otherwise realize upon the Collateral in such portions or in full as the Collateral Agent sees fit in its sole discretion. If an Event of Default shall occur and be continuing, without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred  to  below)  to  or  upon  any  Person  (which  demands,  presentments,  protests,  advertisements  and  notices,  or  other  defenses,  are  hereby  waived  by  the Borrower), may collect, receive, appropriate and realize upon the Collateral, or any part thereof, or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker’s board or office of the Collateral Agent or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold. To the extent permitted by Applicable Law, the Borrower waives all claims, damages and demands it may acquire against the Collateral Agent or any Lender  arising  out of the exercise  by the Collateral  Agent of any of its rights  and remedies  hereunder.  If any notice  of a proposed sale  or other disposition  of the Collateral  shall  be required  by Applicable  Law, such notice  shall be deemed  reasonable  and proper  if given at least  ten (10) Business Days before such sale or other disposition. The Borrower shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient  to  pay  the  Secured  Obligations  and  the  reasonable  fees  and  disbursements  of  any  attorneys  employed  by  the  Collateral  Agent  to  collect  such deficiency.  Any proceeds  of any  sale  or  other  disposition  of the  Collateral  that  remain  after  the  full  and  final  payment  of  all  the Secured  Obligations  shall  be returned to the Borrower. (b)  The Collateral Agent shall have such rights and remedies as are set forth in this Agreement, all the rights, powers and privileges of a secured party under the Code as in effect in the applicable jurisdictions, and all other rights and remedies available to the Collateral Agent, at law or in equity. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have, to the extent permitted under Applicable Law, the right to the appointment of a receiver for the properties and assets of the Borrower, and the Borrower hereby consents to such rights and such appointment and hereby waives any objection the Borrower may have thereto or the right to have a bond or other security posted by the Collateral Agent in connection therewith. (c)  Upon  the  occurrence  and  during  the  continuance  of  an  Event  of  Default,  the  Collateral  Agent  may,  on  behalf  of  the  Borrower, modify,  terminate,  waive or release,  enforce  and sue on the Purchase  Agreement  and, without releasing  the Borrower from  its obligations  under the Purchase Agreement, perform any and all obligations 43 of the Borrower under the Purchase Agreement and exercise any and all other rights of the Borrower therein contained as fully as the Borrower itself could, to the extent  such  actions  are  necessary  or  appropriate  in  order  to  accomplish  or  further  effect  the  purposes  of  this  Agreement.  Notwithstanding  the  foregoing,  the Collateral Agent shall not be obligated to perform any obligation of the Borrower under the Purchase Agreement. Section 8.05     Security Interest Absolute; Rights Cumulative; the Borrower Remains Liable; Further Assuranc es. (a)  All  rights  of  the  Collateral  Agent  and  all  security  interests  and  all  obligations  of  the  Borrower  hereunder  shall  be  continuing, absolute and unconditional irrespective of: (i) any lack of validity or enforceability of this Agreement, the Notes, the Loan, the other Loan Documents, or any other documents executed and delivered in connection therewith; (ii) any change in the time, manner or place of payment of, or any other term in respect of, all or any  of  the  Secured  Obligations,  or  any  other  amendment  or  waiver  of  or  consent  to  any  departure  from  this  Agreement,  the  Notes,  the  Loan,  or  any  other document executed or delivered in connection therewith; (iii) any increase in, addition to, exchange or release of, or non-perfection of any Lien on or security interest in any other collateral or any release of, amendment of, waiver of, consent to or departure from any security document or guaranty, for all or any of the Secured Obligations; (iv) the failure of the Collateral Agent to do any of the things or exercise any of the rights, interests, powers and authorities hereunder; or (v) the absence of any action on the part of the Collateral Agent to obtain payment or performance of the Secured Obligations from any other Person. The Collateral Agent shall not in any way be responsible for any failure to do any or all of the things for which rights, interests, power and authority are herein granted. (b)  The Borrower agrees that the rights of the Collateral Agent and the Lenders under this Agreement, the Notes, the Loan, or any other  Loan Document  (now or hereafter  in existence)  shall  be cumulative,  and that the Collateral  Agent may from  time  to time  exercise  such rights  and such remedies as the Collateral Agent may have thereunder and under the laws of the United States and any state, as applicable, in the manner and at the time that the Collateral Agent in its sole discretion desires. The Borrower further expressly agrees that the Collateral Agent shall not in any event be under any obligation to resort  to  any  Collateral  prior  to  exercising  any  other  rights  that  the  Collateral  Agent  may  have  against  the  Borrower  or  its  property,  or  to  resort  to  any  other collateral  for  the  Secured  Obligations  prior  to  the  exercise  of  remedies  hereunder  nor  shall  the  rights  and  remedies  of  the  Collateral  Agent  be  conditional  or contingent on any attempt of the Collateral Agent to exercise any of its rights under any other documents executed in connection herewith or in connection with the Collateral against such party or against any other Person, including Baxalta, Roche, Halozyme or the Escrow Agent. (c)  Notwithstanding anything herein to the contrary, (i) the Borrower shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be construed as a delegation of duties to the Collateral Agent or Lenders and (ii) the exercise by the Collateral Agent of any of its rights or remedies hereunder shall not release the Borrower from any of its duties or obligations under the contracts and agreements included in the Collateral. (d)  This Agreement  shall  remain  in full force  and effect  and continue  to be effective  should any petition  be filed  by or against  the Borrower  for  liquidation  or  reorganization,  should  the  Borrower  become  insolvent  or  make  an  assignment  for  the  benefit  of  creditors  or  should  a  receiver  or trustee be appointed for all or any significant part of the Borrower’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to Applicable Law, rescinded or reduced in amount, or must otherwise be restored or returned by the Collateral Agent or the Lenders, whether as a 44 “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. (e)  The Borrower agrees to make, execute, deliver or cause to be done, executed and delivered, from time to time, all such further acts, documents  and  things  as  the  Collateral  Agent  or  the  Required  Lenders  may  reasonably  require  for  the  purpose  of  perfecting  or  protecting  its  or  their  rights hereunder  or  otherwise  giving  effect  to  this  Agreement,  all  promptly  upon  request  therefor.  The  Borrower  shall  take  or  cause  to  be  performed  such  acts  and actions as shall be necessary or appropriate to assure that the security interests granted herein shall not become subordinate or junior to the security interests, liens or claims of any other Person. ARTICLE IX THE COLLATERAL AGENT Section  9.01  Appointment  and  A  uthority.  Each  of  the  Lenders  hereby  irrevocably  appoints  BioPharma  Credit  Investments  IV  Sub,  LP  to  act  on  its behalf  as  the  Collateral  Agent  hereunder  and  under  the  other  Loan  Documents  and  authorizes  the  Collateral  Agent  to  take  such  actions  on  its  behalf  and  to exercise such powers as are delegated to the Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except for the penultimate paragraph of Section 9 .08, the provisions of this Article IX are solely for the benefit of the Collateral Agent and the Lenders, and neither the Borrower nor Halozyme shall have rights as a third party beneficiary of any of such provisions. Subject to Section 9.08 and Section 1 0.04, any action required or permitted to be taken by the Collateral Agent hereunder shall be taken with the prior approval of the Required Lenders. Section 9.02 Rights as a L ender. The Person serving as the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Collateral Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Collateral Agent hereunder in its individual capacity. Such Person and its Affiliates may lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Collateral Agent hereunder and without any duty to account therefor to the Lenders. Section 9.03 Exculpatory P rovisions. The Collateral Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents to which it is a party. Without limiting the generality of the foregoing, the Collateral Agent: occurred and is continuing; (i)  shall  not  be  subject  to  any  fiduciary  or  other  implied  duties,  regardless  of  whether  a  Default  or  Event  of  Default  has (ii)  shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents to which it is a party that the Collateral Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in such other Loan Documents), provided that the Collateral Agent shall not be required to take 45 any action that, in its opinion or the opinion of its counsel, may expose the Collateral Agent to liability or that is contrary to any Loan Document or Applicable Law; and (iii)  shall not, except as expressly set forth herein and in the other Loan Documents to which it is a party, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Collateral Agent or any of its Affiliates in any capacity. (b)  The Collateral Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Collateral Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 1 0.04) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Collateral Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Collateral Agent in writing by the Borrower or a Lender. (c)  The  Collateral  Agent  shall  not  be  responsible  for  or  have  any  duty  to  ascertain  or  inquire  into  (i)  any  statement,  warranty  or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Collateral Agent. Section 9.04 Reliance by Collateral A gent. The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Collateral Agent also may rely upon any statement  made to it orally or by telephone and believed  by it to have been made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Section 9.05 Delegation of D uties. The Collateral Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Collateral Agent. The Collateral Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article IX shall apply to any such sub-agent and to the Related Parties of the Collateral Agent and any such sub- agent. The Collateral Agent shall not be responsible for the negligence or misconduct of any sub-agent except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Collateral Agent acted with gross negligence or willful misconduct in the selection of such sub-agent. Prior to its appointment hereunder, each sub- agent shall agree to be bound by the confidentiality agreement set forth in Section 10.10 and Annex A hereto. Section 9.06 Resignation of Collateral  A gent.  The Collateral  Agent may at  any time  give notice  of its resignation  to the Lenders  and the Borrower. Upon the receipt of any such notice of resignation, the Required Lenders 46 shall have the right, in consultation with the Borrower so long as no Default or Event of Default has occurred and is continuing, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Collateral Agent  gives  notice  of  its  resignation,  then  the  retiring  Collateral  Agent  may,  on  behalf  of  the  Lenders,  appoint  a  successor  Collateral  Agent;  provided that, whether or not a successor has been appointed or has accepted such appointment, such resignation shall become effective upon delivery of the notice thereof. Upon  the  acceptance  of  a  successor’s  appointment  as  Collateral  Agent  hereunder,  such  successor  shall  succeed  to  and  become  vested  with  all  of  the  rights, powers,  privileges  and  duties  of  the  retiring  (or  retired)  Collateral  Agent,  and  the  retiring  Collateral  Agent  shall  be  discharged  from  all  of  its  duties  and obligations  under  the  Loan  Documents  (if  not  already  discharged  therefrom  as  provided  above  in  this  Section  9  .06).  After  the  retiring  Collateral  Agent’s resignation, the provisions of this Article IX and Section 10.14 shall continue in effect for the benefit of such retiring Collateral Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Collateral Agent was acting as Collateral Agent. Upon any resignation by the Collateral Agent, all payments, communications and determinations provided to be made by, to or through the Collateral Agent shall instead be made by, to or through each Purchaser directly, until such time as a Person accepts an appointment as Collateral Agent in accordance with this Section 9 .06. Section 9.07 Non-Reliance on Collateral Agent and Other L enders. Each Lender acknowledges that it has, independently and without reliance upon the Collateral Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and make the Loan hereunder. Each Lender also acknowledges that it will, independently and without reliance upon the Collateral Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Section  9.08  Collateral  M  atters.  Each  Lender  agrees  that  any  action  taken  by  the  Collateral  Agent  or  the  Required  Lenders  in  accordance  with  the provisions of this Agreement or of the other Loan Documents, and the exercise by the Collateral Agent or Required Lenders of the powers set forth herein or therein,  together  with  such  other  powers  as  are  reasonably  incidental  thereto,  shall  be  authorized  and  binding  upon  all  of  the  Lenders.  Without  limiting  the generality of the foregoing, the Lenders irrevocably authorize the Collateral Agent, at its option and in its discretion: (a)  to release any Lien on any property granted to or held by the Collateral Agent (A) upon discharge of the Secured Obligations, (B) that is sold, transferred, disposed or to be sold, transferred, disposed as part of or in connection with any sale, transfer or other disposition (other than any sale to a Loan Party) permitted hereunder, or (C) subject to Section 1 0.04, if approved, authorized or ratified in writing by the Required Lenders; (b)  to subordinate any Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Permitted Lien on such property; and (c)  to enter into a subordination and intercreditor agreement as contemplated by Section 5 .08. Upon  request  by  the  Collateral  Agent  at  any  time  the  Required  Lenders  will  confirm  in  writing  the  Collateral  Agent’s  authority  to  release  or  subordinate  its interest in particular types or items of property pursuant to this Section 9 .08. In  each  case  as  specified  in  this  Section  9.08  ,  the  Collateral  Agent  will  (and  each  Lender  irrevocably  authorizes  the  Collateral  Agent  to),  at  the  Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request (i) to evidence the release or subordination of such item of collateral from 47 the assignment and security interest granted hereunder, or (ii) to enter into a subordination and intercreditor agreement as contemplated by Section 5 .08, in each case in accordance with the terms of the Loan Documents and this Section 9.08 and in form and substance reasonably acceptable to the Collateral Agent. The Collateral  Agent shall  deliver  to the  Lenders  notice  of any  action  taken  by it  under  this  Section 9.08 as soon as reasonably practicable after the taking thereof; p rovided, that delivery of or failure to deliver any such notice shall not affect the Collateral Agent’s rights, powers, privileges and protections under this Article I X. Section 9.09 Reimbursement by L enders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Section 10.14 to be paid by it to the Collateral Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Collateral  Agent  (or  any  such  sub-agent)  or  such  Related  Party,  as  the  case  may  be,  such  Lender’s  pro  rata  share  (based  upon  the  percentages  as  used  in determining the Required Lenders as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, damage, liability or related expense, as the case may be, was incurred by or asserted against the Collateral Agent (or  any  such  sub-agent)  in  its  capacity  as  such  or  against  any  Related  Party  of  any  of  the  foregoing  acting  for  the  Collateral  Agent  (or  any  sub-agent)  in connection with such capacity. Section 10.01 Notices and Deliveries .    Except as otherwise expressly provided, all notices, communications and materials to be given or delivered pursuant  to  the  Loan  Documents  shall  be  given  or  delivered  in  writing  (which  shall  include  telecopy  transmissions)  at  the  following  respective  addresses  and telecopier numbers and to the attention of the following individuals or departments or at such other address or telecopier or telephone number or to the attention of such other individual or department as the party to which such information pertains may hereafter specify: ARTICLE X MISCELLANEOUS (a) if to the Borrower or Halozyme, to it at: Halozyme Royalty LLC c/o Halozyme, Inc. 11388 Sorrento Valley Road San Diego, CA 92121 Attn: Laurie Stelzer Tel: 858-794-8889 Fax: 858-704-8311 With a copy to: Attn: Corporate Secretary Tel: 858-794-8889 Fax: 858-704-8311 or 48 Halozyme, Inc. 11388 Sorrento Valley Road San Diego, CA 92121 Attn: Laurie Stelzer Tel: 858-794-8889 Fax: 858-704-8311 With a copy to: Attn: Corporate Secretary Tel: 858-794-8889 Fax: 858-704-8311 in either case, with copies (which shall not constitute notice) to: DLA Piper LLP (US) 4365 Executive Drive, Suite 1100 San Diego, California 92121-2133 Attn: Douglas Rein, Esq. Tel. 858-677-1443 Fax: 858-638-5043 (b) if to the Collateral Agent, to it at: BioPharma Credit Investments IV Sub, LP c/o Intertrust Corporate Services (Cayman) Limited 190 Elgin Avenue Georgetown, Grand Cayman KY1-9005 Grand Cayman] Attention: Director Facsimile: (347) 945-4757 with copies (which shall not constitute notice) to: Pharmakon Advisors LP 110 East 59th Street, #3300 New York, NY 10022 Attn: Pedro Gonzalez de Cosio Phone: (212) 883-2296 Fax: (212) 490-7576 and Akin Gump Strauss Hauer & Feld LLP One Bryant Park New York, NY 10036-6745 Attn: Geoffrey E. Secol, Esq. Phone: (212) 872-8081 49 Fax: (212) 872-1002 (c)  if to any Lender, to it at the address(es) set forth on Exhibit A hereto for such Lender. Notices,  communications  and  materials  shall  be  deemed  given  or  delivered  when  delivered  or  received  at  the  appropriate  address  or  telecopy  number  to  the attention of the appropriate individual or department. Section 10.02 Amounts  Payable  Due  upon  Request  for  Payme  nt.  All  amounts  payable  by  the  Borrower  under  the  Loan  Documents  shall,  except  as otherwise expressly provided, be immediately due upon request for the payment thereof. Section  10.03  Rights  C  umulative.  Each  of  the  rights  and  remedies  of  the  Collateral  Agent  and  the  Lenders  under  the  Loan  Documents  shall  be  in addition to all of its other rights and remedies under the Loan Documents and Applicable Law, and nothing in the Loan Documents shall be construed as limiting any such rights or remedies. Section 10.04 Amendments; Wai vers. Any term, covenant, agreement or condition of the Loan Documents may be amended or modified, and any right under such Loan Documents may be waived, if, but only if, such amendment, modification or waiver is in writing and is signed by the Required Lenders and, in the case of an amendment or modification, by the Borrower and, if its rights or obligations hereunder are affected thereby, by Halozyme; provi ded, h owever, that: (a)  unless agreed to by each Lender directly affected thereby, no amendment, waiver or modifications shall: (i) reduce or forgive the principal amount of the Loan or any Note, reduce the rate of or forgive any interest thereon, or reduce or forgive any premium or fees hereunder, (ii) extend the final scheduled maturity date or any other scheduled date for the payment of any principal of or interest on the Loan or any Note, or extend the time of payment of any premium or fees hereunder, (iii) except as expressly contemplated hereunder, increase the original principal amount the Loan over the amount thereof in effect or extend the maturity thereof (it being understood that a waiver of any condition precedent set forth in Article III or of any Default or Event of Default, if agreed to by the Required Lenders or all Lenders (as may be required hereunder with respect to such waiver), shall not constitute such an increase), (iv) reduce the percentage of the aggregate outstanding principal amount of the Loan or Notes, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take or approve, or direct the Collateral Agent to take, any action hereunder or under any other Loan Document (including as set forth in the definition of “Required Lenders”), (v) change any other provision of this Agreement or any of the other Loan Documents requiring, by its terms, the consent or approval of all the Lenders for such amendment, modification, waiver, discharge, termination or consent, (vi) change or waive any provision of Sections 2.12 or 2 .04, any other provision of this Agreement or any other Loan Document requiring pro rata treatment of any Lenders, or this Section 1 0.04, or (vii) release any Lien on all or substantially all of the Collateral other than in connection with a sale or transfer of assets permitted by this Agreement; and respective rights or obligations of the Collateral Agent, as applicable, hereunder or under any of the other Loan Documents. (b)  unless agreed to by the Collateral Agent in addition to the Lenders required as provided hereinabove to take such action, affect the Unless otherwise specified in such waiver, a waiver of any right under the Loan Documents shall be effective only in the specific instance and for the specific purpose for which given. No election not to exercise, failure to exercise or delay in exercising any right, nor any course of dealing or performance, shall operate as a waiver of any right of any Lender under the Loan Documents or Applicable Law, nor shall any single or partial exercise of any such right 50 preclude any other or further exercise thereof or the exercise of any other right of any Lender under the Loan Documents or Applicable Law. Section 10.05 S et-Off. Subject to Section 2.12 hereof, each Lender is hereby authorized by the Borrower, at any time and from time to time, without notice, upon the occurrence and during the continuance of any Event of Default, to set off against, and to appropriate and apply to the payment of, the Liabilities of the Borrower under the Loan Documents (whether matured or unmatured, fixed or contingent or liquidated or unliquidated) any and all Liabilities owing by such Lender or any of its Affiliates to Borrower (whether payable in Dollars or any other currency and whether matured or unmatured). Section 10.06 Assignment and S ale. The Borrower may not sell, assign or transfer this Agreement or any of the other Loan Documents or any portion hereof or thereof, including their respective rights, title, interests, remedies, powers, and duties hereunder or thereunder. Nothing in any Loan Document shall prohibit any Lender from pledging or assigning this Agreement, its portion of the Loan or its Note and such Lender’s rights under any of the Loan Documents, including collateral therefor, or any portion hereof or thereof to any Person; provided that (i) in the case of an assignment of any Lender’s portion of the Loan or any Note or any rights or participations  therein,  such Person shall agree in writing to the provisions hereof applicable  to Lenders (including  the provisions of Article IX and Sections 10.04 and 1 0.10) and (ii) unless such assignment is to another Lender or an Affiliate of a Lender, so long as no Default or Event of Default has occurred and is continuing, (x) the prior written consent of the Borrower is obtained (such consent not to be unreasonably withheld, conditioned or delayed), (y) no assignment shall be made to a Competitor, and (z) such pledgee or assignee represents in writing to the assigning Lender that such pledgee or assignee is not a Competitor. Any assignee or successor to a Lender shall provide notice of the assignment to Collateral Agent for purposes of the Register to be maintained pursuant to Section 2 .07, which notice shall include information related to the new Lender, the amount and form of the assignment and such other information as Collateral Agent may reasonably request. Any assignee or successor to a Lender shall become a “Lender” under this Agreement at the time such Person’s ownership interest in the Loan or a Note is recorded in the Register and such Person shall be subject to the obligations set forth in this Agreement. Section 10.07 Governing L aw.  This  Agreement  and  the  other  Loan  Documents  and  any  claims,  controversy,  dispute  or  cause  of  action  (whether  in contract  or  tort  or  otherwise)  based  upon,  arising  out  of  or  relating  to  this  Agreement  or  any  other  Loan  Document  (except  as  may  be  expressly  otherwise provided in any Loan Document) shall be governed by, and construed in accordance with, the law of the State of New York (including Sections 5-1401 and 5- 1402 of the New York General Obligations Law, but excluding all other choice of law and conflicts of law rules). Section 10.08 Judicial Proceedings; Waiver of Jury T rial. Each party hereto agrees that any judicial proceeding brought against it with respect to any Loan Document Related Claim may be brought in any court of competent jurisdiction in the City of New York and irrevocably waives any objection it may now or hereafter have as to the venue of any such proceeding brought in such a court or that such a court is an inconvenient forum. Each party hereto waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Section 1 0.01, and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail. Any judicial proceeding by any Loan Party against the Lender involving any Loan Document Related Claim shall be brought only in a court of  the  State  of  New York  sitting  in  the  City  and  County  of  New York  and  of  the  United  States  District  Court  of  the  Southern  District  of  New  York and  any appellate court thereof. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY INVOLVING 51 ANY LOAN DOCUMENT RELATED CLAIM (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT  SUCH  OTHER  PERSON  WOULD  NOT,  IN  THE  EVENT  OF  LITIGATION,  SEEK  TO  ENFORCE  THE  FOREGOING  WAIVER  AND  (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 1 0.08. Section 10.09 Severability of P rovisions. Any provision of the Loan Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by Applicable Law, each Loan Party hereby waives any provision of Applicable Law that renders any provision of the Loan Documents prohibited or unenforceable in any respect. Section 10.10 C onfidentiality. For so long as this Agreement is in effect and for a period of (a) five (5) years following the date of termination of this Agreement or (b) in the case of any Confidential Information arising under or subject to any of the License Agreements, five (5) years following the expiration or earlier termination of the applicable License Agreement, the Loan Parties, the Collateral Agent and the Lenders shall comply with and be bound by the provisions set forth in Annex A hereto, with the party that discloses Confidential Information (as defined in Annex A ) being the “ Discloser” and the party that receives Confidential Information being the “ Recipient”; p rovided, h owever, that nothing herein shall limit the rights of any Lender, or Collateral Agent, Escrow Agent or their respective successor or assigns to disclose Confidential Information  as contemplated  by the Baxalta Consent and Direction or the Roche Consent and Direction.  The  confidentiality  obligations  of  the  Lenders  under  this  Agreement  supersede  any  prior  confidentiality  agreements  between  the  Lenders  (or  their Affiliates) and Halozyme or Borrower. Section 10.11 C ounterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. Section 10.12 Entire Agreeme nt. This Agreement and the other Loan Documents embody the entire agreement between the Borrower, the Collateral Agent and the Lenders relating to the subject matter hereof and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof. Section 10.13 Successors and A ssigns. All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 10.14 Expenses; Indemni fication. (a)  The Borrower agrees to pay, within ten (10) Business Days after  the receipt  of written notice from the Collateral  Agent or any Lender, all reasonable and documented out-of-pocket expenses of the Collateral Agent and the Lenders, including reasonable fees and disbursements of counsel, in connection with: (i) the negotiation, preparation, execution, delivery, and filing, if required of this Agreement and the other Loan Documents (provided that the obligation to reimburse under this clause (i) shall not exceed $300,000 in the aggregate), (ii) any amendments, modifications, supplements, consents or waivers hereto or to the other Loan Documents and (iii) the administration, preservation or enforcement of its or their rights under this Agreement and the other Loan Documents (collectively, the “ Borrower E xpenses”). 52 (b)  From and at all times after the Agreement Date, and in addition to all of the Collateral Agent’s and the Lenders’ other rights and remedies against the Borrower, the Borrower agrees to indemnify, defend and hold harmless the Collateral Agent and the Lenders and their respective Related Parties (each such Person, including the Collateral Agent and the Lenders, being called an “ Indem ni tee”) from and against all damages, losses and other out-of- pocket costs and expenses of any kind or nature whatsoever (including reasonable attorneys’ fees and expenses, court costs and fees, and consultant and expert witness fees and expenses, but limited in the case of attorney’s fees and expenses to the reasonable and documented out of pocket fees, disbursements and other charges of one counsel to the Indemnitees, taken as a whole and if reasonably necessary, one local counsel in each appropriate jurisdiction (and, in the case of a conflict of interest, where the Indemnitee affected by such conflict notifies the Borrower of the existence of such conflict and thereafter retains its own counsel, one additional separate counsel for all similarly affected Indemnitees) (collectively “ Costs”) arising in any manner, directly or indirectly, out of or by reason of any and all claims (whether valid or not), actions, suits, inquiries, investigations and administrative proceedings (collectively, “ Pro c eedings”) relating to (i) the negotiation, preparation, execution or performance of this Agreement or the other Loan Documents, or any transaction contemplated herein or therein, whether or not any party protected under this Section 10.14(b) is a party to, or target of, any Proceeding in question ( provided, h owever, that no Indemnitee shall have the right to be indemnified hereunder for any liability resulting from the willful misconduct or gross negligence of such Indemnitee (as finally determined by a court of  competent  jurisdiction),  material  breach  by  any  Lender  of  its  obligations  under  this  Agreement,  or  disputes  that  are  solely  among  Lenders  or  among  the Collateral  Agent and the Lenders  other  than disputes  arising  from an act or omission  of the Borrower), (ii)  any breach of any of the covenants, warranties  or representations of the Borrower hereunder or under any other Loan Document, (iii) any Lien or charge upon amounts payable hereunder by the Borrower to the Lenders or any taxes, assessments, impositions and other charges in respect of the Collateral, or (iv) any violation or alleged violation of any Applicable Law, equitable requirement or other legal requirement by the Borrower or with respect to any Collateral to the extent that the Borrower is alleged to be responsible for such violation or alleged violation. All Costs shall be additional Secured Obligations under this Agreement, shall be payable within ten (10) Business Days of demand to the Indemnitee and shall be secured by the security interest and Lien created hereunder. The obligations of the Borrower under this Section 10.14(b) shall  not  be  limited  to  any  extent  by  payment  of  the  Secured  Obligations  and  termination  of  this  Agreement  and  shall  remain  in  full  force  and  effect  until expressly terminated by the Lenders in writing. This Section 10.14(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim, or any Indemnified Taxes. (c)  Halozyme agrees to indemnify each Indemnitee against, and to hold each Indemnitee harmless from, any and all Costs incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of: (i) any representation, warranty or certification made by Halozyme in this Agreement or certificates given by Halozyme in writing pursuant hereto which is untrue, inaccurate or incomplete in any material respect; (ii) any Parent Disbursement Instruction delivered to Escrow Agent by Halozyme pursuant to Section 6.03(c) which is untrue, inaccurate or incomplete; (iii) any material breach of or default under any covenant or agreement by Halozyme pursuant to this Agreement and, if capable of being remedied, such breach or default shall continue unremedied  for  a  period  of  thirty  (30)  days,  (iv)  any  material  breach  or  default  under  any  covenant  or  agreement  by  Halozyme  pursuant  to  either  License Agreement, and if capable of being remedied, such breach or default shall continue unremedied for a period of thirty (30) days; or (v) any Set-off by Roche (or its Affiliates)  or  Baxalta  (or  its  Affiliates)  of  any  amount  against  the  otherwise  required  amount  of  any  Post-  Closing  Royalty  Amounts;  provided  that  such indemnity shall not, as to any Indemnitee, apply to any such Costs arising from willful misconduct or gross negligence of such Indemnitee (as finally determined by a court of competent jurisdiction).  Notwithstanding the foregoing, (x) no provision of this Agreement shall be deemed or may be construed to constitute a Guaranty or assurance by Halozyme as to the amount 53 of any Post-Closing Royalty Amount or of the value of the Collateral and (y) neither the Collateral Agent, the Lenders nor any other Indemnitee shall have any recourse under this Agreement against Halozyme, its assets or properties, except for claims expressly provided for under this Section 1 0.14(c). (d)  The provisions of this Section 10.14 shall survive termination of this Agreement, and shall remain operative and in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loan, the occurrence of the Maturity Date, the invalidity, illegality, or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender. All amounts due under this Section 10.14 shall be payable within ten (10) Business Days following written demand therefor. Section 10.15 Tax Legending of N otes.    Notwithstanding anything to the contrary contained in this Agreement, each Note shall bear the following legend: THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR U.S. FEDERAL INCOME TAX PURPOSES. THE ISSUE  PRICE,  AMOUNT  OF  OID,  ISSUE  DATE  AND  YIELD  TO  MATURITY  OF  THIS  SECURITY  MAY  BE  OBTAINED  BY WRITING TO HALOZYME AT THE ADDRESS SPECIFIED IN SECTION 10.01(A) OF THE CREDIT AGREEMENT. [Signature Pages Follow] 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers all as of the Agreement Date. HALOZYME ROYALTY LLC, as the Borrower By:     /s/ Laurie Stelzer      Name: Laurie Stelzer Title: Vice President and Treasurer HALOZYME, INC. By:     /s/ Laurie Stelzer      Name: Laurie Stelzer Title: Chief Financial Officer 55 BIOPHARMA CREDIT INVESTMENTS IV SUB, LP, as the Collateral Agent and a Lender By: By: Pharmakon Advisors, LP, its Investment Manager Pharmakon Management I, LLC, its General Partner By: /s/ Pedro Gonzalez de Cosio      Name: Pedro Gonzalez de Cosio Title: Managing Member 56 ATHYRIUM OPPORTUNITIES II ACQUISITION LP, as a Lender By: By: Athyrium Opportunities Associates II LP, its General Partner Athyrium Opportunities II Associates II GP, LLC, its General Partner By: /s/ Andrew C. Hyman      Name: Andrew C. Hyman Title: Authorized Signatory 57 ANNEX A 1.  Confidential Informa tion. “ Confidential Informa tion” shall mean any information related to Discloser’s business, prospects, technologies, current  products,  future  products  and  proposed  products  and  services,  whether  written,  oral  or  visual,  disclosed  or  provided  by  the  Discloser  to  Recipient, including patent, copyright, trade secret  and other proprietary information,  research, development,  scientific  or financial data, compilations,  formulae,  models, design details, patent disclosures, procedures, processes, projections, protocols, results of experimentation and testing, specifications, strategies and techniques, customer lists and information, business forecasts, sales information, pricing, manufacturing information and assets. Without limiting the foregoing, “Confidential Information” includes any information that may be made known to Recipient and which Discloser has received from others that Discloser is obligated to treat as confidential or proprietary, whether or not marked as confidential. “Confidential Information” does not include information which the Recipient can establish by competent evidence: (a) was in the public domain at or subsequent to the time such information was communicated by Discloser to Recipient through no fault of Recipient; (b) was developed by employees, contractors or agents of Recipient independently of and without use of or reference to any Confidential Information disclosed by Discloser to Recipient; (c) was known to Recipient at the time of disclosure; (d) was approved for release by prior written authorization of Discloser; or (e) was provided to Recipient by a third party or was otherwise obtained by Recipient without obligation of confidentiality. 2.  Nondisclosure and Nonuse O bligations.  Recipient  shall  not  use,  disseminate,  or  in  any  way  disclose  the  Confidential  Information  of  the Discloser at any time except in furtherance of the transactions contemplated under the Loan Documents. Further, Recipient shall not disclose the existence of this Agreement or any other Loan Document without the prior written consent of the Discloser. Recipient shall treat all Confidential Information with the same degree of care as Recipient accords to Recipient’s own confidential information, but not less than reasonable care. Recipient shall maintain the Confidential Information of  the  Discloser  in  confidence,  and  shall  not  disclose  the  Confidential  Information  of  the  Discloser  to  any  third  party.  Recipient  shall  disclose  Confidential Information  only  to  those  of  its  employees,  Affiliates,  directors,  consultants  or  agents  (collectively,  “  Re  presentatives  ”)  who  have  a  need  to  know  such information and assist Recipient with respect to the transactions contemplated under the Loan Documents. Recipient certifies that each such Representative will have agreed, either as a condition of employment (as applicable) or in order to obtain the Confidential Information, to be under an obligation to Recipient to be bound by terms and conditions no less restrictive than those terms and conditions applicable to Recipient under this Agreement. Recipient shall immediately give notice to Discloser of any unauthorized use or disclosure of the Confidential Information. Recipient shall assist Discloser, at Recipient’s expense, in remedying any  such  unauthorized  use  or  disclosure  of  the  Confidential  Information.  Recipient  shall  be  liable  to  Discloser  for  any  breach  of  the  confidentiality  or  use obligations hereunder by Recipient or any Representative of Recipient. A disclosure of any Confidential Information (a) in response to a valid order by a court or other  Governmental  Authority  or  (b)  as  otherwise  required  by  Applicable  Law  shall  not  be  considered  to  be  a  breach  of  this  Agreement  or  a  waiver  of confidentiality for other purposes; p rovided, however that Recipient shall provide prompt prior written notice thereof to Discloser to enable Discloser to seek a protective order or otherwise prevent such disclosure. The burden of establishing the existence of such exclusions rests with the Recipient. 58 LOAN AMOUNTS; NOTICE ADDRESSES EXHIBIT A Lender Principal Amount Notice Address BioPharma Credit Investments IV Sub, LP $100,000,000.00 c/o Intertrust Corporate Services (Cayman) Limited 190 Elgin Avenue Georgetown, Grand Cayman KY1- 9005 Grand Cayman Attention: Director Facsimile: (345) 945-4757 with copies (which shall not constitute notice) to: Pharmakon Advisors LP 110 East 59th Street, #3300 New York, NY 10022 Attn: Pedro Gonzalez de Cosio Phone: (212) 883-2296 Fax: (212) 490-7576 Em ail:  pg@pharmakonadvisors.com and Akin Gump Strauss Hauer & Feld LLP One Bryant Park New York, NY 10036-6745 Attn: Geoffrey E. Secol, Esq. Phone: (212) 872-8081 Fax: (212) 872-1002 Em ail:   gsecol@akingump.com 59 Athyrium Opportunities II Acquisition LP $50,000,000.00 60 c/o Athyrium Capital Management, LP 530 5th Avenue, 25th Floor New York, NY 10036 Attn: Laurent Hermouet and Andrew Hyman Phone: (212) 402-6925 Em ail:   lhermouet@athyrium.com, and ahyman@athyrium.com with a copy (which shall not constitute notice) to: Moore & Van Allen PLLC 100 North Tyron Street Charlotte, NC 28202 Attn: Jim Langdon, Esq. Phone: (704) 331-3705 Fax: (704) 339-5855 Em ail:   jlangdon@mvalaw.com     EXHIBIT B THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR U.S. FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY OF THIS SECURITY MAY BE OBTAINED BY WRITING TO HALOZYME AT THE ADDRESS SPECIFIED IN SECTION 10.01(A) OF THE CREDIT AGREEMENT. $____________.__                                ___________, 201_ FORM OF SECURED PROMISSORY NOTE FOR VALUE RECEIVED, HALOZYME ROYALTY LLC, a Delaware limited liability company (the “ Borrower”) hereby promises to pay to the order of [ ] (the “ Lender”), the unpaid principal amount of the Loan made by the Lender under the Credit Agreement referred to below, on the Closing Date pursuant to Section 2.04 of the Credit Agreement, and to pay interest on the principal amount of the Loan (including principal consisting of capitalized interest on the Loan) on the dates and at the rate specified in or determined pursuant to Sections 2.03 and 2.04 of the Credit Agreement and otherwise in accordance with the terms and conditions of this secured note (this “ Note”) and the Credit Agreement. Principal, interest and all other amounts due to the Lender with respect to this Note are payable to the Lender at the place, in the type of money and funds and in the manner specified in Section 2.09 of the Credit Agreement. The defined terms in the Credit Agreement are used herein with the same meaning. Presentment, demand, protest, notice of dishonor and notice of intent to accelerate are hereby waived by the undersigned. This Note evidences the Loan made under, and is entitled to the benefits of, and subject to the burdens of, the Credit Agreement, dated as of December , 2015, among the Borrower, Halozyme, Inc., BioPharma Credit Investments IV Sub, LP, as Collateral Agent and a Lender and the other Lenders from time to time parties thereto, as the same may be amended, modified, restated or supplemented from time to time (the “ Credit Agreeme nt”), including the security interest granted by the Borrower to the Collateral Agent for the ratable benefit of the Secured Parties thereunder. This  Note  is  one  of  the  Notes  referred  to  in  the  Credit  Agreement  and  is  issued  to  evidence  the  Loan  made  by  the  Lender  pursuant  to  the  Credit Agreement. All of the terms, conditions and covenants of the Credit Agreement are expressly made a part of this Note by reference in the same manner and with the same effect as if set forth herein at length, and any holder of this Note is entitled to the benefits of and remedies provided in the Credit Agreement and the other Loan Documents. Reference is made to the Credit Agreement for provisions relating to the interest rate, maturity, payment, prepayment and acceleration of this Note. In  the  event  of  an  acceleration  of  the  maturity  of  this  Note  pursuant  to  the  Credit  Agreement,  this  Note  shall  become  immediately  due  and  payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys’ fees. 61 This Note and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Note shall be governed by, and construed in accordance with, the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction and venue of the courts of the State of New York sitting in the City and County of New York and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, although the Lender shall not be limited to bringing an action in such courts. The ownership of an interest in this Note shall be registered on a record of ownership maintained by the Collateral Agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. The Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity. HALOZYME ROYALTY LLC, as the Borrower By:          Name: 62 Title: 62 SUBSIDIARIES OF HALOZYME THERAPEUTICS, INC. Name of Subsidiary Halozyme, Inc. Halozyme Holdings Ltd., a wholly owned subsidiary of Halozyme, Inc. Halozyme Royalty LLC, a wholly owned subsidiary of Halozyme, Inc. State or Jurisdiction of Incorporation or Organization California Bermuda Delaware Percent Owned 100% 100% 100% EXHIBIT 21.1                 EXHIBIT 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-3 No. 333-179444) of Halozyme Therapeutics, Inc., (2) Registration Statement (Form S-8 No. 333-119969) pertaining to the Halozyme Therapeutics, Inc. 2004 Stock Plan and Nonstatutory Stock Option Agreement with Andrew Kim and Assumed Options Under the Deliatroph Pharmaceuticals, Inc. Amended and Restated 2001 Stock Plan of Halozyme Therapeutics, Inc., (3) Registration Statement (Form S-8 No. 333-133829) pertaining to the Halozyme Therapeutics, Inc. 2005 Outside Directors’ Stock Plan and Halozyme Therapeutics, Inc. 2006 Stock Plan of Halozyme Therapeutics, Inc., (4) Registration Statement (Form S-8 No. 333-152914) pertaining to the Halozyme Therapeutics, Inc. 2008 Outside Directors’ Stock Plan and Halozyme Therapeutics, Inc. 2008 Stock Plan of Halozyme Therapeutics, Inc., (5) Registration Statement (Form S-8 No. 333-174013) pertaining to the Halozyme Therapeutics, Inc. 2011 Stock Plan of Halozyme Therapeutics, Inc., (6) Registration Statement (Form S-8 No. 333-188997) pertaining to the Halozyme Therapeutics, Inc. Amended and Restated 2011 Stock Plan of Halozyme Therapeutics, Inc., and (7) Registration Statement (Form S-8 No. 333-206279) pertaining to the Halozyme Therapeutics, Inc. 2011 Stock Plan of Halozyme Therapeutics, Inc.; of our reports dated February 29, 2016 , with respect to the consolidated financial statements and schedule of Halozyme Therapeutics, Inc. and the effectiveness of internal control over financial reporting of Halozyme Therapeutics, Inc. included in this Annual Report (Form 10-K) of Halozyme Therapeutics, Inc. for the year ended December 31, 2015 . San Diego, California February 29, 2016 /s/ Ernst & Young LLP EXHIBIT 31.1 I, Helen I. Torley, M.B. Ch.B, M.R.C.P. , Chief Executive Officer of Halozyme Therapeutics, Inc. certify that: CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of Halozyme Therapeutics, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a) b) c) d) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): a) b) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: February 29, 2016 /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                                 EXHIBIT 31.2 I, Laurie D. Stelzer, Chief Financial Officer of Halozyme Therapeutics, Inc. certify that: CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of Halozyme Therapeutics, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a) b) c) d) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): a) b) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: February 29, 2016 /s/ Laurie D. Stelzer Laurie D. Stelzer Senior Vice President and Chief Financial Officer                                 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 EXHIBIT 32 In connection with the Annual Report of Halozyme Therapeutics, Inc. (the “Registrant”) on Form 10-K for the fiscal year ended December 31, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Helen I. Torley, M.B. Ch.B, M.R.C.P. , Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: February 29, 2016 /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 In connection with the Annual Report of Halozyme Therapeutics, Inc. (the “Registrant”) on Form 10-K for the fiscal year ended December 31, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Laurie D. Stelzer, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: February 29, 2016 /s/ Laurie D. Stelzer Laurie D. Stelzer Senior Vice President and Chief Financial Officer                                                             CORPORATE INFORMATION BOARD OF DIRECTORS EXECUTIVE TEAM GENERAL INFORMATION Jean-Pierre Bizzari, M.D. Former Executive Vice President Clinical Development Celgene Corporation James M. Daly Former Executive Vice President and Chief Commercial Officer, Incyte Corporation Kathryn E. Falberg Chairman of the Board, Halozyme Therapeutics Jeffrey W. Henderson Former Chief Financial Officer of Cardinal Health Director, FibroGen, Inc. and Qualcomm Inc. Kenneth J. Kelley Advanced Leadership Fellow, Harvard University Randal J. Kirk Chairman and Chief Executive Officer, Intrexon Senior Managing Director and Chief Executive Officer, Third Security, LLC. Connie L. Matsui Former Executive Vice President, Knowledge and Innovation Networks, Biogen Idec Matthew L. Posard Executive Vice President and Chief Commercial Officer, Trovagene, Inc. Helen Torley, M.B. Ch.B., M.R.C.P President and Chief Executive Officer, Halozyme Therapeutics Helen Torley, M.B. Ch.B., M.R.C.P President and Chief Executive Officer, Corporate Headquarters 11388 Sorrento Valley Road San Diego, CA 92121 858-794-8889 Outside Counsel DLA Piper LLP (U.S.) San Diego, California Independent Auditors Ernst & Young LLP San Diego, California Transfer Agent Corporate Stock Transfer, Inc. 3200 Cherry Creek Drive South, Suite 430 Denver, Colorado 80209 303-282-4800 Form 10-K Annual Report Each Stockholder may receive without charge a copy of the Annual Report on form 10-K filed with the Securities and Exchange Commission by written request addressed to Investor Relations at the address provided. Stock Listing Halozyme Therapeutics, Inc. common stock trades on the Nasdaq Stock Market under the symbol HALO. Halozyme Therapeutics Athena M. Countouriotis, M.D. Senior Vice President & Chief Medical Officer William J. Fallon Vice President, CMC Operations Sunil Joshi Vice President & Global Product Team Lead, Oncology Michael J. LaBarre, Ph.D. Vice President and Chief Scientific Officer Harry J. Leonhardt, Esq. Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary Jim S. Mazzola Vice President, Corporate Communication and Investor Relations Michael E. Paolucci Vice President, Alliances and Human Capital Kenneth A. Schultz, M.D. Vice President of Innovation, Strategy & Business Development Laurie D. Stelzer Senior Vice President and Chief Financial Officer Kristina Vlaovic Vice President of Regulatory & Safety SAFE HARBOR STATEMENT This Annual Report contains forward-looking statements regarding our products in development, anticipated clinical, regulatory and commercial milestones, business intentions, financial conditions and results of operations and prospects and other statements concerning future matters. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” 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 the Annual Report. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including unexpected expenditures and costs, unexpected results or delays in development and regulatory review, regulatory approval requirements, unexpected adverse events and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company’s reports on Forms 10-K, 10-Q, and other filings with the Securities and Exchange Commission. Halozyme Therapeutics, Inc. 11388 Sorrento Valley Road San Diego, California 92121 Main 858.794.8889 Fax 858.704.8311 www.halozyme.com 

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